Budgeting Basics

One of the most important tools in the management of expenses is the Chapter budget. A budget is an intelligent estimate of income and an expense plan for the spending of that estimated income. All successful Chapters have a budget.

The budget is compiled by the Crysophylos with the input of officers and committee chairmen. This draft budget is presented to the Chapter for approval. Once the Chapter approves the budget, usually at a retreat, the budget is given to the Board of Advisors for their review. After that, the budget should not be changed without the knowledge of the Board of Advisors. It is important to note that nobody can unilaterally change expense allocations. Doing so is called misappropriation.

Once the budget is approved, the Crysophylos monitors revenue and expenses throughout the year and compares to budget. This is done for the Board of Advisors with regular Financial Reports. In those financial reports, the Crysophylos identifies any potential budget problems before they become major disasters.

A budget has two sections: revenue (or income) and expense. The estimated total revenue must always exceed the estimated total expense. The best guide is to overestimate expenses and under estimate income. This conservative approach will help the Chapter remain out of debt.

One good tool for planning a conservative budget is to allow 10% for bad debt, which means that you only plan to spend 90% of your estimated revenue. This method will help you when a Frater doesn't pay his dues, because your budget is built on the assumption that 10% of the dues will not be paid. Your Chapter can build a contingency plan for when it collects more than 90% of the revenue. For example, you could increase the social budget.

Fundraisers and donations should not be counted as revenue when creating a budget because the amounts are not definite. Revenue should come from your members. Fundraisers are a good way to help individual members pay their dues. Fundraisers for charity should not be part of the budgeted revenue.

Three sample budgets have been prepared to help guide your Chapter. Sample Budget A (xls) is a basic budget that most chapters will be able to use. Sample Budget B (xls) is a little more complicated because it breaks down expense categories into events. Sample Budget C (xls) includes housing.

Here are instructions for completing the Sample Budgets:

  1. Input the projected number of members, current dues charges, projected new member total and new member dues.
    • Projected new member total - this number should be the goal for the number of recruits the chapter will get this semester.

    • New member dues - any fee charged in addition to the Candidate and Initiate fees that are paid directly to the Offices of the Grand Chapter. It is important to remember that new members have to pay these two fees, so their new member dues need to be reasonable.

    • Fundraisers and donations should be used as a way for members to pay for their dues or to pay for extra events like t-shirts, brotherhood events, or some social events.

  2. Input these expenses that occur every year and need to be paid.

    • Risk Management Fees - HRH/Kirklin & Co., LLC will send an invoice for your risk management fees. The information can also be found on the Maintenance Module.

    • Annual Membership Fees (AMF) - ACP Resources will send an invoice based on the roster the chapter completed with the Offices of the Grand Chapter in the fall.

    • Conclave Saving Plan (CSP) - Each chapter and colony is required by The Black Book to send one representative to Conclave. This is a fixed expense and is assessed each semester.

  3. If the total income cannot cover at least these 3 main expenses, then dues need to be raised. Insurance and AMF can be split into 2 payments, but this ends up costing the chapter more.

  4. InterFraternity Council (IFC) dues are another expense that many chapters incur every year. Record this expense into the budget.

  5. Recruitment activities have their own budget as well. Record the total for expense for recruitment activities, or breakdown the activities and record an expense for each.
  6. Social events also have their own budget. Record the total for expense for social events, or breakdown the events and record individual expenses.
    • Events include: mixers, formals, homecoming, and parties.

  7. Officers should have a set budget for themselves. This should be determined during the budget retreat.
    • Use the officers expesnes to record the total for all officer budgets, or breakdown into individual officer expenses.

  8. Other expenses to consider are philanthropies, composite, and RLC. There will also be some other expenses and these should be accounted for under Misc.

  9. The new member program is the expenses used during new member education. Half of new member dues goes to cover these costs.

  10. The bad debt reserve is to cover unexpected costs as well as to provide security in case members do not pay dues.

  11. Once all the expenses are input, total income must exceed total expense. If not, then dues need to be raised or events need to be cut.

  12. This completes the Projected part of the budget. Throughout the year, all income and expenses should be recorded when they occur.
    • As expenses are paid, they need to be recorded under the Actual part of the budget. This will show how much money you have spent so far this year.

    • The Difference column shows how you are doing compared to the projected budget that was originally created.
      • If an expense is overspent, then other areas need to be cut back or dues/income need to be raised.

  13. There is also an Accounts Receivable page to the budget. All members need to be recorded in this page.
    • List the member scroll number and name to create their account.

    • For fall semester put the amount of dues that is charged to that member under Dues Billed.

    • As they pay, record this under Dues Paid.

    • The amount they still owe will appear under Balance.

    • Once you record a payment, it will automatically be added to the budget under Income: Member Dues Collected.

  14. There is also a section for New Members.
    • Fill this out the same way as the active members.

    • New members from the fall will be charged the full due amount in the spring semester.

    • New members in the spring will be charged the new member rate.

    • Once you record a payment, it will automatically appear under Income: New Member Dues Collected.

Note: Sample Budget C includes Parlor Fees, and these should be recorded in A/R following the same steps outlined in steps 13 & 14.