Fight the good fight Massive drop-offs in grants, sponsorships and donations from once-staunch supporters have marked the current economic downturn. Accordingly, problems with cash flow — and staying in the black — have followed for many nonprofits. If you’re like most organizations, you’ve already taken many steps to cut costs. Wage freezes, staff cuts, eliminating out-of-town travel and many other money-saving measures are now the norm. But there are other actions you can take to ensure that your nonprofit continues to stay afloat. Here are seven of them: 1. Revisit your organization’s mission. Now is a good time to review your organization’s mission and its programs. Perhaps there’s a particular program that, while not critical to your organization’s mission, provides a huge drain on cash balances and staff attention. Saying good-bye to that program can be a difficult step — but the reward is eliminating cash drain and freeing up funds for more pertinent programs or administrative necessities. If a program cut is done right, there could be no break in service to the individuals served, as they can be redirected to similar programs in other organizations. 2. Examine your investment portfolio. Are you one of the many nonprofits with portfolio investments or idle assets that aren’t generating operating income? Donated real estate, collections and other nonmarketable holdings are examples of these types of investments. If so, now may be the time to divest some of these possessions and obtain the operating funds you need to stay afloat. While the market may not be ideal for liquidating certain investments, they can be a good source of operating cash if cash flow is a priority. 3. Review your permanently restricted endowments per UPMIFA. Another potential source of operating funds is your organization’s permanently restricted endowment funds. Passage of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) last year — and the full or partial adoption by most states — may allow you to prudently spend what was once considered the untouchable original principal (or historical balance) of funds that nonprofits were required to maintain into perpetuity. Access to these funds generally is available when the donor of the original gift is silent about restrictions or doesn’t specify that UPMIFA provisions don’t apply. In some cases, an original condition or restriction may no longer be practicable — or may now be impossible to achieve. In those situations, UPMIFA makes it much easier for the organization to get those restrictions lifted, thereby releasing the funds for other more practical purposes. Consult your attorney first to be sure. 4. Contact the original donor. Whether or not UPMIFA provisions open up a potential source of funds, your nonprofit could take another route by approaching the endowment’s original donor. Ask the donor to lift all, or some, of the spending restrictions so you may use a portion of the funds for operating costs. Many endowments were made in more lucrative times, with the donor’s original intent to nourish the organization’s future cash flow. But given the state of the economy, your current need to supplement your operating fund may be easily communicated. 5. Rely more heavily on board members. Don’t hesitate to turn to your board in tough economic times. Board members usually have a passion for their organization and its mission and will do whatever they humanly can to assist. In many cases, board members already have employer backing for your organization. And that company may be willing to step up its financial support. Board members likely have other community contacts as well. Sometimes all you need to do is ask. 6. Focus on your most effective fundraising activities. Nonprofits frequently have several fundraising events each year to raise money. Look at each of these activities and determine which ones are most effective. If one or more of these events or activities fail to provide a good return for the time and expense involved, consider alternative fundraising events. Look for an option that has a higher rate of return — and thus enhances operating funds. 7. Look to “recession-proof” sources. Focus your efforts on sources of funding that aren’t necessarily affected by the recession, such as governmental funding programs. The state or federal government already may have earmarked funds for organizations with programs like yours. As part of your fundraising activities, exhaust these opportunities by submitting applications for grants to all likely providers. Whether or not your nonprofit will survive this recession may depend on the ability of your management and board to come up with creative ways to generate operating cash flow for the organization. The ideas above, while not all-inclusive, point to cash sources you may need to sustain your organization. • |