Building a Strong Organizational Financial Plan. Michigan Association of United Ways Annual Meeting

Transcription

1 Building a Strong Organizational Financial Plan Michigan Association of United Ways Annual Meeting 7/8/2015

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3 Agenda 1. Financial Planning The chicken or the Egg? 2. Mission Based Budgeting 3. The Expense Side Cost Allocation Cost Recovery 4. The Revenue Side Typical Revenue Streams Innovative Revenue Streams

4 Financial Planning The Chicken or The Egg? July 4 8, 2015

5 Financing the Dream Nonprofit organizations are based on hope, sometimes on prayer, and almost always on dreams. Optimum planning can turn dreams into realizable goals. Jody Blazek (Financial Planning for Nonprofit Organizations, Wiley Publishing, 1996) 5 July 8, 2015

6 A Nonprofit s Reason for Existence Primary goals are mission based Advancing the Common Good Financial goals are secondary to mission Financial success however enhances mission So, what comes first: The programs that accomplish the mission, or The cash to finance the programs?

7 Balancing Mission and Finances Mission goals and Financial goals are inextricably intertwined Both goals must be recognized and coordinated Results of both must be measured and monitored Successful organizations see them as: o A cycle of intertwining concerns, o Concurrent objectives that advance each other, and o Work that never stops because they facilitate each other

8 Mission Focused Financial Planning Cycle Evaluate Community Constituent s Environment Access Resource Potential Define Mission Set Goals Adopt Financial Plans and Controls Criticize Evaluate Research Review Programs Staffing Volunteers

9 July 9 8, 2015 Mission Based Budgeting

10 Two Traditional Types of Budgets Incremental: Easiest method (likely the most used) Treats existing programs/expenses as pre-approved Increases or decreases based primarily on available resources Zero Based: Assumes no programs/expenses are necessary and no money needs to be spent Each year every program/expense must justify its existence via comparison to alternatives Worthiness must be tested and proven to be financially sound otherwise not funded 10 July 8, 2015

11 Mission Based Budgeting Financial Planning = Long-Term Budgeting: Starts with the Mission Long-term goals Strategic Plan Departmental Work Plan Individual Work Plan Individual Budget Department Budget Strategic Budget Annual evaluation and adjustment

12 Example: United Way Worldwide (Bold Plays = Strategic Plan)

13 Example: United Way Worldwide (Strategic => Department => Individual Work Plan)

14 Example: United Way Worldwide (Individual Work Plan => Individual Budget)

15 Example: United Way Worldwide (Individual => Department => Strategic Budget)

16 Ongoing Monitoring (Work Plan Dashboards and Budget Reports)

17 Annual Review and Adjustment Review the Bold Plays (Strategic Plan) Celebrate successes, note shortfalls Evaluate progress toward long term goals Reset priorities Reset annual work plans Rebuild annual budget 17 July 8, 2015

18 July 18 8, 2015 The Expense Side

19 Cost Allocation An accounting practice intended to convey the benefit each part of the organization derives from shared/common costs Not a financial planning tool but, An important element in financial reporting that tells a more accurate story Overhead Applied to Program Overhead Applied to Fundraising

20 Cost Recovery A mechanism to ensure that you aren t using money that could support mission to underwrite someone else s fundraising An important element in ensuring the maximum amount of existing resources are focused on mission related costs Increases expenses with only a equal offsetting revenue, at best. Why did I bring this up?

21 The Overhead Myth Many people seem to think that managing expenses is financial planning But they forget that overhead ratios have two elements o Expenses o Revenue Financial planning must focus on revenue as much as it does on expenses

22 July 22 8, 2015 The Revenue Side

23 Typical United Way Revenue Streams (lots of guidance from UWW on these ) Workplace Campaigns Events Fiscal Agency Grants Investments Bequests Trusts

24 Innovative Revenue Streams Donor Advised Funds 24 July 8, 2015

25 Innovative Revenue Streams United Way Life

26 Innovative Revenue Streams Collaboratives Planned Giving NP & AS Regional Appeals

27 Innovative Revenue Streams - Cause Funding 27 July 8, 2015

28 Innovative Revenue Streams - Crowd Funding 28 July 8, 2015

29 Innovative Revenue Streams - Social Impact Bonds

30 Concluding Thoughts Financial Planning is a long-term proposition not a shortterm exercise Don t perpetuate the Overhead Myth make it irrelevant Revenue generation takes both Fundraisers and Finance people working together be part of the solution Creative Accounting bad Creative Accountants good!

31 Questions?

32 Additional Resources Nonprofit Financial Planning Made Easy, by Jody Blazek, Wiley Publishing, 2008 (available from Amazon.com) United Way Guide to Planned Gifts, CFO Deskbook section of United Way Online Endowment Investment Best Practices Toolkit, Resource Development section of United Way Online Leadership Giving Quick Reference Guide, Resource Development section of United Way Online Introduction to United Way Financial Operations and Accountability Courses (101 & 201), August 3-6, 2015, Dallas, Texas 2015 United Way Financial Management and Human Resources Forum, October 5-7, 2015, Phoenix, Arizona 32 July 8, 2015

33 Thank You! Ken Euwema, VP-Controller United Way Worldwide