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A Radical Proposition: Say Goodbye to Budgets

Publication date: 
Saturday, March 1, 2014
Jessica Bearman (AKA: Dr. Streamline)Bearman Consulting

Note: The following post originally appeared on the Project Streamline blog in a series on budgets and financial report.

In a related post, readers were left with an intriguing question: What if you stopped asking for a budget at all?

Unthinkable? For the Unitarian Universalist Veatch Program at Shelter Rock, it was not only thinkable, but, with help from Fun with Financials Nonprofit Financial Crusader Carol Cantwell, it was also doable.

Working together, the Veatch Program and Carol Cantwell implemented a Financial Health Assessment Tool that dives much more deeply and meaningfully into organizations’ financial health without requiring grantee budgets. I interviewed Carol and Molly Schultz Hafid from the Veatch Program.

Dr. Streamline: Tell me about the impetus to get rid of the budget – what made you consider making a change of this magnitude?

Molly: Veatch and Carol just happened to meet at the right moment. Before that, Carol had been talking about this idea for years – and her message finally fell on the right ears.


Our Executive Director, Ned Wight, provided the visionary leadership that opened the space for this conversation to begin. Initially, we called Carol for a training to help our board understand budgets and financials. We had some board members who were a bit scared of the financials and others who were extremely interested in them – and they were speaking two different languages.

Carol asked us: “What do you really use the budgets for?” And we told her, “We know they’re sort of fictitious, but we just try to make sure that they equal zero at the bottom so that no one asks any questions.”

That’s when Carol pounced… in her very zen-like manner. She introduced her thinking about how budgets aren’t really that helpful. She suggested we talk about how to have real insight into the financial health of our grantees.

Dr. Streamline: Carol – talk a bit about where this originated for you.

Carol: I’ve been thinking about issues of organizational financial health in the social justice movement for ten years. I think about it from a systems perspective – what are the upstream factors affecting the downstream problems? To me, the number one problem was that organizations were spending so much time creating all types, shapes, sizes of budgets for their funders – and it was distracting them from their actual financial health.

My long term organizing campaign is to call the question: What is this exercise for? What are we trying to achieve here? Funders have legitimate reasons for concerns about nonprofit financials, but funder budgets mainly tell you that a nonprofit has learned to make a funder budget – it’s not the way to go about assessing financial health.

Dr. Streamline: Many funders probably share your concern that financial information as it’s currently collected plays a dubious and inconsistent role in decision-making. What were some of the key discussions you had as a staff and board.

Molly: Financials were never the deciding factor for the Veatch Program as to whether or not we’d grant funding. They were one piece of the profile, but we often recommended funding for groups despite financial concerns. We were most interested in the funder list and the appropriateness of the budget to the organization’s ambition. But discerning this by looking at a funder budget was like reading tea leaves.

When people are giving away money, they feel incredible anxiety that the money will go to the wrong group and that they will be responsible for the failure. Board and staff need to be able to articulate: what is it that concerns us? What do we really want to know?

When we started working with Carol, we wanted to think about how we could get more of the information we actually needed, and let go of the false sense of security that people get when they look at a tidy list of numbers on a sheet.

Carol: I don’t think financial information should be used punitively. I was willing to create a financial health assessment process for Veatch because they’d already agreed to this critical principle.

Dr. Streamline: Now that you don’t get nonprofit budgets, what do you do instead?

Molly: Basically we’ve taken the administrative burden in-house. Instead of looking at a budget created for us by the nonprofit, we use the Financial Health Assessment Tool (FHAT) which requires us to devote a portion of staff time to pulling information from the 990 to paint a much deeper picture of the organization’s health. A portion of our program associate’s time is dedicated to completing the FHAT for each docket.

Dr. Streamline: Wait a second. It sounds like you’re now devoting more time to financial analysis. Is it worth it?

Molly: That’s right — we are spending much more time on financial analysis. But now we’re learning meaningful things about our grantees. It’s worth it. A few stories:

One grantee was a long-standing organization with a newer ED. When their FHAT came up with a “needs attention” flag for two years in a row, I had a conversation with the ED and said: our financial assessment indicates that your organization is in a tough place. Is that your assessment?” and the ED said: “yes – and it’s been keeping me up at night.” In this case, the leader was absolutely the right person to lead the organization, but didn’t yet have the skills to manage the cash flow and budget issues. I was able to say: “We are going to support you no matter what, but this doesn’t have to be an albatross for you.” And now the ED is getting support and the organization is growing stronger.

Carol: Here’s another story: When we were piloting the FHAT, one board member who had been hanging back on financial conversations was able to see in a snapshot that a group that was core to Veatch’s mission was struggling. And instead of suggesting that these financial struggles made the organization a risky bet, the board member asked: “is this a group that we should be giving more support to and help them build their reserves?” My heart leapt from my chest to hear the analysis go in that direction!

Dr. Streamline: Do you have any advice or thoughts for other organizations that might consider a similar move?

Molly: I’d council any organization to make sure that there’s strong support from leadership and also great engagement and support from administrative staff. This is a big shift and is a lot of work. It’s not easy – we’re in the huffing and puffing stage right now – but it’s already paying off with better insight and information into the real financial health of our grantees.

Want More? Jessica, Molly and Carol will all be leading a session at the 2014 GEO National Conference.

You can also listen to a Nonprofit Spark Podcast interview with Carol Cantwell.

Bio: Jessica Bearman is Principal of Bearman Consulting, a long-time Project Streamline gadfly and consultant to GMN. You can find Jessica on Twitter @jbearwoman. She blogs regularly at

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