Sustainable Nonprofits

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Sustainable Nonprofits
Presenter Lindy Turner, RCD Coordinator/NRCS
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A simple scenario

• Program A costs 20
• Program B costs 10
• You have 15
• What to do?

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Sustainable Defined

• To keep going
• To provide for by furnishing means or funds
• To hold up
• To support
• To keep in existence
• is this what we want?

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Vigorous Defined

• Strong, active, robust
• Energetic, forceful
• Powerful in action or effect
• Growing well
• Sturdy, sound, healthy
• or is this more
  like it?

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Chicken or Egg

• Money
• People
• Mission
• what is the order of importance?

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What is your NP role?

• Arm of Government?
• Government contractor?
• Local charity?
• Not for profit business?

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Assumptions

• You want to be a not for profit business
• You want to thrive, not just survive
• You are interested in being around for the long
  haul.
• You want do more mission, but are limited by
  funding.
• You want to have some control of your
  organizations future

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Where does your funding come from?

• Grants
• Dues

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Expand your sources

• Grants
• Program income
• Public support
• Service income
• Sales/proceeds
• Loan funds
• Loans
• Interest
• Endowment payouts
• Other

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Lets talk about tax exempt purpose and income

• Related Income related to YOUR tax exempt
  purpose (and agreed to by IRS)
• Unrelated Income not related to TE purpose

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UBIT Unrelated Business Income Tax

• In a nutshellyou must pay tax on net income
  earned from activities unrelated to your TE
  purpose

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Two Important Revenue Opportunities for RCD

• Fees for service - market based
• Enterprise development market based

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Fee for Service

• Being paid a fee for expertise
• Examples..
• Prospecting for grantors
• Writing grant proposals
• Providing professional services like financial
  management, training, legal, accounting, etc.
• Providing technical services like engineering,
  conservation, forestry, horticultural, energy
  audits, construction oversight, etc.

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Fee for Service (the cash builder)

• This is a vendor arrangement. Agreed-to price
  for the service. Not tied to actual costs not
  a grant. There is great misunderstanding and
  confusion regarding fee for service in some
  federal agencies.
• Fee for service offers great opportunity for
  building unrestricted funds in a way that is
  related to mission (related income) and yet not
  taxable.

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WARNING!!!

• Admin fees are NOT fees for service and are often
  charged erroneously and illegally.
• You CANNOT take x off the top for
  administrationno matter what ANYBODY says. It
  is not allowed, Not Allowed, NOT ALLOWED per OMB
  A-122 if you deal with any federal grant. This
  is fraud. Even if your funder tells you to do
  it, it is still wrong and still fraud. Ignorance
  is no excusewhen the Chair signs the contract,
  he/she certifies they understand and follow the
  rules.

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Warning! Warning!

• You may not.NOT.EVER make money (skim, take off
  the top, etc.) on a federal grant to and for your
  organization. Period.
• You CAN recoup your indirect costs
  (administration, general and administrative,
  overhead) if you follow guidelines in A-122 (cost
  allocation plan or approved indirect cost rate)

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Mission-Based Business

• The best hope for owning your future.
• You can develop social enterprises to do mission
  and make money.
• You do NOT have to form a for-profit (or any
  other kind of entity) to have a social enterprise
  that makes a profit.

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Remember.

• The only reason to make money is to do more
  mission. Mission always comes first, but when
  there is no money, there is no mission.

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Keep this in mind

• Every resource allocation (time, staff, money,
  facilities, project) decision you make is an
  INVESTMENT.
• When you make an investment you need to think in
  terms of the Return on Investment (ROI).
• How will you measure the ROI? Mission, money,
  reputation, etc.

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Mission Based Business

• You are already a mission-based business.
• Social Enterprise development...
• Is there good mission in it?
• Can this endeavor pay for itself?
• Can it be sustainable beyond start up?
• Can it generate a surplus that can help fund
  other mission areas?
• Could we get a better mission/money return
  elsewhere?

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Caveat

• You may not operate a for-profit business out
  of a federal office.
• Excess income over expenses does not make it
  for-profit.
• The sticking point is usually the perception of
  profit and unfair competition

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Clinch-Powell

• 4 office locations
• 8 full-time, 9 part-time employees
• 20 AmeriCorps members
• 1 NRCS staff
• Own property in 4 of 5 counties
• Wholly owned construction company
• Several social enterprises
• Net assets over 1.5M

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Income Expense Over Time
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Growth in Total Assets
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FY06 Revenue Streams
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FY06 Expense Breakdown
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Financing Strategy

• Service Income
• Fees for service professional services,
  technical services, equip rental, property
  management, etc
• Sales homes, goods and services
• Loans small biz, industrial, home repair,
  community development
• Property rentals and lease payments
• Grants as start up
• Investments
• Real estate
• Endowment

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A simple scenario - revisited

• Program A costs 20
• Program B costs 10
• You have 15
• What to do?

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What do you want to know?
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Organize for Success!

• Be bold think business
• Mission, mission, mission. No money, no mission
• Build the board. Dont settle for less than the
  best
• Take calculated risks
• Make deliberate decisions that move you toward
  your goals
• Never spend money (resources), MAKE INVESTMENTS
• Diversify income, be entrepreneurial
• Have a shared, compelling vision
• Recruit talented staff with a passion for your
  mission
• Institute tight controlsfinancial management
• Have fun, celebrate success, tell your story

Do more.better!
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Call us if we can help

• Clinch-Powell RCD Council
• PO Box 379
• Rutledge, TN 37861
• 865-828-5927
• www.clinchpowell.net

We are private citizens doing public good in
your neighborhood