Your Nonprofit’s Budget: A Window to Finding Your Priorities

Six strategies to help you read your budget for mission alignment.

In the intricate tapestry of nonprofit management, the budget serves as both a compass and a mirror. Our budgets reflect the financial health of our organization, but they also show our deepest priorities. As the Head of School at Pinkerton Academy and executive director of a nonprofit organization, I have come to realize that the budget is not merely a compilation of numbers. Instead, it is a narrative that speaks volumes about our vision, mission, and commitment to our core values. While I may articulate our priorities, our budget reveals the true focus of our resources.

At the heart of every nonprofit operation lies its budget, a comprehensive financial roadmap that delineates income, expenses, and allocation of resources. That is, the budget represents the intrinsic link between financial allocation and the strategic choices an organization makes. It is the blueprint that transforms aspirations into actions. And it is through careful examination of this document that we gain insights into an organization’s true priorities.

How to Read a Budget for Mission Alignment

A nonprofit’s mission is not merely a statement on paper. It is a living, breathing commitment that should resonate through every facet of its operations. And here, the budget is no exception.

Let’s take a look at 6 strategies to help you read your budget for mission alignment.

1. Scrutinize every line.

I want to be very clear: every line item on the budget should align with your nonprofit’s mission.

As Head of School, I have always insisted on scrutinizing our budget line by line, ensuring that each allocation aligns with our overarching mission: “Rooted in a community of courtesy, respect, and responsibility, Pinkerton Academy seeks to provide a safe and welcoming environment that prepares all students for success in a changing world.” Essentially, we want to create the optimal environment — both in terms of safety and comfort — for our students to succeed.

Keeping student safety, comfort, and success front and center means focusing on our mission while doing a cost-benefit analysis¹ for each budget item. In this cost-benefit analysis, we must assess each line item’s effectiveness in achieving these specific educational goals that we have set. Part of what this means is prioritizing our programs — while considering the perspectives of various stakeholders — in order to appropriately guide budgetary decisions for the upcoming year and for long-term planning.

2. Make sure it prioritizes your programming.

Simply put, a nonprofit’s programs are the conduits through which its mission is realized. This means that we should not only look directly at line items to make sure they prioritize our programming, but that a significant portion of our budget must be dedicated to programs and initiatives that directly contribute to our educational outcomes. This deliberate alignment ensures that financial decisions reinforce our core purpose and ultimately resonate with our stakeholders. In this way, the budget itself becomes a powerful tool for programmatic prioritization.

To clarify, I’m not necessarily saying that you should use a budget to understand what you should prioritize — where your nonprofit gets the most bang for its buck, as it were. Instead, I’m suggesting that your nonprofit’s budget can show you where your actual priorities lie. That is, by examining where financial resources are directed, nonprofit executives can gauge the organization’s commitment to its core programs.

As such, this scrutiny should extend beyond mere dollar figures. It involves an understanding of the efficiency and effectiveness of each program. In order to gauge a program’s efficiency and efficacy, ask yourself: Are resources allocated to programs that demonstrate tangible impact? Are there opportunities to optimize spending in order to enhance outcomes? These questions guide nonprofit leaders in refining their programmatic priorities and maximizing their impact on the communities they serve.

3. Invest in human capital.

One of the clearest indicators of organizational priorities is the investment in human capital. Nonprofits are fundamentally people-driven entities, reliant on the dedication and expertise of their staff to achieve their goals. Consequently, a budget that prioritizes competitive salaries, professional learning opportunities, and a positive work environment underscores an organization’s commitment to its most valuable asset: its people.

At Pinkerton Academy, we utilize salary benchmarking as well as regularly review salaries and compensation packages. This allows us to be competitive and attract talented employees while taking care of our current workforce.

We also support current employees by offering professional learning that promotes growth in their current and future roles.² Planning, for both the future of the organization and its staff requires budgeting, not just us saying we do it. Funds are allocated for a variety of training opportunities, allowing employees to choose different areas that they might want to pursue that are related to their current — or prospective future — roles. Our professional learning program has even expanded to include opportunities for employees to enlist in a registered apprenticeship program to become a certified teacher — just one example of how we have budgeted for employees to advance their career and support their professional goals. With each of these, it is important to communicate and demonstrate the institution’s commitment to their employees.

At Pinkerton Academy, our approach also includes wellness trainings, as fitness and mental health are important for creating a positive work environment. Based on employee recommendations, we’ve used funding to develop an active wellness program so that they can be better positioned to run the nonprofit’s programming itself.

As an executive director, I have consistently advocated for a budget that reflects our recognition of the critical role our staff plays in driving our mission forward. Over the past few fiscal years, we have been able to increase pay significantly for employees, enhancing our compensation package while also looking at creative ways to ensure our employees feel valued. Our budget includes funds to allow us to recognize employees for work they do with gift cards but also gives us the opportunity to take employees out to lunch so we can listen to their thoughts and ideas. An employee is not just their salary (or their labor) — so make sure you are investing the time and resources to understand their feedback as well.

4, Collaborate.

Collaboration is a cornerstone of effective nonprofit work, often necessitating partnerships with other organizations, businesses, and communities.³ The budget, once again, emerges as a key player in the cultivation of these relationships. Allocation of funds for strategic partnerships, joint initiatives, and collaborative projects communicates a commitment to leveraging collective strengths for greater impact. By examining the budget, nonprofit leaders can discern the extent to which their organization values collaboration as a means of achieving shared goals.

At Pinkerton Academy, we have done this by collaborating with stakeholders both internally and externally. I regularly meet with students, faculty, staff, business leaders, and community members to talk to them about their ideas as well as ask for their feedback in how we might better serve the community. The feedback I have received has allowed me to review our budget and fund strategic partnerships further growing our relationships that will benefit students and learning across our campus.

5. Ensure your budget is adaptable.

In the dynamic landscape of the nonprofit sector, adaptability is a prized trait. A budget that allows for flexibility in response to emerging needs and changing circumstances is indicative of an organization’s resilience and commitment to staying relevant.

As an executive director, I have often emphasized the importance of building contingencies into the budget, allowing for swift responses to unforeseen challenges or opportunities. This adaptability signals a proactive approach to navigating the complexities of the nonprofit environment while demonstrating our commitment to sustained impact.

6. Balance.

Balancing a budget doesn’t just mean making sure the numbers add up. Instead, nonprofit leaders must balance the immediate needs of their organizations with a long-term vision for sustainability.

Of course, your budget should reflect a commitment to financial stability through prudent fiscal management, diversified funding streams,⁴ and strategic reserves. This balance of different revenue streams and rainy-day funds indicates your organization’s dedication to weathering uncertainties and ensuring its continued existence. Examining your budgetary decisions through the lens of sustainability allows can allow you to assess your organization’s resilience in the face of economic fluctuations and funding uncertainties, which, as we’ve recently seen, can crop up at any time. A balanced budget will help you stick around and continue to serve your communities.

Nothing is Written in Stone — Even The Budget

In the world of nonprofit management, the budget is not a static document. It is a dynamic reflection of an organization’s priorities, values, and commitment to impact.

As executive directors, we must therefore approach budgeting not as a routine financial exercise but as a strategic opportunity to bring our mission to life. By following these six principles, we can ensure that our budget serves as a powerful instrument for positive change. We must use fiscal responsibility as a rallying cry for nonprofit executives, urging our leaders to wield their tools with precision, purpose, and an unwavering commitment to the communities we serve.

Footnotes:

1. For more on how to perform a cost-benefit analysis, check out this article!
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2. For more on why professional development is crucial to leadership succession, check out this article! ↩︎
3. For more on how collaboration manifests differently for a variety of different nonprofits, check out this article!
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4. For a strategic example of how to diversify your funding streams, check out this article! ↩︎

About the Author

Dr. Timothy J. Powers

Head of School at Pinkerton Academy

Dr. Timothy J. Powers has entered his 22nd year in education. Beginning as a math teacher, Tim’s career extended beyond the classroom, coaching multiple sports. With a decade-long stint as an athletic director and dean of students, Tim gained profound insights into the multifaceted dimensions of school dynamics.

Tim has assumed the role of Head of School, steering Pinkerton Academy with visionary leadership and a deep-rooted commitment to student and faculty success. Tim places immense value on the voices of both students and staff, championing their perspectives in shaping the educational landscape.

With a forward-thinking approach, Tim excels in future-oriented strategic planning, ensuring that students, staff, and the entire school community are well-prepared for the challenges of tomorrow. With a strong foundation in accounting from his undergraduate studies and a master's degree in education specializing in curriculum, Tim possesses a unique blend of analytical acumen and pedagogical expertise.

Tim holds a doctorate in educational leadership, underscoring his dedication to continuous learning and honing his skills to better serve the community. Passionate about nurturing an environment where all flourish, Tim is not just an educator but a catalyst for growth, fostering a legacy of excellence in every institution he leads.

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