The Organizational Development Muse

Dr. Mark L. Vincent's Blog

Gum Ball Financial Management (Part 1)

Posted by Mark L. Vincent on Mar 27, 2013 6:36:00 AM

Gum Ball Financial Management

(Part 1)

Guest Blogger: Darryl J. Brown

Many not-for-profits deal with finances like a little kid at the gum ball and candy machine wall in a large store. Their eyes get big when they see all the variety of candies, prizes and trinkets that a quarter or 50 cents will buy. But because they don’t have any money of their own, they begin to look around for someone who can fund their immediate little heart’s desires. When offered a choice of a $5 bill or two quarters they happily snatch up the coins and run away.

darryl brown, gum ball financial management, design group internationalSadly, the parallels of this little story plays out time and again with well intentioned organizations. The not-for-profit has a great mission statement, they are concentrating single-mindedly on why they exist and are accomplishing much. Their cause is appreciated and championed by many. And so, they are concentrating on their own specific purpose, what makes them tick. Unfortunately they don’t take the time to ask the hard questions that will help them to realize exponential growth.

I would submit that many not-for-profits fail to realize their growth potential, and the vision of their founders, because they don’t plan for financial giving. In other words, revenue, gifts, donations, excess income… whatever you want to call it… does’t come to the organization because they have not anticipated the receipt of those monies. If the child at the gum ball machine had only anticipated what a $5 bill could do for him it would have changed his actions and outcome. However, he only had a quarter or fifty-cent plan and that was all he needed at the time. Instead, he might have brought a paper bag with him to the store expecting to have an opportunity to receive a large gift and be able to fill the bag with the goodies. So the question is, “How should a healthy not-for-profit organization handle their financial matters and fund-raising efforts?”

Efficient financial management and effective fund-raising begin with a mindset. The organization must keep in the forefront of their communication and activities a commitment to financial transparency. Clearly disclosing financial activities to the general public and proactively providing critical financial documentation is essential. When an upstanding organization doesn’t disclose the expected information it has the potential to be misconstrued by potential benefactors as obfuscation. Should it be perceived that the organization is hiding something, then, it calls all the activities of the entity into question. A benefactor who is looking to connect in a meaningful way with the organization should not have to dig too hard for the financial picture of the entity. Otherwise it may be perceived that the not-for-profit is not a good financial “risk”.  Unfortunately, most 501(c)3 organizations are not good financial risks for this very reason, they don’t anticipate the needs of their potential donors and the essential financial transparency that is required.

Let’s look at this issue through a slightly different lens, the prism of trust. When your child or grandchild comes to you out of the blue and asks you with love in her eyes for twenty dollars. What is the first thing that you will say?

“Why, what in the world do you need twenty dollars for, my dear?”

This question is designed to help us determine whether this sweet young child before us is a good risk. We want to know that the money that we have the ability to give will be used in an appropriate way.  Our ability to give more than $20 far exceeds our generosity. We just are trying to determine whether the child is worthy of the gift. In the very same way, potential benefactors need to determine the level of trust that they can place in your organization financially. So, what is your organization doing to establish and build trust in your potential donors?

Operationally the not-for-profit needs to consider what actions it should take, what information it makes available, what processes it establishes that will make the organization a good financial risk. When a bank considers a request for a loan it begins to analyze the potential client’s ability to repay the loan, the feasibility of the need, the viability of the person and their historical connection to the bank. All these factors matter, not only to a bank but when establishing your organization as the recipient of any financial gift.

Pretend for a moment that you are the executor of a large, well established foundation with millions of dollars under management. The foundation was established by a wealthy individual who set some specific criteria for how this money should be used. Over time, the foundation has established their process by which grant requests are entertained and made. By law they are required to gift away 5% of their assets under management every year. They have a need… the need to give money away. But, they also have a responsibility to the guidelines and stipulations of the trust. Because there are more requests for donations than they have the ability to meet they must decide whether each request is valid and a good risk. What would the executor of the foundation want to see in your organization?  This is what every not-for-profit needs to spend some time hammering out before it can ever expect to be the recipient of any major gifts on a regular basis.

If the previously mentioned foundation were to look at your organization in its public communications what would it see? Would it see an ad hoc board of directors that meets the IRS requirements of a 501(c)3 organization but doesn’t have any real substance? Is this really a board-led entity or is it the “baby” of one strong willed individual who is unwilling to give up “control”. If the organization really has done the work of discovering its primary purpose and mission then the leadership on the board needs to be substantial. The organization needs to clearly define the roll of each board member and recruit qualified individuals to fill those roles, not just a name to take up space in the quarterly board minutes. This is important for potential donors. They want to see leadership. An organization’s constituents need to have trust massaged. This only comes from transparency, organization and proactive anticipation of what the constituent is looking for.

Put yourself in the shoes of your next significant prospective donor. What would they see if they began to dig into your organization when they look at your website, your brochures, your newsletters. Are you trustworthy? Or, are you just looking for another quarter for the gum ball machine?

darryl brown, design group internationalAbout Darryl Brown- Growing up in Haiti as the son of missionaries has given Darryl a unique perspective. After spending a total of 12 years in Haiti, he returned to the United States, graduating from a small Bible College in northeastern Indiana. Several years were spent as a Youth/Associate Pastor before moving on to attend Trinity Evangelical Divinity School. While living in Illinois, during

the seminary days, Darryl served as the Missions Chairman for the growing Village Church of Gurnee. God brought into his life the experiences of a self-employed business owner and a corporate trainer for a Fortune 100 company before moving the family to St Petersburg, FL, where he now resides. It was in Florida that he continued his full-time ministry as Associate Pastor in a church with the Missionary Church denomination. At this point God had blessed Darryl and his wife Robin with three children. But soon enough God’s sense of humor was revealed and they were expecting again… this time it was twins! When the church in which they were serving began to struggle with identity, it became apparent that it was time to move on. Now as a layman, among other things he has served at a deacon in his local church and also acted as Missions Chairman again. He and his family are now deeply involved at BridgePoint Church in St. Petersburg, FL.

A career change was unexpected, but that is exactly what occurred. For the last 14 years Darryl
has worked in the financial services field and has developed quite an understanding of the
financial challenges pertaining to Not-for-Profit organizations. Darryl worked at several financial companies including Franklin Templeton (a large mutual fund company) and Morgan Stanley. With these firms he honed his knowledge and skills in asset management and strategies that individuals can use to gift efficiently and effectively to charitable causes. He seeks to help individuals find appropriate strategies for leaving a legacy to organizations of their choice as well as help organizations to establish a strategic foundation for donor relations.
He can be contacted at darryljohnbrown@primerica.com 727-330-5944.

 

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Topics: process consulting, nonprofit leadership, fiscal responsibility, financial management, Nonprofit Organization, Design Group International

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