Developing a Line-Item budget Prior to the beginning of each fiscal year,the staff of a human service agency (excecutive director,program

manager, the chief financial officer , governing board members ,and others)determine the amount of staff, equipment,facilities,travel,supplies and so on that will be required to operate the agency and its various programs during the coming fiscal year. A human service agency usually strives to have its line-item budget in place and approved by its governing authority (eg: board of directors,governor,city council,mayor, county commission )prior to the beginning of each new fiscal year ,a human service agency may have to begin the budget process several weeks , if not months ,in advance of the start date of its next fiscal year .in government human service agencies,the budget process is usually part of a larger budget proves and can begin six months or more prior to the beginning of next fiscal year. During the budget preparation stage ,program managers and other staff of a human service agency including the executive director and the chief financial officer estimate both the revenues the agency anticipates receiving and the expenses the agency proposes to incur during the Fiscal year,frequently these estimates are arrived at based primarily on what might be called educated guessing.other times , more sophisticated forecasting techniques are employed. Program managers have an advocacy role to play during the budget preparation process They must strive and sometimes even fight to ensure that the best interests of their programs and client are furthered. This advocacy role frequently entails requesting additional needed funding for more staff in order to serve more clients .frequently the combined funding requests of program managers are greater than the estimated revenues to be received by a human service agency . at this point a human service agency finds itself with an unbalanced line- item budget, a budget with proposed expenses greater than anticipated revenues.

Balancin a line item budget A line item budget should be blanaced,anticipated revenues should be equal to or greater than proposed expenses .one way to think about a line item budgeting system is that it is a mechanis, to control agency expenses .when a human service agencys line item budget is not balanced , it is essentially out of control Balancing an unbalanced budget in a human service agency can be a difficult task .as a general rule,agency resources are seldom sufficient to provide services to all clients in need . in dealing with an unbalanced budget ,social workers and other human service professionals frequently find themselves torn between what might be called programmatic concerns and financial management concerns.

Allowing programmatic concerns to override financial management concerns .how human service agencies get themelves into financial difficulties. Over the years,many well intetntioned human service agencies and administrators have found themselves deep financial trouble because they attempted to provide more services tomore clients than was financially feasible. Sound financial management requires balancing programmatic concerns with fiscal reality. Three basic ways to exist to balance an unbalanced line item budget 1)utilize agency reserve funds 2) increase anticipated revenues and 3)reduce proposes expenses Many human services agencies set aside funds in a special account frequently referred t o as a reserve fund, for emergencies and other specila needs . the utilization of a human service agancys reserve fund to balance an unbalanced line item budget should be viewed as the solution of last report. The reason is that dipping into a reserve funds avoids the necessity of making the more difficult choice of reducing proposed expenses or finding ways to increase recenues. Additionally an opportunity cost arises when a reserve fund is used to balance an unbalanced budget ; the funds once used are no longer available for other special needs or emergencies. Unless one time only expenses are involved (e.g a one time purchase of a piece of critical equipment ) the utilization of reserve funds to balance an unbalanced budget simply delays the decision to reduce expenses or increase revenues . The second way to balance an unbalanced line item budget is to find additional sources of revenue.A Temptation sometimes exists to balance an unbalanced budget by simply increasing revenues when no real expectation exists that the revenues will be forthcoming . on its face, this approach makes little sense .neverthless human service administrators can be tempted to take this easy way out rather than reduce exposed expenses . including revenues in an agency line item budget when there is no real expectation of receiving them is not a sound financial management practice. The last of the three approaches to balancing an unbalanced budget is to reduce proposed expenses . This approach can be a painful exercise in that it may entail cutting back on proposed agency travel,supplies , equipment and so on and may even necessitate reducing agency staff.Neverthless , an unbalanced budget must eventually be balanced . in the end , it is easier to make reductions and cuts in An agency staff.neverthless , an unbalanced budget must eventually be balanced. In the end , it is easier to ,make reductions and cuts in an agencys proposed expenses before the fiscal year begins than after. For each month that passes in a fiscal year, a human service agency has less and less flexibility im making cuts and reductions in its line-item budget. Monitoring a Line item budget As already mentioned , a line item budget is essentially a financial plan. A financial plan ,like many Plans require changes from time to time . for example , during a fiscal year actual revenues received may fall behind anticipated revenues or actual expenses may exceed proposed expenses .because of

things change, a line item budget needs to be monitored during the fiscal year. The monitoring of a human service agencys line item budget usually takes the form of monthly or quarterly financial reports that compare actual revenues received and actual expenses uncured to anticipated revenues and proposed expenses.