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.