Monday, May 2, 2011

A Different Twist on Budgeting

by Steven H. Davis

As we all know, the annual pursuit of a properly balanced budget can be an arduous task. For most of us, there are three gates that must be transited. First, there is arriving at consensus at the staff level (lots of competing projects and activities vying for the available dollars), and then there is getting over the Finance Committee hump in the process (keeping folks out of the weeds can be an issue), and then there is the pursuit of approval from the elected leadership (here as well keeping folks out of the weeds can be a problem).

We all have our set approaches, our traditional issues, and our approaches to overcoming those issues. What I want to share in this posting is a process that I have refined in recent years that seems to facilitate an easy transit through all three of the gates mentioned above.

Step 1: Staff budget managers (managers, directors and the executive director) together prioritize all planned new objectives, based on set criteria, including strategic value to the membership and resource requirements to accomplish. Objectives are prioritized under each Strategic Plan Goal, with each goal treated equally. Doing this in group fashion eliminates the lobbying that often occurs in this part of the process.

Step 2: The elected leadership then goes through a similar exercise in one of its official meetings, taking staff’s priorities and reordering them as they feel is needed. This is a critical step.

Step 3: Staff then pursues an initial budget that only includes already approved activity …none of the prioritized new activity is included in this first cut. Our experience is that this leaves an in-the-black budget with a sizeable net positive.

Step 4: Staff then adds new activity to the budget, based on the leadership’s prioritization, until that net positive is narrowed-down to the desirable figure. A key in this step is to ensure that adequate resources exist to accomplish budgeted new objectives …most importantly staffing.

Step 5: Staff evaluates all current programming for sunsetting. The focus is on current value to the members, as determined through member surveys and staff/volunteer perceptions.

Step 6: Staff provides the elected leadership with draft guidelines for it to modify & approve that will outline their intentions for the Finance Committee’s role in the budgeting process. These guidelines are focused on keeping the FC strategically focused and not in the weeds. They focus the committee on evaluating the staff’s budget justifications, not the detail.

Step 7: Armed with the formally approved guidelines and the leadership’s new-objective prioritizations, the Finance Committee then works through the process fairly expeditiously and ultimately approves supporting the draft budget to the elected leadership for approval.

Step 8: Reviewing proposed new activity based on its own prioritizations, the elected leadership then has a fairly clean ride through its part of the process.

No budgeting process is perfect, but the one just outlined seems to facilitate a fairly smooth transit to a strategically focused budget that can be readily embraced by everyone.

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