Video Transcript:

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>> We're looking at the budget for next year and in particular, this time I want to look at the new literacy initiative that we're talking about. A budget is a statement of goals translated into revenue and expense projections for a set period, normally a year. It gives you a framework that allows you to provide sort of optimal services to children but at the same time stay within your resources. I mean most organizations have an established fiscal year which its calendar or fiscal established by law really and the budget cycle simply projects in revenue and expenses over that period. In trying to establish the relationship between programmatic goals and budget the center director would establish their programmatic goals and then create a budget to try to fund it and there's usually attention as you sometimes have to trim your goals or you may have to be aggressive in seeking your funding to achieve it so that interplay occurs. Well in a budget there are 3 main broad categories: Personnel, essential comprises salaries and French benefits, variable expenses and fixed expenses. Child care is very labor intensive; so that inevitably personnel expenses will consume 75-80% of your budget. In creating the personnel budget you have to abide by staffing ratios. There's particular regulations in terms of the ratio between teachers and student so you have to account for that. Because of that ratio you also have to account for substitute time for compensated absences. In addition to salaries you then you have to look at French, sort of mandatory French taxes things like health insurance, dental insurance, if you're lucky retirement. You know so personnel is a real combination of trying to project salaries and French benefits in this particular industry you know most of your budget goes towards that.

>> Want to use the green one? The green paint. Want to use this one?

>> A variable expense generically would be an expense that varies with revenue. Some examples of variable expenses: Supplies, consultant, training, travel. Usually line items in a budget crunch to sort of give you the first pass at trimming costs you have the most discretion there. Well a fixed expense is an expense that does not vary with your revenue or utilization. A typical example would be facilities. If you lease a facility for a center whether your enrollment is 95% or 60%, the cost is fixed. A lot of your fixed expenses fall into sort of the general category we call occupancy which his rent, utilities, insurance, that sort of thing. There are multiple sources of income for a child care center. The main source is usually child care fees. The particular source of that has to do with your client mix. If it's primarily private it may be parent fees. If the if they're lower income children they may that may include a significant amount of public subsidies. In addition to the basic child care fee some centers also provide optional services and families are charged optional fees. Examples would be for nutrition, transportation and after hours care. Apart from your core funding this is sort of child care fees a center can seek alternative funding. You can seek grants, federal, state or local. You can certainly try [inaudible] foundations for grants. Once you've entered the data into whatever budget template that you use you will then present the first preliminary draft to the relevant participants of the managers at a budget meeting where people have an opportunity to make changes. If your desire is to have a particular operating margin and you fall short of it you determine where you want to cut or where there are opportunities to enhance revenue. If there's opportunity to do more things, if you have a greater margin than you thought from your initial pass then you may decide to establish build your reserve, or it may be an opportunity to do some creative programmatic initiative you always wanted to do but thought you were financially constrained. A small organization you would have account and function. Sometimes what small businesses do they buy consultant. They may actually buy a consultant for X number of hours a month, whatever you think is appropriate and you can afford to keep your books in order but you would need input from a financial professional to create the budget and clearly to do your month to month accounting.

>> I know this is a big item but I'm wondering if we can also get a laminating machine with the paper supplies.

>> Ok well we'll try to get some grant funding for it. What we'll do is talk to the. There is a natural tension that occurs between expensive programmatic goals and available resources and the budget provides a mechanism, sort of discipline to bring your goals and ambitions and balance of your available resources.