Please explain the answer. Thank you.

CASE STUDY: CREATING A BALANCED BUDGET FOR MANAGEMENT DECISION MAKING It is September 1, 2011. The executive director of the nonprofit organization Youth Movement has just resigned to accept a position with another youth-serving organization. You are the director of programs for Youth Movement and have been named interim acting executive director. In June 2011, the prior executive director did not present a FY 2011/12 (July 1, 2011-June 30, 2012) proposed bud get for approval by the board of directors because he had recently become aware of the following financial problems for FY 2011/12: The federal grant for the HOPE program was going to be reduced by 50 percent. The corporate grant for general support (unrestricted) was going to be eliminated. The individual contribution for general support (unrestricted) was going to be eliminated. Given these large financial problems, the board of directors told the execu- tive director that he could take a few months to determine how he would propose a balanced budget with cost reductions and/or revenue increases. He never completed the task. The board of directors has now instructed you to present a FY 2011/12 balanced budget for approval by the board no later than September 30, 2011. Using Tables 8.12 through 8.15 for reference, follow the steps outlined below to build a balanced budget proposal. The data you will need include Youth Movement's current statement of financial position, statements of activities with comparative data, a trial balance sheet, and details of temporarily restricted net assets. (All tables and worksheets are also available on this book's student Web site, http://college.cqpress.com/Sitesonprofit-budgeting/) 176 TABLE 8.12 Youth Movement Statement of Financial Position and Statement of Activities, June 30, 2011 Statement of Financial Position June 30, 2011 (with comparative totals for 6/30/10) Statement of Activities June 30, 2011 (with comparative totals for 6/30/10) 2011 2010 Temporarily Unrestricted Restricted Total 2011 Total 2010 $60,724 $204,894 $7.938 $43,000 $171,932 $115,684 $2,092 $50,000 $4,242 $16,920 $15,230 $376,100 Support and Revenue - Grants and Contributions - Contributed Services - Interest Income - Net Assets Released from Restriction Total Support and Revenue $1,075,650 $37,975 $783 Assets -Cash - Grant Contracts Receivable - Other Receivables - Unconditional Promises to Give - Prepaid Expenses - Security Deposits - Office Equipment Net of Depreciation Total Assets Liabilities - Accounts Payable - Accrued Expenses $265,000 $1,340,650 $37.975 $783 $948,675 $45,150 $2,123 $6,985 $15,081 $338,622 $224,927 ($224,927) $0 $1,339,335 $40,073 $1,379,408 $0 $995,948 BUDGETING AND FINANCIAL MANAGEMENT FOR NONPROFITS $9,721 $11,400 $51,503 $6,885 Expenses - Program Expenses - Management and General - Fundraising $1,133,780 $95.470 $75,413 $1,133,780 $1,030,379 $95,470 $86,763 $75,413 $68,535 Total Liabilities $21,121 $58,388 Total Expenses $1,304,663 $1,304,663 $1,185,678 Net Assets - Unrestricted - Temporarily Restricted Total Net Assets $233,479 $121,500 $354,979 $198,807 $81,427 $280.234 Change in Net Assets Net Assets Beginning of Year Net Assets End of Year $34,672 $198,807 $233,479 $40,073 $81,427 $121,500 $74,745 ($189,730) $280,234 $469,964 $354.979 $280,234 Total Liabilities and Net Assets $376,100 $338,622 TELE Youth Movement Statement of Activities, FY 2009/10 (07/01/09-06/30/10) Teng Total Unrestricted Restricted $40,000 Revenues - Grants and Contributions - Contributed Services - Interest income - Met Assets Released from Restriction $908,675 $45,150 $2,123 $948,675 $45,150 $2,123 $180,000 ($180,000) ($140,000) $0 $995,948 $1,135,948 Total Revenues Expenses - Program Expenses - Management and General - Fundraising ($1,030,379) ($86,764) (S68,535) ($1,030,379) ($86,764) ($68,535) Total Expenses Change in Net Assets Net Assets beginning of the year Net Assets end of the year ($1,185,678) (549.730) $245,537 $198,807 ($140,000) $221,427 $31,427 ($1,185,678) ($189,730) $469.964 $280.234 TABLE 8.14 Trial Balance, from Accounting Software June 30, 2010 June 30, 2011 Debit Credit Debit Credit $195,525.63 $60.723.96 $23.593.83 $204.894.00 $7.938.01 $43,000.00 Acct. Name 1001 Commerce Bank-Money Market Acct. 1002 Commerce Bank-Checking Acct. 1101 Grants receivable 1102 CON Training receivable 1201 Pledges receivable--general 1202 Pledges receivable-jones 1301 Prepaid rent and security deposit 1401 Furniture 1402 Oice equipment 1493 Accumulated depreciation 2001 Accounts payable 2101 Salaries payable 2102 Payroll tax payable 2103 FUTA payable 2104 SUTA payable 2105 Other accrued expenses 3101 Uhrestricted net assets 12 Temporarily restricted net assets $115,683.95 $2,091.85 $20,000.97 $30,000.00 $21.161.56 $3.730.00 $26,275.00 $6,984.85 $3.730.00 $22.270.00 $14.775.00 $9.721.10 $3,456.98 $567.45 $1,098.00 $0.00 $6.278.55 $198,806.65 $121,499.97 $10.919.00 $51,502.56 $1,654.09 $271.35 $425.67 $15.78 $4,518.09 $248,453.44 $81.427.00 (Continued 178 BUDGETING AND FINANCIAL MANAGEMENT FOR NONPROFITS TABLE 8.14 (CONTINUED) Acct. # Name 4101 Federal Grant-HOPE program 4102 State Grant-HOPE program 4103 City Grant-CARE program 4202 Foundation Grant-CARE program 4203 Foundation Grant-HOPE program 4301 Corporate Grant-Unrestricted 4401 Individual contribution HOPE program 4402 Individual contribution-Unrestricted 4501 Contributed services-corporations-special event 4502 Contributed services-individuals-special event 4601 interest income 5101 Salaries-HOPE program 5102 Salaries-CARE program 5103 Salaries-Executive Director 5104 Salaries--Finance Director 5105 Salaries-Other mgt. and general 5201 Fringe benefits-HOPE program 5202 Fringe benefits-CARE program 5203 Fringe benefits Executive Director 5204 Fringe benefits-Finance Director 5205 Fringe benefits-Other mgt. and general 5301 Consulting ServicesHOPE program 5302 Consulting Services-CARE program 5303 Consulting Services-general 5401 Travel-HOPE program 5402 TravelCARE program 5403 Travel general 5401 All other expenses-HOPE program 5402 All other expenses-CARE program 5403 All other expenses-general 5501 Audit fees-general 5601 Equipment and maintenance general 5701 Rent-general 5801 Contributed services-special event Totals June 30, 2011 Debit Credit $1.005.000.00 $25,000.00 $150,000.00 $50,000.00 $20,000.00 $10,000.00 $5,520.00 $35,057.00 $25,500.00 $12,474.76 $783.00 $640,000.00 $79,651.49 $60,000.00 $40,000.00 $27,952.06 $160,000.00 $19.912.87 $15,000.00 $10,000.00 $6,988.02 $100,000.00 $5,000.00 $5,000.00 $20,362.15 $4,861.25 $1,990.00 $29,965.43 $10,015.15 $240.15 $10,000.00 $14,750.00 $5,000.00 $37.974.76 $1.719,132.29 $1.719,132.29 June 30, 2010 Debit Credit $819,300.00 $22.500.00 $135.000.00 $45,000.00 $18,000.00 $9,000.00 $4.968.00 $35,281.92 $24.150.00 $21,000.00 $2,122.00 $576,000.00 $71,686.34 $54,000.00 $36,000.00 $25,156.85 $144,000.00 $17.921.58 $13,500.00 $9,000.00 $6,289.22 $90,000.00 $4,500.00 $4,500.00 $18,325.94 $4,375.13 $1,791.00 $26,968.89 $9.013.84 $216.14 $9,000.00 $13,275.00 $5,300.00 $45,150.00 $1,535,510.52 $1,535,509.90 TABLE 8.15 Temporarily Restricted Net Assets Information Received from Accountant $23,000 $25,427 $20,000 $13,000 As of June 30, 2010 - WEP Foundation -DED Corp. -Pat Goodlin - Joe Blow Foundation As of June 30, 2011 - John Dory Foundation -Excalibur Corp - Joe Doaks Fdn. Remaining amount due from award in 2010 Amount to be received in FY 2010/11 Amount to be received in August 2010 Three-year grant awarded in 2000 cash received in March 2010. Cash received October 2010 $40,000 $40,000 $41,500 Amount to be received in October 2011 Cash received in January 2011 Financial Tools for Informed Decision Making 179 1. You first need to determine the organization's statement of financial nosition as compared against the previous year and broken down by type of net seset. Drawing on data from the tables provided, complete Worksheet 8.1. WORKSHEET 61 Youth Movement Reformatted Statements of Financial Position (amounts in thousands) June 30, 2011 June 30, 2010 Temporarily Temporarily Unrestricted Restricted Total Unrestricted Restricted Total Assets -Cash - Grant contracts receivable - Other receivables - Unconditional promises to give - Prepaid expenses - Security deposits - Office equipment net of depreciation Total Assets Liabilities - Accounts payable - Accrued expenses Total Liabilities Net Assets Total Liabilities and Net Assets 2. Next, detail Youth Movement's unrestricted revenues and expenses for FY 2009/10 and FY 2010/11 in Worksheet 8.2. This will provide you with historical, actual data formatted in the budget categories. These historical data can be used as a primary source for constructing the FY 2011/12 budget. 3. Now transfer only the unrestricted amounts for assets, liabilities, and net assets from Worksheet 8.1 to Worksheet 8.3. Also transfer the revenue and expense amounts from Worksheet 8.2 to Worksheet 8.3. After you have done this, Worksheet 8.3 should present an easily readable view of the overall incial position of the organization. As you complete Worksheet 8.3. provide comments on the financial situation at the organization. Leave the budget column blank for the time being. 4. You can now create a budget model for FY 2010/11 based on Youth 'vement's current financial situation. Refer to Table 8.16 on claim information 180 BUDGETING AND FINANCIAL MANAGEMENT FOR NONPROFITS WORKSHEET 8.2 Youth Movement Reformatted Statement of Activities ($ in 000) (unrestricted only) FY 2010/11 FY 2009/10 Revenues - Government Grants - Foundation Grants - Corporate Grants - Individual Contributions - Contributed Services - Interest Income Total Expenses - Salaries - Fringe Benefits Subtotal - Consulting Services - Travel -Equipment and Maintenance - Audit Fees - Rent - Contributed Services -All Other Expenses Total Revenues Less Expenses with funding sources when filling out Worksheet 8.4. Also, refer to Worksheet 8.3 for the total amounts for each revenue and expense category. 5. Having reached this point, you are now ready to prepare a balam budget proposal for FY 2011/12. Complete Worksheet 8.5 by taking the follow sequential steps: Take the amounts shown in Worksheet 8.4 and apply the follo proposed changes for FY 2011/12 to Worksheet 8.5: Reduce the grant revenue for the HOPE program by 50 percent. Eliminate the porate grant for general support (unrestricted). Eliminate the ind ual contribution for general support (unrestricted). These changes should result in a proiected deficit for FY 2011/ amount in the bottom right-hand side of the model). 5: Reduce the federal eliminate the cor inate the individ cit for FY 2011/12 (the WORKSHEET 83 Statement of Financial Position Unrestricted June 30, 2011 June 30, 2010 ($ in 00s) ($ in 000s) Statement of Activities Unrestricted FY 2011/12 FY 2010/11 FY 2009/10 ($ in 00s) ($ in 00s) ($ in 000s) Budget Actual Actual Revenues - Government Grants Assets -Cash - Grant contracts receivable - Other receivables - Unconditional promises to give - Prepaid expenses - Security deposits - Office equipment net of depreciation - Foundation Grants - Corporate Grants Total Assets - Individual Contributions - Contributed Services Liabilities - Accounts payable - Accrued expenses Financial Tools for Informed Decision Making - Interest Income Total Liabilities Total Net Assets Total Liabilities and Net Assets Expenses -Salaries -Fringe Benefits Subtotal - Consulting Services - Travel -Equipment and Maintenance -Audit Fees - Rent - Contributed Services - All Other Expenses Total Revenues Less Expenses TABLE 8.16 FY 2010/11 Claim Information for Claims Filed with Funding Sources 1. HOPE Program (cost reimbursable) - Revenue is received based on costs incurred. - Overhead (or indirect cost rate is 10% of total cost e... Foundation claim is $18 for direct expenses and $2 for overhead rect) costs. This rate applies to each funding source. 2. CARE Program (fee for service) - Revenue received based on completion of activities, 0.g. number of youth served, - FY 2010/11 Govt. Grant claim based on serving 150 youth during the year. FY 2010/11 Contract allows up to 175 youth served each year." - Foundation grant based on serving 100 youth during the year. Grant allows up to 110 youth served each year." WORKSHEET 8.4 Youth Movement Program Budget Model, FY 2010/11 (s in 000s) Programs Support Total Subtotal Special Events Admin. Subtotal HOPE Cost reimbursable CARE Fee for service Type of Funding Available Revenues - Government Grants - Foundation Grants - Corporate Grants - Individual Contributions - Contributed Services - Interest Income Total Expenses - Salaries - Fringe Benefits Subtotal - Consulting Services -Travel -Equipment and Maintenance -Audit Fees - Rent - Contributed Services - All Other Expenses Total Revenues Less Expenses Financial Tools for Informed Decision Making 183 Now suggest actions that the organization can take to achieve a bal- anced budget in FY 2011/12--that is, have the amount in the bottom right-hand side of the model be zero. Briefly describe each proposed action and your rationale for it. Be sure that your suggested changes are both reasonable and practically achievable for the organization. After completing this worksheet, return to Worksheet 8.3 and complete the budget column for FY 2011/12 WORKSHEET 85 Total Youth Movement Program Budget Model, FY 2011/12 ($ in 000s) Programs Support Special HOPE CARE Subtotal Events Admin. Cost reimbursable Fee for service Subtotal Type of Funding Available Revenues -Government Grants - Foundation Grants - Corporate Grants - Individual Contributions - Contributed Services - Interest Income Total Expenses - Salaries - Fringe Benefits Subtotal - Consulting Services - Travel - Equipment and Maintenance - Audit Fees - Rent - Contributed Services - All Other Expenses Total Revenues Less Expenses From Operations) Unstime (Nonrecurring) Items trots Less Expenses (Final) 184 BUDGETING AND FINANCIAL MANAGEMENT FOR NONPROFITS TABLE 8.17 A Nonprofit's Accounting Transactions Debit Credit $52,000 $3,457 $50 $25,000 $50,000 $10,000 $20,000 $5,000 $7,500 $100,000 $80,000 $10,000 $6,000 $250,000 Account # 1 - 11110 1 - 11111 1 - 11112 1 - 11113 1 - 11200 1 - 11201 1 - 11310 1 - 11320 1 - 11330 1 - 12110 1 - 12111 1 - 12210 1 - 12211 1 - 13110 1 - 21110 1 - 21111 1 - 21210 1 - 21410 1 - 31110 1 - 31112 1 - 31113 1 - 41110 1 - 41111 1 - 41210 1 - 41211 1 - 41210 1 - 41510 1 - 51110 1 - 51111 1 - 51112 1 - 51210 1 - 51310 Description Cash-Operating Cash-Payroll Petty Cash Cash-Money Market-Restricted Govt. Grants Receivable Govt. Grants Receivable-Restricted Foundations Receivable Corporations Receivable Individuals Receivable Facility Facility-Accum. Dep. Equipment Equipment-Accum. Dep. Long-Term Investments Accounts Payable Accrued Salary Deferred Revenue Facility Loan Fund Balance-Unrestricted Fund Balance-Temp. Rest. Fund Balance Perm. Rest. Federal Grants (Program Inc.) State Grants (Program Inc.) Foundation Contributions Corporation Contributions Individual Contributions Investment Income-Op. Salaries-Management Salaries-Staff Salaries Other Payroll Taxes Health Insurance $35,175 $2,500 $5,000 $20,000 $149,332 $35,000 $200,000 $400,000 $300,000 $720,000 $125,000 $185,000 $10,000 $300,000 $700,000 $100,000 $67,000 $200,000 $25,000 1 - 51311 Disability Insurance Financial Tools for Informed Decision Making 185 Debit Credit Account # 1 - 51410 1 - 51411 1 - 51412 1 - 51413 1 - 51414 1 - 51417 1 - 51420 1 - 51421 1 - 51422 Description Program Services Depreciation Facility Depreciation Equipment Custodial Costs Interest Supplies-Admin Legal Fees Accounting Fees Miscellaneous Total $200,000 $10.000 $1,000 $110,000 $1,000 $6,500 $1,500 $4,000 $14,000 $2,273,007 $2.273.007 ASSIGNMENTS For all three of the following assignments, use the accounting transactions pro vided in Table 8.17. ASSIGNMENT 8.1. CREATING A STATEMENT OF FINANCIAL POSITION Create a statement of financial position as of December 31, 2009, with the three net asset classes displayed. ASSIGNMENT 8.2. CREATING A STATEMENT OF ACTIVITIES Create a statement of activities for the period January 1, 2009, through Decem- ber 31, 2009. Use major revenue and expense categories only. ASSIGNMENT 8.3. DESCRIBING THE FINANCIAL SITUATION briefly describe the organization's financial situation. Explain these major ele. ments using financial ratios in your description of the financial situation: liquid ily, statement of financial position, and statement of activities. KEY TERMS Cash-flow management report (p. 166) Endowment draw (p. 163) General support revenue (p. 163) Receivables (p. 166) CASE STUDY: CREATING A BALANCED BUDGET FOR MANAGEMENT DECISION MAKING It is September 1, 2011. The executive director of the nonprofit organization Youth Movement has just resigned to accept a position with another youth-serving organization. You are the director of programs for Youth Movement and have been named interim acting executive director. In June 2011, the prior executive director did not present a FY 2011/12 (July 1, 2011-June 30, 2012) proposed bud get for approval by the board of directors because he had recently become aware of the following financial problems for FY 2011/12: The federal grant for the HOPE program was going to be reduced by 50 percent. The corporate grant for general support (unrestricted) was going to be eliminated. The individual contribution for general support (unrestricted) was going to be eliminated. Given these large financial problems, the board of directors told the execu- tive director that he could take a few months to determine how he would propose a balanced budget with cost reductions and/or revenue increases. He never completed the task. The board of directors has now instructed you to present a FY 2011/12 balanced budget for approval by the board no later than September 30, 2011. Using Tables 8.12 through 8.15 for reference, follow the steps outlined below to build a balanced budget proposal. The data you will need include Youth Movement's current statement of financial position, statements of activities with comparative data, a trial balance sheet, and details of temporarily restricted net assets. (All tables and worksheets are also available on this book's student Web site, http://college.cqpress.com/Sitesonprofit-budgeting/) 176 TABLE 8.12 Youth Movement Statement of Financial Position and Statement of Activities, June 30, 2011 Statement of Financial Position June 30, 2011 (with comparative totals for 6/30/10) Statement of Activities June 30, 2011 (with comparative totals for 6/30/10) 2011 2010 Temporarily Unrestricted Restricted Total 2011 Total 2010 $60,724 $204,894 $7.938 $43,000 $171,932 $115,684 $2,092 $50,000 $4,242 $16,920 $15,230 $376,100 Support and Revenue - Grants and Contributions - Contributed Services - Interest Income - Net Assets Released from Restriction Total Support and Revenue $1,075,650 $37,975 $783 Assets -Cash - Grant Contracts Receivable - Other Receivables - Unconditional Promises to Give - Prepaid Expenses - Security Deposits - Office Equipment Net of Depreciation Total Assets Liabilities - Accounts Payable - Accrued Expenses $265,000 $1,340,650 $37.975 $783 $948,675 $45,150 $2,123 $6,985 $15,081 $338,622 $224,927 ($224,927) $0 $1,339,335 $40,073 $1,379,408 $0 $995,948 BUDGETING AND FINANCIAL MANAGEMENT FOR NONPROFITS $9,721 $11,400 $51,503 $6,885 Expenses - Program Expenses - Management and General - Fundraising $1,133,780 $95.470 $75,413 $1,133,780 $1,030,379 $95,470 $86,763 $75,413 $68,535 Total Liabilities $21,121 $58,388 Total Expenses $1,304,663 $1,304,663 $1,185,678 Net Assets - Unrestricted - Temporarily Restricted Total Net Assets $233,479 $121,500 $354,979 $198,807 $81,427 $280.234 Change in Net Assets Net Assets Beginning of Year Net Assets End of Year $34,672 $198,807 $233,479 $40,073 $81,427 $121,500 $74,745 ($189,730) $280,234 $469,964 $354.979 $280,234 Total Liabilities and Net Assets $376,100 $338,622 TELE Youth Movement Statement of Activities, FY 2009/10 (07/01/09-06/30/10) Teng Total Unrestricted Restricted $40,000 Revenues - Grants and Contributions - Contributed Services - Interest income - Met Assets Released from Restriction $908,675 $45,150 $2,123 $948,675 $45,150 $2,123 $180,000 ($180,000) ($140,000) $0 $995,948 $1,135,948 Total Revenues Expenses - Program Expenses - Management and General - Fundraising ($1,030,379) ($86,764) (S68,535) ($1,030,379) ($86,764) ($68,535) Total Expenses Change in Net Assets Net Assets beginning of the year Net Assets end of the year ($1,185,678) (549.730) $245,537 $198,807 ($140,000) $221,427 $31,427 ($1,185,678) ($189,730) $469.964 $280.234 TABLE 8.14 Trial Balance, from Accounting Software June 30, 2010 June 30, 2011 Debit Credit Debit Credit $195,525.63 $60.723.96 $23.593.83 $204.894.00 $7.938.01 $43,000.00 Acct. Name 1001 Commerce Bank-Money Market Acct. 1002 Commerce Bank-Checking Acct. 1101 Grants receivable 1102 CON Training receivable 1201 Pledges receivable--general 1202 Pledges receivable-jones 1301 Prepaid rent and security deposit 1401 Furniture 1402 Oice equipment 1493 Accumulated depreciation 2001 Accounts payable 2101 Salaries payable 2102 Payroll tax payable 2103 FUTA payable 2104 SUTA payable 2105 Other accrued expenses 3101 Uhrestricted net assets 12 Temporarily restricted net assets $115,683.95 $2,091.85 $20,000.97 $30,000.00 $21.161.56 $3.730.00 $26,275.00 $6,984.85 $3.730.00 $22.270.00 $14.775.00 $9.721.10 $3,456.98 $567.45 $1,098.00 $0.00 $6.278.55 $198,806.65 $121,499.97 $10.919.00 $51,502.56 $1,654.09 $271.35 $425.67 $15.78 $4,518.09 $248,453.44 $81.427.00 (Continued 178 BUDGETING AND FINANCIAL MANAGEMENT FOR NONPROFITS TABLE 8.14 (CONTINUED) Acct. # Name 4101 Federal Grant-HOPE program 4102 State Grant-HOPE program 4103 City Grant-CARE program 4202 Foundation Grant-CARE program 4203 Foundation Grant-HOPE program 4301 Corporate Grant-Unrestricted 4401 Individual contribution HOPE program 4402 Individual contribution-Unrestricted 4501 Contributed services-corporations-special event 4502 Contributed services-individuals-special event 4601 interest income 5101 Salaries-HOPE program 5102 Salaries-CARE program 5103 Salaries-Executive Director 5104 Salaries--Finance Director 5105 Salaries-Other mgt. and general 5201 Fringe benefits-HOPE program 5202 Fringe benefits-CARE program 5203 Fringe benefits Executive Director 5204 Fringe benefits-Finance Director 5205 Fringe benefits-Other mgt. and general 5301 Consulting ServicesHOPE program 5302 Consulting Services-CARE program 5303 Consulting Services-general 5401 Travel-HOPE program 5402 TravelCARE program 5403 Travel general 5401 All other expenses-HOPE program 5402 All other expenses-CARE program 5403 All other expenses-general 5501 Audit fees-general 5601 Equipment and maintenance general 5701 Rent-general 5801 Contributed services-special event Totals June 30, 2011 Debit Credit $1.005.000.00 $25,000.00 $150,000.00 $50,000.00 $20,000.00 $10,000.00 $5,520.00 $35,057.00 $25,500.00 $12,474.76 $783.00 $640,000.00 $79,651.49 $60,000.00 $40,000.00 $27,952.06 $160,000.00 $19.912.87 $15,000.00 $10,000.00 $6,988.02 $100,000.00 $5,000.00 $5,000.00 $20,362.15 $4,861.25 $1,990.00 $29,965.43 $10,015.15 $240.15 $10,000.00 $14,750.00 $5,000.00 $37.974.76 $1.719,132.29 $1.719,132.29 June 30, 2010 Debit Credit $819,300.00 $22.500.00 $135.000.00 $45,000.00 $18,000.00 $9,000.00 $4.968.00 $35,281.92 $24.150.00 $21,000.00 $2,122.00 $576,000.00 $71,686.34 $54,000.00 $36,000.00 $25,156.85 $144,000.00 $17.921.58 $13,500.00 $9,000.00 $6,289.22 $90,000.00 $4,500.00 $4,500.00 $18,325.94 $4,375.13 $1,791.00 $26,968.89 $9.013.84 $216.14 $9,000.00 $13,275.00 $5,300.00 $45,150.00 $1,535,510.52 $1,535,509.90 TABLE 8.15 Temporarily Restricted Net Assets Information Received from Accountant $23,000 $25,427 $20,000 $13,000 As of June 30, 2010 - WEP Foundation -DED Corp. -Pat Goodlin - Joe Blow Foundation As of June 30, 2011 - John Dory Foundation -Excalibur Corp - Joe Doaks Fdn. Remaining amount due from award in 2010 Amount to be received in FY 2010/11 Amount to be received in August 2010 Three-year grant awarded in 2000 cash received in March 2010. Cash received October 2010 $40,000 $40,000 $41,500 Amount to be received in October 2011 Cash received in January 2011 Financial Tools for Informed Decision Making 179 1. You first need to determine the organization's statement of financial nosition as compared against the previous year and broken down by type of net seset. Drawing on data from the tables provided, complete Worksheet 8.1. WORKSHEET 61 Youth Movement Reformatted Statements of Financial Position (amounts in thousands) June 30, 2011 June 30, 2010 Temporarily Temporarily Unrestricted Restricted Total Unrestricted Restricted Total Assets -Cash - Grant contracts receivable - Other receivables - Unconditional promises to give - Prepaid expenses - Security deposits - Office equipment net of depreciation Total Assets Liabilities - Accounts payable - Accrued expenses Total Liabilities Net Assets Total Liabilities and Net Assets 2. Next, detail Youth Movement's unrestricted revenues and expenses for FY 2009/10 and FY 2010/11 in Worksheet 8.2. This will provide you with historical, actual data formatted in the budget categories. These historical data can be used as a primary source for constructing the FY 2011/12 budget. 3. Now transfer only the unrestricted amounts for assets, liabilities, and net assets from Worksheet 8.1 to Worksheet 8.3. Also transfer the revenue and expense amounts from Worksheet 8.2 to Worksheet 8.3. After you have done this, Worksheet 8.3 should present an easily readable view of the overall incial position of the organization. As you complete Worksheet 8.3. provide comments on the financial situation at the organization. Leave the budget column blank for the time being. 4. You can now create a budget model for FY 2010/11 based on Youth 'vement's current financial situation. Refer to Table 8.16 on claim information 180 BUDGETING AND FINANCIAL MANAGEMENT FOR NONPROFITS WORKSHEET 8.2 Youth Movement Reformatted Statement of Activities ($ in 000) (unrestricted only) FY 2010/11 FY 2009/10 Revenues - Government Grants - Foundation Grants - Corporate Grants - Individual Contributions - Contributed Services - Interest Income Total Expenses - Salaries - Fringe Benefits Subtotal - Consulting Services - Travel -Equipment and Maintenance - Audit Fees - Rent - Contributed Services -All Other Expenses Total Revenues Less Expenses with funding sources when filling out Worksheet 8.4. Also, refer to Worksheet 8.3 for the total amounts for each revenue and expense category. 5. Having reached this point, you are now ready to prepare a balam budget proposal for FY 2011/12. Complete Worksheet 8.5 by taking the follow sequential steps: Take the amounts shown in Worksheet 8.4 and apply the follo proposed changes for FY 2011/12 to Worksheet 8.5: Reduce the grant revenue for the HOPE program by 50 percent. Eliminate the porate grant for general support (unrestricted). Eliminate the ind ual contribution for general support (unrestricted). These changes should result in a proiected deficit for FY 2011/ amount in the bottom right-hand side of the model). 5: Reduce the federal eliminate the cor inate the individ cit for FY 2011/12 (the WORKSHEET 83 Statement of Financial Position Unrestricted June 30, 2011 June 30, 2010 ($ in 00s) ($ in 000s) Statement of Activities Unrestricted FY 2011/12 FY 2010/11 FY 2009/10 ($ in 00s) ($ in 00s) ($ in 000s) Budget Actual Actual Revenues - Government Grants Assets -Cash - Grant contracts receivable - Other receivables - Unconditional promises to give - Prepaid expenses - Security deposits - Office equipment net of depreciation - Foundation Grants - Corporate Grants Total Assets - Individual Contributions - Contributed Services Liabilities - Accounts payable - Accrued expenses Financial Tools for Informed Decision Making - Interest Income Total Liabilities Total Net Assets Total Liabilities and Net Assets Expenses -Salaries -Fringe Benefits Subtotal - Consulting Services - Travel -Equipment and Maintenance -Audit Fees - Rent - Contributed Services - All Other Expenses Total Revenues Less Expenses TABLE 8.16 FY 2010/11 Claim Information for Claims Filed with Funding Sources 1. HOPE Program (cost reimbursable) - Revenue is received based on costs incurred. - Overhead (or indirect cost rate is 10% of total cost e... Foundation claim is $18 for direct expenses and $2 for overhead rect) costs. This rate applies to each funding source. 2. CARE Program (fee for service) - Revenue received based on completion of activities, 0.g. number of youth served, - FY 2010/11 Govt. Grant claim based on serving 150 youth during the year. FY 2010/11 Contract allows up to 175 youth served each year." - Foundation grant based on serving 100 youth during the year. Grant allows up to 110 youth served each year." WORKSHEET 8.4 Youth Movement Program Budget Model, FY 2010/11 (s in 000s) Programs Support Total Subtotal Special Events Admin. Subtotal HOPE Cost reimbursable CARE Fee for service Type of Funding Available Revenues - Government Grants - Foundation Grants - Corporate Grants - Individual Contributions - Contributed Services - Interest Income Total Expenses - Salaries - Fringe Benefits Subtotal - Consulting Services -Travel -Equipment and Maintenance -Audit Fees - Rent - Contributed Services - All Other Expenses Total Revenues Less Expenses Financial Tools for Informed Decision Making 183 Now suggest actions that the organization can take to achieve a bal- anced budget in FY 2011/12--that is, have the amount in the bottom right-hand side of the model be zero. Briefly describe each proposed action and your rationale for it. Be sure that your suggested changes are both reasonable and practically achievable for the organization. After completing this worksheet, return to Worksheet 8.3 and complete the budget column for FY 2011/12 WORKSHEET 85 Total Youth Movement Program Budget Model, FY 2011/12 ($ in 000s) Programs Support Special HOPE CARE Subtotal Events Admin. Cost reimbursable Fee for service Subtotal Type of Funding Available Revenues -Government Grants - Foundation Grants - Corporate Grants - Individual Contributions - Contributed Services - Interest Income Total Expenses - Salaries - Fringe Benefits Subtotal - Consulting Services - Travel - Equipment and Maintenance - Audit Fees - Rent - Contributed Services - All Other Expenses Total Revenues Less Expenses From Operations) Unstime (Nonrecurring) Items trots Less Expenses (Final) 184 BUDGETING AND FINANCIAL MANAGEMENT FOR NONPROFITS TABLE 8.17 A Nonprofit's Accounting Transactions Debit Credit $52,000 $3,457 $50 $25,000 $50,000 $10,000 $20,000 $5,000 $7,500 $100,000 $80,000 $10,000 $6,000 $250,000 Account # 1 - 11110 1 - 11111 1 - 11112 1 - 11113 1 - 11200 1 - 11201 1 - 11310 1 - 11320 1 - 11330 1 - 12110 1 - 12111 1 - 12210 1 - 12211 1 - 13110 1 - 21110 1 - 21111 1 - 21210 1 - 21410 1 - 31110 1 - 31112 1 - 31113 1 - 41110 1 - 41111 1 - 41210 1 - 41211 1 - 41210 1 - 41510 1 - 51110 1 - 51111 1 - 51112 1 - 51210 1 - 51310 Description Cash-Operating Cash-Payroll Petty Cash Cash-Money Market-Restricted Govt. Grants Receivable Govt. Grants Receivable-Restricted Foundations Receivable Corporations Receivable Individuals Receivable Facility Facility-Accum. Dep. Equipment Equipment-Accum. Dep. Long-Term Investments Accounts Payable Accrued Salary Deferred Revenue Facility Loan Fund Balance-Unrestricted Fund Balance-Temp. Rest. Fund Balance Perm. Rest. Federal Grants (Program Inc.) State Grants (Program Inc.) Foundation Contributions Corporation Contributions Individual Contributions Investment Income-Op. Salaries-Management Salaries-Staff Salaries Other Payroll Taxes Health Insurance $35,175 $2,500 $5,000 $20,000 $149,332 $35,000 $200,000 $400,000 $300,000 $720,000 $125,000 $185,000 $10,000 $300,000 $700,000 $100,000 $67,000 $200,000 $25,000 1 - 51311 Disability Insurance Financial Tools for Informed Decision Making 185 Debit Credit Account # 1 - 51410 1 - 51411 1 - 51412 1 - 51413 1 - 51414 1 - 51417 1 - 51420 1 - 51421 1 - 51422 Description Program Services Depreciation Facility Depreciation Equipment Custodial Costs Interest Supplies-Admin Legal Fees Accounting Fees Miscellaneous Total $200,000 $10.000 $1,000 $110,000 $1,000 $6,500 $1,500 $4,000 $14,000 $2,273,007 $2.273.007 ASSIGNMENTS For all three of the following assignments, use the accounting transactions pro vided in Table 8.17. ASSIGNMENT 8.1. CREATING A STATEMENT OF FINANCIAL POSITION Create a statement of financial position as of December 31, 2009, with the three net asset classes displayed. ASSIGNMENT 8.2. CREATING A STATEMENT OF ACTIVITIES Create a statement of activities for the period January 1, 2009, through Decem- ber 31, 2009. Use major revenue and expense categories only. ASSIGNMENT 8.3. DESCRIBING THE FINANCIAL SITUATION briefly describe the organization's financial situation. Explain these major ele. ments using financial ratios in your description of the financial situation: liquid ily, statement of financial position, and statement of activities. KEY TERMS Cash-flow management report (p. 166) Endowment draw (p. 163) General support revenue (p. 163) Receivables (p. 166)