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:

• Nonprofit Law Blog: 10 New Year’s Resolutions for Your Board
• January Risk Management Tip of the Month: Getting Your Board’s House in Order

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:

• Not-For-Profit Accounting’s 990 To Do List
• From Guidestar: The Revised Form 990: A How-to Guide for Your Organization
• The Charities Review Council’s New IRS Form 990 Resources
• Eve Borenstein’s Form 990 Tips and Resources

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

• Form 990 Resources and Tools
• Form 990 Case Study – The New Form 990: Getting Started – Video Series Introduction – This series of videos, each between five and ten minutes long, are part of The New Form 990 Getting Started case study. Each video covers a key area of the Form 990, using facts from the case study.
• Form 990 Filing Tips archive
• Questions about Schedule A (Public Charity Status and Public Support) and Schedule L (Transactions with Interested Persons)
• IRS Stay Exempt Mini Course, including special features on how to file the new form and information about the revisions.

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

• What Does Grantmakers’ 2010 Funding Outlook Mean for Minnesota Nonprofits?
• Nonprofit Fiscal Rules for the “New Normal”
• Tips : Third Sector Connector : Nonprofit and NGO Tips, News, Best Practices, Resources
• Nonprofit Managers Say Top Investment Priority Is Having Assets in Spendable Form
• NFF’s State of the Sector Survey

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

• Cash flow template
• Projecting and Managing Cash Flow Webinar

Scenario Planning

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

Additional Resources

• For more on scenario planning, check out Contingency and Scenario Planning – What’s the Difference and How Do Nonprofits Get Started? from PhilanTopic.
• To learn more about adapting your budget for greater flexibility, read Blue Avocado’s article, Focus on the Destination, Not the Route (Budget)!

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

• IRS Releases Tips for Attachments to the Form 990 Tax Return
• IRS and 990 Resources from Not-For Profit Accounting
• Sample Policies:
  • Board Operations from the Community Foundation of Sarasota’s Nonprofit Resource Center
  • Model Documents and Policies from the Charities Review Council

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.

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

• Improving Cash Flow Management In Challenging Times: A Primer from Nonprofit Quarterly
• Our Cash Flow Template and Nonprofit Scenario Planning Tools
• Nonprofit Layoffs and Furloughs: Do Them Right from Blue Avocado

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

This Week’s Harvest

• Governor’s Unallotment Plan
• Check out the Nonprofit Quarterly’s Daily Digest – the Nonprofit Newswire
• Strategies for Hard Times: The Case for Sustainable Funding
• Charities Review Council unveiled a draft of their updated Accountability Standards
• Recession Resources for Artists and Arts Organizations

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:

• Tracking Volunteer Time to Boost Your Bottom Line: A Complete Accounting Guide from Blue Avocado
• Value of Volunteer Time from Independent Sector

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

• Two-Thirds of Foundations to Reduce Grantmaking in 2009 from PhilanTopic
• Helping Themselves from the Wall Street
• The Recession Brings Tough Challenges and Opportunities, Say Experts on Socially Run Businesses

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

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

• Not-For-Profit Accounting
• Online mini courses from StayExempt.org (IRS)
  
• What’s New from the IRS: The 2009 Work Plan for the Nonprofit Sector (GuideStar)
• Six Things Every Board Member Should Know About the NEW 990 (Blue Avocado)
• New 990 To Do List

This Week’s Harvest

• Nonprofit News Update from Not-For-Not-For-Profit AccountingProfit Accounting
  
  • Video: Ten Basic Responsibilities of Nonprofit Boards (BoardSource)

• Philantopic’s Nonprofit Strategies for Tough Times: Economic Stimulus Act FAQ, including:
  
  • How do I find out which types of programs are eligible to receive funding?
  • Where do the decision-making powers lie?
  • Where can I turn for assistance and counsel?
  • Related resources

• Transcript from Managing in Hard Times: How Nonprofit Leaders Can Make the Right Decisions

• Media Matters for America launches Financial Media Matters

• Foundations comment on the State Budget
  • Foundation group throws out big ideas to shake up state budget talks (MinnPost)
  • Improve Public Services and Spend Less: Foundations Speak (Philanthropy Potluck)

Tracking Volunteer Time to Boost Your Bottom Line: A Complete Accounting Guide from Blue Avocado

Tracking volunteer time: sounds like another chore? Actually it can help you meet match requirements, improve your financial statement presentations, and reduce liability.

Read the full article for the whys and how-tos of tracking and reporting volunteer time and get more bang for your (volunteer) buck.

Collaboration

Last week I mentioned the award-wining collaboration between the YMCA and JCC/United Jewish Council of Greater Toledo.  SSIR recently interviewed the Collaboration Prize Co-Winners.

Mission Plus Strategy: What did each agency get from the merger?
Connie: The merger allowed each of our agencies to serve who they serve best, drawing from the strengths of each agency. The YMCA could handle all of the recreation activities, and daycare programs, where we are strong.
Abby: Because the YMCA was handling all the recreation and fitness programs that freed us up to completely focus on Jewish community programming and increase our services from cradle to grave

Read the full interview with Mission Plus Strategy to learn more about how “Two Faith-Based Nonprofits That Trust Each Other and Communicate Honestly Can Do Anything.”

Reconsidering Mission

Responding to the state of the economy and the housing market, Habitat Adds Demolition to Its Mission:

Workers will remove (and resell) reusable housing material rather than send it to landfills, some homeless or unemployed people will be paid to work on the program, and money earned through the demolitions will go toward the organization’s longtime goal of getting poor families into new or rehabbed homes.

“You have to look at the mission; the mission is to make housing more affordable,” said Paul Warriner, the executive director of Saginaw’s Habitat for Humanity affiliate. “And when you think about this, that isn’t too much of a stretch.

Updates from the Cohen Report

The Cohen Report perks up, with a series of new articles.

• Nonprofits Speaking for Themselves: The Impact of the National Economic Tailspin: This article compiles information from a number of surveys, including one by MCN, to gauge how the economy is impacting the nonprofit sector.  The post identifies key trends:
  • Budget deficits
  • Using reserves
  • Funding cuts – including sources of cuts and likely future reductions
  • Personnel cuts
  • Mergers
• How Corporate Giving Will Fare in This Recession 
• Foundation Payout Depends on How You Average

Tips for Your Board

• Board role in crisis from pubTalk
• To Be or Not to Be…High Performing from Greenlights

This Week’s Harvest

• Federal News Update for Your Nonprofit
• Why nonprofits are like so totally out of fashion
• What Social Media Can Teach Us About Sustainability
• Funder/Grantee Relationships: Or, What To Do After You Get That Check
• 25 Random Things that Make the Nonprofit Sector Great

And don’t miss out on the Chronicle of Philanthropy’s next live discussion, Managing in Hard Times: How Nonprofit Leaders Can Make the Right Decisions.  Participate Tuesday, March 24th at 11 CT/12 ET or read the transcript.

At this time of year, there are many blog posts on resolutions (mine, Kate’s) and strategies about how to achieve our goals.  PhilanTopic has one that stood out, More Good Advice for Nonprofits.

I suggest you read the entire post, but my favorite suggestion is:

2. Grow your mission. Many nonprofit organizations that were founded between 1929 and 1935 are still in existence. Focus your attention on growing your mission. If you focus on excellence, money will follow. If you focus on money, excellence never happens. As in the best of times, let your mission dictate management decisions.

Grow as in nurture, not grow as in expand.  At a time when we are all fighting the urge to do more with less, let your mission and core competencies be your guide.

Outlook for 2009

This week, the Chronicle of Philanthropy hosted an online discussion, Outlook for 2009: What the Recession Will Mean for Your Organization.

This was a particularly useful and timely discussion.  In the risk of overdoing it, the topic of mission creep came up here as well:

What would be the top five things you would recommend in either assessment/ evaluation or strategic implementation for 2009?

The response?

1. Making sure mission and program [and budget] are aligned. If not, why not?

2. Make sure that core competencies of the org – including staff, facilities, etc are aligned with #1. In good times, orgs sometimes add all sorts of people and programs, and suddenly find that there is an imbalance between what is being done with core mission. Has you mission in fact changed? Ask the hard questions.

If I seem preoccupied with mission creep, it is because we see how it impacts organizations.  An expanded mission may not create a stronger organization. Often it dilutes the services, goals, and focus — which we cannot afford right now.

Check out the rest of the transcript for more information on how the recession may impact your organization’s bottom line.

Giving in Minnesota

For local organizations looking for additional insights, MCF has released its 2009 Outlook Report, which projects foundation and corporate giving for the year.  According to their findings, we should anticipate a decrease in overall giving as compared to 2008:

Overall, grantmakers anticipate giving will drop about four percent in 2009, as compared to 2008. For grantmakers in the sample who give $10 million or more annually, giving is expected to decrease only 1 to 2 percent.

MCF President Bill King also issues a reminder: “This is, of course, a snapshot in time. The giving picture may change with the economy throughout the year.”

• Read the press release

•  2009 Outlook Report

The upcoming Giving Forum will include additional analysis and recommendations.

This Week’s Harvest

• Climate Change on SSIR (Hat tip: Rosetta Thurman)

• Briefing on the Economy and Charitable Giving: December 2008 from the Center on Philanthropy at Indiana University

• Fiscal Sponsors Directory:  Connecting Community Projects with Fiscal Sponsors (Hat tip: PhilanTopic)

• How Small Foundations Can Protect Themselves From a Madoff-Style Scandal

• NEA study: Theaters vulnerable during recession

As you can see from the screenshot, you can sort the data by fiscal year, state, or recipient type.  It’s important to note that this includes grants and PRIs or program-related investments.  (Kate describes the benefits of PRIs in her post, Hidden gems of foundation funds.)

For more information, read the announcement on PhilanTopic.  Their intent is for the map to evolve and accurately reflect foundation giving:

New grants will be added to the map on an ongoing basis to provide the most current picture of foundation giving for programs and issues relating to the economic downturn. Grantmakers are encouraged to send announcements about their grants or PRIs to Matthew Ross at mr@foundationcenter.org.

Do you know what’s happening in your community?  Chime in!

• “Invest in Good Overhead” from Philanthropy 2173

• In This New Economic Reality, Nonprofits & Philanthropy Have to Confront the Fierce Urgency of Now from Perspectives from the Pipeline

• An open letter to MOCA’s board of trustees in the LA Times

• Budget fix in health and human services: Cut rates or cut eligibility from Scott Russell at MinnPost

• What stories do you tell about yourself? from Sasha Dichter
  • While you’re there, check out A NonProfit CEO Manifesto (blame it on Seth Godin)