A nonprofit budget is a building block to sound financial management. That said, there are times and reasons to make changes to your budget. Generally speaking, the budget is prepared by the staff and reviewed and approved annually by the Board of Directors. This is a financial map of all income and expenditures to follow throughout the year.
A great time to take a long hard look at your budget is a few months before your year-end or during any significant change. Look at your numbers and take special note of revenue that falls short. This could be a budgeted donation that hasn’t been received or say other fundraising goals haven’t been made.
A few steps should be taken before you change an approved budget. Look at revenue forecasting for the next 90 days and see where costs can be minimized. With good planning, a nonprofit should be able to continue operating within its approved budget. Some advocate not changing the budget unless there is a major change of structure to your organization. Instead, it is suggested to simply add columns to your budget which explain a “Year-End Forecast” or “Year-End Variations.” Proponents state that the forecasted information is the most accurate to use to build your next year’s budget.
If the shortfall is considerable think about changing or amending your nonprofit budget. Please review your organization’s bylaws by doing so, as each organization is different. Generally speaking, small changes can be made by executive directors, and larger changes must be approved by the Board of Directors.
Careful planning provides several budgeting choices. You may seek other sources of funding that weren’t in your original budget. A gifted asset may be listed and provide budget relief. If possible the start of a program may be postponed to the next quarter, therefore moving the expense into a new fiscal year. As with any budget work, keep careful notes. With the proper documentation, policies and procedures can be improved upon year after year. We are not tax professionals, we must recognize the importance and utility of a good solid budget. Having a nonprofit budget is important to operations, financial soundness and even funding. If your budget does require changing please consult your bylaws, directors and eventually your board. Budget changes can be made but they are not done lightly.
VSCPA, Nonprofit Accounting Basics
You may also like these budget-related videos from MoneyMinder: Tracking Budget Changes in MoneyMinder: Keep your budget fresh:
