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Capital Funding 2.0: The New Approach to Nonprofit Capital Projects

8/28/2012

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Guest Blog Post

By Cherie Kirschbaum

At some point in every nonprofit’s lifecycle, the organization reaches a point where its current facility no longer meets its needs. The organization may consider leasing new space, purchasing a new property, expanding or renovating, or building a new space. In the past, nonprofits thought the only way to finance the project was through a capital campaign. And, nonprofits in this situation typically embarked on a campaign feasibility study to see how much could be raised. 

The feasibility study conclusions typically became the sole instrument to guide leadership throughout planning for the capital project, placing the focus on what could be done for this amount of money.  This approach keeps nonprofits from assessing and addressing comprehensive facility requirements – both immediate and long-term. 

Today, progressive nonprofits approach capital projects by first determining what they need, then by developing a financial plan to fund the project. A financial plan allows nonprofits to develop a diversified approach for funding capital projects, and includes a variety of sources accepted by financial institutions, foundations and donors.

 There are five funding categories available to nonprofits for capital projects:
1. Public funding (local, state and federal)
2. Foundation funding (grants)
3. Bank financing (bonds or commercial loans)
4. Cash reserves
5. Capital campaign

While, each source has advantages and disadvantages, they are not mutually exclusive. Nonprofit capital projects can be funded using a combination of these methods. In many cases, a combined approach allows a nonprofit to leverage the investment among all stakeholder groups. A well developed project and financing plan will not only inspire confidence from potential funding sources, but also encourage participation in the project as an investment. 

Below are a few comments about each of these five funding categories:

Public Funding: While the process to apply for and receive public funding can be daunting, the amount of money that could be granted to the project is well worth the effort. These funding sources include Community Development Block Grants, HOME Funds and others. It is important for a nonprofit to understand the requirements that come with some of these funding sources, such as Davis Bacon Wage requirements or HUD Section 3 compliance. These requirements can have an impact on the cost and schedule of the project. 

Foundation Funding: Most nonprofits are aware of the private and community foundations in their area that provide capital grants. Foundations recognize their role in financing a well-conceived project for a nonprofit with a strong financial track record, qualified leadership and a committed Board of Directors.

Bank Financing: Bank financing can become a bridge between getting a project done now and completing a capital campaign. Some nonprofits may be able to continue to pay the debt service on a bank loan even after the capital campaign is complete. This category of financing is becoming more mainstream, and is frequently accepted by both nonprofit funders and the nonprofits themselves. 
 
Cash Reserves: A nonprofit’s cash on hand or endowment can provide the equity sometimes required by other funding sources, and can be replenished through a capital campaign.

Capital Campaign: Nonprofits that embark on a capital campaign, even in difficult economic times, can be very successful. A well conceived project and financial plan can help to leverage stakeholder support, while also deepening donor commitments. Campaigns can attract new donors, and elevate visibility within the community and beyond. 

Savvy nonprofits consider the full spectrum of funding sources available for capital projects. By doing so, these organizations are often able to open the doors to a new space without sacrificing elements necessary to best meet program needs. They are also able to engage, rather than exhaust, donors, foundations, and community partners in their long-term success.

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Cherie Kirschbaum, President and Founder of City Projects, Inc., is passionate about the power of real estate to affect social change. A recognized community leader, Cherie was named the Denver Business Journals 2011 Outstanding Women in Business and as a Women to Watch by Jewish Women International.

City Projects partners with nonprofits to plan, orchestrate and complete their real estate development projects to transform not only their space but their organization. City Projects’ project management guidance unlocks productivity, unleashes creativity and enhances capacity. City Projects has worked alongside public and private organizations including the Mental Health Center of Denver, Karis Community, Mile High Youth Corps, The GLBT Community Center of Colorado, Pikes Peak Hospice & Palliative Care and others to successfully conceptualize and complete real estate projects. The City Projects team integrates each client’s mission, programs, financing and fundraising strategies into the day-to-day requirements of the project. In addition, the team serves as a translator between the client’s staff, board and project team, facilitating communication and managing implementation through project completion.

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Your Nonprofit's Essential Documents

8/21/2012

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By Rebecca Reynolds

The nonprofit organization develops and safeguards certain documents to ensure that it operates within the legal parameters as provided by the state and also by its primary governing body, the board of directors. Some of the most important of these documents include:

Articles of Incorporation are filed with the Secretary of State; they spell out the conditions under which the organization was incorporated, and include the statement of purpose (mission).

Bylaws are the set of rules particular to the organization that describe how the board will operate and carry out its business. The bylaws express requirements for official meetings, describe the duties of officers, how board members and officers will be selected and for what terms they will serve, what number makes a quorum and so on. The board’s adherence to its bylaws is a fundamental of good governance.

Policies serve as guidelines set by the board for how the organization as a whole will view and handle a variety of situations. Policies deal with the general rather than the specific and should be readily accessible to the board and staff. A board policy book is advised to avoid searching for policies through board meeting minutes.

Board Meeting Agendas preview for the board the priority issues that will be dealt with at the board meeting. The agenda is generally developed by the president in tandem with the executive director, with input from other board and staff members as needed. It is also the outline for the minutes prepared from the meeting.

Board Meeting Minutes are the legal record of the corporation’s official business conducted at board meetings, taken on behalf of the board by the board secretary. These serve as the institutional memory of the organization and should be carefully crafted and archived by the nonprofit.

Developing and storing the above documents can appear to be a perfunctory administrative duty, and is often left to office personnel to handle. This is a mis-step. These documents represent leadership's fundamental agreements as to the purpose, functioning and decisions of the organization. They are the bedrock of the organization's governance. Maintaining their currency and operating within their parameters are what protect the nonprofit and its leadership in times of crisis and guide their actions under normal conditions. The board is responsible for both and should be deliberate in its delegation of anything to do with either. 

For more on the nonprofit's most important documents, get Nonprofit-KnowHow: The Workbook.


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Making the Most of Your Meetings

8/7/2012

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By Rebecca Reynolds

Time in meetings is some of the most valuable time there is. Think about it. Each person participating in the meeting is spending time that has a monetary value; the more people involved in the meeting, the more valuable that meeting time is. Even though nonprofit board members are unpaid, their time is worth money to them, and their time being well spent by the nonprofit adds to each member’s overall productivity (and to the nonprofit's credibility). This makes board meetings some of the most precious meetings of all. So, making meeting time as efficient and productive as possible should be an obvious goal for all nonprofits. How to get there isn't always so obvious. 

To help make highly productive meetings attainable, one of the key things to focus on is good preparation. Developing consistent procedure for meeting preparation and then following it is a simple yet highly effective way to get greater results from meetings. And this also means being able to have fewer of them!

At the heart of preparation is the meeting agenda. It is the tool that both reflects the forethought that went into the meeting and acts to maintain the meeting’s focus in real time. The following steps are a guide for how to develop an agenda for board meetings, but these steps can be applied to any meeting.
 
1. Scan all of the issues currently facing the organization (this may necessitate conferring with the officers, major committee chairs
and executive staff members). This scan should be jointly done by the CEO and the board chair since this pair represents the entire view of the organization – the board chair has the more macro view and the CEO has the more micro or day-to-day view. Another benefit of this pairing is that the board chair can support the CEO in bringing issues appropriate to the purview of the board – framing the right topics for the meeting participants at the right level of deliberation is key to highly productive meetings.

2. Decide what the priority issues are (matters of financial or legal concern are always top priorities) and what order of discussing them makes the most sense. For instance, financial condition has an impact on most decisions, so the board having an up-to-date understanding of this as a precursor to other discussions is helpful. Sequencing agenda items is as important as identifying the items themselves.

3. Decide what action is needed on each issue from the board. For example, brainstorming, feedback from a review, evaluation, delegation, decision (specify what). Note this action on the agenda with each item so as to prepare the board for what is needed from them and to assess how much time each item will require. 

4. Determine the length of time needed for each item and its desired board action. When the times are added, they shouldn’t exceed approximately 90 minutes for a regular board meeting. Meetings that routinely go much longer than this will need breaks and perhaps different formats to ensure participant productivity. If the agenda item times add to more than 90 minutes, consider postponement of some topics and/or reframing what the board will accomplish on the item at the meeting. The  meeting  facilitator (in the case of board meetings, this is the board chair or president) uses the agenda times to maintain the meeting’s momentum.

5. For each agenda item identify a presenter or “lead.” This is the person who knows the most about the topic and will present the issue to the group. The more often this can be a member of the board as opposed to a staff person, the better. Other knowledgeable parties (board or staff) can always add information as part of the discussion. Each item’s lead is also noted on the agenda, and of course, the agenda item lead is informed well in advance of their role in the meeting so s/he may prepare.

6. Consider what background materials will be useful to prepare board members in advance of the meeting. At minimum, board meeting prework materials will include the set of previous meeting’s minutes, the month’s financial statements and brief reports from the executive director and any current committees. But consider other documents or materials specific to each agenda topic (for example, a schematic, budget and model for discussing capital campaign planning). 
 
7. Collect these materials and develop any needed instruction for what is expected of the board in its prework (e.g., if there are documents to read, what specifically is the board reading for?) Distribute the prework materials with the agenda about a week in advance of the meeting (allow more time if prework is more complex).

Remember, preparation is what makes the difference between an efficient, productive meeting and one that wears everyone out and feels like a waste of time. Following these simple steps when preparing for your meetings is guaranteed to increase its productivity.


Nonprofit-KnowHow covers how to make board and other meetings the most productive time, greatly reducing the number of meetings needed!

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Commencement

8/1/2012

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We're so excited about the A-WOW International Girls Leadership Initiative "Be the Change" Summit taking place in Dallas right NOW! Young women, ages 16 - 21 from Liberia, Ghana, Cameroon and other parts of Africa, together with women from the US, participate in a week-long intensive leadership program to help prepare them for assuming leadership roles in their lives and countries.

A-WOW founder and CEO, Carolyn Wright - a mentor-leader par excellence - beams with enthusiasm over her brainchild: "An amazing part of the summit is witnessing young  women experience a lifetime transformation. As I track and travel their journey  of leadership, oh my, how beautiful to see A-WOW footprints - priceless!"

Rebecca Reynolds is honored to be the Commencement Speaker for this visionary event. Her presentation is entitled "Taking the 'Women' Out of 'Women's Leadership.'" Stay tuned for excerpts from her speech and a link to the photographic montage of women she will use.
 

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    Rebecca Reynolds, author of Nonprofit-KnowHow,  is the author and editor of Nonprofit Navigator, the Nonprofit-KnowHow blog. Contact us if you'd like your nonprofit to be featured or to be a guest blogger on the Navigator!


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Photos used under Creative Commons from Dave Hamster, pabloverdugo, Katri Niemi