Building Organizational Capacity
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ANNUAL BUDGET, MONITORING AND FORECASTING SYSTEMS

An annual budget approved by the board is necessary for staff implementation of programs and services and should reflect the goals and objectives of the organization.

The objective of budgeting is to arrive at a knowledge of realistic resources and liabilities, current and expected, and to monitor financial activities during the current year. It is the responsibility of individual board members and the board as a whole to insure that an organization is operating according to sound fiscal principles. Annual budgets and monitoring systems are important components of good fiscal management.

To make worthwhile financial determinations, timely and accurate information is required. Accountants, bookkeepers and other financial professionals should be appropriately used. Regular financial reports should be closely reviewed and monitored by a finance committee. Regular accurate presentations to the board are essential.

The format for the budget should minimally include the following:
· A narrative summary of the year ending and the year ahead.
· A five-year review of income and expenses.|
· A comparison of working fund activities and balances, for both the closing and prior year.
· A proposed budget that includes-for each line item-the prior year's budget, the prior year's actual, and the recommendation for the coming year.

Multi-year plans are desirable.

While some funding agencies require the nonprofit to provide them with multi-year plans, all arts organizations would find this exercise beneficial, as they move forward and consider options for future activity.

Reserve Position
A desirable goal of an arts organization is to establish reserve funds or endowments.
While adequately attending to their own organizational needs and to the needs of their constituencies, some organizations have been able to use donor support to provide themselves with reserve funds or endowments--assuring a more stable financial base for the organization and supporting the organization's future growth.

Cash Flow and Revenue Base
Expected resources and liabilities can be derived by anticipating the amounts of cash received through contributions, borrowing, or by other means, and expenditures for assets and operating expense. Cash flow budgets (as compared to activities budgets and capital asset budgets) compare cash inflows to cash outflows from all sources. Most organizations consider the need for this type of budget in order to assure that sufficient cash is available at all times to cover expenditures.

The Alliance of New York State Arts Organizations has a 28-year history as New York's primary service association for community based arts and cultural organizations. The Alliance provides leadership and vision, and delivers services, resources and tools that strengthen community cultural organizations. The Alliance monitors, informs and mobilizes the field on statewide and national issues affecting the arts and assists local arts agencies in building community support and developing effective grassroots public policy.

245 Love Lane, P.O. Box 96
Mattituck, NY 11952-0096
Phone (631) 298-1234 / Fax (631) 298-1101