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    Introduction to Budget

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    cadinhojr825

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    © All Rights Reserved
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    Introduction to Budget

    Uploaded by

    cadinhojr825
    5 views3 pages

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    © © All Rights Reserved

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    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    5 views3 pages

    Introduction to Budget

    Uploaded by

    cadinhojr825

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    What is a Budget?

    A budget is a financial plan that outlines expected revenues and expenditures over a specific
    period, enabling organizations to allocate resources effectively. For NGOs, budgets are crucial as
    they provide a framework for utilizing funds responsibly to achieve their objectives while ensuring
    accountability to donors and stakeholders.

    Why is Budget Important for NGOs?

    1. Resource Allocation: Helps NGOs allocate limited resources to priority areas effectively.
    2. Transparency and Accountability: Demonstrates to donors and stakeholders how funds are
    being utilized.
    3. Strategic Planning: Aligns financial resources with the organization's mission and strategic
    goals.
    4. Donor Compliance: Ensures that funds are used according to donor agreements and grant
    conditions.
    5. Monitoring and Evaluation: Tracks financial performance and helps identify areas where
    adjustments are needed.
    6. Risk Mitigation: Anticipates potential financial shortfalls or overspending, enabling pre-
    emptive action.

    Role of Budget in Financial Management

    1. Planning: Acts as a roadmap for financial activities, ensuring alignment with


    organizational objectives.
    2. Control: Establishes financial limits for various activities to avoid overspending.
    3. Decision-Making: Provides a basis for making informed decisions regarding
    expenditures and program funding.
    4. Forecasting: Helps project future financial needs based on current and historical data.

    Role of Budget vs. Actual (BVA) in Financial Management

    1. Performance Monitoring: Compares planned budgets to actual expenditures,


    highlighting variances.
    2. Accountability: Ensures spending aligns with the approved budget, maintaining
    transparency for stakeholders.
    3. Corrective Action: Identifies deviations from the budget early, allowing corrective
    measures to be taken.
    4. Donor Reporting: Demonstrates proper use of funds as per agreements, building
    donor confidence.

    How to Prepare a Budget (Step-by-Step)

    Step 1: Define Goals and Objectives

     Identify the specific goals and objectives of the NGO for the budget period.
     Understand the scope of activities to be funded.
    Step 2: Review Past Budgets and Performance

     Analyze historical data to understand previous spending patterns and revenue streams.
     Review past variances to avoid repeating mistakes.

    Step 3: Identify Revenue Sources

     List all potential income sources, such as:


    o Grants from donors
    o Membership fees
    o Fundraising events
    o Government subsidies
    o Service fees (if applicable)

    Step 4: Categorize Expenses

     Separate costs into the following categories:


    o Program Costs: Direct expenses related to program activities (e.g., training,
    workshops, materials).
    o Administrative Costs: Indirect costs such as office rent, utilities, and staff salaries.
    o Fundraising Costs: Costs associated with fundraising campaigns.

    Step 5: Estimate Costs

     Break down expenses into smaller components for accuracy

    Step 6: Consider Inflation and Contingencies

     Add a contingency line (e.g., 5–10% of the total budget) to account for unforeseen costs.
     Account for inflation, particularly in volatile economic environments.

    Step 7: Align Budget with Strategic Plan

     Ensure that each line item supports the organization’s strategic objectives.

    Step 8: Prepare a Budget Template

     Create a detailed table with the following columns:


    o Description of the item
    o Quantity
    o Unit cost
    o Total cost
    o Funding source (if applicable)

    Step 9: Review and Approve

     Share the draft budget with relevant stakeholders for feedback.


     Present the budget to the Board of Directors or other governing bodies for approval.
    Step 10: Monitor and Update Regularly

     Continuously track actual expenses against the budget and update it as needed.

    Salary Costs

     Total Salary Costs: $28,800

     Principal: $300 × 12 = $3,600


     Head of Teachers: $250 × 12 = $3,000
     Teachers (4): $250 × 4 × 12 = $12,000
     Finance Manager: $250 × 12 = $3,000
     Watchmen (2): $150 × 2 × 12 = $3,600
     Cleaners (2): $150 × 2 × 12 = $3,600

    One-Time Costs

    Total One-Time Costs: $6,900

     School Innovation: $5,000


     Graduation Event Cost: $500
     Certificates for Students (700): $2 × 700 = $1,400

    Maintenance & Running Costs

    Total Maintenance & Running Costs: $14,299.96

     School Repairing: $208.33 × 12 = $2,499.96


     Electricity: $120 × 12 = $1,440
     Water: $50 × 12 = $600
     Internet: $120 × 12 = $1,440
     Stationery: $166.67 × 12 = $2,000.04
     School Rent: $520 × 12 = $6,240
     School Visibilities: $80.04

    Grand Total

     Salary Costs: $28,800


     One-Time Costs: $6,900
     Maintenance & Running Costs: $14,299.96

    Grand Total: $49,999.96

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