Central New York Ronald McDonald House Charities, Inc.
2017Operating Budget
Central New York Ronald McDonald House Charities, Inc.
1100 East Genesee Street
Syracuse, New York 13210
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TABLE OF CONTENTS
EXECUTIVE SUMMARY
Background
Budget Highlights & Future Concerns
Revenues
Expenses
Overall Results
2017 Operating Budget – Summary
2017 Operating Budget – Detail of Operating Expenses
Appendix A – 2017 Detailed Budget Assumptions...... 6
Revenues
Expenses
Appendix B – Summary of Internal Fundraising Events...... 10
APPENDIX C – CAPITAL BUDGET……………………………………………………….. 11
EXECUTIVE SUMMARY
Background
Each year, Central New York Ronald McDonald House Charities, Inc., (CNYRMHC) prepares a financial budget to guide and direct the operations of the Ronald McDonald House for the ensuing fiscal year. This operating budget is the result of a collaborative process involving the Executive Director and staff of CNYRMHC, and the members of the finance committee. Various meetings were conducted in an effort to ensure that all known external factors, influences, and programs were properly considered and incorporated in the final budget. Additionally, we discussed prior and current year operating trends, anticipated needs in 2017 (including operational and cash flow needs)and the potential for improving financial performance in certain revenue and expense categories.
Budget Highlights & Future Concerns
In 2016, a risk management was a major focus in areas of technology, human resource management, and work flow management. In 2017, there is additional technology investment including a donor database management system and a house security system. The expenses for these initiatives, including new staff, are necessary to maintain the quality of the mission in the new house. However, the increased expenses create pressure to increase revenue and leverage the investment.
Major accomplishments by RMHC staff in 2016 contributing to the increases in revenue below were the successful addition of 16 more McDonald’s locations to the canister collections, increasing frequency of collections in high-traffic stores and monitoring the collection agency. Also contributing is increased emphasis on Major Gifts. Non-recurring revenue like bequests and the NYS Grant need to be replaced with increased efforts in Major Gifts including grants.
All of the assumptions used in creating the 2017 budget are included in detail in Appendix A to this document. The more significant variances to 2016projected results are as follows:
Revenue – Overall, 2016 budgeted revenue was a net decrease of $112,000 from 2016 projected actual, but there are some sources which are increasing.
$50,000 decrease - The NYS grant totaled $50,000 for both 2015 and 2016 but is not recurring in 2017.
$113,000 decrease - Bequests which are known and quantifiable of only $14,000 expectedin 2017vs. $127,000 in 2016 as we had one unexpected bequest of $70,000. There are no known future bequests beyond the $14,000 in 2017.
$52,000 decrease –McDonald’s operators revenue decrease is misleading as there was an extra local promotion in 2016 due to timing as well as success in other promotions for an additional $100,000 in 2016 vs. 2015. Offsetting this is an actual budgeted increase in canister collection based upon 16 additional stores and trends of $48,000.
$70,000 increase – McDonald’s National programs revenue increase from December 2016 campaign and new March 2017 Shamrock Shakes campaign expected.
Expenses – Most expenses are budgeted in line with 2016 projected actuals (see Appendix A) except the following:
An exception is the addition of two part-time positions to add capacity to a staff that is stretched. A Volunteer Coordinator will help with efficient management of the house and the organization’s important resources. The Donor Relations and Database Manager will contribute to the emphasis on financial stability needed to increase revenues. Both additions are strategic in nature and needed to leverage the existing resources.
Additional fundraising expense of $22,000 budgeted for the golf tournament venue pending final negotiations with senior management which we expect to lower this amount.
Some expenses and capital budget added for a security system for Guest Background Check which is a major initiative for 2017.
Future Concerns
Last year the concerns listed said the 2017 budget could be $170,000 lower in revenue based upon unsustainable sources of revenue in 2016. That prediction was mostly true with the exception of Syracuse National being continued, so the amount is lower at a$112,000 decrease. The concerns still remain but we are gaining in some other areas.
The 2017 budget does address another concern from last year which was a house staff stretched thin as it adds two new part-time positions. These must be funded, adding more pressure on revenue generation.
The Board and staff must focus on finding new revenue sources and optimizing the revenue/cost ratio for traditional sources to leverage the fund raising expense resulting in increased sustainable revenue for 2018 and beyond.
EXECUTIVE SUMMARY
Revenue
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The chart at right compares our revenue sources by type over the last 4 years. Our success as a continued viable organization is dependent to a significant extent on our ability to continue to effectively manage our internal fund raising revenues (43% of our revenues come from those sources for 2016 budget) through our events and through donations. Also, and equally important, approximately 32%of our revenues are dependent on our continued relationship with McDonald’s owner operators and national programs.
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Expenses
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The chart at right compares our operating expenses by functionover the last 4 years. Consistent with prior years, our most significant operating expense continues to be payroll and related costs, however, their percentage has decreased from 55% (in 2012 in the previous home) to 41% as house related expenses and depreciation have grown reflecting the increased operating costs of the new facility(staffing, maintenance, utilities and insurance.) Depreciation has also increased significantly in the new facility. Continued emphasis oncost control is critical.
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EXECUTIVE SUMMARY
Overall Results
The overall budget proposed for 2017 results in an operating loss (expenses in excess of revenues) of approximately ($148,000). Adjustments are made below for other non-cash items in the operating loss and balance sheet items. This results in a budgeted positive operating cash flow of approximately $168,300 for 2017 and an increase to cash of$24,300 after debt and capital payments.
Budgeted expenses in excess of revenues $ (148,000)
Dividends/interest income reinvested (18,000)
Pledges receivable collections 30,000
Add back – depreciation expense 304,300
Cash flows from operations $ 168,300
Required 2017 debt principal payments (112,000)
Capital budget (49,960)
Net increase to cash $ 6,340
The budgeted positive operating cash flow of $168,300is sufficient to make the scheduled principal payments on the bank loan and fund the capital budget. In addition, there is opportunity for grant income that will not be included in revenue but can fund capital projects. In short, our budgeted cash flows resulting from the enclosed budget more than appropriately funds our overall cash requirements for all of 2017.
The loan was re-financed in 2015 for a ten year term at a fixed rate of 3.85%. The current investment balance is in excess of $3.4 million at 12/31/16, well in excess of the $2.5 million minimum threshold set for the building project. The investments will be allowed to grow in 2017 as no cash is needed for operations. Also, the organization has accumulated excess operating cash in 2015 and 2016. We might use a portion to fund a property reserve account after analysis in 2017. Other excess cash will be invested in short term investment options to maximize return. The long term objective of re-financing the loan in 2015 was to preserve the investment portfolio growth and have cash flow from operations fund the loan principal payments. This objective was met and 2017 is sustainable from a cash flow perspective.
We believethat the budgeted 2017 operating results to be an acceptable for the following reasons:
- We continue to maintain revenue that is controllable in most areas for 2017. The strength of our major events continue to provide a sustainable revenue source but significant growth is not achievable given the competition for these events locally. The McDonald’s sources of revenue continue to be strong,reliable, sustainable and increasing year over year. In 2016, the revenue budget was achieved through the budgeted sources and some unplanned extras.Although our brand has never been stronger, continued increased revenue from the traditional sources is becoming more of a challenge.
- We continue to effectively control costs for our core operations although we are adding costs in 2017 for needed staff and technology to achieve results. The loss we are budgeting is generated primarily from the significant increase in depreciation expense and is not indicative of any systemic operating issues.
As stated earlier, the organization needs to target increases in revenue. Continued emphasis on existing and new sources of revenue will be the key to enhancing the financial strength of our organization as we move forward.
2017 Operating Budget – Summary
The accompanying assumptions are an integral part of the above financial budget.
2017 Operating Budget – Detail of Operating Expenses
The accompanying assumptions are an integral part of the above financial budget.
Appendix A– 2017Detailed Budget Assumptions
Revenues
Direct internal fundraising revenues- major events…………………………………………$ 281,900
Comprised of:
Many Hearts One Home (MHOH) …………………………………………...... $ 112,500
RMHC Invitational Golf Tournament ………………………………………...... 107,000
Fashion Show……………………….………………...... 62,400
Budget amounts are reflective of anticipated outcomes for these events at an8% increase over 2016.See also Appendix Bfor more details.
Direct internal fundraising revenues- donations…………………………………………….$ 177,100
Comprised of:
Individuals…………………………...………………………………………...... $ 47,400
Businesses….…………………………………………………………………...... 26,100
Memorials…..……………………….………………...... 15,300
Major Gifts……………………………………………………………………………… 84,500
Others ………………………………………………………………………..………….3,800
Amounts for individuals, businesses, memorials and other approximateswhich was received in 2016; Major Gifts based 2016 actual with a 17% increase;others include $3,800 Pop-Tab.
Direct internal fundraising revenues- Other………………………………………………...$ 50,200
Comprised of:
Friendship Fund……………………………………………………………..………….. $23,700
Board Leadership Fund………………………………………………………………... 5,000
Share-a-Night Newsletters…………………………………………………...... 18,400
Just-A- $Buck Campaign……………………………………………………...... 1,100
Buy A Brick Program……………..…………………………………………...... 2,000
Budget amounts approximate that which was received in 2016. Direct mail,employee giving campaigns andBoard Leadership commitment program.
Donations – bequests………………………………………………………………………… $ 13,700
We budget for bequests when the amount is probable and reasonably estimable. The estimate is based on information from our attorney’s office, Mack Rosso $5,000and $8,700 from Jean Bice. There are no other known bequests at this time.
Appendix A – 2017 Detailed Budget Assumptions
Revenues (continued)
External fundraising………………………..………………………………………………..$ 98,300
2017 budget amount is based on events from 2016 that will repeat in 2017. For 2017, RMHC has again been selected as the beneficiary for the Syracuse Nationals event. We budgeted $70,000 in 2017 which is based on 2016 actual. $28,300 is from other external fundraising and includes anticipated events, school, and organization fundraisers.
McDonald’s operators – canisters and other ………………………………………………$ 273,000
2017 budget for canister donations $207,000is net of 25% to Global Ronald McDonald House Charities. It is based on additional 16 donation boxes and current marketing trends as a result of RMHC/McDonald’s national marketing efforts. “Other” includes $66,000 local McDonald’s co-op fundraising initiatives including in store promotions.
McDonald’s national programs……………………………………………………………..$ 96,700
Based on projected proceeds from National McDonald campaign conducted in December 2016 – to be received in early 2017. Also includes the addition of a new campaign in March 2017 – Shamrock Shakes.
Investment income, net……………………………………………………………………… $ 56,100
Income from the investment of unrestricted funds & endowment funds assumes interest and dividend income on the fixed portfolio balance at the end of 2016 of 3% less fees of 1%. This is a projection based on theprojected investment income for 2016. The service fees are 25% less than 2016.
Income from operations ………………………………………………………………………$ 125,300
Income from guest fees comprises $123,400 of the total. It is budgeted based on 2016 monthly occupancy rate of $25 per night for a totalof 4936nights. Remaining amount is the income from soda and laundry machine proceeds and is estimated at $1,900 – consistent with 2016 actual.
Appendix A – 2017 Detailed Budget Assumptions
Expenses
House expenses ………………………………………………………………………………$ 534,200
Comprised of:
Compensation and related costs …………………………………...... $384,600
House routine & ground maintenance…………………..….………………..………….....64,100
Utilities ……………………………………………………….…………………………...27,000
General insurance………………………………………...... 29,700
Telephone…...... 7,300
Linen service …………………………………………………..………………………….. 7,500
Security / fire alarm……………………………………………………………...... 900
Household supplies……………………………………………………………...... 1,200
All other house expenses …………………………………………………………………..11,900
- Compensation and related costs based on proposed 2016 salarieswhich include theaddition ofone new part-time Volunteer Coordinator position. A 4% meritpool for eligible employees and $0.70 minimum hourly rate increase in 2017 as per New York state law. The minimum wage increase will have impact on weekend and overnight staff.
- House maintenance expenses are based on contracts.
- Budgeted utilities are based on 2016 projected.
- General insurance based on current coverage and insurers estimated 2016/2017 rates.
- Telephone reflects estimate of current usage and contract with phone vendors. Landline service has been switched from Time Warner Cable to Northland, which saves about $90 per month. Budget amounts approximate the new landline service contract amount and regular Verizon mobile phone charges.
- Budget amount for linen service is based on contract with linen service company, monthly usage estimates and a stipend of $800for linen replacement purchase.
- Security/fire alarm is based on estimates from contracts.
- Household supplies based on estimates for miscellaneous household purchases. Majority of house supplies are purchased by gift cards or donated in kind goods. Budget anticipates that those donations will continue in 2017.
- All other house expenses include Cable TV $1,000, trash $1,600, water & sewer $4,800, Guest Background Check Fee $3,000 and miscellaneous house events$1,500 (ie,security coverage and zoo pass). Budget for trash, water & sewer approximate that which was incurred in 2016.
Appendix A – 2017 Detailed Budget Assumptions
Expenses (continued)
Fund raising …………………………………………………………………………………$ 335,500
Comprised of:
Direct expenses – internal fund raising …………………...... $ 161,100
Compensation and related costs …….……...….…………………………………...... 158,400
Contracted public relations consultant……………………………………..………...... 10,000
Newsletter……………………………………………………………………...... 6,000
- Direct expenses reflect estimated costs for specific events (see also Appendix B) – Many Hearts One Home Event- $36,700; RMHC Invitational golf tournament - $52,100; Fashion Show - $18,400; Friendship fund annual appeal (cost of printing and mailing appeal letter) - $4,500; Syracuse Nationals - $9,000;Other Fund Raising Expenses - $300; McDonald canister collection program – $38,000; Major gifts - $1,800; Mileage $300.
- Compensation and related costs consistent with explanation under house salaries in addition to a new part-time Donor Relations and Database Management staff person.
- Contracted public relations consultant represents 1/3 of consultant fee of $2,500 per month. Reflects 2017 contracted amount with PHG.
- Share A Night Newsletter expenses $6,000 represents ½ of total cost of two newsletters.
General and administrative…………………….………………………………………………$ 69,000
Expenditures consistent with 2016 projected amounts with adjustments for certain individual line items for discretionary spending. Conferences and meetings ishigher in 2017 as there isInternational RMHC conference in 2017. Computer/Software Expense is higher than 2016 projected because of new contracted IT services and upgraded donor management software annual fee $5,600.Contracted Service – Employee Benefits Evaluation/Review $5,000 is new in 2017.
Marketing and public relations………………………..………………………………………$ 35,500
Contracted public relations consultant represents 2/3 of consultant fee of $2,500 per month. Share A Night Newsletter fee of $6,000 represents ½ of total budgeted cost of two newsletters. Collateral Materials $10,000 based on 2016 amount.
Interest expense….……………….……..…………..………………………………………….$ 41,800
Represents scheduled interest payments due in 2016 on outstanding balance of mortgage payable at the new fixed rate of 3.85%.
Depreciation….……………….………………………..………………………………………$ 304,300
Based on detailed fixed asset listings updated for 2017 additions.
Appendix B – 2017Summary of Internal Fund Raising Events
APPENDIX C – 2017 CAPITAL BUDGET
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