1August 25, 2015

YWCA USA Financial Leadership & Management ProgramThe Art & Science of Budgeting & Dashboard Driving

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Join us on Twitter: @SpectrumSteve

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WELCOME

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Financial Leadership Model

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Today’s Conversation

• Budgeting in Context– Roles– Timeline– Bridging the Gap– Presenting the budget

• Dashboard Driving– Styles and Metrics

AGEN

DA

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Which is a better budget?

Program Budget Actual

A $850 $900

B $1000 $900

It depends!Planning Monitoring

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Putting Budgeting into Context

Planning• Define organizational

goals• Tie into strategic plan• Online resource needs

and uses to accomplish goals

Monitoring

• Monitor progress throughout the time period

• Show differences between plans or goals and actual use

• Take corrective action as problems arise.

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Budgeting:A Holistic Process

• What is the problem that needs solving?

• What will you do about it? – Theory of Change, Mission Impact.

• What will that cost you?

• Who would and why should someone pay? – Marketing, Fundraising

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Who is Involved?

Everyone

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Roles in Budgeting

Description CEO/CFO Devel. StaffProgram

StaffFinance

CommitteeProgram

CommitteeDevelopment Committee

Full Board

Set Goals              Estimate

Costs              Forecast Revenue            

Bridge the Gap              

Approve              

Implement              

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But, Who is In-Charge?

• Typically the Director of Finance or Bookkeeper will be the budget keeper, in-charge of the spreadsheet. If you contract out services, the Executive Director may keep the spreadsheet.

• The ED as the FINANCIAL LEADER is responsible for keeping the time table and momentum.

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When do we budget?

• Budgeting takes time – make sure you allot enough of it.

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Sample Budget CalendarJune 30th Year End

March Retreat - review performance; set goals

April Program plans; direct cost estimates

May Income plans; capital budget; first draft

June Cash flow; alignment, approval

July Begin implementation

October 1st quarter review

January Mid-year review (and revision, if needed)

Ongoing Monthly review of budget vs. actual

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6 Stages of Budgeting

Setting Goals and

Context

Estimate Costs

Forecast Income

Bridging the Gap

Approve the Budget

Implement and Monitor

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6 Stages of Budgeting

Setting Goals and

Context

Estimate Costs

Forecast Income

Bridging the Gap

Approve the Budget

Implement and Monitor

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Setting Context and Goals

• Review past performance

– Financial metrics:

• What is our reserve?

• What do we want our reserve to be?

– Program metrics

• How many people did you serve?

• How are our impact measures?

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Setting Context and Goals

• Review past performance

• Review strategic or business plan– What are your goals?

– Where should you be on goals?

– Were any assumptions incorrect?

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Setting Context and Goals

• Review past performance

• Review strategic or business plan

• Review your market– Are constituent needs changing?

– Are funders or revenue streams changing?

– Is there new competition?

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Setting Context and Goals

Exploration Area Who

Strategic Objectives CEO / Staff / Board

Impact / Program Objectives Program Committee

Market Analysis CEO / Staff / Board

Financial Goals / Reserve Finance Committee

Revenue / Development Plan Development Committee

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2016 Budget Goals

As of August 15, 2015

Overall Goal 2016 Objective Stabilize programs and ensure highest quality

Salary increases to all staff Replace computers and equipment

Increase direct client support

Improve on key financial health indicators

Build cash reserve Reduce overhead rate

Obtain line of credit

Maximize fundraising effectiveness

Increase endowment income Increase board role in fundraising

Build temporarily restricted balance Maximize cost recovery in foundation grants

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A note on structure

Your chart of accounts:– Does it easily show how your programs are

performing?

– Do your expense categories make sense?

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6 Stages of Budgeting

Setting Goals and

Context

Estimate Costs

Forecast Income

Bridging the Gap

Approve the Budget

Implement and Monitor

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Estimate Costs

What are the costs for accomplishing our goals?

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Estimate Costs

Personnel Costs• Create a staffing plan.

• Not based on who is currently working there and how they are funded, but rather how many people you need to cover your goals.

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Staffing Plan

For the Nine Months Ending 9/30/14

Program Activities   Supporting Activities  

Position  

Employment / Economic

Development

Domestic Violence Prevention & Intervention

Childcare / Youth Development   Admin

Fund- raising  

Shared Costs

   

Executive Director 100% 5% 10% 15%   35% 35%  

Admin Asst. 100% 15% 5% 5%   45% 30%  

Finance Director 100%   100%  

Development Director 100%   100%  

Director of Counseling 100% 100%    

Director of Education 100% 100%    

Counselors 400% 400%    

Teachers 150% 150%    

Director of Technology 100%     100%

Receptionist 100%     100%

Custodian 20%     20%

Bookkeeper 50%   50%  

Development Coordinator 50%   50%  

   

Total FTE's 14.70 2.70 5.15 0.20 2.30 2.15 2.20

Total FTE's w/o Shared 12.50

Shared Allocation % 22% 41% 2% 18% 17%

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Know your expenses

Direct Program

Shared Costs Administration Fundraising

• Not budgeting in the correct category can lead to a high overhead rate.

• Understand the relationship between growing one category and the other.

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Estimate Costs:Questions to Ask

• Think about what is new and what is the core of your program?

• Can we realistically just keep adding services or tasks?

• Who will pay for new services?

• Are there new technologies or theories that will help us deliver on our mission?

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6 stages of budgeting

Setting Goals and

Context

Estimate Costs

Forecast Income

Bridging the Gap

Approve the Budget

Implement and Monitor

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Forecast Income

Contributed Support Earned Revenue

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Forecast Income

Sources of Support• Individuals• Foundations / grants• Corporations• Special events• Planned giving

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Forecast Income

• What is happening with the economy?

• Are we cultivating donors?• What is the timing for

foundations?• Are we building up restricted

grants?• Can we deliver on restricted

grants?

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Forecast Income

• Understand the true costs of delivering programs including shared and administrative costs.

• Are we competitive?

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Forecast Income

Contributed Support Earned Revenue

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Setting Goals and

Context

Estimate Costs

Forecast Income

Bridging the Gap

Approve the Budget

Implement and Monitor

6 stages of budgeting

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Bridging the Gap

• How much do you have in reserves?

• Do you need to build a reserve?

• Can you use a reserve?

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Bridging the Gap

• Go back to the priorities that were set in Step 1.

• What is a high priority for the organization to accomplish this year?

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Bridging the Gap

• Cash flow projections:– Does the cash flow work for this budget?– Do you need to move income or expenses

around?

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Bridging the GapQuestions to Ask

• Are we putting our money where our mission is?

• Does the budget support financial health?

• Are we making effective, efficient use of funds?

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6 stages of budgeting

Setting Goals and

Context

Estimate Costs

Forecast Income

Bridging the Gap

Approve the Budget

Implement and Monitor

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Approving the Budget

• Presentation is important.– A key opportunity to focus the board on how

to read and understand the financial statements.

• Drive the conversation with functional statements.

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Summarized Statement of Functional Income & ExpensesFor the Nine Months Ending September 30, 2014

   Program Activities   Supporting Activities  

 

Employment / Economic

Development

Domestic Violence

Prevention & Intervention

Childcare / Youth

Development   Admin Fund- raising  Shared Costs TOTAL

Contributions 90,000   90,000 Foundation grants 25,000   25,000 Fundraising events, net         76,300     76,300 Total Support - - - - 191,300   - 191,300

 Government contracts 340,000   340,000 Fee For Service 4,700   4,700 Investment Income       3,965       3,965 Total Revenue - 340,000 4,700 3,965 -   - 348,665

 Net Assets Released from Restriction 144,080 25,000 35,500         204,580 Total Income $ 144,080 $ 365,000 $ 40,200 $ 3,965 $ 191,300   $ - $ 744,545

 

Personnel Expense 96,370 224,020 21,045 34,960 37,950 51,750 466,095 Non-Personnel Expenses 31,300 157,400 6,780 13,000 3,900 54,200 266,580 Total Specific Costs 127,670 381,420 27,825 47,960 41,850 105,950 732,675

Shared Costs Allocation % 22% 41% 2% 18% 17% 100%Allocation of Shared Costs 23,309 43,440 2,119 19,071 18,012 (105,950) - Expense without Admin. 150,979 424,860 29,944 67,031 59,862 - 732,675

 Admin Allocation % 23% 64% 4% -100% 9% Admin. Allocation 15,204 42,784 3,015 (67,031) 6,028      

 Total expenses after allocations $ 166,183 $ 467,643 $ 32,959 $ - $ 65,890   $ 732,675

 Change in Net assets $ (22,103) $ (102,643) $ 7,241   $ 3,965 $ 125,410   $ 11,870

Base for Admin Allocation $ 732,675   $ (67,031)  $ 665,644

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Numbers to Look at

Money / MissionExpense Budget,By Program Area

% Expense Budget,By Program Area

“Investment”(Subsidy) By

Program Area  

Live Within MeansTotal Revenue –Total

ExpenseRevenue - This year,

Last yearExpenses This Year,

Last Year  

Effective/ EfficientUse of Funds

Cost Per Client Served/ Per Outcome

Cost Per Service Unit

% of Capacity metScale % Need Met;

Cost Efficiency

Reasonable Admin Support

% Overhead Rate

Key Admin Skills Available

   

 

Community Support# Donors

# Major DonorsTotal Raised

# Volunteers, Hrs. of service 

 

Trends Any significant trends, shifts in areas above

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Setting Goals and

Context

Estimate Costs

Forecast Income

Bridging the Gap

Approve the Budget

Implement and Monitor

6 Stages of Budgeting

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Monitoring Your Budget:Key Questions

• Is our budget performance on target?

– Have you budgeted by month?

– Projections?

• If not, what are our corrective action plans?

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Budget to actual report

Balance Sheet?

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How do I read these things?

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As a Dashboard

Indicator Target 6 months ago 3 months ago This Month

Days of cash on hand 60 25 48 57

Net surplus or deficit YTD compared with YTD budget. 0.0 $10,450 better $2,500 worse $5,400

better

Individual Contributions 100,000 50,250 75,000 98,290

Total expenses On budget $2,500 worse $760 worse On budget

Days from end of month to financial statement completion 45 days 65 52 40

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A dashboard’s purpose

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• Agreement ahead of time on what matters

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–Agreement ahead of time on what matters

–Agreement ahead of time on targets

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• Agreement ahead of time on what matters

• Agreement ahead of time on targets

• Agreement ahead of time on when action is needed

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Styles of Dashboards

• Most are 1 page

• Charts, graphs, icons, colors . . .

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2015 Dashboard Red Act NowYellow MonitorGreen Celebrate

6 mos ago 1 yr ago 1.5 yrs ago

1. Days Cash on Hand (current) 30 15 Total cash/average daily expenses2. Months Operating Reserve 3.3 3.3 Total proj expenses/12 months3. Overhead % 22% or less 20.6 % G&A and Fundraising/Total Budget4. Diversity of funding sources

a. Government grants 50% 57% % govt funds/total revenue b. Foundation 30% 22% % fdt funds/total revenue c. Individual 20% 21% % indiv funds/total revenue5. Revenues within 10% of budget within 10% 10% Expenses within 10% of total proj revenues6. Expenses within 10% of budget within 10% 13% Revenues within 10% of total proj revenues

Human Resources7. Morale >4 3.75 Rated on scale of 1 to 5 every Spring

8. Turnover <20% 24%(Total # of employees that have departed)/(total number of employees for year)

9. Professional Development 80% 89%% of staff engaging in professional development

10. Staff Evaluations 100% 70% % completed by Feb 28

Fundraising11. On track to meet individual goal $550K $525K12. Board Giving 100% 100% % of Bd members making annual contributions13. Advisory Board Giving 75% 75% % of Adv Bd members making annual contributions14. Board involvement 100% 90% % of Board involved in fundraising activities15. # of new funders a. foundations 10 13 b. individuals 75 6516. # of donors who give $1K plus 70 68

Communications18. # of press hits 50 48 # of times in media19. % readership of partner e-newsletter 50% 47%

Key

Finance

TrendPerformance Indicators

2012 Targets Proj Year-end

Comments

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Dashboard Dials

1. Finance

2. Program objectives and impact

3. Human resources

4. Compliance & risk management

5. Board of Directors and governance

6. Fundraising

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Starting Points

Key Questions:

– What is the organization focused on this year?

– What are the key drivers that will bring success?

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Performance Indicators Targets Current Indicator

TrendComments

Ranges

6 mos ago 1 yr ago1.5 yrs

ago Celebrate Monitor Act NowFundraising                  

New major donors 5 or more 3 2    Mesaured against how many we want for the year. Donors who give more than $1,000 5 or more 3 2

Major donors introduced by a board member

5 or more 5 5Measured against how many we want for the year. Not necessairly an "ask" - may be an introduction. 5 or more 3 2

Donors who gave over $100 last year, repeating this year

56% or more 53% 60%    Dones as a % of total donors who gave $100 in time period last year. > 56% 40-55% < 30%

Fundraising event revenue - net > $20,000 $ 23,000 $ 20,250    Proportionately to time of year - desired event revenue for 06-07 is $20,000 net > $20,000

$18,000-20,000

< = $15,000

   

Finance   Celebrate Monitor Act NowSurplus / deficit compared to budget within 3% 5% 8%     Measured as % vs. % of year elapsed   w/in 3% 3-10% >10%

Unrestricted liquidity > 1.0 0.8 1.2    Ratio = Current assets (Cash & Investments + Accounts Receivable - Restricted cash) / current liabilities   > 1.0 1 < 1.0

Unrestricted contributions (funding diversity)

20% or more 22% 19%    % of individual, corporate & other contributed support to total revenue (excludes foundations)   >= 20% 10-20% < 10%

               Human Resources               Celebrate Monitor Act Now

Staff retention 80% 100% 100%% of staff with at least 1 year over total staff   80% 70% 60%

Compensation study 7-Feb Not Done N/A     next steps by 2/07  Feb-07

Before Feb-07

After Feb-07

     Board Governance               Celebrate Monitor Act NowAttendance at board meetings 90% 100% 100% % of board at last 4 meetings   90% 80% 70%

New nominees meeting criteria 80% 75% N/A    % of new nominees meeting at least 6 of 9 established criteria   80% 70% 60%

Focus on strategy and generative issues 75% 80% 60%    % of meeting time during last 2 meetings spent on these issues   75% 60% < 50%

   

Programs               Celebrate Monitor Act Now# of outreach presentations 35 35 37 Count each session regardless of topic 35 < 30 20

Program Y Activity 500 420 390    Based on previous years' numbers and the strong emphasis on increasing #s 500 375-500 <= 375

Program X Activity 50 60 52    Based on previous years' numbers with some anticipated growth built in. 50 < 45 35

Average client satifisfaction 4.8 4.9 4.8    

Out of 1-5 scale. Don't have mechanism in place for averaging all evals. Need to work on consistency between program areas. 4.8 4.3 - 4.0 < 4.0

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Library of Possible Metrics

www.compasspoint.org

Click on Resources

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OTHER BUDGETING TECHNIQUES

Budgeting

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Avoiding Budget Disasters

Contingency Planning• Identify key revenue

drivers and expense assumptions

• Rate the stability/volatility/risk of each

• For high risk: • Can we reduce it?• What if it is eliminated?

Rolling Budgeting

• On a quarterly basis:• Review current budget and

assumptions• Always have a 4 quarter

budget

• Easier for grant funding• Keeps budget front and

center

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Your Questions

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Recap

Estimate your costs, know your expenses

Have a plan to bridge the gap and monitor progress over time

Agree ahead of time on what matters, know when action is needed

Build your budget with context and goals

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YWCA FLM: Discussion Sitehttp://ywcaflm.ning.com/

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Next Webinar: September 22

Revenue Strategy

• Finding the “right revenue” for your association

• Tools and questions for analyzing revenue streams

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Steve ZimmermanSpectrum Nonprofit Services

www.spectrumnonprofit.com

stevez@spectrumnonprofit.com

414-727-1029