Is Altering the Budget Responsible Financial Management?
Board members often comment on an executive director’s performance as poor because the executive director dared change certain items in an approved budget. The opposite should be revered. Why?
Any executive director that is rationally adjusting expenditures in the budget is one who is paying attention to the changes within and outside of the organization. In other words, the executive director is handling the organization’s finance with diligence and care.
All Changes, However, Must be Justified
Changing the budget without rationalization that makes sense for the organization is foolhardy. There must be sound reasoning for making any alteration to the budget.
Board members should accept that, once a budget has been approved, the executive director can make alterations to keep pace with changing circumstances within and outside of the organization. For example, if the power bill goes up substantially without notice, then the line item wherein that expense is allocated needs to change and possibly another expense reduced or income increased. Of course, not to pay the bill would mean no power. Who can afford to be without power?
The executive director needs to communicate with the board when such changes are required and provide the board with the justification and tell the board how the change will affect other line items. This communication needs to be sent by email. Why email?
Each board member needs to acknowledge that he/she has received the information. Isn’t that silly? No. Why? Because board members are usually quite busy people and their volunteer work is secondary to other responsibilities. They may receive a message, forget they have or not bother opening the email but, at a board meeting, these same board members will argue that they have never received the information causing a tremendous amount of time wastage and angst, perhaps even ill feelings or thoughts that the executive director is inept.
An executive director must protect themselves by assuring that board members are kept informed. An acknowledgement by a board member assures the information has been received thus assuring that the executive director is not endangering their position with the organization nor is the productivity of board hampered.
Yes, Budgets Need to be Changed
Responsible management dictates that budgets need to be changed based on changing circumstances. A budget is a best “guess” about what will happen during the year reflected in numbers based on the current state of affairs and anticipated plans.
Life has a funny way of throwing curve balls into the best laid plans.
Change is normal. You probably don’t wear the same clothes you loved ten years ago – change is inevitable. Everything changes. A budget needs to be amended as required.
On Contract Only Live and Virtual Ltd.