Why Boards Shouldn’t Approve Budgets

Definition of Budget: An idea about how much money will be received and spent. The board’s approval of a budget is its agreement that the Leader has an idea. No budget in history has ever been met. Anticipated expenditures are higher in some areas and lower in others, but never being exactly what was projected.

What does the board value. Let me correct that: what should the board value? It should value the ultimate purpose of the agency.  The details of how that happens should be of far less concern than the overall purpose of the agency.

For example, a mission agency exists to see that churches are planted in Cambodia.  The board approves $7500 for travel expenses. We already know that travel will not cost $7500. It may cost $7838.54 or $6994.13, but never $7500.00. At the end of the year what will the board care about? Many boards will be mildly concerned with the amount over budget and more delighted that travel costs were under budget.

I have now identified the values of the board. Spend less than management’s original idea. Keep costs down. It rewards the Leader for inflating projected costs and spending less than projected. But were the objectives of the ministry compromised by the savings? Suppose the under budget travel expense included a trip to Chile; having nothing to do with the purpose of the agency? That question is seldom asked. The board is more concerned about meeting budget than the values which should undergird the budget.  

So what should a board be concerned about as it relates to the budget?

It may want to see a budget that projects breaking even; and that is arguably a good thing. But the more important question is whether the Ends of the agency were advanced by the travel. It should be equally concerned if the Ends of the agency were materially compromised by significantly reduced travel.

Be clear about the value of accomplishing the reasons for the agency’s existence: seeing that churches are planted in Cambodia and done so without incurring a deficient.

 And ignore the numbers.