Nonprofit Knowledge Matters

Nonprofit Knowledge Matters | Facing the Future

September 17, 2014

Facing the future:  “It’s always wise to look ahead, but difficult to look further than you can see.” Winston Churchill

Notes from the Field, contributed by Jennifer Chandler, Vice President and Director of Network Support and Knowledge Sharing, National Council of Nonprofits

Here’s what we know: Leaders leave.” - I was tempted to use this as my opening salvo when speaking with nonprofit leaders in Indiana last week about continuing and emerging trends. As expected, when I asked those in the room to share what was keeping them up at night related to their nonprofits, about half in the room reported they were worried about their nonprofit’s financial sustainability. But an equal number confessed their concerns about finding new board members to replace those who were retiring, or their apprehension about what would happen if their executive director were to leave. One leader shared how devastating it was for her small nonprofit when a key employee (one of only 3) was out of work for months due to illness.

Transitions are times of great vulnerability for nonprofits. We’ve all seen nonprofits struggle with a funding dip, as donors wait to see how the new leadership will turn out. Transitions may cause collaborations to lose momentum, or strategic thinking to shrink, as the new leader cleans up a mess or simply needs time to get up to speed addressing day-to-day operations. Yet well before the inevitable transition there is a serious conundrum: whose job is it to bring up the fact that the nonprofit needs a leadership transition plan? Both the board and the staff leader may be reluctant to raise the issue, but planning for the future, including leadership transitions, is one of the most important fiduciary duties for any nonprofit board. Advance planning is a proven risk management strategy to minimize the stress of a transition.

While there are many good resources available encouraging nonprofit boards to focus on succession planning well in advance of leadership transitions, instead we are prone to ignoring the issue. Having to deal with transitions through crisis management instead is unfortunately one of the ‘dirty little secrets’ that even your nonprofit board may be hiding.

We understand. It’s hard to gaze into the future to the day when leaders say ‘goodbye.’ That’s why I was so pleased to find a little book filled with lots of wisdom titled, When Leaders Leave. It’s particularly well-suited for nonprofits still being led by their founders. We invited the authors to share an excerpt that we think underscores the vital importance of accepting that the future is uncertain. Once you take that initial psychological leap, you are already preparing your nonprofit to be resilient in the face of a transition of leadership.

Read on for concrete suggestions and inspiration from When Leaders Leave that can help your nonprofit face for the future with renewed resiliency.




Accepting leadership change as inevitable can be the engine that fuels the resiliency and agility an organization needs to thrive. Because change is the only constant we can count on, we all need to embrace it and figure out how to use it in our favor so that we can help our organizations grow and evolve. Here’s what we know.

Leaders leave.  Whether it’s a founder or leader with beginning thoughts about retirement, a new generation leader just starting her planned five-year run, or a transition in board leadership, organizations are always in flux somewhere on the continuum of leadership transition.

Leadership change is a challenge.  Leadership change is not simple. It impacts every employee, board member and stakeholder in the organization.  Anticipating that challenge in advance ultimately smoothes out the process and prepares the organization for a successful transition and integration of new leadership.

Leadership change is opportunity. Knowing that change is inevitable opens the doorway to new thinking about how an organization and its leaders can positively impact the mission. When the environment supports a mantra of continual growth, new directions will evolve. With change in mind, management always has an eye toward long-term growth and development for the individual and for the organization.

Change is constant. And a change in leadership is inevitable. That’s true even when that leader is the founder who passionately embraced a societal need, brought together bright and promising people to think about solutions, and created the organization.  At some time, at some point, that founder/leader will move on.

A change in leadership, which often strikes fear at the very heart of an organization, can throw the board, staff and leadership into turmoil. In fact, people go to great lengths to avoid disrupting the status quo.  Sometimes, they even stay in bad relationships because it seems like a more palatable option. If we are overwhelmed by the fear of new leadership and we try to hold onto the status quo, we expend a lot of energy grasping at something that is unachievable. Successful organizations have both the stability and the resiliency to respond to changes in their internal and external environments.

Change in leadership is, indeed, a painful thought.  But avoiding it or pretending that it won’t happen could put an organization in long-term jeopardy. What is most important is that the facts are faced and parameters put in place to ensure that the organization will continue to thrive and stand on its own without the current leadership.  It is critical because this will ensure that the organization’s leadership can continue to address its mission in positive ways.

Planning ahead and thinking through that potential change in leadership for the chief executive and, sometimes, for the board chair, is actually a series of three processes that support the organization’s overall strength and development: leadership legacy planning, succession planning and transition planning. 

Leadership legacy planning assures the organization’s ability to survive and thrive. This focus is actually part of an important, ongoing process in which the organization periodically assesses its vision based on the reality of current needs and refines its optimal path for growth. This process also provides a roadmap to ensure that all levels of leadership are aligned with the same focus. With advanced leadership legacy planning, the organization will survive a leadership transition and actually thrive because of the reflection inherent in the process and the diverse thinking and energy brought by a new CEO.

The opportunities abound. Every organization has the potential to go through a leadership change and emerge with strength. The transition provides a unique chance for the organization to manage change by establishing good leadership practices and creating an environment of resiliency.

Priscilla Rosenwald and Lesley Mallow Wendell are the authors of When Leaders Leave, a small but mighty book that is jam-packed with practical wisdom based on the authors’ many years of guidance to nonprofits during leadership transitions.




Why “overhead” is not a myth

It’s an undeniable fact: Spending on “overhead” is needed to accomplish your work. Nonprofits may have stuck their heads in the ground to avoid talking about this truth for years - often because so-called “watchdog groups” doled out demerits when a nonprofit was honest about actual costs. Unfortunately the donating public has become accustomed to claims

Fortunately, today an increasing number of nonprofits are talking about their overhead costs differently, and we encourage you to do the same. Why? Because you can’t wiggle your nose and solve the world’s problems. Instead it takes resources. Foir our nonprofits to be financially sustainable we all need to get in the habit of owning our own costs. Our communityies and  donors expect and deserve transparency, and need to know that providing important services in communities costs something. It’s up to us to demonstrate that administrative costs are essential to nonprofit operations. (Our report, Investing for Impact: Indirect Costs are Essential for Success, will give you lots of ideas and proven research to explain why such costs are essential to advancing your mission.) 

Just in time, the federal government is dangling a proverbial carrot in front of the charitable nonprofit community, to help us overcome the false notion that overhead-is-bad. New federal rules that go into effect late in 2014 offer an incentive for nonprofits to know exactly how much “indirect” costs go into their program and service delivery. Nonprofits with grants or contracts with the federal government, or that receive dollars from any down-stream government agency or nonprofit partner providing federal flow-through dollars, will be able to negotiate for recovery of the nonprofit’s indirect costs. (This is quite a change from the past and current system, when most frequently nonprofits are not reimbursed the full costs incurred when they provide services for governments.)

But first, your nonprofit will need to getin the habit of properly allocating administrative/overhead/indirect costs.

What’s the key to changing habits? It’s no surprise that positive and negative reinforcement play a huge role in both establishing and changing habits. So we invite you to identify something that motivates you and your colleagues at your nonprofit, and every time you have the opportunity to explain to a donor, or grantmaker, or to a government partner, how essential administrative costs are to your nonprofit’s ability to deliver services, pass around the chocolate!  And stay on the lookout for special programs offered by your State Association of nonprofits to help you learn about cost allocation, accounting for overhead, and how to prepare for the new OMB Uniform Guidance, that goes into effect at the end of 2014.




Featured Resources

When Leaders Leave by Priscilla Rosenwald and Lesley Mallow Wendell

Why and How to Hire an Interim Executive Director (North Carolina Center for Nonprofits)

Succession planning resources (National Council of Nonprofits)

Twelve ways to get a new executive director off on the right foot (Blue Avocado)

Nonprofit Executive Succession Planning Toolkit (Federal Reserve Bank of Kansas)

Overhead cost definition worksheet (Nonprofits Assistance Fund)

Worth Reading

Golf outings for charity: A “hole- in-one” or a sand trap that drains your resources? (Guidestar)

Raise Your Voice – A Cause Manifesto, by Brian Sooy

Whether you are already a fan of design thinking, or are looking for guidance on nonprofit communications, you will find that Raise Your Voice offers an indispensible reminder to link all your nonprofit’s communications to its cause more intentionally.

After Overhead: Investing in Nonprofit Financial Fitness (Nonprofit Finance Fund)

Nonprofit Knowledge Matters | Will America Give More?

August 20, 2014

Will You Help America Give More?

We don't often ask you to do more than read and reflect on the latest nonprofit trends, explore new resources, or respond to one of our polls in the sidebar. However, right now we could all make history together. We have the opportunity to ensure that nonprofits won't have  to ask Congress every year to extend charitable giving incentives that Congress has approved for the past decade. Just think - we could save all that time in the future, and use it to advance our missions!

The House of Representatives has already passed a bill that would unquestionably help nonprofits with more financial and in-kind resources; the Senate needs a push from all of us to take action. That is why we’re making one of those rare asks of you now – please help all nonprofits by writing your Senators (and talking to them while they are home for the August recess) and urging them to pass the America Gives More Act when they return to Washington in September. (Resources to help you reach out are included below.)

What the America Gives More Act does:

  • Allows donations made through April 15 to be eligible for deductions on the prior calendar year’s taxes – which can create an additional “giving season” for nonprofits around tax time, in addition to the holiday season;
  • Makes permanent the ability of individuals age 70½ and older to donate directly from individual retirement accounts (IRAs) to nonprofits;
  • Makes permanent and enhance incentives to donate nutritious food to food banks;
  • Makes permanent the incentive for donating conservation easements; and
  • Streamlines the excise tax for foundation investment income.

In other words, there's a lot to like about this law, which the House already passed in July, with strong bi-partisan support.

Senators are heading back to Washington soon from the annual summer recess. When they return there will be barely a dozen legislative days left in September before Congress adjourns again for the November elections. This means that the charitable nonprofit community needs to let Senators know right now that when they return to Washington the communities in their districts will be watching to see if they will act with compassion and pass the America Gives More Act

That's why we're making a rare ask of you now: Will you help America give more? Please join other nonprofit board members, staff members, and volunteers across America by delivering this simple message to your Senators: Don’t leave Washington in September until the Senate passes the America Gives More Act; our communities are counting on you.

  • Call your Senators’ local or Washington, DC offices (202-224-3121)
  • Text or Tweet your Senators
  • Write your Senators (see sample letter)

Learn more about the Act and what nonprofits can do to help.

FUNdraising – Perspectives on Corporate Sponsorships

What do wine and surfing have in common? It turns out that clean beaches are good for both picnics and surfing…and for raising money. As Bruce Burtch, author of Win-Win for the Greater Good, explains it, when you find the right alignment of missions and a messenger you trust you’ve got a greater chance of leveraging corporate support into a productive, and financially rewarding, relationship.

We’re pleased to share this article by Bruce Burtch on the importance of mission alignment in “cross-sector” (nonprofit/for-profit) partnerships.

The correct alignment between your organization and a potential corporate sponsor is of paramount importance. By ‘alignment’ I mean that when put side by side, your nonprofit’s mission and culture align with the potential sponsor’s brand, and your nonprofit’s values with their values, so that the partnership is compatible: intellectually, emotionally, and practically. The alignment must make sense to both partners, and especially to the public. This critical need for the proper partnership alignment is what I refer to as “brand fit.”

In what I feel was a stunningly poor example of “brand fit” between Kentucky Fried Chicken and Susan G. Komen in the “Buckets for the Cure” campaign, the wrong product or service alignment can be disastrous for a cross-sector partnership or cause marketing campaign, and more importantly, to a nonprofit organization's reputation.

In your assessment process, as you are selecting who to partner with, take a look at what your organization stands for, as well as the reputation of the for-profit partner. This is the starting point of your alignment process. Appropriate brand fit is fairly obvious. If your nonprofit is a food bank, for example, brand alignment would exist with a local grocery store. If your nonprofit is Habitat for Humanity, a construction business or hardware supply company would provide outstanding alignment because those businesses have expertise, employee talents, and knowledge of construction that are all needed in the building or remodeling of homes.

This alignment creates a natural flow when integrating the mission and cause of your partners into your own organization's culture. It just makes sense - to you, to your organization, to your partners, to the public - to all you wish to attract to the cause.
A perfect example of excellent alignment is the partnership between Barefoot Wine and the Surfrider Foundation, whose mission is the protection and enjoyment of oceans, waves and beaches. Together they created the “Barefoot Wine Beach Rescue Project” to help keep America’s beaches “barefoot friendly.” The partners hosted beach cleanups and restoration events coast-to-coast, utilizing volunteers to clean the shorelines, plant native greenery and collect litter along the beaches. At the end of each event, volunteers enjoyed Barefoot Wine and surf-inspired food. Aligning a brand like Barefoot Wine with the surfing-originated and water-focused Surfrider Foundation is an example of excellent alignment. Even the events themselves emphasized this barefoot-friendly fit.

The campaign won the Cause Marketing Forum’s 2012 “Halo Award” for Best Environmental or Animal Campaign. And while the campaign and both organizations are national in scope, this type of cause-related campaign could just as well have been orchestrated with any community park, beach or swimming pool partnering with local businesses related to water sports. It’s about finding the right idea and the right brand fit.

Bruce Burtch is the author of Win-Win for the Greater Good. Please visit www.bruceburtch.com for more information about cross-sector partnerships.

What is the impact of nonprofits in your state?

 Many state associations of nonprofits produce eye-opening reports that educate us all about the significant role charitable nonprofits play in our communities and in our states’ economies. A compelling example is Causes Count, a new report by CalNonprofits. Economic impact reports from around the country are posted on our website.

Get Ready for Giving Day!

To get the most out of giving days, like #GivingTuesday, you need a clear plan of action. Network for Good has offered our readers a special guide that outlines 11 action items to help you raise more money, rally support, and have more fun with your next giving day. Download the guide and start planning your organization’s campaign, whether for the biggest giving day of the year, Giving Tuesday, December 2, 2014, or any upcoming regional/state giving day.



Worth reading
New Nonprofit CEO Basics by Jatrice Martel Gaiter, executive vice president, external affairs, Volunteers of America 

The Nonprofit Fundraising Solution by Laurence Pagnoni
Free sample tools from the authors 

Have we got a deal for you…Bruce Burtch, author of Win-Win for the Greater Good, has generously shared a discount code with readers of Nonprofit Knowledge Matters to receive a 20% discount ($4) off the retail price ($19.95).
Purchase with the following code: JHHVKMHW.

Be “In the Know”
Do you know that reimbursing employees for medical expenses = reportable income? New regulations in 2014 require employers that reimburse employees through a medical reimbursement plan to report such reimbursement as “income” to their employees. This advice is provided courtesy of the North Carolina Center for Nonprofits and Dennis Walsh, CPA, who advises many charitable nonprofit clients.

Changes ahead for large employers under the Affordable Care Act
Starting in 2015, large employers (those with 50+ employees who work the equivalent of “full-time” as defined by the ACA) will have to report to the IRS whether or not they offer health coverage to their employees.

Nonprofit Knowledge Matters | Crowdfunding for Nonprofits and Fundraising for Overhead

July 9, 2014

What’s missing? #NPFullCosts

npfullcosts-barbecueNonprofits care. Nonprofits are staffed by hard working people. And for a long time, especially now, nonprofits have been doing more with less. So why the negative attitude about paying nonprofits what it really costs for them to operate? What’s missing is the understanding that nonprofits delivering services to individuals and providing programs in communities incur “overhead” expenses just like for-profit and government entities incur. Thank goodness the negative attitude towards essential expenses is changing – even if too slowly. We invite your help in spreading the word.

If you like the message in this cookout postcard, feel free to use it on social media to call attention to the limiting effect of the old thinking about overhead. Just click on the image to view the full-size image and feel free to save it and post it to social media with the hashtag #NPFullCosts. Also be sure to follow @NatlCouncilNPs and @buildnpcapacity on Twitter for updates and new resources. And we invite you to read an article published by NTEN authored by Rick Cohen, our colleague at the National Council of Nonprofits, who makes the case that without investments in technology, such as an up-to-date computers and database solutions (which would generally be accounted for as an “administrative” expense, lumped into the “overhead” category) most nonprofits will have difficulty delivering their missions. How does your nonprofit pay for technology expenses? Have you been successful communicating to grantmakers or governments, when negotiating a contract, the vital connection between investments in technology and advancing your nonprofit’s mission? The article offers ideas that may help critics of overhead understand that all nonprofits need to invest in infrastructure expenses in order to effectively deliver their programs and efficiently advance their missions. Read Changing the Conversation about Overhead.

What Nonprofits Need to Know About Crowdfunding

By Alexandra Woodruff, Summer Fellow

crowdCrowdfunding is any effort to raise money with donations from a large number of people. At its inception, crowdfunding was primarily used by young entrepreneurs as a way to capitalize new for-profit ventures. Now, crowdfunding is projected to become a 90-96 billion dollar industry by 2025, and is being touted as a valuable new tool for fundraising for charitable nonprofits. (No data exists yet that can tell us how many dollars are raised for charitable causes through crowdfunding.)

Crowdfunding happens through either (1) online websites tailored to showcase specific projects or causes, or (2) in-person, arranged around high-energy, community-building events. Here’s a primer:

- Online crowdfunding happens via websites (you may have heard of “Kickstarter” or “Indiegogo”) that allow sponsors of the event to post descriptions, videos, and pictures of their fundraising projects, along with a dollar amount goal. Online crowdfunding has the benefit of expanding far beyond a project’s typical audience, since anyone with internet access has the potential to learn about your project or fundraising cause. A crowdfunded project’s online presence can be shared easily via Facebook, Twitter, or any other social media platform. Additionally, most crowdfunding platforms allow the sponsor of the event fundraiser to reward donors for various levels of donations, which builds excitement that can motivate even more donors to support the cause.

- Live crowdfunding, on the other hand, features exciting live events hosted by those raising funds or by third-party organizations that specialize in creating crowdfunding events, such as The Funding Network (itself a nonprofit). The Funding Network (TFN), which recently founded a chapter in New York, is a London-based organization that is expanding its crowdfunding services globally. Nonprofits wishing to use crowdfunding to fundraise may apply for one of three spots at each live-crowdfunding event hosted by TFN. Nonprofits have the opportunity to give a six minute pitch and answer questions from the audience; audience members then pledge donations in an auction-like setting. “Live crowdfunding,” says Dana Williams, Program Director at TFN’s New York chapter, “brings people together who want to make a bigger impact.” Though TFN specializes in live event crowdfunding, Williams notes that all types of crowdfunding are “democratizing philanthropy.”

How Are Nonprofits Using Crowdfunding?

Nonprofits are using crowdfunding across the globe to expand their reach and raise funds as well as awareness for the causes that matter most to them. This past January, the Utah Nonprofits Association hosted crowdfunding specialist Devin Thorpe to speak about how nonprofits can benefit from online crowdfunding. Thorpe, author of Crowdfunding for Social Good (available as a free download), sums up the influence of crowdfunding: “While crowdfunding does not constitute a complete development plan, no development plan is complete without crowdfunding.”

Any nonprofit can take advantage of the benefits of either live or online crowdfunding. Both models allow donors to ask questions and offer feedback, facilitating discussion and building relationships between donors and organizations. Additionally, both can attract and inspire new donors who might not have contributed to your cause otherwise.

What Should Nonprofits Know About Online Crowdfunding?

There are important nuances in online platforms that nonprofits should be aware of. Some platforms are tailored for creative projects, while others cater specifically to nonprofits interested in using crowdfunding to fundraise. Additionally, different platforms charge different fees: some charge more if a project doesn’t reach its goal, while others don’t charge a fee at all, but also don’t allow the sponsoring nonprofit to collect donations unless they reach the target amount. In that case, donations are never actually collected/debited from the donor’s credit card, so donors’ contributions are not made, and neither the crowdfunding platform nor the nonprofit receive revenue. Something to be alert to: All crowdfunding platforms charge a baseline processing fee, and fees vary.

Pros and Cons of Crowdfunding for Nonprofit Fundraising

Some commentators suggest crowdfunding is pushing charitable nonprofits to be more transparent, since crowdfunding platforms encourage nonprofits to showcase specific projects and indicate how and where a donation of ten, twenty, or fifty dollars will be used. Others point out that online crowdfunding could open up new avenues for fraud, since donors often have not had person-to-person contact with the organization they contribute to. Still others warn that potential donors—who could be anyone from your neighbor to a sympathetic donor thousands of miles away – are less likely to be repeat donors, and that the time, energy, and effort required to host a successful crowdfunding event is draining, with very little promise for a long-term financial return.

Before Your Nonprofit Crowdfunds….Caution!

As with any fundraising activity, nonprofits need to know the laws that regulate fundraising. In 39 states there are laws that require charitable nonprofits to register with the state BEFORE soliciting residents of that state. This means that an online crowdfunding event for a California charitable event, hosted through a platform based in New York, sending messages to potential donors known to be in Illinois, has to wonder, “Which combination of these three states should our nonprofit be registered in?” Good question; one that savvy board members and staff members of charitable nonprofits are increasingly realizing they have to answer in order to responsibly raise funds using the internet or mobile technology, including crowdfunding.

Charitable solicitation laws in most states remain murky when it comes to solicitations via the internet or mobile technology, and certainly don't adress crowdfunding - yet. While the Attorney General of Michigan recently issued a statement specifically about crowdfunding, it focuses less on the obligations of charitable nonprofits, and more on the obligation of donors to keep their eyes open for fraud. The National Association of State Charity Officials published Social Media and Internet Solicitation Wise Giving Tips that offers guidance to nonprofits, donors, and web-based fundraising platforms, warning the latter about their need to be aware of legal requirements pertaining to fundraising, and instructing them to alert the nonprofits they work with about state-specific charitable registration requirements. But don’t rely on the fundraising platforms – know what your nonprofit’s legal responsibilities are.

Ready for more? Join your state association of nonprofits to connect with useful information and stay up-to-date with trends, like crowdfunding, and review our resources on fundraising, charitable registration, and crowdfunding

Nonprofit Knowledge Matters | Celebrating Better Budgets

June 11, 2014

Building a better budget (even if you are allergic to numbers)

During an interview with staff members at the New York Council of Nonprofits, Jenny Chandler, Vice President at the National Council of Nonprofits, learned how to build a better budget:

In an effort to get over my allergy to numbers, I spoke with the terrific team of Kelly Mathews (Chief Operating Officer), Michelle Jarvais (Chief Fiscal Officer), and Elizabeth Mathews (Senior Accountant), who shared with me their “6 P’s” approach to nonprofit budgets. See if you can find the “P’s” in their advice!

Jenny: When you work with nonprofits to build a “better” budget, what are your goals?

Michelle: We’re going for a strategic process that helps you plan – not just taking last year’s numbers and updating them. We encourage nonprofits to look a few years ahead and take a multi-year approach because that will result in a better budget.

Kelly: In my work with nonprofits I often see folks not thinking through the long-term effects of short-term decisions. An example would be a simple cost-of-living adjustment. It’s great in the year it’s given – it bumps up salaries and boosts morale. But has the nonprofit projected out the impact of that adjustment for the next few years? It’s going to change the revenue requirements for many years to come. That could be huge.

Michelle: We encourage nonprofits to think of their budget as a living, breathing, guiding document. Your budget is not something that’s approved by the Board of Directors and then locked in stone for the rest of the year. It’s never going to be static. It’s going to change month-to-month. It’s normal for the actual numbers to turn out differently than you projected when you drafted the budget, so a “better budget” is one that changes with the nonprofit’s experience. 

Jenny: It sounds as if you are suggesting that the board-approved budget should be formally amended throughout the year?

Michelle: Perhaps. Many organizations approve at least one budget revision annually. But sometimes adjustments are anticipated and reflected in the budget narrative so that a formal amendment isn’t necessary. If the narrative is thoughtfully drafted it will explain potential variances and alert the board to alternate scenarios.

Jenny: Wait a minute. You just said, “narrative” – You mean budgets aren’t just numbers on an Excel spreadsheet?

Michelle: No! A budget acts like a narrative when it tells the nonprofit’s story through the numbers. But it’s also useful to add short narrative explanations for various entries so that those reviewing the budget-: -- program staff, the finance committee, and board members – are aware of the underlying rationale for the numbers, or alerted to the reasons why a number in this year’s proposed budget is different from last year’s, for instance.

Jenny: You just mentioned some “P’s” – People who help build and approve the budget. Program staff? What’s their involvement?

Elizabeth: Program staff are the folks who will know the expenses of their programs and will have a wish-list of expenditures that they’d like to include in the budget planning process. It’s helpful to interview them during budget planning time and make them aware that some of the overhead costs for the entire operations (rent, insurance, utilities, internet etc.) will be allocated to their program budget. We need to help all staff understand the full costs of delivering services, which is more than just direct program expenses. In the budget we refer to those indirect and administrative costs as “shared costs,” which fosters the sense that we’re all in this together. We don’t want those shared costs to be covered up or overlooked when the fundraising staff are writing proposals for grants. We need to know our full costs and embrace them, and accurately reflect them in the budget for each program. That’s being transparent, and it’s also building a better budget.

Jenny: What are the biggest myths about budgets?

Kelly: That they are static, and that they are for one-year only. Better budgets are flexible as Michelle explained, and they are also forward looking and multi-year, so they can accurately reflect not only multi-year funding sources, but also projects that extend beyond one fiscal year. Also, if you start from scratch (we call this a “zero-based budget”), you can think about what you really need to make a program or activity successful. What would it cost if you built it from the ground up? Don’t be bound by last year’s budget.

Jenny: What’s an unexpected speed bump for budget builders?

Michelle: Politics. You can’t avoid it. Staff may try to out-hustle each other to secure a greater slice of the budget pie. Office politics play a role in budgets!

Jenny: What do you like best when building a budget?

Elizabeth: It’s a process that keeps everyone in the loop. An example is office supplies. The office manager puts in the supply order. If s/he is aware of how the budget is a guiding document for supplies throughout the year, s/he can monitor the expenditures and push back if someone is requesting supplies that won’t be approved. S/he can help out the rest of the team by being proactive.

Jenny: Is building a budget an art, or a science?

Michelle: Both. It’s a science because you need to rely on a process and policies that tell you who approved the budget and how it’s developed… But it’s an art because you are making projections about the future that are unknown. So you try to be creative in thinking of all the “what if’s” and plan for alternate scenarios for cash-flow or revenue sources. It all ties together – the planning, the process, the policies, the people, the politics, and in the end – the product. A better budget.

You too can learn to build a better budget guided by the finance folks at the New York Council of Nonprofits by attending a webinar on July 23 at 11 am Eastern. Discounted registration is available if you are a member of a State Association that is member of the National Council of Nonprofits.

Changing the Culture on Costs, One Community at a Time

Most nonprofits know the problems caused when governments, funders, and the public incorrectly assume that only program costs are well spent and that overhead costs are undesirable. Some nonprofit leaders in Napa Valley, California are doing something about those attitudes, and providing inspiration for the rest of the nonprofit community...

The Napa Valley Coalition of Nonprofit Agencies recently created an Advocacy Education Committee that is dedicated to two primary goals. First, the committee seeks to promote the sustainability and growth of the nonprofit sector by providing its membership with tools and education to effectively advocate for their mission and clients. Second, the group is educating the community at large about the value of nonprofits. Core to both goals is helping people understand what overhead is and why it is so important for maintaining a vital and effective nonprofit sector.

Sara Cakebread, Co-Chair of the Committee, put it succinctly: “What we’re trying to do is to create a whole program that educates the public: What is overhead, why it is important and why we need to support our nonprofits, if we want them to thrive.” Toward this end, Committee member Becky Peterson reframes how nonprofits should be viewed, “[They] do good work in our community, often filling the gap that government or the private sector doesn’t fill… we need to think about nonprofits as service providers, not as charities.”

This subtle, but important shift supports the growing understanding that to be effective and efficient nonprofits must invest in their infrastructures and a solid base from which to operate.

Cakebread said it well when she observed: “Donors say we want our money to go to programs, we don’t want to spend anything on overhead. As a donor you can’t do that — you can’t give somebody a lot of money and tell them they can’t pay for somebody to administer it. Or deposit the check. Or pay for an office or pay for utilities. All of those things people don’t think about.”

Jan Masaoka, CEO of CalNonprofits, calls The Napa Valley Coalition of Nonprofit Agencies “a great example of local nonprofits working together to get more funding to the communities they serve and represent, as well as working with county officials to streamline government processes."

Subscribe here to receive your free copies of Nonprofit Advocacy Matters (every other Monday), where this article was originally published.

And now for something fun: A summer celebration of charitable nonprofits!

Sit back in your chair, let yourself relax for two minutes to enjoy this short “Motion Graphic” about how nonprofits are essential to the quality of life in our communities. Brought to you by our member State Association, the Nonprofit Association of the Midlands.



Resources to help your nonprofit develop a budget

Budget Best Practice Tips (NYCON)

Financial management resources (National Council of Nonprofits)

NYCON’s Budget and Cash Flow Toolkits: Comprehensive, step-by-step guided & easy to use ● Take a tourInformation & Online Order Form ● Contact your state association of nonprofits to inquire about a discount.

Worth Reading

Is Strategic Philanthropy Yesterday’s News? (Nonprofit Quarterly)

Build a board culture that advances fund development (Cause Planet)

Preventing fraud in the cash disbursement process (Tate & Tryon)

Author Interview: A Board Member’s Easier Than You Think Guide To Nonprofit Finances (Andy Robinson and Nancy Wasserman)

Worth Noting

Beware of a current government grant scam.

Free program: Everything you always wanted to know about Grants.gov (June 25, 1 pm Eastern)

Nonprofit Knowledge Matters | Intern, Volunteer, or Employee?

June 15, 2011

Interns and Unintended Consequences

recruiting internsAbout this time of year, many nonprofits are bringing summer interns on board. Interns can be terrific additions to a nonprofit’s capacity building journey, but it’s important to clarify whether interns are unpaid volunteers or paid employees – or something in between. In particular, there could be unintended consequences if an intern receives a stipend that could transform a volunteer intern into what the Department of Labor would consider an employee, resulting in a risk that the nonprofit could owe back wages (to pay the intern at least minimum wage) and back taxes.

Nonprofit Knowledge Matters | The Financial State of the Nonprofit Sector

May 14, 2014

The “State of the Sector” -  Our take

The Nonprofit Finance Fund's 2014 State of the Nonprofit Sector Survey documents some of the most important trends affecting the nonprofit sector this year. Responses from over 5,000 nonprofit leaders from across the country tell the story of a charitable nonprofit community that for the past six years has reported that it cannot keep up with the increasing demands for services: The majority - 80 percent - reported an increase in the demand for their nonprofit’s services in 2013. That is no one-time spike, but the sixth straight year of increased demands, so the cumulative impact on the sector should not be trivialized. Indeed, the needs are overwhelming: 56 percent reported they were unable to meet the demand for their services last year – the second year in a row in which a majority of nonprofits reported that they could not keep pace.

Some might see the Nonprofit Finance Fund data as proof that the proverbial “safety net” is fraying  – But in our opinion, when 28 percent of those responding reported that they ran a deficit in 2013, the safety net metaphor is no longer valid. When more than a quarter of the respondents’ programs are not financially sustainable -- to the point where they need a safety net themselves -- there is not much “safety” left in the “net” for our communities and vulnerable populations.

Overwhelmingly, the top challenge reported by charitable nonprofits in the 2014 State of the Sector Survey is “achieving long-term financial sustainability.” Yet only 32 percent reported receiving general operating support, and a mere 20 percent reported receiving multi-year funding – both of which we know give financially stressed nonprofits much-needed flexibility to weather financially lean and uncertain times. (This compelling Nonprofit Quarterly article points out a recent report documenting the debilitating effects on nonprofits when general operating support was curtailed in a community in California.)

In sum, here’s our take: the recession is far from over for charitable nonprofits. The “State of the Sector” right now is generally not healthy and for too many charitable nonprofits, not sustainable.

This video reminds us how easy it is to take charitable nonprofits for granted, but let’s not do that. Strengthening the nonprofits that create the environments where we live, work, play, and learn is everyone’s responsibility. It’s worthwhile to pause - imagine our communities without charitable nonprofits – and ask, what would we do differently? And to avoid a future where needs go unmet, how can we protect and strengthen those organizations that have done so much, for so many, for so long, with so little – and right now are no longer able to sustain the pressure?

One answer is for nonprofit staff members to share the findings of the Nonprofit Finance Fund’s State of the Sector survey with every board member and donor, to help others be more aware of all that charitable nonprofits provide in communities and the strains they are under. Second, read and share the report that the National Council of Nonprofits will issue tomorrow, “Towards Common Sense Contracting,” that describes all the challenges continuing to face nonprofits that enter into written agreements with governments. We all need to do whatever we can to remove barriers to advancing nonprofits’ important missions, whenever and wherever those opportunities arise: in the board room, in a chamber of commerce meeting, at a social gathering, or watching a ball game. That’s advocacy in action, and that’s what our charitable nonprofits – and our communities -- need from us right now.

If you are interested to see the State of the Sector survey results for the charitable nonprofits in your state, you can use the Nonprofit Finance Fund’s online Survey Analyzer that highlights responses across states, sub-sectors, and by budget size.  A new "compare" function makes it easy to see similarities and distinctions between data slices side-by-side. And to share a data slice with anyone, just click on the 'share' option in the Analyzer's main menu.

To learn even more about trends and challenges facing charitable nonprofits, and how your peers across the country are responding, join your State Association, and follow the National Council of Nonprofits on Twitter @NatlCouncilNPs so that you’ll receive updates about important reports and emerging issues of importance to all charitable nonprofits.

Bravo for board members who ask questions about financial reports!

In this guest post by a CPA who works with charitable nonprofits, we learn about end-of-the-month financial reports and some useful questions for board members to ask.

By: Wavel Joseph, CPA, CGMA, CFO, Tate and Tryon

In this guest post by a CPA who works for charitable nonprofits, we learn about end-of-the-month financial reports and some questions board members might want to ask.

Your nonprofit’s monthly financial reports most likely include a Statement of Financial Position (sometimes called the “Balance Sheet”) and a Statement of Activities (often referred to as the “Income Statement”). Just looking at those two reports may not tell you enough information for sound decision-making. What questions can board members ask to help them understand what’s going on?

First question to ask: “Are the reports timely?” If the reports were completed some time ago, you should question whether the information is still useful or relevant for making decisions. Second question to ask: “What do you think these reports are telling us?” As the reader of the financial information, have you ever asked the staff member who prepared the financial reports to explain what story s/he thinks the reports are telling? The resulting dialogue may help uncover whether the reports convey a helpful narrative, or instead are ambiguous or confusing to some board members.  Too often board members simply accept reports that are prepared, without asking any questions. If no questions are asked, the staff has no way of knowing whether the reports are actually helping the board understand the nonprofit’s financial position.

Should the financial reports include “variances”?

Comparing where the nonprofit is at the end of a month with where it was in a prior month or comparing year-to-year results can be useful – but not always. Can the preparer explain the variances so that the reader clearly understands the reasons behind the variance? Some variances are generated by activities (or lack thereof) and others could be due to timing issues. For example, a year-over-year comparison may not be relevant if an organization has reorganized its programs or changed its fee structure.

Once the reader understands what’s behind the variances, then a discussion about financial health can follow. The point is that the reader of the reports and the preparer should regularly question why certain reports exist at all. In some cases knowing the variance from a prior time period just isn’t relevant to the progress the nonprofit is monitoring. While we should all strive to be transparent and give board members helpful information, sometimes too much information is not helpful at all!

What story do the financial reports tell?

One element of the month-end financial report not to leave out is the executive summary. This is where the preparer can share the story the financials are telling for that particular month. The summary should highlight what the organization has achieved relating to its financial health in the past month (or year-to-date), draw attention to anything of concern, and set the tone for the actual financial statements that follow. The executive summary is also where the preparer can set the stage for the relevancy of any variances reported on the financial reports, and help the reader gain a better understanding of the month’s financials in the context of the entire fiscal year.

“A picture is worth a thousand words”

Dashboards have become very popular over the past few years, and like Infographics should be created with a sensitivity to the type of information being presented, as well as the intended audience. Colors used in dashboards can play an important role in communicating meaning: action and urgency, in particular. Dashboards can also effectively display chronological comparisons over months or years. Including dashboards in the end-of-month financial reporting package can help the board make better decisions by illustrating what’s coming down the road or what progress has been made. (Resources and tools for making your own dashboard.)

Ideally, the preparer and board members are partners in the financial reporting process,  continually challenging the relevancy of what is reported so that the most timely information is considered and the most helpful trends are evaluated. There is no “one size fits all” solution. Your nonprofit is unique, and each group of board members is unique, so ensure that the financial reports reflect that uniqueness by continually questioning what to include in the end-of-month financial reporting package.  





Resources for nonprofits and board members on financial management (National Council of Nonprofits)

Worth Reading

An executive director’s guide to financial leadership (Nonprofit Quarterly)

Questions every nonprofit should ask about sustainability (MD Nonprofits)

Nonprofit Knowledge Matters | Having Fun With Nonprofit Financial Literacy

April 16, 2014

How much is that doggy in the window?

By Jennifer Chandler

April is financial literacy month, so in the nonprofit community it’s the right time of year to ask this question: “We’ve got some board members who don’t want to serve on the finance committee and claim not to understand financial reports. How can we help them become more comfortable with our nonprofit’s finances?”  Hmm. Without meaning to be flippant, I submit that helping board members with this is as simple as showing them a cute puppy and asking them how much it costs. They might not be familiar with cost allocations for programs, or restricted funds, but they can understand that the cost of the puppy is not just the initial cost, but also the direct costs of food, treats, vet bills, plus the real, yet indirect costs of washing towels (muddy paws!), and just in case – “Oops – the puppy just swallowed its leash!” (this actually happened to a neighbor of mine) – funds set aside for emergencies.

So the puppy provides us with some important but pretty basic concepts in nonprofit finance: calculating full costs, annual budgeting, and reserves. Another very important concept for board members to understand, that I confess I couldn’t figure out how to fit into the cute puppy analogy, is donor restricted funding. Why not take ten-minutes at the next board meeting to make sure everyone is on the same page with these basic concepts?

If you’re still asking: “What’s with the puppy?” I admit that nonprofit accounting is not THAT simple, but how about opening your next board meeting with some cute puppy pictures and then introducing your board to one of these options?

(1)    Take a “video coffee break” – Balance Sheet Basics – What we have, what we owe, and what we’re worth (Nonprofits Assistance Fund);

(2)    Energize the board with a group project: The authors of Nonprofit Sustainability designed a way for board and staff members to analyze, visualize, and recognize the relative costs and return on investments for a nonprofit’s various activities using their “matrix map;” 

(3)    For those who like checklists:  Ask your board to complete a short Financial Management Self-Assessment Tool developed by the Nonprofit Association of Oregon that will give you a starting point for what to focus on first when building up your board’s financial literacy.

(4)    For readers: Share these how-to publications: Understanding Nonprofit Financial Statements, Third Edition  (BoardSource) which can help your board members understand underlying financial concepts so that they are equipped to perform their fiduciary responsibilities, set realistic financial goals, evaluate your organization's performance, and make informed decisions, or the Budgeting guidebook for small nonprofits (a free resource provided by the Virginia Society of CPAs);

(5)    For board members who take the DIY route: Affordable software tool for building a budget with proper cost allocations and managing cash flow: Cash Flow and Budget Toolkit (New York Council of Nonprofits); and finally,

(6)  The OD approach: Share and discuss: How to talk about finances so nonfinancial folks will listen (Bridgespan).

Happy Financial Literacy Month from all of us at the National Council of Nonprofits.

Soon, what you don't know can cost you

Speaking of financial literacy, quick – tell me – what’s your nonprofit’s indirect cost rate? Need a hint? Sometimes it’s referred to as your “overhead” or “administrative” cost rates (although technically there is a difference). Still not sure? Most nonprofit executives don't know either, probably because no one has asked before.

But what if there were a financial incentive for knowing your indirect costs, so that you would be paid more if you could accurately calculate those costs? Would an extra 10%, 15%, or even 26% inspire you to understand the full costs of delivering your nonprofit’s programs?! If so, then read on, because it’s possible!

The National Council of Nonprofits has been focusing on a financial literacy challenge that will benefit the entire nonprofit sector and those we serve. The issue involves the source of a third of the nonprofit sector’s revenue every year: no, it is not foundation grants (which amounts to only 2% of the total revenue to the nonprofit sector) or individual giving (9%), but government contracts/grants that provide 32% of the sector’s revenue.

In the past, governments – federal, state, and local – have often (around 4 out of every 5 times,  according to a recent survey by the Nonprofit Finance Fund) refused to pay nonprofits the full cost of program delivery. How? Among other ways, by setting artificially low limits on how much nonprofit contractors and grantees can receive for the indirect costs (sometimes called overhead or administrative costs). Fortunately, that will change in late 2014 when new federal guidelines go into effect; whenever federal agencies or “pass-through” entities (like state and local governments) use federal funds to pay nonprofits for services provided under a contract or grant, they will have to reimburse the nonprofit for the indirect costs it incurred. How much? Whatever rate the nonprofit has negotiated with the federal government for an indirect cost rate. What if the nonprofit hasn’t already negotiated a rate? Then the nonprofit will have a right to ask either to negotiate a rate or get paid a default minimum rate of 10 percent. So now there is a financial incentive for nonprofits to understand, manage, and recover their full costs. Stay connected with the National Council of Nonprofits and your state association of nonprofits to learn more as the procedures are finalized and more information becomes available later this year.

Fresh Air for Annual Reports

When was the last time your nonprofit invested long hours and significant dollars in drafting, designing, editing, proofing, printing, and mailing a hard copy annual report? If you are scratching your head or thinking, ‘Never!’ you are not alone. With the ease of handheld video cameras, sending an e-blast, and posting a pdf, technology is morphing the traditional annual report into something else. But as these exciting alternative opportunities develop, let’s make sure we continue to honor the purpose: to let in the fresh air of transparency so our nation’s charitable organizations continue to earn the trust of the donating public.

A novel way to present an annual report that offers transparency as well as connections with stakeholders is to host a national conference call. That’s what GuideStar did earlier this year, experimenting with an innovative approach to annual reports.

“We really want to evolve the definition of transparency. We were interested in sharing timely, substantive information in an interactive and easily digestible way,” explained James Lum, CFO of GuideStar, when we asked him why GuideStar chose to convene an “Impact Call” to present its 2013 accomplishments. “We wanted to model financial transparency and essentially be more forward looking than is possible through a traditional annual report.” GuideStar’s February 24, 2014, Impact Call (which was convened via Webex so GuideStar could share dashboards of financial information and depict other information visually) was so successful that GuideStar is planning to convene similar Impact Calls after each quarter’s end, with the next call scheduled on Mary 12.

According to GuideStar, the advantages of moving off paper, and even off its website, into real time, accomplished these goals:

(1)    Sharing timely information: Sharing your nonprofit’s IRS Form 990 financial information immediately shifts attention to the past, whereas sharing a snapshot of more recent financial status is more transparent. Typically, by the time a nonprofit’s Form 990 is filed (sometimes on extension) it’s many months, if not a year or more, since what is reflected on the IRS form was the nonprofit’s actual financial situation.

(2)    Accountable: In a conference call format members of the community are on the phone as the nonprofit’s leadership explains its financial position, mission accomplishments, and perhaps even its challenges. Those community members can submit their questions and get their answers during the call. A call provides real-time access, modeling accountability in a compelling way for those on the call (and for others who may listen to a recording.)

(3)    Inclusive and Interactive: Let’s face it: reading a traditional annual report, even one chock-filled with lovely photos, is still passive. And watching a short video, while more entertaining, asks the viewer to accept a portrayal of the nonprofit that some may worry is overly choreographed. In comparison, simply the act of inviting stakeholders to be at once audience and focus group on an “Impact Call” is an inclusive gesture, signaling to donors and other supporters that the nonprofit has nothing to hide and is listening to community voices. Anyone can join GuideStar’s Impact Call, which means its results are being reported far more widely than to just its funders and board. 

(4)    Comprehensive: Being freed from the traditional “table of contents” of annual reports allows a nonprofit to include the most relevant and timely information that goes beyond financials and includes programmatic outcomes and a prospective discussion of where the organization is heading.

How could your nonprofit reinvent its annual report? Whether convening a call, creating a video, or sticking with paper or pdf, try to personalize the nonprofit. By including voices (such as the Board Chair, senior staff, and perhaps even a loyal donor) and by creating space for interaction, you can portray the nonprofit less like a monolithic institution, and more like the diverse, empathetic, and human-focused organization it is. Accomplishments can be highlighted through testimonials and stories. And if you go the route of inviting the audience to ask or submit questions, that interactive process can present opportunities for explaining why additional help is needed from the community to advance the mission. Your nonprofit might even use an Impact Call to lay the groundwork for recruiting its future advocates: community ambassadors, donors, and even potential board members!

All this sounds great, but will it take a ton of time? Actually, it may not be as time consuming as you think. Preparing for the call might be similar to preparing for a presentation to your board members, especially if your nonprofit already shares timely financial reports or dashboards with board members. What will it take to set-up a webinar, and share a desktop Prezi or PowerPoint presentation, compared with sending out a direct mail piece or an e-mail blast? What are the advantages or draw-backs of each?

Whatever method you choose: How is your nonprofit opening a window to share timely financial and impact information? It doesn’t do your nonprofit any good to wait a year or more to share financial and programmatic information with potential donors. Over a year ago we pointed out the many creative and engaging ways nonprofits are using to turn the traditional “annual report” into a testament to their organization’s impact. A year later, as we open a window to share our updated financial and programmatic information with you via our Charting Impact report, we want to underscore how important it is to provide the donating public with timely and transparent financial and programmatic information. The annual report is dead! Long live the annual report!

For additional resources and educational programs for board and staff on accountability and transparency and financial management, look to your state association of nonprofits. 



Resources for boards on financial literacy

Financial Management – the basics  (National Council of Nonprofits)

Board’s role in reviewing executive compensation (National Council of Nonprofits)

The importance of operating reserves – How much is just right? (Gilman, Rosenburg, and Freeman)

Other goodies for board orientations

Glossary of financial terms  (Nonprofit Finance Fund)

Cheat sheet on balance sheets (Nonprofits Assistance Fund)

Characteristics of financially healthy nonprofits  (Nonprofits Assistance Fund)

How to manage restricted funds (Nonprofits Assistance Fund)

Kivi Leroux Miller has posted all her blog posts on nonprofit annual reports here.

Worth Reading

2014 State of the Sector Report (Nonprofit Finance Fund)

Beyond Financial Oversight: Expanding the Board’s Role in Pursuit of Financial Sustainability (Nonprofit Quarterly)

The Power of Habit: Why We Do What We Do in Life and Business

Nonprofit Knowledge Matters | Funding for capacity building - What is most effective?

March 19, 2014

Effective capacity building support is contextual, continuous, and collective

To gain insights to what grantmakers are currently thinking about nonprofit capacity building, Jennifer Chandler, our vice president and director of network support & knowledge sharing, recently interviewed Lori Bartczak, vice president of programs at Grantmakers for Effective Organizations (GEO). GEO is a community for grantmakers committed to building stronger and more effective nonprofits.

Jennifer Chandler, National Council of Nonprofits: Lori, at GEO you are in a unique position to observe how grantmakers think about funding for capacity building. What are you and your colleagues at GEO seeing?

Lori Bartczak, GEO: What we’re seeing is that as the demand for services from nonprofits continues to rise in communities everywhere, more funders are recognizing capacity building as a critical way to support strong organizations that are equipped to rise to the challenge.

JC: Are there specific types of capacity building funding that grantmakers find more valuable than others to invest in?

Lori Bartczak: In our most recent study in 2011, Is Grantmaking Getting Smarter, we found that a slight majority (65%) of the grantmakers that participated in our survey provided some type of capacity-building support to grantees. The areas they funded tended to be: leadership development, fundraising capacity, evaluation capacity, communications, and technology. When we publish our new report later this year we’ll see whether those categories remain at the forefront.

JC: Can you give us a sneak peek into the new findings?

Lori Bartczak: What we know so far from a listening tour with both funders and leaders of nonprofits is that questions persist about how to build strong nonprofit boards; how to build and track budgets in uncertain times; and how to look at questions of decision-making and leadership. We have also learned that one solution does not fit every problem, because each leader and organization is unique, and circumstances are always changing, so capacity building has to be contextual.

JC: What exactly do you mean that capacity building support needs to be “contextual?”

Lori Bartczak: By “contextual” we mean that it’s essential for capacity building to be tailored to meet the unique characteristics and needs of individual nonprofits, because effective capacity building is influenced by variable characteristics such as the organization’s geography, life cycle stage, and revenue sources, among other factors. Grantmakers want to support their grantees in having the greatest impact possible, and capacity building is a key means of achieving that end. But the diversity of the organizations that grantmakers support makes it difficult to be clear on best practices. Based on fifteen years of experience with our members and conversations with nonprofit leaders, GEO believes that by taking an approach that is contextual (tailored to the unique needs of the grantee), continuous (taking the long view), and collective (considering how the parts add up), grantmakers will be well positioned to provide capacity building support in ways that effectively support nonprofits to achieve lasting impact.

JC: Can you share an example of “contextual capacity building” assistance?

Lori Bartczak: One example is capacity building support through an award established by the Evelyn and Walter Haas, Jr. Fund, called the “Flexible Leadership Awards” program, which provides long-term, customized leadership support to grantees. The award recognizes that there is no one-size-fits-all approach to leadership development. Access to longer term support allows the nonprofit board and staff to step back and think expansively about what their organization wants to achieve and the leadership challenges ahead.

JC: Do you have any suggestions for how nonprofits can help their funders take a more contextual approach?

Lori Bartczak: Last year we traveled around the country and held focus groups with nonprofit leaders to get a better understanding of their capacity needs. One nonprofit leader described an exemplary relationship with one particular program officer. She said: “She will have lunch with us, she visits, she’ll call us because she heard something that might be of relevance to our work. I see her in the community, at coalition meetings, in city meetings. She’s not just sitting in her office. I’m impressed with her because she cares about what we—her funded organizations—are doing. That’s big. We have a relationship, and because of this I am more likely to call her with a concern or a problem, or to let her know what we’re up to so she won’t be blindsided.”

JC: I can imagine that funders might not be wild about GEO’s second finding, of “continuous” capacity building funding, so how should a nonprofit make the case for longer-term support?

Lori Bartczak: Nonprofit leaders repeatedly tell us that funders are not providing capacity-building funding with an appropriate time horizon. At the listening sessions we heard many stories of partially completed capacity-building projects that ended up not meeting their original objectives due to the lack of funding to cover costs required to implement and maintain the work. So we are seeing the need for continuity --

Funders build our capacity, and then what?” one leader asked. “The funders are going to walk away, and we have to be able to sustain whatever they helped us build. A lot of the challenge with capacity building is the question of how we’re going to sustain the work after the funders are done helping us.”

JC: Are foundations aware of the realistic need for long term capacity building, or “continuous” funding as you call it?

Lori Bartczak: Yes, some are. Grantmakers who do this work well devote a considerable share of their time and resources to capacity building and endeavor to establish a strong and open relationship with grantees. For example, one program officer advised fellow-grantmakers to take the long view in their capacity-building work like this: “Be willing to stick with programs longer than three years… While it’s always good to be open to new ideas, funders can sometimes jump from one fad to the next without giving programs enough time to produce results or taking the time to learn from both success and failure.”

JC: In addition to understanding the context, and accepting that capacity building is not usually effective as a short-term intervention, what other measures has GEO noted are needed to promote effective capacity building?

Lori Bartczak: Many successful capacity-building programs reach beyond the executive director role to engage a team that is drawn from multiple levels of the organization. Since people remember and respond to learning new things better when they are in a group, effective capacity building often benefits from a “collective” approach. Also, grantmakers can look for opportunities to collaborate with other grantmakers to leverage investments in capacity and provide more organizations comprehensive support to grantees. Because building capacity requires a significant, ongoing investment, grantmakers might look for opportunities to collaborate with other grantmakers to leverage their individual investments and thereby collectively provide more comprehensive support to grantees. Another way to look at the collective approach is to think about the overall capacity of the set of organizations that are vital to the issue you work to address—whether that set is bound by a geographic area or an issue area – take a systems approach to building capacity.

JC: Can you share an example of this type of collective approach?

Lori Bartczak: In Washington State nine funders were working collectively to build the capacity of the nonprofit ecosystem across the state. The funders came together in 2009 in response to the challenges facing the nonprofit sector as a result of the economic recession. They commissioned an assessment of capacity building in Washington State that found a disinclination for thinking systematically about capacity building at a state or community level, and recommended specific investments and strategies—from providing more general operating support, to filling gaps in knowledge and service delivery. Since 2010, investments from the collaborative include an online directory of vetted consultants and resources related to capacity building, targeted funding to rural areas in the state, and the creation of an organization (Washington Nonprofits) that aims to provide a voice for nonprofits across the state through advocacy, education, capacity building, and networking.

JC: Thank you, Lori, to you and your colleagues at GEO for highlighting practices that can help grantmakers feel more comfortable with funding capacity building.

For even more information on this topic, we recommend that you read this article by Lori that inspired this interview: Supporting Nonprofit Capacity: Three Principles for Grantmakers (Nonprofit Quarterly, December 2013).

Should you go global with your nonprofit’s domain name?

You’ve heard the expression: “Think globally, act locally.” That expression usually applies to our imprint on the environment. But it also is a fitting description of how potential donors and others find your nonprofit via the internet. Today your nonprofit may be using a domain name ending in “.org,” but starting in late summer 2014, two new domain names will be available for nonprofits: “.NGO” and “.ONG.” Unlike .org, the new domains will be available only to charitable nonprofits and other tax-exempt organizations, as well as non-governmental organizations (commonly referred to as “NGOs”) – thus creating for the first time an international database of verified or “genuine” NGOs (according to the Public Interest Registry, the entity that was originally created to manage the .ORG domains). Why might a nonprofit decide to reserve or use a new domain name in addition to its existing URL? Reserving one of the new URLs may help avoid future confusion in the event another organization reserves the same name with a different ending. To make sure your nonprofit has the opportunity to reserve a domain name using one or both of the new endings, you’ll want to visit GlobalNGO.org and fill out an “Expression of Interest” so that you are contacted and have the opportunity to reserve the new domain names when they are released on a first come, first serve basis later this year. Learn more.  


How does your budget grow?

Just announced! We are happy to announce that nonprofits now have two affordable, easy-to-use tools: one to develop their budget and another to help manage their cash flow. These tools were developed specifically with the needs of small and mid-sized nonprofits in mind. It doesn’t take someone with an accounting degree to use them, and they offer the ability to create reports for your board members. Both toolkits are intuitive and easy to use even though they have lots of accounting rules built-in. For example, the budgeting tool makes sure your nonprofit allocates costs in accordance with nonprofit accounting requirements. We are proud that these tools were developed by staff members of the New York Council of Nonprofits with the needs of small nonprofits in mind. Through a generous arrangement with NYCON, any member of our state association network is eligible to receive a member-only discounted price on the toolkits.


If you would like to know more about the NYCON Budget and Cash Flow Toolkits, try the demo, and if your nonprofit is a member of its State Association of nonprofits be sure to contact your membership liaison at the State Association in you state for special discounted pricing and details on other member benefits. If you are not a member of your State Association, learn how being part of the nation’s largest nonprofit network can advance your mission!




Nonprofit Trends

A new nonprofit sector report from New Jersey could be a harbinger of 2014 trends for nonprofits.

  • 82% report increase in demands for services
  • 31% expect expenses to exceed financial support

Interested in what economic trends impact nonprofits in other states?

Did you know?

The new domain name for nonprofits ending in “ONG” has the same meaning as “NGO” (the widely recognized acronym for non-governmental organizations) but it is specifically used in regions of the world that speak Romance Languages (e.g., Spanish, French, Italian, and Portuguese). Learn more.




Worth reading

A message to grantmakers: Why what’s happening in YOUR state matters


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