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By now you should have a general idea of how much money you need to operate and are aware of some funding sources that could contribute toward your efforts (if not, visit some of our earlier blog entries for help).  However, there are still some key questions you should be able to answer, such as “who’s going to actually write the grant applications?” or “what’s the best way to account for these funds?” or “are there other requirements that come with this money and how do I handle them?”…among others.

A good start to answering these questions can be found in identifying some key persons and their associated tasks, including grant writers, grant managers, and bookkeepers/accountants.

Grant Writers
Just as the name implies, grant writers develop the grant package that is sent to potential funders and can assist in identifying other potential funders.  In many organizations (especially start-ups), the organization’s grant writer may also be the board chair or a congregant at the church or a student volunteer or…  In any case, this person ensures that the organization and its programming is placed in the best light for the potential funder to see. 

According to the American Association of Grant Professionals, freelance grant writers must guard against unethical behavior on the part of the organizations on behalf of which they write grants.  Some organizations may try to pay a grant writer only after the grant has been awarded or pay the grant writer with a percentage of the grant money. According to the Association, both of these practices are ethics violations.  Be mindful of this as you consider compensation for your grant writer.

Grant Managers
Consider this scenario:  You got the grant!  Everyone is thrilled…until reality hits.  Someone has to be responsible for administering the project, complying with regulations, reporting to the funder…and that someone is (drums, please) the grant manager.  Regardless of whether you are seasoned professional at a large institution or a volunteer for a grassroots organization, the job of a grant manager is a balancing act – making sure that program staff have the flexibility to accomplish something meaningful, while at the same time that every obligation to the funding source is met. [1]

Bookkeeper/Accountant
Starting out, you may be able to use Microsoft Excel or even a basic version of QuickBooks to account for revenues and expenses for your organization’s administration and programming.  However, as you secure greater amounts of funding from government and philanthropic sources, their compliance requirements may dictate that you seek out an experienced bookkeeper or accountant to report on the use of their funds.  At a minimum, they may require an annual audit of your financing by an independent CPA which, depending on the size of your organization, can cost thousands of dollars.

In conclusion, make sure that your organization’s financial plan include not only raising funds, but properly managing and accounting for these funds as well.

Be strong and be blessed!

[1] – Source: Essentials of Grant Management: A Guide to the Perplexed by Henry Flood (2001).  Article can be found at http://www.tgci.com.

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We are all familiar with the famous quote from the movie “Jerry Maguire” – Show me the money!  It means “put up or shut up”…do what you say you’re going to do…walk the talk.  When it pertains to raising funds for your organization, it is rare that someone will walk into your office and say “I have a million dollars to give to your organization” (it would be nice, but highly unlikely – unless you’re close to Henry Ford or Bill Gates).  Therefore, you have to SEEK out the funds and then do what it takes to SECURE those funds.

Whether it’s a foundation or government grant, each has a process by which you communicate your funding needs as well as how your needs match the funder’s priorities.  There are a number of methods by which you can communicate your needs, including:

  • Face-to-face – As you network in your community, you will meet different people who may have an interest in working with you to address your funding needs.  Take the opportunity to tell them about your organization and, if appropriate, ask for a follow-up meeting to discuss your needs, including financial.  The saying is true that people tend to help those whom they know.  Also, you never know how a person may be able to help you – don’t just focus on the money!
  • Letter of introduction/interest – This is an effective way to introduce your organization to a potential funder without the pressure and time commitment associated with a formal application.  In fact, many funders require this as a “pre-application” step to screen out ineligible requests before time and effort are spent by the applicant to complete a more detailed application.
  • Formal application – Most funders use an application to obtain information about an applicant such as its organizational structure, its target audience, its programming, and its desired use of the funds being requested.  More and more applications for funding are being completed and submitted on-line.

To talk a bit more about formal applications, there are some key pieces of information that are requested (many we’ve talked about before).

  • Tax-exempt status – Many funders can only make contributions to organizations that have obtained tax-exempt status from the IRS.  This means that contributions made to this type of organization are tax-deductible to the contributor and that many purchases made by the organization can be purchased tax-free.  For more information on obtaining tax-exempt status for your organization, please contact me or visit the IRS website.
  • Evaluation – As mentioned in a previous blog entry, a funder wants to know that their contribution will have the desired impact that led them to make the contribution in the first place.  To better ensure this, the application will request details up front on how the program will be evaluated to determine success.  For example, if your goal is to reduce the number of students dropping out of school, how will you know you are successful (e.g., benchmarking, pre- and post-testing, etc.)?  You may consider securing outside assistance from, say, a university to provide expertise and objectivity.

There are many other items included in formal applications for funding.  However, if you are diligent in following the recommendations above as well as those giving in previous blogs, you will be better prepared to apply for and secure funding.  Our plan is to talk about the human capital needs associated with fundraising in our next entry.

Be strong and be blessed!

When it comes to fundraising, knowing where to find the money is as important as how to get it.  We’ve talked some about the “how” in the past, so now we’ll provide a brief introduction to the “where”.

There are five primary sources of funding for nonprofits – individuals, foundations, federated funds, churches/organizations and government [1].

  • Individuals – Individual contributors make up the largest source of giving to nonprofits and once they are contributors, they can become your most fervent advocates.  However, one key disadvantage is the cost associated with developing and reaching these individuals, with a relatively small return per contributor.
  • Foundations – According to the Foundation Center, there are more than 76,000 grantmaking foundations in the United States that give more than $40 billion in gifts annually.  There are three types of foundations: community, corporate and independent.
  • Federated Funds – A federated fund is a cooperative enterprise, owned and controlled by the nonprofit members, whose purpose is raising program and operating capital for each member agency (e.g., United Way).
  • Churches/Organizations – Depending on your organization’s mission, churches and other organizations can become key partners in achieving your goals and objectives.  These organizations are more likely to be a source for volunteers and other in-kind assistance.
  • Government – While a great source for large sums of money, the application process and on-going compliance requirements can be time-consuming and arduous.  To find out about federal government grants, go to www.grants.gov.

We’ll go into more detail on the application process and other issues regarding fundraising in future entries.

Be strong and be blessed!

[1] – Source: managementhelp.org
[2] – Source: www.businessdictionary.com

After you’ve developed the budget for your organization, you will be in a better position to determine the type(s) of funding you will need.  There is a tendency to only focus on the different SOURCES of funding that are available (which we’ll cover in the near future) rather than recognizing and focusing on funding the different TYPES of needs you have.

In general, there are three primary expense types that require fundraising – operational, capital and programming.  As mentioned in a previous blog, operational expenses are expenditures that a business incurs as a result of performing its normal business operations.  Examples of operational expenses include salaries, office space, and supplies.  Capital expenses are expenditures creating future benefits – for example, fixed assets such as a building, property or equipment [1].  One primary difference between operational and capital expenditures is how they are treated for tax purposes.

As you begin to research funding options, you’ll discover that there are many more opportunities to secure funding for programs than there are for funding operations or capital purchases.  This is because many funders are eager to support the functions that directly impact those whose needs are being met (i.e., programming) and place less of an emphasis on the “indirect” functions that support programming (e.g., salaries and buildings).  However, as one who has been on both sides of the funding table, it is recognized that financial support for the people and assets that support programming is vital for long-term sustainability (there’s only so much that volunteers can or would be willing to do!).

To address this need for financial support for operations, many funding sources allow for a percentage of the grant to be used for this purpose (typically, 10% of the grant amount).  There are a few grantmakers that provide funding specifically for operational expenses (e.g., NC Community Development Initiative in North Carolina); however, most of them are housed within city and county governments where resources are scarce and needs are high.  You may find that this amount is insufficient to cover all operational expenses, thus the need to identify additional funding sources.

We will discuss in the near future more details about sources of funding and how to determine which ones to concentrate on for your particular funding needs.

Be strong and be blessed!

[1] – Source: Wikipedia.com

We’ve all heard the expression “if you fail to plan, you plan to fail” …and this is certainly true when it comes to the operations of your nonprofit organization.  As in your personal life, planning for your organization’s fiscal health is a vital element in making sure that, for example, your expected revenues exceed your expenses.  In addition to determining how much money you REALLY need, a budget can help you in the execution of your organizational plan in general (e.g., how many employees do I need, should I buy or rent office space, etc.).

Before going further, it would be good to highlight some general terms that are often used [1]:

  • Fund Accounting – Nonprofit organizations aren’t in the business of making a profit (thus, it’s name :)), so they use an accounting system called fund accounting.  Fund accounting groups financial data together into funds or accounts that share a similar purpose.
  • Revenue – The amount of money that is brought into a company by its “business” activities (e.g., grants, income from programming, contributions, etc.).
  • Expense – Any expenses incurred in the ordinary course of business (e.g., salaries, office space rental fees, taxes, etc).
  • Operating expenses – A category of expenditure that a business incurs as a result of performing its normal business operations.
  • Non-operating expenses – An expense incurred by activities not relating to the core operations of the business (e.g., interest charges or other costs of borrowing funds).
  • Cash-flow – The cash generated from the operations of a company, generally defined as revenues less all operating expenses, but calculated through a series of adjustments to net income.  NOTE: It’s cash flow that pays the bills (“cash is king”)!

The financial statements for nonprofits relate to for-profit statements in the following way [2]:

Business Financial Statement Equivalent Nonprofit Statement
Income Statement Statement of Activities
Balance Sheet Statement of Financial Position
Cash Flow Statement of Cash Flows

Back to developing your budget…   It is recommended that the following steps be taken to methodically develop your budget [3]:

  1. List your monthly nonprofit operational expenses.
  2. List your monthly salaries and wages for each employee (if applicable).
  3. Identify and list your monthly expenses for your specific programs.
  4. Identify your monthly revenues.
  5. Assess the difference between your monthly revenue and expenses.

Please make sure that you are realistic and practical in your planning so that expectations are not set too high.  As with a for-profit business, sometimes an organization can get overwhelmed if it grows too fast too soon!

For more help in developing your budget, contact me or click here.

Be strong and be blessed!

[1] Source: Investopedia.com
[2] Source: http://tinyurl.com/3vyre8h
[3] Source: eHow.com

In the starting phase of your organization, you may be able to provide services with little or no cost – primarily with board contributions and volunteers.  However, as demand for your services increases, you will find that additional financial resources are needed to buy equipment, to hire professional help, to rent office space, and for other necessary expenses.  At this point, a “resources development” plan is recommended to organize your fund raising efforts.

There are a number of issues to consider as you develop your plan, including:

  • What type of funding do I need (e.g., capacity-building, programming, etc.)?
  • Where can I find the type of funding I need (e.g., foundations, government, corporations, etc.)?
  • How much money do I need (i.e., budgeting)?
  • What expertise do I need to manage these resources?

Over the next few weeks, we will discuss these and other issues surrounding the process of securing financial resources for your organization.  If there are related issues you would like to see covered or have specific questions, please let us know and we’ll do our best to address them.

Be strong and be blessed!

You have spent countless hours creating your organization’s programming to meet a need in your community.  You’ve developed key partnerships and your board is top-shelf.  Now you’re ready to approach funders for support – but wait (there’s more :))!  How will you know if what you’ve spent time developing will be successful?  In order to determine whether investments of time, money and energy were worth it, an evaluation of the program should be planned and performed.

It has been said that “(a) true measure of your worth includes all the benefits others have gained from your success.”[1]  Taking this thought a step further, there should be an objective way to account for these “benefits” so that the value (or “worth”) can be better determined.

Program evaluation is an important step in a program’s life cycle and it must be deliberately planned on the front end of the planning process.  Most, of not all, funders want to know how you propose to measure success.  Key questions that should be asked when determining how to evaluate your program include the following:

  • What are the desired outcomes of this program? What are the goals? What are we trying to accomplish within the next month/quarter/year(s)?
  • How will we get there? What activities will enable us to reach our outcomes? 
  • What will indicate to us that we are making progress toward the desired outcomes?

Nevertheless, even if you are already implementing your program, for evaluation purposes it is essential to identify and document the program outcomes, activities, and indicators that will be evaluated.  Think of the desired outcomes as what you ultimately want the program to accomplish, the activities as what you will do to get there, and the indicators as the gauge of whether, and to what degree, you are making progress. [2]

Outcomes should be consistent with what could reasonably be accomplished and not “pie in the sky.”  This doesn’t mean you won’t strive for more, but in terms of carrying out an evaluation the more clearly defined and measurable the outcome, the better.  For example, your outcome may be to reduce the high school drop-out rate among Hispanic students or to increase the number of African-American girls majoring in engineering.

The activities are the interventions that your program will provide in order to bring about the intended outcomes.  In general, program activities can be defined as any type of direct service or information that is provided to participants.  Continuing with the above example targeting African-American girls, you may provide direct tutoring services and mentoring opportunities to encourage more interest in the engineering fields.

Indicators act as the gauge of whether, and to what degree, your program is making progress. Your program’s progress needs to be examined in two distinct ways:

  1. the quantity and quality of the program activities you are delivering, and
  2. the quantity and quality of the outcomes that your program is achieving.

For example, one indicator may be to “increase the number of African-American girls successfully passing advanced math classes in high school by 50% over the next three years.”

Equally important in this discussion are what information is being captured and how you capture information for evaluation.  If you are measuring progress for a particular indicator, you would want to determine the “base line” by obtaining data at the beginning of the program (e.g., how many African-American girls are successfully passing advanced math classes now).  In addition, consider using methods such as focus groups, surveys, and pre-/post-tests to capture relevant data.

As mentioned before, the more detailed you are in planning and executing program evaluation, the more confident you will be in communicating your program’s success (which could lead to increase support of your efforts).

Speaking of “increased support,” we will transition into a series of discussions focusing on obtaining financial support for your organization and programs.

Be strong and be blessed!

[1] – Quote by Cullin Hightower
[2] – Gajda, Rebecca & Jennifer Jewiss (2004).  Thinking about how to evaluate your program? these strategies will get you started. Practical Assessment, Research & Evaluation, 9(8). Source: http://pareonline.net/getvn.asp?v=9&n=8