long term strategic financing & capital campaigns april 6, 2010
TRANSCRIPT
Questions from Readings
What is the Nonprofit Finance Fund’s attitude toward debt?
What types of nonprofits were profiled in this monograph, and why do they need loans?
What are some responses to economic hard times?
Why would structural and engagement strategies be better than quick financial strategies?
Loan Case Studies of Educational Nonprofits & Slate 60
Tough Times Strategies: Moving Beyond the Bake Sale
Questions from Readings
What are some of the organizations studied and what were the criteria for selection?
What growth strategies to “really big” nonprofits employ that go against conventional wisdom?
Is government funding growing or declining compared to GDP?
What are 2 quick ways to bring in revenue?
Why develop money making ventures?
What kind of organizations are best suited to this?
How Nonprofits Get Really Big
Short and Long Term Approaches to Finding Revenue
a time-limited effort to raise significant dollars for a specific project. Often the acquisition, construction, or renovation of a building. Sometimes used to build an endowment or fund an extraordinary acquisition. Capital campaigns have a beginning and an end, and employ all the usual means of fundraising.
Capital Campaigns
Capital Budgets
Will the asset improve organizational performance?
How will the acquisition be financed? What will it cost to obtain and maintain
the asset throughout its life? Capital acquisition budgets: showing
capital over time (one year showing total cost, projected additions or sales, proposed through next year.
Asset Management
Determining Cost of Major Purchase Original cost: purchase price, shipping,
accessories, installation, training, other Annual cost: purchase price/estimated
years of use Recurring annual costs: insurance,
maintenance, upgrades, training
Example – Heart House Houston
Expense TOTAL In-Kind
Needed
Land $90,000 $90,000
$0
General Conditions: contractor, surveys, permits, tests, etc.
45,000 25,000 20,000
Professional Services: architects, engineers, legal, etc.
110,000 75,000 35,000
Construction 1,200,000
500,000
700,000
Example – Heart House Houston
Expense TOTAL In-Kind
Needed
Fixtures 12,000 0 12,000
Exterior 30,000 8,000 22,000
Furniture, equipment, supplies
62,000 5,000 57,000
3 years utilities & maintenance
35,000 0 35,000
Example – Heart House Houston
Expense TOTAL In-Kind Needed
3 years operating 420,000 0 420,000
Fundraising 45,000 25,000 20,000
Contingency 80,000 0 80,000
TOTAL $2,129,000
$728,000
$1,401,000
Campaign Elements
Organizational background including funding history, board, etc.
Case statement for organization and specific project (i.e. growth plan)
Budget Budget goals by time and size of gifts Potential donor identification by constituency
(individuals, corporations, foundations etc.) Naming opportunities Materials
Macro Resource Goals
Establish working capital base Maintain a minimum of three months’ operating
funds Retire debt or reduce accounts payable Seek endowment funding for investments Buy or build a facility Establish branches or franchise Conduct marketing campaign to increase revenues Raise salaries and/or increase staff Improve employee benefits Establish volunteer branch Hire CFO
Resource Acquisition
Forming alliances to improve efficiencies (i.e. sharing high-cost professionals, co-sponsorships)
Business income – related and unrelated Loans Investments Planned gifts
Trusts Retirement funds Life insurance policies
Endowments
Permanent gift meant to be kept intact to produce income to support activities, sometimes specific. Organization must be relatively stable. May be restricted for a specific number of years – 25, 50, 100. Restrictions may have stipulations for times of crisis.
Investments
How long can funds be invested? Can we afford to lose money? How secure are funding sources? Are staff capable of overseeing
investments Consider the risk – risk pyramid
Choices for Tight Budgets
Raise service fees, publication rates, membership prices etc.
Charge for services offered for free Eliminate programs and/or downsize
staff Merge Sell underutilized assets
Review of Financial Reports
Suggested Inventory
Independent Accountant Audit Opinion Letter Statement of financial position Statement of activities Statement of financial position Cash flow statement Notes to financials Management letter