Because success brings a new set of challenges, growing nonprofits need increased support. In the most nonprofits, program growth begins to outstrip the capacity of support staff. For example, the human resources associate may find herself with twice as many staff to support in the same amount of time. Perhaps the information technology troubleshooter finds herself with twice as many requests for help but gets no help for herself. The finance team may need to submit twice as many monthly government vouchers with no additional resources.
The inevitable result of this pattern is staff burnout, high turnover, missed deadlines, and critical errors.
To compound the problem, donors who will support administrative functions are rare. Nonprofits are forced to rely on unrestricted gifts, the most difficult type of money to raise, to fund critical behind-the-scenes work. Fortunately there is a solution for growing nonprofits starved for infrastructure: smarter project budget writing and management.
Nonprofits often omit support for back office functions from project budgets because they think foundations and government will support only program functions. However, most funders will support a reasonable amount of administrative activities. The key is to demonstrate the relationship between the administrative activity and the program.
Here are some tips for writing and managing proposal budgets that support back office functions and organizational sustainability:
- Consider project supervision a project cost rather than an administrative cost. Could your program operate effectively without oversight from a program director or executive director? Probably not. The percent of the director’s time spent on oversight is a valid program expense.
- Allocate salaries across projects for greater understanding of the true cost of each project. This enables you to know the bottom line for each project and focus fundraising efforts on projects with the smallest bottom line. In other words, expense allocation is a tool to make sure you are asking for money where it’s needed most.
- Align your project budget categories with your accounting software chart of accounts to help your finance team create budget to actual comparisons by project. If different funders require different budget categories, create a cross reference from the budget categories to the chart of accounts. To help prevent overspending or underspending on projects, analyze variances monthly, understand the reason for significant variances, and determine whether corrective action is necessary.
These tips will help your fundraising dollars go further by freeing up more contributed funds for administrative support.
To learn more about how an effective project budget supports financial sustainability and raises funds where needed, join Paul on Thursday, March 8 for the webinar “How to Avoid Common Project Budget Mistakes,”. Early Bird pricing ends March 1. You won’t need any finance or accounting training to participate because project budget best practices will be presented using simple English. You will learn how to work cohesively with your colleagues to build a program budget that meets your nonprofit’s needs for program and administrative resources and will be appealing to potential funders.
PAUL KONIGSTEIN is a senior consultant at CliftonLarsonAllen, a professional services firm delivering integrated advisory, outsourcing, and public accounting capabilities, where he helps nonprofits master finance and accounting. Prior to joining CLA five years ago, Paul served as a controller and Chief Financial Officer at arts, culture, education, and international development not for profits including the Metropolitan Opera, the New York Hall of Science, Helen Keller International, ArtsConnection, and the American Montessori Society. .