Balancing the Mission Checkbook

At Nonprofits Assistance Fund, we value scenario planning and we often find ourselves communicating this information with nonprofit leaders by asking, “What would you do if…?” Due to the high demand for a resource to help anticipate these situations, we even created a concise template for budget scenario planning. As times have changed, it is getting more and more difficult to have confidence in funding assumptions. For many nonprofits, decisions are made in rooms and conferences far outside of their influence that have major, and sometimes sudden, impact on their future. In the meantime, you hold your breath and wait.

The drawn out debate and standoff over the state budget was an amped up case study. In comparisons between the Governor’s and Legislature’s versions of the proposed budget many nonprofits could see different futures – reductions, increases, hold steady and eliminations. For weeks, if not months, these directors and program managers continued to provide services and manage their organizations while not knowing what was to come. Because the final budget bills were completed and passed so quickly, holding your breath was the norm.

For example, this Minnesota Budget Bites blog post summarizes some big changes contained in the Jobs and Economic Development budget bill. For some of the nonprofits that provide jobs, training, and economic development services in the community, many of these changes are major and long term. And they’re in effect right away. I know one organization whose budget will shrink by 25%, and another that expected a similar reduction but got an unexpected one year reprieve. Neither organization knew what was in the bill until early morning on July 20^th. In both of these cases the organizations knew that their programs were “in play” in budget talks. They’ve both developed some scenario plans and had board discussions about changes to come.

Scenario planning is only one component of managing uncertainty. Nonprofits must have a solid understanding of their financial structure and what levers they have (or don’t have) to make changes. The “ideal” financial management practice for right now is the capacity to adapt, which requires you to have a system in place for forecasting and managing cash flow.

Last week, we got some great news. We were awarded a $1.5 grant by the CDFI Fund of the US Treasury Department. You can read the press release here. This is award will help us grow our loan fund and serve more nonprofits for many years. I knew when the awards were going to be announced, and I was pretty distracted and jumpy while I waited in anticipation. This award means a lot to our future, but I really had no idea what to expect. About 10 minutes before the scheduled announcement of the awards I realized that I was holding my breath. I wonder if lots of others were holding theirs’, too. We were one of 155 organizations that received good news from the CDFI Fund, but I know many great organizations that got bad news that day. I know the feeling – anticipation, disappointment and let down, and then take some time to re-group.  When decisions that have a big impact on the fate of your organization and its work in the community are really out of your hands, what do you do? Do you have a grounding in structure and options, or do you close your eyes and hold your breath?