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 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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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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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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