Janet Gibbs, former CFO at Feeding America, explores best-practices for creating budgets that capture real costs of nonprofit programs, and how to use a dashboard to track progress.

1. Finance – Budgets and Dashboards
Presented By: Janet Gibbs
President & CEO
Mission Accomplished
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2. Session Focus
• Best practices for better budgets
– for organizations and programs/projects
• In this session, participants will learn:
– How to create budgets that capture the real costs
of programs
– How to use dashboards to track progress
– How to talk with funders about budgets

3. What is a Budget?
• An estimate, often itemized, of expected
income and expense for a given period in
the future.
• A plan of operations based on such an
estimate.
• A benchmark against which to measure
performance
• The total sum of money set aside or needed
for a purpose: the construction budget.

4. Purpose of the Budget?
• Fiscal roadmap
• Fiscal control
• Align with plans or Align with past?
• Balance revenues and expenses
• Save for future plans
– Debt repayment, construction project,
endowment

5. A Budget is: An itemized estimate of expected
income and expense for a given period
• Typically begins with a high level estimate of
each revenue line item
– Program fees, state support, gifts and grants,
auxiliary income, investment income
– Targeted organization-wide input
• Expense budget is an organization-wide
PROCESS
• Report actuals against the plan

6. A Budget is: A plan of operations
• Certain programs and service levels are
assumed in the budget
• Programs/services provided regardless
(almost) of actual revenue and expense
– Auxiliary operations
– Membership activities
• Report budget variances along with
program/service levels

7. A Budget is: A benchmark against
which to measure performance
• Budget is set and never changes, even if
revenues and expenses change
• If actual revenues or expenses differ, that’s OK
• Report variances and explanations
– Budget was not correct
– More/less revenue due to?
– Expenses over/under due to?

8. A Budget is: The total sum of money set aside
or needed for a purpose
• Budget of $10 million to upgrade student
activity center
• Line item detail required
• Control project through expense budget
• Hands-on progress monitoring required

9. Your Role in Budgeting
• It depends!
• Does budgeting report to CEO, COO, CFO?
• How involved is the Board, leadership team,
staff, members?
– Don’t forget funders, government, clients,
community

10. Your Role in Budgeting
• Since CFO must manage and report on the
budget, the CFO must fully understand it and
the goals it is expected to achieve
• What is your/CFO role in controlling the
budget?
• What is your/CFO role in setting funding
priorities for programs and administration?

11. A Variety of Budget Processes
• Incremental
• Zero-based
• Planning, Programming, and Budgeting
Systems (PPBS)
• Performance based
• Formula budgeting
• Responsibility center (RCB)
• Initiative-based

12. Can the Budget Process Drive Change?
• In spite of the various means, change is
difficult
• Most all budgets are truly incremental in spite
of the road taken
• Is this good or bad?

13. Why Incremental Budgeting?
• Why, in spite of dozens of strategic plans and
budgeting processes, do we most often end
up with incremental budgeting?
– A little addition here, a little reduction there

14. “Fixed” Budget Roadblock
• 70%+ of all operating budgets consist of
“fixed” costs
– Salary and benefits
– Debt service
– Rent/lease agreements
• “Tenured” staff
– Founder
– Former superstar
– Untouchables

15. Service Level Roadblock
• Most budget reductions come from non-
program, central support functions
• Service levels naturally change
• How long can you do more with less?
• Who wants a colleague to lose their job?

16. Incremental Revenue Roadblock
• Revenue increases go primarily to support
cost increases in personnel, operations
– Usually for programs
– Indirect costs are limited and don’t cover
overhead
• Little left over for new initiatives

17. From Planning to Budgeting
• How do we implement all of the great new
initiatives in an incremental financial world?
• Where does the money come from?
• Everything we do looks like it fits into the plan

18. Planning Drives the Budget
• Or does it?
• Once there is a plan, the budget should be
easy, right?
• How to implement the plan’s priorities
– Fully fund 1 or 2 at a time?
– A little bit of everything each year?
– What about multi-year commitments?

19. For real change to occur, there
needs to be a burning platform.
Otherwise, what’s the hurry?

20. There’s nothing like a good financial
crisis to stimulate change

21. How to Change Resource Allocations
and Program/Service Support
• Gain buy-in up front
– we want to implement this plan, don’t we?
• Focus everyone on the long-term goals
• Don’t reinvent the plan!
• Involve all levels of the organizational
community

22. How to Change Resource Allocations
and Program/Service Support
• Have a plan
• Decide to use it and develop budget process
that supports inclusion of plan attributes
• Create incentives for change
• Think long term
• Show the possibilities
• Be tough!

23. How is the Budget Built?
• Guidelines?
• Inflation factors?
• Cuts needed?
• Revenue growth?
• Compensation increases?
• Use of reserves or budget carry-forwards?

24. How is the Budget Built?
• Based upon current year budget?
• Based on prior year(s’) budget(s)?
• Last year’s actuals?
• Average of past x years’ actuals?
• Incentive or new program opportunities?

25. Who is Ultimately Responsible?
• Budgeting by Committee
• Input from multiple constituencies inside and
outside the organization
• Rank the program additions and reductions
proposals
• Draw the proverbial “red line”
• What to do with multi-year commitments?

26. Budget Review Process
• Who is involved?
• What level of detail is reviewed?
– Line item detail
– Comparisons to prior years
• What level of detail is presented to the Board?
• Who reviews central budgets?

27. Budget Questions
• Should budgets be balanced?
– Conservative or aggressive estimates?
• Should budgets be cash or accrual?
• Should budgets include non-cash expenses like
depreciation and accounts payable?
• Budget use of reserves?
• Budget receipt and use of grants, gifts?

28. Budget Monitoring and Reporting
• Monthly reports of budget versus actual
• Monthly, quarterly or annual budgets?
• Does the budget change during the year?
– If so, know what you are reviewing
– Budget variances are not necessarily bad
• KPI’s?
• Trend analysis is important

29. Monthly and Annual Financial Reports
• Actuals should be substantially the same
– Create and present reconciliation
• Operating versus non-operating
– Unrealized investment gains and losses
– Depreciation
– Use of reserves
• Educate the Leadership and the Board

30. Talking with Funders about Budgets
• Be knowledgeable
• Be honest and transparent
• Know what’s in the budget and what’s not
• Don’t be afraid to discuss importance of
funding for infrastructure
• Understand and present impact of donor
funds on your success

31. Tracking Progress through Dashboards
• Dashboard is a visual progress report
• Progress at a glance
• Focus on key performance indicators
• Suggest action required
• Cover the entire organization, not just budgets

32. Finance Dashboard
Adapted from Blue Avocado (http://www.blueavocado.org)
A Nonprofit Dashboard and Signal Light for Boards
Target 6 months ago Now
Days of unrestricted cash on hand 45 days 85 days 18 days
Net surplus or deficit YTD
compared with YTD budget
Within 25k
or better
$42,500
worse than
YTD budget
$28,000
worse that
YTD budget
Government funding YTD Within 3%
5% worse
than budget
3.1% worse
than budget
Days from end of month to
financial reports 15 days 45 days 30 days
Finance

33. Program and Impact
Target 6 months ago Now
Number of first-time clients
enrolled 360 this year 160 205
Certifications obtained 90% 70% 82%
Paid seats per theatre
performance
90% of
available
seats 75% 85%
Presentations to churches,
companies, neighborhood groups 15 per year 7 YTD 7YTD
Program and Impact

34. Human Resources
Target 6 months ago Now
Performance evaluations
completed on time 90%
No data
available 82%
Truck accidents per year 0% 3 1
% diverse staff in exempt
positions 55% 20% 32%
Open workers compensation
claims
No more
than 8 15 6
Human Resources

35. Board of Directors
Target 6 months ago Now
Attendance at Board meetings 75% 75% 85%
CEO performance evaluation
completed 15-Feb
Not
applicable
Completed
February 13
New Board members
4 new
members by
September
30
2 new by
June 30
No change
since June
% of Board members making
personal charitable contribution 100% 35% 65%
Board of Directors

36. Fundraising
Target 6monthsago Now
Newfoundationsorcorporations 10thisyear 3 7
Newindividualdonors 9-Apr 11 82
Averagegiftsize $200 $95 $150
%ofunrestricteddonations 30% 5% 18%
Fundraising

37. Compliance and Risk Management
Target 6 months ago Now
Form 990 filed on time
By
November
15
Not
applicable
Applied for
extension
Annua safety drill conducted By March 31
Not
applicable
Completed
March 15
Complete review and evaluation
of insurance coverage By June 30
Completed 4
of 7 policies
Completed
and new
policies in
place
Audit grant compliance Quarterly
Completed
25% of
grants
Completed
75% of
grants
Compliance and Risk Management

38. Dashboards Have Limitations
• May not be helpful on complex matters
– Consider a merger?
– Program evaluation
– Environmental scan
• Color choice is subjective
• Too many line items leads to lack of focus

39. Dashboard Summary
• Board members can readily focus on matters
needing their attention
• Multiple data points is best
– Show trends over time
• Understand what you expect form your Board
when Yellow and Red is reflected

40. Thanks So Much!
• For more information, please contact:
– Janet Gibbs
– President & CEO
– Mission Accomplished
– gibbs.jca@gmail.com
– www.linkedin.com/in/janetgibbs/