Budgeting for the Not-for-Profit: A Case Study

Overview of the Not-for-Profit Organization Ontario Assist

Case Study #3 – Budgeting for the Not For Profit

Ontario Assist is a not for profit organization that operates in the province of Ontario providing assistance to families in need due to emergencies and disasters, and to the elderly that live alone and require assistance. The organization has hired you as the Budget Officer and you are required to budget the next fiscal year ending December 31, 2022. The following items need to be considered when you plan for the budget:

· The government funding for the year of $10 Million is expected to increase by 20%. The funding is received monthly on the first day of the month. Each Month receives 1/12 of the total funding.

· The budget is to be set up on a monthly basis consolidating and totalling to a yearly summary.

· The organization receives interest revenue of $48,000 per year from an interest bearing monthly investment. The interest is received on the last day of the month.

· In the 6^th month, they intend to sell a piece of equipment for $50,000.

· In the 8^th and 9^th month, they plan to purchase fixed assets in the amount of $25,000 for each month.

· When there is a combined monthly surplus of at least $200,000, Ontario Assist will invest any amount above the $200,000 in a short-term investment that can be easily redeemed on a days notice. The investment earns 5% per year.

· The monthly expenses last year averaged $800,000 per month and are expected to increase by 15% in the next budget year that you are completing.

Required

1) Complete the monthly budget given the above mentioned budget items. Then consolidate into a yearly summary.

2)  The office staff had often complained about heavy workloads. Does the budget exist to hire one office staff at $40,000 per year?

3) In the month of December 2022, the organization has the option to purchase property for $250,000 that would be paid in full by cash funds on hand. Does the organization have this cash available to them to make the purchase?

4) The organization wants to engage all office staff and managers in the budget discussion. Provide a few suggestions on how you will achieve this engagement from all staff.

5) Budgeting process usually happens in the month prior to the new fiscal year. Thus, the month of December is historically a very busy month for the office, provide and explain your recommendations if there may be a preferred alternative to completing the budget in the month prior to the new fiscal year.

6) There are some employees that suggest Budgeting is a waste of time as no one can predict the future. Provide a response to this suggestion that Budgeting is a “waste of time”.

7) The Bank has offered the organization with an operating line of credit in the amount of $100,000 at an interest rate of 5%. Do you recommend they take the line of credit, yes or no and why.

8) There has been some discussion at prior office meetings that the surplus monthly funds should be invested in a long-term higher yielding type of investments that are generally more risky due to the volatility of the investment return. Provide your recommendation to the idea of investing in these higher yielding investments.