Budgeting

From Democratic GAIN Wiki

A campaign budget is the financial blueprint of the campaign strategy. It sets to paper all the items and services the campaign plans to buy, what each will cost, when each purchase is planned and when the bill comes due.

All campaigns have limited resources (people, time and money). The most important job of the campaign manager is to allocate resources efficiently and effectively. The campaign budget is a written plan for allocating one of the most scarce resources — money.

The budget is the one place where all elements of your campaign interconnect. When writing a budget, you are forced to put a price tag on each element or activity of your campaign plan. If the overall price of the plan is too high, you may need to adjust the plan. As you work your way through these revisions, the budget is the visual illustration of the campaign’s priorities.

The budget is also, in effect, a formal request to your fundraising department. You are communicating how much money you need and when you need it to run a winning campaign — communicating, in essence, that you are counting on the fundraising team to meet these goals or to let you know in a timely fashion that the goals can’t be met.

The campaign budget is a series of choices you have made and priorities you have set. It is the campaign plan expressed in numbers. With the resources projected to be available, this is your formula for winning.

Of course, the budget is never set in stone. New information sometimes alters campaign strategy, and the budget must be revised accordingly. You may decide to send out one more piece of persuasion mail or purchase paid television advertisements a few days earlier than expected. These decisions will change your budget. But while your budget should be expected to go through many stages, it should never be changed on impulse. Each new campaign plan and budget should reflect your best blueprint for victory, all things reconsidered.

Contents 1 How Big is My Budget? 2 What Does a Budget Look Like? 3 Why Do You Need a Budget? 3.1 The Budget and the Campaign Plan 4 What’s in the Budget? 5 Preparing a Campaign Budget 5.1 Guidelines 6 Monitoring Cash Flow 6.1 Money 7 Who is Responsible for the Budget? 8 Compliance Activities 9 Budget Do’s and Don’t’s

[edit] How Big is My Budget?

The budget is a campaign tool, and part of the campaign plan. It is absolutely vital that you work out all potential campaign expenditures before you spend any significant amount of money. There is no point in planning the campaign of your dreams if you are just going to run out of money before you pay for street operation and GOTV programs.

With this scenario in mind, it is important to remember to make careful and precise calculations about your budget, and then what it will provide for you — not the other way around. There is no point in planning for what you won’t be able to afford. Make a frank assessment of your campaign’s fundraising potential and when this money will be needed, then use this to create three versions of a budget with high-, middle- and low-end projections. This way, if your predictions about fundraising are inaccurate, you’ll already be prepared to pare down or gear up the campaign. Writing a realistic, accurate budget for the campaign is every bit as important as writing a strategic, targeted campaign plan.

Research or ask -- How much have previous campaigns raised and spent? How much have your Steering Committee members given in the past?

[edit] What Does a Budget Look Like?

A campaign budget is a two-dimensional spreadsheet. You list your programs and all the activities and elements that make up each program down the left column, and you list units of time (quarters, months, weeks, days) across the top. All spreadsheet software packages on the market today can assist you in setting up your budget.

While there are many ways a final budget can look, in this manual, when we refer to a campaign budget, it is a budget consistent with the following rules:

• Expenses are grouped by department. For example, you will see printing and postage under numerous departments. Each staff position should be listed under its respective department. You may even have travel under more than one department.
• Each department has a subtotal. The expense subtotals of a program budget allow the campaign manager to identify the costs of each department — for example, to easily monitor what percentage of the budget is being spent on the central headquarters’ field organization as opposed to regional field office activities.
• All expenses will be listed under the appropriate unit of time. In your campaign, that may be quarters, months, weeks or days. As the campaign progresses, the units of time should become increasingly smaller.
• Each time unit is broken into two columns: “budget” and “actual.” As you begin to spend money, you will need to keep the “actual” column up to date.

[edit] Why Do You Need a Budget?

A seemingly perfect campaign strategy is useless unless the manager can develop a realistic budget to pay for it. A campaign budget serves as a road map for the campaign manager, and provides continuity in times of chaos. In addition, it can serve as an indicator that your campaign is viable. For example, a campaign could have the best-trained staff, the biggest yard signs and the most in-depth research data. However, if it does not have the money in the bank for the final paid media push, victory may be elusive. A campaign budget keeps the campaign on track.

A budget helps the campaign manager:

• Spend Wisely: All campaigns have limited resources. There is no money to waste. Dollars should not be spent on impulse. Always ask yourself, “Was this item budgeted?”

• Stay on track: When dozens of people realize that the key to winning the election is just one hundred more car-top signs or a few thousand personalized emory boards, the budget will be there to provide the answer. Even if the cash is available, if it has not been budgeted for, it is not in the plan.

• Establish credibility: Members of your finance committee, major donor prospects, political action committees, Democratic Party committees and opinion leaders often want to see a version of your budget to help them understand and believe in your strategy. Even consultants you plan to hire may want to see a budget. For these players, a summary of your budget is a prerequisite to establishing your credibility and proving your sophistication. They know that a plan is not a real campaign plan until the numbers have been tallied up and committed to paper.

• Manage crises: It is not the least bit unusual for campaigns to enter into stages of crisis management at any moment. A completed budget and corresponding documents are essential to the campaign in these times.

[edit] The Budget and the Campaign Plan

Let’s say the campaign plan is an automobile. The campaign budget is like the steering wheel: you could try to drive the car without it, but who knows where it will go?

The campaign plan and the budget are dependent on each other. Changes in the campaign plan will almost always be reflected by changes in the campaign budget. While the campaign is a combination of all the campaign’s strategies and tactics — those that cost money and those that don’t — the budget summarizes those items and activities in the campaign plan which cost money. As the campaign progresses, the plan and the budget need to be coordinated every step of the way.

For example, say the campaign plan calls for mailing to a targeted universe of voters. When the plan changes so the piece will be dropped by volunteers (therefore saving the campaign money), the budget must change accordingly.

As the campaign progresses, the plan and the budget need to be coordinated every step of the way.

It is important to note that the majority of your fundraising activity needs to take place before the final six to eight weeks of the campaign. During that crucial last two months you will spend the majority of the money you have labored to raise. Your campaign plan must reflect this budgetary reality.

[edit] What’s in the Budget?

Make sure you take into account all expenses so you do not under-budget, including:

• Staffing expenses, including payroll taxes and health insurance.
• Office overhead, including utilities, phones, Internet server/provider, rent, security deposits, field offices, computers, software, printers, cell phones/pagers, office supplies, etc.
• Voter contact and field program costs, including consultants, voter lists (these add up!), postage, printing, yard signs, etc.
• Voter file enhancement costs, costs of collecting and appending data to file.
• Volunteer refreshments for HQ and field offices.
• Communications expenses – conference calls, blast-fax, list-serves, media event expenses, etc.
• Fundraising costs.
• GOTV and Election Day expenses, including poll workers, drivers, canvassers, literature, vans, extra cell phones/pagers, lunches, etc.
• Legal and compliance costs.
• Polling and research expenses, if applicable.

The best way to ensure that you are not neglecting any area of the budget is to have each director put together estimates for his or her own area. This will force the directors to understand the costs involved and what they need to spend, while keeping them accountable. Plus, this way you can come up with two types of budgets — one cost center, budget to detail the cash flow, and a detailed program budget, which will include the cost of each program area with all the calculations.

Consultants can provide a sort of “wild card” aspect to your budget. Ask them for precise estimates up front, and keep an eye on their miscellaneous expenditures. Place restrictions on what they can be reimbursed for, and stick to them. Consultants should follow the same chart of accounts and expenditure procedures as the staff.

Your spending should always be matched with your income expectations. Make sure you’re communicating with your fundraisers so that they know when you need money to spend and must have that money into the bank.

[edit] Preparing a Campaign Budget

When you’re ready to write the first draft of your campaign budget, what do you need? The following list will guide you through the process:

1. A frank assessment of your campaign’s fundraising potential. There is no sense writing a budget you can’t afford. Research your candidate’s history of past fundraising success, consult with your finance director and then create three estimates (high, medium and low) of the financial resources likely to be available to the campaign.
2. A copy of your campaign plan. The budget must reflect the campaign plan. For each activity listed in the plan, you will need to decide how much that activity will cost and when the expenditure will be made.
3. Detailed projected budgets from each department of the campaign. Your department heads must submit estimated budgets for their projected programs. You will need to make the estimates for yourself for departments that won’t be staffed until later in the campaign.
4. Detailed projected budgets from each campaign consultant. If you have not yet hired consultants, collect the best estimates you can. For example, call local printers, graphic designers, mail vendors, television and radio stations — or contact other individuals who have worked on a similar campaign in your area to gauge similar costs.
5. A copy of appropriate campaign fundraising and spending laws. If your campaign is a federal race, you can get the information from the Federal Election Commission. For a state or local race, contact your local board of elections office.
6. An accounting software package. There are numerous computer software products designed specifically to link your expenditures, financial contributions and compliance reporting activities together. Shop around and find an affordable package that works for you and your campaign.

[edit] Guidelines

Every campaign is different, and budgets for statewide campaigns are clearly more complex than those of small local races. It is important to note that much of the campaign’s field operation can be paid for out of the Coordinated Campaign, if in fact there are joint operations with other campaigns. So field operations may be a much more substantial part of your campaign activity, but it may part of your campaign budget.

However, there are some basic guidelines for allocating resources to keep you on target:

• Administration 10% - 20% of total budget
  
• Fundraising 10% - 15%
  
• Media 50% - 60%
  
• Field Organization 10% - 15%
  
• Research 5% - 15%

As you being to work through the initial draft of your campaign budget, you may want to set up a worksheet for specific campaign activities. For example, within your field organization budget, you might find it helpful to create a separate “materials” budget. In addition, you may want to refer to a sample price list in the preliminary stages of preparing your budget. However, keep in mind that prices change rapidly and every race is different. Do your own research.

You can’t adequately prepare for a campaign by using someone else’s plan.

Furthermore, your campaign may be in a position to benefit from the Democratic state party Coordinated Campaign activities. It is designed by the federal candidates and is reflective of the general election strategy of the Party nominees. Coordinated Campaigns allow campaigns at all levels to pool their resources to perform basic organizational tasks — such as voter registration and absentee ballots — that benefit all Democratic candidates in the general election.

Your campaign should be prepared to review all Coordinated Campaign activities and your budget should reflect these opportunities. Contact your state party executive director for more information.

Finally, remember that the majority of the money you raise must be allocated toward those activities that communicate the message of the campaign directly to the voters. Resources are often interchangeable. You may find that volunteers can handle an activity you initially budgeted money for. Most campaigns must be in a position to do everything they can to maximize money available to spend on paid advertising: television, radio and direct mail.

[edit] Monitoring Cash Flow

Your carefully-planned budget is going to be useless if you don’t methodically track all of your expenditures and continually ensure that your campaign is financially on track. The budget is an evolving document — it should be created with fluctuations in income in mind, and should be reevaluated when something unpredicted happens.

Your initial budget should show how much money you need and when you need it. All anticipated expenses should be listed by month, and by week for the last three weeks as you gear up for GOTV. This will allow you to micro-budget the campaign. The more effort you put into the initial budget, the more carefully the budget will have to be followed and the more secure your finances will be.

Realizing these expenses and communicating them with your fundraisers will help you to ensure that they can raise the cash when key infusions are necessary. When it’s time to pay for an absentee mail program, phone ID program, issue advocacy, base vote mobilization events, persuasion mail, etc., your fundraisers will be able to tell donors exactly how their money will be used. (This is just one more example of why solid communication between different departments of a campaign is so vital.) Fundraising projections should be regularly updated to make sure projected expenses are in line with the latest fundraising expectations.

Keep your fundraiser in the loop.

Internal cost controls are key to adhering to a budget. Campaigns should develop a strict check request, expenditure approval form and expense reimbursement procedure. Make sure these documents are clear to every staff member who has the authority to approve expenditures. A chart of accounts should be used not only by the comptroller, but also by every person submitting a financial form. If they have a problem finding their expenditure category on the chart, it probably means that their expenditure is not in the budget.

As projected expenses become actual expenses, the budget should be updated to reflect what you actually spent. At the end of each month, you will have two totals to looks at – the budgeted amount and the actual amount.

[edit] Money

The campaign has three options by which to pay expenses: cash, checks and credit. Each has its own advantages and disadvantages.

Cash: If handled correctly, petty cash is the simplest way to pay for the campaign’s smaller, everyday expenses. You should decide how much petty cash you need to have on hand at all times, and what is the maximum amount for which it will be used. The key to making a petty cash system work for you is to keep it accountable. Only one person should be entrusted with the petty cash on any given day, and that person is held responsible for making sure that the receipts plus the cash on hand add up to the whole number agreed on at the start of the campaign. In other words, if your staff decides that it should have $1,000 in petty cash, and $200 is spent in a week from that supply, you should have EXACTLY $800 in cash and EXACTLY $200 in receipts. The receipts should be sent to the bookkeeper or comptroller at set intervals and undergo the same accounting system as every other campaign expenditure, and $200 should be taken out of the campaign bank account to replace the spent cash.

The petty cash system should have a sign-out sheet, including date, time and what the expense was. If the system is checked at the end of every day, it should be relatively easy to find any discrepancies.

PRO:Money is available when you need it.
CON:Money can be hard to track.

Checks: Checks are the most easily trackable method of payment. Consider purchasing checks with duplicates, or a financial software system that will allow you to write checks and track payments. Certainly, all invoices and bills should be paid with checks. Make copies of all checks and their accompanying request forms. These should be filed for future reference, in case a bill is disputed or the bookkeeper has a question about a payment.

Only one or two people should be authorized to sign checks. These people are those who have responsibility for the account at the bank, and should probably be the campaign manager and/or the comptroller.

PRO:Easy to prove that a bill has been paid.
CON:Time-consuming. Must wait for authorized signer to be available.

Credit card: The credit card is a great way to save the campaign during slow periods of fundraising, but you should not count on this in your budget. It can be particularly helpful at the start of a campaign, when you have less money but more start-up costs. It can also be used over the phone and online — dangerous if it falls into the wrong hands, but helpful when you need something sent overnight, for example.

The other downfall of using the credit card is that it’s easy to slack on tracking your expenditures. When it’s simple to place an order — online, for example— people tend to not fill out expenditure forms. Make sure that any order placed online with the credit card is printed out as a receipt, and that all necessary forms are filled out.

Again, only a couple of people should be authorized to use the credit card.

PRO:Extremely simple to make a payment.
CON:Harder to regulate.

[edit] Who is Responsible for the Budget?

Ultimately, responsibility for the budget falls to the campaign manager. He or she should regularly review expected and actual income and expected and actual bills due, and reconcile them with the campaign budget.

The comptroller, however, actually spends the most time with the budget. He or she prioritizes, and organizes and pays campaign bills and makes sure that the campaign complies with legal requirements on fundraising and expenditures (federal vs. nonfederal money). He or she updates the Coordinated Campaign director by preparing monthly and weekly cash flow reports.

Obviously, these overlapping responsibilities mean that communication between the comptroller and the campaign manager is vital. The third person who needs to be in constant contact is the fundraiser. The three should meet at least weekly starting early in the campaign to discuss the budget and to revise expectations and expenditures as necessary. Later, if the race is close, these are the three who will decide if the campaign is willing to go into debt to win.

The campaign treasurer is responsible for reviewing and signing the financial reports filed with the FEC, or the state or local board of elections office.

[edit] Compliance Activities

Compliance procedures present not only a responsibility for the budget staff but an opportunity for the overall campaign to illustrate the strength of the candidate and the campaign. Campaign finance disclosure reports tell the world how much money you have raised and from whom, and how much money you have spent and where.

The first step you must take is to research the campaign finance disclosure laws that apply to your race. Check federal, state and local laws. (Most election boards will send you a copy of all relevant election laws when your campaign committee forms are filed.) Read and understand them. Don’t be afraid to get advice from an experienced lawyer and accountant who specialize campaign finance.

The second step of compliance procedures is to design all campaign accounting systems in accordance with these laws. You will want to set up an organized record-keeping operation that includes detailed check request and reimbursement systems. The fundraising team, comptroller and treasurer should be responsible for understanding and implementing compliance procedures throughout the campaign.

Organize the campaign’s financial information strategically. For example, the laws in your state for reporting contributions may require that you report only contributions over a certain dollar figure. However, you may want to show the grassroots support for your candidate — and therefore decide to include every single contributor when filing your report.

Finally, one of the most effective ways to deliver the message of a winning campaign is to file a financial disclosure report with a strong cash on hand balance. However, this is not done in a vacuum 48 hours before the report is due. You begin your compliance strategy on day one of your budgeting process.

[edit] Budget Do’s and Don’t’s

• DO consider every expense in your campaign plan. Try to picture the activity taking place, so that you envision all the hidden costs in each step.
• DO save copies of your calculations. After you calculate an expense and place the figure into the budget, make a not of how you reached that figure (for example, how many units and cost per unit). As you research you may find out information that will change your calculations and it will be helpful to know what you based your original numbers on.
• DO estimate. There will be many numbers that you just don’t feel confident about. Make an educated estimate, and mark it as such. Keep a list of items you need to research and numbers you need to verify. As you get more accurate numbers, recalculate your budget.
• DO set aside money for your media buy. Consider setting up a separate interest bearing media account to be used solely for paid media activities and earns you interest.
• DON’T assume that the budget from another campaign will suffice for your current campaign. Every election is different. Think for yourself.
• DON’T lump expenses together on the same budget line. It’s good to remind yourself of all the costs you will have to face within every campaign program.
• DON’T assume that when you budget an expense that is also when you need to pay for that expense. Your budget should reflect when checks must be written, cashed and dispersed.
• DON’T plan to end with a deficit. Be fair to the individuals and businesses that trust your campaign to pay its bills. Plan to pay them what you agreed to pay when you agreed to pay.
• DON’T rush. The budget is crucial, so take your time and do it right.

Topics in Finance

General: Fundraising | Fundraising Plan | Fundraising Principles | Fundraising Technology
Spending: Budgeting
Compliance: Overview
Techniques: Call time | Fundraising mail | PAC Fundraising | Events | Online Fundraising