Nonprofits offer lots of programs to improve their communities. They also develop new programs regularly as their communities’ needs change. Oftentimes, programs are created quickly and delivered by existing staff with existing resources. In this environment, it’s easy to ignore the need for a program budget. But this is an important first step that you shouldn’t skip! Not only will it help you determine if you can actually afford the program, it will also help you make a stronger case for funding in grant applications.
Fortunately, creating a program budget is easy if you have a program description or a clear vision of your program. Here are 5 easy steps to finishing your budget in a morning:
Make a list of all the expenses
The first step to create a program budget is to make a list of all the expenses your organization will have to cover annually for the program to be successful. Don’t worry about categorizing anything or determining costs at this point – just jot down all the expenses in one long list.
To make sure you capture everything, read through your program description and consider everything that will cost money or time. For example, if your staff will attend outreach events, consider the costs of staff time, mileage, vendor fees, brochures and business cards for the table, tent rentals, etc. If you haven’t developed a program description yet, think through all the activities required to plan for and implement the program. As you’re thinking through all those activities, write down all the expenses for each one.
Once you have your list, review it to ensure you didn’t miss anything. This list should include absolutely every expense, even if it’s already funded or will be provided through in-kind support.
Categorize the expenses
Once you have a list of expenses, it’s time to categorize them. Here are some common categories used in program budgets:
- Include the salaries required for all staff supporting the program, based on the percentage of time they’ll spend. For example, if the Executive Director will spend 5% of her time on the program, then include 5% of her salary.
- Employee Expenses. This category would include any items such as taxes (e.g., FICA, workers’ compensation) and benefits (e.g., health insurance), prorated based on the salaries dedicated to the program.
- Contractors/Consultants. Nonprofits often use consultants to assist with grant requirements, especially for activities such as evaluation. You may also choose to bring on contractors (vs. employees) for short-term or part-time staffing needs. Include all the contractor and consultant fees here.
- Any items that your organization will expend throughout the grant period are considered supplies. This includes items such as office supplies, brochures, and participant materials.
- Equipment is an item that your organization won’t expend during the grant period. Common equipment required for a new or expanding program include office furniture, computers, and printers.
- All expenses related to local or out-of-town travel fall in the travel category. This includes mileage reimbursement, airplane tickets, hotel stays, and per diem.
- Other Expenses. This is a catch-all category for many of the other program-related expenses your organization might incur. Some examples of “other” expenses include phone or internet service, printing or copying, or postage.
Determine the cost of each expense
Now that you’ve identified and categorized all your expenses, it’s time to determine the cost of each item. To calculate salary costs, first determine the percentage of time each person will spend on the program. Then, multiply the percentage by each person’s salary. For example, if the Executive Director earns $70,000 annually and will spend 5% of her time on the program, the salary cost for her support of the program would be $3,500. Once you have a total salary cost, use that figure to calculate each of the employee related expenses. For example, if your total salary cost is $100,000, then your FICA cost will be $7,650 (7.65% of $100,000).
Calculate contractor and consultant fees based on the amount you will pay each one and the total hours they’ll commit to the program. Alternately, a consultant may charge a flat rate for their services, which you would include instead of an hourly rate.
You can gather the costs for all your supplies, equipment, and “other” expenses by checking out prices at your local office store website, or by requesting quotes for larger items. You can also determine all your travel expenses online by checking out the average cost for airline tickets, federal mileage reimbursement rate, and allowable lodging and per diem rates by city.
Once you’ve determined all the costs, simply add them all together and you’ll have your total program cost. You may also want to add up the total costs within each category to get a sense of how costs are distributed.
Write a brief narrative for each expense and cost
At some point, you’ll have to share your program budget with others, including your board, other staff members, or potential funders. So it’s important that you include brief details about each expense within your program budget. These details should focus on the importance of the expense to the program (briefly!) and the calculations you used to determine the cost. For example:
Consider your revenue sources
Now that you know how much your program will cost, it’s time to consider your revenue sources. Just like you did with the expenses, make a list of all the current revenue you have that could support this program. Consider all your existing revenue sources first (e.g., existing staff whose salary is covered, grants, individual donations, in-kind support). Then determine how you might secure the remaining amount (e.g., grants, fundraising events, participant fees). For each source, write down the amount that will be provided and the status (secured, requested/planned, will request/implement). Add each source with the amount and status into a table, and you have a complete program budget.
Congratulations! Now you have a program budget. This is a valuable tool that will help you determine if you can afford to offer another program. You can also use your program budget for grant applications – just make sure it aligns with your program description and the funder’s formatting requirements.
Do you want a little extra help with your program budgets? Contact us today to learn more about how we can help.