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Progression Tracker
Do You Need a Funding Plan?
Introduction to the Six Steps
Step 1: Establish Priorities
Step 2: Assess Capacity
Step 3: Set Fundraising Goals
  • Creating a budget
  • Calculating a fundraising goal
Step 4: Identify Funding Sources
Step 5: Evaluate & Select Funding Sources
Step 6: Write & Implement Plan
Final Quiz
Sample Finance Plans
List of Case Studies
References & Additional Resources

Step 3 (continued). Creating an Annual Budget

Graphic showing people sitting at a table with a brain above them that has lightning bolts emanating from it; meant to show that they are brainstorming.An annual budget will help you develop a realistic fundraising goal and give context to your fundraising decisions. While we don't go into detail about creating a budget here, additional resources on creating a budget are available. Also, here are six tips to consider when creating your budget:

  1. Budgets should be developed well in advance of the new fiscal year. The previous years' budgets should be used as a starting point for the next year's budget. Similarly, plan to review your budget and financial statements regularly (once a month is ideal).

  2. Include not only direct program costs, but also indirect costs.

    Direct Program Costs: Direct costs are those that are clearly and easily attributable to a specific program.

    Indirect Program Costs: Indirect costs are more difficult to calculate. Indirect costs are those that are not easily identifiable with a specific program, but are necessary to the operation of the organization. These costs are shared among programs and include all operational and overhead costs. For example, the monthly rent and utilities, the bookkeeper's salary, and office supplies are all indirect costs. In preparing your expense budget, you may itemize all indirect costs in your budget or assess a fixed percentage to the project's total budget. More information on calculating indirect costs is available on the Resources page.

  3. All staff and board members should be involved in creating or approving the budget. Staff members can make valuable contributions to the development of programmatic budgets because they are the closest to daily program operations.

  4. Operating reserves and endowments are worth considering and can improve the fundraising stability of your organization. In general, creating new revenue sources and expanding existing ones will make your organization more sustainable.

    Establish an Operating Reserve: An operating reserve is an organizational "savings account." Its principle purpose is to provide funding to keep your organization operating during periods of crisis. However, reserves are flexible and can be used to finance growth and expansion or to provide upfront money for a reimbursable grant or earned income project. All organizations should have some kind of operating reserve.

    Establish an Endowment: An endowment is an organizational "trust fund" or "retirement plan." It is a pot of money that your organization agrees to invest forever. The principal remains untouched and the earnings can be used to provide a permanent, steady stream of income for your organization. Not all organizations should create an endowment. The first consideration is whether your organization will still be delivering services 50 years from now.

    If the answer is yes, then you should meet these additional guidelines:

    • Be at least ten years old
    • Have a five to ten year plan
    • Have had a budget surplus for several years
    • Have at least one thousand regular donors
    • Have a healthy "major donor" program
    • Have a planned giving program so that donors may leave assets to the organization
    • Have an established operating reserve

    More information on establishing a reserve or endowment is available on the Resources page.

  5. Plan for a surplus. A sustainable organization has higher revenues than expenses, which allow your organization to be more resilient to any crisis or unexpected event.

  6. Remember to be conservative with your projections. It is better to err on the high side of regarding expenditures and the low side regarding revenues.

Below is an example of a budget. While simplified, it should give you some ideas on getting started.

Sample Budget

Friendly Watershed Council Operating Budget
Revenue & Support:Annual Budget
Foundations $75,000
River Festival55,000
Corporate Giving/Sponsorships40,000
Individual & Workplace Giving40,000
Government Contracts34,000
Fees for Service10,000
Board Contributions10,000
Sale of Materials5,500
Interest Income1,000
In-kind Donations 5,000
Other 4,000
Total Revenue $275,500
Costs & Expenses
Salaries $108,275
Taxes & Fringe Benefits26,550
Consultants 15,500
Workshops/Trainings 12,000
Printing 12,750
Staff Travel4,000
River Festival29,750
Postage & Shipping8,500
Materials & Supplies8,500
Donor Recognition1,200
In-kind Expenses5,000
Total Expenses $259,650
Net surplus (deficit): $15,850

Citation: See Resources, Works Cited #7

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