Who Prepares the Budget?
The budget should include input from the entire staff, especially given the universal impact of this decision. Ultimately, however, it is the responsibility of the board of trustees to prepare it as part of its oversight of the organization. Typically, the executive director works with a budget sub-committee to prepare this living document; however, in the case of smaller museums with more overlap between positions, it may be necessary to pull in more staff members to put the budget together.
Defining Your Fiscal Year
The fiscal year of an organization is set in the by-laws and it serves as the time frame in which all of the organization’s financial transactions occur. Typically lasting 12 months, the fiscal year need not align with the calendar year. Instead, the dates that your organization selects should take into account three things: 1) dates of the museum’s programs, including moments of high traffic and low traffic with visitation; 2) the fiscal year of the primary funding source for your organization; and 3) opportunities for fiscal review, typically during low traffic times in your calendar. For example, if your organization experiences the highest traffic during the spring and summer, performing a fiscal review during the fall or winter (and aligning your fiscal calendar in accordance with this practice) may be the most advantageous. A fiscal calendar such as this one could be October 1 to September 30th.
Preparing and Finalizing the Budget
After establishing the dates for your fiscal year, next you need to begin preparing the budget. Before doing so, however, review (or prepare) your mission statement and strategic plan; these documents state your organization’s priorities for the next few years and can serve as a guideline for apportioning money. Finally, review your proposed events and programs. It is important to understand your organization’s overarching goals and planned programs early on to identify everything that you want to put into the budget. Reviewing budgets from previous years to see where the money was spent and when can also help in the planning process.
Next, determine when and from where the money to fund these projects is coming. When is the planned income expected to arrive? Will there be fluctuations in the amount given from previous years that need to be taken into account? If you have earned income from sources such as admissions fees, a museum store, or membership fees, what were the numbers from previous years? Establishing anticipated income before writing the formal budget can help you determine what your fundraising needs will be for the year.
Then, approximate the cost to operate your organization for the upcoming year, including your proposed programs, administrative costs, and any overhead needs (perhaps determined from previous budgets). This is the part when you take your prioritized events and attach a monetary value to them. For example, how much will it cost to operate your educational programs for the year? What about any events that you planned? After laying out the cost of each initiative and the income that you already know will be coming in, you can allocate the resources necessary to operate your institution for the upcoming year. Adjust and balance the budget where necessary in this stage before finalizing it.
Finally, it is the duty of the board of trustees to review and approve the final budget. It is crucial to keep in mind here that, as the oversight for the organization, it is also the duty of the board to ensure that any fundraising needs are met.
Source for preparing your own budget:
The council of nonprofits has a very comprehensive guide to creating an annual budget. This is a wonderful place to start!
Enacting and Managing the Budget
After the board of trustees reviews and approves the budget, it is up to the executive director of the organization to monitor its enactment throughout the year. Depending on the size of your organization, you may have a chief financial officer whose primary job is to manage the museum budget, assisting the executive director. Or perhaps it is a role shared by the department heads. Each of these individuals has a deep familiarity with the fiscal needs and practices of their departments; working closely with them helps to ensure that museum administrators on all levels of your organization are on the same page. Either way, it is important that people do not work in isolation with each other. Routine communication between the board, executive director, and staff is necessary to regularly compare how the proposed fiscal plan for the year aligned with the actual practices of your organization.