Nonprofit Preparations for State Government

Transcription

1 Nonprofit Preparations for State Government Shutdown

2 Welcome Jon Pratt, MCN Executive Director

3 Presenters Jon Pratt, Minnesota Council of Nonprofits Kate Barr, Nonprofits Assistance Fund Christina Wessel, Minnesota Budget Project Jeannie Fox, Minnesota Council of Nonprofits

4 Today s agenda State Budget and Policy Context and Process Crisis Communications Financial Planning Final Q&A

5 Christina Wessel Minnesota Budget Project Deputy Director

6 Governor Dayton s budget Cuts in services $495 million to Health and Human Services $171 million to Higher Education No cuts to state aid to cities and counties $1.8 billion in taxes (May 16th offer) 4 th tier income tax of 10.95% ($2.0 billion) Continue K-12 funding shift ($1.4 billion)

7 Legislative approach School funding shift hf ($1.4 billion) bll New tax cuts Large cuts in services to pay for rest of deficit and tax cuts $411 million cut to higher h education $118 million cut to transit $1.6 billion cut to health h and human services

8 2005 government shutdown As of June 30, 2005, on three bills had not been passed: K-12 education Health and human services Transportation Special Master determined core functions of government Shutdown lasted less than two weeks, agreement included tobacco tax increase

9 This time around it will be dff different More areas of the budget are impacted More voices are calling for a stricter reading of the constitution Negotiations have not progressed very far

10 Jeannie Fox Deputy Public Policy Director, MCN

11 So, now what?

12 Activity in the Courts June 13, Attorney General (AG) files petition June 15, Governor files response with the Court June 17, AG files additional petition specific to funding of the courts June 20, Republican legislators file suit challenging court s authority to spend state funds June 20, MCN delivers letter to Chief Judge re: nonprofits and essential services June 23, scheduled hearing in Ramsey County

13 What is a Special Master?

14 What about the legislature?

15 How to keep informed Minnesota Management & Budget, BeReadyMN.com Minnesota Budget Project, minnesotabudgetbites.org g MCN Shutdown web page at minnesotanonprofits.org

16 Emergency Communications & Decision Making Who needs to know what, when? Who needs to decide what, when?

17 Duty to inform People served by organization Partners (referral sources, service collaborators, key vendors) Employees Supporters (funders, volunteers, community leaders) Local Media Consider appropriate medium for delivery for each audiance

18 Messages Comes from Top (ED or Board Chair) What the organization knows about how the shutdown will affect the services it delivers What impact this would have on the people it serves What the organization will do if there is a shutdown Where to look for updated information from the organization Convey the timeline

19 Tone Straightforward news reporting, respectful Be clear and concise Transparency (you can know what we know) Timeliness (you ll know it when we know it) Panic doesn t help

20 Emergency Decision Making Clarity of roles of management and board Agree who needs to be involved in which decisions (fewer is better in emergency) More frequent communications to board What the organization knows about how funding will be affected; communications from state t or county What effect this will have on clients, cash flow, budget, staff, partners, etc. What decisions have been made, by whom What other organizations are doing

21 Emergency Decision making Consideration of options Suspension of services Continuation of services without state funds Unknown potential for retroactive payments Petition to be considered essential or core service Cost reduction options, including furlough and layoffs

22 MCN Emergency Survey Gathering information to demonstrate impact on nonprofits Strengthen case for nonprofit services to be deemed essential Share information among nonprofits of how other organizations are handling the situation 48 hour survey link sent June 22 nd Results announced week of June 27th

23 Kate Barr Nonprofits Assistance Fund

24 What Are the Potential Impacts? Internal impact on nonprofit Type of impact Severity of impact Duration of impact External impact on clients, partners, community Type of impact Severity of impact Duration of impact

25 What Are the Key Variables? What is the state funding at risk? How much is at risk? Source of state funding Contract/grant date and terms Normal payment method and timing Status in state budget

26 What Are the Constraints? Inventory your obligations Contractual obligations Restricted grants Affiliates and parent organizations Personnel and benefits Leases and loans

27 Financial Impacts: Cash Flow Short term delays in receipt of funds Shutdown/startup backlog may cause longer delays Possible need to appeal or resubmit for some payments

28 Financial Impacts: Budget Potential temporary income reductions Payment for services provided during shutdown Retroactive provision for contract terms Potential long term income reductions Final state budget reductions in contract or grant amount Final state budget reduction or elimination of future amounts

29 Assess Your Financial Status Amount of cash on hand Cash reserves available Line of credit available Status of budget to actual Income sources and stability Surplus or deficit results

30 Two Critical Variables CASH AVAILABLE Significant OUNT OF AMO Minimal Significant PROBABILITY OF LOSS OF REVENUE

31 What Risks Must You Manage? OUNT OF AMO AVAILABLE CASH A PROBABILITY OF LOSS OF REVENUE

32 Preparing for Cash Flow Analyze cash and liquid assets Available cash and investments Unrestricted funds available Balances in restricted and designated funds Requirements of reserve policies

33 Managing Cash Flow Develop cash flow projections for 3 6 months Realistic projection for non-state income Timing of state fund inflow multiple scenarios Routine expenses and payments One time or lump sum payments

34 Cash Flow Projections $25,000 $20, $15,000 $10,000 $5,000 Cash $0 ($5,000) Apr May June July Aug Sept Oct Nov Dec ($10,000) ($15,000) ($20,000) ($25,000) ($30,000) Month IF there will be a shortfall, what are the options?

35 Using Cash Reserves Review reserve policies Duration of need Authority to use reserve funds Required reporting Replenishing reserves

36 Delaying Cash Payments Request deferred payment terms Major vendors and contractors Landlord Loans Delay discretionary purchases Cash flow options for staff expenses Optional deferrals Never delay ypy payroll taxes

37 Using a Line of Credit or Bridge Loan Borrow short term for temporary cash needs Existing line of credit Temporary increase in maximum line Obtaining a credit line Typical terms and conditions Policies of using credit line

38 Using Restricted Funds Legal requirements and restrictions Funder requirements for cash accounts When to consider using restricted cash Risks of using restricted cash

39 Use cash flow management strategies to manage CASH FLOW problems

40 Preparing for Loss of Revenue Duration and extent of potential income reduction Options for replacing state income Costs of delivering affected program Capacity to subsidize program budget Overall priority of maintaining program

41 Budget Reductions Temporary budget reductions Discretionary expenses Timing of purchases or large expenses Long-term budget reductions Organizational and program budget scenarios

42 Reducing Staff Expenses Legal considerations Follow human resource policies/handbook i Temporary reductions Reduced work schedule Optional leave without pay Furloughs Long-term reductions

43 Address reductions in revenue with BUDGET strategies

44 Planning Priorities CASH AVAILAB LE AMO OUNT OF Cash flow planning & management Access to supplemental cash and/or reduce outflow Make intentional i decision about using cash to subsidize activities Budget review and expense reductions PROBABILITY OF LOSS OF REVENUE

45 Decision Making Team Communicate with staff and board Role of staff leadership and board leadership Establish big picture priorities and goals Understand parameters for decisions Assign sufficient authority to manage the fluid situation Clear milestones or decision points for board or committee Clear milestones or decision points for board or committee action

46 Continuous Planning State Funding Internal & External Assessment Constraints Options Cash Flow Budget Framework Priorities Limitations Impacts Actions

47 Nonprofits Assistance Fund Emergency cash bridge loans Availability of loan funds Application process Loan amounts and terms Financial management tools Cash flow projection template Scenario planning template Financial assessment and counsel

48 Scenario Planning Provide an action plan to achieve strategic goals Translate strategic plans into financial plans Confirm priorities Identify capacity needs Prepare for organizational changes to support goals

49 Scenario Planning Worksheet

50 Scenario Planning Worksheet

51 Who We Are Nonprofits Assistance Fund s mission is to build financially healthy nonprofits that foster community vitality. Our financial experts help nonprofits strengthen their capacity to address unexpected events, finance new opportunities, and realize strategic goals. We fulfill our mission by helping you thrive. Find out more at