Set yearly budgets based on quarterly "estimates"

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Gary_Miller
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Set yearly budgets based on quarterly "estimates"

Postby Gary_Miller » Sat Jun 15, 2013 7:48 am

TinMan wrote:Now if someone can explain how we are supposed to set yearly budgets based on quarterly "estimates" i.e. "guesses," well, chaos can be avoided.

Its really quite simple. When I'm setting up the next years budget I use and average estimate of the last 4 quarters. And as the year goes alone that gets adjusted as the actual budget gets sent down to the ward each month. I have also developed a spread sheet which enables me to adjust the next quarter budget based on the current quarters quarterly report. For the most part I'm usually within $100 - $200 of what my averages were at the beginning of the year, and usually an increase. The only time there is a drastic change (decrease) is if there is a big fluctuation in move outs for a quarter.

TinMan wrote:"Dear Young Women's leader: You will have a yearly budget of $1200.00.

Unless it isn't."

In my ideal world organizations would not just be handed a total amount for the year but would give the bishop a detail budget of what they estimate their activity costs for the year will be. That way a decision can be made at the beginning of the budget process on wither or not a activity can be supported. Wither or not we need to ask participants to help fund long term camp. And wither or not we are going to need to do a fund raiser to help out.

TinMan wrote:Thus the bishops "administration fund," also known in certain circles as "the slush fund."

We don't have an administration fund we just don't allocate all of the estimated budget to the organizations. That way if any one quarterly actuals come in lower than the estimate we are covered. For example on 5 June our unassigned annual budget projection was $543.32 however since the third quarters projections came in lower than what was estimated the unassigned annual budget projection on 11 June is now at $334.32.

Using this method we should never have to make an negative adjustment to any of the organization budget.

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Re: Set yearly budgets based on quarterly "estimates"

Postby TinMan » Sat Jun 15, 2013 12:33 pm

so, just to be clear to me, you adjust the budgets every quarter?

And in spite of the extensive budget program in MLS, you keep a separate spread sheet?

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Re: Set yearly budgets based on quarterly "estimates"

Postby Gary_Miller » Sat Jun 15, 2013 12:56 pm

TinMan wrote:so, just to be clear to me, you adjust the budgets every quarter?

I only adjust the Quarterly Allowance Estimate not the organizations budgets.

TinMan wrote:And in spite of the extensive budget program in MLS, you keep a separate spread sheet?

The spread sheet I was speaking of above is one I developed for the purpose of figuring out the next quarterly allowance. It pretty much looks just like the sheet that is sent out to the wards that show what your next Projected/Actual Quarterly Budget Allowance. The advantage of my spreed sheet is it allows me to figure out what the next quarter budget allowance will be using the percentages that the parent unit is using.

I do have another spreed sheet that is basically looks just like the Budget Allowance Summary report that I use instead of the MLS reports because it was easier to breakout and link to a separate worksheet for each organization and eliminated the income and transfer columns that just clutter the report in MLS. All I do with this is enter the same figures from the Budget Allowance Summary report from MLS into my spreadsheet and it links to a each organization worksheet.

While its all the same information from MLS and I can do the same-thing in MLS it just easier to read for the organization leaders. It also helps to figure out the next years budget as I have it linked to the last three years of budget data so can come up with an average very easily.

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aebrown
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Re: Set yearly budgets based on quarterly "estimates"

Postby aebrown » Sat Jun 15, 2013 1:01 pm

Here's how we do it in my stake (I'm at the stake level, but the same process works at the ward level):
  1. In November, I project the budget allocation for the coming year, based on the last year and any consistent trends. I put the estimated amount into a spreadsheet.
  2. Then under the direction of my stake president, I gather requests from the auxiliary leaders and any high councilors or others who have reason to request budget for the activities and other expenses for the coming year.
  3. I enter those requests in the spreadsheet, along with detail sections that were supplied by the auxiliary leaders (e.g., the YW president would have line items for camp, activities, office supplies, refreshments, etc.)
  4. The stake presidency reviews these requests, and makes adjustments as necessary to make the individual budgets fit within the overall projected budget.
  5. We make sure that budgeted expenses are less than the projected allocations.
  6. Once the budget is approved, we enter the individual organization budgets into the separate subcategories of Budget in MLS, and also enter the estimated quarterly budget allocations.
  7. As each quarterly allocation arrives from CHQ, MLS automatically changes the estimated quarterly allocation into an actual amount. We review these adjustments, but invariably our conservative budgeting gives enough of a cushion that even if the allocation is less than expected, there is no problem with expenses exceeding the budget. Thus there is never a need to tell organizations in the middle of the year that their budget has been reduced.
I find a spreadsheet to be helpful in the planning phase, but after that, I use MLS. I don't see a need for tracking subcategories of Budget outside of MLS.

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gregwanderson
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Re: Set yearly budgets based on quarterly "estimates"

Postby gregwanderson » Sat Jun 15, 2013 6:27 pm

I share TinMan's observation that, increasingly, the software and instructions for tracking finances in the church seem more professional-accountant-friendly than they are non-accountant-friendly. Some things are just unnecessarily complicated. (I'm glad I'm not the one doing the marathon audits these days.) And, without rehashing the details, I think I can kindly say that the transition to CUBS in 2010 wasn't as smooth as it should have been.

Among the problems in late 2010 was the emphasis on quarterly budgeting vs. annual budgeting. I know one ward finance clerk who was so convinced of the importance of quarterly budgeting that he was tracking every single budget expense in a spreadsheet on his home computer. You see, MLS can't really do quarterly budgeting for each auxiliary, so he wasn't using MLS to track any budget data. Of course, this meant that if anyone wanted a budget report he'd have to promise to bring it the following Sunday because it simply wasn't in MLS. (If you looked up the ward budget, every allocation was zero… except in the quarterly budget spreadsheet at his house.)

It was quite a mess to straighten out. And, because the auxiliary leaders had limited access to the budget reports, they were afraid to spend much for a couple of years. So the entire ward under-spent a significant amount of budget money for at least two years. And now they have to figure out how to responsibly deal with the surpluses that are still sitting in the ward account.

So I would suggest we go back to the way it was pre-CUBS. What I mean is, look at how much was spent for the whole year previous (and maybe the one before that) and then (with input from leaders) estimate whether each auxiliary will need more or less than what their allocation was for the previous year. Make the adjustments and, bang! You're done. Don't confuse the auxiliary leaders with the notion that they need to break down their quarters a year in advance. After all, MLS will only record annual auxiliary allocations anyway! And I would advise anyone to avoid making a lot of custom spreadsheets if there's any way that you can track the same data within MLS.

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Re: Set yearly budgets based on quarterly "estimates"

Postby Gary_Miller » Sat Jun 15, 2013 8:17 pm

mrrad wrote:Some things are just unnecessarily complicated. (I'm glad I'm not the one doing the marathon audits these days.)

I'm no accountant, although I did some financial management while in the military. I do not find things unnecessarily complicated in fact it quit simple compared to the way the government does their budgeting.

As for Audits what do you mean by marathon audits? I have reviewed the audit worksheet every six month before the audit and find it to be a simple straight forward audit. As long as the auditor follows the worksheet it should only take him a couple of hours to complete the whole audit.

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gregwanderson
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Re: Set yearly budgets based on quarterly "estimates"

Postby gregwanderson » Sat Jun 15, 2013 8:48 pm

Gary_Miller wrote:As for Audits what do you mean by marathon audits?


Oddly enough, I mean "a couple of hours."

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Re: Set yearly budgets based on quarterly "estimates"

Postby TinMan » Sat Jun 15, 2013 9:08 pm

Gary_Miller wrote:I'm no accountant, although I did some financial management while in the military. I do not find things unnecessarily complicated in fact it quit simple compared to the way the government does their budgeting.
It seems to me that you have experiences with budgets I don't have, so naturally it isn't as confusing to you as it is to me. I think that is my point.

"marathon audits:"

Accountant friendly audit: "Meet me at the church on Wednesday evening for two hours while I have your clerk pull out checks written two months ago to make sure that all the signatures and documentation are in order. And pull out several donation batches to see if the proper procedures are being followed. Meanwhile, you can pull out all your bishops store house orders for the last six months so we can compare the pink copy to the yellow copy and make certain they match."

Non accountant friendly audit: "I am coming to your clerks office after the block this Sunday and observing how the donation batches are being done and checking any checks written that day to see if the documentation is correct. And a reminder: You need to check the pink copy of bishop storehouse orders with the yellow copy when the come in so you can see any discrepancies or changes. You are a bishop. I trust you can do that."

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aebrown
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Re: Set yearly budgets based on quarterly "estimates"

Postby aebrown » Sun Jun 16, 2013 5:10 am

mrrad wrote:Among the problems in late 2010 was the emphasis on quarterly budgeting vs. annual budgeting.

I'm not sure where you may have gotten the impression in late 2010 (or any other time, for that matter) that there was any emphasis on quarterly budgeting. I've just reviewed the communications sent out with the CUBS transition that took place then, and nothing talked about quarterly budgeting. Yes, budget allocations would arrive quarterly, but that had been happening for years before that.

For many, many years, the policy of the Church has been to do annual budgeting. That is in the current Handbook (HB 1, 14.7.1) and similar wording has been in at least the two previous handbooks.

mrrad wrote:I know one ward finance clerk who was so convinced of the importance of quarterly budgeting that he was tracking every single budget expense in a spreadsheet on his home computer.

That's a pity -- both because there has never been a need to do quarterly budgeting, and because there's no need to do external tracking of expenses.

mrrad wrote:So I would suggest we go back to the way it was pre-CUBS. What I mean is, look at how much was spent for the whole year previous (and maybe the one before that) and then (with input from leaders) estimate whether each auxiliary will need more or less than what their allocation was for the previous year. Make the adjustments and, bang! You're done.

I agree that we need to continue to do annual budgeting. I would not, however, recommend using baseline budgeting, which is what you seem to be advocating. That has never been the policy of the Church, as far as I know. The expenses incurred by an organization in the previous year is not relevant to the budget that will be needed for the next year. Instead, the focus should be on what budget funds are needed for the activities of the coming year. That may be dramatically higher or lower than the previous year, and there should be no expectation that an organization will maintain the previous year's funding level. See Budget allocation methods.

And again, nothing should have changed in this regard with the transition to CUBS.
mrrad wrote:Don't confuse the auxiliary leaders with the notion that they need to break down their quarters a year in advance. After all, MLS will only record annual auxiliary allocations anyway!

Indeed, MLS really only supports annual budgets for organizations.

mrrad wrote:And I would advise anyone to avoid making a lot of custom spreadsheets if there's any way that you can track the same data within MLS.

I agree. That's needless work and creates room for error; CUBS/MLS have the official record of finances.

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Re: Set yearly budgets based on quarterly "estimates"

Postby TinMan » Sun Jun 16, 2013 6:41 am

aebrown wrote:I agree that we need to continue to do annual budgeting. I would not, however, recommend using baseline budgeting, which is what you seem to be advocating. That has never been the policy of the Church, as far as I know. The expenses incurred by an organization in the previous year is not relevant to the budget that will be needed for the next year. Instead, the focus should be on what budget funds are needed for the activities of the coming year. That may be dramatically higher or lower than the previous year, and there should be no expectation that an organization will maintain the previous year's funding level.
No disrespect, but that is an example of what I am talking about. There is policy and there is practicality. We are asking people who are not accountants to think like one. Many good people can not or will not do that.


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