PAF 9140 BUDGETING, ACCOUNTING & FINANCIAL MANAGEMENT
OBJECTIVES (TASKS):
1. To write a simple Mission Statement.
2. To present your agency's upcoming fiscal year (FY 2017)operating budget.
3. To present your agency's cash position over the year with a Cashflow Analysis.
4. To provide a written synopsis of your assumptions (approximately 2 pages bullet point- Word document) OR you can incorporate all your assumptions into the Excel workbook
5. To answer the additional general questions.- as a separate Word Document attachment
Description of Agency:
- 40 year old New York City agency started as a daycare center in 1977. There is discussion with the board to have a celebration gala in 2017 for the 40th anniversary
- Based in the Bronx serving mainly an African American, West African and Latino(a) population
- Size of staff- 120 full time and 30 part-time (with no health benefits- they work less than 20 hours week)
- 3 program sites (locations where programs/classrooms are held)
- Management- Executive Leadership team consists of CEO, COO, CFO, Director of Programs, Director of Legal Services, Director of Development
- Board size- 25 people (but only 20 gave in FY 2016)- various professionals and community leaders- they have never been major fundraisers but there is some capacity for growth.
Services Provided:
1. Early childhood education for up to 4 years old
2. Daycare services for infants & toddlers
3. Family case management services
4. Nutrition/food program
5. Legal services (especially around immigration issues and housing)
FACTS & ASSUMPTIONS:
- Fiscal Year (FY 2016) is July 1, 2015 to June 30, 2016 (you are preparing FY 2017 budget for approval)
- FY 2016Annual Operating Budget is approximately $12,000,000 (BALANCED) was approved by board in May 2015.
- Your agency is projected to end FY 2016 (June 30, 2016) with anoperating deficit($400,475).
- This deficit is the first one in 10 years at the agency
- $1,000,000 Restricted Endowment for real estate (Established in 2000)
- Operating Reserves- Non restricted (in a basic Money Market Account) = $500,000
- Line of Credit = $1,000,000 (not used in 10 years) requires payback within 90 days of accessing funds.
- The Board is considering undertaking a Feasibility Study (a plan to evaluate whether or not to move forward with a formal campaign) on a potential Capital Campaign to buy a building
o ASSUMPTIONS
- ASSUME FOR FY 2017 NYC CONTRACT IS CUT BY 30% (Mainly covers Food Program)
- ASSUME FOR FY 2017 NYS CONTRACT IS CUT BY 10% (Mainly Case Management Services)
- ASSUME PERSONNEL COSTS WILL BE 32% OF SALARY FOR FY 2017 DUE TO HEALTHCARE COSTS INCREASE
- ASSUME DEPRECIATION & IN KIND WILL BE THE SAME FOR FY 2017
- ASSUME OCCUPANCY COSTS WILL INCREASE BY 5% FOR FY 2017
- YOU CANNOT ADD ANY REVENUE OR EXPENSE LINE ITEMS
TASK 1:
- Write a brief Agency Mission Statement (you can be as creative as you would like- given the services that you provide). Include the Mission Statement as a part of the word document for answering the additional questions.
Task 2:
- Produce Variance Analyses for FY 2016 (see tab 1 of workbook)
Task 3:
- Produce a BALANCED FY 2017 OPERATING BUDGET, taking into account the budget cuts you will receive on the Revenue Side
- You can make whatever assumptions you would like about other Revenue items (except you know that In-Kind services& Depreciation will remain the same as FY 16)
- You can use either Zero based budgeting or Incremental approach- BE SURE TO STATE WHAT APPROACH YOU ARE USING FOR ALL LINE ITEMS WHEN PRESENTING.
- There are several strategies that you can use for example you could hold budget firm to FY 2016 numbers and look for ways to increase revenue in other revenue line items or: You can cut your budget in FY 2016 (more conservatism approach)- or a combination of both
- Spread the budget monthly- you can use straight line approach or cyclical approach for expenses but use a Cyclical approach on Revenue Items that are driven by key dates (see FY 2016Operating Budget- because you have key special events that happen at certain times of the year)
TASK 4:
- With the following information you will also put together a Cash Flow Analysis for the year (FY 2017).
FACTS:
- Starting Cash positions for July 1, 2016 are
- $1,000,000 in Bank Account
- $250,000 in Saving Account
- $500,000 in Money market reserve account
- DO NOT INCLUDE LINE OF CREDIT
Assume Cash Receipts are cyclical for events/activities- YOU CAN ASSUME THAT THE CASH RECEIPTS ARE FAIRLY EVEN SPREAD FOR NYC & NYS MONEY
Assume- Cash received from Board mainly happens at the end of the FISCAL year
Assume mostCash Disbursements are stable and evenly spread throughout the year.
DO NOT ASSUME THAT YOUR MONTHLY BUDGET SPREAD IS THE SAME AS YOUR MONTHLY CASH FLOW!!!!!!
TASK 5:
Answer these additional questions:
1. What is the Mission Statement and why is it important?
2. Why do you need to present the budget and the cashflow projection?
3. What would you suggest to the Board in terms of the feasibility study for the Capital Campaign?
4. Do you need to do anything with the deficit projected for FY 16?
5. Calculate your agency's BURN RATE
6. If your Cash Threshold is 3 months- When do you meet this threshold?
7. What statement would I need to look at to find my Cash Position?
8. What statement do I use for developing ratios on liquidity?
9. What is the difference between leverage & coverage?
10. What is the difference between STATEMENT OF CASHFLOWS and Cashflow Projections/Analysis?
What will the assignment look like when completed?
What you are graded on?
1. Clarity of information presented (including formatting- for ease of reading).
2. The validity of your assumptions
3. Variance Analysis
4. Budget presentation & Cashflow Projection
5. Your specific answers to the additional questions asked
Attachment:- BUDGETING FIN.xlsx