Questions the board and management should be asking each other
When you are developing your budget and reviewing the multi-year financial plan which is tied to that budget, you should actively review your mission, priorities, and management and financial capacities. Below is a menu of questions you can use to make sure your are heading in a direction that is mission-relevant and sustainable.

  1. If you are considering an expansion in program, facilities, or staff:
    • How would we change our operations to handle this expansion? Who on our staff would be affected and what is their view?
    • How would we fund this added expense? If we plan to acquire additional governmental support, have we approached government officials and have they assured us of additional annual support for the foreseeable future?
    • If we hope to receive additional foundation or United Way support, have we discussed our expansion with them and have they assured us of additional annual support for the foreseeable future?
    • If we plan to increase private contributions, what actions will we take and what assurances should we expect before we go ahead with the acquisition?
    • Is one or two years of expansion worth the risk of budget strains forcing you to cut back beyond where you are today? What are the probabilities?
    • Are you as a board prepared to step in financially to prevent such a cut back scenario?
    • Are there other nonprofits who are better able to handle and sustain the expansion? If you expand are you precluding a stronger nonprofit from filling this need?
    • If you are forced to scale back if revenues don't materialize, are there other nonprofits who would be able to make up for your reduction in services or is the community dependent on you for the services you currently provide?
    • Will your donors be less supportive if you fall into financial difficulties than if you had not expanded at all?

  2. In reviewing alternative directions or visions:
    • Is your underlying view of the world or the organization still valid?
    • What are the implications of one decision versus another?
    • Which action has a greater impact, option one or option two?
    • What outcome are we aiming for and what types of actions are likely to help us achieve that outcome?
    • Can we identify which actions are more likely and which ones less likely to achieve our goals?
    • Which actions may take the longest to reach our goals? The fastest?

  3. Assume the local economy races ahead: which revenues will grow faster and which ones are likely to be unaffected; which expenditures will grow or decline and which are likely to be unaffected? Will the need for your services diminish if the local economy surges ahead?

  4. How about a sharp decline in the local economy? Which of your revenue sources will suffer and which will hold their own? How about your expenditures? Will demand for your services increase or decrease during an economic decline?

  5. Which expenditures can you control and which are pretty independent?

  6. What are the implications of these scenarios on your budget balance? If surpluses are likely, will you set aside reserves or expand your programs? Use the financial plan to see what that choice may mean!

  7. If deficits are likely, do you have reserves to call upon? For how long? Are there some revenues you can increase? Expenditures you can decrease?

  8. Can you sustain your current service levels? For how long? How long do you want to or need to sustain those levels?

  9. Which expenses or services would you be able or willing to cut back immediately?

  10. What do these scenarios imply about your ability to achieve your strategic plan and fulfill your mission? What would you need to do differently now in order to achieve your strategic plan despite a decline in the local economy? Will improvement in the local economy help you achieve your strategic plan?

  11. Is service demand likely to grow in future years? If so, does your budget start planning for that growth?

  12. Will current grant and philanthropic efforts be adequate to support such growth? What does the proposed budget do to sustain those efforts? Will the level of service delivery and/or financial condition fostered by this budget encourage donors and grantors to meet the level of gifts anticipated in the budget and plan?

  13. Will any of your facilities need significant repair or modification in the next few years? If so, do you expect to perform those repairs? How will you pay for them if you do and what are the consequences if you don't?

  14. Will you use some of your savings now or in the near future? If so, do you have a plan of action to have sufficient savings set aside in time?

  15. Do you anticipate borrowing now or in the near future? If so, are you fostering good banking relationships and getting your balance sheet into a lender-appealing shape?

  16. How do you expect your environment to change in the next few years? More or fewer clients or patrons? A different client or patron profile?

  17. Will it be easier or more difficult to obtain government support?

  18. Are your donors likely to be able to sustain or increase giving?

  19. Will other nonprofits be undertaking major fundraising campaigns that may draw on your donor pool?

  20. Will your costs grow over the next few years? Can your fee structure support that growth? Do other revenue sources also need to grow?