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Archive for March, 2011

Board Designated Reserve Fund: First Step to Endowment

In the world of nonprofits, or if you prefer, community benefit organizations, the challenge is to keep streams of revenue coming in the door in order to keep the mission delivery going out the door.  Dollars in. Mission out. It sounds very simple, but it’s not at all easy. Community benefit organizations are always working to get the story told, making new friends, building relationships, working to bring donors in.

When times are toughest during deep recessions like we’re now emerging from…new dollars are even harder to find. Wouldn’t it be nice of we had an endowment of significant size that could throw off earnings to help pay the bills?

Yes. Of course it would be nice. Today, I’m writing about ways to get a fund organized that can be invested and generate earnings that will help us keep pushing the mission out the door even in toughest times.

My recommendation?  Talk with the Board of Directors about starting a Board-designated reserve fund. Setting aside revenue that will help assure the long-term purposes of your nonprofit will be around for the long term.

I recommend that you start where the American Lung Association of New Hampshire started in the 1970’s.  That nonprofit adopted a Board policy that unrestricted bequests of $1,000 or more would be set aside for the long term. Over the years, bequests grew in number and amount to the point that the reserve fund approximated 100 – 125% of annual operations.  And at $800,000 in annual operating expense, the reserve produced income of about $40,000 a year. A tidy sum.  And along the way, the Finance Committee organized an Investment sub-committee that oversaw investment of the reserve fund.  Every three years, this sub-committee reviewed the performance of the bank trust department or investment company that managed the money and determined if returns on the fund were competitive.  The investment policies were pretty clear: no money invested in tobacco companies, or companies found guilty of polluting.  This added a whole level of complexity to making this nonprofit work effectively.  But for me as its executive (1979 – 1995) and for the Board of Directors, we were comfortable with these responsibilities. We liked the experience and skill level of board members we could attract in part because we had this fund.

Public benefit organizations may consider starting a campaign to build an endowment fund. It takes a certain pool of donors with the means to make significant contributions (usually of stocks or other investments) to such a donor-restricted fund. For those nonprofit leaders who are not quite at that point, consider a Board Designated Reserve Fund. Which may also mean, organizing a planned giving effort.

At the American Lung Association in the 1980’s through the 2000’s, we worked with The Sharpe Group.  I have no financial or other interest in this company. But I recall they worked with a high degree of ethical integrity, advised us well, and helped us grow our nationwide planned giving program. You can learn more about them at /resources. And, of course, you can use your search engine to find other professional companies and advisers who can help you move in this direction.

Discuss this with your development and finance committees.  Set a course that makes sense for you.

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What Can I Do to Help the People of Japan?

With thousands dead and hundreds of thousand of people displaced particularly due to the tsunami that followed the devastating earthquake, we in the USA watch in horror and wonder: What on earth can I do that might be of some help?

You can start by making a donation to a charity that’s working in the area hit by the devastation. Here’s the latest from Yahoo News on effective places to send charitable dollars:   I regret to report that I had two abbreviated addresses I found, but neither worked when I tested.  Thus the unwieldy URL.

I re-tweeted a story about children making 1,000 origami cranes and using these as a fundraiser.

More recently, the Chicago Tribune reported on people in Columbus Ohio making thousands of these origami cranes for a display of their connection with Miyoshi, Japan their sister city which was hit hard by the tsunami last week. Link to story:

I recommend that you take a look at this visual tweeted by @policysettle: with a story by Dan Vegono in USA Today illustrating the movement of the tsunami across the Pacific Seeing the force in this digital picture is quite unsettling.

Is it the overwhelming scope of this tragedy that makes it hard for us to wrap our minds and hearts around the extent of it?  Just too much to comprehend?  Finding the right way for each of us as individuals to respond to something so overwhelming is…overwhelming. But let’s take a moment. Think about it. And act in a way that feels right to us. Each of us. No “one size fits all.”

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Will a Special Event Fit for Your Nonprofit?

Special Events can be great ways to mobilize volunteers, engage Facebook followers, build new friends for your nonprofit.  By running an activity that draws in people, is pledge-based and brings significant new net dollars for your mission you can accomplish a number of objectives by producing one event.

How long have you been in business?  If you have a corps of supporters who can be mobilized to raise money for your cause, then a fundraising special event can be just the ticket. Here are some factors to assess to help determine if an event is right or wrong for you:

  • How long have you been in business? If you have a following that will raise money for you: go for it! If you’ve been building momentum with an effective program and a good group of supporters, an event could be right for you.
  • Enough motivated folk for an ad hoc work group? The lead staff person for the event seeks out volunteers from your participant lists who will help shape and organize the event.
  • Yes, but what event exactly?  Convene the ad hoc group (I hesitate establishing a committee) to join you to explore this. Look at two or three nonprofits like you in communities in other States, examine their websites, and see if they do events that seem to fit well.  Also, did you try an event some years back that flopped?  Maybe now that you have more experience and stronger relationships,  it’s time to re-consider what didn’t work a few years back might do well now.
  • How do we plan? Build a time-line, perhaps going six months.  Work backwards from the event. Is it a walk?  A bicycle event?  A breakfast or a gala?  What’s it going to take?  Do we need corporate sponsors to be effective? who has connections to bring this support to us?
  • How do we set a dollar goal? Be realistic. Conservative.  It’s your first time down the chute. How many participants is it realistic to expect?  Will they collect pledges?  Will there be incentives? Who among our vendors do we go to to ask to sponsor this?  What will it cost us to produce this?

Special events can be right for your nonprofit. And, they also can be wrong. Go into this effort in a thoughtful, conservative way. Be sure the board of directors is with you on this. Start the conversation there. Recruit the most enthusiastic to join the work group.  If you have a person with strong marketing and/or communication skills in your neighborhood, recruit her/him. They have skills that can help make this work for you.

As I write this blog, we’re approaching the New Year.  A good time to organize a money-making special event that will take place in summer, 2012. I do recommend at least a six-month time frame to organize then produce a successful event that fits your nonprofit.

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