Budgeting monitoring for NGOs
Posted on 29 May, 2023 at 15:34
Budget monitoring is a vital
process for NGOs to ensure that their funds are used efficiently and
effectively. Budget monitoring involves comparing the actual income and
expenditure of a project or an organization with the planned budget, and
identifying any variances that may indicate problems or opportunities. Budget
monitoring can help NGOs to track their progress and performance against their
objectives and indicators also to identify and address any financial risks or
challenges that may affect their operations or sustainability and to communicate
and report their financial status and achievements to their donors, partners,
beneficiaries and other stakeholders.
Some of the common challenges
that NGOs may face in budget monitoring include a lack of adequate skills,
systems or tools to collect, analyze and present financial data, an inconsistency
or discrepancy between different sources or formats of financial information or
delay or difficulty in obtaining timely and accurate financial reports from
field offices, partners or sub-grantees. To overcome these challenges, NGOs can
adopt some of the following best practices for budget monitoring:
- Establish clear roles and
responsibilities for budget preparation, approval, implementation and
monitoring among staff, managers, board members and other stakeholders.
- Develop and use standard
templates, tools and systems for budgeting and reporting that are aligned with
the organizational and donor policies and procedures.
- Conduct regular and frequent
budget reviews and forecasts at different levels of the organization and
project, involving relevant staff, partners and donors.
- Analyze and explain the causes
and implications of any significant budget variances, and take corrective
actions as needed.
- Document and share the budget
monitoring findings, recommendations and lessons learned with internal and
external audiences.
Some examples of budget
monitoring tools and techniques that NGOs can use include the following
The cashflow report:
This report shows the inflows and
outflows of cash for a given period, and helps to identify any potential cash
shortages or surpluses that may affect the project implementation.
The budget monitoring report
This report compares the actual
income and expenditure with the planned budget for a given period, and
calculates the variance (difference) between them. It also shows the grant
utilization percentage (the proportion of the total grant amount that has been
spent) for each budget line.
The forecast report
This report projects the income
and expenditure for the remaining period of the project based on the latest
activity plans and information. It helps to anticipate any future challenges or
opportunities, and to adjust the budget accordingly.
The variance analysis table
This table summarizes the
significant variances (positive or negative) between the actual and planned
income or expenditure, and identifies their causes using a 3-criteria model:
timing (due to delays or advances in activities), quantity (due to changes in
unit costs or quantities), or quality (due to changes in specifications or
standards). It also suggests follow up actions to address the variances.
Budget monitoring is not a
one-time activity, but a continuous cycle that requires constant attention and
improvement. By following these guidelines, NGOs can enhance their budget
monitoring skills and processes, and ultimately improve their financial
management and accountability.