Your organization’s budget serves as a guiding star for your nonprofit, functioning as a vital management tool and detailed map for where the organization is headed year over year. While budget monitoring and continuous review are always best practices, as Covid-19 generates increased instability, the importance of revisiting your organization’s budget now cannot be overstated.
A mid-year assessment is critical and can provide visibility into budgeted versus actual financial performance to date and help determine whether your current nonprofit budget will continue to serve as a guide for the remainder of the fiscal year. Determining where variances lie, the size of those variances, and the amount of unbudgeted expenses or revenues, can help your organization determine how to adjust and re-align to a strategic plan in the face of current real-world conditions.
If budget and actual results indicate your organization is still performing to plan, you may determine that even with small changes or adjustments, the current budget is the best basis for expected financial performance through the remainder of the year.
A successful budget is continuously monitored and reviewed, enabling nonprofit leadership to quickly respond and address critical impacts.
When variances point to larger impacts to the original year-end forecast, for example revenue looks to be falling too short or certain fundraising goals are unable to be met, larger changes to the budget should be expected.
Start by reviewing the organization’s bylaws on proper next steps and anticipate an approval process that includes the Board of Directors. Budget amendments may include:
- seeking additional sources of funding
- Postponing the start of a program to delay the expense to the next fiscal year
- Planning for new gifted assets or fundraising dollars to provide budget relief for specific areas of the organization
If there are substantial changes to the nonprofit’s mission, strategy, or specific programs, team members and the board of directors should consider a re-budget for the remainder of the year.
This process should only be considered when internal or external changes have extensive implications on overall operations. For example, significant loss of revenue and funding, coupled with increased expenses and program changes, may be so considerable that a new budget outlining a new understanding of the organization’s projected year-end forecast is essential. While not ideal, re-budgeting may be necessary, and it will allow your nonprofit to re-group and re-organize while maintaining services, programs, and operations during large-scale challenges such as these.
Financial sustainability is key to a nonprofit’s ability to deliver relevant and long-term social impact. Learn more about how to navigate fiscal uncertainty and manage your nonprofit budget review process with confidence.