Budget Modifications In An Era Of Change
Your budget is not written in stone. Situations change, after all, and your budget needs to reflect those. However, do you have policies and procedures for modifying your organization’s budget, and have they been written down and distributed to all staff who have program, unit, fiscal or budgetary management responsibilities?
In addition, remember that grant- or contract-funded programs often have funding source restrictions on making budget modifications and frequently require a nonprofit to obtain advance written approval from the funding source, explain Murray Dropkin, Jim Halpin and Bill La Touche in their book The Budget-Building Book for Nonprofits, second edition (John Wiley & Sons Inc.).
Besides ensuring that the document describing budget modification policies and procedures includes the need to comply with any such restrictions, your policies and procedures should address the following:
1. The preferred timing for in-house budget modifications. Budget modifications should never be made on a whim. Internal requests for routine modifications may be considered on a semiannual, quarterly or even monthly basis, depending on an organization’s size and nature.
2. The format for requesting in-house budget modifications. Such requests should specify the account(s) and line item(s) to be modified, the dollar amount of the requested modification and a brief rationale for the modification.
3. The process for reviewing budget-modification requests. Who is responsible for reviewing budget-modification requests to ensure compliance with board policies and procedures, any funding-source requirements and overall objectives? Each modification request also should be reviewed to ensure that funds are available for any account or line item transfers.
4. The approval authority for budget modifications. The people who have the authority to approve budget modifications should be identified in writing. Occasionally, approval authority may be assigned depending on the type of modification requested.
5. The responsibility for follow-through. Budget-modification policies and procedures need to define the person(s) responsible for following through on modification requests.