To continue with the building metaphor, budget review is the annual inspection you should do on any foundation to look for cracks, leaks, etc!
"Few center directors have mastered the financial business elements when they start caring for children but all can learn the fundamentals given the
right tools and resources. The time you spend on the business side of your center will be rewarded in a stronger foundation that supports your program
goals," from First Children's Finance.
The Budget Review process allows you to think about whether the costs that your are incurring really help you to accomplish your mission and vision.
Are you using your money to help you accomplish your most important tasks? The process also helps you realize you have expenses that don't seem apparent at first glance. So the budget process from beginning to end helps you to better understand your organization's total fiancial picture.
Understanding the financial realities of your center will help you to know when your center is bringing in enough revenue to pay all the expenses; project which months during the year cash is tightest; understand if there will be cash available to make a large purchase; and have confidence that you will be equipped with the necessary information to make decisions about your center's future.
Take the necessary time to adequately review your financial statements. Compare your budget, which is your estimated income and expenses, to your actual income and expenses. Look for trends, both good and bad, that might affect your program's quest for high quality. Is your income growing from year to year or has it been declining? Are you spending more money on one line item than you thought? Why do you think that is? What can you do about it? These are all questions you can answer once you've taken the time to review your financial statements.
Budget Review
Completing your Budget Review worksheet will offer you great insight into when your program is bringing in more money than expected or when your program might be spending more money than expected. This is a nice snap-shot to see where your budgeted amounts are not matching your actual amounts after the year is done.
This document allows you to look at the details of your original budget to compare what you thought your income and expenses would be on each line item to what they actually were. Completing this spreadsheet on an annual basis and taking the time to analyze the data can prove to be very useful toward the financial health of your program.
Differences
As part of your Budget Review, you will want to examine closely the differences between the actual income and expense with your Annual Budgeted income and expenses for each line item. In each where your actual and your estimate don't match, you will want to do a bit of investigative work to determine the cause for the difference. There will always be events that occur in our program that affect the financial health of the program that are out of our control. For example, a large factory closing which dramatically changes your enrollment numbers or a sudden spike in the price of gas which might affect your transportation costs. And while completing the Tracking Actual Income and Expenses sheet on a monthly basis will allow you to adjust if you see a dramatic change occurring, a Budget Review allows you to look at the bigger picture.
There will be times when the difference is something you can control. For example, staying abreast of the economic climate of your community will allow you to prepare for a large business closing or the price of gas increasing. Often what happens is enrollment increases or decreases slowly and food costs increase on a incremental basis, so we don't notice the small change over time. Not until you complete the Budget Review spreadsheet can you fully grasp the impact those small changes are having on the financial status of your program.
Differences
As part of your Budget Review, you will want to examine closely the differences between the actual income and expense with your Annual Budgeted income and expenses for each line item. In each where your actual and your estimate don't match, you will want to do a bit of investigative work to determine the cause for the difference. There will always be events that occur in our program that affect the financial health of the program that are out of our control. For example, a large factory closing which dramatically changes your enrollment numbers or a sudden spike in the price of gas which might affect your transportation costs. And while completing the Tracking Actual Income and Expenses sheet on a monthly basis will allow you to adjust if you see a dramatic change occurring, a Budget Review allows you to look at the bigger picture.
There will be times when the difference is something you can control. For example, staying abreast of the economic climate of your community will allow you to prepare for a large business closing or the price of gas increasing. Often what happens is enrollment increases or decreases slowly and food costs increase on a incremental basis, so we don't notice the small change over time. Not until you complete the Budget Review spreadsheet can you fully grasp the impact those small changes are having on the financial status of your program.
Click on the "Budget Review" document below to open. Save to your computer, then consider printing. This document does not open in a new window, so you will have to click on the 'back arrow' in the upper left corner of your computer screen to go back to the tutorial. You may have to 'enable editing' once this document opens, depending on the Office version you have.
budget_review.xls | |
File Size: | 62 kb |
File Type: | xls |
You will see at the bottom of this spreadsheet there are 2 tabs. As with the Budget, the sample tab will offer some directions and the other tab is your working document.
Questions to consider...
Consider how you would answer these questions - use your answers to develop and implement financial practices and policies that will help support the financial health of your program.
1. When was the last time I raised my rates/tuition or fees (enrollment, supplies, etc) or considered doing so?
2. When was the last time I added a fee or considered doing so?
3. Am I aware of what the current rate of payment is for my county?
4. Are we able to accomplish what we want to accomplish? Do we meet our missions, vision and organizational goals?
5. Were we able to operate at a profit, or did we experience a loss as a result of our operations?
1. When was the last time I raised my rates/tuition or fees (enrollment, supplies, etc) or considered doing so?
2. When was the last time I added a fee or considered doing so?
3. Am I aware of what the current rate of payment is for my county?
4. Are we able to accomplish what we want to accomplish? Do we meet our missions, vision and organizational goals?
5. Were we able to operate at a profit, or did we experience a loss as a result of our operations?
YoungStar Requirements
Under the Business and Professional Practices section of YoungStar, group centers are required to complete a Budget Review for 3, 4, and 5 Stars.
Programs are expected to review their budget annually and make adjustments to future annual budgets as necessary. Administrators should not continually update or change dollar amounts on their current budgets, but rather review them periodically and use the information to inform and create future budgets.
The documents in this "Budget Review" section of the tutorial, will equip directors/administrators in showing at least one area where actual income and expenses from the previous year informed the annual budget for the current year. For example, a program might notice on the "Difference" column of teh Budget Reveiw form that more money was being spent on food items than was originally put on the budget. In doing some research, the director or administrator might note that food costs from the vendor have increased by 2% but that wasn't reflected originally in the budget, but will be in the upcoming budget.
Programs are expected to review their budget annually and make adjustments to future annual budgets as necessary. Administrators should not continually update or change dollar amounts on their current budgets, but rather review them periodically and use the information to inform and create future budgets.
The documents in this "Budget Review" section of the tutorial, will equip directors/administrators in showing at least one area where actual income and expenses from the previous year informed the annual budget for the current year. For example, a program might notice on the "Difference" column of teh Budget Reveiw form that more money was being spent on food items than was originally put on the budget. In doing some research, the director or administrator might note that food costs from the vendor have increased by 2% but that wasn't reflected originally in the budget, but will be in the upcoming budget.
Disclaimer: Materials and links provided by WECA on this tutorial do not constitute legal, accounting, tax or finance advice. Participants seeking professional business advice about specific aspects of their program should consult a professional such as a lawyer, accountant, etc.