program based budgeting
Non-Profit Program-Based Budgeting
We start by taking your operating budget and going through each line item, often working directly with your finance staff and/or accounting service providers, and then organizing your operating budget within Programs, Administration, and Fundraising (Aligns with IRS 990, financial auditing, GuideStar/Charity Navigator review/rating).
We then break down your budget by each program. We will clearly show the costs associated with each program for better evaluation and understanding of resource allocation—showing how you pay for these costs through your revenue streams.
We will specifically account for and allocate Direct & Indirect Costs of running each program, organizational administration, and fundraising, including staff time, work outsourced through professional service providers, materials, and other relevant expenses.
Program Costs - Ideal 75%
Would show 75 Cents of Every Dollar Raised Goes to Program Delivery!
Any cost, direct or indirect, including staff time, occupancy, and marketing of programs, that is put towards operating your programs is counted in this category.
Administrative Costs - Ideal 10-15%
Examples: Costs to organize, coordinate, and hold Board of Directors’ and committee meetings, general legal services, accounting, insurance (Officers & Directors – not General Liability, that gets allocated), office management, auditing, human resources, and other centralized services.
Fundraising Costs - Ideal 10-15%
For Example, Would Show it Costs 15 Cents to Raise a Dollar
Examples: Costs for publicizing and conducting fundraising campaigns, maintaining donor mailing lists, mailing/postage specific to donation requests/appeal letters, conducting special fundraising events à Any Activities or Costs that involve Directly Soliciting Contributions.
PROCESS
Step 1 – Allocate Staff Time
Each Staff Member Allocates % of Time
- Admin
- Fundraising
- Programs then Each Program
Examples: ED – 30% Fundraising, 30% Administration, 40% Programs
Program Director – 100% Program – 25% to each of 4 Programs
Education Program Coordinator – 100% to Education Program
Steps 2 – Allocate Direct & Indirect Costs
Allocate by % to each Program, Fundraising, and Administration
Example: Fundraising – Annual Year-End Appeal Letter – Printing (Direct), Occupancy (Indirect), Liability Insurance (Indirect)
Under-Valued/Excluded Costs Add Up
When we know the true cost, we can better fundraise for more from grants, individuals, and sponsorships.
Step 3 -Allocate Revenue
Examples: Fee-for-Service (costs paid by participants or attendees), Restricted Grants, Unrestricted General Operating Grants, Restricted and Unrestricted Major Gifts, Unrestricted Individual Donations through the Annual Year-End Appeal, Business Sponsorships, Event Net Revenue
Education Program – Cost $100,000 per year to run. How is it paid for?
Step 4 - Totals & Percentages
Total Costs for each Program, Fundraising, and Administration – what are those percentages?
Examples: Programs Overall 77.9% (and each Program Individually)
Admin 11.6%
Fundraising 10.5%
Analysis: Insights à Fundraising strategies
Examples: Education Program is highly grant-fundable; however, 60% of unrestricted operating funds are being utilized to fund the program. Free up your unrestricted funds by winning more restricted program grants (the lowest hanging fruit).
This is a great program that benefits the community. Pursue community business sponsorships to support the program.
The revenue from fees to participate covers only 10% of the cost to run the program. It is very popular and is filled to capacity. Raise the price to participate to match the cost to participate in similar programs in your community. However, you do not want to price out low-income participants. Create a scholarship program to maintain their access to your services. Scholarship programs are also grant fundable.
Fundraising Costs are low. If you spent more on fundraising, could you increase your revenue by a margin that would increase your overall organizational revenue? E.g., hiring a grant consultant for $24,000 for one year, resulting in an increase of your grant revenue by $100,000 (net $76,000 increase).
Do you hold a popular event but still don’t net significant revenue? Seek donations for food and drink. Max out sponsorships by creating an appealing, value-added sponsorship program for the event.
Run a highly internally valued program that needs more revenue to be sustainable? It’s not a program that appeals to grantors. Perhaps this is an excellent fit for a major donor or potential major donor? This situation also brings into question the case for the program – can you demonstrate need beyond a Board member or non-profit founder’s personal commitment or vision? Is there no legitimate data to support the need for the program? Then perhaps the program should be dissolved?
Should you run a Capital Campaign?
Strategic Planning – Financial Sustainability
Projecting Your Budget – Next Year and Beyond
Add 10% to Last Year’s Actual
Then add new/expanded programs, staff, and equipment per the Strategic Plan – NOW, how much larger does next year’s budget, and the year after, and the year after need to be to achieve goals set out in your strategic plan? Create or revise your Annual Comprehensive Fundraising Plan to show/map out how you will achieve these fundraising goals, or change the level of growth per year, or move goals out on a longer timeline, or even consider removing the goal altogether. For example, it is highly unlikely that you will increase grant revenue by 300% or individual donations by 100%.
We start by taking your operating budget and going through each line item, often working directly with your finance staff and/or accounting service providers, and then organizing your operating budget within Programs, Administration, and Fundraising (Aligns with IRS 990, financial auditing, GuideStar/Charity Navigator review/rating).
We then break down your budget by each program. We will clearly show the costs associated with each program for better evaluation and understanding of resource allocation—showing how you pay for these costs through your revenue streams.
We will specifically account for and allocate Direct & Indirect Costs of running each program, organizational administration, and fundraising, including staff time, work outsourced through professional service providers, materials, and other relevant expenses.
Program Costs - Ideal 75%
Would show 75 Cents of Every Dollar Raised Goes to Program Delivery!
Any cost, direct or indirect, including staff time, occupancy, and marketing of programs, that is put towards operating your programs is counted in this category.
Administrative Costs - Ideal 10-15%
Examples: Costs to organize, coordinate, and hold Board of Directors’ and committee meetings, general legal services, accounting, insurance (Officers & Directors – not General Liability, that gets allocated), office management, auditing, human resources, and other centralized services.
Fundraising Costs - Ideal 10-15%
For Example, Would Show it Costs 15 Cents to Raise a Dollar
Examples: Costs for publicizing and conducting fundraising campaigns, maintaining donor mailing lists, mailing/postage specific to donation requests/appeal letters, conducting special fundraising events à Any Activities or Costs that involve Directly Soliciting Contributions.
PROCESS
Step 1 – Allocate Staff Time
Each Staff Member Allocates % of Time
- Admin
- Fundraising
- Programs then Each Program
Examples: ED – 30% Fundraising, 30% Administration, 40% Programs
Program Director – 100% Program – 25% to each of 4 Programs
Education Program Coordinator – 100% to Education Program
Steps 2 – Allocate Direct & Indirect Costs
Allocate by % to each Program, Fundraising, and Administration
Example: Fundraising – Annual Year-End Appeal Letter – Printing (Direct), Occupancy (Indirect), Liability Insurance (Indirect)
Under-Valued/Excluded Costs Add Up
When we know the true cost, we can better fundraise for more from grants, individuals, and sponsorships.
Step 3 -Allocate Revenue
Examples: Fee-for-Service (costs paid by participants or attendees), Restricted Grants, Unrestricted General Operating Grants, Restricted and Unrestricted Major Gifts, Unrestricted Individual Donations through the Annual Year-End Appeal, Business Sponsorships, Event Net Revenue
Education Program – Cost $100,000 per year to run. How is it paid for?
- 20%/$20,000 from Restricted Grants
- 20%/$20,000 from Fees from Participants
- 50%/$50,000 from Unrestricted Operating Funds (Annual Appeal/Individual Donations, Investment Income, Annual Gala
- 10%/$10,000 from Unrestricted Operating Grants
Step 4 - Totals & Percentages
Total Costs for each Program, Fundraising, and Administration – what are those percentages?
Examples: Programs Overall 77.9% (and each Program Individually)
Admin 11.6%
Fundraising 10.5%
Analysis: Insights à Fundraising strategies
Examples: Education Program is highly grant-fundable; however, 60% of unrestricted operating funds are being utilized to fund the program. Free up your unrestricted funds by winning more restricted program grants (the lowest hanging fruit).
This is a great program that benefits the community. Pursue community business sponsorships to support the program.
The revenue from fees to participate covers only 10% of the cost to run the program. It is very popular and is filled to capacity. Raise the price to participate to match the cost to participate in similar programs in your community. However, you do not want to price out low-income participants. Create a scholarship program to maintain their access to your services. Scholarship programs are also grant fundable.
Fundraising Costs are low. If you spent more on fundraising, could you increase your revenue by a margin that would increase your overall organizational revenue? E.g., hiring a grant consultant for $24,000 for one year, resulting in an increase of your grant revenue by $100,000 (net $76,000 increase).
Do you hold a popular event but still don’t net significant revenue? Seek donations for food and drink. Max out sponsorships by creating an appealing, value-added sponsorship program for the event.
Run a highly internally valued program that needs more revenue to be sustainable? It’s not a program that appeals to grantors. Perhaps this is an excellent fit for a major donor or potential major donor? This situation also brings into question the case for the program – can you demonstrate need beyond a Board member or non-profit founder’s personal commitment or vision? Is there no legitimate data to support the need for the program? Then perhaps the program should be dissolved?
Should you run a Capital Campaign?
Strategic Planning – Financial Sustainability
Projecting Your Budget – Next Year and Beyond
Add 10% to Last Year’s Actual
Then add new/expanded programs, staff, and equipment per the Strategic Plan – NOW, how much larger does next year’s budget, and the year after, and the year after need to be to achieve goals set out in your strategic plan? Create or revise your Annual Comprehensive Fundraising Plan to show/map out how you will achieve these fundraising goals, or change the level of growth per year, or move goals out on a longer timeline, or even consider removing the goal altogether. For example, it is highly unlikely that you will increase grant revenue by 300% or individual donations by 100%.