60
Proactive Budgeting in the Face of an Uncertain 2019 Karen A. Roche, CPA Partner
Proactive Budgeting in the Face of an Uncertain 2019 Karen A. Roche, CPAPartner
CALIBRECPA.COM
• Budgeting Basics• Roles and Responsibilities• How Uncertainty factors into the budgeting process
– Transforming the operating model– Optimizing business processes– Right sizing staff size (FTE)
• Monitoring Budgets• Administrative Tips
Topic Outline
CALIBRECPA.COM
Budgeting is a continuous process
Budget Formulation• How are spending
priorities determined
Budget Execution• How funds are allocated
Budget Monitoring• How is spending
accounted for?
CALIBRECPA.COM
Four Types of Budgets
• Operating Budget – Accrual Basis
• Cash Flow Budget– LM is Cash Basis– Best practice for many locals
• Capital Budget
• Opportunity Budget
CALIBRECPA.COM
A Good Budget …
• Contains well thought out goals that are essential to the organization’s success• Clearly defines the activities and resources needed to achieve organizational goals• Sets deadlines and establishes a timetable for the activities of the organization• Defines who is responsible for the budget
3
CALIBRECPA.COM
A Good Budget …
Will Allow the Organization to …• Gauge whether it is meeting its financial goals• Provide useful information to internal decision makers and the general
public• Review the performance of its programs and initiatives
4
CALIBRECPA.COM
Organization Wide Budget
“The Big Picture”• Central Budget
– Employees– Contract Consultants– Building/Facilities Costs– Other allocated costs
• Roll Up of Program Budgets
5
CALIBRECPA.COM
Program Budgets
• Operational budgets for individual programs/activities are the building blocks of the organizational budget
– Costs included should roll up to the organizational budget and include all elements necessary to evaluate the operations of a specific program/activity
6
Budgeting Roles and Responsibilities
• Board Responsibilities
• Shared Responsibilities
• Officers/Staff responsibilities
Policy Making
Implementation
CALIBRECPA.COM
Board Responsibilities
• Develop mission statement and endorse fund-wide and state-wide processes and/or plans for the projects
• Establish general polices such as requirements for a balanced budget and use of cash reserves
• Set goals• Formally reviewing and approving the budget • Regularly monitoring results
8
CALIBRECPA.COM
Board Responsibilities
• Ask Mission Questions• Reassess the need for high-cost, low-return initiatives• Consider long term commitments• Focus on program performance avoiding the time-honored but ill-advised practice
of across-the-board spending cuts -- a strategy that implies that everything is equally important at the margin
• Regularly monitoring results
8
CALIBRECPA.COM
Shared Responsibilities
• Strategic Planning• Goal Setting• Monitoring• Corrective Action
8
CALIBRECPA.COM
Officers’ Responsibilities
• Schedule strategic planning sessions with the Board (or subset) and prepare recommendations to guide budget development
• Create budget schedule and ensure that deadlines are met• Review draft budgets and provide recommendations for any
changes necessary• Prepare the budget document for presentation to the Board• Review financial reports and correct deviations from budget
throughout the year• Make resource allocation decisions• Communicate results of monitoring to the Board
9
CALIBRECPA.COM
Officers’ Responsibilities
• Develop and propose budget goals that will be approved by the Board• Collaborate with Regional Directors to create detailed operational budgets for
each program/activity • Develop capital budgets for new equipment needed• Make resource allocation decisions within their areas to meet targets• Develop scenario budgets• Monitor and be accountable for variances throughout the year
10
CALIBRECPA.COM11
How Does Uncertainty Factor In?
CALIBRECPA.COM
Don’t Confuse Uncertainty with Distress
Distress or Turnaround
• Cash conservation• Global cost reduction
Prolonged Uncertainty
• Transforming operating model• Optimizing business processes• Right sizing FTE
Priorities Shift
Distress or Turnaround
Growth
Talent
Costs
Liquidity
PRIORITIESProlonged Uncertainty
Growth
Talent
Costs
Liquidity
PRIORITIES
Where Do You Start?
• Transforming the operating model
• Optimizing Business Processes
• Right Sizing FTE
Transforming your operating
model
Aligning Costs to the strategic objectives versus global cost cutting
Revenue objectives such as member retention and growth might require spending money to make moneyPerformance enhancement means making sure operations support staff
Aligning Costs to Strategy
• Aligning starts with dissecting and segregating costs
• Good Costs are capabilities that add value and spending focused on what really matters
• Bad costs are non essential areas of spending
Judging the
Good and the
Bad Not requiredNon essential capabilities
Low or no Return on Investment (ROI)
Fixed Costs & “Can’t avoid”Constitutional Requirements, DOL
Requirements
“Lights On” Costs to operate or building costs
Benchmarking or Comparing Trends with Other Labor Organizations
• Identifies best practices• Highlights potential areas
of concern• Often results in cost
savings• Easy and affordable
Calibre Labor Union
Report
• Year over Year LM2 Data• Separates information into
three groups based on size of Per Capita Tax/Dues/Fees
• Totals and Averages
Benchmarking Tools
Cost outCost out Scenarios•Base Case•Worst Case•Best Case
Develop Scenarios
Prepare Narrative Outcomes around Uncertainties•Moderately good outcome•Moderately bad outcome•Worst possible outcome
Gather Data
Key factors• Trends• Geographical influence• Uncertainties
Scenario Analysis to Budget Revenue
Optimizing Business
Processes
Map out processes (Dues, HR, Representation, Union Administration, Overhead)
Analyze Data
Identify weak or inefficient processes
Optimize
• Restructure• Reassign• Automate
CALIBRECPA.COM
Analyzing Data
• Revenue and expense trends over 3 to 5 years capture nonrecurring items and cycles longer than one year
• Useful in identifying total costs• Predictable versus unpredictable
– Per FTE ratios for predicting other costs such as travel, training, use of consultants– Historical costs for predicting meeting costs etc– Costs subject to COLA
Analyze your IT Costs
• Business typically spend 4.1% of their revenue budget on IT
• Optimizing technology is essential to performance enhancement
• Potential cost savings – Virtualization– Outsourcing IT– Outsourcing Security– Hybrid Cloud Implementation– Pay as you go benefits
Optimizing for
Efficiency
• Restructure• Reassign• Automate
Right Sizing the Workforce
Human Resources Planning
Total Organization
Demand
Auditing Jobs and
SkillsCapabilities Inventory
CALIBRECPA.COM
Matching Demand to Jobs and Skills
Organization Demand
• Analyzing needs based goals and objectives
• Availability of human resources• Collective bargaining/unit
demands• Include benefits as a cost
component
Jobs and Skills
• What jobs exist now?• How many individuals are
performing each job?• How essential is each job?• What are the characteristics of
jobs needed to implement new strategies?
Capabilities Inventory
• Compilation of the skills, education and experiences of current employees.
• Assess whether current staff can meet strategic goals
• Identify and plan for training gaps• Succession planning• If you don’t have a formal evaluation
process now is a good time to start!
Monitoring Budgets
Budgeting Basics for Non-Profits 37
CALIBRECPA.COM
Current Year Implementing and Monitoring
• Comparing Budget to Actual Results – What Happened? – Actual Expense – Budgeted Expense = Variance
• Variance Analysis : Why?– Typically reported both as an amount and as a %
41
CALIBRECPA.COM
Updating Fiscal Projections
Reexamine the assumptions used in projecting income and expenses
Adjustments to the budget must be made if: – Administrative costs are more than projected– Price increases were lower than estimated– New sources of income were found and utilized
CALIBRECPA.COM
Variance Analysis
• Small variances are normal and expected• Large variances need to be understood.
CALIBRECPA.COM
Variances can be due to:
• Timing/Delays in processing payments or receiving income• Uneven spending patterns• Incorrect profiling of budgets• Incorrect budget assumptions• Mis-codings• Centrally managed budgets• Activity/Demand changes• Management of resources
CALIBRECPA.COM
Tools for better variance analysis
• Refer back to the narrative portion of the budget to help:– Identify incorrect assumptions– Identify incorrect budget profiling
• Transaction comparisons; monitoring reports show totals. Ask for lists of transaction detail to help:
– Identify mis-codings– Identify activity/demand changes
CALIBRECPA.COM
When to take corrective actionTypically no corrective action:
• Timing issues• Uneven spending patterns• Centrally managed budgets
Might require corrective action:
• Incorrect profiling of budget• Mis-codings• Activity/Demand changes• Management of resources
CALIBRECPA.COM
Corrective Action
Variance
• Incorrect profiling of budget• Mis codings• Activity/Demand changes• Management of resources
Possible Corrective Action
• Noted for next years budget• Reclassification entries • Re-forecast budget, re-align priorities• Immediate action to make sure
problems don’t worsen over time
CALIBRECPA.COM
Budget Administrative Tips
• Planning• Communication
CALIBRECPA.COM
Planning the Budget Process
Four Steps for Developing a Budgeting Calendar1. Think through the entire budget cycle2. Establish time frames and specific deadlines
• Start with known deliverable dates and work backwards3. Establish accountability by clearly assigning ownership to
tasks4. Allow time for drafts and revisions
CALIBRECPA.COM
Communicating the Budget Process
• Budget Kick-Off meeting to introduce the process– Budget preparation package with:
• The Budget Calendar• Budget Instructions• Budget Worksheets
• Budget Training – It may be necessary to go over the Budget Instructions & Worksheets in greater detail at a
separate Budget Training Session
CALIBRECPA.COM
Suggestions for Budget Instructions
• Each line item should include written narrative that explains and justifies its figures
• Use current year figures as a starting point for next year’s budget• Determine which expenses to have the accounting department budget centrally
and have them provide allocations to program directors as appropriate• Make sure the personnel budget captures total cost including benefits and taxes
and proposed increases
CALIBRECPA.COM
Payroll Budget Suggestions
• Payroll – Consider OT and travel time in the upcoming year and figure in any anticipated increases; vacation and supplemental dues are added to the base hourly wage to get the taxable wage
• Build Pension/Health & Welfare/Payroll Taxes/ Workers Comp into the workbook so they will be automatically calculated based changes to staffing
CALIBRECPA.COM
Travel Budget Suggestions• Budget trips/events individually and provide narrative. This helps
identify and avoid duplication– Location– Timing– Attendees– Purpose
• Provide guidelines such as:– Limits on airfare, hotel, car rental
• Consider IT and material needs at offsite locations
CALIBRECPA.COM
Capital Budget Suggestions
• Evaluate age and book value of furniture and equipment in planning replacement• Seek economies of scale in purchasing – see if bundling purchases previously made
separately might lower prices• Evaluate cost associated with auto policy• If you own a building consider a facility condition assessment to prioritize and plan
for renovations and repairs
(202) 331-9880
Chicago (312) 655-0037
New York (212) 695-1300
Washington, D.C.
Direct DuesCalibre WebinarNovember 2018
www.billhighway.co
CALIBRECPA.COM
“We’ve taken the employer completely out of the membership process and put the power back in the hands of members.”- Ruby Newbold, President, Detroit Association of
Education Office Employees
CALIBRECPA.COM
States that have either lost or havefaced threats on the loss of payrolldeduction
States that are BOTH Right toWork for Less and have eitherlost or are facing threats to losepayroll deduction
Right to Work for Less States
Loss of PayrollWhere is the problem now and in the future?
Billhighway: Better Tools,More Engaged Members
SolutionServing only member-based organizations
since 1999
Union FocusUnifying HQ & locals
for the betterment of all
Dedicated80+ dedicated team experts and $1bln
processed annually
MichiganLocated in Troy,
Michigan
CALIBRECPA.COM
• American Federation of Teachers (AFT)
• Michigan Education Association (MEA)
• Missouri State Teachers Association (MSTA)
• National Air Traffic Controllers Association (NATCA)
• Pennsylvania State Education Association (PSEA)
• United Steel Workers (USW)
Who We Partner With…
Preparation is Key
• Member sign up forms
• Membership renewals
• Member record updates
• Managing list for recurring payments
• Gathering/updating payment information
• Failed transactions follow up
• Member balance, past due, or insufficient funds
• Security & compliance• Billing for recurring
payments (mimicking payroll)
MembershipManagement
PaymentManagement
Banking &Accounting
ChangeManagement
• Process payments (ACH)
• Process payments (Credit card)
• Exception handling• Proper separation
of COPE and dues payments
• Funds transfers
• Training locals on new process
• Support for local administrators
Educating our clients
Our focus is to educate and provide thought leadership to our clients in the labor space…
Batch File Reconciliation
Manual Input
Eliminate Admin Headaches
Offline Payments
Real Time Data
1234
Member Rosters
Accurate Financials
Configurable Roles
Keep Dollars & Data Safe
5678
CALIBRECPA.COM
PCI Compliance NACHA Compliance
= Member Data Secured
SAVE:
$9.7MBased on a study from
the Security Intelligence, the average consolidated
total cost of a data breach for 65,000 members totals to
$9,750,000 or $158/member.
https://securityintelligence.com/media/2016-cost-data-breach-study/
Sensitive Data Needs to be Protected
What Members Want
Convenience
Secure Payment Info.
PAC Support and Other Initiatives
Automation
24/7 Access
$
$
$
Questions?Do you have any questions about Direct Dues or the Billhighway solution? Let us know how we can help. Contact us!
Ron Krouse
703-615-0289
Megan Pyles
248-273-0074
