Christian Leadership Alliance
| 
1 of 4
Turnabout
An extreme makeover for ministry finances.| Outcomes, Winter 2009
During the past 30 years I have observed and participated in a seemingly endless parade of budget expansions and contractions in dozens of ministries and nonprofits. Not unlike my personal weight control challenges, they are always gaining or losing but rarely stable. The expansions are heady stuff, followed by contractions that deplete net gains, destroy morale, and cause misery for employees who find themselves unemployed as a result of retrenchments.
Is financial instability inevitable for nonprofits? Must we accept the endless parade of budget expansions and contractions as essential to nonprofit ministry? Or is there another way, a higher ground that reduces budget volatility and builds long-term financial sustainability?
If you have ever purchased a house, you no doubt remember signing an onerous stack of papers at the sale's close. Buried in that stack was information assessing the flood plane for the property. You may remember that your house is in a 40-year flood plane, or better yet, in a 100-year flood plane. If you are in the 100-year flood plane, you are likely to experience flooding only once in 100 years during the rarest of storms. This does not mean you should play the odds and totally ignore the possibility of flooding, because that flood could happen this year, or perhaps not for another 99 years. Statistics have no memory, so there is no guarantee that these catastrophic storms will be evenly spaced every 100 years. If, however, your house is in a 20-year flood plane, you should be much more concerned about flooding.
The same concept should apply to budgeting. Budgeting is a risk management tool that prepares your ministry to survive all storms, including that big storm, like Hurricane Katrina, that may hit only once in 100 years. The obvious case in point is the current recession, which is far greater in magnitude than any recession since the Great Depression. Rare is the organization that anticipated the severe drops in investment values, real estate values, and donor contributions we have seen. Perhaps your ministry was conservative and planned for the 40-year storm but not for the 80-year storm.
Unfortunately, too few ministries prepare even for the 20-year storm. The endless parade of budget contractions and expansions is the result of short-term planning. In fact, prior to the current recession, one in three nonprofits operated in perpetual financial distress, a pattern that had been stable for over two decades. Their expansions showed great zeal to invest every last dollar in current ministry with little regard for building long-term sustainability, leaving them lurching from one financial crisis to another. For some, budgeting for the 100-year storm is seen as a lack of faith that misappropriates funds that could be spent on today's ministry. While the zeal to meet current needs is admirable, if not tempered, it will destabilize the ministry in the long run.
635 Camino de los Mares, Suite 216, San Clemente, CA 92673 · (949) 487-0900