Finance Strategy and Reserves Policies
Your finance strategy is a plan
of how you will finance your organization and its activities, what money you
will need and where it will come from. Your strategy should describe how you
intend to move from your current position to your intended position
§ Where are we now?
§ What are our plans for the future?
§ How will we get there?
§ Do we know what the risks are and how we will manage
these?
§ How
will we manage the competing demands of spending against savings needed?
Budgeting -2009,Uhuru Kenyatta had his moment of glory in Parliament. He arguably presented a unique budget that was as different as no other since independence-
Board responsibilities cover many areas of operation, one of which is budgeting. Part of approving a budget means asking sufficient questions so that the budget is understood.
§ Does the budget reflect the organizations priorities?
§ Who is responsible for monitoring and controlling
budget expenditures?
§ What are the boards’ budget policies that govern the
preparation and control of the budget? Generating income is more than fundraising. It is about making your organization sustainable by establishing a range of funding (diversifying your sources of income), so that you are not dependent on one source. The fundamental question becomes on how to generate income in a sustainable way for your non-profit organization.
§ you are raising sufficient levels of income to enable
you to deliver your organisation’s purpose; it must cover all costs
incurred.
§ you have taken into account any restrictions imposed
by funders on how your organisation can apply the funds received
§ you
have a sufficiently diverse source of income to avoid the high level of risk
associated with depending on one source.
Funds received from funders for a specific purpose are known
as
restricted
funds: you
are legally obliged to use them only for the
purpose for
which the funder gave them to you.
In
contrast, unrestricted funds can be used for any purpose that
helps you
to achieve your charitable objects. The more unrestricted
funds you
have, the more freedom of action you have. You can for example, choose to cover
costs that funders are reluctant to fund, like core costs.
The discipline is the same whether
generating restricted or unrestricted income and funders will require the same
financial information of you. Some of the basic information required is;
§ Clarity that the organisation is seeking funding to meet a specific beneficiary need.
§ Financial details of your organisation.
§ How the funds will be used; e.g. what percentage of the funds will go towards core costs, salaries etc.
§ Your organisation’s ability to manage
finance.
Sustainability
and diversification
A good plan
for generating income will aim to achieve sustainability by stabilizing your
funding base, in some cases increasing your funding and diversifying your
funding sources. Sustainability ideally means managing your income streams in
such a way that if or when one stream comes to an end, the work can be
repositioned, making it suitable for funding by another stream. Opportunities
available to diversify income streams range from donations and grants to
service level agreements or contracts to deliver services, to trading in goods
and services.
Remember fundraising activity has costs associated with it, e.g. fundraiser’s time. It is important therefore that these are reflected in the associated budget plan. Diversificationalso has costs associated with it, such as increased management effort etc. You must therefore recognise at what point the benefits of diversification are outweighed by costs.
currently the president of Kenya, uhuru kenyatta is the former minister for finance.
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