1. Sustainability Journey
Community Foundation of Southern Indiana
Indiana Philanthropy Alliance
Statewide Conference
June 7, 2016
Linda S. Speed, J. D.
President & CEO
Kenton Wooden
Director of Community Outreach
Community Foundation of Southern Indiana

2. Sustainability
The ability of a community foundation to fund its operations over time with predictable and reliable sources of income.

3. But How? One Community Foundation’s Journey
on the Road to Sustainability

5. Sustainability Requires… It’s a Decision and a Process
An understanding of the “business model” of a community foundation
An institutional decision making process that considers sustainability as a factor
It’s not an accident –
It’s a Decision and a Process 8

6. Revenue Sources Best Good Not So Good
Administrative Fees on Endowed Funds
Payout from Operating Endowment
Good
Administrative Fees from Pass-through Funds
Annual fundraising for Operating Funds
Not So Good
Grant from Unrestricted Fund
Draw on Operating Reserve

7. Determined by Asset Size It’s All About Asset Mix
The Big Myth About Community Foundation Sustainability
Sustainability is NOT
Determined by Asset Size
It’s All About Asset Mix
Asset Mix = Number, Type and Size of Funds

8. Asset – Expense Mismatch
Total Assets
Revenue
Asset Mix
Workload
Expenses

9. CF Southern Indiana Fund Mix
81%

10. Sustainability Formula “Sustainability Number”
Sustainable Revenue
Operating Expense
“Sustainability Number”

11. Sustainability Calculations
August 2012
Sustainability Calculations
72%

12. 72% Sustainability Means. . .
28% of our operating expenses must be funded by something else
Reserve
Grant from unrestricted assets
Annual operating campaign
Not acceptable!

13. What Our Board Said
We need to make a policy decision as to the appropriate balance of sustainable and other revenue and make decisions that, OVER TIME, will move CFSI in that direction
We need to create an intentional long term plan to achieve sustainability

14. Background
In 2012, Strategic Plan made Ensuring Financial Sustainability a priority
In 2013, Sustainability Task Force created
Used the process suggested by
Nonprofit Sustainability
(book by Bell, Masaoka and Zimmerman)
Major focus was looking at true operating costs and taking the
emotion out

15. How Did We Get Started? Task Force Created in October 2013 Meeting 1
Identify our core functions
Meeting 2
Determine Profitability
Meeting 3
Determine Relative Impact
Mission Impact
Financial Impact
Meeting 4
Matrix Mapping
Meeting 5
Making Choices to Adjust Business Model
Keep & contain costs
Invest & grow
Close or give away
Increase Impact
Meeting 6
Review of Policies
Sustainability
Admin. Fees
Fiscal Sponsorship
Time & Cost Study

16. Step 1: Identify our Core Functions
Staff “brainstormed” list of core functions
From the myriad activities performed each day at CFSI, it boiled down to these core functions:
Establishing a New Fund or Acquiring a New Gift
Operations
Making Grants
Providing Non-Grant Services to the Non-Profit Community
Other Staff Activities

17. Step 2: Determine Profitability (Time & Cost Study)
Time & Cost study performed by all staff
Covered every activity, program, service, etc.
PROFITABILITY NUMBER calculated using:
1. Amount of time spent on each
2. Revenue generated by each
3. Direct/Indirect cost of each

19. GIFT Cost Tool

20. Step 3: Determine Relative Impact (Mission Impact and Financial Impact)
All NPOs have a dual bottom line
(1) Profitability and (2) Mission Impact
We looked at both
“Profitability Number” calculated from time/cost study
“Mission Impact Rating” for each product/program/service based on
Overall impact on the community
Alignment with mission and strategic plan objectives
Staff and Task Force collaborated on this rating

21. Sustainability Cont.
Info

22. Step 4: Matrix Mapping
Staff plotted each product/service/activity/program onto a grid for a visual guide showing where each falls based on mission impact and profitability
The information helped inform strategic decisions about activities, programs, products.

23. Water/Harvest and Increase Impact
High Mission Impact, Low Profitability
High Mission Impact, High Profitability
Keep, Contain Costs
Invest and Grow
Profitability
Low Mission Impact, Low Profitability
Low Mission Impact, High Profitability
Close or Give Away
Water/Harvest and Increase Impact
Source: Bell, Maosaka, Zimmerman, Nonprofit Sustainability

24. Impact Profitability In-Home Events Community Grant Awards3
Donor Cultivation Activities 1
Youth Grant Awards
(30,000)
(20,000)
(10,000)
10,000
20,000
30,000
Youth Program -1
Impact
Volunteer Dinner
Annual Operating Campaign -3
Profitability

25. Step 5: Making Business Decisions
1. Evaluating Programs:
Typically, programs may
have relatively low mission impact
have actual costs in excess of perceived costs
have received initial funding from outside grant dollars but have been maintained long after funding is exhausted
operate under the Foundation’s umbrella and therefore carry a significant amount of liability – the IRS views the Foundation as the responsible party

26. Step 5: Making Business Decisions
2. Evaluating Fees:
Are we charging an appropriate fee for our services?
Over ten years since a fee increase
What does our current fee schedule look like when plotted on the matrix map?
What would change if we changed our fees?
Looked at 10 different fee “scenarios”
Chose the one that moved things closest to midline
Backed up by data, only covering costs

27. Step 5: Making Business Decisions
3. Evaluating Fund Types:
Is our “asset mix” sustainable?
Is it feasible to continue to offer pass through funds?
if so, what type?
Are project funds or fiscal sponsorships sustainable?
Do we have the right minimums in place?
Endowment ($5,000)
Pass through ($1,000)
Grants ($100)
Applied to all funds, including scholarships

28. Proposed Fee Schedule - FY 2015
Sustainable Fees
Current Fee Schedule
All Endowment
First $1,000,000
Greater of $150 or 1.65%
$1,000,001 - $2,000,000
1.50%
$2,000,001 - $5,000,000
1.25%
Over $5,000,000
0.85%
Scholarship Endowments
Tiered (see above)
Unrestricted - Board Advised
Passthrough
All PT Funds
Up Front 2%
Funds over $10,000 keep all earnings
Charitable Remainder Trusts
1.5% of the principal market value and actual expenses
Proposed Fee Schedule - FY 2015
Endowment (DE, AE, DAF)
$0 - $15,0000
$300
$15,001 - $100,000
2.00%
$100,001 - $1,000,000
1.75%
$1,000,001 - $2,000,000
1.50%
$2,000,001 - $5,000,000
1.25%
Over $5,000,000
1.00%
Scholarship Endowments
$0 - $15,000
Over $15,000
Unrestricted - Board Advised
All balances
Passthrough
All PT Funds
Up Front 2%
Foundation retains all earnings
Charitable Remainder Trusts
Standard endowment fee based on principal market value and actual expenses, unless entire remainder will be unrestricted, then fee is 1.5% and actual expenses

29. How do you handle these small funds?
Sustainable Funds
Pass through funds
Only accept Donor Advised Funds going forward
All existing pass through funds grandfathered in
No change to current administrative fee (2% one time)
Endowment funds
New endowment fund minimum set at $15,000
Endowment funds with balances below the new fund minimum ($15,000) were not grandfathered in
How do you handle these small funds?

30. Sustainable Funds “Small Fund Clean Up” program implemented
“Build and Grow” option using Lilly Endowment GIFT Phase VI matching funds – three years
Roll fund balance into another endowment
Terminate fund and pay out a single distribution (for funds < $5,000)
“Pool” similar funds administratively (designated, agency, scholarship)
Communication, communication, communication
Six month communications plan approved by Board
Required numerous contacts with fundholders

31. Sustainable Programs To address shortfalls in programs:
New Programs – First year, minimum fee of $250 per month for its costs of supporting new approved project/programs
Second year & after - fee charged based on actual calculated costs incurred
Current Programs – continuing programs assessed a reasonable fee based on actual costs OR funded by CFSI discretionary grant (made the board take notice)

32. Before
Fund 1
Program 2
Program 1
Service 1

33. After
After
Fund 1
Program 2
Service 1

34. Step 6: Adopt Sustainability Policy
Adopted by CFSI Board May 2014
Documents the importance of long term sustainability
Addressed shortfalls from programs and services and identified reasonable solutions:
Administrative fee schedule adjusted
Fiscal sponsor policy adopted
Fund balance & grant minimums increased
Imposed reasonable fee for services
Included six month communications plan for existing fundholders
Makes sustainability a focus for all future Foundation business

35. Key Points
Our imperative was and is to find a way to continue our work but address the shortfalls some of our funds, programs and services incur
Programs and services can be a tremendous drain on resources and you have to address those head on by knowing what your true costs are – knowing the data drives all the other decisions
Have the hard conversations – they are worth it to your sustainability

36. What did this all mean for the Foundation?
Results
What did this all mean for the Foundation?

37. Results
2 years of sustainability work resulted in over 380 contacts to endowment fundholders
Very little negative feedback from current fundholders with funds over $15,000
Individual relationships with small fundholders matter
Small Fund Cleanup Completed

38. Results: Small Fund Cleanup
67 Endowments were below the new $15,000 minimum
12 Closed, total of $16,581
29 Pooled, total of $224,805
9 Agency Funds – $67,545
5 Designated Funds – $47,076
15 Scholarship Funds – $110,169
4 Converted to fund with similar purpose, $29,454
9 Converted to Board Advised Fund, $39,696
13 Chose to Build and Grow, $131,708

40. Step 7: Communication May 2014 March 2015 July 2014
Communication Plan Begins
July 2014
New Fee Schedule
Goes into Effect
December 2014 – March 2015
Individual Work with Fundholders
to Resolve Any Issues
May 2014
Board Accepts
Sustainability Policy
March 2015
Indiana AG Notified by Letter of Plans
May 2014
March 2015

41. Step 8: Finish Up
New fees were effective for existing funds as of January 1, 2015 – except Build & Grow funds
Build & Grow funds - new fees effective when balance reaches $15,000
Wrap up all fund close-outs, mergers/pools, etc.
Build and Grow funds will be notified each October of their progress

42. Timeline 4
Staff Completes Time/Cost Study
Staff Begins Communications Rollout Plan and
Small Fund Cleanup 9
Board and Staff Attend Sustainability Info Meeting hosted by GIFT 6
Task Force Begins
Fee Analysis 2
2012
2013
2015
2014 1 7
Task Force Approves Plan/Makes Recommendation
Sustainability Work Completed, Board Approval Given. Indiana AG notified. Actions Implemented.
Sustainability included in
strategic plan
Board Approves Creation of Sustainability Task Force in May 2013, First Meeting in August 2013. 3
Board Approves Sustainability Policy
Mission Impact and Profitability
Maps Completed 10 5 8

43. Sustainability Moves the Needle % of Sustainable Income
77%
FY 2014
Actual
89%
FY 2015
Actual;
FY 2016
Projection
90%
FY 2017
Estimate

44. Bottom Line? This is an exhaustive process – but so worth it!
Provides economic clarity
Justifies/validates the true costs of what you do
Makes the funding conversation easier
Relatively small changes can make a significant impact on sustainability
You’re never really done – it’s a journey, not a destination.

45. Questions?