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Budgeting
What is a budget?

A budget is a plan that shows the amount of money available to the organization and how it will be spent. A budget reflects all the income that is expected for a set period, e.g. a financial year running from 1 April to 31 March of the following year as all the expenditure expected for that period.


Why Budget?

A budget is an informed guess of the costs for operating your facility for a fixed period of time. It assists planning, decision-making and re-evaluating your priorities.


Who Budgets?

The facility manager together with bookkeeper, staff and the finance/management committee participate in the budgeting process.

TYPES OF BUDGETS
Capital budget

The capital budget usually refers to the expenditure associated with the development, creation or purchase of new facilities/equipment and forms part of the ling-term plan for the facility. Items, which may be included in the capital budget , are:

· New buildings and facilities
· New equipment for programmes (sound systems,videos,TV monitors)
· New equipment to be used to maintain the facility (lawnmowers,line markers).
· Replacement of existing equipment and tools.
· Office furniture (desks,photocopy machines, computers)
· Purchase of land for new development


The above mentioned items reflects expenditure side of the capital budget.

Operating Budget

The operating (maintenance) budget refers to the day to day expenditure/revenue of a facility/club. The expenditure side of the operating budget includes all the items needed to keep the facility up to standard, e.g:

· Salaries
· Material (items such as toilet paper, disinfectant soap and paper towels)
· Transport
· General Administration
· Course/Programme materials
· Marketing,etc

The revenue (income) side of the operating budget reflects all the expected income for the facility, for example:

· Membership Fees
· Programme/Course Fees
· Hiring out sporting fields and halls/courts

It is important to have a facility fees policy drafted with input of all stakeholders. Everybody should be informed on how fees are determined

FACTORS THE MAY INFLUENCE THE BUGDET
Utilisation of the facilty

An increase in the utilization of the facility for e.g. when more people start participating in programmes, will have a positive effect on income as more money will be generated. There will, however, be a negative impact on the expenditure side, as more cleaning materials,toilet etc. will be needed to accommodate the higher flow of people through the facility. The over utilization may result in a decrease of income over the longer term, since the cost of maintenance may be higher than the income generated by the hiring out of the facility.

Examples:

The carrying capacity of a cricket pitch is 40 games (Saturdays) per season.
The fee to hire the pitch is R 100 per game.
Income = 40 x R 100
Profit = R4 000 per season

The new manager, however, decided to use the pitch twice every weekend during the season (Saturdays and Sundays) in order to increase the revenue.
Income = 80 x R 100 
              = R8 000
After the first season replace the pitch (over-utilisation).
After the first season replace the pitch (over-utilisation)
Expenditure = R 15 000
Loss =  - R 7 000
The club therefore suffered a loss R7 000 where they could have made a profit of R4 000

If possible, it is very useful to have additional exercise facilities so that your “ good pitch” is mainly utilized for competitions. This will also allow enough time to prepare the pitch for competitions.

Staff

The wages of staff is general the main item of expenditure on any facility’s budget. It is therefore of the most utmost importance that staff are utilized productively and are qualified /experienced for the position.

The actions of your staff would also have a direct influence on the operational budget of your facility. The following examples illustrate this statement:

· If an employee is not well trained on how to operate the lawnmower, the maintenance cost of this piece of equipment could increase.
· Staff abuses the official telephone for personal calls which impacts negatively on your telephone bill.
· Staff members take home toilet paper and make photocopies for personal use.


Location of facility

Should your facility be located far way from your office, factors like:

· Travel Cost
· Phone calls
· Unproductive travel time of staff, will have an influence on your overall expenditure

Note:

Should your facility be located close to an industrial area, you may have to increase your building maintenance provision as air pollution and dust from the factories might result in a shorter painting cycle for the buildings. An out-door facility, located close to a wetland area, will also need a different kind of fertilizer, which might increase your expenditure.




ITEMS FOR THE BUDGET

You should make provision for a contingency fund. This is to cater for unexpected items of expenditure, not provided for on the budget.

Purchasing of equipment
The purchasing of equipment should form a vital part of the capital budget.

Note:
Access to, for example, good office equipment impacts directly on your level of service delivery, e.g. delivering a photo copying or typing service to the community. When buying new equipment, it is advisable to collect quotations from a variety of manufacturers to allow an informed decision from a large range of products. It is important to try and standardize on equipment in order to cut down on expenditure on spares. If two machines performing the same function from different manufacturers are used, two different sets of spares need to be stocked which double maintenance cost.

It is useful to have specifications drafted for all capital equipment.

The budgeting process for the purchase of equipment can be summarized as follows:

· Compile a wish list.
· Consult with your management committee/staff members with expertise on equipment.
· Decide on the type of product to be purchased in consultation with all concerned parties.
· Obtain a formal quotation from the supplier(s). It is important to obtain a budget price from the supplier and not a tender price. A budget price makes provision for escalation of the price where the tender price price is the minimum price at which the supplier could supply the equipment.
· Compare the quotations and decide on the service provider.
· Provide for the estimated amount on your provisional budget for the next financial year.

Provision for maintenance
The maintenance of your equipment is as important as the initial purchase Provision should be made for the servicing of equipment, fuel, oil, spare parts, etc. on your operating budget. As mentioned earlier, standardization on equipment will assit in cutting down on stocking expensive spares.

Programmes / events budgeting
Compile a programme list.
A community needs analysis will provide you with the type of programmes/events need. Draft a list of programmes / events in consultation with staff / steering or management committee and have it approved. The scheduling of your programmes / events should give a clear picture of the utilization of your facility during peak and slower times as well as expected income and expenditure. Remember to budget for additional staff as well as expendable items (e.g. course materials) where necessary.

EXAMPLE: Programme List

Event  Expected income  Expected Expenditure
July
Schools Rugby Tournament 

700 

700
 
August
Cricket Development Teachers  500  460
Teachers Swimming Dev.  1200  1200
 
September
Music Workshop  (sponsor) 100  100
 Senior Citizen’s Fun Day  400  400
 Costume Carnival  1000  1100
 Heritage Day  (mayor) 200
 Softball course-Teacher  1200  1200
 Aerobic Marathon  1100  800
 Life skills Programme  800  800
 Take 5 Road Race  2000  (sponsor) 1000
 Victory Race 300  300
  
October 
Fun run   100  200
Gospel Music Festival  200  200
 Chess Open Dev.Tournament  220  150
Sports Awards  8000  7500



The approved list of events must now be linked to the funds available and possible sources of funds.

Operating Costs
The following are examples of items for which detailed budgets are required for different types of facilities.

· Protective Clothing
Tracksuits, t-shirts,shorts, swimming trunks, towels,jackets,safety shoes, overall,safety helmet,boiler camass,rain coats etc.
Why needed – These items will be needed to identify your staff and to make sure that they perform their duties under safe conditions.

· Salary wages and allowances
Salaries, overtime, bonuses, retirement funds contribution, medical aid contribution,
Medical aid contribution,travelling allowance etc.

· Chemicals
Gas, cylinders,sodium carbonate,HTH,chloride of lime, hydrochloric acid,fertilizer,herbicides,poison bags,portable spray equipment etc.
Why needed - This equipment will be utilized for running programmes and for maintenance.

· Materials and stores
Coal,germotol,deo,blocks,furniture polish,window,waste rags,toilet rolls,spades,rakes,garden forks,leaf strainers,nylon brushes,etc.
Why needed - These items will be needed for the cleaning of your facility as well as minor repairs.

· Communications
Rental and usage of fax machines,telephone,cellular phones.
Why needed - This is your communication with the world outside.

· Premises maintenance
Repairs,underground pipes,thatch roofs,irrigation system,garden benches,dewatering pump,paving,starting blocks,timing system,etc.
Why needed - These items will be needed for the maintenance of your premises.

· Building Maintenance
Reseal roof, repairs to lights,sealings, alarm systems,windows, window frames,toilets/urinals,flower boxes,skydome,burglar proofing,etc.
Why needed - These items will be utilized for the upkeep of the buildings.

· Machinery and plant
Repairs to all valves,boiler,heat exchanger, 4 x bi-monthly services of boiler,pumps,motors,electrical equipment,filter drums and pipes,etc.
Why needed - All motorised equipment could be maintained from these funds.

· Painting of buildings/pools
Swimming pool paint,colour-coded paint, paint brushes, rollers, cleaning material masking tape etc.
Why needed - Special paint is needed for a pool.

· Printing and stationery
Pens,pencils,eraser,paper (fax & photocopying),scissors,stapler,calculator,letterheads,ruler,receipt books, files etc.
Why needed - These items will be utilized for the administration of the facility.

· Other

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Copyright: Alexsan Kopano Educational Trust and/or organisations and/or persons associated with Alexsan Kopano Educational Trust.
Page last updated: 05/04/2012 .

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