Presented on 4/11/12 at Grantwriters Network of Greater Houston membership meeting

1. Budgeting For Grant Writers
Grant Writers Network of Greater Houston
John F.X. Prior, LCSW, ACSW
Harris County Protective Services
for Children and Adults
Houston, Texas
March 11, 2009

2. Definition
A numerical expression of an
organization’s dreams that serves as a
guide or measure of acceptable
financial performance.

3. Benefits of a Budget
 Establishes goals to be achieved
 Identifies work to be done
 Projects resources that will be needed
to get work done
 Establishes timetables and deadlines
 Assigns individuals responsible for
work

4. Overview of Budgets
 Well-prepared, clear and accurate
budgets allow nonprofits to:
 Adjust plans, activities, and spending
 Achieve cost effective spending
 Receive CLEAN audits
 Avoid incurring questioned or disallowed
costs or cost overruns

5. Overview of Budgets
 Brings together input from Board, clients,
management, prospective donors, and general
public
 Anticipate operational expenses and identify
revenue sources
 Provide financial & operational guidance to
implement policies and use resources
 Are tools for controlling spending, avoiding deficits,
and assessing the financial situation.
 Integrates administrative, staff, and operating
activities
 Serves as basis for performance reviews
 Ongoing process

6. Roles of Staff to Create a Budget
 Agency Accountant, Treasurer, or
Chief Financial Officer
 IF NOT:
 Someone knowledgeable about the
project & organization
 Person who regularly handles finances
 Collaborative Effort

7. Budget Planning Issues
 Balancing
 Timing
 Evolution
 Accountability
 Zero Basis vs. Incremental
 Forecasting

8. Types of Budget
 Income & Expenses
 Revenues by Type
 Individual project, department, or program
 Service delivery costs
 Capital Additions
 Investment income
 Cash Flow
 Fund raising events
 Income generating activities
 Personnel projections

9. Advantages
 Enhances likelihood that organization will be
financial successful
 Tool that translate abstract goals into determinable
information; stipulates performance goals
 Budgeting process leads organization to look at
itself, set priorities, and to narrow its choices
 Facilitates coordination and cooperation between
various programs and financial department
 Periodic budget comparison to actual performance
can identify problems and allow time for a response
to changing conditions
 Measures financial performance in relation to
expectations.

10. Disadvantages
 Presence of controls may stifle creativity
 Tendency to emphasize cost control
 Budget based on historical data only can fail
to keep up with changing circumstances
 Budgets completed by only nonfinancial
personnel can result in a plan without
adequate staff input
 Not easy to implement and may require
enthusiasm among management staff to be
accepted as useful

11. Budget Elements
 Personnel
 Fringe Benefits
 Travel
 Equipment
 Supplies
 Contractual
 Indirect Charges
 Program Income

12. General Budget Components
 INCOME
 Donations & Memberships
 Service Delivery Fees
 Grants and Contracts
 Investment Income

13. Budget Components
 EXPENSES
 Personnel
 Fringe Benefits
 Travel
 Equipment
 Supplies
 Contractual
 Construction
 Indirect Charges

14. Budget Narrative
 Budget = Includes detailed
calculations with estimation methods,
quantities, unit costs, and other similar
qualitative detail.
 Budget Narrative = Discusses
necessity, reasonableness, and
allocation of costs.

15. Indirect Charges
 Costs not readily identified with a
particular aspect of organizational
operation (i.e.: administration,
fundraising, etc.)

16. Budgeting Do’s
 Budget for the life of the grant
 Allowable costs
 Indirect Cost Rate Agreement
 Cost of living increases
 Address matching requirements
 Seek non-Federal support
 Focus on sustainability

17. Evaluating Financial Health
Organizational Budgets
Positive Indicators Red Flags
 The Executive Director understands The executive director cannot explain
the financial aspects of the organization. the financial aspects of the organization.
The expenses and income outlined in The board is not involved in the budget
the budget are reasonable. development process.
The organization appears to have In reviewing anticipated income
appropriate income streams and a (committed, identified, unknown), the
realistic budget that adequately covers unknown is too big.
core operating costs. Budgeted income exactly equals
A comparison of the budget to actuals budgeted expense — this is a “plugged”
year-to-date shows that the organization budget; nature is never this precise.
is close to meeting its budget.
There is someone in the organization
who knows its financial performance
and can explain any patterns.

18. Evaluating Financial Health
Project Budgets
Positive Indicators Red Flags
The project budget is aligned with the The project budget is unrealistic
organizational budget. and/or not consistent with the
The overall project budget seems proposal narrative.
appropriate for what is described in the In reviewing anticipated income
proposal narrative.
There appear to be appropriate income
(committed, identified, unknown),
streams and a realistic budget that
the unknown is too big.
adequately covers program costs.

19. Evaluating Financial Health
Funding Mix
Positive Indicators Red Flags
The organization has diversified The E.D. and board member(s)
contributed income, as well as earned cannot articulate their funding mix.
income (if appropriate).
The organization is overly
The fundraising goals (for the
dependent on one source of
organization or the project) and overall
budget are realistic based on the funding.
economy and past experience. The organization has had a
difficult time meeting the public
support test and maintaining its
public charity status.

20. Evaluating Financial Health
Financial Position & Trends
Positive Indicators Red Flags
The organization has a history of breaking The organization does not have enough
even or operating in surplus. cash on hand to meet demands.
The financial manager and executive The organization has a growing
director can describe the organization’s accumulated deficit, and is projecting
current financial state. another deficit this year.
The organization has a long-term vision of The balance sheet shows negative net
where it wants to be financially. assets.
The organization has debt other than long-
term debt for asset acquisition, and has no
debt reduction plan.
There are unusual items in the
organization’s financials (loans from board
members, unpaid salaries) that are not
clearly accounted for.
The auditor has issued a “qualified
opinion.”

21. Evaluating Financial Health
Fund Development
Positive Indicators Red Flags
There is a plan for raising money, The organization cannot articulate a
developed with the involvement of plan for fundraising.
board members. The board is not involved in
The board of directors is aware of
fundraising.
The board members responsible for
or involved in the organization’s
fundraising and development oversight
fundraising goals and activities. don’t have the skills or interest.
The budget projects a perfect
breakeven, and the fundraising budget
number is exactly the amount needed.
Is it justified or just a “plugged” number.

22. Evaluating Financial Health
Financial Systems & Health
Positive Indicators Red Flags
Regular Audits for Organizations of There are no financial reports or
$250,000 or more statements generated.
Board has financial expertise and The organization has financial
Board conducts regular financial statements, but they are not reviewed
reviews by the board, or they are out of date
Board receives financial reports at (more than two months old).
least quarterly The organization “borrows” from
Management & Program staff other programs or restricted funds.
understand how to read financial The organization’s mid-year financial
statements statements indicate it is way off
 Financial reports are used to inform budget.
programmatic and other decisions Auditor’s letters to management
indicate weakness in internal controls.

23. Identify Funding Sources and
Financing Strategies
 Do you know how much you need?
 Is the initiative pursuing a variety of
financing options?
 Do you have a plan in place to pursue
options?

24. Creating a Strategic Budget Plan
 Clarify What You are Budgeting For?
 Number of clients you want to serve
 Number of sites you want to operate
 Target population you want to serve
 Range of activities you want to provide,
and
 Level of quality of services you want to
provide.

25. Creating a Strategic Budget Plan
 Estimate Fiscal Needs
 Activities & strategies you want to sustain
 Over what time period do you want to
sustain them?
 Ramp Up Assumptions:
 Scale of operations
 Start-up Costs and Timing
 Ongoing Operating Costs
 Infrastructure Costs

26. Creating a Strategic Budget Plan
 What funding sources currently support your
initiative? Amounts? Type?
 What non-cash resources provide support to
your initiative?
 Are these resources restricted to specific
program elements or functions?
 Over what timeframe will these resources be
available to you?

27. Creating a Strategic Budget Plan
 Assess Funding Gaps
 Identify Major Strategies or Activities
 Identify Total Costs
 Identify Available Resources
 Identify Gaps in Funding.

28. Creating a Strategic Budget Plan
 Identify Funding Sources and
Financing Strategies
 Clarify your NEED and WHEN
 Review current funding mix
 Public Funding
 Time-limited grants of 1 to 3 years
 Longer term funding commitments of more
than 3 years
 Any current funding sources that may be at-
risk of reduction or termination

29. Creating a Strategic Budget Plan
 Identify Funding Sources and Financing
Strategies (continued)
 How much revenue can be generated?
 What is the administrative burden?
 Does funding stream help diversify your funding
mix?
 When can you expect to realize the revenue?
 How can the funding be used (allowable costs)?
 Does accepting funding provide opportunities to
create new partnerships, or will it limit your
abilities?