Kent Chabotar, who served as vice president for finance and administration and treasurer at Bowdoin College for a decade before being named president of Guilford College (NC) in 2002, discussed how a strategic budgeting plan can be tethered to reality by improved long-range financial planning and a more program-and-outcomes-based budget.
     Crafting a strategic budget, he explained, requires seven major steps: assessment, establishing process parameters, strategic planning, budget programs and tasks, careful budget review, sensitivity analysis, and evaluation and feedback. The first step is to “identify status quo financial assumptions in current strategic plans, policy statements, budgets, financial analysis and plans, accreditation reports, capital campaign statements, and related documents.” When outlining the process parameters, Chabotar said college officials need to look at “alternate models, including top-down, information, consultative, or participative; include the president, internal and external constituencies, and the board in the process; identify constraints, including resources and time; and continually communicate with major stakeholders.”
     Chabotar stressed that “strategic plans must contain the institution’s mission and goals (vision and core values), objectives and performance indicators, programs and tasks, resource requirements, and competitive analyses.” In addition, the plan must be linked with action and measurable via strategic indicators, such as number of students, cost per student, annual giving/gifts, fund- raising cost per dollar raised, number of employees, endowment, and net operating profit and loss, among others.
     In setting budget programs and tasks, he cautioned the CAOs to “start at the lowest possible level. Most expenses will be personnel; assign percentages of salary and fringe benefits to programs; include non-personnel-related expenses; allocate overhead expenses; separate capital and operating costs; and identify sources of funds.” When reviewing the budget, Chabotar advised keeping the following questions in mind: Do future budgets make sense in terms of current performance? Does the budget represent the best way to carry out activities and achieve mission? Does it meet institutional and legal requirements? Do you have the skills and capabilities to implement the proposed programs and activities? and Where are the reserve funds?
     The sensitivity analysis should include “an examination of the prior plan and budget to determine how closely they approximated actual results.” In addition, he stressed that officials should not underestimate benefits and maintenance expenses, overestimate revenues from operations, or misclassify capital and operating expenses. The analysis should contain “what if” contingencies, and a second opinion should be sought, he said.
     Finally, Chabotar said a process of evaluation and feedback is crucial. Officials should “be sure that the budget contains a control system to monitor the plan’s progress and make corrections when necessary. Comparing the monthly budget versus actuals, budgeted to date versus actuals, current year versus prior years, manager assessment, and strategic indicators” are key elements of an effective evaluation.

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Last updated: December 2003
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