Nonprofit Harvest

Training for Minnesota Nonprofits, And Beyond

This is an exciting time at Nonprofits Assistance Fund. This week we unveiled our new webinar trainings, which have been in the works all summer.

Photo Credit: jurvetson on flickr

We’re looking forward to having our trainings available to nonprofit leaders across the state of Minnesota, as well as our friends all over the country.

If you have been hoping your friendly nonprofit finance geeks (that’s us!) would visit your neighborhood, the wait is over.  Participate in our webinars and share any thoughts you have about the experience.  We are very excited about this expansion of our training program and want it to be as helpful as possible.  Your participation and feedback will make it a stronger service.

As online learning and communications tools continue to evolve, we’ll do our best to take advantage of new ways to serve the nonprofit community. We’ll continue to ask how technology can enhance our work and deliver services to nonprofits in and outside of the Twin Cities metro area.  If you have ideas for us, share them here, on our facebook page, or contact @NAFund on twitter.

Additional Online Training Opportunities

There are many other online learning options for nonprofit staff and board members.  Here are some interesting opportunities that you can explore to take your work to the next level:

• Foundation Center’s Events Archive (their podcasts are also available on iTunes)
  
• Chronicle of Philanthropy Live Discussions 
• Pro Bono Partnership of Atlanta videos and webinars on nonprofit legal issues
• Arts Enterprise: Art as Business as Art course from UW-Madison and the Artful Manager,  Andrew Taylor (podcasts available through iTunes U)

Reconsidering Your Budget

Last week, Jeanne Bell wrote an excellent article for Blue Avocado, Focus on the Destination, Not the Route (Budget)!   In a nutshell, she is arguing that, especially in an uncertain economic climate, rolling projections and organizational goals are more valuable than an annual budget.

She offers great rationale for why this shift in focus matters, as well as some practical steps to get started, included:

Do a revised projection at the end of the current quarter, and have the management team and the board discuss it. Consider these questions:

• What are the key discrepancies between what’s in the budget and what we now believe is going to happen?
• Given this information, do we need to expect a different financial outcome for the year than what the budget was meant to achieve?
• What changes need to be made in the management of any revenue or expense items?
• What implications are there for the next fiscal year, given the projected financial result of this year?

Nonprofit Harvest: Employee Benefits

This week’s Chronicle of Philanthropy Live Discussion was on Employee Benefits at Nonprofit Groups.  It was a timely discussion, especially given a recent report by the Johns Hopkins Listening Post Project (a summary is available on MCF’s Philanthropy Potluck blog).

The discussion pointed out some useful resources to help nonprofits consider ways to limit costs while still providing benefits and professional development opportunities to their employees:

• Rethinking Benefits for Nonprofit Employees from CommonGood Careers:
• Nonprofit Workforce Action Agenda from Listening Post Project

Cash Reserves and Access to Capital

As some organizations are tapping into their cash reserves to minimize the impact of diminishing resources on their programs, the question of how to use and manage these funds keeps surfacing.

On one hand, organizations lucky enough to have this rainy day fund are wise to consider best practices and consult their own internal policies around using reserves.  The Foundation Center recently did a feature, How Much Should My Nonprofit Have in Operating Reserves? Review their article for a list of resources.

However, the time may have come to ask a different set of questions. In Beyond Cash Reserves, Kate advocates for a new kind of thinking about cash - that working capital is king:

Rather than dwelling on the best practice or target for designated cash reserve accounts, maybe nonprofits need to learn to be more sophisticated managers of cash and its relative, working capital.

The Social Innovation Fund

Tactical Philanthropy is covering the Social Innovation Fund (What Exactly is the Social Innovation Fund? and Why the Social Innovation Fund Matters).  He draws attention to a number of reasons this is an important development, but he keys in on the value of growth capital:

The Social Innovation Fund is the first meaningful incentive for large foundations to provide growth capital to nonprofits.

The Fund is providing cash grants to grantmakers. Most grantmakers are stuck with the endowment they have and do not have access to additional funding. But the Fund requires that grantmakers use this money (plus matching funds from the foundation’s endowment) to provide growth capital and capacity building grants to nonprofits.

L3C - The New Kid on the Block

Increased access to capital is one reason the L3C model is such a hot topic (we have covered it here before).   A new post from Foundation Center does a good job of summarizing the available information and discussion about L3C, including sharing some examples from Vermont. To learn more you can also read Notes from Capital Sources, Options, and Structures.

Another Round of Reports

The Minnesota Perspective

The Minnesota Council on Foundations (MCF) has released an updated 2009 Outlook report.  Key findings include:

• In March 2009, 52% of Minnesota grantmakers said they expect to decrease grantmaking in 2009, more than the 40% who anticipated decreases in November 2008.

• Nearly half of Minnesota grantmakers expect giving will remain the same (31%) or increase (17%) in 2009 compared to 2008. In November, 41% expected grantmaking to remain the same in 2009, while 15% expected increases.

• In relation to the economic downturn, grantmakers say they are most likely to provide support for food, housing and jobs.

• Minnesota grantmakers report the most likely ways they will cut operating costs is by reducing travel and conference attendance, eliminating salary increases, and reducing or eliminating the use of consultants.

Warren Woolfe at the Star Tribune recently covered the struggles of Minnesota’s nonprofits to address rising needs with fewer resources in his article, Anxiety on the rise at area’s nonprofits.  You can also read MinnPost’s three-part story on the Minnesota economy, starting with The big question for economic recovery: Which stresses are merely cyclical and which indicate a cold, new reality?

The National Perspective

The Chronicle of Philanthropy also reported on two national surveys on the impact of the recession on the nonprofit sector:

• Ninety-two percent of the nearly 100 respondents in a survey conducted in May by the Bridgespan Group said they were feeling the effects of the downturn.

• Eighty percent of charity officials reported that their organizations were experiencing financial stress, in another study conducted in April by the Johns Hopkins University’s Listening Post Project. Nearly 40 percent of the 363 respondents described the stress as “severe.”

Two findings from the Bridgespan Survey struck me as particularly timely:

Finding No. 2: More organizations are tapping into reserves. Also, more nonprofit leaders are developing contingency plans, a key step that can help them respond purposefully when crises arise, and also prepare for better times ahead.

Finding No. 3: The deepening recession has led more nonprofits to lay off staff and reduce program activity, while taking action to protect core services and activities. The specific tactics used to cope with the downturn have varied by organization size. But now, more than ever, it is important to identify the people who matter most to an organization, and to keep that group strong.

If you need help grappling with these decisions, you can visit our resource page. It has contingency planning tools and other resources from Nonprofits Assistance Fund and other capacity building organizations.

Nonprofit Harvest

• Finding Inspiration from Founders
• Pawlenty shifts mean schools need loans; charters especially worried
• Nonprofits Carrying out the Stimulus-or Trying to
• IRS Info and Some Questions and Answers
• Just what the prez ordered: $$ for community clinics

Summer Bloggin’

This summer we’re going to be writing this blog every few weeks. We’re working on some exciting projects, so stay tuned for information about new opportunities.

If you need a regular dose of nonprofit financial management news, follow us on twitter. You can also check out Tactical Philanthropy’s Daily Digest, PhilanTopic’s Weekend Link Roundup,  or Not-For Profit Accounting’s Nonprofit News feature.

Charitable Giving: Glass Half Empty or Hall Full?

This week, Giving USA released their report on 2008 giving.  As nonprofits can attest, it was a rough year.  According to the study, total giving decreased by 5.7%, with donations down across the board.

• Individual giving: -6.3 percent
• Foundation grantmaking: -0.8 percent
• Corporate giving: -8 percent
• Charitable bequests: -6.4 percent
• Two-thirds of public charities experienced a decline in donations.

However, even in the worst economic climate since the Great Depression, charitable giving exceeded $300 billion.

Over at Tactical Philanthropy, Sean does some excellent analysis in his post How Much Did Americans Really Give in 2008?

So what’s the take away? I would say that the best way to think about charitable giving in 2008 is that it contracted sharply, but that the contraction was less than many people feared and the total amount given was within the range of the level of giving seen over the past few years. Giving as a percentage of GDP was 2.2%, within the normal range and very close to the 2.3% of GDP that was given in 2007…

Charitable giving behaved more or less as it normally does when the economy sours. This is, by most measures, the worst recession in a very long time and so we’re seeing charitable giving get hit. But it is only declining in line with the way it normally behaves.

As a reminder, if this recession is similar to other economic downturns, it will take the philanthropic/nonprofit sector longer to recover than the rest of the economy.  The Giving USA authors commented in a discussion hosted by the Chronicle of Philanthropy that this recession resembles the one in1974 , when took three years for giving to rebound.  However, they cautioned against assuming that this would be an accurate guide, noting the changes in the world and the nonprofit sector.

Related Coverage

• Charitable Donations Fell by Nearly 6% in 2008, the Sharpest Drop in 53 Years
• Charitable Giving Fell by 2 Percent in 2008, ‘Giving USA’ Says

Other Giving Reports

• Foundation Center 2009 Foundation Giving Forecast
• 2009 Giving Forecast by Minnesota Grantmakers
• MCF 2009 Outlook Report

What’s a nonprofit to do? Start contingency planning

During the Giving USA chat, someone brought up the question of budgeting amidst so much uncertainty:

Question from Hazel, animal charity: How can one do any financial planning or construct a budget for the coming year when it may even be worse than last year and no one knows whom we can depend on?

Nancy Raybin:  Agree on different scenarios, e.g. economy gets worse by 10 percent, economy levels; economy gets better by 10 percent. Make some hypotheses about the impact of different scenarios on your animal charity’s activities and what donors are likely to do. Then prepare different budgets for each scenario. Clearly, you know best how animal lovers respond in these times. You must also have a number of donors on whom you can depend. Focus on those.

Sometimes it feels like I’m beating the scenario planning drum all time, but it really is the best advice we can give to help nonprofits plan and adapt in these uncertain times. Download and use our tools to get started.

This Week’s Harvest

• A Nonprofit News Round-Up from Not-For Profit Accounting,  including:
  • Bringing the Stimulus Plan Home: Obama’s Effect on Nonprofit Jobs
  • 7 Things To Consider For Your D&O Policy
• British Charity Mergers Examined
• FASB Releases Standard for Nonprofit M&A

Employee Compensation

Recently there’s been a lot of chatter about nonprofit wages in the blogosphere and beyond. Debating these questions is important, but in this age of tight budgets, are there any steps an organization can take to improve employee compensation right now? Especially for lower wage employees who are critical to an organization’s success, but are sometimes left out of this conversation.

Blue Avocado gets to the heart of the matter in the article Low-Wage Workers and Nonprofits:

While raising salaries would be, by far, the best way to support these important staff, doing so isn’t possible for most nonprofits: certainly not in the short term, and often impossible for the long term given business models and funding constraints…

Although the challenge of providing adequate compensation to low-wage employees may seem overwhelming, especially during a financial crisis, the fact is that nonprofits, consultants and funders can consider a number of helpful options without torpedoing the budget.

The article offers a range of options, which fall into three main categories:

• Steps to take relatively quickly at little or no cost
• Intermediate steps
• More far-reaching steps

These ideas are not intended to replace a real conversation about wages, especially one that goes beyond executive compensation.  But they are a place to start. Add your thoughts and suggestions here or leave a comment at Blue Avocado.

Related HR Resources

Not-For-Profit Accounting shares some information from the intersection of HR and accounting.  This post unpacks the sometimes woolly world of employee classifications — exempt vs. nonexempt, independent contractor vs. employee — and provides information on payroll systems.

If you have specific questions about nonprofit account, I suggest submitting them to Alan.  His regular Q&A feature is a great resource for financial managers.

New Resource Collection

Blue Avocado has compiled all of their articles about nonprofits and the economy. Visit this archive for information on financial management, HR, and more.

Harvest

• IRS Form 990 Filing Tips: Part VI, Governance 
• Nonprofit Policy News | May 2009
  • Federal Legislative and Regulatory Developments
  • IRS makes public its 2009- 2013 strategic plan
• Free Foundation Center Widgets
• Charities Loosening Strings on Arts Grants

The Chronicle of Philanthropy and Nonprofit Finance Fund are hosting a special series of discussions to help nonprofits address challenges during this recession.

This week’s topic was New Ways for Arts Organizations to Finance Their Operations.  There was an interesting conversation about the ideas of mergers and new ways to raise revenue.

Generating Revenue

Clara Miller: Starting up and growing a new line of business requires investment all its own, and may take years to actually contribute net revenue to operations. And earned revenue is the lion’s share of most arts orgs’ revenue now.  I have seen a variety of creative approaches to wringing more net revenue out of the current business platform:

Examples cited by Clara Miller and Holly Sidford:

• “Meet the artist” salons and other forms of patron engagement
• Deploying artists into the community in various venues (hospitals, schools, etc.)
• Partnerships with business, universities, etc
• 2 for 1 tickets
• Pay-as-you-can admissions
• Free outdoor events with a pass-the-hat request for donations
• Special deals for members and subscribers (perks like free parking, better seats, meet the artists opportunities, free admission to other events)

What ideas is your organization trying to boost revenue?

Mergers and Strategic Collaborations

Clara Miller: From a purely practical perspective, sharing performance space or tech equipment, for example, can be challenging because the nights when ticket sales are highest tend to be the same, and times when rehearsal is needed is similarly clustered. I think that “neutral” platforms–those run commercially, sometimes as cooperatives themselves–are worth looking into because they are already scaled, and actually large enough to benefit from economies of scale–two (or even 12) small arts organizations may get some scale economics, but internal complexity will be problematic in reaching true economies, and will require new skill sets and systems to be built.

Holly Sidford: Arts groups ought to look for opportunities to economize on shared services with non-arts organizations as well as arts groups…it may be more difficult for two arts groups in a given discipline to combine forces than for arts groups to collaborate across discipline lines (dance and theater, for example, or music and dance), or to combine with educational, social service or even health organizations.

An example from the discussion:

The Great Lakes Music Festival, the Eisenhower Dance Ensemble and the Detroit Chamber Winds & Strings, share physical space, marketing staff, and development staff, and accounting among other numerous functions.

More resources and ideas about nonprofit collaborations:

• Fieldstone Alliance’s Tools You Can Use: Engagement Strategies: Making the Most of Working Together

• Foundation Center’s From the Answer Desk: What do I need to know about collaboration and other kinds of strategic alliances?

Other Artful Resources

• Arts in Crisis: A Kennedy Center Initiative

• Springboard for the Arts - check out their delicious account for great resources, and an example of how an organization can aggregate and share information

• smArts & Culture (If you’re on twitter, follow Maryann)

Nonprofit Harvest

• White House Officials Discuss Plans for Social-Innovation Office

• More ways to track stimulus spending in Minnesota and around the country

This week the Chronicle of Philanthropy and Nonprofit Finance Fund launched their discussion series, Financial Management in Tough Times.

The first topic was Financing Options, which included information about loans, PRIs, and other financing options.  Coincidentally, at the same time we were hosting a Social Enterprise Network on capital sources and touched on many of the same topics.

This week’s post gathers definitions and resources shared by participants of both discussions. For more details, I suggest you read the transcript at the Chronicle of Philanthropy’s website or Not-For Profit Accounting’s summary.

Program Related Investments (PRIs)

A PRI is a tool foundations can use to provide capital to nonprofit organizations.  It is more like a loan than a grant because it must be repaid or otherwise provide a return for the foundation.  In their PRI Primer, the PRI Makers Network lays out the benefits of these investments:

PRIs give charitable organizations or commercial ventures access to needed capital, typically at favorable terms. In return, the funder benefits in several ways:

• It is often able to recycle PRI payments for subsequent charitable investments.
• The foundation is generally able to count PRIs toward its minimum five percent payout of net assets.
• PRIs allow foundations of every type and size to have greater programmatic impact.

Resources

• The Hidden Gems of Foundation Funds from Balancing the Mission Checkbook

• What is a Program Related Investment? from the Foundation Center

• PRI Makers Network

• Program-Related Investing guide from Grantcraft

• Calvert Foundation

Community Development Financial Institutions (CDFIs)

Community Development Financial Institutions are vehicles to foster economic growth and ensure access to capital in urban and rural low-income communities.  Many CDFI’s focus on affordable housing and economic development activities.  Others, like Nonprofits Assistance Fund and Nonprofit Finance Fund, specialize in providing credit and financial training to nonprofit organizations that serve low-income and underserved populations.

• Learn more about the CDFI Fund

• To find a nearby CDFI, use the Member Locator on Opportunity Finance Network’s website

Loans and Lines of Credit

Clara Miller issues an important reminder that “loans are never a substitute for revenue” and makes an excellent case for when credit makes sense for your organization. For more information you can also read our Borrowing Guide.

Download our Cash Flow Template to help assess whether or not credit can help your organization bridge a gap caused by grant timing, delays in government reimbursements, or other accounts receivable.

Nonprofit Harvest

• Now What?

• Nonprofits Buying Into Franchises from The Nonprofit Times

• State And Local Governments Consider Fees on Nonprofit Groups