OnePierce Community Resiliency Fund hosted a full-day training on nonprofit financial management for organizations in Pierce County on December 10th. Attending organizations learned to assess their own financial performance and to understand appropriate financing for organizational growth. The training was delivered by Nonprofit Finance Fund, with financial support from UnitedHealthcare, and it aimed to increase readiness for the launch of OnePierce’s community loan products in the first quarter of 2020.
Illustration courtesy of Nonprofit Finance Fund
OnePierce Community Resiliency Fund (“OnePierce”) hosted a full-day training on nonprofit financial management for organizations in Pierce County. The training was part of OnePierce’s support for local nonprofits to assess their own financial performance and to understand appropriate financing for organizational growth.
As training attendees learned, managing nonprofit business models can be more challenging than overseeing for-profit strategies. For-profit organizations sell services or products that customers buy directly. Non-profits, by contrast, often deliver services to low-income customers and therefore require third parties to subsidize their operations. This need for constant subsidy, including during organizational growth, requires nonprofits to effectively run two businesses: one focused on serving its customers, and a second aimed at raising subsidies through grants and fund development.
Most funders do not understand or acknowledge these unique challenges facing nonprofits. Additionally, decades of under-investment in nonprofit services has led to financial instability among many service organizations. The training hosted by OnePierce aimed to build financial management capacity internally and to support better communication externally around financial histories and forecasts. Training attendees covered four topics:
- The nonprofit financial landscape: Attendees discussed challenges of nonprofit management, myths about running nonprofits (including the dreaded ‘overhead ratio’), and the goal of achieving a business model that is both sustainable and adaptable.
- Assessing nonprofit financial health: Presenters laid out the difference between business models and capital structures, and how these two aspects of financial health can reinforce one another. Attendees discussed their own organizational financial conditions and the different risks and contingencies that exist for various business models.
- Capitalization and calculating the full cost of services: Attendees learned about aligning balance sheet resources with short and long-term missions and aims. They discussed the inclusion of unfunded work (including underpaid, overworked staff) in the full cost of services.
- Understanding strategic use of loans: Presenters reviewed the three reasons why nonprofits take on debt (and why it can be a great way to help your organization), how to determine which types of financing to use for working capital and for capital projects, and what lenders look for in organizations. They also discussed what organizations should look for in lenders and what to do if an organization is not yet ready to take on debt financing.
OnePierce, a nonprofit impact investment fund, is the funding arm of Elevate Health, the Accountable Community of Health for Pierce County. OnePierce’s mission is to promote health equity and improvement in social determinants of health; it does this by investing grants, debt, and equity into community assets and direct services. It will be launching its community loan products in the first quarter of 2020 and its responsive grant program later in 2020.
The training “Linking Money to Mission” was delivered by Nonprofit Finance Fund, a national Community Development Finance Institute and advisor on nonprofit business models. The training was made possible by United Healthcare Community Plan of Washington.