1. Kay Sohl kay@kaysohlconsulting.net Making the Case for Endowment Giving in the Midst of Recession September 10, 2009

2. Recession Impact ??? On your nonprofit’s viability? On building your endowment?

3. Recession Impact Charitable Giving Individuals Business & corporate support Foundations Government Stimulus State and local

4. More Impact Program fees & product sales Access to credit Endowment & other investment losses

5. Recession Challenges Increased demand for human services Board, Staff, and Donor anxiety Decision-making amidst uncertainty

6. Board Roles... in Good Times & Bad Set mission & priorities Oversight Liaison with community Ensure availability of resources

7. Key NPO Goals in Recession Achieve mission Remain viable Ensure sustainability Maintain integrity

8. Resiliency Ability to withstand adversity, continue operations, and fulfill the mission

9. Red Flags Indicators of weakness or threat that may impair the nonprofit’s ability to meet legal obligations, protect its assets, and continue operations

10. Financial Resiliency Factors Liquidity – Cash position Net Assets available for operations Endowment Diversity of income sources

11. Organizational Resiliency Factors Clear understanding of business model: relationships between costs & income generation Capacity for timely decision-making

12. {Mental Map} Resiliency Cash Net Assets Business model: relationship between costs & generation of earned & contributed income

13. {Mental Map} 3 Year Trends Revenues Expenses Net Income Unrestricted Net Assets Cash

14. {Mental Map} Cash

15. Your Cash Position? Days of cash on hand? Restrictions on use of cash? Recession impact?

16. Cash in Recession Collections slow down Government reimbursement Customer payment Donor pledges & contributions Payables pressure intensifies Vendors & consultants Collaborative partners

17. Cash Challenges Deficit problems misidentified as Cash Flow problems Restricted cash drained to meet operating expenses Cash pressure limits ability to generate income

18. {Mental Map } Net Assets

19. Net Assets Provide: Ability to continue to operate despite experiencing losses Capacity to take risks and innovate

20. Nonprofit Net Worth Assets -Liabilities =Net Assets

21.  Growing Net Assets  Revenues – Exp. =Net Income Opening Net Assets +Net Income = Ending Net Assets

22. Nonprofit Net Worth Unrestricted Net Assets Temporarily Restricted Net Assets Permanently Restricted Net Assets

23. Unrestricted Net Assets

24. Temp. Restricted Net Assets are like a Cookie Jar

25. Temp. Restricted Net Assets like a Cookie Jar Intended to be eaten... Need to know the ingredients/restrictions... “Mission-focused” cookies can keep you going... Need to refill the jar...

26. Temp Restricted Net Assets Contribute to resiliency if restricted to future use for core functions Function as “available for operations” for future periods

27. Key Net Assets ??? Target ratio of Net Assets Available for Operations to Operating Expenses? Board willingness to accept operating losses in order to invest in future development or sustain services?

28. {Mental Map } Your Business Model Sources of income Uses of resources Relationship between investment in expenses & and generation of income

29. {Mental Map} Sources

30. {Mental Map} Income Trends

31. { Mental Map} Uses of Resources

32. {Mental Map} Business Model Relationship between program activity and earned & contributed income in each line of business Each program’s contribution to overhead

33. {Mental Map} Fund Development Investment Cost to raise $ Allocation of fundraising resources to current & longer term strategies Progress indicators

34. Know the past – Focus on the future

35. Projected Impact of Operating Results on Resiliency

36. {Mental Map} Nonprofit Net Worth Unrestricted Net Assets Temporarily Restricted Net Assets Permanently Restricted Net Assets

37. Endowment: Represents capacity & commitment to continue to serve Reduces the need to generate every $ every year

38. Endowment Building during the Recession??? Opportunities and constraints Allocation of resources for fund development efforts

39. Endowment Building Opportunities Endowment Donors: Focused on long-term vision Desire to be remembered Mission rather than activity focused

40. Donor Constraints Income and net worth reduced Uncertainty Concerns about NPO investment performance

41. Organizational Constraints Current operational resiliency Total resources available for fund development activities Allocation of development efforts

42. Potential Endowment Donors Have relationship with your org Long term thinkers Seek opportunities to make larger impact Think like investors

43. Endowment Donor Cultivation Personal Sustained Future needs focused Distinct from annual giving cultivation

44. Endowment Building: Key Messages Organizational resiliency Long-term vision Impact of endowment on current & future capacity Resources to support donor exploration

45. Board Role in Endowment Building Effective stewardship Policy direction Donors to endowment Relationship building with potential donors

46. Every Board Member’s {Mental Map} Mission & vision Resiliency & business model Impact of endowment Motivation for personal giving

47. Your Next Steps? Evaluate financial resiliency? Determine appropriate investment in endowment building Monitor progress? ????