Charity Budget Tango

Posted: 4 September 2016 in Business Systems, Cultural
Tags: ,

Creative budgeting 1Have you played Budget-Tango?  Between a charity that supports other institutions, say a hospital, school, homeless project, there is a dance.  Where the donor and done strut around eachother. It is Budget-Tango.

Your charity or grant making body seeks to support an independent organisation or project, in UK or elsewhere, with some funding and some management and budget advice.  Their show – but your help too.

Opening Moves of the Dance
It starts when they send you a copy of their budget.  Very nice to get one at all.  Do not be surprised at the number of front line services that do not have them.  The Chief Medical Officer/ Principle Housing Director/ Emergencies Director did not enter their vocation to sit in the office playing with spreadsheets and accounting jargon.  But you’ve got one – hurrah!

You glance at the headline figures: Income 200k, expenditure 250k, loss 50k, opening balance 10k, closing balance -40k.  Viola- insolvency.  Budgeting for bankruptcy– are they crazy?  The institution is independent, an attribute that is precious and essential for long term sustainability.  SoCreative budgeting 2 it is not for me to instruct or demand what they should budget for.  But as an accountant of many years experience, I believe they should budget for income to equal or exceed expenditure.  All budgets have a strong psychological component.  In the UK as well as elsewhere.  What is going on here is two things:

Dance Move Two – dealing with budget income uncertainty
Their step, “expenditure is so much easier to predict than income. We budget for what you expect, not for dreams and fantasies.  So we end up with expenditure being more than income”.

My step, “But in reality, your month-by-month decisions are based on a balanced budget mentality.  Very sensibly, you try not to spend unless you have cash in the bank.  Your budget figures are only for expenditure.  The income budget is then not a budget but a guide only, a note to yourselves to help your thinking.  You still use this word budget because [1] that’s the most accessible word in the dictionary, and [2] because you know we expeCreative budgeting 3ct you to have one.”

Their next step, “you want me to insert figures for the unknown unknowns? This is creative accounting, or outright fiction.”

My next step, “There are known unknowns.  While you do not know what grants/ donations/ legacies you will actually receive in the new budget year, you will know from past trends, that you should get at a minimum of xxxk.  And there are other monetary transactions that flow in and out, (e.g. staff loans and repayments), that for those doing cash accounting, should be included, to monitor levels, and generate more realistic total income and total expenditure budgets.”

Dance Move Three – when two bodies embrace
As donor & recipient arms grip and spin eachother, things become more subtle.
As recipient draws donor closer, you think, “I am anxiety that if I build a break even budget, or even worse – a surplus, then you and other would be donors will think, Great Scott – they don’t need our funds.” So their  next step is, “there is always a need for more expenditure to meet the needs we were created to meet, so our budget ends up showing big losses, to clearly show donors that it is all dust without donor dough”

At which point they hope we swoon in their arms.

Of course, whatever they decide, whether we like it or not, we will be there to assist their budget management.

When the music stops
When the music has stopped, do we have the following?

  • Does the budget give sensible total income and expenditure figures?  Even if it has some speculative lines called “new grants”?
  • Do the recipients trust the donor advisors, not to switch money elsewhere, just because they are now planning a surplus?
  • Do the donors and their advisors trust the recipients that they have built a sensible budget, which can be flexed and used to monitor progress during the year?
  • Despite the psychological interplay between those with money to give and those who desperately want to use that money, does respect and trust remain higher than it was before?  Or has that balance been run down?

I hope so.

Bill
p.s. You think I have written about your project?  Much less than you think.  This is a compilation of the many places I have worked in, in UK as well as elsewhere.
pps. You think this is not the normal stuff I write about (religion, prisons, foreign cultures).  Much more than you think.  To be a Christian in humanitarian projects anywhere requires effort to support ones counterparts, plus an effort to unveil the twists and turns of the dance between us.  I often stumble.  But for the Grace of God, I’d fall more often still.

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