Nonprofit Harvest

Transparency as a Planning Tool

National Council of Nonprofits has produced a series of Special Reports on the economy.  Their most recent update, Strategies Being Used by Nonprofit Leaders To Cope with the Nation’s Economic Crisis, summarizes findings from a range of reports and provides some key takeaways.  I found the first tip is particularly interesting:

[B]eing transparent about financial challenges and “staying close to funders” emerged as an essential strategy for many organizations. Savvy nonprofits are asking grantmakers to be transparent – because nonprofits need to know how much to expect, and within what timeframe, in order to conduct realistic financial planning. For instance, asking foundations to expedite payments,  in these times when “cash flow” for many nonprofits feels like “cash drip,” is a fair thing to ask.  Likewise, it is better to hear bad news – that a grant will be smaller, or delayed, or even discontinued – earlier rather than later so that adjustments can be made immediately.

Until you have information about the likelihood and timing of grants and other sources of revenue, it’s hard to engage in realistic contingency planning.  The Minnesota Council of Foundations is doing their best to gather and aggregate data on how Minnesota grantmakers are responding to economy.

• Updated 2009 Giving Outlook 
• 2009 Giving Forecast by Minnesota Grantmakers

Nonprofits Assistance Fund has also created materials to help organizations manage cash flow and make informed financial management decisions.

• Cash flow template
• Scenario Planning tools:
  • Scenario Planning Example
  • Scenario Planning Worksheet: A blank template for you to use

To see all of our financial management tools and articles, visit the Resources section of our website.

Nonprofit Harvest

Training and Resources

• New! Blue Avocado Webinars
• Human Resources for Nonprofits Update from Not For-Profit Accounting
  
• Alternatives to Forming a Charitable Nonprofit an article from Gene Takagi and Emily Chan of the Nonprofit Law Blog
  

Social Enterprise

• More Details on the Social Innovation Fund from Foundation Center DC
  
• New corporate structure could give social entrepreneurs new funding stream
• Foundation portfolios, proxy action leverage social change from MinnPost

News and Other Updates

• Sales tax breaks for nonprofits: New rules in the works from MinnPost
• Weathering The Storm - Financial Health Standard from Charities Review Council

Dashboards

A few weeks ago, Blue Avocado published a great post about the value of Dashboard reports:

Imagine getting a dashboard like this at every board meeting. With a glance, board members could see how the organization is doing and start asking the important questions. The board would also be able to discuss what indicators should be added to the dashboard and which might not be necessary…

It’s hard to imagine driving a car without quick, ongoing access to a speedometer, fuel gauge, or gear position. An organizational Dashboard can be the same, fast way to check in on basics . . . so you can pay more attention to where you’re going.

It was a timely article, because we had just revamped our own dashboards.  We wanted to make sure we were giving the board and staff the most useful metrics about our finances, programs, and other work.  The end result is more useful dashboard for board and staff, but just was useful was a by-product of the process.  It forced all of us to take a step back and consider what information we’re sharing and why.

As the Blue Avocado article states, it doesn’t tell us where we’re going, but it provides critical information that allows us to focus on our work and the road ahead.  A tool that helps you cut through the noise and focus is a great asset.

For more on dashboards, read What Gauges Belong on Your Dashboard? or Seth Godin’s post, Dashboards.

Overhead

There is an interesting debate swirling about nonprofit overhead expenses.  Are they an investment in infrastructure,  money that could be better spent on programs, or something in between? Do donors care?  Should they?  This is Kate’s take:

Here’s my soapbox

I agree that it’s wise to “Do the same due diligence on your donations that you would your investments or your business.” But when I review an investment opportunity, I review based on the expected criteria for a successful business - profitability, market share, and returns. I don’t review their overhead and management costs. So why would overhead be the criteria for a charity?

…Do some due diligence on charities before you donate, just as you would for an investment or business opportunity. Pay especially close attention to how successful the nonprofit has been at achieving its mission. Do they provide information about how effective their programs are and what impact they have on the people and communities that they serve? Do they have a way to measure and communicate progress and/or success?

Join the conversation at Balancing the Mission Checkbook, facebook, or follow the example of Rich Cowles from Charities Review Council and blog about your position.

Late July Harvest

Mergers

• Joining Forces in the Back Office - Lodestar Foundation Resources
• Nonprofit mergers: Putting the best foot forward

IRS Updates

• IRS Releases Final Regulations for Returns of Small Groups
• IRS Training Materials - Governance

Other Resources

• Workshop Resources, Questions and Answers
• Nonprofit Leadership 601: New to Running a Nonprofit: Here’s an Overabundance of Resources
• Turning Crisis Into Opportunity: A Conversation With Two Nonprofit Sector Leaders

Crowdsourcing: What’s Working, What’s Not

A few weeks ago, Kate issued a call for “stories of change and transformation” and in the comments we talked a little bit about how we could leverage the power of our online community and crowd source this. I’ve had a few conversations about tools and tags, but before we jump into tactics, I wanted to ask:

• Is this happening elsewhere?
• Is anyone interested is collaborating on this kind of project?

Let me know in the comments.

Are You Concerned About Cash?

Blue Avocado’s new issue includes the financial management article, Finance Fear Factor Ratios.  Unfortunately, a number of people can probably relate to this experience:

A CFO at a troubled organization told me, “The first and last thing I do in the morning and evening is look at our bank balance and see if we have enough cash to meet our next payroll. The budget looks fine, but cash flow is our biggest problem.”

How do you know whether or not you should worry?  Read the rest of the article for ratios and four key questions to help you recognize red flags.

You can also read Cash is Cash, Sometimes for information on what could impact your ability to access your organization’s cash.  And our handy Cash Flow Template is available to help you craft your own cash flow projections.

Calling All Minnesota Social Entrepreneurs

Don’t miss your opportunity to enter the Social Entrepreneurs Cup - a joint venture of Social Venture Partners Minnesota and the Minnesota Cup.  This competition “seeks out, supports, and celebrates Minnesota’s most innovative and effective social entrepreneurs and the nonprofit organizations they lead.”

The deadline is Friday, April 24th, so you have one more week to enter.  It’s an opportunity to win a $20,000 general operating grant and 40 hours of consulting from Social Ventures Partners.

In the News: This Week’s Harvest

• The Pohlad Family Foundation announced $20 million in grant support to businesses and nonprofits.  (Our loan fund is generously supported by the Pohlad Family Foundation.  Our complete list of funders is available here.)

• USA Today launched a new feature specifically for the nonprofit and philanthropic community.  Check out the Sharing section for news on our sector.

• The Foundation Center-Cleveland’s online librarian, Katie Artzner, live-blogged a recent conference session, Navigating Your Nonprofit Through Challenging Times.

• Updates from the Social Enterprise Summit (via the Chronicle of Philanthropy):
  • Nearly Half of Charities Operate Businesses
  • New Legal Status for Socially Oriented Business Gains Ground

• White House Appoints Head of Social Innovation Office

On the Stimulus

• New York Times:
  • For States, Stimulus Offers Temporary Relief 
  • Economic Stimulus Special Section
• Washington Post:
  • Taking Apart the $819 billion Stimulus Package
  • States Counting on Stimulus Aid to Balance Budgets

Analysis from Center for Budget and Policy Priorities

• Statement by Robert Greenstein, Executive Director, on the Conference Agreement on the Recovery Package
• Economic Recovery Act: Key Provisions (With State-by-State Estimates)

The Nonprofit Angle

• From the Chronicle of Philanthropy:
  • Congressional Compromise on Stimulus Plan Includes Money for Arts, Social Services, and Volunteerism
• The Cohen Report:
  • Reading an Early Draft of the Stimulus Bill Conference Report: Compromise Provisions (Part I)-Spending 
  • Reading an Early Draft of the Stimulus Bill Conference Report: Compromise Provisions (Part II)-Safety Net Tax Relief 
• Washington Post Op-Ed: Where Stimulus Funds Can Make a Difference

Transparency and Accountability

• Recovery.gov
• From ProPublica (Hat Tip: Utne Reader)
  • Will We Be Able to Follow the Money?
  • The Stimulus Plan: A Detailed List of Spending
  • State-by-State Breakdown of the Economic Stimulus Plan?
• ShovelWatch
• ReadTheStimulus.org (Hat tip: A little light reading…readthestimulus.org)
• From the Sunlight Foundation: We Need Online Review of Stimulus Legislation
• Show Me the Spending

The Minnesota Angle (aka Budget Update)

• Minnesota’s stimulus take: About $9.1 billion
• MPR has a special section devoted to news on the Bailout (it complements their coverage of Minnesota’s budget shortfall)
• From Minnesota Budget Bites:
  • Minnesota quick to prepare for infusion of federal funds
  • Revenue-raising options, with their price tags and impact on tax fairness
  • Legislature asks for your opinion about budget solutions at forums around the state
• pubTalk: MN Legislature: Please Fix the Governor’s Budget
• Political Animal (from Pioneer Press): Pawlenty must redo his budget
• Politics in Minnesota does a great daily roundup of stories on the budget and other related news.

Nonprofits and Credit

• Billions in Nonprofit Projects on Hold Due to Credit Crisis, Report Finds
• Charities Set $166-Billion Worth of Construction Plans on Hold
• Credit Crisis Is Leaving Charities Low on Cash

Other News

• NY Times Op-Ed: Soup-Kitchen Accounting
• From pubTalk: New opportunity for “economies of skill”? 
• Half a Million Nonprofits Could Lose Their Federal Tax Exemptions
• POLICY MEMORANDUM: A Scan of Nonprofit Policy Recommendations for the Obama Administration

 On the Bailout

The Center for Budget Policies and Priorities

The Center for Budget Policies and Priorities has a Special Series Economy Recovery Watch where they post regular updates and analysis on the stimulus package, the state budget crisis, and other economic news.

• Recovery bill’s “Fiscal Stabilization Fund” is important to protecting education and averting state and local budget cuts that would further weaken the economy

The Stabilization Fund would provide funds to partially close state and local budget shortfalls and allow states to avoid some of the most harmful actions they otherwise would have to take to meet their balanced budget requirements.  In particular, it would help avert damaging cuts in state aid to education at a time when school districts are reeling from declines in property taxes caused by sinking property values.

Additional Useful Resources

• What Nonprofits are Saying About the Bailout: A Fast Roundup from Blue Avocado

• From the Cohen Report:
  • What Can Nonprofits Look Forward to in the Economic Stimulus Bill
  • Ensuring a Timely Economic Stimulus: The Benchmark of CDBG Expenditures

• The Artful Manager asks Stimulus or pork byproduct? on the NEA’s possible inclusion in the stimulus package

• Economic Stimulus Package’s “Infrastructure Financing Tools” - a Boost to Charities

The Minnesota Angle

• Impact of federal economic recovery bill on Minnesota

• Update: The stimulus challenge from MPR

Updates

• Sources: Tentative deal reached for $780 billion stimulus package

• Democratic officials say tentative stimulus deal reached

Harvesting the Web

• From Philanthropy Potluck:
  • Nonprofit Survival: Four Steps to Take Now
  • Filling the Gaps: Expectations vs. Reality

• Blue Avocado: The Nonprofit Layoff Issue

• From Scott Russell at MinnPost: One more way nonprofits can save a little money

• Q&A with Nell Edgington - Accelerating Social Innovation

• Global Social Investment Exchange on Philanthropy 2173
  

• Avoiding the Sirens Song of Social Media Fundraising - The Great Social Media Debate?

Minnesota Budget Update

• From Smart Politics a Humphrey Institute blog: Minnesota’s 2010 Budget Deficit Among Top 10 Largest In Nation

• Pawlenty budget makes things worse a Star Tribune editorial written by Dane Smith of Growth and Justice and Nan Madden of the Minnesota Budget Project

• Finance and Commerce
  • Even the small state agencies are taking a hit
  • Pawlenty’s HCAF proposal could cost Minnesota federal stimulus dollars
• Politics in Minnesota:
  • How much would it cost to leverage the additional $2 billion in health care money in federal stimulus package? No one knows
  • The T Word: Which taxes to raise? Five ideas that are circulating at the Capitol

• State think tank leaders find little common ground on economic issues

• From the Star Tribune: Editorial: Tobacco bonds aren’t a lasting fix
  

The Nonprofit Angle

• Nonprofits lobby for fair tax hikes to avoid drastic cuts from MinnPost
  

The Local Government Angle

• The City of Minneapolis: Cuts to the City’s 2009 budget

Tuesday’s budget announcement was just the beginning:

The budget debate is just beginning, and Governor Pawlenty said his proposal will need some adjustments in the coming weeks to reflect new financial information.

One change will come when Minnesota learns the amount of its share of the federal economic stimulus bill. Another will come next month, when finance officials update the state economic forecast, which is expected to project an even larger budget deficit.

Deferring Revenue and One-Time Solutions

The Governor proposed a number of one-time solutions which will reduce our budget for the upcoming biennium, but will not address the underlying problems that impact our state.

The impact of these decisions have been addressed more eloquently by others (here, here, here, and here). Concerns about their feasibility can be found here and here.

What strikes me is that we have a problem with our business model. Our expenses outweigh our income.

To fix that problem, we must both cut spending and increase revenue. As D.J. Leary writes in his reaction to the budget, we have a structural problem:

This governor has faced two multi-billion dollar budgetary shortfalls since first being elected in 2002 and he still doesn’t appear to have grasped the reality that Minnesota has a structural defect in its overall fiscal configuration.  Minnesota simply has too narrow an income stream to provide government services at the level its people want and need.  The governor’s budget is nothing more than state government’s version of Three-card Monte.

The Governor is proposing some ways to generate revenue - such as additional fees for service - but has taken off the table one way to do this.  “Don’t increase burdens by raising taxes” was one of the Governor’s underlying principles when crafting this budget.

Taxes are a loaded topic.  Deciding to raise taxes, especially in the midst of a recession, is not easy. What concerns me is that the Governor is not willing to consider this revenue stream.

As an example, can you imagine a nonprofit being unwilling to consider an earned income venture or an individual giving campaign when trying to bridge a 14% funding gap? Or an organization that solved this through problem a large one-time grant, using restricted funds for another purpose, and deferring payments to vendors to the next fiscal year.

Unconvinced? Mr. Leary and I are not alone.

Minnesota Budget Trends Study Commission

Minnesota Budget Trends Study Commission was established at the end of the 2007 session to analyze the factors that were contributing to our state’s ongoing budget volatility.  In particular, they looked at the implications of our shifting demographics:

The State Budget Trends Study Commission is established for the purpose of completing a study of the implications of state demographic trends for future state budget conditions, including both expected revenue collections and spending for state government services and local services supported by state revenues.

On January 12, they released a report that outlined some of the challenges facing the “long-term stability of the state budget.” Their findings included, but were not limited to (emphasis mine):

• Despite continuing to rank high among many key social and economic indicators, Minnesota’s economy has underperformed recently relative to the nation.
• Demographic and economic factors will lead to lower growth of state revenues over the next 25 years.
• Minnesota has a long-term structural budget problem, with long term expenditure growth likely to outpace revenue growth.
• Minnesota’s general fund tax base has grown more volatile in the past decade.

Coverage on the report:

• Report: Minn. budget problems need long-term fix from the AP (via the Star Tribune)
• Minnesota budget trends study says changing demographics require revised state financial system from MinnPost’s Joe Kimball
• Report from Minnesota Budget Trends Study Commission from Jerry Zhao of the Humphrey Institute
• A commission with some common sense ideas from Minnesota Budget Bites

How do we Fix the Problem?

The first step to any solution is acknowledging that there is a problem.