#139 Sybil Speaks: Cut Through the Red Tape of a Nonprofit’s FinancesJul 31, 2023
This month's theme is about asking for only what you need from a nonprofit's budget and finances. Donors often ask for more than what's necessary and that creates busywork for the nonprofit, which can waste time and money. Sybil does not want this to happen to you. To avoid this potential pitfall, consider your donor identity, whether you're a sustainer, campaigner, or launcher donor and go through Sybil’s simple training that she offers in this episode so that you can ask the right questions, and get down to the business of answering only the most important budget and financial questions.
- Know your donor identity in order to ask for the financial information you truly need
- Understand how to support the nonprofits in creating collaborative budgets that propel the issue you care about forward
Sybil Ackerman-Munson Bio:
With over 20 years of experience as a nonprofit professional and foundation advisor, I work with philanthropic institutions and foundations interested in successful, high-impact grant making, so you can make a true and lasting positive contribution to the world on your terms.
If you enjoyed this episode, listen to these as well:
Crack the Code: Sybil’s Successful Guide to Philanthropy
Become even better at what you do as Sybil teaches you the strategies as well as the tools you’ll need to avoid mistakes and make a career out of philanthropy.
Sybil offers resources that include special free short video mini-courses, templates, and key checklists, and words of advice summarized in easy-to-view PDFs.
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Hello everyone, I'm excited about this month's theme, and I'm going to talk to you today specifically about how to only ask for what you need with a non-profit budget and finances. All too often, I see us donors asking for way more than what's necessary for what you need when you ask for a nonprofit's budget, information, and finances.
And so, what we're going to talk about this month is how you think through the kind of things you asked for. So usually you're good at it, and I've seen my clients too being good at asking a nonprofit for a proposal or a pitch specifically connected to what you're interested in, right? You don't ask them for everything in the kitchen sink. You don't ask them to tell you everything. You ask them to tell you about what you're interested in.
However, when you ask for the finances, you’ll ask for way too much, and what I've seen is that my clients end up asking for everything but don't end up looking at it. Some of them do, but most of them don't, and so that just creates a lot of extra busy work.
So, for this month, I'm interviewing experts on this issue so you can think through what financial pieces you want. And so, you don't have to ask for everything. OK, so let's get into it.
So, the first thing you need to know is that I created an entire free mini-course about this issue with detailed materials and a short video. I have a link to it in my show notes. So please check that out.
So, I'm assuming that you are going to go check out that special video where I go through the Top 10 things That you may ask for in a budget, and then you're in the finances and sort of the reasons why you may want to do those asks and the reasons why you might not want to. You might not need some of those. So please listen to that and check out that video. But let's get into some exercises in this podcast episode with you to get you thinking about some of these things.
All right, first, I want to go through this checklist. The first thing you should think about is what kind of donor you are. What's your donor identity? Are you mainly a sustainer? Dinner, a campaigner, or a launcher donor, and when you're talking to the nonprofit that you want to ask for a donation from, are you asking them as a person who wants to give year after year to this nonprofit you love every single thing they do, which is a sustainer donor, or are you talking to the nonprofit because you want to solve a problem. So, you have a project you want to fund and that means you're a campaigner. Or you have a gap. There's a problem you want to solve, but there's a gap you want to fill. That means you want to launch a new initiative, so you're a launcher that matters in terms of finances. That you asked for from your nonprofit. All right, so if you're a sustainer donor, here's what I'd suggest: That means you care about everything that your favorite nonprofit is doing, so you want to ensure that the nonprofit generally has enough money around to remain solvent. That's what I would suggest. That's your most important question.
And So, what you want to do is ask for their 9-90s. Their audited financial statements and their organizational budget but what you don't need if you're asking if you're a sustainer donor and you want to fund them year after year and you love everything, they do is what you don't need to ask for. Is a project budget. You don't need to ask for actuals or a profit and loss statement. You don't need to do that.
You might say Oh, no, no, no. I want those. Well, then that's fine. If you're pushing back on me and you are going to read them… great, but you don't need them if you're a sustainer donor. You love your nonprofit and the main thing you're worried about is you want that nonprofit to remain to solve it. You want to ask for nine 90s audited statements and an organizational budget, but probably not a project budget, actuals, or profit and loss. The organization you should have been the 9-90s Audited statements and organizational, but just on hand, so it wouldn't be a big deal for them.
- But I also have some extras you might want to think about but think about this carefully before. You ask if you're concerned about the nonprofit's solvency and whether they can stay alive during hard times. Ask them about their reserve fund. You want to make sure that they have at least three to six months of reserve at all times. Sometimes they're audited. Financials will show you that information. I have a training course that's on my website. It's free training. That's what I did with this wonderful gentleman, Douglas Regalia, who's a CPA and an expert in reviewing and doing audits for nonprofits, in the training we went through the audit how he goes through and audits the financial statements and how you should read them so you can decipher what your nonprofit's finances are all about.
So, I'd suggest, and I'll have links to that in my show notes too. You go through that free training to look through it because that can give you this kind of information as well. But if you just want it straight up, it’s not that hard to ask your nonprofit what your reserves are like and how are you doing. Because they will tell you.
If you're concerned that someone at the nonprofit doesn't have its fraud protection measures in place, if you're worried about that, and then you can ask them about that, what are your fraud prevention measures? Or do you make sure you have more than one person signing checks? That kind of thing? You also might not be worried about it. You might know this group. It's very, very good. It's very reputable, and it has, you know, lots of things going on already. You might not be worried, but if you are asked specifically. If you want to help the nonprofit raise money with other donors, you might ask them for their donor list. But that's only if you plan. And when it comes to collaborating with other donors, I'm just trying to minimize the amount of paperwork you are asking these folks to do.
So that's if you're a sustainer donor. OK, you'll mainly want to make sure that this nonprofit you love will stay around for a long time. OK, if you're a campaigner or launcher donor, the questions in the budget and financial issues Situation that you want to know about are quite different. Since you are thinking about a specific problem you want to solve, then what you want to ask for is a project budget, an organizational budget, and the audited statements. That's to ensure that the organization in mind is managing its finances properly.
And again, I have that training that I did with Doug Regalia, who is the expert here on audited statements. And please check that out so that you can understand how to read those audited statements. What I don't suggest you just write off or ask for are the 9-90s actuals and profit and loss. Again, you might say to me, Sybil, I want those. Well, fine, ask for them, but only ask for them if you are going to read them. You feel like they're necessary for the project that you're asking for.
The most important thing I find is the project budget and organizational budget. That can help you understand. What they plan to spend on the project and how that links into what they're spending overall and their priorities, organization-wide, can be helpful because sometimes an organization will pitch to you. Oh no, this project is perfect for us. We want to do it. But when you look at the budget, you see that it's only a tiny part of the organization's budget. And that is a really important piece of information. You can talk to them about that.
All right, extras. If you're concerned about their solvency, then ask for the reserve information. If you're concerned that someone at the nonprofit may be fraudulently working out, you know there might be some kind of fraud. Ask for the protection measures that they have in place. And if you want to help the nonprofit raise money to tackle a problem or fill a gap that needs to be filled, you also want to ask them who the other donors are.
Because of this kind of issue, if you're a campaigner or launcher, you'll probably want to collaborate with other donors to make sure that the campaign or launch is successful. Because you are usually no matter how much money you have, you can't do that alone. And also, if any of this project Includes lobbying the nonprofit, I also have training on how to make sure that you are the nonprofit you're working with and that you are not funding lobbying directly if you're a private Family Foundation.
But there are a whole bunch of rules around this, and I do have a whole little mini-course on that, so, please. Check out the link. But if you are interested in making sure that you're clear on how much the organizations are lobbying in that, and you're not going afoul of any of those rules that I have in my other training on this, which I have the link to in my show notes, you want to ask the nonprofit what percentage of time they're spending lobbying on this campaign. Or to fill the gap that you're trying to work on. So again, check out my whole mini-course that talks to you more about how to make sure that you're above board on this issue with lobbying.
Also, if you're worried about this piece, you're going to want to talk to your lawyer to make sure that you're asking these questions correctly around the lobbying piece. But with campaigns and launching new lobbying questions does come into play because a lot of times organizations are trying to change policy and law because it's a problem they're trying to solve, which often means that laws aren't there now to address it. So, a new law may need to be created, and there's going to be a part of the work that, if structured in a certain way, you can't fund. If you're structured another way legally, you can, and again, I have a different course for that piece. But with budgets, I find it good, if you're worried about this at all, to specifically ask, what percentage of the time are you lobbying?
Again, that's only if you're working on a project or a campaign or launching something that includes some kind of lobbying. OK. So again, what I find and the reason I'm emphasizing all this is that I have all this in my show notes too, and I'll have a special template with a checklist. You can go back and look at this if you're running around; I just want to emphasize that a lot of times our campaigners and launch your donors. You all end up asking for all of this stuff. And I want to say that I don't think you need it all. I want you to think as carefully about what you ask for in a nonprofit's finances as you do when you're thinking about the project you want to fund or the organization you generally want to support year after year and the issues that they're working on.
I also want to talk a little bit about a lot of things, especially if you're a campaigner or launcher you're going to be interested in funding multiple nonprofits working to solve a problem together in a collaborative way. And so sometimes these nonprofits will come together and say, we want to offer one campaign budget that tells you what you need to fund for each organization. Which nonprofit is doing different things?
So, one nonprofit might be an expert in media and communications to solve the problem. Another might be an expert in litigation. A 3rd might be great at grassroots organizing, and they all might need different funding strategies and amounts of money.
And so, they all have one big collaborative budget. It can be really exciting for you when you start hearing from all of your favorites. non-profits that they all have a similar problem. They want to solve problems, and they want to work together to make a difference. That's awesome.
So, you can ask them all for a collaborative budget, which shows a specific campaign or gap they want to fill by launching something. And they can say, this is how much it's going to cost for all of us to be able to solve this problem that you want to be solved. It's awesome. I love it when that happens. The thing that can happen, though, is that you, as a donor, can make a mistake. Can hear some of your favorite nonprofits say that they have a similar problem. They want to solve it, and you might say, oh my gosh, this is so awesome.
They all have the same problem, and you might say to them, why don't you give me a collaborative budget if they haven't proactively given you one? This can actually end up causing more harm than good because sometimes they'll feel like they're competing with each other. It'll cause a lot of stress if the different groups don't get along. There's a lot of stuff to think through there.
So if you want to do this right, what you should do is talk to all of the different folks in the collaboration. Ask them if they may want to work with others around collaboration to solve the problem, and you want to go through some very careful steps to make sure that when they come together and create that collaborative budget, they do it in a way that's supportive and doesn't end up getting them spinning and end up causing pointy elbows.
I actually have training on how you can work with a bunch of organizations to bring them together in collaboration in a way that won't end up wasting money and time. I have a link to that training in my show notes. But I'm also this month interviewing a woman named Lisa de Brugere, who is an amazing individual who's been able to really work as an independent facilitator, helping groups bring together a collaborative budget in a way that's productive and helpful.
So, I look forward to you listening to that podcast episode as well that's coming up here this month. Where I dig into the key elements to think about when you're supporting an organization or a bunch of organizations to create a collaborative budget. So more to come on that. It's going to be great and check out my training on this issue as well. It's very important that when you think about doing a collaborative budget, you think very specifically about doing it in a deliberative and step-by-step manner that I flesh out later for you.
All right, so I think I've just thrown a ton of information at you. And I hope that you got a lot out of this Sybil Speaks episode. And that you're thinking now about, “Hmm, what are some next steps I want to take if I have a bunch of nonprofits that want to come together on a collaboration? How do I help them define their budgets? I'm going to learn more from Sybil on that later” and I also hope that you've thought very carefully now about the kind of financial instruments you want to ask for from the nonprofit perspective, depending on whether you're a sustainer, campaigner, or launcher, think carefully about that. Check out my show notes and my training on this matter, and I look forward to more conversations with you in the future. Have a wonderful day.