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Wed

19

Feb

2014

Expedited 2014 budget process yields new innovation fund, RFPs for JED and marketing
Written by Victor Drover   
Wednesday, 19 February 2014 13:54

Shortly after being selected to serve as Treasurer of Open Source Matters, I presented my vision for managing the financial interests of the Joomla project. This short presentation (PDF) was delivered at the 2013 Leadership Summit in November in Boston.

The main point of the presentation was to solicit feedback from all the leadership teams regarding things that were working well when it came to the project’s accounting practices, and of course things that needed improvement. The main takeaways from this part of the summit were as follows:

  • The financial health of the project remains strong
  • Financial reporting per leadership team is not currently possible
  • The Chart of Accounts is not intuitive
  • Financial status reports need simplification

Finding solutions

To address these issues, it became clear that a complete restructure of the project’s Chart of Accounts was required. Critically, the new Chart of Accounts would need to be implemented at the same time as the 2014 budget.

This was further complicated by the timing of the Christmas holidays and the busy season that often follows.  

Coincidentally, a colleague who has experience in such things recommended the Unified Chart of Accounts (UCOA) for nonprofit organizations.

After some research and conversations with our accountants, I decided this was a good choice for the Joomla project.

However, this did not solve our issues with reporting on a per-team basis.

The Joomla project uses Quickbooks as our accounting software.  In addition to supporting a Chart of Accounts to organize transactions into the common financial categories (i.e. income, expenses, payables, receivables, etc…), Quickbooks “Classes” can be used to organize transactions into any categories you want. Importantly, we have full control over what those categories are.

To solve the reporting problem, I decided to use Leadership Teams as classes: CLT, PLT, OSM and INF (for Infrastructure, or expenses shared among the teams), as well as some other common classes like Events.

Budget process

With the UCOA and Quickbooks Classes providing solutions to some of the problems identified above, it was necessary set an ambitious schedule to complete the budget in an acceptable timeframe.

With consideration for the Christmas holidays, the following deadlines were adopted:

  • 6-December-2013 — Set goals
  • 20-December-2013 — Set objectives for each goal
  • 7-January-2014 — Estimate budget items to support objectives
  • 14-January-2014 — Finalize monthly dollar amounts
  • 17-January-2014 — Request OSM budget vote
  • 21-January-2014 — Final 2014 budget approved

The most important part of this process was first setting goals, and then objectives to support those goals. The goals, objectives and annual budgetary estimates are summarized in the 2014 Budget Worksheet

Bringing it all together

While the leadership teams were completing this worksheet, I worked with our accounting firm to solidify the new Chart of Accounts. This was an important step in the process as a finalized Chart of Accounts and specific Classes would be required to merge the Budget Worksheet with the UCOA. 

In addition, we also had to plan a migration of the existing Chart of Accounts to the UCOA.  

This was mostly completed by the first week of January and the line items from the Budget Worksheet were then moved to the actual Chart of Accounts along with monthly estimates of spending. 

The final budget — including some modifications to the estimates from Budget Worksheet — can be viewed in the 2014 Public Budget spreadsheet or downloaded as a PDF.

Here is a summary of the 2014 budget that was unanimously approved by the entire board of Open Source Matters on January 22, 2014 (a simple majority of the vote was obtained prior to the January 21st deadline):

  • Total liabilities & net assets, $508,350
  • Total revenue, gains, & other support, $765,100
  • Total expenses, $966,865
  • Net operating income, -$201,765
  • End-of-year Assets Projection, $306,585

The project has been under-spending its budget for the last 2 years, and so the 2014 budget is predicted to cut into the net assets with heavy investments in:

  • Event Sponsorship, including non-Joomla events (Account 8320). 
  • The Joomla Travel Program, formerly known as the Joomla Scholarship program (Account 8310_INF_Events_Joomla).
  • An Innovation Fund to provide rapid funding for innovative or special projects (Account 7015, 10% of revenue, details to follow.).
  • Leadership training (Account 8540_INF).

One of the largest line items in the budget is the Joomla World Conference and a new Developer Conference (Account 8320_OSM_Events_World). However, the $110,000 cost is largely offset by ticket sales (Account 5810) and event-specific sponsorships (Account 4021).

Volunteer travel — for summits, sprints, working group meetings, Google Summer of Code and the Joomla Travel Program — remains one of the largest expenses of the project and has continued to increase year-on-year.

As such, we expect to spend 30% of the projects entire annual expense budget on travel-related costs ($293,800, Account 8310).

Other new/interesting items in the 2014 budget include:

  • RFP funding for the new JED (7550_CLT_RFP)
  • RFP funding for a marketing agency (7540_CLT_RFP)
  • Welcome baskets for new Joomla User Groups (Account 8110_CLT).
  • Thank-you gifts for Google Summer of Code mentors (Account 8590_PLT_Gifts). 
  • Thank-you gifts for volunteers (Account 8590_CLT_Gifts).
  • Increased donation to the Software Freedom Law Center (Account 8590_OSM_Gifts).

Looking ahead

As you may now appreciate, the concurrent tasks required to restructure our accounting system and prepare the budget were very time consuming for all involved and the schedule was difficult to keep.

However, I am proud to say that all the Leadership teams collaborated well to complete the tasks as soon as possible and well ahead of the 2013 budget approval date.

The real work on executing the objectives set early in the budget process now falls to each of the Leadership Teams and their associated committees and working groups. 

On the financial side, our short-term tasks include finalizing the 2013 books so our tax return can be prepared. I have been working closely with our Assistant Treasurer Martijn Boomsma in the last few weeks and I am happy to report we are all but ready to close out 2013 and begin the tax preparation process with our Accounting firm.

As soon as the taxes are complete, we will migrate to the UCOA in Quickbooks and input the 2014 budget totals.

We will also be recruiting volunteers for a financial committee who can set the workflow and arbitrate financial requests from the Innovation fund.

Finally, I plan to have the 2015 budget prepared by December 1, 2014. Based on the budget process described above, all Leadership Teams should expect the budget process to begin on or about September 29, 2014.

If you have questions or comments about anything in the budget, please feel free to discuss it on the forum. I have created a specific topic for this purpose.