Tuesday November 9, 2021
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Hey, I just want to have a little nugget for us about putting together budgets. And because it's budget season, I wanted to be sure to share that with you. All right, listen up.
One question we have for Otwan Lowery is what do you want organizations to consider when they're putting together a budget? Be that for their organization, grant or program?
Absolutely, I think first is asking yourself as an organization, how impactful do you want to be because it's not just about the numbers in a budget, the numbers have to make sense and that's what a lot of funders look for, right? If I give you x amount of funds, how impactful can you be with those funds. That's the return on them giving you that money.
So what I tend to see is what organizations will do is, they will just roll over their budget from the previous year and then maybe they had a new hire or something like that so they'll plug that in. And maybe they have a few additional things that they want to do in a program but there's no real plan that comes together, they don't tend to speak with the program directors to get a real understanding of the need that will help push this program a little bit further. So what I would do is a couple of things.
First, identify how impactful you want to be whether that's how many students or people, members of a program, how many classes you want to have, you can start there and let that be the driver. Then what I would do beyond that, is yes, use my prior year as a starting point but I would also look at and see how I spent my money last year as well, and see if maybe I can do a little bit of an adjustment or modification.
Maybe you don't need as much money in this expense line item and you can maneuver over here. And that can be done at the grant level because usually when you submit a budget to the grant, especially if it's restricted funds, you have to spend that according to that grant. And what I also see happen is that when people look at like their grant budgets, they look at it individually as opposed to a whole, right, so as opposed to a whole part of the organization.
So if I say, Okay, I have these two grants, and you have some expense items that may be overlapping, you can maybe modify one of the budgets in the grant so that it covers certain expenses that are not necessarily covered by other grants and now you're not using unrestricted funds to cover programmatic expenses. Now you can say unrestricted funds, and really push that into administrative expenses because most of the time admin expenses are not covered at large, in most cases by different grants.
So what I first do with any organization is obviously look at prior year as a starting point. But then have a discussion of how impactful you want to be this year. Make sure you bring other people in and parties that are going to be a part of the budget, like your program directors, I feel like they're not a part of the conversation often enough when you're first building the budgets. And then I would look at each budget separately.
So you have your organization budget, you have your program budget, and then you even have your grant budget, see, we can't just lump these all into one budget, you have to look at them separately, and see how you can really maximize the allocation of the expense items within each so that you can get the best bang for your buck, so to speak, as far as your money is concerned. So as a whole system, and as a whole process is not just taken last year and plug in play, we need to have that kind of conversation as we're building it out and look at it throughout the year. Don't just set it at the beginning of the year, get it approved by the board and forget about it. Set it, look at it throughout the year. If you need to make adjustments, make those adjustments as you go.
Yeah, I think one of the things when I was looking at precise grants was thinking about the that overlap and how do you prevent that overlap because it happens and you don't want to find out when we're looking at oh, it's the end of the year or the budget report is due, the grant warnings when they're like so good times. We've spent all the money but I don't know if we spent this money twice.
And the other thing is misallocation of funds but to be honest, there's some misallocating of funds happening with a lot of nonprofits and that's a no no, you can really get dinged by that by your funders. One of the other, kind of cool things we added on recently to PreciseGrants is setting up an alert for when some of your grant budget line items get close to that 80-90% of the budget.
We give you an alert so that you can go in and consider doing a budget modification and I don't think nonprofits know that, oftentimes, you can go back to your funder, and reallocate how the money is spent. And as long as they prove it, you're still complying with the funder, and you're good to go. But again, that's a part of monitoring the budget on an ongoing basis, and not just setting it and forgetting it.
Yeah, I love that. I just wish more organizations would just be like we didn't make up a number. It wasn't like, Oh, good number. Let's see what happens. There has to be some thought pulling in, like you said, other people who are the other stakeholders, make sure your program team is involved. And then don't just forget about it, really monitoring your budget throughout the year. So that you know, end up at the end of a grant period, or at the end of the year, like what happened.
So if you're looking for some budget help, talk to Otwan, check out precise grants, be sure to just really think about all the resources at your disposal to really maximize your budget preparation so that it doesn't feel like you have to go it alone, or that you have to figure it out and never see it again. The Board approval is not the last time you should look at the budget.
Exactly, you hit it right on the nose.
Thanks for listening to another episode of The Nonprofit Ace Podcast. Until next time, bye.
Otwan Lowery Links:
Social Media LinkedIn: https://www.linkedin.com/in/otwanlowery/