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Fiscal Resources


... are currently spent. ... what percentage of the yearly budget has been spent to date. ... (The organization can not spend more than $ 1 million per ... – PowerPoint PPT presentation

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Title: Fiscal Resources

Fiscal Resources
  • Budgeting and Funding Sources

The purpose of organization budgets is to
  • Plan how funds will be used within a one year
  • Identify how much money will be needed by the
    organization to deliver services.
  • Monitor how funds are currently spent.
  • Predict how much money will be needed for the
    next fiscal year.

Budget time frames are called fiscal years. The
fiscal year may span the time period
  • January 1 December 31
  • July 1 June 30 (the fiscal year for most state
  • October 1 September 30. (Federal budget year)

Budgets specify
  • Dollars on hand
  • Revenue
  • Expenditures
  • Revenue minus Expenditures
  • Specific categories of expenditures.

The two biggest items in agency budgets are
  • Salaries and wages
  • Fringe benefits
  • - Payroll taxes (employers share)
  • - Health Insurance
  • - Pension (share)
  • - Other incentives given to employees (for
    example, college tuition)

Personnel costs are approximately 80 of all
expenditures in an agency budget. Of that amount,
fringe benefits, on average, are about 15-25 of
the total for salary and wages.
The two primary types of budgets are
  • Line item budgets (includes specific categories
    of expenditures for the organization)
  • Program budgets (lists the same types of
    expenditures as the line item budget except
    that they are organized by program). A typical
    program budget would just be a line item budget
    that includes columns for each of an
    organizations programs.

Items typically included in a budget are
  • Personnel (salary/wages and fringe)
  • Office supplies
  • Rent or mortgage
  • Utilities
  • Maintenance costs
  • Xeroxing and/or printing
  • Phone
  • Insurance
  • Cost of Annual Audit
  • Equipment
  • Travel
  • Professional Development

Two approaches to budgeting are
  • Cash accounting Transactions are recorded only
    when money flows into or out of the organization.
  • Accrual accounting income is recorded during
    the time period in which it is earned. Expenses
    are recorded when they occur rather than when
    they are paid.

Other important accounting concepts are
  • Fund accounting. Columns on the budget sheet
    indicate whether funds are restricted for
    certain uses.
  • Restricted funds are those that for which funders
    limit utilization. Therefore organizations need
    to set up separate accounts or record-keeping
    processes that separate restricted funds from
    nonrestricted funds.

Methods for developing a budget
  • 1) Increasing or decreasing line items in
    relation to projected increases or decreases in
    funds. Often line items in budgets are increased
    at the rate of inflation (3 to 5). Similarly,
    line items may be reduced by a specific
    percentage per year.

Addition methods for making budget estimates
  • How much did the organization go over or under
    the designated budget amount in the previous
    year? Adjustments are made accordingly.
  • Estimating cost on a line item by line item basis
    based on vendor estimates of costs, existing
    contracts, or costs that have previously been
    locked in or fixed.
  • Using budgets from similar programs to estimate
    future costs in new programs.

Additional methods to allocate costs (continued)
  • The unit cost of delivering services to
    individuals, families, or groups. If we know the
    unit cost, we can estimate budget changes based
    on increases or decreases in clientele.
  • Allocating funds based on the percentage of space
    used by a program or the number of employees in a

In general, there are two types of costs in
  • Fixed Costs. Costs that we know in advance and
    that will probably not change in the next year.
    One approach to managing resources is to lock in
    as many of the yearly costs as possible (rent,
    utility rate plans, salaries)
  • Variable costs. Costs that may vary in the course
    of day to day operation that are difficult to
    control, for example, xerox and telephone.

Another way to categories expenses involves
certain administrative costs (Overhead)
  • Certain types of management activities are
    considered to be overhead or indirect costs for
    example, manager salaries, clerical support, or
    accounting and other services. (Direct costs are
    considered expenditures used to operate programs)
  • Funders often restrict what percentage of program
    overhead may be paid for with grants and
    contracts. (8 to 20)

Overhead may be listed
  • As a specific line item in a budget.
  • As a cost center or separate program in a program
  • Allocated among the various programs in an

There are several different types of budget tools
used to monitor agency budgets
  • Operating statements lists the various sources
    of funding and expenditure categories.
  • Balance sheets Lists Assets and Liabilities
    Difference between this years and last years
  • Cash flow statement (month by month listing of
    revenue and expenses)
  • Year to date budget what percentage of the
    yearly budget has been spent to date.

Tax-Exempt Organizations are also required to
submit information to the IRS each year
  • Results of a yearly audit by a certified
  • Form 990 is to be filed with the IRS (statement
    of revenue and expenditures)
  • Most 990 forms are filed electronically and can
    be found at the Urban Institutes website
  • http//
  • Organizations also must publish annual reports
    that must be made available to the public upon

Three approaches to analyzing budgets
  • Revenue Analysis
  • Expenditure Analysis
  • Efficiency Analysis

Revenue Analysis
  • What proportion of revenue comes from grants,
    contracts, and donations?
  • Does the proportion of funds generated from these
    sources help the organization balance accounts?
  • How reliable is the revenue base? Does money come
    in as expected?
  • What new sources of funding can be used by the
    organization? Can on-going sources be increased?

Efficiency Analysis involves estimating unit cost
or work effort
  • Unit cost. Calculate cost of delivering the
    program. Divide this cost by the number of people
    served in the program. How does this compare to
    other programs in the organization or similar
    programs outside the organization? For example,
    Total Cost 100,000. Clients 100. Unit Cost

Work Effort
  • Work Effort. How much of a workers time is used
    to complete a specific activity.
  • Therapy for One client 20 hours client contact
  • One staff member serves 50 clients per year.
  • The staff member works 8 hours per day, 235 days
    per year
  • 20 hours X 50 clients / 235 8 1000/1880 53
    of worker time

Expenditure Analysis
  • Is the organization over budget in a number of
    expenditure categories.
  • Is the organization under budget in a number of
  • Is the organization under budget in some
    categories and over in others (what adjustments
    should be made in the budget)
  • What proportion of the annual budget is spent on
    overhead or fundraising costs?

Funding Sources
  • Raising Funds for Organizations

Types of funding
  • Government Grants Contracts
  • Independent foundations
  • Corporate foundations
  • Community foundations (United Way or Community
  • Fees for Service
  • Membership Dues
  • Donations from Individuals
  • Special Events
  • In-kind Donations

Typically problems with government funding
  • Duration 1-3 year cycles.
  • Must apply for a grant or negotiate a contract.
  • Performance based contracts only reimburse for
    the delivery of specific services.
  • Reimbursements may be delayed.
  • Contracts often do not provide start-up funds.
  • Organizations must often supplement funds in the
  • The organization can often lose money on a
  • The organization may be forced to select only
    those clients who will have successful outcomes.
  • The contractor or grantee must be accountable to
    the funder
  • The organization can lose funding if there is a
    problem with the way the money is spent.
  • The funder may not invest money in actually
    monitoring the agency.
  • The agency may save money by reducing staff
    salaries or using volunteers
  • Federal contracts place restrictions on using
    contract dollars for lobbying

Other funding related problems
  • Organizations may become reliant on one source of
    funds and have few options if that funding is
  • The organization may lose its independence and
    autonomy if funding is conditional on compliance
    with funder demands.
  • The organization may forfeit social justice
    related goals in order to please funders or shift
    from a social action to service delivery focus.

Strategies to reduce reliance on one or two
primary funder
  • Use a mixture of sources.
  • Raise all funds through membership fees, fees for
    service, and individual donations.
  • Offer a unique service not provided by other
  • Develop power resources such as a board of
    directors with powerful members or network with
    government officials to protect organization

IRS restrictions on 501 (c) (3) organizations
  • The organization can only allocate the following
    amounts for direct lobbying
  • 20 of the organizations first 500,000
  • 15 of the organizations second 500,000
  • 10 of the organizations third 500,000
  • 5 of any remaining funds
  • (The organization can not spend more than
  • 1 million per year on lobbying).
  • For Grassroots lobbying, the organization can
    only spend 25 of total spent for direct
    lobbying. (Grassroots lobbying involves telling
    others to lobbying on issues of concern to the

Activities that are exempt from lobbying
  • Lobbying for changes in regulations
  • Lobbying by volunteers, unless the organization
    spends its own money on this.
  • Any communication that simply informs people
    about an issue.
  • An organizations response to a legislator on
    technical issues.
  • Lobbying to protect the organizations existing
    grants and contacts.
  • Sending out a nonpartisan analysis of a
    legislative issue.
  • Urging the public to support or oppose a ballot

Organizations typically send out funding
proposals to a variety of organizations
  • Proposals are sent out to a variety of
  • They are sent out at several points during the
    year. Each funder may have a different deadline.
  • Funding agencies vary in terms of a specific
    emphasis or areas in which they fund.
  • Funding can be for operating expenses, specific
    programs, facilities, or endowments.

Sources of information about funders
  • Federal Register.
  • Foundation databanks on the web.
  • Libraries.
  • Annual Reports
  • The funders web page (often includes information
    about past grantees).

Components of a Proposal
Proposal Must Contain
  • Quantifiable and Feasible Goals and Objectives
  • A description of the programs theory of action
    (a description of how the program is expected to
    work and the anticipated outcomes X ? Y)
  • An evaluation plan.
  • A timeline for expected task completion (GANNT