Funding: An inside story (Part 1)

Providing leadership to a growing non-profit organization can be a maddening enterprise!

Don't get me wrong, I love the work I get to do every day.  I love my team.  I love our neighbors.  I love our supporters.

But, and maybe it's my prejudice for a "full disclosure" approach to about everything, this job is the hardest one I've ever had, bar none.

A huge part of that "hardness" factor relates to funding.  Forgive me, but it helps to talk about it--just to lay it out there for everyone to see.  This approach is sometimes frowned upon by the experts in philanthropy.  I mean, you just don't reveal everything when it comes to funding, development strategies or the financial threats that you inevitably face along the way if you are attempting anything worthwhile.

So, stay with me for a bit here as we consider a number of the realities of non-profit funding.

1.  Every year you must find a way to virtually, completely recapitalize your business.  This is especially true if you work in the human services/poverty space.  Cash reserves are nice and important, and very difficult to grow in view of the pressing and expanding human need that one observes all around. Basically, in this sector you grow accustomed (almost) to  having to build your wealth from practically ground zero every 12 months.  Thank God for great, good, consistent partners who journey with you in this world!

2.  The reality of differing kinds of funds with different uses can send you over the edge! Very little of the funding received is for general or unrestricted use.  Especially as an organization grows, more and more of the funding comes in the form of contracts, grants, or bequests that restrict and designate just where funds may be legitimately deployed.  So, an organization might have $1,000,000 in the bank, but none of it be available for use except in the special way its purpose is defined.

Imagine if your paycheck were restricted in such a manner. What if you could only use your pay for capital improvements or education or savings?  How would you cover more general operating expenses?  Possibly you would decide to get a part time job!  Non-profit management can feel about that scattered and desperate at times.  Hey, I'm just sayin'!

3.  Then, there are matters related to sheer scale, as in the amount of funding that must be acquired on an annual basis. Let's say your organization crafts an annual operating budget, not including any special capital or reserve efforts, that comes in at $11,900,000.  In real, pressing, "keep you on your toes and awake at night" terms, that budget calls for funding at an annual rate of $1,358 per hour calculated on a twenty-four hour/7-day week basis.

4.  Meeting your financial objectives and goals demands the development of a sophisticated strategy complete with a variety of fundraising tactics.  To raise $1,000,000 monthly you need some large gifts.  You also must be working on a basis of hundreds of smaller gifts.  Staying in touch with your supporters on their terms can be challenging, but essential, and not just because you need their gifts. Effective fundraising assumes that you are working to assist donors realize their individual giving goals.

More and more non-profit organizations are attempting to identify "widgets" to manufacture in hopes that social enterprises might provide some relief.  Fee for services and sales can be helpful in rounding out a comprehensive funding strategy.

No one approach proves adequate.

It's complicated!

More on all of this later, I'm sure.

Thanks for hearing me out. . .it helps, as I noted in the beginning.

But now, I've really got to get back to our daily goal:  $32,592 and some change!

Rethinking non-profit work

The high cost of "success"

I've been aware of the reality for quite awhile now. 

And, that fact doesn't make it easier or more comfortable to write about it! 

You see, the truth is in my world, the non-profit sector in a city like Dallas, the more success you enjoy the higher the stakes for survival!  Yes, that's right, survival. 

Most entrepreneurial leaders and endeavors understand the risk and the necessity of what I call "strategic over-extension."  You take risks to achieve significant gains.  You decide not to "play it safe."  In my case, the needs of hurting people fuel the risk taking, at least in part.  I'll grant that some portion of the approach is defined and shaped by who we are as individuals.  Personality types, strengths and weaknesses, psychological makeup, experience in life, all play a part in one's leadership style and pace.

Over-extension leads to more funding.  More funding leads to more people engaged both in terms of meeting needs, strengthening communities and organizing low-income folks for action and growth in confidence and self and collective efficacy.  More impact in these areas leads to more attention from other non-profit organizations and leaders and more place in local media. 

Success leads to options for partnerships.  All these factors combine to push growth.  As the growth track continues, you find yourself pushed up and out even more.  In due course, the process repeats itself in something of a dynamic swirl, but with even higher risks and stakes.  The cycle upward can repeat itself again and again, depending on how much risk a leader is willing to take, as well as how much stamina he or she draws upon. 

Outsiders who observe the growth part of the process begin to make assumptions about organizations that grow, innovate and expand.  At the top of this list of assumptions is the notion that the growing, "successful" organization has everything under control, needs very little to continue and can be regarded as established and without need. 

Of course, nothing could  be further from the truth! 

The more an organization grows, increasingly taking on higher stakes risks, the more that organization needs entrepreneurial investors, supporters and partners. Rather than seeing "successful" organizations as the most logical place for continuing investments, many folks turn to smaller organizations or to "start up" efforts, I suppose in the hope that such groups offer new solutions or easier access for personal engagement.  Closer investigation of the older, larger organization will dispel such myths.

Other observers lead their own non-profits.  The smaller nonprofit organizations approach often to investigate the prospects of receiving assistance from larger organizations in one form or the other.  At CitySquare we like to remain open to such collective efforts, but the assumption that we are "flush" with readily available resources is far from the truth! 

We encounter these realities again and again.  As a result, we continue to adjust our approach to resource development.  We keep trying to find new venues for telling our story.  At the same time, we reach out to trusted, long term partners to keep them posted on our successes, but even more on our struggles. 

An example of our dilemma can be seen in our current efforts to develop a new community, one-stop-shop resource center in historic South Dallas-Fair Park.  Located at the southeast corner of I-30 and Malcolm X, we call it the Opportunity Center.  We are in the midst of a $13 million capital campaign.  At the same time, we are attempting to fund an annual budget of even more than that! 

Forget our success to date.  We find ourselves in an updraft of real risk:  we need help! 

Sure, we've enjoyed some success and we've touch and lifted thousands of people since our beginnings in 1988.  But, still, we don't have everything figured out! Not by a long shot.

We continue to need loyal, long term investors.  We need partners.  We need new sources of funding.  We need help building viable, conservative cash reserves--an unheard of luxury in many anti-poverty organizations. 

So, don't be fooled by our appearance or our supposed milestones. 

The game is not over. 

The deal is not done. 

And, most of all, we need the help of people just like you.

New leaders' organization in Dallas

Calling all Nonprofit CEOs/Executive Directors!

On behalf of the transitional team, you are invited to attend the final meeting of the Association of United Way Agency Executives (AUWAE) and inaugural meeting of the Chamber of  Human Service Nonprofits/
Friday, September 16, 2011
9:00 am-10:15 am
Communities Foundation of Texas
5500 Caruth Haven Lane
Dallas, Texas 75225

This meeting is open to all AUWAE members, CEO’s/Executive Directors of agencies newly funded by United Way and CEOs/Executive Directors of ALL health and human service providers. Please invite your friends.

AGENDA

Brent Christopher, President/CEO of the Communities Foundation will share his insights into our community impact and how the Communities Foundation has created its funding mechanisms and priorities.

Sandy Kress, Senior Counsel with Akin/Gump and a long time leader in our community and in the state as a proponent of public education will provide an update and offer insights into the future of public education and our opportunity to influence and support that critical process.
A third agenda item will be a quick piece of organizational business as we respectfully retire the Association of United Way Agency Executives and give form to our new organization – Chamber of Human Service Non Profits: aka CHSN.

BACKGROUND INFORMATION

You have heard several times from AUWAE leadership about the work that has occurred over the past nine months to retire the organization now that we are no longer relevant to the United Way structure and to create a new future for our work together. We are ready to remove the “under construction” banner.

With credit to the entire Executive Committee, but especially Florencia Velasco-Fortner, The Concilio who served as the Chair of the organization last year, and to Larry James, CitySquare who will be nominated as the Chair of the new organization, we pondered the question “is there a reason for this organization to exist in the future?” We spent many hours in conversations with community leaders and with United Way volunteer and staff leadership. And we listened to you through personal conversations and a survey that was distributed last January.

The overwhelming response we received focused on two important issues:

• Leadership of north Texas nonprofit human service organizations are very interested in creating a forum for fellowship, discussion and focus on common issues.

• Leadership also expressed a keen interest in opening lines of communication with major funding sources that look to our sector for community-based solutions through collaborative programs.

With those two objectives defining our early planning, we are excited to report that our meeting next Friday at the Communities Foundation will feature two highly regarded community leaders.

We are excited for you to join us to learn more…see you Friday, September 16 at 9:00 am.

Rita K. De Young
Chief Executive Officer
4411 Skillman Street
Dallas, Texas 75206
214-824-1122 Ext. 101
214-824-1148 Fax
http://www.campfireusadallas.org/

Charity Navigator

Charity Navigator, the nation's largest, independent non-profit evaluator, recently sent us our annual rating letter. Charity Navigator "works to advance a more efficient and responsive philanthropic marketplace by evaluating the financial health of over 5,500 of America's largest charities."  Naturally, all of us here at CitySquare are encouraged by Charity Navigator's opinion of our work and our management. 

Here's what the letter said:

On behalf of Charity Navigator, I wish to congratulate CitySquare on achieving our coveted 4-star rating for sound fiscal management.


As the nonprofit sector continues to grow at an unprecedented pace, savvy donors are demanding more accountability, transparency and quantifiable results form the charities they choose to support with their hard-earned dollars.  In this competitive philanthropic marketplace, Charity Navigator, America's premier charity evaluator, highlights the fine work of efficient charities such as your own, and provides donors with essential information needed to give them greater confidence in the charitable choices they make.


Based on the most recent financial information available, we have calculated a new rating for your organization.  We are proud to announce CitySquare has earned our fifth consecutive 4-star rating for its ability to efficiently manage and grow its finances.  Only 6% of the charities we rate have received at least 5 consecutive 4-star evaluations, indicating that CitySquare consistently executes its mission in a fiscally responsible way, and outperforms most other charities in America.  This "exceptional" designation from Charity Navigator differentiates CitySquare from its peers and demonstrates to the public it is worthy of their trust.


Forbes, Business Week and Kiplingner's Financial Magazine, among others, have profiled and celebrated our unique method of applying data-driven analysis to the charitable sector.  We evaluate ten times more charities that our nearest competitor and currently attract more visitors to our website than all other charity rating groups combined, thus making us the leading charity evaluator in America.  Our irrefutable data show that users of our site gave more than they planned to before viewing our findings, and in fact, it is estimated that last year Charity Navigator influenced over $10 billion in charitable gifts.


We believe our service will enhance your organization's fundraising and public relations efforts.  Our favorable review of CitySquare's fiscal health will be visible on our website as of December 1st.


We wish you the best in all of your charitable endeavors.


Sincerely,


Ken Berger
President & Chief Executive Officer

Donations down. . .challenging times. . .

Almost everyone who works in the non-profit sector knows the times are very, very tough.  While our donations are actually up from a year ago at this time, we are well under budget in terms of what we expected and planned as we looked to 2010.  As a result, we are in a scramble to cut expenses and trim programming costs as we move into the end of the year. 

But the extent of the downturn was driven home Monday by a report made public by the Chronicle of Philanthropy.  A concise report on the story appeared on The Huffington Post over the weekend: 

WASHINGTON — A new ranking of the nation's 400 biggest charities shows donations dropped by 11 percent overall last year as the Great Recession ended - the worst decline in 20 years since the Chronicle of Philanthropy began keeping a tally.


The Philanthropy 400 report to be released Monday shows such familiar names as the United Way and the Salvation Army, both based near Washington, continue to dominate the ranking, despite the 2009 declines. The survey accounts for $68.6 billion in charitable contributions.

An earlier report by the Giving USA Foundation found overall charitable giving declined 3.6 percent last year. That report included giving to private foundations and to smaller charities, while the Chronicle's survey only includes top charities raising money from the public.

"It shows that charities are really having a tough time, and this is some of the most successful charities in the United States," Chronicle Editor Stacy Palmer said. "Usually bigger charities are more resilient, so that's the part that is still surprising."

Read the entire story here.

Non-profit reach and scope

Here in Dallas, The Center for Nonproift Management, in partnership with Communities Foundation of Texas, published an interesting report, Surprising Power:  The State of the Nonprofit Sector in North Texas. The report focuses on the work and presence of nonprofit ogranizations in the 16-county region. 

Here are a few of the facts the report "unearthed."

• There are 19,336 registered 501 ( c ) 3, nonprofit organizations in North Texas.
• Of that number, 7,393 file IRS Form 990 tax returns.
• 9,149 are located in Dallas County; 4,788 in Tarrant County.
• In 1998, there were 70,383 nonprofits registered in Texas; by 2008 that number grew to 100,734.
• 82.66% of the region's nonprofits operate with an annual budget of less than $100,000; something less than 2% operate with annual budgets between $5 million and over $10 million.
• In 2008, the total revenue reported on the Form 990 was $17.7 billion; $12.1 billion in Dallas County; $4.7 billion in Tarrant County.
• Texas has 40.8 nonprofits for every 10,000 people.
• In the U. S., the norprofit sector employs almost 13 million people or 9% of the national workforce. 
• Nationally, nonprofits represent 5.2% of the GDP and 8.3% of U. S. salary and wages.
• In the North Texas region, nonprofits employ 94,533 individuals.
• Between 1997 and 2001, nonprofit employment added more than 1 million jobs to the nation's economy. 
• From 1998 to 2005, employment  in the sector grew by 16%--three times faster than the rest of the economy. 
• Nationally, nonprofits employ 12.5 million workers, almost 10% of the workforce.

Non-profit vs. For-profit. . .interesting ideas

Click here to check out Randy Mayeux's blog synopsis of Uncharitable: How Restraints on Nonprofits Undermine their Potential by Dan Pallotta.

Reactions?

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CDM welcomes Steve Palma, new CFO!

Here’s a thrilling new development: Steve Palma has joined the Central Dallas Ministries team as our Chief Financial Officer!

In view of our continuing growth and the increasing complexity of our financial challenges and opportunities, we set about late last summer searching for someone to fill this very important position. We received many resumes and we pursued a rigorous interview and investigation process. At the end, Steve was our unanimous choice to fill this important slot.

Steve brings a wealth of experience to CDM from the corporate world where he spent his career in finance, accounting, retail operations and real estate development for J. C. Penney, JCP Realty, Inc., Melville Corporation and, most recently, CVS/Pharmacy.

While at CVS, beginning in January 2001, he directed the lease administration process for over 6,200 properties and 1,500 closed and sub-leased locations, the construction budget for over 275 new and relocated stores and new store development strategy for the company. He retired from CVS in April 2007.

In addition to this amazing corporate experience, Steve co-founded M5 Technologies, a computer software company, and he owned and operated the New York Sailing School!

As CFO, Steve will be directing the accounting and development offices here at CDM. With one foot in "sources" and the other in "uses," I know that our entire financial operation will only grow stronger as we move into our future.

Hiring Steve is the latest indication of just how seriously our Board, our executive leadership and our entire staff take the stewardship of every dollar given in support of our work in the city.

Over the next several weeks, Steve will spend his time getting to know and understand every department and corner of the world of CDM.

We are most fortunate to have him on board!

Welcome, Steve!

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Thanks, Ted, I needed that!

So, last week I hear Ted Turner, founder-creator of CNN, tell Lou Dobbs that "we sweated payroll for twenty years."

Wow, that is encouraging!

Running, leading, directing a non-profit corporation is much more like managing a business or a venture capital endeavor than a church, I can tell you for sure.

Taking on real risk, sometimes inordinate risk for the sake of your target audience, the community, is simply the nature of the beast in the world of community development.

But, back to Ted Turner. Twenty years of "sweatin' payroll," now there is an encouraging word!

We sweat payroll every two weeks around my world, and we have for the past 15 years! But, like CNN, we have grown and we have served thousands more people than would have been possible without the commitment to "risk it."

In the process we drive the "sideline" crowd nuts. There are some funders who wish we kept 60 to 90 days minimum in cash reserve. Dream on! I'd love to be able to do that. But, you tell me, how do we walk that road when folks are living every day in such devastating need?

Beyond the need there is the fact that what we know needs to be done just requires capacity to risk.

Our payroll comes in at about $145,000 every other week.

Every single member of our team is devoted to helping relieve the pain and the roadblocking reality of poverty here in Dallas. Every single dollar, I mean every single dollar, is spent in a way that makes a difference for those who are struggling for life and hope.

Risk is simply part of the deal.

Thanks, Ted, I needed to hear that you understand what it means to "sweat" a payroll!

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Just for fun, but with a point. . .

Want to see an extremely creative website?

Take a look at http://www.signmeupstan.com/. It is a hoot!

The Richards Group is one of the premier advertising agencies here in Dallas. Obviously, Stan Richards is a creative genius. I also expect he is really fun to work for.

When you get to the site, be sure and click on "The Meeting." The other spots are great, but this one is where you need to go today.

In community development, as in business, the group culture needs to work off of the assumption that there are really no dumb proposals and that mistakes are not only tolerated, they are encouraged for the sake of creativity, progress and group solidarity.

Let me know what you think after you take a look. I gotta tell you, I howled!


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Ray Hunt on great organizations

Ray Hunt runs the Hunt Oil Company. A couple of weeks ago, Hunt delivered a speech to the Texas Energy Council. He talked about economics and the cost of gasoline, predicting that our current high prices are here to stay.

But my interest in his speech has to do with what he said about "the five characteristics that separate great companies from good ones."

1. Great companies develop a strong corporate culture, with shared values and a strong work ethic. "If you have a group of men and women with shared personal values and work ethic, they can do anything," Hunt said.

2. Great companies possess the ability to differentiate themselves from other groups. "If you are like everybody else, that means you're average," Hunt declared.

3. Great companies demonstrate adaptability. Change is expected, never a surprise. The DNA of great teams directs that they will be ready and expect to adapt to ever-changing circumstances and challenges.

4. Great companies adapt with amazing speed. It is no longer enough to be able to change or adapt. It is now necessary to be able to adapt as quickly as possible, and that as a part of normal operating procedures. So much for over valuing the 5-year plan!

5. Great companies are very willing to be contrarian. "If you see the whole industry going in some direction, you will not find us there," Hunt confessed. Hunt expects his employees to make mistakes. In fact, an error-free year likely indicates that a team member was not being aggressive enough. "There is no penalty in our company for a bad idea," Hunt said.

While there is not much connection between the business operations of an oil exploration company now hard at work in Iraq, among other places around the world, and our non-profit, the principles apply. I'm wondering if at some point we would be well-served to have a more in depth conversation with Mr. Hunt.

(The Dallas Morning News, Friday, March 7, 2008, pages 1, 5D)

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Givers' Greed

Doing good can get complicated.

Managing a frontline organization that depends on donations for its continued existance can be extremely complicated.

Donors make the world go round. They can also clog up the system and grind things to an absolute halt! It is amazing how the good intentions of donors accomplish this feat fairly regularly.

Interested in learning more about what I mean? If you are interested in really bringing about change in a city, you've got to read this! Check out this link:

http://www.huffingtonpost.com/justin-hudnall/givers-greed-charitys-_b_70834.html