Proper Budgeting for Small Nonprofit Organizations

Morgan Blogs Part 2 (2)

Our nonprofit clients depend on us for multiple areas of expertise.

One point of emphasis that consistently comes up is budgeting.

If you’re a small nonprofit, you can lean on the experts at Morgan & Associates for advice about your budgeting efforts. Below are a few tips from our staff.

Responsibilities and timeframe of budgeting committees

A well-selected budgeting committee for your organization reflects the knowledge of the organization’s goals and objectives for the next fiscal year.

Within the group, the financial plan should include budgets for both capital and operations.

Capital budgets might include projects that affect operational budgets.

Operating budgets will show the nonprofit’s planned financial activities for the year, showing how much revenue is expected from specific sources, and how much it will spend on operations.

Understanding how and where funding will come from will help determine the fiscal calendar of the budgeting year.

The timeframe for the budget process will usually consider the calendar year, the fiscal year and the approval process.

The fiscal year is the period that the nonprofit organization (NPO) uses to measure funds: for example, the federal government has a fiscal year that ends Sept. 30, while many NPOs have a fiscal year that ends June 30.

A fiscal year ending June 30 is particularly appropriate for NPOs that intend to complete their audit prior to the deadline of mid-January, a common deadline to submit grant applications.

Budget priorities, expenses & costs

Determining budget priorities will tie directly into fundraising efforts and donor targets.

Typical sources of revenue are contributions from the public, grants and endowment/restricted funds income (based on the organization’s spending policy), ticket sales, auction proceeds and fees for goods and services.

Excess revenue over expenses can usually be used to cover other expenses of the organization — for example, programs that do not generate revenue and administrative expenses.

Some programs are funded entirely by grants. The budgets for specific grant programs are made at the time of the grant application. These budgets should include not only requests for the specific costs of the program, but also enough to cover the internal costs of administering the program if the grant were awarded.

Many programs have been granted based on direct costs, without consideration of the indirect costs. Incidentals can add up quickly and overwhelm a well-planned effort.

Finding expert help in accounting and budgeting

If your budgeting committee is not well-versed in nonprofit language and expectations, it can be overwhelming. We regularly advise our nonprofit clients on issues relating to:

  • Agreed-upon procedures
  • Audits, reviews, and compilations of financial statements
  • Budgeting, forecasting, and projections to assist with long-term strategic goals
  • Business accounting services such as bookkeeping, account reconciliations, on-site controllership services, and financial statement preparation
  • Employee Benefit Plan Audits
  • Fraud awareness and prevention
  • Internal control reviews
  • Mergers and acquisitions
  • Single audits (also known as Subpart F audits under the Uniform Guidance)
  • Tax planning and preparation of federal and state tax returns, including Form 990, 990-EZ, 990-T, and 990-PF

Fill out our contact form at the bottom of this page to get help today. At Morgan & Associates, we want to help you achieve your objectives. With our years of experience, we can help you move closer to your goals.

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