Raising Money, Talking About Money
The Chronicle of Philanthropy just reported in its June 4th issue that the value of endowments held by all 229 organizations in its survey declined by a combined $29.1 billion from 2007 to 2008. This will come as no surprise to development directors. Many organizations don’t want to talk much about the big drops they’ve seen in their endowments, other than to say they are “similar to what the rest of the market has seen.”
My view is that putting our heads in the sand about our financials is a failed approach, and one that will hinder future fundraising.
Why? Because donors understand that market failures are not the failure of the organization. But if they learn that the organization is not flexible to respond to challenges, if they feel it doesn’t communicate the bottom line, and if they don’t see transparency in fiscal governance, then donors may rethink where they are putting their next dollar.
So how do you communicate your finances to donors?
Really all stakeholders should have an understanding of your finances. You should make at least annual presentations—albeit less detailed than what you show your board—of your inflows and outflows plus your major financial challenges. This is not just a rehash of the annual report, which is more of a “look-back” document, but rather a clear indication of your strategies for the future. Incorporated into this presentation should be an explanation of how past financial decisions have affected future mission-driven outcomes. You should also include the ways in which you change the lives of the people you serve. In other words, it’s not just a PowerPoint with numbers.
Some institutions find this a shocking idea. But your Form 990 is already out there for the world to see. The question is: are you backing it up with good fiscal management policies? Are you communicating the coming challenges as you see them? Are you outlining the staffing, programmatic and expense item changes you are making in response to an increase in need or a decrease in funds, or both? How are you still meeting your mission goals?
When donors, staff, trustees and other stakeholders are included in the budget conversation, they are much less likely to pick on a particular item they hear about through the grapevine.
In his new book What Would Google Do?, Jeff Jarvis talks about how the internet has become not just a collection of information, but a conversation. In much the same way, the post Sarbanes-Oxley, new Form 990, GAAP accounting rules world of nonprofit fiscal management is also becoming more of a conversation. You can either put your head in the sand and pretend it’s not going on, or you can engage your stakeholders and understand their perspectives as together you create your future financial plan.
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