End-of-budget-year dilemma: too MUCH money
May 20, 2013 11:11 AM   Subscribe

I have a pretty hefty surplus in my nonprofit project budget this year, and I have been told to spend it all, because otherwise it would go back to the funder. We're talking about $20K. We did our work, we met our goals, we provided what we said we'd provide. It just took less money than anticipated. I feel dirty and guilty about blowing this much money on "stuff" that isn't what we said we'd spend it on. I have never had a budget at all before, much less a surplus, so I may be a little naive about how the (nonprofit?) world works. Can you please give me some thoughts about how to view this in a way that doesn't feel icky? Am I just being silly and this is normal practice? Bonus points if you have suggestions on what to spend it on.

When discussing purchases with leadership, nobody has pressured me to purchase things that would not be beneficial to my program, nor are they suggesting anything hinky as far as I know. But, for example, I'm going to get some new equipment, when we did not budget for it. It doesn't go into any of the other line-item categories easily. Isn't that kind of sketch? I mean, i "need" the equipment and all (though i'm buying top-of-the-line), but it just seems off to me.

I've had to keep things pretty general here, but if it matters, this is a small- to medium-sizeed nonprofit, working in a climate where funding is hard to get, for a progressive cause. It is not directly political, though, and it's money from a private foundation.
posted by anonymous to Work & Money (29 answers total) 5 users marked this as a favorite
 
I am a non-profit accountant, and this sort of thing is very standard practice.
posted by Nimmie Amee at 11:14 AM on May 20, 2013 [7 favorites]


"Sketch" is relative. This is what almost everyone with a budget does. Profit, nonprofit, you name it. The end of every single fiscal year is either famine - my project just had mandatory vacation time because we burned hot toward the end - or feast. And you're in Feast mode. You have extra money, so you spend it, because if you don't, you'll get less next year. It isn't ideal, and it is a bit uncomfortable for those of us who (like you) are concerned with efficiency, but it's definitely 100% boringly normal.
posted by Tomorrowful at 11:14 AM on May 20, 2013 [6 favorites]


Totally normal in academic research (which I guess is nonprofit). Not only does this money go back to the funder, but you're likely to have your budget cut in future years or in future grants.

Obviously it's a different arena (though similar situation), but I've heard anecdotes about startup project managers being fired for not using all the funds their VC gave them.
posted by supercres at 11:15 AM on May 20, 2013


It seems pretty standard to me. Buying equipment or other supplies (office? lab? replacing broken furniture? printing?) will only help further your work and it will presumably help bolster your budget for next year if you don't have to worry about further equipment costs.
posted by jetlagaddict at 11:17 AM on May 20, 2013 [1 favorite]


If your office has computer hardware that is more than 3 years old, replace it. Anything more than 3 years old should be fully depreciated. Buying new equipment and then accounting for depreciation should accrue tax benefit to the organization in the future. You will see budgetary benefits in the future for spending this money, so it is prudent to spend.

It's sad that you have to wait for a use-or-lose budget situation to maintain needed equipment, but that's how it goes.
posted by crazycanuck at 11:17 AM on May 20, 2013 [2 favorites]


Can you use the money to fund professional development for you and your staff? So a trip to a conference, classes, etc.?
posted by Young Kullervo at 11:17 AM on May 20, 2013 [2 favorites]


I work at a nonprofit art institution and this is a totally normal annual event for every department (though not necessarily to the tune of $20,000!).
posted by scody at 11:17 AM on May 20, 2013 [1 favorite]


I've worked for several nonprofits and this is arguably the best problem to have, too much money is better than not enough! I always viewed having extra money as a good thing, because it meant we were efficient and operating within our bounds, so viewing it that way may make you feel less hinky. As for how to spend it, is there anything you could really use to help make things better or any goals you could expand? For example, provide an extra 100 dog beds to the animal shelter or whatever your cause is? Is there any office equipment that could make things run smoother for next year? I'm sure you'll find something!
posted by julie_of_the_jungle at 11:18 AM on May 20, 2013 [2 favorites]


I feel dirty and guilty about blowing this much money on "stuff" that isn't what we said we'd spend it on.

It's totally normal practice. As the person running the budget, you need an overage list: that list of items for which you do not anticipate having budget but would love to have in the years you do. Spend it on professional development if you can; pre-pay any outside consulting or subscriptions in advance; buy a swanky new printer and a shitload of ink (that's the normal one.)
posted by DarlingBri at 11:24 AM on May 20, 2013 [5 favorites]


Spend it on things that will make your organization work more smoothly in the coming year. As suggested above, new computer hardware and training would be great. Think about things you've had problems with this year; is there anything that money could fix? In addition to training and hardware, could you spend some of the money revamping your processes to make them more efficient? Are there any tools (hardware or software) that would increase efficiency or eliminate bottlenecks?
posted by Doohickie at 11:28 AM on May 20, 2013


Maybe it would help to keep in mind that getting a substantial part of their donation back abruptly at the end of the year would not be a good thing for a private foundation. They are required to donate a certain percentage to organizations like yours to maintain a tax-favored status as private foundations. Getting unused money back might be anything from a minor headache to a crisis, but it would not be a welcome profit for the foundation.

They want you to have this money. They don't want it back. They will be very happy to hear "we did everything we promised, then invested in X Y and Z which will make this project even more successful both next year and into the distant future."
posted by steinwald at 11:33 AM on May 20, 2013 [1 favorite]


Next years funding is determined and defined by whether or not, and by how much, you over or under-spent this year's budget.

If you underspend your funders will construe that as you needing less money than they've supplied, and they will in future supply what they now perceive you need (ie less).

If you overspend slightly, they will construe that as you needing more money, and in turn supply it.

This is why major IOs and international NGOs have to keep their funding intentions secret from recipient governments until the very last minute, it is why government departments always try to just overstep the line when it comes to spending public funds, it is why you in a non-profit should be trying to hit the bullseye.

So do not fret about overspending slightly or having some planning room so that you can get things just right.

Just enjoy doing good with your spare cash.
posted by Ahab at 11:34 AM on May 20, 2013


Also consider office furniture. Next time we have extra money, everyone who wants one is getting a sit/stand desk (there are also things like Ergotron which convert a sit-only desk to sit/stand). Last time around, it was new office chairs for anyone who needed one. (We are a government agency.)

Also seconding new computers/printers.
posted by rabbitrabbit at 11:34 AM on May 20, 2013


Nthing standard practice.

If you do not spend this money, next year the funding agency will think you don't need it and you won't get as much. But next year might be the year when something comes up and you will not be able to buy the miscellaneous things your organization needs which you are about to "blow" this "extra" money on. Next June, you might be scrambling to pay your normal bills and the wishlist will be laughable. It's not excessive, it's prudent to use it.
posted by epanalepsis at 11:37 AM on May 20, 2013


Another consideration: if you "give back" money at the end of the year, it will impact what you receive in future years, since it will be assumed that you will continue to need less than your initial request. You can get into a spiral of declining funding if you don't spend what you have - this year you get $100,000 and "give back" 1/5th of your budget; next year you ask for $100,000 but they assume that you only need $80,000, or you ask for $80,000 and you are only given $64,000, etc etc.

And a third consideration: for larger projects and larger (especially government) funders, it is a commonplace to have 'carryover' funds from one year to the next. If you were running an NIH project, you'd be "carrying over" that money into the next budget period or applying for a "no-cost extension" to continue the work of the project until it was spent out.

It is not sketchy to spend this money in ways that will forward your work in the future. It would be sketchy to spend it on unrelated things.
posted by Frowner at 11:38 AM on May 20, 2013


It's actually how things like electronics and office furniture are upgraded or replaced. Funders really hate paying for things like "new printers" or "new wifi access point," especially when they're not your only source of income.
posted by barnone at 11:39 AM on May 20, 2013


It really depends on the grant agreement with the original funder. They should outline in their grant letter/contract/whatever came with the check specifically what they require you to do with unspent grant funds. The organization I work for (a private nonoperating foundation) has declined to continue funding to organizations who used unspent grant funds on administrative expenses not budgeted in their original proposal, yet we have also approved for release unspent grant funds to go to unrelated administrative expenses.
posted by poffin boffin at 11:48 AM on May 20, 2013 [3 favorites]


(Er, I should note that we specifically state in our contract that any unused portion of our grant funding should be returned to us. So the grantees that used it for other stuff were doing something we clearly stated they should not be doing.)
posted by poffin boffin at 11:50 AM on May 20, 2013


DarlingBri: "As the person running the budget, you need an overage list: that list of items for which you do not anticipate having budget but would love to have in the years you do."

This is an important key point; you need to be able spend money on short notice so you should maintain a prioritized list of needed items and ideally at least an idea of budget for each of those items. By doing this you can spend a long time preparing the business case for any particular item on the list and won't be caught out by an inappropriate last minute/impulse purchase.
posted by Mitheral at 11:53 AM on May 20, 2013 [1 favorite]


This is pretty normal in my agency/government world, as well. In a similar situation, I have used such funds to purchase equipment and training to use it (e.g. digital media equipment and film-making/editing training) in order to give us in-house capacities we didn't have before. It wasn't considered hinky at all.
posted by rpfields at 12:03 PM on May 20, 2013


Seconding all of the commenters above who pointed out that this is all fairly standard.

You should definitely look into professional development (or leadership development) for staff. Maybe talk to your HR department's talent management person (if you have one) to talk about where you could make the most impact.
posted by duffell at 12:39 PM on May 20, 2013


I was in your situation and used the extra money to arrange a seminar. We invited a couple of world class experts and our core staff to discuss state of the art within our field at a nice, but cheap site. I think it ended up being excellent use of the money, creating networks and inspiring the staff.
posted by mumimor at 12:41 PM on May 20, 2013


Private foundations have slightly more relaxed attitude about their funds but you should check against your grant document the relevant clauses regarding unspent funds and indirect or administrative costs. If your superior has a good relationship with them, informally checking in with the foundation's grant officer is also a good idea. Aside from staff development also, in case there are reasons for the funds to be more strictly spent then consider discussing with your project's activity partners about holding additional activities or project component add-ons.
posted by cendawanita at 1:18 PM on May 20, 2013


Totally standard. If you send it back to the funding source, they won't know what to do with it.

Pretty much any office equipment can be made to conform to the terms of the grant, so can professional development.

Be thoughtful about how it's spent, but do spend it.
posted by Ruthless Bunny at 1:31 PM on May 20, 2013


Seconding what cjelli said. If all the money went "only to the project" (which private funders like to see but does not acknowledge the reality of what it actually takes to do the project, like lights, staff, benefits, a physical work space, etc.) I would add it in.

Also, when this has happened to me, I've looked to other things that might be an extension of the program (serve more kids, have more sessions, whatever it is) and ask if we could just take the extra and do more. Or, if it's an ongoing program ask if you can put that money toward the next year (but as others said that will likely result in them giving you less the next time).
posted by loveyallaround at 1:39 PM on May 20, 2013


I agree with those that have suggested looking at your grant agreement to make sure you won't be penalized in the future for reallocation of funds. If you are restricted, or want to put the money towards next year, I would suggest looking to see if you can 'pre-pay' any expenses so the spending comes in for this year but you're helping with next year's programs. This is pretty standard practice in both the for-profit and non-profit world.
posted by scrute at 4:05 PM on May 20, 2013


When this has happened, we've checked with the donors and asked if we can use it to fund more of the program, or if it was a finished program, if we should mark the surplus as general funds or use it to improve a specific need of ours. We've never had a donor request funds back, they're pleased we managed to do well with the funding (it's very important to communicate if this was just a happy efficiency or if your original budget was really out of whack, to explain why so the donors trust your next proposed budget) and most of them chose general funds. We had a grant where we had to use the surplus as staff training I think, and we hired an external consultant to give some staff training over a longer period which was more helpful than a one-time seminar.

It is a good problem to have. A responsible budget should be somewhat bigger than you expect to spend - you would be doing wrong by your clients and your donors by asking for a bare bones budget, because there are almost always screw-ups out of your control, and your donors want you to plan for that so the clients/program can succeed. If it was a foundation/governmental fund, they probably have a protocol for this because it happens a lot.
posted by viggorlijah at 9:00 PM on May 20, 2013


I think of it as the Lee Harvey Oswald Effect.

The decline in the great book publishers began in the mid-1970s, long before the internet. It happened like this:

Republicans blocked Kennedy's proposals for aid to education. After the assassination, Lyndon Johnson used the outrush of sympathy for Kennedy to push through his education aid proposals. These took effect near the end of the school year, and school boards had an entire year's budget to spend in a short time. They ended up ordering two of everything the education publishers (which were divisions of general publishers) had. At the time, I was an editor for various publishers and saw it happen.

This created a spike in publishers' profits, leading to takeovers by the merger-and-acquisition sharks. When it became clear that the spike was a one-time unrepeatable event, the conglomerates cut publishers' staffs and activities to the bone and then started amputating. I was also caught up in this. The silver lining was that it gave me a kick in the pants that landed me in law school.
posted by KRS at 6:44 PM on May 21, 2013


Mod note: From the OP:
Update: I reviewed our grant contract and it said we needed to get permission in writing before making substantial changes in our spending allocation. I talked to my boss and our finance person and explained I was concerned about this, and we agreed I'd call my program officer and ask how to proceed. Just got off the phone with her, and her reaction was basically "Call me a bad program officer, but I don't care how you spend the money as long as it's going to real program needs. Just explain your changes in the narrative."

So, off we go on a spending spree, and I feel much better. Thanks, all.
posted by jessamyn (staff) at 12:10 PM on May 23, 2013 [3 favorites]


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