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Rosenswig McRae Thorpe LLP
January 2015Lorraine Varga CPA, CAGreg Loskutov CPA, CA
BUDGETING FORNOT-FOR-PROFIT ORGANIZATIONS
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BUDGETING AS PART OF STRATEGIC PLAN
Strategic plan sets strategic goals
What resources are required to achieve goals?
Allows for prioritizing goals and determining how realistic they are
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Goal - increase number of athletes who receive $6,000 grants from 50 to 100.
Action - Host a fundraising event (30 tables for $15,000 each).
Success - funding of additional 50 athletes
Based on this goal: Raise additional $300,000 Fundraising event Cost
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WHAT IS A BUDGET & WHY DO IT
Financial plan of action
To plan and control expenditures
Monitor surplus/deficit
Common types of budgets: Operational budgets Capital budgets Program budgets Line item budgets
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BUDGETING PROCESS
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BUDGETING PROCESS
Who and when
Determining goals Define and set objectives Ensure these are reasonable
Gather data Look at historic information Involve entire organization
Creating the budget Simple or extremely detailed Level of detail depends on complexity (cost/benefit)
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BUDGETING PROCESSR
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BUDGETING PROCESS Two main components of budget:
Revenues Committed Repeat sources New sources (do not over-estimate)
Expenditures Variable vs. fixed Departments and programs
Document assumptions Prepare various scenarios Approval by the board Communicated throughout organization
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BUDGETING PROCESS
Monitoring Actual vs. budget Investigate variances Tracking and achieving goals
Adjust as needed Change in circumstances Revisions
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GALA RESULTSR
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OTHER CONSIDERATIONS
Budget vs. cash flow forecast
External restrictions
Benchmarks
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RATIOS
Current Ratio = Current Assets .Current Liabilities
Ability of an organization to pay back its short-term liabilities with short-term assets
Debt Coverage = Net Operating Income .Debt Service
Ability of an organization to generate enough income in its operations to cover the expense of debt
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BUDGETING PROCESSR
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YEAR-END AUDIT TIPS Budgets can help auditors understand what happened
during year
Budgets do not have to mirror FS groupings
Keep books (general ledger) as straight forward as possible
“Wish list” prior to the audit
Information is readily available
No further adjustments
Subledgers and summaries agree and reconcile to the general ledger
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CRA UPDATES
Revocation of charitable status
Concerns of NPOs earning profits and building up reserves
Electronic filings
Disbursement quota and fundraising ratios
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Questions/Discussion
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