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Budget and Budgeting

Jeffrey H. Altschul

In discussions with SAA members, I am often asked why we fund particular programs and not others. Frequently these questions are posed in the middle of our fiscal year and take the form of requests for funding a workshop, an interest group's newsletter, or a survey of our membership. The answer is always the same, and surprisingly simple. We did or did not budget for it.

The budget is a yearly plan of what we expect to take in as revenues and how we expect to allocate those funds to programs, services, and reserves. Although the Board of Directors can change the budget, such moves are always guided by the assumptions and priorities that were used to develop it. SAA members, then, should understand the budgeting process. This column is one step in that direction.

The budget process begins with the development of general assumptions. These assumptions relate to the environment and the general marketplace and includes analyses of factors that will impact SAA. Some assumptions are relatively concrete, such as anticipated increases in postal rates or paper prices. Others are more abstract--Do we expect our membership to increase? How much money will the Annual Meeting make?

Once these assumptions are formulated, they are approved by the board and the staff begin to draft the program budget. In addition to general assumptions, the board is responsible for clearly stating program priorities for the coming year. Changes in the length or format of our publications, new programs, expanded services--all need to be articulated with the financial consequences of each clearly understood. From the start, the budget is tied to priorities; it is not created in a vacuum.

SAA program staff are responsible and accountable for the budgets that they draft, manage, and monitor. For every line in the budget, there is a detailed justification. Along with a draft budget of 80+ pages, there are an additional 30+ pages of justifications that are submitted to the Executive Committee.

Committees also play a formative role in the budget process. At the same time that staff members are drafting budgets for their particular set of services, committee chairs submit budget requests and justifications to the treasurer for review by the Executive Committee. The Executive Committee serves as the budget committee. The Investment and Finance Committee, which does not develop the budget, reviews the draft budget at the same time it is sent to the Executive Committee. The Investment and Finance Committee also reviews the budget at the close of the fiscal year to evaluate the success and failure of the strategies that year.

Each year SAA develops both an operating and a capital budget. The purpose of the operating budget is to set out the Society's objectives in financial terms, whereas the capital budget outlines when and for how many capital additions (equipment, furniture, etc.) will be purchased. Essentially along with each draft budget that is considered, there is a proposed capital spending plan. The plan outlines specifically what assets the Society plans to purchase, indicating expected cost and date of purchase.

The budgets are developed for the fall meetings of the Executive Committee and the board. The Executive Committee does an intense analysis of the draft, led by the treasurer. The Executive Committee tunes the budget and submits this new draft budget to the board for discussion and approval. The fall meeting of the board always has as a major focus the approval of the budget for the coming fiscal year.

Once approved, the board is reluctant to make large changes in budget allocations in that fiscal year. This can lead to frustration for committees that meet at the Annual Meeting in the spring and decide to take an action requiring financial support. That support may be forthcoming, but, because of the nature of the process, can only be built into the next fiscal year at the earliest. Thus, funds will not be available until sometime after the fall board meeting.

Not simply a planning tool, the budget also is a prime benchmark from which we manage the Society's finances. The budget is integrated into the accounting system, and monthly financial statements are produced which show the relationship of the fiscal activity to the budget. Variance percentages from the budget also are provided. Staff develop preliminary analyses of these financials. Within the financials themselves, there are comparisons to the previous fiscal year. These historical data provide a good basis for analysis. In addition to staff review and the treasurer's review of the financials, all of the members of the board receive these documents as does the chair of the Investment and Finance Committee.

The budgeting process, then, helps us in three areas. First, it forces the board to set priorities for programs and services. Second, the creation of the budget provides the best means of assessing our dues structure and setting revenue targets. Third, the budget is used to monitor the fiscal performance of the Society. Our budget is a tool that expresses our operating plan for the year and involves staff, the board, and committees. It is actively used as a tool to evaluate and control throughout the year. Each year we evaluate all lines so that a new budget is not simply an update of the previous year but a true reflection of the Society's priorities.

Jeffrey H. Altschul, treasurer of SAA, is president of Statistical Research, Inc., in Tucson, Arizona.

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