Equitable Budgeting for Nonprofits
A thoughtful and introspective budget can serve as a roadmap for an organization’s finances, a tool for communicating mission goals and resource needs, and a compass for becoming a more equitable organization.
When preparing a budget that reflects your organization’s commitment to equity, there are a number of considerations for how to create an inclusive budgeting process that allows people to meaningfully engage with financial information and weigh in on key decisions. The lists below compile ideas and practices that NFF has explored and learned about through our consulting work with nonprofit leaders.
We recognize that many nonprofits don’t have the luxury of implementing an ideal budget because of limited funding options. This is especially true if nonprofits have smaller budgets, are led by and serving Black, Indigenous, and other communities of color, have lots of reimbursement contracts, and/or are located in rural areas. Often, limited funding is due to power dynamics in the nonprofit funding sector that are beyond nonprofit leaders’ control, such as lack of access to funders and inadequate resources to cover costs. However, we offer these lists as a starting point for conversations about how to build the budget that best serves your mission.
Ten tips for creating an equitable budgeting process
An equitable and inclusive budgeting process is a year-round process that draws from many of the same organizing and advocacy approaches that nonprofits already use to engage their communities – such as making sure people are informed, able to participate, and valued for their expertise and unique perspectives.
Building on these approaches, an equitable budgeting process might include the following actions and activities:
- Lay out a timeline that gives people plenty of time to ask questions and unpack issues along the way.
- Consider a process with many touch points throughout the year – these touch points can be simple (e.g., distributing board reports to staff and community members and incorporating time in staff meetings to respond to questions and recommendations regarding budgets and programs).
- Establish the norm that conversations about budgeting process and decision-making intersect with strategic planning and goal setting.
- Be inclusive of staff throughout the organization as well as community members and other stakeholders who will be impacted by budget priorities.
- Offer training and informational sessions so that people can participate with an informed lens about what a budget is and what’s involved in creating one.
- Consider adding program-based trainings for finance and other administrative staff for a holistic understanding of the organization's mission and impact.
- Use a financial storytelling approach that connects the mission to the budget and prioritizes finance-based decision-making.
- Create opportunities for staff and community members to name organizational needs and collectively prioritize them.
- Share knowledge and distribute some decision rights across the organization; at the same time, clarify with your staff who will make final decisions about the budget (most often the Board and Executive Director but could also be a community-based committee or consensus-based decision-making among staff, community, and the Board).
- Commit to ongoing feedback loops and sharing the “why” behind decisions so that people feel heard and valued for their contributions.
- Make financial data easily accessible to staff and others impacted by budget decisions
- Provide as much transparency as possible to help destigmatize conversations about organization decision-making, program updates, and finance, particularly when it comes to staffing, salaries, equitable pay, and business model shifts.
- Build in review and feedback opportunities throughout the year that will allow for any adjustments needed to the original budget – this may be needed if more funding or less funding is received than anticipated.
The Budgeting Process Cycle
What to include in an equitable budget
A useful starting point is to look at your organization’s full costs to parse out total expenses (here’s a workbook to help calculate full cost expenses). Full cost budgeting is synonymous with equitable budgeting because it helps define what an organization needs to deliver its mission goals with a workforce that is fairly compensated and fully supported to do their work.
One category to pay close attention to is unfunded (or underfunded) expenses. Many nonprofits operate using volunteers, low wages, and/or outdated technology due to limited funding – we refer to these as unfunded (or underfunded) expenses. To align with more equitable practices, funding would ideally increase to cover these types of expenses and allow the organization to work at its current level of programming with access to much needed resources.
Consider the following when creating an equitable budget for your organization:
- Ensure adequate staffing so that workloads are reasonable and distributed fairly.
- Pay salaries that are competitive and that allow staff to thrive in the ever-changing financial uncertainty of rising interest rates, unpredictable inflation, and profit structures that make it difficult for day to day needs to be met.
- Organizations can use websites such as Glassdoor, SalaryExpert, Indeed, and the Bureau of Labor Statistics (BLS) for market research on current pay scales
- Compensation (or pay) audits can help organizations ensure that the values of the organization are reflected in the pay structure.
- Consider moving away from percentage-based increases and/or contributions (e.g., retirement, COLA, and other pay-based benefits) to a flat or tiered dollar amount across the organization to avoid further exacerbating pay/benefits inequities. In this structure, Staff with the smallest salary bands would receive the greatest increase/contribution, while staff in middle and high salary bands would receive a smaller increase or none at all. This structure helps organizations reach more equitable salary structures that are more responsive to the greater impact of cost of living increases on lower-salaried employees.
- Offer childcare support.
- Provide comprehensive benefits.
- Cover paid time for coalition building, networking, and advocacy work.
- Identify unfunded expenses and allocate resources to invest in upgrades, supplies, or other improvements for the day-to-day functioning of an organization (e.g., What do you need that you’ve been functioning without? What would make your job easier to do so you can focus on what really matters?).
- Plan budget surpluses to build out reserves, pay down debt, and create more stability and adaptability for the organization.
Your budget might include some of these items as well as others not on this list. The goal is to prioritize investments that can make the biggest difference while striving to address others as more resources become available.
Every organization will have a unique budgeting process based on its current structure and financial status. With a more inclusive and thoughtful budgeting process, you can build a shared understanding among staff, the board, and community members, which will strengthen the connection between budget and mission.
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