![]() Often, the definition of programs is evident in how your organization delivers services and functions internally. The process begins with the decision of which activities at your organization comprise a program for the purpose of budgets and financial reports. Allocate indirect (administrative) costs.Identify program specific and general income categories.Allocate direct costs by an appropriate method.Allocate staff salaries, benefits, and taxes.Establish format and structure for accounting.Some of the information will be specific to your organization, but as a first step you’ll need: a list of income and expense categories, detailed budgets, a list of staff, their compensation, and records or estimates of their activities, and information about major expense items, such as facility and program expenses. Assemble as much as you can in advance, though it’s likely that more questions will come up once the process is underway. Gather the Dataĭeveloping accurate program budgets and allocation formulas requires a number of data sources. Having a shared understanding and buy-in from senior leaders, financial staff, and program managers is critical to both creating the budget and to using the information for planning and strategic decisions. If the organization has never allocated costs or overhead before, spend some time discussing the concepts and practices described in this guide. Getting Startedīefore diving into the numbers and spreadsheets, it’s important to begin with a discussion about why the organization is undertaking this process, any specific goals you have, how the financial information will be used, and who will be involved in developing and using the information. Program-based financial information will be most useful for planning, management, and communications if it is comprehensive, accurate, and used consistently. While a calculation can be completed for a single program or activity, we highly recommend that these concepts and practices be used throughout a nonprofit. The accompanying spreadsheet template may be used for a one-time analysis project or to implement ongoing program-based budgeting and financial management practices. You can find a glossary of terms in our resource library and below, a list of articles and resources for more in-depth discussion or technical guidance on this topic. This resource is an overview of the concepts and management decisions needed to calculate the true costs of activities for a nonprofit and also a how-to guide for the accompanying spreadsheet template. Propel Nonprofits developed this guide and spreadsheet template to help nonprofits implement program-based budgeting and financial reporting. Propel Nonprofits Program Budget and Allocation Template and Resource Knowing the real costs of each program allows us to make informed decisions and choices that will lead to mission and financial success. Deciding whether and how to support these services is a central strategic decision for nonprofits. Other activities may require periodic or ongoing subsidy from fundraising or other program areas. For most nonprofits, some programs may be financially self-sustaining or even generate a surplus. One of the most valuable results of understanding the true cost of programs is the ability to make wise choices about how to support mission critical work. Why Does This Matter?Įquipped with accurate information about the cost of each program area, nonprofit leaders are better able to plan and manage budgets and make the case for support and for contract terms that cover the full cost of services. Understanding the true, full cost of delivering various programs and services in the community is a critical piece of the management puzzle. ![]() While the long-term goal for nonprofits is not to return profits to shareholders, we all know that nonprofits are business entities that need to maintain financial health and stability in order to achieve their mission. ![]() This guide and accompanying spreadsheet template break down the process of understanding true program costs, either through budgeting or financial reports, into several stages. Download & Share Download File Download File 2
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