Bridgespan Marc Rahlves presentation Marc Rahlves... · TBG 130717-MIE Conference TBG pres ... 9...
Transcript of Bridgespan Marc Rahlves presentation Marc Rahlves... · TBG 130717-MIE Conference TBG pres ... 9...
6/28/2013
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“Breaking out of the Nonprofit Starvation Cycle to Better Deliver on Mission”
Collaborating to accelerate social impact
y
July 17, 2013MIE National Directors Conference
Who is The Bridgespan Group?
The Bridgespan Group aspires to a society characterized by equality
of opportunity and justice. To that end, we collaborate with mission-
driven leaders and organizations seeking to break cycles of
intergenerational poverty, provide effective safety nets and ensure
core human and civil rights
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core human and civil rights.
• History: Founded in 2000
• Values: Impact, respect, candor, collaboration, passion
• Services: Strategy consulting, leadership development, philanthropy advising, and developing and sharing insights
• Offices: Boston, New York, and San Francisco (~200 staff)
• Clients: 400+ foundations and nonprofits globally
Why we are here today
•Importance of economic clarity for strategic decision making
•Challenging macro environment
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•Resource allocation as key lever for impact
•Need for support structures and getting them funded
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Objectives
• Provide interesting and practical information
• Understand what applies to the legal aid field
• Give opportunity to connect and discuss with
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• Give opportunity to connect and discuss with your peers
Today’s agenda
• Key trends in government and philanthropic funding
• Managing and succeeding in tough times
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• Understanding your costs and why it matters
• Break
• Dynamics of the Starvation Cycle and breaking out of it
• Wrap up
1,000,000,000
1,500,000,000
Funding in USD
IOLTA
Legal communityOther
1,293,742,000
Civil Legal Aid Funding comes primarily from public sources
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0
500,000,000 LSC
State Legislatures
Fdns/Corps
Other Public Funds
2012 Data Collection = $1,294,000,0002011 Data Collection = $1,344,000,0002010 Data Collection = $1,375,000,000
So, a 3.5% decrease from the prior year, when there was a 2% decrease from the high.
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Federal funding outlook is bleak
Government Accountability Office -- Realistic Scenario
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Source: GAONote: Data are from Alternative model used in GAO’s Fall 2011 simulations based on the Trustees’ assumptions for Social Security and CMS Actuary’s alternative assumption for Medicare.* This also includes spending for insurance exchange subsidies and CHIP
State and local outlook also troubling
Surplus(Positive balance)
5
4
3
2
Percentage of GDP
Government Accountability Office -- Estimate of State and Local Operating Balances, as a Percentage of GDP
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Source: GAO simulations, updated April 2011
Deficit(Negative balance)
1
0
-1
-2
-3
-4
-5
Operating Balance
2005 2010 2015 2020 2025 20552030 2035 2040 2045 2050 2060
Year
Near-term budgetary concerns not making the situation any better
Fallout from the federal stimulus•$740B of ARRA funding has paid out; the stimulus
has run its course
•As one non-profit executive noted, the stimulus money running out is a “cliff we are toppling over.”
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$2.1T in pending cuts stemming from the Budget Control Act•$900B in cuts to discretionary funding starting in FY
2012
•An additional $1.2T across the board trigger cuts will begin to take effect in FY 2013
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Philanthropic giving is improving slowly…
• Total charitable giving has increased in current dollars in every year since tracking began in 1967 with the exception of three: 1987, 2008, and 2009
• 2012 charitable giving grew 3.5% (1.5% when adjusted for inflation)
R h di t it ill t k t l t i t i h
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• Researchers predict it will take at least six more years to raise as much as before the recession
• Only sharp growth in giving came from corporations (12%), foundations increased their grants by 2.3%.
• Nearly 40 percent of the 6,000 charities that responded to a study by the Nonprofit Finance Fund said they planned to change how they raised money this year
Source: Giving USA Report 2013, The Chronicle of Philanthropy, CCS Snapshot of Today’s Philanthropic Landscape 2012
…with individual donors giving more than 70% of all philanthropic dollars
60
80
100%
Human ServicesPublic-Society benefits
HealthInternational affairs
Arts,culture & humanitiesEnvironmental/animals
To Individuals
100%
60
80
100%
BequestsCorporations
Foundation
$316.2B
11130717-MIE Conference TBG pres ...TBGSource: Giving USA Report 2013, CCS Snapshot of Today’s Philanthropic Landscape 2012
0
20
40
60
Giving by typeof recipient (2010)
Religion
Education
Foundations
0
20
40
60
Giving by source(2012)
Individuals
$8
$10
$12
erso
n
Legal Aid Funding Trends (not inflation adjusted)
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$0
$2
$4
$6
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Dol
lars
Per
Poo
r Pe
LSCIOLTAStatePublicPrivate
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Summary Legal Aid trends
•Funding from public sources decreasing
•Biggest drop in relatively restriction free and (historically) ongoing sources- Total reduction around $82.3M - Public: LSC (-14%) state funding (-7%)
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Public: LSC ( 14%), state funding ( 7%) - Private: IOLTA (-7%)
•Increasing sources virtually all private- Total increase around $32.3M- Only legal community funding generally unrestricted and ongoing (+7%)
Questions for discussion
•What aspects of our findings most resonate with your experience?
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•Where/how/why are you seeing things differently?
Today’s agenda
• Key trends in government and philanthropic funding
• Managing and succeeding in tough times
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• Understanding your costs and why it matters
• Break
• Dynamics of the Starvation Cycle and breaking out of it
• Wrap up
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Small group discussion at table
•How has the economic situation impacted your organization?
•Where did you have to make adjustments or cuts?
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y j-Programs?-Overhead?-Staff?
•What has worked well, what has not worked so well?
Most nonprofit organizations have felt the impact of thedownturn
•Many organizations have experienced funding cuts
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•The demand for services continues to increase
•Anxiety levels of staff are high
Nonprofits we surveyed saw less severe decreases in revenues in 2010
Percentage of respondents reporting decrease in revenues
80%
Percentage of respondents reportingdecrease in revenues greater than 10%
62%
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2009 2010
32%
Source: Bridgespan Succeeding in Tough Times Survey Results, N for 2009=106, N for 2010=102
2009 2010
18%
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Most direct service nonprofits experienced higher demand for services in 2010
Respondents reporting increased demand for servicesin prior year (percent)
100%95%
88%81% 80% 80%
19130717-MIE Conference TBG pres ...TBGSource: Bridgespan Succeeding in Tough Times Survey Results, N =102
Health
Multi-s
ervic
e
Prov
iders
Educ
ation
and
Yout
h Se
rvice
s Other
Housin
g an
d
Elder
ly Se
rvice
s
Job Tr
aining
Arts/
Cultu
re
25%
We also sought to learn more about how government funded nonprofits and government officials viewed the situation
•We focused our research on a few guiding questions:-How are nonprofits funded by government viewing the situation?-What do they believe the future holds for them and their beneficiaries?-How are they preparing for that future?-How do their perspectives compare with those of government funders?
•To help answer these questions, we conducted a survey for
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p q ynonprofit organizations who received more than 50% of their revenues from government
-68 survey responses received-59 from human service organizations-56 from organizations which received funding from more than one type of govt. funding stream (local, state, national)
•We also conducted 23 interviews-17 interviews with nonprofit leaders-6 interviews with federal, state and local government officials
“Has your organization’s total funding from all government sources increased or decreased since the recession began in 2008?”
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Note: 68 survey takers answered this question
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“Over the next 2-3 years, I expect that funding for my organization from all government sources will likely ___ ?”
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Note: 67 survey takers answered this question
Nonprofits viewing pending federal cuts with pessimism and uncertainty
“The federal budget cuts enacted this summer and the additional cuts likely in the months ahead will cause significant problems for our organization as we
Please rate your level of agreement with the following statements:
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Note: 67 survey takers answered this question
for our organization as we seek to fund our mission”
“Our organization has an adequate understanding of how the pending federal budget cuts will impact our organization”
Strongly AgreeAgreeDisagreeStrongly Disagree
FOCUS COMMUNICATION COLLABORATION
•Focus resources on mission critical
•Communicate with and engage stakeholders
•Collaborate with other organizations
Organizations haven taken different approaches to address the crisis
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programs
•Scale back, eliminate subset of programs
g g(staff, volunteers, board)
-Discussions-Communication plans-Board involvement in addressing challenges
g-Form advisory group-Share resources such space and admin. support
-Apply jointly for funding
Need to understand full costs Challenging and timeconsuming
Effective to better meetdemand
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•Too slow to cut costs
•Focus on fundraising
However, many show gaps with potential for serious consequences
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•Few deep reserves
•No well-defined contingency plan
Actions by government funded organizations we surveyed with focus on long-term
80% Identified full cost to deliver each program or service
80% Increased efforts to accurately measure outcomes
80% W k d l l ith b d t dd d t
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80% Worked closely with board to address downturn
77% Improved productivity with available resources
72% Clarified which programs are strategic priorities
72% Diversified funding outside of gov’t sources
Note: 67 survey takers answered this question
71% Froze salaries and hiring
62% Reduced staff
62% Reduced costs by increasing administrative efficiencies
Short-term actions by government funded organizations we surveyed
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42% Utilized reserve funds
29% Cut salaries
46% Changed services to lower costs
Note: 65 survey takers answered this question
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7 steps to help managing through tough times
1. Act quickly, but not reflexively, and plan contingencies
2. Protect the core
3. Identify the people who matter most and keep that group strong
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4. Stay very close to your key funders (and don’t wait for them to call)
5. Shape up your organization
6. Involve your board
7. Communicate openly and often
Growing organizations have used outcomes measurement, contingency plans, and communications
Additional common tactics associated with growth(% tried in the prior year)
76%
94%
69%
84%
59%
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Increased efforts to accuratelymeasure outcomes
Developed a contingencyplan
Created a communicationsplan to address recession
43%
Decreased/stablerevenue
Increasedrevenue
Source: Bridgespan Succeeding in Tough Times Survey Results, N=102
Today’s agenda
• Key trends in government and philanthropic funding
• Managing and succeeding in tough times
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• Understanding your costs and why it matters
• Break
• Dynamics of the Starvation Cycle and breaking out of it
• Wrap up
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Why this matters to executive directors
•Resource allocation is an important part of strategy and powerful lever for achieving goals
•Unrestricted funds are often your most precious resource
Th t f ki t d ff i iti l t
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•The art of making trade-offs is critical to your success
•Examples-Which programs do we fund?-Should we expand to a new location?-How much money to we need to sustain our programs?
Scope of financial data available in many nonprofits is still worrisome
•Revenues are typically sufficiently understood
•Full cost transparency is the exception and every organization has their own way at looking at its cost information-Limited views
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8Total costs only8Grant accounting only8Program-specific expenses is what is usually needed
-Rationale for limited data8Time and resource intensive8Insufficient systems8Information not used
•By service offering
“True Costing” seeks to address these issues
•By functional areaHow are costs grouped?
Functional analysis True cost analysis
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•Direct costs of programs
•Gross contribution = program revenue –program costs
•Direct and indirect costs
•Focus on key cost drivers
•Net contribution = restricted program revenues – (direct + indirect program costs)
Which costs assigned to programs?
Financial measure?
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Begin by examining your programs, both in theory AND in practice
Mapping and
Target outcomes
Target participants
Target program operations
Your management’s definition of programs IN THEORY
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pp gsegmentation of programs, participants, outcomes
Actual outcomes
Actual participants
Actual program operations
Analysis of actual program, participant, and performance IN PRACTICE, and impact on costs
What is the difference?
This informs true cost by identifying (in principle and practice) key cost drivers
• Various ratios of staff to participants–Case loads, class/program sizes–Level of utilization of resources
• Levels of ‘dosage’ of a service (may contain three components)
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components)–Duration of time service is delivered–Frequency in which services are offered– Intensity of effort per instance of services
• Target number of participants served, and outcomes to achieve
• Where revenue comes from, what restrictions this places on who is served
Let’s start with an example
$3 200
Average cost per youth for nonprofit X to serve ~1,100 youth
$3 400
Contract price per youth by Dept of Juvenile Justice to serve 200 more youth
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$3,200 $3,400
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At its most basic, this looks pretty good
$3 200 $3 400 = $200
Surplus per youth
Contract price per youth by Dept of Juvenile Justice to serve 200 more youth
Average cost per youth for nonprofit X to serve ~1,100 youth
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$3,200 $3,400 = $200
Further analysis reveals different picture
Nonprofit X serves youth with different intensities of service – and this impacts cost
A t$5,470
Program A: Intensive services for the most at-risk youth (cost per youth)
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$3,200
Average cost per youth for nonprofit X to serve ~1,100 youth
,
$2,800
$1,600~500 youth
~275 youth
~300 youth
Program C: Light services for on-track youth to keep them on-track (cost per youth)
Program B: Moderate services for struggling youth (cost per youth)
We learn that this contract is specifically for intensive services to youth most at-risk
$5,470~300
$3,400 = ($2,070)
Deficit per youth
DJJ funding per youth
Average cost per
Program A: Intensive services for highly at-risk youth (cost per youth)
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$3,200 $2,800
$1,600~500 youth
~275 youth
300 youth
This would result in $414Kdeficit
And it gets worse...
g pyouth for nonprofit X to serve ~1,100 youth
Program C: Light services for on-track youth to keep them on-track (cost per youth)
Program B: Moderate services for struggling youth (cost per youth)
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$580
These costs do not include indirect costs or new fixed investments
$5 470
May require new ‘fixed investments’
New senior manager to oversee 500 vs. 300 youth program
Need to cover portion of admin, mgmt costs
Program A: Intensive services for highly at-risk youth (cost per youth)
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$700
$340
$580
$3,200
$5,470
$2,800
$1,600~500 youth
~275 youth
~300 youth
% of senior leadership team’s time to oversee
Costs such as additional IT, facilities, etc. not captured in ‘direct’ estimate
Average cost per youth for nonprofit X to serve ~1,100 youth
, g(may go down with growth)
Other variable indirect costs not included in estimateProgram C: Light services for on-
track youth to keep them on-track (cost per youth)
Program B: Moderate services for struggling youth (cost per youth)
So it gets worse…
$3,400 = ($2,650)
Deficit per youth
DJJ funding per youth
$580 $5,470~300 Average cost per
th f fit
Program A: Intensive services for highly at-risk youth (cost per youth)
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This would result in $530Kdeficit
$700
$340 $3,200 $2,800
$1,600~500 youth
~275 youth
youthyouth for nonprofit X to serve ~1,100 youth
Program C: Light services for on-track youth to keep them on-track (cost per youth)
Program B: Moderate services for struggling youth (cost per youth)
$580
…Although it might get better (no promises)
$2 917 $3 400 = ($97)
Deficit per youth
DJJ funding per youth
Hypothetical – Contract requires 15:1 staff ratio; this nonprofit provides Program A at 10:1
(and staff represent 80% of direct costs)
Program A: Intensive services for highly at-risk youth (cost per youth)
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$700
$340
$580
$3,200
$2,917
$2,800
$1,600~500 youth
~275 youth
~300 youth
$3,400 ($97)
This would result in $49Kdeficit
Average cost per youth for nonprofit X to serve ~1,100 youth
However – does this org believe it can achieve same results with higher ratio?
Program C: Light services for on-track youth to keep them on-track (cost per youth)
Program B: Moderate services for struggling youth (cost per youth)
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Example/exercise: a high school youth org.
Organization Z in New Orleans
Case Management Employment trainingEducation
Math/English tutoring for in-school youth
GED support for out of school youth
• Program description– Year-round, bi-weekly 1 hour
sessions with youth-trained social worker to provide positive adult role model and support, including referral to internal and external programs and advocacy with
• Program description– A 3-month basic job skills training,
internship, and job placement service for age 18+ participants who graduate high school or gain a GED and do not proceed to college• Program description • Program description
Advance toReferred to
EXAMPLE
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programs, and advocacy with juvenile justice system if necessary
– Case-load of 50 youth per case manager
• Target participants– 500 youth– Youth ages 14-18 living in
Orleans parish– Youth come from families at or
below 300% of poverty
• Target outcomes– Youth remain free from
engagement with juvenile justice system
– Youth get placed in education programming to complete high school, get GED
college – Offered twice a year
• Target participants– 50 youth per session– Age 18+– Requires they have a GED or high
school diploma, and come through case management and education programming
• Target outcomes– Acquisition of a full-time job– Employed 90 days later– Employed 1 year later (may not be
in same job)
Program description– Weekly 2 hours of group
tutoring in math by grade– Weekly 2 hours of group
tutoring in English by grade
• Target participants– 250 youth, in school– Must be engaged in CM
• Target outcomes– Reading/math at grade-level,
on-time grade advancement– Graduation from high school
with a 3.0 GPA– Individualized Life Plan to
seek post-secondary education or employment
Program description– 2 hours a day, 3 days a
week of GED test tutoring, in the afternoon/evening
• Target participants– 250 youth– Out of school, age 16+,
must be engaged in CM
• Target outcomes– Acquisition of GED within 2
years– Individualized Life Plan to
seek post-secondary education or employment
The actual analysis revealed the following
Organization Z in New Orleans
Case Management Employment trainingEducation
Math/English tutoring for in-school youth
GED support for out of school youth
• Program insights– Average case-load actually 35, with
variation from 30-70– Only 50% of youth meeting bi-
weekly
• Actual participants
• Program insights– Full participation in basic job skills
course– Only 25 slots currently available
for internship per session
• Actual participants• Program insightsO l 73% f th ti i t i
• Program insights85% f th ti i ti t
Advance toReferred to
EXAMPLE
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p p– 555 youth being served, but only
70% from Orleans Parish – rest from Jefferson Parish, St. Charles Parish; no funding coming from those parishes to support programming
– 95% of youth had engagement with juvenile justice system pre-engagement with Org Z
– No tracking of economic status
• Actual outcomes– Only 35% of youth have additional
involvement with juvenile justice system once they begin engagement with Org Z; Only 15% of youth meeting bi-weekly get in trouble
– All youth referred to an education program
p p– 50-75 youth per session– Only 70% are graduates of either
education program
• Actual outcomes– 85% job placement rate by end of
program– Participation in internship
component does not influence likelihood of successful job placement
– 90% remain in a job at 90 days– No data tracked/available for
employment at 1 year
– Only 73% of youth participate in both math AND English
• Actual participants– 280 youth, all in school– All youth referred by CM
• Actual outcomes– Youth participating in both math
and English have 90% likelihood of graduating on time
– Youth in just one only have 60% on-time grad. rate
– 30% of youth drop-out, end up in GED program
– ILP’s not tracked; grade advancement not tracked
– 85% of youth participating at target dosage
• Actual participants– 250 youth– 70% youth referred by CM;
30% involved without being in CM system
• Actual outcomes– 90% receive a GED within 2
years– ILP’s actively tracked through
a home-grown Microsoft Access-database created by staff
Only 80% of target Orleans Parish youth in CM actively participating in education program, even once referred
Activity discussion:
• What observations do you have from this analysis?
• What impact could actual performance be having on the cost structure of this nonprofit, its pricing, its revenue, and on its funder relationships?
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• If you were the Executive Director of this nonprofit, what would you explore further? What actions might you take that could influence cost? Performance?
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It is important to allocate the direct costs of staff...
Name of programs/activities
In-Patient Program
Out-Patient Program
In-Home Program
After-School Program
Total staff direct cost
List of program-specific staff
Salary plus benefits/tax $ 207,000 $ 172,200 $ 325,110 $ 230,090 Check
Director of IP $112 000 100% 100%
ILLUSTRATIVE
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Director of IP $112,000 100% 100%
Director of OP $135,200 100% 100%
Director of IH $155,000 100% 100%
Director of AS $103,000 100% 100%
Program associate 1 $65,000 60% 20% 20% 100%
Program associate 2 $65,000 20% 80% 100%
Program associate 3 $60,000 10% 40% 30% 20% 100%
Tutor $36,900 100% 100%
Family and child counselor $87,300 70% 30% 100%
Consultant to IP program $50,000 100% 100%
Consultant to IH program $65,000 100% 100%
…as well as non-staff direct costs
Name of programs/activities
In-Patient Program
Out-Patient Program
In-Home Program
After-School Program
Total non-staff direct cost
List of program-specific staff
Total expenses $ 106,200 $ 240,350 $ 107,650 $ 116,000 Check
ILLUSTRATIVE
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spec c sta e pe ses $ 06, 00 $ 40,350 $ 0 ,650 $ 6,000 C ec
Supplies $112,000 60% 20% 20% 100%
Local site rent and utilities $135,200 50% 50% 100%
Transportation $155,000 45% 55% 100%
Consultants $103,000 100% 100%
Food and miscellaneous $65,000 60% 40% 100%
There are three basic methods for allocating indirect costs…
Then allocate indirect costs, using drivers
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Flat across programs
Proportional based on program size
Based on specific program knowledge
In practice, nonprofits use a combination of all three
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Finally, distinguish restricted from unrestricted funding
• Not all revenue is created equal
• Getting clear on which pieces come with strings attached is key to understanding true financial picture
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… is tied to utilization on specific programs
… is given to the org. in general and offers
maximum flexibility
…is not restricted in the traditional sense but still face limitations
Unrestricted fundingRestricted funding Potential grey area
ILLUSTRATIVE
Bringing it all together: Here’s what one nonprofit knew before true cost analysis...
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In-Patient Out-Patient In-Home After-School
Indi
rect
cos
ts
Res
trict
ed re
venu
e
Unr
estri
cted
reve
nue
Dire
ct c
osts
…and here’s what they learned
ILLUSTRATIVE
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In-Patient Out-Patient In-Home After-School
Dire
ct c
osts
Unr
estri
cted
reve
nue
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Today’s agenda
• Key trends in government and philanthropic funding
• Managing and succeeding in tough times
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• Understanding your costs and why it matters
• Break
• Dynamics of the Starvation Cycle and breaking out of it
• Wrap up
Does any of this sound familiar?
“No administrative fees means that all money goes to local charities.”
- Ad for donation drive
“Our organization has remained lean, allocating nearly 90% of revenue to direct service
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nearly 90% of revenue to direct service programs...”
- Large multi-service organization in CA
“100% of your donation will go towards programs that help children; 0% will go to overhead.”
- Large health services organization
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What about this?
“The 10% figure is totally unrealistic…”- Executive Director
“We’re having to raise pools of general support to pay for our real overhead
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“13% overhead doesn’t nearly capture the reality of our administrative costs.”
- Nonprofit COO
pp p ycosts.”
- Board Chair
But Wait!
56130717-MIE Conference TBG pres ...TBGAdam E. Moreira, Wikimedia Commons Gallery
We don’t judge companies on their overhead
40%
50%
Average for service industry = 34%
Sales, General & Administrative Expense as % of Total Sales
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10%
20%
30%
Source: Compustat; Standard & Poor’s Global Industry Classification Standard Structure
Software and services
Health care equipment and
services
Communicationsservices
Consumer services
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How does this play out for nonprofits?
“Marc Nonprofit”“Ann Funder”
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“No more than 10% of these funds can be used for non-program
expenses.”
Pressure to conform →
Under-report + Under-invest
The Nonprofit Starvation Cycle
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Pressure on nonprofits to
conform
“The Starvation
Cycle”
More than half of donors expect nonprofits to spend less than 20% on overhead
20
30%
Percent you expect spent on programs
30%
25%
22%
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0
10
> 80% At least80%
At least70%
At least60%
8%
At least50%
12%
Don't know
3%
Source: BBB Wise Giving Alliance Donor Expectations Survey, 2001; case study interviews
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Donors consider overhead rate more important than program effectiveness
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80% of foundations said they did not include enough
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include enough overhead to cover the cost of reporting.
Government contracts limit overhead
“[Government funder X’s] rate is woefully inadequate. We report our finances to comply with the grant, then look elsewhere to bridge the huge funding gap that this grant creates.”
63130717-MIE Conference TBG pres ...TBGSource: Case study interviews
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Nonprofits feel pressure to limit overhead
“Do you feel pressures from ____ to limit overhead, fundraising or admin expenses? “20% overhead is the
industry norm. It doesn’t capture the way we think about and manage overhead…”
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“We found that a peer organization allocates 70% of their finance director’s time to programs. That’s preposterous.”
Many nonprofits underreport true overhead
“Analysis of over 220,000 Forms 990 found widespread reporting that defies plausibility.”
37%
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37%Percent of nonprofits reporting ZERO
fundraising expenses on their IRS form 990
Actual overhead often differs from reported
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Org 1 Org 2 Org 3 Org 4
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These differences aren’t surprising given:
• Lack of accountability and standards for nonprofit reporting
• Lack of infrastructure and systems
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• Tacit “support” of misleading reporting by multiple players
• Lack of consequences for misreporting
Under-investment hampers impact
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The Nonprofit Starvation Cycle
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Pressure on nonprofits to
conform
“The Starvation
Cycle”
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Where is your organization?
(A) Highlight us (B) Equip us (C) Convince us (D) Convert us
We’re able and We’re willing to We’re able to report We’re not able or
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willing to report on
full costs
report on full costs
but not able
on full costs but not
willing
willing to report on
full costs
Framework courtesy of Grantmakers for Effective Organizations (GEO)
Nonprofit leaders, know thy costs
• It’s impossible to know if you are misreporting or under-investing without clarity on your true costs
• This IS about having clarity, within your management team, on where your money is going and what trade-offs you are making (explicitly or implicitly)
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g ( p y p y)
• This is NOT the same as reporting your functional “pie” on your 990 or in your annual report
Ending the cycle: It starts with funders
• Shift to a focus on outcomes
• Be honest about what it takes to achieve outcomes
• Provide general operating support
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• Provide general operating support
• Pay a fair share of overhead when making program grants
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Ending the cycle: Nonprofits also must act
• Share real overhead with the board
• Share real overhead with funders
• Ask “Where are we under-investing?"
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• Ask Where are we under-investing?
• Educate donors on critical importance of overhead
Small Group Discussion
•How much does the Starvation Cycle affect the Legal Aid Field?-Today?- In the future?
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In the future?
•What do you see as the biggest challenges and opportunities for your organization?
Additional resources
For NonprofitsFor Funders
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Today’s agenda
• Key trends in government and philanthropic funding
• Managing and succeeding in tough times
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• Understanding your costs and why it matters
• Break
• Dynamics of the Starvation Cycle and breaking out of it
• Wrap up
Thank you!
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