From Silicon Valley to Swaziland, Rick & Wendy Walleigh [i love reading books .txt] 📗

Managing Budgets and Donors

As with many companies and non-profit organizations, in TechnoServe, fall is the time for planning and budgeting for the upcoming year. In every organization, matching expenses with revenues is a challenge. There are always too many good ways to spend money to improve performance than can be justified by existing or planned revenues. Hopeful managers who submit prospective budgets are almost always disappointed as their superiors are forced to cut back their anticipated expenses. Although I had gone through this many times in the commercial sector, I had to learn some new twists common to nonprofit development organizations. As with most other similar organizations, TechnoServe’s revenues come primarily from project awards. Government agencies, such as USAID, corporations, and large foundations provide TechnoServe with a fixed amount of money for a particular period of time to accomplish specific goals. For example, USAID might provide TechnoServe with a three-year grant to increase the incomes of cashew farmers in a particular area by 50 percent. Since most projects last several years, the majority of the next year’s funding is already committed when the annual budget has to be created. However, the abrupt starts and stops of project funding make it very difficult to create a consistent level of funding and a smooth budget.

The idea of programs with fixed budgets, specific objectives, and limited timeframes is a good one for accountability; but it generates challenges for the organizations receiving the grants. As anyone who has worked in a project-based organization knows, there is always a challenge of matching resources (primarily people) to a changing workload as projects come and go. It was a particularly challenging year for the Kenya office since a big project was ending, meaning that a lot of people would be available but would not immediately have work. We had proposed a number of new projects but hadn’t heard back yet from the potential donors. For some organizations, this would not have been a problem because they hire people to do a specific project and immediately let them go when the project finishes. TechnoServe believes that it can produce a greater impact by having a longer-term commitment to its employees and continuity in its ongoing development operations in the countries where it has its offices. They try to maintain a portfolio of development projects and balance resources to meet the requirements.

Usually TechnoServe was able to maintain a core of highly experienced employees in all of the country offices, but there were fluctuations in employment levels as programs came and went. Some practices in the donor community make this situation harder for all development organizations. First is the project orientation of nearly all donors. This is a manageable challenge when the projects are long enough (minimum three years) and the donors’ priorities don’t change too radically over time. Some donors are very good about establishing and maintaining their direction; others jump around to the “cause du jour,” making it difficult for their grantees to have any continuity in their programs. Another challenge is that donors want their recipients to spend exactly what they have been granted, no more and no less. In the private sector, it is usually good to come in under budget on projects. In the development community, donors want you to spend all of the money they gave you to do exactly what you said you would do. They don’t want you to shift their money to other programs or to give it back to them. And of course, they are not willing to pay for overruns. Under-budget projects are usually handled through “no cost extensions” that allow the projects to continue a little longer than planned and help a few more people.

A third challenge to nonprofit organizations is donors’ previously mentioned aversion to anything called overhead or administration. Donors justifiably want as much money as possible to be spent directly on the intended beneficiaries in the field and not on people doing administration in offices. However, someone has to answer the phone and greet people at the office door; someone has to keep track of the money being spent and someone has to be developing a proposal for the next project. Donors recognize the necessity for all of these; they just don’t want to pay for them. They want these expenses to be paid from some other source of funds. One of the consequences of all of these practices is that organizations like TechnoServe cannot afford to have employees without immediate project assignments. That is the reason we were so concerned as we prepared our budgets.

Along with the budgets, Fred had a number of people in the office preparing concept papers for potential new projects. A concept paper is a three-to-five-page document describing a potential project, its costs, and its benefits. These are used to