Posts Tagged ‘budget’

For many, their only interaction with the treasurer of a nonprofit is listening to their report about the organisation’s finances during regular board meetings. Most of the processes and procedures that involve the treasurer are conducted out of the limelight, which is why so many people have a very limited understanding about the tasks and duties that are performed by the treasurer. It’s also the reason why most newly elected treasurers come to the job full of questions about the role that they will play in their NFP.

The following overview outlines some of the major functions and responsibilities of the volunteer treasurer.

 Management and Oversight of Finances

The treasurer is an officer of the board, and as such has the same fiduciary responsibility to ensure that public funds are spent for the public welfare, and in keeping with the nonprofit’s mission.

The treasurer is also tasked with managing and overseeing their organisation’s finances. They are responsible for recording and tracking both the monies that the nonprofit receives, as well as those that it expends. Effective management of cash flows is critical to effective financial management.

They help to establish policies and controls to protect the nonprofit’s assets and are either directly, or indirectly, involved with making and monitoring deposits, seeking board approval for the disbursement of funds, managing investments and similar activities.

Whether the treasurer is directly involved in the day to day cash transactions or has a staff that assists them with this and other duties, typically depends on the size of the nonprofit.

Creating and Managing the NFP Budget

The treasurer plays an integral part in creating the annual budget and is responsible for helping the board stay on track as it raises funds, makes expenditures and invests in capital projects. The treasurer is responsible for creating a realistic budget and using sound, reasonable judgement and accepted accounting principles and practices when making forecasts involving income, outlays, expenses, and similar items that affect the financial health and sustainability of the nonprofit.

Reporting and Adherence to Legal Requirements

Nonprofits must meet the requirements of many state, federal and regional laws when it comes to reporting, as well as the calculation and payment of taxes and other obligations. This means that the treasurer is responsible filing reporting forms in a timely manner.

The treasurer is also tasked with keeping the board well informed about the NFP’s financial status and producing and presenting formal reports that illustrate the NFP’s current financial status on a regular basis. To fulfil this role, treasurers often find themselves offering the board advice so that they can make better decisions that will advance the mission forward without weakening the NFP’s long-term financial stability.

Additional Duties and Responsibilities

The treasurer is also responsible for many other tasks that complement their main duties. For example, it is the treasurer that is tasked with preparing the nonprofit for an audit, and, helping the board to fully understand any issues or items of interest that may be raised in the auditor’s report. They should also work to keep the NFP’s accounts updated and current on a regular basis and be prepared to assist a new treasurer with assuming the position should they choose to retire or otherwise leave the role.

The position of treasurer is one that requires the person holding it to be responsible and well-organised. Since so much is dependent upon the nonprofit’s finances, the treasurer should also be honest and known for their determination and moral character.

While some duties that are performed by the treasurer are sensitive to deadlines, the actual work involved with being the treasurer need not be excessively time-consuming. A good accountancy software suite, such as Admin Bandit can help treasurers stay on track by automating and streamlining many of the data entry and recordkeeping requirements associated with the role.


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Fundraising campaigns are one of the most significant sources of funding for most nonprofits. Most fundraising events are not without cost, however.

Preparing a budget for special fundraising events helps nonprofits avoid overspending, especially if their event does not raise an amount equal to or greater than its fundraising goal.

The Importance of Setting a Large Enough Fundraising Goal

When making plans for your nonprofit’s next fundraiser, it’s important to set an appropriate amount as your fundraising goal. This goal should be realistic; it should be an amount that your nonprofit can reasonably expect to raise during the event.

Your fundraising goal should also be for an amount that is large enough to cover all of the costs and expenses associated with the event. In addition to this amount, you will want to add a net sum that is left over after all of the costs are paid. This net sum should be large enough that it justifies the time and effort that is put into hosting the event.

The Importance of Creating a Detailed Budget Specifically for the Event

You should create a separate, completed budget that lists each expense that will arise as a result of hosting the event. This list should be thorough, and highly detailed to help you avoid under budgeting.

When creating your budget, look at the history of past, similar fundraising events held by your nonprofit. Look at the types of costs that were incurred, as well as the amounts that you have raised during these events. Can your nonprofit reasonably expect to spend a similar amount, or, have costs increased in one or more categories? Determining the answers to these questions can help you avoid underestimating the actual expenditure.

At the very least, your budget should include the cost to rent the venue for the event, as well as unique items related to the location. For example, will your nonprofit need to rent extra tables and seats or other items and equipment to hold the event at the designated location? Be certain to include realistic estimates for these items in your budget.

Catering, staffing, creating and sending invitations, security, transportation, VIP accommodations,  entertainment, ticketing, fundraising software, marketing materials, promotional and gift items/event swag are all typical expenses associated with special fundraising events, so be certain that you include these and any other costs in your budget.

Don’t Forget to Plan for the Unexpected and Include it in Your Budget

It’s also a good idea to include a built-in “cushion” in your budget to help your nonprofit be able to cover the cost of unforeseen events to help you make certain that your nonprofit has enough funds to cover the cost of the event.

Use Caution When Attempting to Cut Costs

Many nonprofits are still feeling the pinch from the global economic downturn of a few years ago, and remain short of funding, especially given the resulting cuts in Federal monies in the form of grants that many nonprofits relied upon. If your nonprofit is struggling financially, it can be tempting to cut corners to reduce spending. While reining in expenses is important, it’s equally important to avoid cutting quality.

For example, you don’t want to skimp and not spend enough on marketing, and word fails to get out about your event. You also want to make certain that you choose reliable vendors for the venue, catering, and so on. Just because one vendor offers a lower price, doesn’t mean that you can depend on them to deliver on time. Make certain that you still check references and look at past histories in addition to price when comparing services and creating your budget.

Accurately budgeting for your special event is an important part of ensuring your nonprofit’s financial stability. Don’t forget the traditional fundraising metrics such as net revenues and costs to raise when hosting your event, and preserve this information to help you more accurately forecast the budget for your nonprofit’s next special event.

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In past posts, we’ve discussed a few of the different types of budgets and how each type might be used by a NFP. While the most common type of budget is an incremental one, the actual goal that you are trying to achieve determines the type of budget that will provide your board members with the clearest, most actionable information.

Budgets can also vary based on the length of time that they measure, such as monthly, interim and annual budgets. Individual budgets can also be made for a specific department or service project, while a master budget includes information and projections from all of your organisation’s individual budgets.

The following list outlines a few steps to take to help you get started creating your NFP’s next annual budget.

1. Pick a Budget Type. The first step in creating a budget is to decide what you are trying to measure and pick the corresponding budget type that will give your organisation the most useful information. For incremental annual budgets, figures and categories from the prior year’s budget form the basis for your new projections.

2. Start With Expected Revenue. As you begin to prepare your annual budget, you will likely want to start with the revenue section, as your NFP’s level of service, and the number and types of projects it offers the community, are dependent upon the type and amounts of funds that you expect to receive.

Include monies you expect to receive from all sources, including federal grants, donations, proceeds from fundraisers and/or ticket sales, other events and even unexpected or overlooked sources of income, such as rental fees or interest earned from other NFP assets.

3. Count Your Costs. Regardless of the budget type that you choose, you will want to separate your fixed and variable costs. This simple step enables your board to quickly see if they have enough revenue coming in to cover operations and what expenses that they might be able to lower through their direct actions.

Controlling costs enables your board to make the best use of the funds that they receive. Boards can also go a long way to ensuring their long term survival by controlling their costs.

4. Account for Project and Service Funding. This section of the budget allocates funds from revenue to specific services and projects. Depending on the type of budget that you choose, a portion of the fixed and variable costs associated with providing these specific services to the public might also be accounted for in this section of your budget.

5. Stay on top of Capital Budgets and Asset Management. Assets that are owned by the NFP must be properly maintained and cared for, and at some point, may need replacement as well. The costs associated with these actions should be accounted for in the budget.

Rather than directly using funding from the revenue budget, some NFPs use proceeds from investments in real estate, annuities, bonds, or other investment vehicles to help them to save to acquire capital that is later sold, with the proceeds being used to finance specific NFP goals.

Other NFPs seek to operate in such a way as to build cash reserves that can be later used to cover unexpected pitfalls, such as a loss of funding that might occur. Plans to save to cover the cost of purchasing, maintaining, and selling plant, equipment, and other capital assets, as well as plans to build cash reserves, should be included in this section of the budget.

6. Don’t Forget About Restricted Funds and Assets. Some grants and donations may come with conditions that restrict their use, so you will want your budget to include the revenue and costs associated with these funds separately from the sources of revenue and expense that don’t have such limitations.

For example, you wouldn’t want the sections of your budget reserved for general revenue and costs to include funds from sources that can only be spent to meet a specific need.  To ensure that these funds are spent properly, it is best to account for them in an individual budget that is then accounted for in a separate section on your master annual budget.

7. Frequently Review and Revise the Budget. Your board will likely want interim performance reports for each section of the master budget. Budgets should be reviewed frequently and action taken by the board so that they can quickly respond to any sudden changes and developments.

For example, the unexpected loss of funding from a long term donor or governing body should be addressed to prevent a shortfall in the revenue section of the budget and a corresponding drop in service level. If the loss of revenue can’t be made up, the NFP might look at cutting back on some of its variable costs or drawing upon its cash reserves or selling a capital asset in order to maintain its service level to the public.

While preparing the next annual budget for an NFP might seem like a daunting task for the volunteer treasurer, Admin Bandit’s software makes it easy for both the novice and the expert to stay on top of these and other common NFP accounting tasks. You can see just how easy it is to use by getting started today with our 55 day free trial!

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mouse-593297_640As a volunteer treasurer for a NFP, you may wonder just why your organisation needs a budget. After all, your charity isn’t an actual business whose primary purpose is to increase the business owner’s bank account. The funds that your NFP receives should go towards meeting your community’s needs as defined by your group’s mission statement.

Even though the main purpose of a charity or club is to meet needs rather than make a profit, it must still operate in a sound manner so that it can continue to meet its goals and objectives. Both individuals and businesses use budgets to help them better control their expenses, manage their cash flows and create plans for how they will meet future obligations and goals. A realistic budget is also the key to helping your board members have better control over your NFP’s finances.

Budgets are Planning Tools That Help you Meet Your Duty of Care

Having a budget helps your board to wisely manage funding and other resources received by your charity or club. It also helps your board to be able to make strategic plans to ensure your organisation remains operationally sound and able to fulfill its mission statement for many years.

A budget is basically a plan that maps out what funds are expected to be received, when they will be received and how they will be used to further the group’s goals and mission. A budget doesn’t just provide greater control over the NFP’s finances, however.

Creating and approving a realistic budget can also be seen as fulfilling one’s legal duty of care to properly manage the funding for the public good. As we’ve discussed in a prior post, there are negative personal, professional and public ramifications when NFPs and their members fail to follow their duty of care.

Why Budgets are Part of Good Governance

Having a budget is also part of following good governance procedures, as it allows the board to plan how to reduce risks to their reputation and work as well as how they will comply with any tax and superannuation requirements. Along with your NFP’s minutes, the budget, balance sheet and other NFP documents are all records that help to explain why your NFP’s board members have made certain decisions. The Australian Tax Office (ATO) states in Section K of its NFP governance checklist that it’s good practice for NFPs to keep their minutes and other records explaining their actions for at least five years.

We hope you found this information helpful. In our next blog post, we are going to discuss how you can best create a budget, so stay tuned.

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