Topic: General Posts

Subject: Budget Assitance
Tom Daniels
Member: 1999
Posts:2
Submitted on 07-27-10 6:43 am
Message:
Good Morning,

I work for a private nonprofit organization in NH, and we are in the process of putting our budget together. I am reaching out to this group to see if any or your organizations, profit or nonprofit, make provision for vacancy rates. Looking of my organizations history, I see that over the last 5 years, we have averaged 5% of our budgeted salaries do not get spent. So my question is do any of your organizations use a salary offset due to expected vacancies to balance your budgets. Years ago, I worked for the State, and the State used budget footnotes to address this requiring a lapse.

Any help would be appreciated.

Thank you,

Tom Daniels
thomasdaniels@comcast.net
 
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Replies
Dave Rakowski
Member: 2010
Posts: 2

Subject: Re:Budget Assitance

Submitted on 07-28-10 3:20 pm.
Message:
We have done so in the past, yes. Determined a certain % of attrition, and built that into the annual salary plan. I did this for over 15 years for a profit organization.

Dave
 
Dave Saunders
Member: 2008
Posts: 1

Subject: Re:Budget Assitance

Submitted on 07-29-10 5:06 pm.
Message:
You can create a budget offset for an estimation of salaries not spent, but my preference is never ot hold this at the corporate or entity level. I am a firm believer in having operational commitment and an operational owner to every line item in a budget. Push it down to the cost center that has the most turnover or the most hiring and work with the corresponding manager to achieve the reduced level of budgeted spend.

Dave
SaundersDavidJ@Gmail.com
 
Bob Losby
Member: 2009
Posts: 2

Subject: Re:Budget Assitance

Submitted on 07-30-10 3:08 am.
Message:
I've used a salary offset factor as well. The question is where to post it ?

If it is pushed down to individual cost center, then some small cost center with 3 headcount may be over budget on salaries by the "offset" factor AND feel pressure to reduce some other expenses to make their dept budget in total.....this then build resentment toward the practice of pushing into each cost center.

My preference is to push it down to a group of cost centers that are managed by someone at vp, director or manager level, whatever is appropriate for your division.

Hope this helps.

Bob 314-651-4096
 
Rich Maidenbaum
Member: 2007
Posts: 4

Subject: Re:Budget Assitance

Submitted on 08-02-10 1:50 pm.
Message:
We put vacancy wedges based on attrition in the salary and "fringe lines" in an non-operational cost center. We figure a 3.5% attrition rate based on historical experiences
 
Susan Long
Member: 2008
Posts: 1

Subject: Re:Budget Assitance

Submitted on 08-03-10 2:05 pm.
Message:
I am on the board of 3 different non-profits. We also have an allowance for unfilled positions. We treat it as a contra account for the salaries item. As we do not pay as much as the for-profit sector our positions often take a long time to fill. Thus, we are under budget on our salaries and benefits on a regular basis. We treat it sort of similar to collective for A/R's.

Susan Long
 
Rex Fountain
Member: 2010
Posts: 2

Subject: Re:Budget Assitance

Submitted on 08-04-10 9:12 pm.
Message:
Historically, I have used a turnover assumption to account for this type of lapse. Normally, there is enough budgetary pressure that the use of this type of assumption helps reach goals.
 
Mike Grant
Member: 2010
Posts: 1

Subject: Re:Budget Assitance

Submitted on 08-25-10 10:54 pm.
Message:
I like to use "contingency" accounts for budget purposes only. No one is EVER, EVER supposed to post an actual payment there.

It works well if you post any under budget situations to the contingency account and take out any over budget items. As a quick review, you can look at the contingency budget account balance, and see if you are going to be short or long overall.
 
Brian Connolly
Member: 2010
Posts: 1

Subject: Re:Budget Assitance

Submitted on 08-30-10 3:46 pm.
Message:
At both the non-profits and government agencies I worked for we used contingency accounts. We tried very hard to minimize the impact of these calculations to the smaller entities. If by chance we discovered that a smaller entity was unfairly impacted, we performed end of year transfers to adjust for it. All this with our external and internal auditor (CPA) blessings.
 
David Todrin
Member: 2002
Posts: 1

Subject: Re:Budget Assitance

Submitted on 09-01-10 2:49 pm.
Message:
I have used a vacancy rate at non-profit and for-profit companies successfully. Agree with above, needs to be pushed out, but not so low as to hinder the 3-person department without vacancy, as it does result in potentially unintended cuts (which, of course, may or may not be a positive outcome!)

For me, the key is not to have layers of contingency built into every cost center/unit, and salary is a big one, as once you have approved the annual increase, without this, or a directive to cut heads, there is an inherent cushion with the budget holder, not the CFO.
 
John Whiterow
Member: 2006
Posts: 1

Subject: Re:Budget Assitance

Submitted on 09-02-10 9:47 am.
Message:
I will be repeating a lot of what what others have said.
I have used a "vacancy saving" assumption successfully in both the private sector and not for profit sectors and would always seek to do so.. I tend to use a conservative amount of no more than 2%. The trick, as others have pointed out, is how this is allocatted to cost centres. My approach has been to push it down to all cost centres and treat anomolies, like the 3 person cost centre, as the exception, and offer some flexibility if appropiate.

John
 
Jackie Morlando
Member: 2010
Posts: 2

Subject: Re:Budget Assitance

Submitted on 09-14-10 7:20 pm.
Message:
Good evening,
I agree that it generally makes a lot of sense to budget for a vacancy factor if that is something that can be reasonably estimated for the current budget timeframe. I also would recommend a reduction in fringe benefits (in addition to salaries) for expected vacancies and turnover. In doing so, don't forget to take into consideration the costs of turnover and vacancy and budget for those expenses accordingly (recruitment, turnover, loss of productivity, etc). Sometimes a vacancy can end up costing more than the expected direct savings.
Budgeting is an art, not a science and it requires a lot of discussion and involvement from all employees at all levels in an organization. I think several people brought up a good point about a small or 3 person department. I would not recommend pushing a vacancy factor down to those type of departments. It may also make sense to have an analyst review a detailed list of departments and/or positions and then only include a vacancy factor in the areas that you determine is appropriate.
So, that's my two cents. Thanks for asking!

 
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