Through real world nonprofit examples, learn how to build a budget and then use that budget to further the organization's mission.

1. The Budget Primer
Building and Using Budgets Better
Paul Konigstein
October 16, 2013
Twitter Hashtag - #4Glearn
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2. INTEGRATED PLANNING
Advising nonprofits in:
• Strategy
• Planning
• Organizational Development
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www.synthesispartnership.com
(617) 969-1881
info@synthesispartnership.com
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3. Coming Soon
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4. Today’s Speakers
Paul Konigstein
Senior Consultant
Accounting Management Solutions
Assisting with chat questions:
Jamie Maloney, 4Good
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Founding Director of Nonprofit Webinars and Host:
Sam Frank, Synthesis Partnership
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5. The Budget Primer
Building and Using Budgets Better
Paul Konigstein
Senior Consultant

6. ABOUT US
• For more than a decade,
Accounting Management
Solutions, (AMS) has
provided accounting support
and financial management
leadership at the consulting
CFO, controller and
accounting manager level to
dynamic companies
throughout the Northeast.
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7. TODAY’S AGENDA
• Types of budgets
• Creating the budget
• After the budget is
completed
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8. TYPES OF BUDGETS
• Operating – day to day activities of the entire
organization
• Program – activities of one program
• Grant – activities supported by one grant
• Cash flow – cash in and cash out
• Capital – investment activities of the
organization
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9. TIME SPANS
• Year – most common
• Month – most precise – for organizations that
close monthly. Also commonly used for cash
flow
• Multi-year – for strategic planning
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10. NO TWO NONPROFITS ARE ALIKE
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11. TWO BUDGET CREATION CHOICES
1. Traditional budgeting - modify last year’s
budget
2. Zero based budgeting – start from scratch
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12. ADVANTAGES OF
ZERO BASED BUDGETING
1. The environment is changing too rapidly
for historical trends to remain meaningful.
2. Basing budgets on past history
encourages managers to spend every
penny in their budget when it may not be
efficient or effective to do so.
3. Mistakes that inadvertently creep into the
budget are replicated year after year.
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13. DISADVANTAGES OF
ZERO BASED BUDGETING
Cannot accommodate inability to predict demand
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14. ZERO BASED PROCESS
1. Start with volume goal
for each program
2. Determine inputs
necessary to achieve
volume
3. Cost out each input
4. Align costs to revenue
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15. TRADITIONAL PROCESS
1. Estimate revenue/growth contraction from
previous year
2. Grow/decrease expenses in line with revenue
change
3. Change all expenses proportionately or
change one program/project/department and
leave others intact
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16. ESTIMATING REVENUE: FINANCE
AND DEVELOPMENT PARTNERSHIP
• Assess current funding
• Assess prospects
• Assessment methodology:
• probability of obtaining funding OR
• most Likely, somewhat likely, least likely
• Earned Revenue – assess based on market
trends
• Other Revenue – Investment earnings
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17. TIME LINE AND RESPONSIBILITY
Senior Management and Board
Determine appropriate budget process for organization
Finance and Development
Estimate revenue and provide background materials
Department/Program Managers
Draft budgets for their areas
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18. TIMELINE AND RESPONSIBILITY
CONTINUED
Finance and Department/Program Managers
Justify draft budgets
Finance
Check and compile draft budgets
Senior Management
Set priorities for aligning revenue and expense
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19. TIMELINE AND RESPONSIBILITY
CONTINUED
Finance
Finalize budget
1. CEO 2. Finance Committee 3. Board
Approve budget
Finance and Department/Program Managers
Disseminate and monitor budget
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20. AN EXAMPLE
Save the Children – Mali Program
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21. BUDGETS AS A
FINANCIAL CONTROL TOOL
Budgets provide:
• Transparency
• Accountability
• Expectations
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22. MONTHLY REPORTING
BUDGET REPORT
BUDGET
ACTUAL
VARIANCE
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23. KEY TO FINANCIAL CONTROL
• The management team regularly reviews
budget variances.
• Everyone must understand the reason for
the difference.
• A variance which cannot be explained is
likely to indicate improper expenditures and
should be investigated thoroughly.
• Determine action items for variances which
are explained.
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24. REASONS FOR BUDGET VARIANCES
• Program plans change in mid-year.
• Environmental factors affect program
delivery
• A miscalculation is made in the budget
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25. A CASE STUDY
WHEN YOU IGNORE BUDGET VARIANCES..
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26. QUESTIONS??
Paul Konigstein
Senior Consultant
Accounting Management Solutions, Inc.
pkonigstein@amsolutions.net
516-270-5070
www.amsolutions.net
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