Budget glossary

There are three stages in the life cycle of one year's Annual Budget. In each stage, there are different key activities and tasks.

• Planning Stage: If you are like most grant makers, you probably begin planning next year's budget two to four months before the current fiscal year ends. During this time, you get estimates on how much you'll have to give, then work to determine how that money is distributed to different programs, geographic areas, regional offices, and so on. When you add a new Annual Budget, it starts in Planning stage. The main activity at this time is called allocating the budget. By allocating, we mean specifying the amount that goes to each division, each program, and each grant you already know you are giving during the year. We call the records which capture these specifications budget items. More information about the different types of budget items follows in this glossary.

• Open Stage: When the allocation is complete and the fiscal year starts, you open the Annual Budget for the year. Once the budget is in Open stage, Grantmaking users can appropriate funds from the budget to cover Payments. "Appropriate" here means taking money from a specific budget item for use to cover a specific Payment. Those funds can no longer be used to cover a different Payment. Budget appropriation is the main activity during the Open stage of a budget. Additional tasks involve maintaining budget accuracy, enabling you to record the changes that often happen during a giving year.

• Closed Stage: Once the fiscal year ends and you have appropriated funds for all the Payments you have made during the year, you close the Annual Budget. Once a budget is closed, no one can appropriate funds for additional Payments. This preserves your record of how you met your budgetary and giving goals during that year.

In Annual Budgets, you can allocate funds to very broad categories, then further allocate each category to more specific categories, and so on.

This creates a budget structure which we refer to as hierarchical. For example, you can have a budget hierarchy with three levels:

1. Northeast Region is on the top level.

2. The money in for that region has been further allocated to four items on the next level: New York, New York VPs, Boston, and Boston VPs.

3. Further, New York VPs total is allocated to the three vice presidents themselves.

In addition to a budget having a hierarchy and levels, Grantmaking refers to child and parent items. The budget item labeled "M. Piazza" is a child of New York VPs. By the same token, Northeast Region is the parent of the four items below it in the hierarchy.

The Annual Budget total amount is allocated to budget items during Planning stage. There are three different types of budget items in Grantmaking. Understanding the purpose of each is key to using the budget.

• Category: A category is an amount of money allocated to a specific fund, program, or purpose, but not to any specific organization. Users do not appropriate funds directly from Categories; Categories must always have child Line Items and Reserve Funds for that purpose. Categories may have child Categories. In fact, this is the main purpose of Categories; they are how you build your budget hierarchy. In our screen shot above, all the items shown are Categories. It may help to think of each Category as a budget in itself. It seems in our example that each VP gets his or her own giving budget for the year. Categories in the budget hierarchy mirror how funds are really distributed in this corporate structure, and the total amount for each VP Category reflects how much Piazza, Williams, and Parker have to give respectively.

• Line Item: A Line Item is a dollar amount assigned to a specific Organization. Only Payments to the Line Item's specified Organization are appropriated from the Line Item. Typically, you add a Line Item and allocate funds to it with a specific grant in mind. Many corporate giving programs, for example, give to many of the same organizations year after year. Adding Line Items during Planning stage sets aside budget funds for each such grant.

• Reserve Fund: A Reserve Fund is often a “left over” dollar amount in a given Category that is not allocated to a specific Organization. Throughout the year, users appropriate these funds to cover Payments for new discretionary grants. Reserve Funds are added to the top level of an Annual Budget, or as the children of Category at any level of the hierarchy.