LONG TERM STRATEGIC FINANCING & CAPITAL CAMPAIGNS April 6, 2010

Questions from Readings  What is the Nonprofit Finance Fund’s attitude toward debt?  What types of nonprofits were profiled in this monograph, and why do they need loans?  What are some responses to economic hard times?  Why would structural and engagement strategies be better than quick financial strategies? Loan Case Studies of Educational Nonprofits & Slate 60 Tough Times Strategies: Moving Beyond the Bake Sale

Questions from Readings  What are some of the organizations studied and what were the criteria for selection?  What growth strategies to “really big” nonprofits employ that go against conventional wisdom?  Is government funding growing or declining compared to GDP?  What are 2 quick ways to bring in revenue?  Why develop money making ventures?  What kind of organizations are best suited to this? How Nonprofits Get Really Big Short and Long Term Approaches to Finding Revenue

a time-limited effort to raise significant dollars for a specific project. Often the acquisition, construction, or renovation of a building. Sometimes used to build an endowment or fund an extraordinary acquisition. Capital campaigns have a beginning and an end, and employ all the usual means of fundraising. Capital Campaigns

Capital Budgets  Will the asset improve organizational performance?  How will the acquisition be financed?  What will it cost to obtain and maintain the asset throughout its life?  Capital acquisition budgets: showing capital over time (one year showing total cost, projected additions or sales, proposed through next year.

Asset Management Determining Cost of Major Purchase  Original cost: purchase price, shipping, accessories, installation, training, other  Annual cost: purchase price/estimated years of use  Recurring annual costs: insurance, maintenance, upgrades, training

Example – Heart House Houston ExpenseTOTALIn-KindNeeded Land$90,000 $0 General Conditions: contractor, surveys, permits, tests, etc. 45,00025,00020,000 Professional Services: architects, engineers, legal, etc. 110,00075,00035,000 Construction1,200,000500,000700,000

Example – Heart House Houston ExpenseTOTALIn-KindNeeded Fixtures12,0000 Exterior30,0008,00022,000 Furniture, equipment, supplies62,0005,00057,000 3 years utilities & maintenance35,0000

Example – Heart House Houston ExpenseTOTALIn-KindNeeded 3 years operating420,0000 Fundraising45,00025,00020,000 Contingency80,0000 TOTAL$2,129,000$728,000$1,401,000

Campaign Elements  Organizational background including funding history, board, etc.  Case statement for organization and specific project (i.e. growth plan)  Budget  Budget goals by time and size of gifts  Potential donor identification by constituency (individuals, corporations, foundations etc.)  Naming opportunities  Materials

Long-Term Strategic Planning

Macro Resource Goals  Establish working capital base  Maintain a minimum of three months’ operating funds  Retire debt or reduce accounts payable  Seek endowment funding for investments  Buy or build a facility  Establish branches or franchise  Conduct marketing campaign to increase revenues  Raise salaries and/or increase staff  Improve employee benefits  Establish volunteer branch  Hire CFO

Resource Acquisition  Forming alliances to improve efficiencies (i.e. sharing high-cost professionals, co-sponsorships)  Business income – related and unrelated  Loans  Investments  Planned gifts  Trusts  Retirement funds  Life insurance policies

Endowments  Permanent gift meant to be kept intact to produce income to support activities, sometimes specific. Organization must be relatively stable.  May be restricted for a specific number of years – 25, 50, 100.  Restrictions may have stipulations for times of crisis.

Investments  How long can funds be invested?  Can we afford to lose money?  How secure are funding sources?  Are staff capable of overseeing investments  Consider the risk – risk pyramid

Choices for Tight Budgets  Raise service fees, publication rates, membership prices etc.  Charge for services offered for free  Eliminate programs and/or downsize staff  Merge  Sell underutilized assets

Review of Financial Reports Suggested Inventory Independent Accountant  Audit Opinion Letter  Statement of financial position  Statement of activities  Statement of financial position  Cash flow statement  Notes to financials  Management letter

Review of Financial Reports Suggested Inventory Monthly Status Reports  Program service reports and ratio analysis  Investment performance Projected Budgets  Operating revenue and costs by function  Cash flow analyses  Capital expenditures  Fundraising projections