How to prepare budget estimates
Full understanding of the budget planning and preparation system is essential, not just to iture projections but to be able to advise policymakers on the feasibility and desirability ic budget proposals, from a macroeconomic or microeconomic perspective. It is to control government expenditures at the "upstream" point of budget preparation during the execution of the , fiscal economists and general budget advisors need to know:What is the framework in which budget decisions are made;. Are the typical weaknesses in procedures and how can these be overcome; can changes in budget plans be programmed and targeted? Delivery of public services (productive efficiency); zation of the financial costs of budgetary management (i. Preparation is the principal mechanism for achieving items (1) and (2); item (3) es as an element of budget preparation only in industrial countries, while item (4) ially an issue in budget execution and cash management (see sections 4 and 5). Moreover,No system of budget execution or cash planning (the subjects of sections 4 and 5) can do mitigate the problems caused by poor quality or unrealistic budget is the framework in which budget decisions preparation is a process with designated organizations and individuals having sibilities that must be carried out within a given timetable (see figure 1 in section 1 for l time line). While generally sharing broadly common procedures, budget preparation (ion) systems do exhibit differences depending on their historic origin. Given the ge of many countries, it is possible to identify four main patterns--francophone, an, (british) commonwealth, and transition understand the budget preparation process in a given country, it is important to:Assess the basic soundness by judging the budget preparation system against ationally accepted standards or "budget principles";. Where to find the rules governing the budget preparation process; those rules, identify who has the responsibility for what elements of the izing the usefulness of budget on the objective macroeconomic assessment of available revenues and financing, ideally,The expenditure budget should aim to be comprehensive, transparent, realistic, policy-oriented,And allow for clear accountability in budget execution. These concepts form a standard by soundness of budget systems can be judged (see box 1). Assessing the soundness of the soundness of budget systems can be judged by the following:Is the coverage of government operations complete? Most organization for economic cooperation and development (oecd) countries,Comprehensiveness and transparency are achieved by designing a budget system with three ity. A budget is prepared every year, covering only one year; voted every year; ed over one year. While maintaining the core concept of annual authorization, ple has been modified at the preparation stage, such that most oecd countries p the annual budget within a multiyear perspective, through the preparation -term revenue and expenditure frameworks. Revenue and expenditure (as well as borrowing constraints) should be er to determine annual budget targets. The budget should cover all government other institutions undertaking government operations, so that the budget presents idated picture of these operations and is voted on, as a whole, in the sality. In general,Earmarking of resources for specific purposes is thus to be discouraged; but the case udgetary funds is considered in more detail three characteristics are essential to ensure that, in budget preparation, all policy undertaking government expenditure will be forced to compete for resources, and ties will be established across the whole range of government are usually considered a prerequisite to meeting the first two of the four main goals ive public expenditure management noted at the beginning of this section: exercising conomic constraint of affordability on the total, and ensuring efficiency in the resources. These characteristics are typically enshrined in a legal and ork regulating the budget gh the precise legal framework for central government budgeting varies from country y, it is usually set out at several constitution is the highest in the legal hierarchy.
These laws may take the form of a single law that guides budget preparation,Approval, execution, control, and auditing (loi organique relative au budget in phone system; ley de administracin financiera in the latin ), or there may be several general laws covering specific areas of public ment (e. The organic budget law also gives to the government, or er responsible for public finance, the authority to issue detailed regulations and instructions. These are often quite constitution, the budget organic law, and financial regulations are permanent and form framework within which the annual budget law, which includes the revenue iture estimates for a given year, is prepared, approved, executed, and audited. The law can take different shapes depending on the the francophone and latin american systems, the coverage of the law (called budget or loi de finances in francophone countries and de presupuestos in latin america) is rather wide, since it contains the amount s of revenue and expenditure, the balance, and also any new tax legislation measures changes to spending. Often the latter are further divided into recurrent pment estimates, sometimes presented as separate volumes. By contrast, the annual budget in many ies has often been rather summary in format: prior to any recent reforms, tes were presented by budgetary institution--typically only the major utions and not their subordinate units--and broken down only by broad "functions," more the sectors used in the previous central planning fying the responsibilities within the budget powers assigned to the legislative and executive branches, and, within the executive branch,Who does what, essentially define the responsibilities for preparing the budget (box 2). Following summarizes some of the key questions on the overall budget is the budget timetable? Power to propose vote--global vote on ive powers to limit spending below are budgeting powers distributed within the executive? Instance, when considering expenditure changes at the budget preparation stage, in the extent to which the parliament can change the budget, once it is submitted for eration. Many countries, for example, allow for the composition of the expenditure e plans to be changed but not the global total; in others, particularly in a number tion economies, new expenditure proposals--often poorly costed--can be put forward,Approved by the parliament, and thus enter into the budget. Although those preparing the help improve parliamentary understanding through discussions, the budget must negotiated by the executive with the is responsible for the planning ation of the budget? Responsibility for preparing the budget usually lies with the ministry of finance with the line ministries and some smaller spending agencies. This exercise is normally a central budget department located in the ministry of finance, or sometimes in a character of central budget departments differs widely between countries, however. In such cases, the may be prepared by a planning or development ministry (or even at a higher level in minister's or president's office), while the debt service costs are assessed (and paid) r entity. Some budget departments are in charge of preparing the entire budget, involved in implementation of the budget. Others have a say on expenditure commitments,And some are also in charge of monitoring budget execution. It is particularly useful to know if the ment is responsible for supplying partial or complete data on budget preparation,Expenditure commitments, and full budget execution many developing countries, only partial data on budget preparation may be available in department. It is important that all data on the current budget, the capital budget, and service (including data on secondary and tertiary tiers of government) are consolidated that, in total, they are consistent with macro objectives.
In some countries, ments of the central bank may carry out this are the basic steps in budget principle, the basic steps in a standard budget preparation system comprise the following:The first step in budget preparation should be the determination of a ork for the budget year (and ideally at least the next two years). The tions, prepared by a macroeconomic unit in the ministry of finance or elsewhere, should with the minister of finance. This allows the budget department within the ministry e to determine the global level of expenditure that can be afforded without conomic implications, given expected revenues and the level of deficit that can be ed. Second step should be the allocation of this global total among line ministries, for reserves (a separate planning and a contingency reserve as explained below) to d by the ministry of next step should be for the budget department to prepare a budget circular to ctions to line ministries, with the indicative aggregate spending ceiling for each ministry,On how to prepare their estimates in a way that will be consistent with macro objectives. Ed there needs to be an effective "challenge" capacity within the budget department to costing of existing and any new policy next step comprises the negotiations, usually at official and then bilateral or erial level, leading finally to y, step six is cabinet endorsement of the proposals for inclusion in the budget that the principles should be broadly familiar in most ministries of finance (and would even ered out of date in those industrial countries with the most advanced budgeting systems),Actual practices may fall a long way short. For example, in too many countries the ment does not prepare a macro framework, nor even a first outline of the budget, let tive ceilings by line ministry, before sending out the budget circular. In such cases, ar is an administrative mechanism that initiates the budget-making process, ing a timetable for budget submissions--that is, estimates of financial requirements by and by line ministry or spending agency--but not giving them much guidance in ation of their estimates or overall spending limits. Thus, when preparing their ts, the ministries often merely add percentages, guided by an inflation projection in ar, to their previous year's budget. With this "bottom-up approach," line ministries are overstate their needs, exerting upward pressure on overall in the preparation stage, that is before the budget circular is issued, those the preparation of the budget should ask:Is the budget based on an aggregate level of general or central government expenditure, terms, that is consistent with the macro framework, and any fiscal rules in place? Ideally, within the aggregate total there should be a e (not allocated in guidelines given to each line ministry), so the ministry of assign extra resources later during budget negotiations for the most urgent priorities, ing the macroeconomic constraint. Moreover, after all final line ministry allocations made, there should still be a contingency reserve within the aggregate that will and administered by the ministry of finance to meet genuine contingency spending are the typical weaknesses of are often weaknesses in budget preparation systems: their nature, scale, and to be understood, both to assess the value of the data produced and, where there tions to be made by an imf team or other external advisers, to accommodate sses. Eight common problem areas can be identified:The central government budget is not really unified. It is a dual-budget system te recurrent and capital or "development" budgets that may be based on conomic assumptions, budget classifications, or accounting rules. Each budget may ed by a different ministry--for example, the ministry of finance for recurrent a planning ministry for capital or "development" macroeconomic constraint is not explicitly taken into account in the budget process, economic assumptions underlying the estimated costs of expenditure programs are weak tions for the outturn of the previous and current years' budgets are not prepared, or ence to date is not analyzed, so that budget preparation becomes a simple se based on the previous year's (often erroneous) budget actory procedures do not exist for review of expenditure policies and is no multiyear udgetary funds are used to divert spending to one or more "off-budget" -fiscal expenditures, contingent liabilities, etc. Even in the short term,However, those reviewing budget preparation can play an important role in makers to certain weaknesses and so assist in reorienting the 1 provides a summary of certain weaknesses and some of ations. Potential weaknesses in ing problems for those preparing d budget with budget (pment and recurrent budgets); many extrabudgetary ulty in developing idated budget. With two different budgets it is more difficult to iture limits or develop a fiscal adjustment sality: all revenues go into one fund ing central government ked funds, especially common for udgetary ty in spending priorities leading cient allocation of public resources. Again, this makes ment a more difficult dge and analysis of previous year's n expenditures; availability of volume of data; data not communicated to budget office, or in the budget office may ding.
For example, actual expenditures are usually budgeted expenditures, and the actual number of persons employed may be very the original budget of macroeconomic framework. Poor estimates of program to a bottom-up approach where is determined more by spending-agency requests. Alternatively, a lack ng means imminent problems or recurrent consequences of capital spending are ures for resource ented early in budget direction in priority setting, or attempt to prioritize late in the budget preparation ures for prioritization are ant for meeting deficit targets or spending targets. If priorities are icated in a top-down approach early in the budget preparation process, ve to budget is a likely classification according to ution (administrative), purpose of expenditure (functional), and use of istent nomenclature--for example, mixing economic or budget nomenclature is not consistent with the chart of economic classification is most designing a fiscal adjustment program. Sometimes the only ble is administrative--by budget institution--so that reducing requires cuts by institution, and the quality of the fiscal adjustment suffers. The budget document presented to the legislature may appear to be a unified one, in current budget and the capital budget are often prepared following different procedures. Cases, difficulties can be encountered in meeting macro objectives where the two prepared without full coordination, or on different economic assumptions. Such a system can also lead to cient use of funds because, for example, the same item of expenditure may be included two budgets, or, more typically, investment projects may be included in the budget, ing for the necessary corresponding current expenditure. The supposed superior status included in the development budget may also tend to squeeze out current the affordable ation on planned capital expenditures may be partial, where donor-financed expenditure icant and coordination with the donors is inadequate. It is important to check the extent the budget is unified in the above sense of ensuring the internal consistency of ents. The economic assumptions underlying the budget some countries the budget is prepared with surprisingly little reference to the sis. The absence of proper macroeconomic analysis is in countries that have a "dual-budget" system, that is, separate development ent budgets as described inadequate macroeconomic analysis, there can be insufficient discipline to limit the size sustainable budget deficit at the beginning of the budget process. Since many countries have proven to be perennially optimistic in sting, realistic revenue projections and the financeable fiscal deficit must be the budget preparation procedure begins, not at some late stage just before or,Worst of all, after, its completion. Those preparing the budget need to ensure that the ation timetable is sufficiently long, and the process transparent and comprehensive, so is no need for arbitrary expenditure cuts late in the process, when revenue or aints become r source of weakness is that the economic assumptions to be used in estimating the cost t and new policies may not be accurate, consistent across line ministries, or minatory between different economic categories of expenditure. Fiscal economists need to budget department to specify by category different price factors before tes are prepared. The higher and more volatile the inflation rate, the greater the need entiate by category of recent budget execution figures known and analyzed? Budget department--and others involved in budget preparation, such as the ry--are often unaware of the provisional outturn for the last completed financial year, or ted outturn for the current financial year, because the budget is executed by a ry department, rather than by the budget department. 1 begins early in the current fiscal year (t) before the provisional outturn for us year (t 1) is known, and usually before any projected outturn for t year has been made available, with the consequence that the budget department/ry prepares the budget by reference to the previous and current years' s, and not to the provisional or projected budget outturn for the current there is economic instability--for example, in times of high inflation--the budget se can become seriously unrealistic.
Thereby perpetuate a lax attitude to budget preparation: when the budget is ed, the results may include wasted administrative efforts spent switching resources budget line to another (virement); excessive use of supplementary appropriations; loss conomic control over the total; poor allocation of resources among programs; the preparation stage of the budget, when discussing the budget figures, in addition to department and any planning ministry, the treasury (or budget execution department). In particular, the treasury department should provide estimates ng in the previous year and the spending to date in the current year (both in general and ic programs or economic categories), as well as its forecast of the likely outturn for t year. Efficient budget preparation procedure should aim at making the government's priorities at selecting, from the many budget requests by spending ministries, those which are ant to the government. First, a budget to be determined at a political (typically cabinet) level, which determines (1) the , (2) new policies to be accommodated, and (3) any changes (often reductions) in provision. Second, each spending ministry and the budget department/planning meet to discuss each ministry's estimates. Quite apart from the institutional arrangements, decisions on priorities at the budget preparation stage can artificial because (1) subsequent cash allocations or supplementaries will render ant; (2) amounts given by line item are deliberately loose or unclear, in anticipation of allocation during budget execution; and/or (3) in practice, the priorities are e the formal budget framework, for example, by the president's tely, the allocation of resources across spending programs is a political decision, preparing the budget will need to advise on what is realistically achievable. For example, ministries need to have as ation as possible on expenditure policies and programs, on costs, and, ideally, on s and er possible, however, the cost of all new policies that a line ministry wishes to be estimated separately from the estimates of the costs of ongoing policies. The data should be enough detail to allow the budget department to judge the reasonableness of the t, the activities the request is intended to support, and the corresponding staffing systems are most advanced in a small number of industrial countries: even there, ces (and results) are not wholly in line with the above principles. Yet,Considerable progress has been made, particularly on measuring output and on requiring ments of the results of new policies or programs proposed before they can be the budget. Developments in this direction are to be encouraged, and there are some noted earlier, to facilitate discussion on resource allocation, it is helpful for the ment to set, within the macroeconomic total, guidelines/targets for each spending their total spending, when the budget circular is issued. This allows budget negotiations to coalesce around a realistic target ministry, consistent with the affordable macroeconomic guidelines or targets can be normative (e. Line ministry/spending agency can be asked to put forward its estimates for its existing ne policies within that guideline. Planning reserve is a sum (usually one or two percent of total expenditure) ted in the guidelines, which the ministry of finance later plans to allocate to new programs,If necessary above the guidelines during budget negotiations. Be under the control of the ministry of finance, and access should be granted by ry of finance only under stringent priorities are not being clearly established during the budget preparation process, department/planning ministry can establish benchmarks using these mechanisms and the basis for a discussion by policymakers of the priorities among the there any multiyear planning? For countries with multiyear pips, such plans need to grated with recurrent expenditures and into a multiyear expenditure plan that provides for establishing a realistic global budget. Although the introduction of a regular medium-term planning frameworks by function, by ministry, and (ideally) by program to develop, those analyzing and preparing the budget should begin this process by -term fiscal are several variants of such a planning framework. The simplest has only tions for public spending for the two or three succeeding years beyond the budget year. Shares of a global total are assumed to be held constant to the proportions in the budget year).
The best approach uses these figures for the past budget year as the ine for the next year's budget there a legitimate need for extrabudgetary funds? Funds (as defined in the gfs manual) generally refer to accounts of ctions that are not included in budget totals or documents and typically do not h normal budgetary execution procedures. Such transactions may, for example, ed through foreign aid or earmarked revenues not included in the unately, extrabudgetary funds are often set up for inappropriate reasons, not principles of good governance. For instance, they may be designed to allow the president parts of the executive branch to bypass the normal budget procedures (for example, s spciaux in the francophone system). When consolidated,However, and when the political authorities can be persuaded to consider them as a ent of the published budget, at some point those preparing the budget may be able these accounts or at least to reduce their number. The affected expenditures should regular budgetary procedures and appear in the relevant heading in the r reason to create this kind of account may be to earmark revenue for a particular this case, a specific kind of revenue is transferred to this account when collected, and are available must be spent on a given item. While there are advantages and operating such funds in many countries, in many cases the disadvantages far outweigh ages (see box 3 on the pros and cons of extrabudgetary funds). Worst instances, new extrabudgetary funds may be established specifically to itures out of the budget, sometimes with the aim of publishing a lower fiscal deficit. Ce of opening such accounts is often an indication that the budget process is not ly, and that resources for priority tasks must be allocated through other unately, this practice gives rise to rigidities in the short and long term. Pros and cons of extrabudgetary increase efficiency by simulating private market conditions where levels rds of service are linked directly to fees or provide more consistent source of funds for expenditures that yield high benefits not get much recognition (road maintenance expenditures are a primary example). Result in a loss of aggregate expenditure control; such expenditure may be control of ministry of distort allocation of resources by circumventing the budget process and review ked revenues can become entrenched so funding is no longer based on transparency may lead to inefficiency and/or misuse of facilitate rent-seeking and abuse of monopoly to less flexibility at the margin to reallocate when budget is under incompatible with good cash management having too many extrabudgetary funds should be discouraged, there can be a case for ive use of such funds, quite apart from separate social security funds that are a feature countries--for example, for earmarking resources for infrastructure maintenance. General benefits (positive or negative externalities, public goods arguments) in user benefits that justify support from general budget revenues? Does the management of the extrabudgetary e efficiency, for example through quasi-market mechanisms or through ents, objectives, performance measures? The treasury or ministry of finance have the legal right to reduce funds available iture in extrabudgetary funds if the budget is under severe pressure? By definition, such expenditures do not pass through the budget be easily consolidated with the statement of general government general, it is difficult to extract information on, let alone estimate the cost of, ties so as to consolidate such data in the general government tables. In addition, ing the budget should take every opportunity to persuade policymakers to transform nsparent activities into explicit subsidies, transfers, etc. Of course this will always be a nt; in some years the reserve may be more than adequate--in which case the e can be used to improve the fiscal position relative to the budget. In other years, , even after the contingency reserve, may arise and should be met transparently mentary estimates--see section 4.
An example might be a rt office that charges for the issue of passports but receives budgetary resources for l expenditures. These budgetary resources are often termed appropriations-in-aid, mes net appropriations--that is, the amount sufficient to meet the gross service costs, assumed contribution from the fees and charges they are three issues in this regard. The itures or gross costs of the service need to be identified, as well as how much is own fees and charges, and how much from general budgetary resources. Second, though essentially a budget execution issue, there are often cases where the fees are paid into te bank account held by the relevant spending agency in a commercial bank. As the next section, this is generally poor budgetary practice, which can lead to abuse with being diverted into other areas of expenditure. Third, in budget preparation, it is ary to be aware of deliberate underestimation of the likely revenues from fees and charges,So as to maximize the contribution from general budgetary resources. In particular the ministry e needs to insist on the annual updating of fees and charges to allow for from any separate expenditure policy issues about how much of the service cost should by users and how much by the general are changes in expenditure plans to er the weakness of the budget preparation system itself, the fiscal economist or advisor may be called upon to advise on options for changing expenditure plans (typically,But not always, for reductions in spending). Where planned expenditure reductions have failed (in that outturn expenditure was above the revised budget), they have typically led to s, and/or to excess spending above appropriations. Fundamental problem is that changes in the budget are often proposed at too late a stage preparation. Correspondingly, the only sustained (and sustainable) expenditure plans are those rooted in changed expenditure , expenditure reductions planned under a revised annual budget are not likely to are made in appropriations without accompanying changes in the iture policies. Agreements are made between the ministry of finance and several line reduce the budget provision for certain line items, but with a "nod and wink" that access granted in-year to the contingency reserve; this reserve tends to become overcommitted contingencies arise;. Assumptions are made on "efficiency savings" through reductions in of civil servants and cuts in equipment purchases, utility charges, or fuel bills; ions are made in transfers to lower-tier governments--this just passes on the d expenditure reductions are also not likely to be successful, if they are essentially administrative actions in the budget execution process, where:They are imposed by the ministry of finance through cutbacks in planned appropriations. Often at a late stage in the budget preparation process) without the concurrence, or over of, line ministries;. Appropriations are not themselves changed but rather the ministry of finance control total spending within the appropriated sum--for example, through controls in-year y cash allocations to line ministries; are to be accomplished by creative accounting measures--greater use of ts, the establishment of new or additional extrabudgetary funds, etc. This is not an easy task,Especially in countries that have inherited budget systems designed for compliance control ( macroeconomic or financial management). Budget execution has traditionally been seen ng that spending is carried out according to the budget approved by the parliament. Also, the budget classification systems in ies are weak and may inhibit a satisfactory analysis of options for changes in there are no hard rules about how planned public expenditure can best be adjusted,Experience suggests some guidelines. Three broad approaches can be reviewed: (1) changes m and policy; (2) changes by individual ministry; and (3) changes by economic s to budget plans by policy or program are the optimal (though not able) approach.
In expenditure plans by economic category may have to be made where res emerge at a late stage in budget preparation. Again, they may be seen ary, rather than representing a structural fiscal t that background, and with the renewed warning that there are no hard-and-fast rules,Budget advisors are best advised to:Make any revisions to emerging budget plans as soon as possible (last-minute changes , as a starting point, expenditure changes that are in line with previously ons or views on expenditure policy priorities--this is especially important where there for additional spending;. Sure that cost estimates for new expenditure proposals are realistic and accurate, not the year ahead but over the medium term, and that the proposals can be implemented at wary of the individual ministry or agency approach, except where this is consistent -agreed policy priorities or to address glaring past failures to exercise proper control;. The budget execution stage, however, those preparing the budget should aware of the degree of executive power to limit spending below or to increase spending riations (see section 4). To the provision that the budget deficit must not exceed investment l expenditure, that is, borrowing only for capital spending. Development" budgets often include both capital and current spending ts, mainly, but not exclusively, financed externally. Potter, "dedicated road funds: a preliminary view on a initiative," imf paper on policy analysis and assessment 97/7 (washington: ry fund, 1997), for a related discussion on earmarking revenue for dedicated road to create budget estimates for proposals and project management | social media that comes r: @ogsalexandra samuel's bloghow to create budget estimates for proposals and project sosi: the concept jam part 7how to create budget estimates for proposals and project we're releasing the budget estimating template we use to generate cost estimates and project plans for the concept jam. We use similar templates for all our budgeting processes, so we expect that the attached template will be relevant to a wide range of budget, estimating and project planning needs. Whether you're a social media agency (like us) or in an entirely different sector and service industry, these files and notes can help you define or refine your estimating and project management help you understand our process we are releasing:The concept jam: internal budget estimate spreadsheet. This 17-minute screencast explains our worksheet -- the information it contains parallels what's in the spreadsheet annotations but you may find the walkthrough -by-task budgeting makes for accurate estimates and 's how we use the attached budget estimating worksheet to generate project proposals for clients:We break the project down into phases, which correspond roughly to deliverables, though some phases include multiple break each phase into individual tasks, estimating the hours each staff member or contractor will spend on that add an additional line item to each phase to cover project management hours -- all the e-mails, phone calls etc. We've found that building those project management hours into our budget means we don't need a add a section to the spreadsheet tabulating the business development costs of the project. This allows us to deliver projects at a lower cost to clients who come to us with a clear sense of what they need, and to pay for the time it takes to work with a client to develop a clear set of requirements or project strategy if they need to do that before proceeding to take the total budget and copy-paste as values (so that we can delete rows and columns) into another worksheet, where we delete the task-by-task breakdown and the person-by-person breakdown. There was just one problem: the estimate had come in way over the client's budget, so i trimmed it down by about 40%. We delivered the whole project on time, to the client's whole-hearted satisfaction, and beat our estimate by a few hundred 're now religious about delivering proposals that are always based on line-by-line estimates. Because we know exactly how our estimates break down, we are able to scale a project to a client's budget by trimming scope. We hope that what we've learned can help other companies and consultants refine their own estimating and project management more about our experience developing this budget process and our decision to release dra samuel's dre pieske 30, 2010 - 8: blog and now open sosi have been a very nice experience to follow. Have just been appointed the budget officer of my division in my establishment but i know nothing about budgeting. How to create accurate, up-to-date budgets in order to maintain control over finances and show funders exactly how your money is being are the elements of an annual budget?
Practical ng and gathering information to create a g it all together: creating and working with a budget are the elements of an annual budget? Can be daunting to start the process of creating a budget, especially if you're not familiar with some of the common accounting and budget terminology you will encounter, so we have provided a glossary of terms covered here, located toward the bottom of the page under the in summary section of the is important for organizations to create accurate and up-to-date annual budgets in order to maintain control over their finances, and to show funders exactly how their money is being used. How specific and complex the actual budget document needs to be depends on how large the budget is, how many funders you have and what their requirements are, how many different programs or activities you're using the money for, etc. The amount of money you expect to spend in the coming fiscal year, broken down into the categories you expect to spend it in - salaries, office expenses, year simply means "financial year," and is the calendar you use to figure your yearly budget, and which determines when you file tax forms, get audited, and close your books. You'll want to prepare your budget specifically to cover your fiscal year, and to have it ready before the fiscal year begins. In many organizations, the board of directors needs to approve a budget before the beginning of the fiscal year in order for the organization to ted income. If funding comes with restrictions, it's important to build those restrictions into your budget, so that you can make sure to spend the money as you've told the funder you ments to reflect reality as the year goes on. Your budget will likely begin with estimates, and as the year progresses, those estimates need to be adjusted to be as accurate as possible to keep track of what's really should you prepare an annual budget? Sharpens your understanding of your gives you the real picture - by accurately showing you what you can afford and where the gaps in funding are, your budget allows you to plan beforehand to meet needs, and to decide what you're actually able to do in a given encourages effective ways of dealing with money issues - by showing you what you can't afford with known income, a budget can motivate you to be creative - and successful - in seeking out other sources of fills the need for required information - the completed budget is a necessary element of funding proposals and reports to funders and the facilitates discussion of the financial realities of the helps you avoid surprises and maintain fiscal practical 's important to note that not everyone has the skills or desire to create and manage a budget single handed. There are organizations like score (service corps of retired executives) that exist to assist with things like budgeting. You'll have to estimate of an average monthly sure to add in some money in a "miscellaneous" category, in order to be prepared for the unexpected. There are always expenses you don't anticipate, and it is part of conservative estimation to make allowances for vative estimation: when preparing a budget, try to be as accurate as possible. Estimating conservatively when you plan your budget will make it more likely that you stay within it over the course of the 2: list the estimated yearly expense totals of the absolute necessities of the most organizations, they include, but aren't necessarily limited to:Salaries or wages for all employees, listed separately by benefits for all employees, also broken out by position. Be sure to figure in the annual estimated costs of repairs or service contracts in addition to purchase or lease budgeting purposes, it may be useful to separate program supplies and equipment from office supplies and equipment. If there is nothing illegal or seriously wrong, the cpa then prepares financial statements using the organization's books, and certifies that the organization follows acceptable accounting practices and that its financial records are in order. The larger an organization's budget, the more complicated an audit is likely to be, the more time it is likely to take, and the more it is likely to cost. An audit of a $100,000 budget might cost $2,000 to $4,000, for instance; that of a $1 million budget might cost $15,ng and copying, if not done within the ortation: travel expense for staff, participants, and/or volunteers; and vehicle upkeep and expenses for any organization-owned e and other mailing that you've gathered your necessary expenses, you can take a look at your wish 5: list estimated expenses for things which you aren't sure you can afford, but would like to might include staff positions, new programs (including staff, supplies, space), equipment, 6: add up all the expense items you have total is what you would like to spend to run your organization. Last year's figures, if you have them, as a baseline and estimate conservatively, rather than being overly optimistic, and laying yourself open to disappointment and 1: list all actual figures or estimates for what you can expect from your known funding includes sources that have already promised you money for the coming year, or that have regularly funded you in the past.
8: list and estimate the amounts from any other sources that are expected to bring in some income in the coming fiscal 9: add up all the income items you have total is the money you have to work with, your projected income for the next fiscal g it all together: creating and working with a budget ing and adjusting the 1: lay out your figures in a useful your budget is going to be useful, it has to be organized in such a way that it can tell you exactly how much you have available to spend in each expense easiest way to do this is by using a grid, usually called a spreadsheet. In the above example, if the department of public health says that no more than $18,000 of its grant can be spent on salaries and fringe, for instance, then you know that you have to find the rest of the $49,200 total in those categories from other 2: compare your total expenses to your total your projected expenses and income are approximately equal then your budget is your projected expenses are significantly less than your projected income, you have a budget surplus. This circumstance leaves you with the possibility of expanding or improving the organization, or of putting money away for when you need your projected expenses are significantly greater than your projected income, you have a budget deficit. In this case, you'll either have to find more money or cut expenses in order to run your organization in the coming 3: (for balanced budgets) make sure you are able to use your money as you've filled in the numbers in accordance with your funding restrictions, your spreadsheet should immediately let you know whether you have enough in each of your expense categories. Creating a program simply to make use of available funding is usually a bad idea, unless the program is one you've already planned for, and will clearly fit in with and advance the mission of your 4: (for budget surpluses) be aware that it may not show up as cash until the end of the coming fiscal most conservative course is to try to stick to your budget, and invest the excess money at the end of the year. You could lock in your rent for the duration of the mortgage (probably 20 years), and you might be able to provide the organization with income as well, by renting part of the building to other surplus may not be large enough to enable your organization to make significant changes on its own, but it may provide the means for you to enter into a collaboration with other organizations to achieve a goal that none could have accomplished 5: (for budget deficits) consider combining several or all of the following possibilities to make your budget you have enough money in the bank or in investments from prior years, you can use it to make up the gap in your can try to raise the additional money you need through grantwriting, fundraising efforts and events, increasing your fees for service, etc. But be aware that such a projection isn't "real" money until the financial goal it represents is actually can explore saving some money by collaborating with another organization to share the costs of services, personnel, or materials and can try to cut expenses by reducing some of your costs: use less electricity, use recycled paper, try to get donations of some items you planned to buy, can cut expenses by eliminating some things from your budget. Guide for budget you're going to cut your budget, it's a good idea to have a rational system for doing so. If nothing else will serve to balance the budget, you may have to consider cutting back on whatever it is the organization does, which usually translates to dealing with the positions of paid the hours of one or more staff, if people are on hourly wages - for instance, consider reducing the work week from 40 to 37. Off one or more staff can borrow the money you need, being sure to add the loan payments to your projected expenses and figure them into your revised ng an actual budget the spreadsheet is probably what you'll use to keep track of your finances, you might also want to put the budget in a form everyone in the organization can ly the simplest budget document is one which lists projected expenses by category and projected income by source, with totals for each. Referring back to the spreadsheet example above, a simple budget would look like this:Ucmha annual budget for fiscal 2001 (july 1, 2000 to june 30, 2001). Dollar amount:Department of public ment of r possible form would be similar, but would include a budget narrative, explaining how various items were arrived salary item, for instance, might look like this:Director ($17. Final possibility would be to use the spreadsheet itself as a budget document, for those who wanted to see exactly how the money was to be allocated. Many organizations provide their boards with both a simple budget and a spreadsheet, so that those board members who are eager to understand the organization's finances can get a clear picture, while others can simply see whether the budget is in g with your organizations make sure to review their budgets on a regular schedule - once a month is usually reasonable - and revise them to keep them accurate. If you get a grant you didn't anticipate, or if your spending estimates are off, these things should be figured into the budget becomes the basis for financial documents that you might prepare during the course of the year (balance sheets, for instance) which give an up-to-the-minute picture of the financial status of the you if there are still any gaps in funding, and exactly where they you exactly what you need to do to close those it possible to keep careful track of your money, to adjust to changes, and not to ng a budget process that examines the organization's priorities, and using it to produce an accurate, balanced budget for the coming fiscal year will help you keep control of the organization's finances, and will help guide the work of the organization. A rational and accurate budget will allow you to give accurate reports to funders and to spend their money as you have promised. There are various accounting systems that an organization can use, but the goals of all of them are to assure accurate records, and to give the organization the ability to know exactly how its money is being spent and how its financial position compares to its budget at any given : a cpa (certified public accountant) checks the organization's financial records to make sure they are accurate, and works with the organization to correct any errors or solve problems. The cpa then prepares financial statements using the organization's books, and either certifies that the organization follows acceptable accounting practices and that its financial records are in order, or explains any problems with the financial records and suggests corrective ed budget: projected expenses and projected income are approximately deficit: projected expenses are significantly greater than projected surplus: projected income is significantly greater than projected vative estimation: using the highest reasonable figures when estimating expenses and the lowest reasonable figures when estimating income, so you will be more likely to create a budget that will keep you from : certified public accountant.
A certified audit, which is what most funders require, must be conducted by a year: this term means financial year, and is the calendar which you use to figure your yearly budget (july 1 to june 30, for example) and which determines when you file tax forms, get audited, and close your accounting: the practice of keeping a separate record of the expenditures for each separate grant or contract administered by an organization. Item budget: generally, a budget agreed upon with a funder that specifies how much of the funder's money will be spent on each line-item. It could also refer to any budget that is broken out by ted expenses: the amount of money you expect to spend in the coming fiscal year, broken down into the categories you expect to spend it in -- salaries, office expenses, ted income: the amount of money you know or can reasonably expect to take in for the coming fiscal year, broken down by sources -- i. The amount you expect from each funding source, including not only grants and contracts, but also your own fundraising efforts, memberships, interest and investment income, and sales of or fees for goods or sheet: a grid format for setting out a budget in order to see expenses, income, and the ways they interact all in one place. In a budget spreadsheet, each vertical column represents a funding source, and each horizontal row represents an expense category. Lots of good stuff here on budgeting and other ment assistance program for non-profits provides some useful books and non-profit genie links to resources for non-profits -- a good site, although not always easy to -profit resource center provides links to resources for non-profits.