Budget Reality: The True Bottom Line
By Janet L. Jordan, CPRP
ost public and nonprofit organizations undertake the exercise of updating their capital improvements projects (CIP) budget on an annual basis, often as part of a five-year plan. Dollar figures for years one and two are understandably more reliable than years four and five. Inevitably, those preparing the budget as well as those whose responsibility it is to tighten the numbers will compare a given project to one in another community, state or region of the country. When this question is asked, it is very important to compare apples to apples or recreation facilities to similar recreation facilities, factoring in the year the construction was completed to estimate a reasonably reliable capital budget request amount.
A "total project" budget is comprised of both "hard costs" and "soft costs" and the variables that comprise these costs can make all the difference in the accuracy of the dollars requested or perceived necessary to design and construct the envisioned recreation facility. Well-meaning but not well-informed elected officials, board members and administrators may identify a budget amount that represents only the dollar value of the lowest and best bid (the hard costs) and not take into consideration the design and engineering fees, land acquisition costs, furniture and equipment, surveys, permits and utility taps or soft costs, just to mention a few.
A basic understanding of the components of a total project budget can help you avoid costly miscalculations and allow you to be responsible stewards of the capital funds required for a successful project.