[OSGeo Finance] Budget - how to reach closure for the board?

[Frank Warmerdam]

Dave McIlhagga wrote:
> Hi Frank,
> 
> I agree that the budget does need to reflect the priorities of the board 
> -- however we do have a responsibility to inform the board about options 
> for achieving those priorities and ensuring budget estimates are correct 
> etc..
> 
> Couple of things that I believe would be helpful:
> 
> 1. What level of deficit (if any) is the Board comfortable taking on in 
> a worse-case scenario this year? From an operating standpoint -- can we 
> advise on what we believe that worse case scenario deficit should be for 
> 2009? Can we identify what the implications of this are for 2010? ie. 
> something like "If OSGeo runs a 50k deficit in 2009, the organization 
> cannot afford to take on a deficit in 2010"

Dave,

I will say we should have in excess of 150K in reserves going into 2009.
So, I would say a near worst case scenario for 2009 would be:

  * we don't get the planned new sponsors (-63K)
  * we lose some existing sponsorship (-16K)
  * we do not get google summer of code mentorsship money (-10K)
  * FOSS4G 2009 makes no appreciable money (-20K) (but breaks even)

This would eat $110K out of our reserves assuming we didn't scale back
spending during the year.  This would still leave us with 40K+ in reserves
going into 2010, but we would have to dramatically scale back spending
in 2010.

Well, of course if we really wanted to think about worst case we might
also include possibilities like:

  * The USD drops dramatically against the CAD resulting in extra ED
    expenses of up to $40K.

  * We discover that we are late filing with the IRS, and they find
    we are liable for back taxes and forced to hire expensive accounting
    and legal help to clear things up.  Possible extra expenses of up to $80K.

  * FOSS4G 2009 turns into a losing money pit (lose $75K)

But it seems like such guessing games could get out of hand. :-)

> 2. Given the answer to 1. -- should we identify how to manage the budget 
> so that if our revenues fall short of our goals, we can take action to 
> ensure we don't end up any worse than the worse-case scenario? What I'm 
> saying is -- some budget items may be "contingent" on financial status 
> later in the year. Do we know what those line items (cut if necessary) 
> might be?

I think it is clear that the board should make at least part of the
marketing budget contingent on resources - perhaps holding half of it
for the second half of the year and contingent on income.  Beyond
that the only significant costs that could be reduced during the year
would be the ED travel budget (currently 20K).

> 1. and 2. really need to be addressed by the board -- perhaps we could 
> propose some scenarios and ask the board to address these items as part 
> of approving the budget?

Beyond explaining the above, how would you see such scenarios looking?
Do we provide multiple budgets for them to select from?  Do we just
suggest a few provisos on the budget (like Marketing should not spend
more than $25K in first half of year) to give us room to maneuver
at mid-year?

Best regards,
-- 
---------------------------------------+--------------------------------------
I set the clouds in motion - turn up   | Frank Warmerdam, warmerdam at pobox.com
light and sound - activate the windows | http://pobox.com/~warmerdam
and watch the world go round - Rush    | Geospatial Programmer for Rent