How to Grow an Award Winning Board

Mission Statement | Bylaws | Board Responsibility | Board Member Commitment | Recruitment | Nominations | Board Presidents | Board Meetings | Chairing Board Meetings | Committees | Budgets | Monthly Financial Reports | Fundraising | Executive Director | Liability | Potpourri

THE BOARD AND THE BUDGET. Most board members know that the board is responsible for approving the organization’s annual operating budget. But boards seem to go about this budget approval process in a variety of ways – some good, some not so good. Some boards develop an operating budget with little or no input from staff, and other boards unquestioningly accept whatever staff came up with for an operating budget and simply rubber stamp it. Of course, neither of these extremes is correct.

The development of next year’s budget begins with the executive director who is responsible to present a proposed budget to the board for its approval early enough so that there is adequate time for the board to act upon it. In developing this proposed budget, the executive director will use whatever staff are appropriate to assist. A typical target date for completion of the proposed budget and presentation to a committee of the board is in the ninth month of the current year. In some organizations, where state or federal government is a major source of funding, the governmental agency involved will usually have a definite pattern that must be followed. Other organizations, more independent, will develop their own.

Once the executive director has completed the proposed budget, it must now go before a committee of the board for preliminary approval. Most nonprofit organizations will use the finance committee to review the proposed budget. But, this only answers the financial aspects of the budget. The bottom line in a human service organization budget is service – fiscally responsible service to the community, and not simply dollars and cents. For this reason, you ought to have more than just your best financial minds reviewing the proposed budget.

One option is to create a “budget committee” for the purpose of reviewing the proposed budget. The difference between a finance committee and a budget committee is simply that, unlike the former, a properly constructed budget committee will have about half of its members made up of people with a financial orientation, and the other half will be people who have strong program orientation. With all due respects to your financially oriented board members, there is the possibility that if only your best financial minds examine the proposed budget, the final budget might be so conservatively drawn that you may fail to maximize the proper use of your resources. Some organizations simply augment the existing finance committee with an equal number of program oriented people when it is time to review the proposed budget to accomplish the same objective. A proper mix of people with financial and program orientations will provide the best chance for a properly balanced budget.

Once a budget committee has reviewed the proposed budget with the executive director, then the product of these deliberations, which both the committee and the executive director can accept, is recommended to the full board for approval. In organizations where government controls the funding, the board approved budget will likely have to be sent on to governmental authorities for final approval.

Once approved, the budget will provide the guidelines within which the executive director must manage the organization during the coming year. And once the new year has begun, that same budget will form the backdrop against which the monthly financial statements will be presented.

One final note. If you have anything to say about the design of your organization’s financial report, for heaven’s sake, keep it simple! Far too many financial reports are so convoluted that only a CPA could understand them, It must be remembered that many members of a typical board are not practiced in the art of reviewing financial reports. Always keep the format of this important supervisory tool as simply stated as possible and still produce a meaningful, useful report.

Print Friendly, PDF & Email