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Welcome to the Webinar! We will be getting started promptly at the top of the hour, and until then, you will not be hearing any audio. Feel free to reach out via the Chat function with any questions you may have. While you’re waiting, please type into the Chat … • Your name and organization • What you are most interested in learning today
Housekeeping: The Redux
• Getting comfortable with Zoom
• Throughout the session, use the Chat feature at any time –
you can chat privately to an individual (such as your host) or
to Everyone.
Nonprofit Center of Northeast Florida
Housekeeping: The Redux
• Later on today, we’ll go into
Breakout Rooms to give you a
chance to talk directly to each
other!
• Check out our Zoom Guide at
nonprofitctr.org/zoom-guide
Nonprofit Center of Northeast Florida
Nimble Budgets
July 23, 2020
Nonprofit Center of Northeast Florida
Nonprofit Center of Northeast Florida
Mission
The Nonprofit Center connects, strengthens and advocates for a
strong nonprofit community.
Nonprofit Center of Northeast Florida
Nonprofit Center of Northeast Florida
• Nuggets e-news • 300 Nonprofit Members
• Workshops & Trainings • Staff Consulting
• Job Posting • Peer Convening Groups
• Resource library, website • Community Coaches
• Advocacy & Lobbying • Board Bank
• 2 information platforms • Research
• COVID resources
www.NonprofitCtr.org
www.TheNonprofitLink.org
Nonprofit Center of Northeast FloridaNonprofit Center of Northeast Florida
Upcoming Trainings
• Community First Credit Union Learning Labs
– Gateway: July 28th, 3-4pm
– Changing Homelessness: July 30th, 3-4pm
• Handling Risk During Economic Recession
– August 5th, 2:30-4pmDarien Reynolds Operations Manager
Agenda
• The “What” and “Why” of a Budget
• Building a Budget – “Who”, “When” and “How”
• Tracking Your Budget
• Financial Policies and Procedures
Nonprofit Center of Northeast FloridaPolls • Is this your first time building a budget? • Are you looking to create an organizational budget or a program budget?
What is a Budget?
• An itemized estimate of income and expenses for a set period of
time
• A plan/guide
• An internal AND external document
• A living document
• Specific, organized, and easily understood
Nonprofit Center of Northeast FloridaWhy Do We Need a Budget?
Legal
• Allows Board members to monitor fiscal activity
– Board members must exercise due care in all dealings with the
organization and its interest. This includes careful oversight of
financial matters, attention to issues that are of concern to the
organization and raising questions whenever there is something
that seems unclear or questionable.
Planning
• Puts actions around strategic goals (costs and income)
• Illustrates shortfalls or surpluses
• Monitoring for changes allows time for behavior changes
Nonprofit Center of Northeast FloridaDifferent Types of Financial Documents Planning: • Budget Monitoring: • Financial Statements • External – bank • Internal – budgets vs actuals, profit and loss statement, balance sheet • Reconciliation reports • IRS Form 990 Evaluating: • Audits • Financial Reviews Nonprofit Center of Northeast Florida
Organizational vs. Program
Organizational Program
• Estimates for your fiscal year - a 12 • May be slightly different for
month period of operations developing a program budget
• Your fiscal year can be a calendar – May not receive as much lead
year or another set of dates (look to time
your revenue sources to make a
decision) – Needs potentially less
oversight/approval from the
– Federal fiscal year – October 1- Board
September 30
– Any program changes that affect
– City of Jacksonville fiscal year – the Board’s legal responsibility
October 1-September 30 should be approved
– State fiscal year – July 1-June 30 – May have committee input
– End of year giving – November – Any significant changes to the
and December bottom line should be
communicated to the Board
ahead of time and explained in
updatesTypes of Accounting • Cash – income and expenses are recorded only when funds are received or disbursed. Easy and popular. • Accrual – income is recorded when it is contracted (a “sale” is made); expenses are recorded when goods are received. Nonprofit Center of Northeast Florida
Budget Components
• Income/Revenue – Money coming in
– Possible sources: grants, fundraising dollars, fee for service,
special events
– Restricted: can by law only be used for a specific purpose
– Unrestricted: can be used for any type of expense
– In-kind contributions: donated items or services (needed for
the 990)
Nonprofit Center of Northeast FloridaBudget Components
• Costs/Expenses – Money being spent
– Direct: items that can be easily (directly) assigned or allocated to a
particular project with a reasonably high degree of precision.
– Examples: direct program staff, program equipment
– Indirect: items that cannot easily be allocated to the project
because they typically benefit multiple projects or activities.
– Examples: computers, rent, electricity, accounting staff, insurance
Nonprofit Center of Northeast FloridaBuilding Your Budget - Who
• Staff
– CEO, finance staff, program staff
• Board
– Small group - finance committee, budget committee,
executive committee
– Full Board
– Look for individuals who know budgeting, understand the
big picture, and are strategic in thinking
Nonprofit Center of Northeast FloridaBuilding Your Budget - When
• Staff gathers information needed
4 months
before
• Compiles first draft
• Committee reviews draft
3 months
before • Staff gets feedback and make tweaks
• Staff or committee presents budget to Board
2 months
before • Board approves
• Implement budget tracking systems
1 month
before • Document budget process
Nonprofit Center of Northeast FloridaBuilding Your Budget - How
• Goal Setting
– Strategic Plan – what will your organization do long-term?
Strategic planning is an organization's process of defining
its strategy, or direction, and making decisions on
allocating its resources to pursue this strategy.
– Program – what is the strategy for updating or expanding
program delivery?
– Financial – are there specific financial goals you are trying
to meet?
Nonprofit Center of Northeast FloridaBuilding Your Budget - How
Generally speaking,
• Make your best, educated guess
• Overestimate expenses
• Underestimate income
Nonprofit Center of Northeast FloridaBuilding Your Budget - How
• Expenses
– Make an itemized list of expenses associated with the goal
activities on your timeline
– Take a look at your expenses in the previous year (especially
for operational purposes)
– Don’t forget to include fundraising and advocacy costs
– Use a friend!
Nonprofit Center of Northeast FloridaBuilding Your Budget - How
• Expenses Line Items
– Technology – Salaries
– Furniture and Equipment – Benefits
– Insurance – Rent
– Subscriptions – Phone
– Licenses and Permits – IT
– Office Supplies – Parking
– Meals, Food, Beverage – Repairs
– Marketing – Travel
– Postage – Events
– Printing – Fundraising
Nonprofit Center of Northeast FloridaBuilding Your Budget - How • Overhead ≠ Evil • Guidelines from both the IRS and Financial Accounting Standards Board (Management/General and Fundraising) • Remember to check on and plan for indirect costs in program grants
Building Your Budget - How
• Income and Revenue
– Look at last year’s income (actuals, bank statements, etc.) and
make a list of what you expect this year
– Look at your strategic plan and make a list of what it calls for
– If you are 75% sure or greater that it is coming in, put it in.
If you are less than 75% sure, leave it out
– Plot it on a calendar timeline for cash flow purposesBuilding Your Budget - How • Income Line Items – Unrestricted Grants – Event Ticket Sales – Sponsorships – Restricted Grants – Program Fees – Fee for Service – Reimbursed Expenses – Miscellaneous Income – Annual Campaign
Building Your Budget - How
• Compare
– Cash flow – how money flows in and out (do you have
enough money in the bank?)
– Analyze what is coming in vs. what is going out on a short-
term basis. Look month by month to compare what your
income vs. expenses will be
– Look at the overall result for the year
– Make adjustments to your plans accordingly
Nonprofit Center of Northeast FloridaBuilding Your Budget - How • If Income > Expenses = Surplus Budget • If Income = Expenses = Balanced Budget • If Income < Expenses = Deficit Budget
Building Your Budget - Structure Determine Your Tracking System: • Who needs access to reports, and what do they need to include? • Do programs need the ability to track separately or get regular updates? • Will Excel work, or do we need accounting software? • Who is responsible for tracking budget to actuals?
Building Your Budget – Wrap It Up • Tell the story of your goals • Focus on context, rather than too much detail • Answer questions and accept feedback • Get approval before the current fiscal year is over
Building Your Budget – Wrap It Up • If this is your first budget, document the process for the following year – How – When – Who – Suggested changes for next year
Checking Actuals Against Your Plan
• Updates should include
– Profit and Loss statement (your actual activity)
– Compared to budget
– And potentially compared to prior years, if available
– Mid-way through the year, start including forecasting
– Balance sheet (what you have in the bank and what you own)
• At least quarterly
– Frequency will depend on your work and expectations of
BoardChecking Actuals Against Your Plan • Provide updates – To staff responsible for budgets – To Finance committee – To Board
Financial Dashboard A Perfect Nonprofit
Revenue
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
e es om
e
ue
s es ue
s ue
om Fe Du en
Inc ram In c it D ne
r nD Re
v
&
r og ts
& pr of rt at io t al
a nts dP ran No
n Pa nd To
Gr te ou
t ed tr ic te dG F
tr ic res st ric
n res Un Re
U
Actual Jul 2017 to J an 2018 Budget Jul 2017 to Jan 2018 Actual Jul 2016 to J an 2017
Revenue and Expense Comparison
$700 ,000
$600 ,000
$500 ,000
Axis Title
$400 ,000
$300 ,000
$200 ,000
$100 ,000
$-
Actual Jul 2017 to J an 2018 Budget Jul 2017 to Jan 2018 Actual Jul 2016 to J an 2017
Total Revenue Total ExpensesChecking Actuals Against Your Plan • If income doesn’t materialize – Can you replace it with other, additional revenue? – If not, can you change your timing? – If not, where can you cut expenses? • If expenses don’t materialize – Does that change your ability to achieve your goals? – Is there a plan if you end up with a surplus?
What do you do when your budget is busted? • Variance – the difference between your budget and the actual activity • Establish with your Board what an acceptable variance is, and report on those • In extreme circumstances, budget amendments may be helpful. But remember, it was only a plan to begin with!
Risk Mitigation
• What is Risk Mitigation?
– The process by which an organization introduces
specific measures to minimize or eliminate
unacceptable risk associated with its operation.
• Identifying red flags
– Missing Income/Expenses
– Unexplained variances
– Underestimating expenses
– Missing financial documentsFinancial Policies and Procedures
• Protect Your Organization and Yourself!
– Finance manual
– Authority for necessary and regular financial actions and decisions
– Clear authority to spend funds, including approval, check signing,
and payroll
– Clear assignment of authority to enter into contracts
– Clear responsibility for maintaining accurate financial records
– Reimbursement procedures and travel policy
• Checks and balances – At least three people should have
designated roles independent of each otherFinancial Policies • Conflict of Interest policy • Document Destruction policy • Whistleblower Protection policy • Gift Acceptance policy • CEO compensation review policy • Budget Amendment and Approval policy • Check signers policy • Reserve Use policy • Investment policy
Action Plan
Issue Deadline Person Resources Detail
Responsible NeededBreakout Activity • Build a red flag action plan • Use either an existing issue or make up one • 5 minutes
Resources
• Nonprofits Assistance Fund – www.nonprofitsassistancefund.org
• Budgeting for Small Organizations -
http://www.vscpa.com/Content/Files/vscpa/Documents/2011/Budgeting.pdf
• National Council of Nonprofits - https://www.councilofnonprofits.org/tools-
resources-categories/financial-management and
https://www.councilofnonprofits.org/tools-resources/budgeting-nonprofits
• Nonprofit Budgeting - http://www.blueavocado.org/content/nonprofit-budgets-have-
balance-false
• Budgeting Checklist - https://nonprofitsassistancefund.org/sites/naf-
prod/files/publications/budgeting_checklist.pdf
• Program-Based Budget Template - http://www.wallacefoundation.org/knowledge-
center/Resources-for-Financial-Management/Pages/Program-Based-Budget-
Template.aspx
• Nonprofit Center Resource Library
• The Budget Building Book for Nonprofits, M. Dropkin
• Financial Health Assessment Framework by Michael GellmanQuestions? Nonprofit Center of Northeast Florida
Darien Reynolds
dreynolds@nonprofitctr.org
904-425-1935
Nonprofit Center of Northeast FloridaThank you! Nonprofit Center of Northeast Florida
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