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Land trusts, also known as conservancies, are not-for-profit organizations dedicated to protecting wildlife habitat and natural lands by acquiring ownership rights and transfer of development rights (conservation easements) either thru donation or purchase. This series of Term Projects follows a small land trust through the process of budgeting. Term Project requires students to develop and analyze an annual line-item budget and translate that budget, and additional information, into a quarterly cash budget. Term Project II requires students to convert the line-item budget into a functional budget.

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Further information is employed by students to create a flexible budget. Actual numbers have been obscured while remaining true to the problems faced by the organization. Chippewa Watershed Conservancy: Not-for-profit Budgeting Term Project l: Line-item and Cash Budgets INTRODUCTION The Chippewa Watershed Conservancy (COW) is a small (1 staff person) land trust operating in the Mat. Pleasant, Michigan area. Founded in 1985, the COW has protected 4,233 acres in the Central Michigan area with 49 land protection projects and ranks in the top 10 out of more than 40 conservancies in Michigan in acreage protected.

They can be found at www. chippewawatershedconservancy. Org. Brief History The COW operated on a volunteer basis from 1985 until 2004. During that time period volunteers performed all management functions and succeeded in protecting more than four square miles of wildlife habitat in five counties. However, it became apparent that due to the increasing number of protected parcels and the evolution of legal requirements and management standards that the COW needed professional leadership. In 2004 a part-time employee was hired.

That position evolved over the next several years to a full-time Executive Director status. Over that time period management responsibilities were transferred from volunteers to the Executive Director. Members of the Board of Directors (BODY) continue to serve in a volunteer capacity; however, most of the management of the organization is now performed by the Executive Director. Some technical functions, such as legal review of conservation easements, annual audit, and some routine accounting are contracted out.

Members of the BODY, and other volunteers, continue to help with membership, fundraising, stewardship, and new project evaluation. The BODY is extremely concerned that the COW be managed so that it is sustainable. The commitments of land trusts are, by their very nature, long-term (actually perpetual). Therefore, the COW must ensure that their business plan and budget will ensure their long-term survival. The Current Situation The Executive Director is formulating an Operating Budget recommendation for the next year.

He has made a series of assumptions based on previous year performance and expectations about the coming year. He is particularly concerned about increased energy costs and a likely recession that may hold down contributions and foundation support. The COW wants to budget for a 5% of total expense) surplus to provide protection against unforeseen events. Your role is to prepare the budget for the following (next) year based on the assumptions adopted by the Executive Director and the budget for the current year. You will also be asked to analyze the results of those budget assumptions.

Assumptions for NEXT budget year: Revenue: Special events will increase by 20% due to a new event. Contributions will increase by 10% due to new membership drives. Grants will fall by 20% due to the end of a current grant. Interest income will be unchanged from the current year, but endowment income will be up 20% due to large endowment intuitions in the current and previous years. Expenses: Special events will increase by 20% due to an additional event and there will be a 10% increase in fundraising, newsletter, and postage expenses.

The staff person has already been notified that he should not expect a raise. All other expenses, with the exception of payroll tax, which is proportional to wages, will increase by 4%. Current Year Budget Revenue: Timing: Special Events $15,000. 1st CTR. 10%, 2nd quarter 50% and 3rd quarter 40% Contributions $30,000. 1st CTR. 20%, 2nd CTR. 20%, 3rd CTR. 10%, 4th CTR. 50% Grants $40,000. 4th quarter 100% Endowment Income $5,000. Earnings on Endowment Fund: 25% each quarter Interest Income $1,600 Interest on operating fund: (1% of previous CTR. Ending bal. ) Total Revenue $91,600. Expenses: Travel$3,OOH. 1st quarter 10%, 2nd quarter 20%, 3rd quarter 50%, 4th quarter Special Events $15,000. 1st quarter 30%, 2nd quarter 60%, 3rd quarter Conferences$2,000. 3rd quarter Fundraising $4,000. 1st quarter 20%, 2nd quarter 20%, 4th quarter 60% Insurance $3,000. 1st quarter Newsletter $4,000. 25% each quarter Postage $2,400. 25% each quarter Professional Fees$4,000. 1st quarter 40% and 20% each remaining quarters Publicity $2,000. 25% each quarter Salary$40,OOH. 25% each quarter Supplies $1,200. 5% each quarter Payroll Taxes $4,000. 10% of “Salaries and Wages” each quarter Telephone each quarter Total Expense $85,800. Part A: Prepare a line-item Operating Budget for the following (next) year using the Current Year numbers and assumptions about changes in individual line items. You’ll find that this, and subsequent questions, can be answered more easily if you prepare your work in a spreadsheet. (6 points) 1) Calculate the CSCW surplus or deficit for the current year both as a dollar amount and s a percent of annual expense. 1 point) 2) Without much information about the organization, does any ONE expense seem unusually high / low during the current year? (1 point) 3) Use the assumptions concerning changes in the various revenue and expense line items to calculate the Sac’s surplus or deficit for the next year both as a dollar amount and as a percent of annual expense. (1 point) 4) Does the budget for the next year meet their goal of a 5% (percent of annual expense) budget surplus? If not, calculate the surplus they need to exactly hit the 5% (of total expense) budget surplus target. (1 point)

Part B: Prepare a quarterly cash budget for the next year. Assume all revenue and expenses occur on the last day of each quarter. Also assume a $40,000 beginning cash balance. Add 1% each quarter based on the beginning of quarter cash balance (. 01 x beginning of quarter cash balance) as interest income. Re- calculate the “Interest Income” line item for each quarter. (8 points) 1) How large (calculated both as a dollar amount and as a percent of annual expense) is the lowest quarterly ending cash balance? (1 point) 2) Why did the Interest Income line item increase (decrease) from the budgeted amount?

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