Budget Creation Process
The Freegle budget is an estimation of income and expenditure for the next financial year (and beyond)
It is used to provide an insight into how Freegle's operates, assess the health of Freegle's finances and to provide a benchmark which the actual income and expenditure is measured against
Whilst the budget is being set, it is also a convenient moment for the board to also approve much of the standard financial expenditure related to operations (e.g. IT expenditure)
This process describes how the budget is created
Triggers
The creation of a budget is an annual process, triggered by an entry in the Board Calendar
If there was a major change to Freegle's finances or operations, it might be necessary to refresh the budget on an ad-hoc basis, but as of January 2025, this has never happened
Responsibilities
- Individual Budget Owners provide a view of the likely expenditure in their budget areas for the coming period(s)
- The Finance Director supported by the Treasurer creates the budget
- The Finance Subcommittee is consulted on the content and approves the budget
- The Freegle Board reviews and approves the Budget
Inputs
- The previous budget
- Previous actual financial spend, accounts and forecasts
- Payment approvals
- Views from Budget Owners
Outputs
- Budget Sheet
- Budget Narrative/Report
Budget Sheet Detail
The simplest way to view what detail exists on the budget sheet is by looking at a previous example
However, the budget sheet has previously contained the following key information for each entry:
- An Account Code to allow a match to the information held in the actual accounts
- The Budget Owner
- Details of expenditure for the next financial year
- Details of expenditure for years following the next financial year (to identify any items that do no recur)
- Any assumptions or calculations used to create the item
- Approval information for any items approved as part of the budget
Budget Report Detail
The simplest way to view what detail exists on the budget report is by looking at a previous example
However, the budget report has previously contained the following key information:
- A view of our financial health made by projecting forward our likely deficit or surplus. Specifically, a view of when we will exhaust our reserves
- A graph showing where the main areas of income and expenditure
- A report against a set of Budget Owner Financial Controls (see Budget Owner best practice guidelines)
- A list of the payment approvals requested/made as part of the budget
Process
- Using the inputs above, the Finance Director, supported by the treasurer creates a draft budget sheet estimating the proposed expenditure for the next financial years and those that follow
- The Finance Director reviews the draft budget with individual Budget Owners and agrees any changes
- The Finance Director reviews the draft budget with the Finance Subcommittee and agrees any changes
- The Finance Director creates a draft report, supporting the budget
- The Finance Director also creates a set of approvals for standard operational items to go alongside the budget (see Managing Financial Approvals Process)
- The Finance Director submits the budget sheet and report to the Finance Subcommittee For Approval
- The Finance Subcommittee approves (or asks for changes which trigger a refresh/reapproval loop) the budget
- The Finance Director submits the budget sheet and report to the Board for approval
- The Board approves (or asks for changes which trigger a refresh/reapproval loop) the budget
- The Finance Director secures the budget documents
- The Finance Director creates an updated document for current approved payments, based on the newly approved budget and approvals
