Budgeting/ resource allocation

• Linking the budget to the plan
• Effective budget system
• Budget formats
• Leadership

Linking the budget to the plan

looking at the timing of the process

roles and responsibilities of people in the process

Effective budget system

Some criteria of effective budget systems:

• Fair and equitable
• Supportive of the mission
• Supports the leaders and the managers
• Flexible and feasable.  There are opportunities for influence within the process.
• Based on good chart of accounts
• Produce timely budget reports
• Clear lines of responsibility in the process
• Provides data that you can communicate to a  wide range of constituents (Make it transparent and thoughtful)

Budget formats

• "common sense methods"
   
  • Line item
    Most user-friendly -- Relatively easy to do without much discussion of priorities, but it can lead the mission and financials farther apart

    Use for foundation applications

    
    

    Don't see the details of how everything is used

    Based on the Chart of Accounts where it is possible to fill in the blanks for the next year based  on the year before

    Program people can hide behind the line items because top level people can't see what  the details of resource use is

    
    

    Challenges or issues:

    Incremental budget increases

    Multi-year

    
    

    
    

    
     
  • Program
    Budget leads to the work in each program and what it's trying to accomplish

    
    A little more information regarding mission

    People can see more information,  and more questions can come up

    
    
    

    
    

    
     
• More complex processes
   
  • Formula
    Public organizations and some private (Charter schools: the more students, the more money you get so the budget fluctuates by numbers of students)

    
    

    Internal people don't set formulas, just trying to understand how they work

    Some element of fairness, but only if the formulas are fair...

    
    

    Sometimes only a part of the money is allocated through the formula procedure in combination with other methods.

    If you work in a formula environment and you don't know how the formulas work, you don't know how the money works.

    Incentives and disincentives could be altered: Could start to act based on the formula, not on real life circumstances.

    
    

    
    
    
    

    
    

    
     
  • PPBS
    Program planning and budgeting system

    (Gvt system for budgeting, mostly extinct)

    Multi-year plan for budgets (3-5 year projections for budgets and costs) which means a more extensive plan

    Foundations are trying to move in this direction because it is hard for people to have money on a year by year basis

    More control from the top over several years

    
    

    Good features

    Bigger picture

    Program people have to think longer-term

    
    

    Bad features

    More work than a one year budget  for the people trying to do the work

    More opportunities for conversation, but takes  huge amounts of time to do the budget

    
    

    
    

    
    

    
    

    
     
  • ZBB
    Zero based budgeting

    The first question is always  "why do we need you?"

    Direct connection between what you're trying to do and resources you need to do it

    
    start from zero and make every program justify itself every year or every few years

    On a cyclical basis within the organization

    Some parts of the org do it each year to examine costs and resources

    tends to fund things that are strong and not things that aren't

    
    

    Decision packages

    Figure the bare minimum of what you need to function

    Look for what you describe and include as basic...

    
    What would be the next level up?

    What do you get for a little more money

    Decision packages at each level

    
    In the pure form, you do this every year --Start from scratch each year

    
    Upside

    Lots of conversations on what is the mission

    Sharpened focus on what youre doing and  why

    
    Downside

    People involved learn lots about the content of what you're doing

    Takes lots of time to prepare for the question and answers

    Can be very scary and destabilizing in the organization

    
    
    
    

    
    

    
     

Leadership

4 circles interconnected:

Leadership

Strategy development

Resource allocation

Governance