Training Module 8: Nonprofit Association Finances & Fundraising

1. Training Module 8: Nonprofit Association Finances & Fundraising Presented by the Southern Early Childhood Association

2. Topics to be Presented… • Strategic planning, resource allocation, budgeting • Cash management • Association profits and financial reserves • Financial responsibilities of the Board of Directors • Financial accountability and audits • Types of nonprofit funding • Nonprofit fundraising • Fundraising laws and regulations • Grant proposals

3. Primary Aspects of Nonprofit Financial Planning • Strategic Planning • Resource Allocation • Budgeting • Financial Controls

4. Strategic Planning • Program development • Resource development 2 goals: financial stability, self-sufficiency • Avoid developing programs in response to funding. • Search for resources to fund programs that specifically match organization mission.

5. Resource Allocation • Tends to be difficult - must determine the balance of resources among organizational overhead, fundraising, program costs, etc • Additional factors to consider: - What is the mission of the nonprofit? - In what type of environment does the organization operate? - How does the organization raise money?

6. Budgeting • Identify short-term and long-term capital requirements • Perform cost-benefit analyses of alternatives • Design objectives based on available resources • Budget resources over a reasonable period

7. Financial Controls • Basic objectives: safeguarding assets, ensuring reliability of financial records • Financial control system should include: - Competent personnel with clear authority - Adequate segregation of duties - Proper procedures for authorization and records - Physical control over assets and records - Independent checks and accurate documentation

8. * DISCUSSION * • How confident are you in the way in which your organization manages each of the four primary areas of nonprofit financial planning (strategic planning, resource allocation, budgeting, financial controls)? • Do any of these areas need significant improvement? How would you institute those improvements?

9. Cash Management for Nonprofits Key Events in Establishing an Annual Budget • Re-evaluate organization mission • Develop long-range objectives • Prioritize long-range objectives • Evaluate existing programs, consider new programs • Determine short and long-term financial requirements • Perform cost-benefit analyses of alternatives …

10. Cash Management for Nonprofits Key Events in Establishing an Annual Budget 7. Design programs based on resources 8. Develop and disseminate budget guidelines 9. Prepare specific program budgets 10. Develop capital, revenue and operational budgets 11. Review ALL budgets and make adjustments 12. Board should review and approve budget

11. * DISCUSSION * • Who is responsible for formulating your organization’s annual budget? • Who has oversight over the budget process? • Are there any “key events” in the budget cycle that are being overlooked by your organization?

12. The Importance of Profits for Nonprofits • Build a reserve fund to insulate the organization from ups and downs • Easiest way to build this fund is to operate at a surplus • Level of reserves needed depends on the organization’s goals and responsibilities • Reserves allow for more flexibility than other funding options

13. * DISCUSSION * • Does your organization place emphasis on earning profits each fiscal year? • If so, what is done with those profits? • If not, does your organization maintain a contingency plan to protect itself in the event of a fiscal emergency?

14. Financial Responsibilities of Association Boards of Directors • Ensure the organization’s financial health • Provide budget and expenditure oversight • Stay abreast of all significant financial issues • Allow association staff to handle day-to-day financial decisions

15. Key Financial Questions for Board Members • Have we run a gain or loss this fiscal year? • Are our income sources rising or falling? • Are are expenses under control? • Do we have sufficient reserves? • Is our cash flow adequate? • Does our financial activity mirror the budget? • Are our financial and strategic plans consistent? • Is our staff productive? • Are we filing all IRS documents on time? • Are appropriate cost classifications identified?

16. * DISCUSSION * • How effective is your Board of Directors in fulfilling their function of providing oversight in your association’s budget process? • Do you feel the Board is doing all it can to ensure the financial well-being of your organization?

17. Guidelines for Becoming a Financially Accountable Organization • Make IRS forms readily available. • Publish an annual financial report. • Utilize an annual independent audit. • Create transparent financial policies. • Avoid and manage conflicts of interest. • Maintain organized financial records. • Understand and follow all local, state, and federal financial regulations.

18. Financial Audits… • Provide a thorough analysis of an association’s financial status • Fulfill the need for independent evaluation • Should be performed regularly, as association resources allow • Find nonprofit proficient CPAs at www.aicpa.org

19. * DISCUSSION * • Does your organization regularly hire outside accountants to perform financial audits? • If so, how well does the organization typically fare in these audits? • If not, what steps could your association be taking to ensure financial accountability within the organization?

20. Types of Nonprofit Funding • Restricted grants • Multi-year grants • Annual funds and other fundraisers • Ongoing sale of organization’s products and services (i.e. Girl Scout cookies) ** All organizations should seek BOTH ongoing and episodic financial support.

21. Fundraising • Fundraising is NOT begging!!! • Most people do not give unless someone asks them to give!

22. Major Sources of Funding • Individuals • Corporations • Local and state governments • Federated funds • Foundations

23. Solicitation Methods • Personal: face-to-face • Personal: letter on personal stationary • Personal: telephone call • Personalized letter • Direct mail • Phone-a-thon (recorded message) • Special event • Door-to-door • Media advertising

24. Fundraising Guidelines • Board of Directors should be involved • Fundraising volunteers should be included • Cultivate donors through communication • Maintain a good organizational image • Don’t expect that for which you didn’t ask! • Be specific regarding contributions • Provide proof that money is producing results • Maintain wide array of funding sources • Use current fundraising revenue as a seed for next year

25. * DISCUSSION * • What types of funding are typically solicited by your organization, and what methods are used to recruit donors? • What are the major sources of funding for your organization? • Is this a strong financial picture of your organization, or should changes be made to the way in which your organization raises revenue?

26. Fundraising Laws & Regulations • Federal tax rules • Postal regulations • State regulations • Local regulations

27. Federal Tax Rules • Record-keeping and Reporting Keep records on: total amount of contributions, information on large contributors, and how the raised funds are spent • Disclosure Statements: made on membership applications, direct-mail appeals, etc

28. Postal Regulations • Reduced postal rates are a major benefit of the 501(c)(3) IRS classification. • BUT – 501(c)(3) organizations must follow strict rules in order to maintain these lower rates • See your local bulk mail coordinator for questions regarding your nonprofit postal permit.

29. State Regulations • Registration: Many states require organizations to register with each state in which they plan to solicit donations. • Disclosures: Organizations are often required to file an annual report with the state.

30. Local Regulations • Many different fundraising laws at the local level • Offices regulating fundraising vary depending on the locality

31. * DISCUSSION * • Who in your organization is responsible for ensuring compliance with federal, state and local regulations regarding fundraising and charitable solicitation? • Do you feel as though the organization follows the regulations carefully, or should more attention be paid to the letter of the law?

32. Summary Organizational Information Problem/Situation Description Work Plan/Specific Activities Outcomes/Impact of Activities 6. Other Funding 7. Future Funding 8. Evaluation 9. Budget 10. Additional Materials 11. Putting It All Together Grant Proposals Should Include…

33. * DISCUSSION * • Does your organization regularly apply for grants to fund its projects and operational costs? • If so, what is the process by which this application is done, and who is responsible for managing the process? • Do you feel your organization takes advantage of existing funding opportunities, or do you feel that more could be done in this area?

34. Resources consulted for this presentation: • www.BoardSource.org • C. Callaghan. “Managing Finances.” The Nonprofit Board Book. Independent Community Consultants, 1985. • Joanne Fritz. “Fundraising Fundamentals,” and “How To: Grant Proposal Writing in a Nutshell.” Your Guide to Nonprofit Charitable Organizations. 2006. • Stephen Hitchcock. “Fund Raising: The Board is the Key.” The Nonprofit Board Book. Independent Community Consultants, 1985. • Andrew Lang. Financial Responsibilities of Nonprofit Boards, BoardSource. • Pfau Englund Nonprofit Law, P.C. www.nonprofitlaw.com

35. Any final thoughts or questions?