-------- Original Message --------
Subject: A Synopsis of Our Budget,Fund-raising Priorities & Program
Administration Processes
Date: Fri, 10 May 2002 16:55:06 -0700
From: Carl Pope <[log in to unmask]>
Reply-To: Volunteer Budget Managers
<[log in to unmask]>
To: [log in to unmask]
TO: Board of Directors
Finance Committee
Advancement Committee
Conservation Governance Committee
Training Governance Committee
Communications Governance Committee
Outdoor Activities Governance Committee
Organizational Effectiveness Governance Committee
Council Ex-com
FR: Carl Pope
RE: A Synopsis of Our Budget, Fund-raising Priorities &
Program
Administration Processes
As we approach the May seating of a new Board of Directors, I wanted
to
summarize for everyone in what I hope will be a simple yet
comprehensive
manner the fundamentals of how the Sierra Club decides how much of
its
funds it will dedicate to each of the various purposes and programs.
This is quite different than the picture I would have painted when I
became
Executive Director, when the overwhelming bulk of our program and
activity
was funded with unrestricted, c4 membership dues. Now, the majority
of
program is paid for with restricted, c3 grants and large donations,
with
the dues funds largely used to support the Chapters and the
infrastructure,
but not most of the Sierra Club's program.
The most important things for Directors and GovComs to understand is
that
we have three parallel, but distinct processes, for determining
program
priorities, each with its own set of timelines; that in two cases
large
organizational investments or priority shifts must be determined well
in
advance, with long lead times; and that governance entities,
particularly
the Board of Directors, must make decisions in broader categories and
in
larger "chunks" than can be done in a chapter, a smaller
environmental
organization, or even the Sierra Club of ten years ago. With an
increase
in scale comes a necessary loss of fine-grained detail.
I will begin with the Budget process, which defines the Sierra
Club's
structure and shape, by allocating the organization's unrestricted c4
and
c3 funds, and then move on to the Fund-raising priority process, which
is
the source of most of the funds for conservation program at the
national
level, which come in the form of restricted c3 funds.
I will then briefly discuss the Program Administration process, by
which
once the Board has budgeted budget authority to broad categories
of
program, or donors have given money restricted for specific
purposes, a
decentralized web of volunteers and staff determines exactly how funds
are
spent. Since virtually every major Club program has its own unique
Program
Administration process, this memo does not attempt to explore in any
depth
the variants on this theme that exist throughout the Club.
(This memo does not discuss at all how the Chapters raise or
prioritize
their spending, although it does discuss the process by which the
National
organization devotes resources to chapters and their programs, both on
the
unrestricted and the restricted side.)
THE BUDGET PROCESS
The Club's budget process allocates the organization's
unrestricted
revenues, most of which comes from dues and small contributions
from
members as 501(c)(4) gifts; there are also revenues from c4
bequests
directly to the Sierra Club, from such licensing activities as our
credit
cards and from our investments. Legally unrestricted c4 revenues also
come
in from self funded business programs such as Sierra, Books and
Outings,
but in order to realize these revenues, we must spend an equivalent sum
to
produce the products which we market. Certain programs approved by
the
Board as part of the budget and carried out by the Club, which
are
educational or charitable in nature, can also be paid for with
unrestricted
c3 revenues granted by the Sierra Club Foundation. A significant
portion
of these revenues come from c(3) bequests to the Foundations, but there
are
also unrestricted c3 gifts from both large and small donors received by
the
Foundation and then granted to the Club for educational
purposes.
Unrestricted c3 revenues are brought over to the Club for those
programs
approved as part of the Budget which qualify as charitable.
The crucial leverage point for Directors in setting priorities for
the
Budget process is the approval of the Budget Guidelines. These
guidelines,
annually, specify to the staff what basket of services the Board wants
to
fund from the Budget in the following year: does the Board want to
spend
more, or less, in subventions to the Chapters? Does it want increase,
hold
constant, or decrease, the investment in the Club's information
technology
systems? Should we change the level of our insurance coverage? How much
do
we want to spend on our priority national campaigns? How much
reserve
needs to be set-aside for addition to working capital and to hedge
against
unforeseen adverse financial circumstances?
These Guidelines, for the most part, specify a level of services to
be
delivered not a dollar amount, because at the time they are developed it
is
not possible to quantify precisely how much it will cost to
provide a
particular level of service or program. The Budget Guidelines are
thus
service driven, although certain conservation program elements
are
typically expressed as a level of budget authority. The Guidelines
process
does not allocate funding for programs that are funded by
restricted
funding, so that most programmatic priority decisions are made through
the
Fund-raising priority process. The Guidelines are also designed on
the
assumption that the Club will have, approximately, enough money each
year
to support the same overall level of services and program that it did
in
the previous year. This assumption is adjusted only for known
and
predictable variances in the Club's economic circumstances -- such
things
as windfall gifts which will not recur, major price increases
like a
postage rate, changes in the tax laws, etc. Again, at the time
these
Guidelines are developed, the Club has no detailed financial forecasts
on
the basis of which to assume that the following year will otherwise
be
better or worse than the current year, since the Guidelines are
finalized
in July, only half-way through the previous fiscal year.
The Guidelines thus lay out the Board's vision of the Club's
basic
infrastructure, and broad scale priorities. They do not determine,
with a
few exceptions, level of funding for specific programs, since most of
these
are dependent on restricted grants.
The Board adopts these Guidelines after they have been reviewed
and
recommended by both the Finance Committee and the Staff. It does so
by a
formal vote at the July Retreat. At the same time, the Board
identifies
both areas where it would like to make enhancements, if the
financial
projections show that the Club will be able to do more in the
following
year, or accept reductions, if the projections when prepared in the
fall
show that we need to scale back operations. These enhancements
and
reductions are ranked by the Directors in a straw vote, as a guideline
for
preparing the draft budget.
These Guidelines are then used by the staff to develop a proposed
budget.
This Budget is based on detailed c4 revenue projections for the year
in
question; available funds are then first allocated to meet the
Board's
Guidelines. If after all Guidelines have been funded there are
remaining
revenues, the staff applies the remaining discretionary revenue to
finance
the top priority Enhancements identified by the Directors at the
July
retreat. If there are projected to be insufficient funds for
all
Guidelines, which we have managed to avoid except in unusually
adverse
financial years, the staff would then; using the Reductions list
also
approved in July.
This staff recommended budget then goes to the Finance
Committee
(throughout the entire process Fincom members participate in
the
development of individual departmental budgets), which considers,
amends,
and then passes on to the Board a recommended Finance Committee
Budget.
The Board then revises and adopts the Final budget at the November
Board
meeting.
Typically, the changes made in the Finance Committee/staff
recommended
budget in recent years have been modest, because in general we have
done a
good job in setting the Guidelines with enough flexibility to adhere to
the
mandates of the Board while only committing to fund a level of
program
which the Club could afford to deliver, so there have not been large
sums
available for Enhancements, nor has there been the necessity for
many
painful Reductions.
Thus, the real leverage that Directors have over the Budget process is
in
setting the Guidelines, not in approving the Budget, although
Budget
approval is the legally binding step.
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