Table 11: Components of a budget.64
Component
Income:
Description
All income streams should be included in a financial plan. This may
include internal finance, grants, loan, equity, in-kind contribution and
revenues. Income may be known or estimated.
Expenses:
Expenses should be itemized and include capital/investment and
operating costs, for example, premises, equipment, staff wages and
travel.
Budget Headings: Make sure that the same budget headings or
categories are consistent throughout the organization, for both income
and expense items. This will simplify your bookkeeping and help with
reporting and financial reviews.
Headings may include: staff salaries, rent, utilities, telephones, equipment,
insurance, fuel, travel, fees for expert consultants, etc.
Currency:
Be sure to note what currency and exchange rate you are using when
presenting your budget to a funder. Some may require you to convert your
currency into the US dollars or other currency.
Contingency Include a line item that will incorporate fluctuation of costs or unexpected
funds:
expenses.
In-kind (non-
monetary)
contribution
It is helpful to show the costs or services contributed by your organization
(such as salary for the program manager, or labor to construct a facility).
Funders see in-kind contributions as evidence of the organization and
community’s commitment that could lead to sustainability.
Notes:
Keep notes to record the budgeting process. Notes explain how and why
budget calculations are made. Combined with the budget, notes can serve
as a clear guide for your organization’s spending and decision-making.
Budget clarity and notes also mean that as circumstances change,
revisions to a budget can easily be made to reflect changing realities. It
also helps in case the activity is audited.
The figure below describes a possible finance model for an NGO project; with
typical project costs and potential income streams. It is designed to help us think
about Balance Sheets and Cash Flow Statements throughout the project cycle.
Project costs are grouped by project cycle stage (defined in Annex 1). The diagram
shows the applicability of possible income streams at different stages of the project
cycle. As described in Chapter 4, a project may obtain finance from a single or
combination of sources.
Renewable Energy to Reduce Poverty in Africa
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