PDPM Budgeting Presentation

P D P M | A . H I L LO C K & B . F I S C H E R

BUDGETING BASICS

BASIC PRINCIPLES

• A budget should • Directly reflect organization’s

mission & priorities• Chart a direction for allocating and

maximizing use of resources• Tend to history of finances and

future projections• Futurity through rolling budgets

• Be tailored according to the scope & size of program/project

• Be compared to actual performance of projects• Allows staff to isolate

gaps/misdirected funds

EFFECTIVE BUDGETING

An effective budget is

• Realistic• Consistent• Flexible•Measurable

• Should plan for Short vs. Long Term Investments

PREPARING A BUDGET

• Determine programs & activities for the budget period• Budget expenses and revenues• Based on historical data, forecasts &

economic climate

• Develop a draft budget• Include previous yr budget, current yr and

cash flow

• Review/modify your draft• Have board review and approve• Revise if necessary

• Monitor and record budget activity

CASH FLOW VS. PROGRAM BUDGET

Cash Flow for monitoring the variance between projected and actual income / expenses on a recurring basis (usually monthly)

(BOOK KEEPING)

Program Budget Gives detailed costs of every activity or input that goes into program objectives, noting dates of fund disbursement

(BUDGETING)

CASH FLOW PLANNING

• Difficulties• Volatility, Unpredictability (esp. with Disaster Relief)

• How to• Account for cyclical and seasonal fluctuations in cash

inflow / outflow• Adjustments made when cash inflow less than outflow• May call for postponing expenditures/accelerating client

billings

• Plan for lags between invoicing/billing for services and actual receipt of cash

• Chart expenditures according to payment deadline• Factor in debt repayments

WHERE TO START WITH A CASH FLOW

Zero-Based

• Starts from 0, assuming no program is necessary and no money spent• Orderly evaluation of

all revenues and expenses• Aim is for quantitative

measurability

Incremental

• Assumption is programs and depts. are pre-approved

• Only increases and decreases in resources allocated

• Focus on changes since previous FY numbers

• Less focus on rigid calculations

ADDITIONAL BUDGET REPORTS

• Annual, quarterly or monthly projects of income and expenses• For entire organization, its divisions and depts.

• Revenue projections by type • Donations, gifts, grants, etc.

• Individual project and dept. projections• Service delivery costs• ie. cost per patient/beneficiary

• Cash flow – short and long term• Historic and project fund-raising revenue & expense• Staffing models

NON-PROFITS

• Flexibility!• Contingency plans

• Lead-time for grant requests• multi-year programs, etc.

• Unpredictable cash flows & contribution revenue• Can be dealt with by postponing expenditures,

accelerating constituent billings

• Money allocated appropriately*• Under common law, non-profits have a duty to

donors/grantors to use gifts for the purpose the funds were given

LEAN, ADAPTABLE & ETHICAL

• Transparency & sustainability • Priorities in balance reflect priorities of the

organization• Bear in mind the needs of the beneficiaries and

stakeholders• Reporting mechanisms built in to alert management of

cause for change

• Budget inherently a “push mechanism,” but should also be “pulled” by beneficiaries/stakeholders• Should not only set ceiling prices, but also floor

prices

OTHER CONSIDERATIONS

• As much money as possible in federally insured, interest bearing accounts• Once cash reserves exceed operating costs,

consider longer-term investments • Staff increases, technological investments

• Budget spreadsheets often, requested by third-party stakeholders / [potential] donors• Tracking of expenditures enhances ability to

report accomplishments