Proposal of Budgeting for Non-Profit Organization

Introduction:

A budget can be defined as a quantitative economic plan in respect of a period of time.

Webster, 1997 describes budget as a breakdown of spending plan. This written spending
plans and the control-or lack of control-of spending has a profound effect on a non-profit
organization. The budget must be realistic and accurate. The budget is first and foremost a
planning tool. Without a budget an organization may not be able to make best decisions.

Need of Budget:

Nonprofit organizations (NPO) wrestle continually with maintaining and improving their
operations, especially during todays uncertain economy. In short, NPOs must constantly
strive for sustainability. A well-planned budget will focus on the primary goals and objectives
of the organization and provide financial and programmatic adaptability key ingredients to
maximize sustainability. Every volunteer brings to a small NPO the enthusiasm and interest
necessary to do a good job. These volunteers are critical to an NPOs success, because most
small NPOs lack the funds necessary to seek and pay for professional guidance in the
business world.

Registration/Incorporation:

These organizations were making their contribution towards provision of community services
effectively and efficiently. All organizations that have been certified from PCP are registered
under four registration laws of Pakistan namely,

I. Societies Registration Act, 1860 (34%)

II. The Trust Act, 1882 (12%)
III. Voluntary Social Welfare Agencies (Registration and Control Ordinance), 1961
(39%)
IV. Companies Ordinance (Section 42), 1984 (15%).

This shows that certified organizations in Pakistan are registered under any of the above
mentioned four laws.

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How to Prepare Budget:

Usually the budget is a set of two major components that is Revenue and Expenses. In
nonprofit organizations, component of expense would be same but there will be no revenue
as NPO are neither selling any product nor any service. So, the budget will include in the
components of revenue any grants, donations provided to them or which is expected to
receive. NPO receives funds from grants, the general public and sales of logo items. These
funds pay for the programs that support the NPOs missions. Exhibit-1 describes the
template of a budget report of nonprofit organization.

Time Period for Budget:

The timeframe for the budget process generally will consider the calendar year, the fiscal
year and the approval process. The calendar year often determines the timing of certain
expenses and revenues, particularly end-of-year tax deductible donations.

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Exhibit-1

Budgeted Income Statement for Nonprofit / Charitable Organization.

Income: Rs. (000s)

Grants xxx
Donations xxx
Funds from Organization xxx
Total Income xxx

Expenses:
Salaries of Staff xxx
Utility Expenses xxx
Utensils xxx
Operation Charges xxx
Miscellaneous xxx
Depreciation xxx
Total Expense xxx

Excess / Deficit xxx

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References:

Webster. (1997). Nonprofit World. Vol.15, No. 4

Elizabeth Hamilton Foley. (2009). The Budgeting Process. Greater Washington
Society of CPA
Virginia Society of CPA. (2011). Budgeting: A guide for small nonprofit
organizations.

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