Another blog on governance and fiscal responsibility. Taken from The NonProfit Times, February 6, 2006.

Finance

Budget questions you need to be asking

Any organization’s annual operating budget should include estimates of revenue and expenses for an upcoming year, and it is of course an essential part of nonprofit operations.

In their essay “Understanding Financial Statements” in the book “The Art of Governance,” Patricia Egan and Nancy Sasser offered a list of questions that trustees might ask as part of their review of the budget than an organization’s staff presents to them.

The questions include but are not limited to:

* Is the operating budget balanced? If not, why not?

* Does it provide a small contingency to handle unforeseen events?

* Does the budget include only current-year revenue that is unrestricted and available to be spent on operations?

* What are the riskiest parts of the budget?

* Is there a fallback position to prevent the organization from these risks?

* How do the major budget categories compare to this years budget and year-end projections?

* What new initiatives are included in the budget?

* Are any existing programs terminated?

* If the budget includes significant increases in earned or contributed revenue, does the staff have a realistic plan for activities to generate the growth, and is the development or marketing budget increased to reflect the new activities?

* Does the budget include depreciation as an operating expense?