Nonprofit Financing: This is OUTRAGEOUS!

More on what’s happening TO nonprofits around the country: This time in the State of New York:

A short article by Rick Cohen:
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March 30, 2010; The Business Review | Our reviews of the state budget crises’ impacts on nonprofits have tended to focus on budget cuts and on late payments. But New York State Comptroller Thomas DiNapoli just issued a report [PDF], produced with the help of the New York Council of Nonprofits, the nonprofit state association in New York that is a member of the National Council on Nonprofits, about the delays in state contracts.

According to DiNapoli’s report, 87 percent of nonprofit contracts (of more than $50,000) were not approved prior to the nonprofits’ beginning their work. On average, new contracts were approved nine months after the contract start dates and renewals were five months late on average (state law required that the nonprofits be paid interest on the costs of services they delivered pursuant to late contracts, but New York State has not paid up to the nonprofits in the Comptroller’s study sample and it’s unclear whether it ever will).

Delayed contracts mean that nonprofits are floating the costs of state services without a guarantee that they’ll even have contracts, much less that the contracts will be retroactive to when they started delivering the services. In speaking to Utica Observer Dispatch, Comptroller DiNapoli showed that he gets it: “Not-for-profits are struggling to provide crucial services to New York families. When state agencies fail to approve contracts and make payments on deadline, they make the problem worse.”

The Comptroller’s report contains several important recommendations including standardizing contracts, centralizing contract monitoring and audit management, reducing processing time on nonprofit contracts, establishing performance-based or outcome-based contract measures, prioritizing state funding to reduce or eliminate funding for programs that are inefficient or not cost-effective, and making contract payments more timely.—Rick Cohen

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Using knowledge for success
Dr. Rick Hoefer

Fundraising Through Donated Ticket Sales

My postings in March have primarily been about fundraising for nonprofits. Here is an interesting story about how donated tickets are being used to raise funds in the Chicago area.

But first, I have to say I don’t understand why you need a middle-man skimming off 8% of the ticket price, plus charging the charity a fee to possibly get the tickets in the first place. Am I wrong on this?

A few years ago I had a trip planned to New York City and was taking my daughter with me. I bought two good seats to The Lion King, but, in a momentary lapse of judgement, purchased them a for a performance a week too early. Ouch! But I contacted the local National Association of Social Workers to ask what local charity could use them, got a name, and gave them to the Puerto Rican Education Fund (or something like that). That charity used them for a silent auction item. Worked well for me, for the charity and for the recipient.

Anyway, here’s the article by Bruce Trachtenberg :

March 30, 2010; Naperville Sun | Some people’s bad planning or unexpected conflicts are turning into cash for lucky charities as well as good fortune for people looking to buy tickets for upcoming events. At Tix4Cause.com, people who’ve bought tickets they can’t use for sports, music, theater and other entertainment activities can donate the tickets to a charity.

When sold on its Web site, the charity gets the proceeds from Tix 4 Cause. Tickets are sold at face value and the full amount goes to the charity holding the donated tickets. The company collects an 8 percent fee for processing, plus any postage or shipping costs.

Based in Naperville, IL, outside Chicago, Tix 4 Cause is the brainchild of Ken Nemetz. “Since 2003, I have had the goal and desire to assist charities by creating a Web site that served as a ticket exchange for the donation and sale of unwanted or unused season tickets,” said Nemetz. “You have these corporations and season ticket holders that use about 40 percent of the tickets themselves. The other 40 percent they either give away, sell or eat. And it seemed to me charities could benefit.”

Nonprofits pay an annual $349 fee to be listed on the site, and so far some 35 have signed up and another 200 are considering offers to join. Most current participants are Naperville-based nonprofits, including local chapters of national organizations such as the Humane Society and YMCA. To help them raise cash from donated tickets, charities can send out e-mails to supporters, include information about the service in newsletters or spread the word on social networks.

According to Nemetz, “The YMCA Heritage has earned $1,460 in the four weeks on the site, and still has another 10 months to go before the renewal. We had four Cubs tickets for a game in June, and they were gone in four hours.” The next time you go to the ballpark, the family next to you might not just be smiling about some hard to snag tickets they got, but that they also did some good by buying them.—Bruce Trachtenberg

Leave a comment about this idea, will you?

Using knowledge for success,

Dr. Rick Hoefer

No Cash On Hand At 12% of Charities

One more problem facing nonprofits: no cash!

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America’s nonprofits expect that 2010 will be financially more difficult or as difficult as 2009, according to a survey, the results of which were released by Nonprofit Finance Fund (NFF). And, some of them don’t have enough cash on hand to get through a dry patch of more than 100 days.

The survey of more than 1,300 nonprofit leaders in markets nationwide also found strong evidence of the dramatic and creative steps that organizations are taking to maintain and even expand service delivery to meet increased demand during this time of continued economic uncertainty.

Key findings include:

•The majority (61%) has less than three months of cash available; 12% have none.

•Nearly 90% expect 2010 to be as difficult or more difficult than 2009; only 12% expect 2010 to be financially easier for their organizations.

•80% of nonprofits anticipate an increase in demand for services in 2010; less than half (49%) expect to be able to fully meet this demand level.

•Only 18% of organizations expect to end 2010 above break-even; 35% of organizations ended 2009 with an operating surplus.
“We expect 2010 to be another treacherous year for many nonprofits that routinely take heroic measures to meet demand for services,” said Clara Miller, president and CEO of the New York City-based NFF. “The economic ‘recovery’ has not yet reached people in need, or the organizations that serve them. We must do more to repair the tattered social safety net.”

For “lifeline” organizations that provide critical services to people in need:

•68% expect 2010 to be financially more difficult than 2009 for the people they serve.

•64% do not expect to be able to keep up with demand for lifeline services in 2010.

•56% expect 2010 to be financially more difficult than 2009 for their organizations.

•39% are planning to add or expand programs in 2010; 26% anticipate reducing programs.

“A tough economy is straining families and the child care programs they use,” said Pam Tatum, CEO of Quality Care for Children in Atlanta, Ga. “One approach we’ve taken is to assist families with child care fees. This ensures the child’s access to stable, quality care, and protects the fiscal health of quality childcare programs that would lose revenue with high vacancies. We can’t in good conscience allow quality child care to deteriorate, with so many children in need.”

Nonprofits are taking significant steps to ensure service delivery. During the past 12 months:

•52% have collaborated with another organization to provide programs.

•43% added or expanded programs.

•18% expanded geographies served.

•60% engaged more closely with their board through more reporting and increased communication.

•39% relied more on volunteers.

“Nonprofits aren’t rolling over in the face of economic strain,” said Miller. “The sector is filled with determined individuals and inspiring organizations focused on the most critical issues we face as a society. While the ‘coping mechanisms’ we’re seeing are encouraging, we also need to make fundamental changes to the way the sector is financed.”

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This article is from NPT Weekly, a publication of The NonProfit Times.

Subscribe to The NPT Weekly eNewsletter or any of our other enewsletters and get the latest news and ideas related to fundraising delivered to your inbox.

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It’s always good to see what steps other organizations are taking–it can perhaps provide a new idea to yours.

Using knowledge for success,

Dr. Rick Hoefer

Nonprofits in California Hurting Financially

In yet another posting about the state of affairs in nonprofit funding, this one focuses on nonprofits in one California county. But the same story is being told in states, counties and cities throughout the land.
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March 28, 2010; The Record | The economy may be on the upswing, but the Great Recession’s impacts will be seen in state and local budgets—in cutbacks on funding for nonprofits—for many years to come. In California, nonprofits have watched their local government support dwindle and disappear. The San Joaquin County Historical Museum received $490,000 from the county government a year ago, $304,000 this year, and beginning in the next fiscal year starting in July, zero.

According to the Record in Stockton, the county distributed $800,000 to nonprofits this year, but has told most of the recipients to expect no money next year. Unable to get $50,000, the Community Partnership for Families will have to cut back on its mentoring and computer labs. Family and Youth Services will have to terminate a program that helped parents accused of minor criminal offenses do community service rather than being jailed and separated from their children.

The problem these San Joaquin County nonprofits face is that they can’t turn to the state of California to make up the county-level budget cuts because the state budget is in financial freefall. So they hope that charitable donors will come up with new money. It’s not a pretty picture here or in many other places.—Rick Cohen

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We’re all hoping that the Great Recession gets done with itself soon, but given the depth of pain being felt by people who are served by nonprofits, it will be very long before consumer confidence recovers and need stops increasing.

Using knowledge for success,

Dr. Rick Hoefer

Nonprofit Fundraising on the Internet, Part 3

So far in this series, I have discussed the current (bad) (scary) (horrible) financial situation facing nonprofits. Rather than being just an alarmist, however, I’ve also provided two techniques for adding new, unrestricted revenue to any nonprofit’s bottom line.

These approaches come from the world of online marketiing, and represent ways that have not been mentioned in this connection anywhere that I’ve seen. Affiliate marketing, selling other people’s or organizations’ products while your agency gets a cut, was the first way. Membership clubs was the second. (see previous posts on these topics).

This post describes a third technique to do Internet fundraising for nonprofits. It is called information products in the online marketing industry.

Information Products

Information products are things that educate, inform, inspire and motivate. In the world of internet nonprofit fundraising, these are most likely going to be things that someone in your organization creates. Theese can be in written (report), oral (live presentation), and/or recorded audio and/or video formats.

The best approachh is to have all three, because people and other organizations like to learn in different ways. You can work up your products in different orders: You can first write it and then present it (while recording during the presentation, or you might prefer to present first (recording it as you go) and then develop the written product more fully as a transcript or separate “book”. In this case, the book can be a 20-50 page pdf file that comes directly from the presentation but is presented as a repport.

The question here is, what does your organization know that another organization might like to know?

Does your organization:
• Have a history of implementing a particular evidence-based program well?
• Have a great evaluation plan and process?
• Have tips on working with local officials?
• Have a list of mistakes it has made and lessons learned from those mistakes?

Put yourself in the shoes of another organization. What might they want to know that you can provide? Ask yourself what you wish someone had trained you in before you got to where you successfully are now.

It might be impossible to develop this in-house, and so you may need to hire out the creation of the actual product. Do a good job with it, and be prepared to sell whatever you create in order to get your expenses back and more.

We in the nonprofit world are used to giving our information away, and so creating and selling information products goes somewhat against the grain. Still, it may surprise you how well your knowledge-based products may sell, particularly if it will help the other organization move forward in achieving its goals. Despite the financial difficulties of the nonprofit sector, information is power and often is additional funding as well.

Using Knowledge for Success,

Dr. Rick Hoefer

New Fundraising Technique for Nonprofits, Part 2

Using my newfound knowledge of internet marketing (don’t ask me how I know), I’ve run across the idea of membership sites, where, for example, you pay one fee and get a year-long access to a bunch of useful information that is archived and also added to on a regular basis.

Taking this idea and applying it to nonprofits, I came up with these ideas.

A lot of nonprofits now have a way to donate directly from their webpage. Network for Good, for example, can be set up to accept donations on a nonprofit’s behalf. The visitor just clicks on a button on the nonprofit’s website and is sent to the Network for Good’s website.

The process varies, but it is generally pretty painless for the person donating– UNTIL the final checkout, that is.

The first time I donated to an organization online (I wanted to beat the end of the year deadline for donations in that tax year) I was shocked when I saw that there was a “processing fee” that I could pay or that amount would be deducted from the amount that I donated. As I recall, it was about 4.5% of the total. I felt burned by paying a processing fee to the middle man in this process and I haven’t contributed in this way again.

Convenience always costs, of course, but there is absolutely no reason why a nonprofit should be giving away so much of the money that could be used for services to clients.

An organization can EASILY set up its own business PayPal account and keep nearly 100% of the money people want to donate. (PayPal takes a fee, too, but it is smaller than what I paid to the other organization in order to donate. And there’s not just one way to set this up.

I recommend that nonprofits set up a button on their website that can be good for a one-time donation through PayPal (the giver does NOT have to have a PayPal account to donate). Even better though, in my opinion, is setting up a “membership” program, where the person agrees to donate a set amount per month, through PayPal. This way, the person can donate a smaller amount each month that may add up to more than would be given all at once (the “installment plan”). The process is entirely automated and costs next to nothing.

Just as traditional fundraising programs do, you can set up different levels of giving, with different amounts of incentives. The Silver level might get 2 free tickets to a benefit; the Gold level might get 4 tickets. The Platinum level could receive 4 free tickets and a pass for all four people to a pre (or post)-event reception with the featured speaker.

This “membership” approach fits in precisely with traditional fundraising practices but automates the process and makes it possible to spread the total amount over the year. This benefits both the agency and the donor.

Let me know what you think by using the comment area.

Using knowledge for success,

Dr. Rick Hoefer

Nonprofit fundraising future looks grim

I really don’t seem to be able to go a day without reading something else about how grim the nonprofit funding situation is. Here is more grist for the mill.

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March 21, 2010; New York Times | Things have a long way to go before nonprofit groups can start returning to business as it used to be and it also looks like things are not getting much better for people who are depending on these groups to help them.

According to a survey of 1,315 groups conducted by the Nonprofit Finance Fund (NFF)—and reported in the New York Times—some 80 percent of respondents say they expect 2010 to be harder on them than last year, and that they’ll be asked to do more this year than in 2009. At the same time, only 49 percent believe they can deliver services to all those in need.

Commenting on the survey, NFF chief executive, Clara Miller, said, “One of the clearest messages coming out of this survey is that any kind of green shoots of recovery are very slow to get to the nonprofit sector. Any recovery is not actually reaching people in dire need and the frontline organizations that serve them.”

Compounding problems for nonprofits are expected declines in giving and inability of governments to pay on time for services they contract these groups to provide. If there’s any cheer in the survey, Miller says it’s the way nonprofits are facing their difficulties head on and taking steps to keep their organizations afloat and focused on doing the best job they can. To cope, nonprofits reported collaborating with each other, cutting salaries, trimming staff, and starting revenue producing programs.

As always, nonprofits are demonstrating, when cash is in short supply, it’s time to tap into reserves of ingenuity. We’d love to hear what you have done!—Bruce Trachtenberg

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Here is a link to the report mentioned in the material above.
http://www.nonprofitfinancefund.org/content.php?autoID=230

Using knowledge for success,

Dr. Rick Hoefer

Pre-fundraising Questions to Ask

I’ve been posting about improving a nonprofit’s financial status and the current economic situation that nonprofit’s are facing.

But in the spirit of Evidence-based practice, it is important to assess where the nonprofit actually is, financially. This short article helps pinpoint the questions that nonprofit executives should ask and get answers to.

Thomas A. McLaughlin lists the following questions to ask and I’ve added a bit of commentary after them.

1. How liquid are we, really? Cash is vital, of course, as is line of credit. You may be among the 12% of nonprofits that look like they will not have any cash on hand by the end of the year (see the previous post). You need to know this, of course, so you can try to change what looks like the future of your agency.

2. Do we have unrealized losses? If so, at least you probably still have an investment portfolio left. You may have to cannabilize this to keep afloat unless you can choose well-performing investments, depending on how restricted access to the corpus of the investment is. Check with your lawyer, of course.

3. Are we profitable? How can a nonprofit be profitable? If you’re able to end the year (month, quarter), with a bit more in the bank account you’ve made a profit, though it won’t necessarily be called that. (Remember the term, “net assets”?) Keep costs under control, just as you would in your home budget. A dollar not spent on something unessential is a dollar that can be put towards savings or essential needs.

4. Freeze or postpone? Any kind of spending needs to be examined as to whether it should be frozen (staff positions) or postponed (most other spending). At some point money will have to be spent–you can’t rely on current staff to do as much as before if there are fewer of them. And you can’t put off getting that roof repaired forever. But you might get by one more month.

5. What’s the status of our line of credit? A line of credit is a short term loan, in effect. If you’re getting close to “maxing out” our line of credit, this will hinder your organization from being able to respond to emergencies or unforeseeable problems. Use your line of credit sparingly. You don’t want the bank to call in your credit line when there’s no funds to pay it back.

6. What’s our single largest asset? While your staff may be considered your “biggest asset”, that isn’t what is meant here. Assets are really things that you might be able to turn into cash. Short-term assets are things you could turn into cash in fairly short order. Things like buildings and office furniture are short term assets, though, in today’s real estate market, the building may not be worth as much as it once was. Protect this asset as much as you can, because it may hold the key to your organization’s survival.

While you may not like the answers to the questions, you need to have your facts clear as you move forward with your fundraising efforts.

Using knowledge for success,

Dr. Rick Hoefer

More on Internet Fundraising

It seems the “hills are alive, with the sound of internet fundraising articles” as the below summary from the San Francisco Chronicle shows.

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Social Media, Mobile Technology Reshape Fundraising Environment

Technology is reshaping the way nonprofit organizations, charitable causes, and relief agencies solicit donations and volunteers, the San Francisco Chronicle reports.

CauseWorld — which launched two months ago with funding from CitiGroup, Kraft Foods, and Procter & Gamble — has raised about $400,000 for various community organizations since its launch with a mix of mobile phone applications, geo-location technology, and social media campaigns. And Miami-based Project Medishare, which is working to bring much-needed medical services to Haiti, saw its donations from an annual year-end fundraising drive jump from less than $700 a year ago to $44,000 after integrating social media into its donor-outreach activities.

A report from the Giving USA Foundation and the Center on Philanthropy at Indiana University found that total giving in the United States totaled $307 billion in 2008. According to Mark Davis, an executive at fundraising software-provider Blackbaud in Charleston, South Carolina, an estimated 30 percent of that was donated online. A separate study co-authored by Davis and consulting firm Charity Dynamics found that organizations which adopted social media could increase their fundraising by up to 40 percent.

Indeed, the earthquake that devastated Haiti in January highlighted the fundraising potential of social media, as relief and humanitarian organizations raised more than $21 million, in $5 and $10 increments, in less than forty-eight hours through a mobile phone text-message campaign. In part as a result of the campaign’s success, the Washington, D.C.-based Mobile Giving Foundation, an organization that works with carriers to set up mobile giving campaigns, is currently working with more than four hundred organizations, including a number that are raising funds for earthquake relief and recovery efforts in Chile.

“People have come to accept that this is the way to fundraise,” said Julio Vasconcellos, creator of San Francisco-based TwitCause, an organization that uses Twitter to gain attention for various community causes. “With social media, you can reach out to hundreds of people within a couple of hours, whereas in the past, that would take days,” added Vasconcellos. “We’re reaching three million people every month with TwitCause.”

Evangelista, Benny. “Technology Gives Charities New Way to Reach Out.” San Francisco Chronicle 3/16/10.

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Using knowledge for success,

Dr. Rick Hoefer

New Way to Raise Funds for Nonprofits, Part 1

Ah, the joys of Academic Life. I have enjoyed a wonderful Spring Break, but now, back to work.

I’ve started becoming very interested in new ways for nonprofits to raise money, based on techniques of internet marketing. The principles of “regular” marketing apply as well, and are well known, but I believe I’m on to something that hasn’t been explored before.

Let’s look at Affiliate Marketing as an example.

What is Affiliate Marketing? Affiliate marketing is when an organization has a link on its website that links to another organization or busiiness that sells a product or service. If a person buys a product or service after clicking on that link, the seller gives a percentage of the sale price to the nonprofit.

How could this work? A nonprofit organization might be having a person come speak to a fundraising dinner. As part of the publicity for the fundraising dinner, the nonprofit could have a link on its site that goes to the speaker’s website. Anyone who books that same speaker after clicking on that link could expect that a portion of the speaker’s fee would be channeled back to the nonprofit.

And if the speaker had written a book, the event website could have a link to the Amazon.com website (if the nonprofit organization had become an affilate, through a separate process). Each book that was purchased through the link would also result in a portion of the purchase price being given to the nonprofit.

Some nonprofits already use affiliate marketing, at least to a limited extent. But this is an extremely painless way of generating additional income that can be tied to existiing fundraising efforts.

More on new fundraising ideas soon. Feel free to send this, and any other posts to nonprofits you may know that could use a boost in contributions. I’m also available for consulting with nonprofits about how to implement these ideas.

Using knowledge for success,

Dr. Rick Hoefer