Nonprofit Harvest

Assisting nonprofits gather financial management resources that will help them build sustainable futures.

January 22, 2010

New Year, New You?

Filed under: 990, Accounting, Boards, Financial Management Resources, Philanthropy, training — Tags: , , , , , , , , — ashley @ 2:56 pm

It’s a new year, a new decade, time to turn over a new leaf. Like many of you, I have New Year’s resolutions to get my life (and notoriously messy office) in better shape.

Many nonprofit and social enterprise bloggers have the same idea.  My favorite was Nell Edgington’s ideas about Social Impact Finance:

It’s a new year and a new decade, and both hold tremendous promise for creating real social change.  And key to significant social change is a fundamental restructuring of how we finance that change.  I think (hope) that in the next decade we will see the emergence of a new Social Impact Finance.  And I imagine it will look something like this…

  • Nonprofits Understand the Power of Finance. Nonprofit organizations understand and become successful at financing their overall operations, instead of fundraising for them.  And they begin to think bigger about their work, the overall outcomes they are trying to achieve and how finance fits into that (The GiveWell blog did a great series on the “Room for More Funding Question.”)

Another one of her predictions, Individual Donors Become a Powerhouse, echoes Kate’s post, The Year For “Right-Sized” Donations and the outpouring of support we have seen in response to the tragic earthquake in Haiti.

(For more on Haiti, I suggest visiting Philanthropy.com and PhilanTopic, which have done a great job covering this story from a nonprofit and philanthropic perspective.)

2010, The Year of the Board?

Is 2010 the year of the board?  Two blogs I read regularly are focusing on  governance to start the new year:

Are you looking for ways to help your board of directors take their leadership to the next level? Check out our webinar Financial Clarity for Nonprofit Boards next Friday, January 29th at 2pm CT (3pm EST). This training is a great way to prepare boards to assess and pursue new financial strategies, as well as shore up their understanding of nonprofit financial reports, terminology, and responsibilities.

We offer a range of financial trainings throughout the year.  They are an easy and affordable way to enhance your nonprofit’s financial management. For more information you can visit our website or sign up to receive training updates.

New Year, New Rules

We know there’s a new 990. Since organizations operate with different fiscal years (our Fiscal New Year is also April Fool’s Day) how do you know which form to use? Not-For-Profit Accounting has a short explanation to help you:

When do we file the new 990? Read below or click here for a PDF of a general overview of the instructions.

Calendar year – Use the 2008 Form 990 to report on the 2008 calendar year accounting period. A calendar year accounting period begins on January 1 and ends on December 31.

Fiscal year – If the organization has established a fiscal year accounting period, use the 2008 Form 990 to report on the organization’s fiscal year that began in 2008 and ended 12 months later. A fiscal year accounting period should normally coincide with the natural operating cycle of the organization. Be certain to indicate in the heading of Form 990 the date the organization’s fiscal year began in 2008 and the date the fiscal year ended in 2009.

The Nitty Gritty

There have been many useful guides to the new 990. Here are some of my favorites:

In case you want to go directly to the source, these are updates and resources from the IRS:

This is also a good time to review the Top 5 Compliance Problems for 501(c)(3) Organizations.

For folks interested in taking their analysis to the next level, check out The Door Has Opened: New Form 990 Creates Strategic Opportunities and Risks for Nonprofit Organizations.

Nonprofit Harvest

September 30, 2009

All You Need is Love – And the Right Tools

Filed under: 990, Financial Management Resources — Tags: , , , — ashley @ 2:22 pm

Generally I’m a skeptic when it comes to applying business advice to nonprofits.  Although nonprofits are businesses, we also operate under a different greater restrictions.  However, recently there have been two interesting articles I wanted to share.

Dealing with Uncertainty

McKinsey Quarterly’s article, How managers should approach a fragile economy cautioned business managers that the economic uncertainty is far from over. Uncertainly is something that nonprofit financial managers are well acquainted with. McKinsey continued with some suggestions for managing in this environment:

What else must companies do these days to survive and thrive? First, they must drop the pretense that they can predict the future. Second, they must continue adapting their management processes and capabilities with an eye to making better decisions under uncertainty—for example, by abandoning the fixed calendar and planning schedules typical of annual budgeting and operating processes. This change will require a shift to monitoring macroeconomic indicators in real time, something akin to “just in time” manufacturing approaches applied to decision making. It also means building greater flexibility into strategic activity by putting a greater focus on acquiring options, contingency planning, and the use of stage-gating techniques for committing resources.

If you want to employ some of these suggestions at your nonprofit, we have resources that can help.

Cash Flow

Scenario Planning

Additional Resources

Nonprofits are Awesome

The Harvard Business Review’s The Awesomeness Manifesto questions the constant calls for innovation.  Instead of innovating, it suggests that businesses should focus on what is awesome about their product or service:

Love. You know what’s funny about walking into an Apple Store? The people working there care. They don’t just “work at the Apple store” — they love Apple…the goal of Apple Store employees is simply to show off their awesomeness, and let you share it [rather than sell a product]. Love for what we do is the basis of all real value creation.

Reading this, I was struck by how much love exists in the nonprofit sector. We are here because of the mission.  How can we better tap into this love, the awesomeness of what we do?

Some more food for thought at the Nonprofit Quarterly’s article, Nonprofits: We Must Start Beating the Drum and the v3 campaign’s efforts to raise the profile of our sector.

Nonprofit Harvest – Updates on the 990

July 8, 2009

A Capital Idea

Filed under: Economy, Minnesota, Social Enterprise — Tags: , , , , , — ashley @ 4:37 pm

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

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.

June 19, 2009

Survey Says…

Filed under: Data, Economy, Financial Management Resources, Minnesota — Tags: , , , , — ashley @ 3:18 pm

Minnesota’s Current Conditions

On the heels of last week’s post on the Giving USA annual study, we have more data to digest. MCN recently released their Current Conditions Report for June 2009:

Minnesota’s nonprofits continue to be seriously affected by the recession. Nonprofits are bracing for extended impacts from the reduction in revenue they have already seen and expect to continue to see in the coming months and years.

  • Organizations relying on state, local or federal government are seeing varying levels of unreliability in payments to them from government, making it increasingly difficult for organizations to plan accordingly. Exacerbating this is the threat of unallotment for many organizations.
  • A majority of organizations report an increase in demand for services, yet many are still having to cut back on staff.
  • All major nonprofit revenue sources (contributions, government funding, foundation grants, and earned income) are reported to be down from economic affects.
  • Small organizations are feeling the worst affects, with far more reporting declines in revenue and cash shortfalls. Small organizations are also the least likely to have available reserves or a line of credit to fall back on.

These findings are echoed by other studies (here and here).  Although the specifics vary from state to state, and among organization type and size, people in our sector are doing their best to meet demands with fewer resources.

We are all trying to prudently cut costs in ways that minimize the impact on our mission and overall capacity. This is a tall order, especially when combined with increasing needs for service. How do you go about making those tough choices?

A Four Step Framework

Our executive director, Kate Barr and Judy Alnes of MAP for Nonprofits wrote an article for MCF’s Winter Giving Forum, Nonprofit Survival: Four Steps to Take Now:

Economic uncertainty and the threat of impending doom are not unfamiliar territory for nonprofit organizations. We’ve lived through multiple downturns and have “right-sized” ourselves time and time again. Philanthropic organizations have done likewise.

But something feels uncharted about this downturn. Perhaps it’s the fact that it has fallen on the heels of a downturn from which we never really recovered. Perhaps the global nature of the economic stress makes us see ourselves in a broader context. In any event, this fire is real and hot.

Then they lay out four steps to help you make decisions:

  • Focus
  • Identify Your Most Important Work
  • Seek and Speak Financial Truth
  • Review Size, Scope and Structure

Read the rest of the article for more information on this helpful framework.

Other Resources

More resources are available at Sustenance in Lean Times, our resource collection.

This Week’s Harvest

April 24, 2009

It’s National Volunteer Week

Filed under: Accounting, Financial Management Resources, News — Tags: , , , , , , , — ashley @ 2:44 pm

Serve America Act

National Volunteer Week honors the important work of volunteers in our communities.  It seems fitting that President Obama signed the Serve America Act during this time.

In addition to encouraging service, the legislation includes capacity building resources specifically designed for small to mid-sized organizations. For more information, read Kate’s thoughts or learn more about the Serve America Act.

Volunteer Management Resources

We know that volunteers provide a great boost to nonprofits, but they also require specific management resources.  Here are some tools to help nonprofits get the most value out of their volunteers:

Nonprofit Accounting

Speaking of accounting systems, Alan at Not-For-Profit Accounting makes an excellent case for their importance:

We go into the sector because we care about the mission, making a difference, building community, or any other number of reasons.  Not so we can crunch numbers.

But some people are shocked when they realize just how much regulation, filing and paperwork comes with a tax exempt status…The more time it takes to hammer those reports together, the less time you have to do other things like mission and fundraising work.  The harder it is to compile good financial information, the greater the likelihood of it not being as accurate as it should be.  As has been stated more than a few times,  you can’t figure out what you are going to do financially if you don’t know where you stand right now.  Good cash flow planning and budgeting can only be done if you have a system in place that can get you usable information in a timely fashion.

His post, Why You Need an Accounting System also provides resources to help you get you started.  For more ideas on what questions to ask if you need to develop your own system, read Help! We need an accounting system!

This Week’s Harvest

If you are looking for volunteer opportunities in the Twin Cities metro area, I suggest visiting HandsOn Twin Cities or MAP for Nonprofits.

March 30, 2009

The New 990 – What’s All the Fuss About?

Filed under: 990, Accounting, Financial Management Resources, MNBudget, Stimulus — Tags: , , , , — ashley @ 2:23 pm

Navigating the Revised 990

Form 990 Videos: Understanding the Changes

MCN has uploaded videos from 990s Do Matter, a training designed and conducted by Eve Borenstein.  Nearly 3 hours of video is available on their website, Form 990 Videos: Understanding the Changes:

You’ll want to download the presentation slides (3.06 MB, PDF) and the sample form (2.12 MB, PDF) used during the training prior to viewing. We’ve tried to make each section roughly 10 minutes or less to allow you to learn at your own pace.

Additional Resources

This Week’s Harvest

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