Budgeting and financial management

# Budgeting and financial management

**October 13, 2022**

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# Plan for today

&nbsp;

.box-1.medium.sp-after[Anatomy of a budget]

.box-6.medium[Financial analysis]

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layout: false
name: anatomy
class: center middle section-title section-title-1 animated fadeIn

# Anatomy of a budget

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.box-1.huge[This week just barely scratches the surface of nonprofit finance!]

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# Components of nonprofit finance

.center[
<figure>
 <img src="img/08/accounts.png" alt="Typical chart of accounts" title="Typical chart of accounts" width="43%">
</figure>
]

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# Tracking finances

.box-1.smaller[Where you are]

.center[
<figure>
 <img src="img/08/balance-sheet.png" alt="Balance sheet" title="Balance sheet" width="100%">
</figure>
]
]

.box-1.smaller[Where you're going]

.center[
<figure>
 <img src="img/08/budget.png" alt="Budget" title="Budget" width="50%">
</figure>
]
]

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# Tracking finances

.box-1.smaller[Where you are]

&nbsp;

.box-1.smaller[Where you're going]

&nbsp;

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# Balance sheet stuff

.center[
<figure>
 <img src="img/08/balance-sheet.png" alt="Balance sheet" title="Balance sheet" width="100%">
</figure>
]

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# Assets

&nbsp;

.box-inv-1.medium[Things of value that you can measure]

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# Assets

.box-1.smaller[Cash, securities, inventory, accounts/pledges receivable]
]

.box-inv-1.medium[Long-term]

.box-1.smaller[Property, equipment, investments]

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# Liabilities

&nbsp;

.box-inv-1.medium[Things you owe]

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# Net assets

&nbsp;

.box-inv-1.medium[Assets − liabilities]

.box-1[A measure of how financially healthy your organization is and how well it can weather a financial emergency]

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# Budget stuff

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# Revenues

.box-inv-1.medium[Ways the organization brings in money]

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# Expenses

.box-inv-1.medium[Ways the organization spends money]

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# Funds

.box-inv-1.medium[Types of money the organization can use]

???

Endowment Funds

- A financial principal that remains unspent
- Interest earned on the principal is spent

Unrestricted Funds

- Fees for service
- Gifts from donors not targeted for specific purposes
- Income from a nonprofit commercial venture

Restricted Funds

- Gifts from donors that are targeted for specific purposes

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# Budgets

&nbsp;

.box-inv-1.medium.sp-after[A budget is a moral document]

.box-inv-1.medium[Budgets reflect your strategy]

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# Budget best practices

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.box-1.huge[Budget example]

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layout: false
name: analysis
class: center middle section-title section-title-6 animated fadeIn

# Financial analysis

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# Why analyze finances?

.box-inv-6[Required to make tons of financial information public, including assets, revenues, expenses, and salaries]

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# GuideStar Seals

.pull-left-narrow[
.center[
<figure>
 <img src="img/08/guidestar.jpg" alt="GuideStar logo" title="GuideStar logo" width="100%">
</figure>
]
]

.pull-right-wide[
.center[
<figure>
 <img src="img/08/guidestar.png" alt="GuideStar seals" title="GuideStar seals" width="60%">
</figure>
]
]

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# GuideStar and transparency

.center[
<figure>
 <img src="img/08/trees-atlanta.png" alt="Trees Atlanta at GuideStar" title="Trees Atlanta at GuideStar" width="100%">
</figure>
]

???

https://www2.guidestar.org/profile/58-1584758

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# IRS Form 990

.center[
<figure>
 <img src="img/08/990-1.png" alt="CARE 990" title="CARE 990" width="100%">
</figure>
]

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# IRS Form 990

.center[
<figure>
 <img src="img/08/990-2.png" alt="CARE 990" title="CARE 990" width="65%">
</figure>
]

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# Things to look for in 990s

.box-6.small[Program ratio]

.box-6.small[Administrative ratio (overhead)]

.box-6.small[Fundraising ratio]

???

<https://warrenaverett.com/insights/nonprofit-ratios/>

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# Charity Navigator

.pull-left[
.center[
<figure>
 <img src="img/08/charity-navigator.jpg" alt="Charity Navigator" title="Charity Navigator" width="75%">
</figure>
]
]

.box-6.small[Program expense ratio .smaller[85%+]]

.box-6.small[Administrative expense ratio .smaller[<15%]]

.box-6.small[Fundraising efficiency ratio .smaller[Spend less than $0.10 per $1 raised]]
]

???

- <https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=35>
- <https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=48>

Charity Navigator rating system

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# Ratios vs. impact

.center[
<figure>
 <img src="img/08/care-overhead.png" alt="CARE overhead" title="CARE overhead" width="100%">
</figure>
]

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# Ratios vs. impact

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.box-6.huge[990 example]