Capacity Building for Nonprofit Organizations

Making Good Organizations Great How you, as a donor, can help your favorite nonprofit become self-sustaining and achieve its mission

What is Capacity Building?
Capacity Building Grants help strengthen the nonprofit organization itself, so that in the long-term, it is better able to sustain the programs we care about and make them ultimately more effective for the community
Institutional Operations Programs

Today’s Featured Capacities
Three kinds of capacity building services that can be critical to an organization’s wellbeing:
Leadership Development Financial Sustainability Program Effectiveness

Relevant to Our Times:
The current economic climate has led to:
The flipside is that it has also given nonprofits an opportunity to become stronger:
By assessing it’s strengths/weaknesses
Filling in its weaknesses and building on its strengths
Reduced Funding Increased Need

How Capacity Building Relates to you as a Philanthropist
If you…
have supported an organization over the years that is still in the same place of breaking even…
know of a great organization whose work you want to be sure lasts for years to come…
have a relationship of an organization that has been severely impacted by the economy…
A Grant for Capacity Building may be an ideal way to help that organization overcome today’s challenges and unleash its potential for long-term sustainability.

Expert Capacity Presenters Executive Service Corps: Leadership Development Nonprofit Finance Fund: Financial Stability Special Service for Groups: Program Effectiveness

Nonprofit Finance Fund Presented by Karla V. Salazar, Director Jessica LaBarbera, Director Nonprofit Finance Fund May 6, 2011 Getting to Know Nonprofit Finance Fund

Nonprofit Finance Fund: Where Money Meets Mission
Served thousands of nonprofits and funders since 1980
CAPITAL ACCESS
Nearly 30 years of experience as a 501(c)(3) Community Development Financial Institution (CDFI)
Create access to capital directly (e.g., loans) and/or strategic partnerships (e.g., Program Related Investment management, Philanthropic Equity, and Catalyst Funds)
New Market Tax Credits, $280 million in loans; $100 million in New Market Tax Credit deals; over $1 billion in capital leveraged
CONSULTING
Over 1,000 consulting engagements and workshops in past 5 years
Financial advisors and educators
Collaboration/Merger specialists
Serving nonprofits nationwide from seven local offices
Northeast: Boston, New York
Mid-Atlantic: Philadelphia, Newark, NJ
Midwest: Detroit
West Coast: San Francisco and Los Angeles
All sub-sectors served: $300,000 to $50 million
“ [NFF is]… arguably the most influential voice in the ongoing effort to reshape thinking and practice about nonprofit capitalization.” – The Nonprofit Times

NFF Addresses a Central Nonprofit Challenge
Why do so many nonprofits run into financial difficulties, despite their excellent programs, and what can we do about it?
Mission and Program Capacity Capital What you do and why you do it Your ability to do what you do: Supporting infrastructure (e.g., people, space, and processes) What you have and how it is distributed: Assets, Liabilities and Net Assets

Educating our Sector to Move Beyond Breaking Even
Like any organization, nonprofits need to cover the ‘full cost’ of delivering programs
Tax Status vs. Business Model
Full Costs > Operating Expenses
Full costs include:
Operating Expenses Fixed Asset Additions Debt Principal Working Capital Reserves Depreciation

Five Steps that NFF uses to Assess a Nonprofit’s Financial Health
Profitability & Savings: Are costs covered? Are surpluses sufficient to pay for debt principal and facility or equipment purchases? Is the nonprofit generating adequate savings?
Revenue Dynamics: Where does the nonprofit’s money come from? Are revenue streams relatively reliable or at risk?
Expense Dynamics: Does management understand the differences between direct, indirect and full costs? Does management adjust costs in response to revenue shortfalls?
Health of Balance Sheet: Are the size, nature and distribution of assets, net assets and liabilities appropriate to support the organization’s business and programs over the long term?
Liquidity: Is there enough cash available to cover current obligations? How quickly do receivables convert to cash? How liquid are the nonprofit’s net assets?

NFF Financial Tools
Our financial tools are designed to help nonprofit management plan effectively during years of economic uncertainty and beyond.
Nonprofit Business Analysis (NBA) & Financial Situation Analysis (FSA)
Financial Management Tools: Cash Flow Analysis, Scenario Planning, and Program Profitability Analysis
Facilities Solutions: Systems Replacement Plan (SRP)
Nonprofit Finance Workshops & Clinic

1) Financial Expertise: Nonprofit Finance Workshops & Clinic
Nonprofit Finance Workshops
Linking Money to Mission: A Balancing Act
Facilities Projects: Funding and Financing Strategies
Growth and Nonprofit Organizations: Achieving Impact and Stability
Financial Leadership Clinic
What every nonprofit leader needs to know about the role finance plays in supporting nonprofit mission and program
An opportunity to bring key staff and board members together to examine the crucial financial underpinnings of an organization
A chance to gain in just two days:
A greater understanding of nonprofit finance
Customized financial analysis of the organization
An insider look at the financials of similar nonprofit organizations

2) Nonprofit Business Analysis (NBA) & Financial Situation Analysis (FSA)
The NBA and FSA are an one-on-one consultation using proprietary financial analysis. It provides:
An in-depth examination of a nonprofit’s financial strengths and weaknesses
A fresh, independent perspective to help organizations balance financial considerations with program goals
Clear visuals and helpful tips to help an organization better communicate its financial situation to stakeholders
Clients benefit from:
One-on-one collaborative engagement with nonprofit financial experts
Clear and easy-to-use reports, illuminating a five-year financial picture
Trend analyses, charts and recommendations to communicate financial needs to stakeholders
Technical assistance to reinforce lessons from the NBA

3) Financial Management Tools Program Profitability Analysis Scenario Testing Explore strategic partnerships, collaborations, mergers Debt Consulting and Access to Capital Cash Flow Planning Financial & Organizational Assessment

4) Facilities Solutions: Systems Replacement Plan (SRP)
A Systems Replacement Plan (SRP) gives you a practical plan to take care of your building for the next 20 years, so that it can continue to safely house your mission and programs
An SRP is an assessment of the 20-year repair and replacement needs and costs for a nonprofit facility:
Provides a comprehensive facilities analysis by engineers, architects or construction consultants
Forecasts the necessary replacement of specific systems and equipment, presuming routine maintenance
Details a year-by-year breakdown of proposed costs and savings
Who can take advantage of an SRP?
Nonprofits that own buildings
Nonprofits with a long-term lease that are responsible for all repairs and replacement

NFF approach to working with a Nonprofit Organization to Achieve Sustainability Success & Ongoing Improvement Execution Planning & Decision-making Communication Education Understanding links between finance and mission success Using data to better articulate mission needs Translating what you’ve learned into short- and long-term actions Integrating plans into day-to-day activities and organizational culture Conducting continuous evaluation to leverage impact and adjust course

Nonprofit Finance Fund
Thank you!
To learn more about NFF:
Visit our website: nonprofitfinancefund.org
Sign up for news and updates through our website
Follow us on Twitter! twitter.com/nff_news
Contact us:
Karla V. Salazar Jessica LaBarbera
Director Director
213-623-7001, ext. 2 213-623-7001, ext. 5
[email_address] [email_address]
nonprofitfinancefund.org

Example of Nonprofit Finance Fund’s Work with a Nonprofit Client
Korean Health Education Information & Research Center

Who is KHEIR?
The KHEIR Center is a primary provider of critical linguistic & culturally-appropriate healthcare and human services support to the residents of Los Angeles and its neighboring communities.
Annually, KHEIR Center offers over 30,000 Human Services case visits, 100,000 hot meals to seniors, and 10,000 patient visits in English, Spanish, and Korean.

Recent challenges that KHEIR sought to address with the Nonprofit Finance Fund
One of the key programs for KHEIR, the Adult Day Health Care (ADHC) Center has faced an over saturation in the market for Korean seniors with fierce competition from private clinics.
Also, since the economic recession, there is a constant threat of the ADHC program facing elimination. Currently about 70% of revenue comes from ADHC.
The staff and the Board were in agreement that KHEIR should:
Diversify revenue streams by also diversifying programs and funding sources.
Develop a financial capacity building & sustainability plan, based on a worst case scenario of ADHC eliminations.

KHEIR’s work with the Nonprofit Finance Fund
Through a “Scenario Planning Engagement” Exercise
KHEIR & NFF examined the fiscal and programmatic impact of a funding reduction to the Adult Day Health Care (ADHC) Centers on KHEIR

Scenarios KHEIR explored with the Nonprofit Finance Fund Secure diverse revenue sources and clientele. Utilize/ leverage funds to address housing needs for long-term community benefit. Decision What if Scenario Options Financial Impact #1 Financial Impact #2 ADHC is severely cut or eliminated Minimal Adult Day Care or complete closure Minimal Adult Day Care would require an additional revenue of $1.3 million/year to be sustainable Use $1 million of existing reserves to help wind down ADHC (assuming full year transition is needed) Clinic focuses on attracting new clients Increase marketing $$ Hire new employees Bottom line improves by roughly $250,000 based on projected increase in client intake Stay as-is, allow management to focus on other operational needs

Actions Taken by KHEIR as result of work with the Nonprofit Finance Fund
Adult Day Health Care
Renegotiating lease
Researching addition of a new patient group (service language)
Exploring federal programs for long-term sustainability
Identifying public-private partnership opportunities for Assisted Living Facility
Clinic
Identifying new revenue opportunities:
HMO Contracts
Marketing Imaging Services to other Clinics & Private Practices
Securing service contracts (Federal, State & County)

Replicating KHEIR-NFF Success: Who Else Can Benefit?
Organizations Reviewing Their:
Long Term Sustainability
Revenue Model
Effectiveness (Individual Programs, Agency-Wide)
Growth Potential

Building a Learning Organization to Increase Program Effectiveness Special Service for Groups

Who is SSG?
Incorporated in 1952
Operates 20 programs
Address key issues identified as priorities by local grassroots communities
In last decade, SSG has excelled in developing and leading collaborative efforts with other community-based organizations
Today’s focus: SSG Research and Evaluation’s work as a capacity builder for program evaluations to increase program effectiveness

Why Important?
1) Boosts Program Effectiveness
Nonprofits need to capture information about their programs in order to manage it, learn from it and improve the future of the program.
2) Supports Fundraising Efforts
Nonprofits need concrete information about the impact of their programs in order to convey that they are effective to potential funders to increase funding for their programs.

Don’t organizations already know this?
Nonprofits are generally funded to implement and report on program completion
Organizations are rarely funded to evaluate their programs
Forfeits valuable lessons learned to make future programs more effective
Repeat the same mistakes over and over again
Or miss the opportunity to replicate successes
When could alternatively be getting better and better

SSG as Capacity Builder
CCF contracted SSG in 2010 for an evaluation capacity building project called Building Learning Organizations.
The purpose was to help nonprofits conduct their evaluations—not only as a reporting mechanism—but primarily as a tool to:
Improve programs
Achieve better outcomes
Inform nonprofits’ organizational development

SSG Strategy with Nonprofits
Feedback Loop

What SSG achieves with nonprofits:
Increase staff knowledge of program evaluation concepts and their importance and link those concepts to organizational learning and improvement
Increase capacity of nonprofit organizations to document and evaluate their outcomes and to use evaluation data to inform their organization’s development and programming
Integrate evaluation as a regular part of the organizational culture, and not external to - or independent of - the organization.

Kind of nonprofit that can benefit:
Characteristics of nonprofits that can benefit :
ACCOUNTABILITY CHANGE: Used to compliance reporting but want to switch to an outcomes-based model of accountability (measuring impact versus program completion)
ORGANIZATION DEVELOPMENT: Want to use data to support program improvement, fundraising initiatives and policy advocacy efforts
Characteristics of nonprofits that demonstrate readiness :
Leadership buy-in
Organizations that are trying to implement their strategic plan that includes evaluation
Young or growing organization that does not yet have set infrastructure – more fluid and adaptable to changes
New or revamping programs

Peace 4 Kids Empowering foster and at-risk youth by providing community as family Program Effectiveness Capacity Building Scenario with SSG

Conditions that prompted Peace 4 Kids to engage in Capacity Building with SSG
Peace 4 Kids has an organizational philosophy of continuously seeking to improve
Concerns about the general funding climate in light of the economy
Leadership transition
Wanted to raise more funding and increase competitiveness for funding
Potential new law with possible impact on nonprofits serving foster care youth

Capacity Building Exercises Peace 4 Kids Realized with SSG
Developed Logic Models for programming that were specific to each age group.
Development of New and Revised Intake Application Forms for foster care youth
Created a Program Improvement Committee within our organization

Results of Capacity Building on Peace 4 Kids for Program Effectiveness
Expanded age range of the foster youth served:
Identified greater impact by targeting younger children
Submitted funding proposal to Dept. of Justice for mentoring program:
Better able to articulate why programs uniquely effective
Organization more competitive for funding
New data collection and analysis process:
Identified kind of information needed to demonstrate results
Staff trained on data collection and using excel/spreadsheet software for data analysis

Long-term Impact of Capacity Building on Peace 4 Kids
Program Effectiveness :
More strategically address target community’s needs
Program Impact :
Track progress and direct programs for desired results
Program Funding:
Capture and communicate results for more funding
Program Sustainability :
Increased program effectiveness, ability to capture and convey results increases sustainability

SSG Contact Info
Alexis Moreno
213.236.9395
[email_address]
www.ssgmain.org

Strengthening nonprofits through coaching, consulting, and capacity-building provided by experienced executives who volunteer their services Executive Service Corps of Southern California

Executive Service Corps
Over 120 volunteer executives
80% business
15% nonprofit
5% government
Serving over 150 local nonprofits each year
30 years in Southern California
One of nearly 40 ESC affiliates across the US

ESC Business Model
Areas of Focus
Executive leadership development
Board development (today’s focus)
Fundraising
Management consulting, e.g.:
Strategic planning
Finance
Human resources
Operations
Etc
Value Proposition
Executive-level consultants
Volunteers, enabling affordable pricing
Coaching modality of service delivery, developmental approach to projects
Teams, therefore diverse expertise
Extensive training program (~30/yr):
Best practices in nonprofit sector
Translating business expertise to nonprofits (or large NPs to small)

Executive Service Corps Client Characteristics
Existing nonprofits, government agencies, or established projects within an incubator/fiscal sponsor
Customized approach enables us to work with most sizes and types of organizations, at all lifecycle stages
However . . .
Since culture change is usually involved, project needs commitment of both executive staff and Board
Since our consultants don’t “do for,” org. needs to have sufficient human infrastructure for coaches to work with

Executive Service Corps’ Board Development Services
Helps nonprofit Boards of Directors understand their critical governance and leadership responsibilities (the latter appropriate to their organization’s lifecycle stage) and assists the Board in building the infrastructure and culture to promote successful execution of that role
Provided as a customized consultation (generally 12 months) or as part of a cohort program with other nonprofits (CCF’s BLI is classroom instruction for the ED and two Board leaders along with individualized coaching)

St. Barnabas Senior Services
one
two
three
four
More than100 years
Serves >5,000 seniors annually
Several locations throughout 15-mile service area near downtown
Award-winning leader & advocate
Programs include multipurpose center, cyber café, medical clinic, adult day healthcare, social work offices, six congregate meal sites

Goals of St. Barnabas’ Board Development Project with ESC
To increase levels of engagement and commitment among existing Board members (i.e., attendance at meetings, participation on committees, acceptance of “give or get” requirement, willingness to make funder introductions and assist with public relations)
To strategically recruit new, quality Board members to better reflect population being served and to enhance connectedness to business and banking communities

What ESC Did With St. Barnabas
Provided framework with timelines and milestones for identifying and prioritizing Board-related needs
Offered guidance for increasing members’ understanding of their roles and responsibilities, as well as building their levels of commitment, engagement, and accountability
Conducted regular coaching sessions with Board Chair and CEO – separately and together – to assist with developing strategies, creating tools, and supporting implementation
Participated in meeting(s) with members to facilitate their learning

Results of St. Barnabas’ Board Development Project with ESC
Helped cement relationship between CEO and newly elected Board Chair
Strengthened Board capacity
100% of members signed new Board commitment letter
100% participation in Board retreat (incr. 50% over prior)
100% active participation on Board committees
All achieved with zero attrition from Board members (cont’d)

Results of St. Barnabas’ Board Development Project Cont’d
Significant increase in meeting attendance/participation
Created formal Board recruitment process
Have already successfully recruited new Board members meeting gaps identified:
Ethnic representation
Banking industry representation
Funder connections along with willingness to solicit them on behalf of SBSS (two new gifts so far)

Benefits of St. Barnabas’ Board Development Project with ESC
Enhancing sustainability through ensuring the organization will:
Access the financial , intellectual , and social capital of its Board
Develop a culture of partnership between Board & executive leadership
Make effective , efficient , and meaningful use of all its Board members
Through collective critical thinking and analysis, be better equipped to make vital decisions and meet future challenges
Build a community of support around a constellation of committed leaders rather than one charismatic executive or Board chair

Organizations that Could Benefit from Similar ESC Services
Any organization seeking to:
Build its Board (whether starting up or changing to reflect new program requirements, scale, or reach)
Clarify the Board’s role and focus
Increase the Board’s commitment and engagement in areas key to the organization’s success (e.g., fundraising, public relations, committee involvement, leadership/officer roles)
Strengthen Board relations through enhanced communication (quality and frequency)
Assess the Board Chair/chief executive relationship through a professional, sensitive process

www.escsc.org 213.613.9103 [email_address] Sharon Spira-Cushnir, CEO [email_address] Executive Service Corps of Southern California

Capacity Building Discussion
Q&A
Session

The California Community Foundation
thanks you for your participation.
Please learn more about Capacity Building
with your Philanthropy Team at CCF…
Contact:
Terri Mosqueda
Director of Donor Relations and Grants Management
213.452.6298; tmosqueda@ccf-la.org
Taylor Mitchell
Donor Relations Specialist
213.452.6208; tmitchell@ccf-la.org
www.calfund.org

Capacity Building for Nonprofit Organizations

by California Community Foundation

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