Tagged ‘nonprofit financial management‘

The Lesson of CYD

Today’s Milwaukee Journal Sentinel described in detail the longstanding financial problems of CYD (Career Youth Development). CYD was founded by Jeannetta Robinson more than forty years ago and ran, for years, on her personal energy, charisma, and incredible ability to get and keep the support of elected officials. I knew Jeannetta. She was a force of nature. After her death in 2008, her son, Charles, whom I also know, took over CYD. The agency has always been very much the family business with all the good and bad that approach brings.

It has always been CYD’s practice to work with people whose problems kept them out of other agencies. The idea behind holding a big holiday event after Christmas for the ‘little kids that Santa forgot’ exemplifies the theme running through CYD’s programs. Nonprofit concerns like goals, objectives, outcomes, reporting, financial management, clean audits, and a strong board were hazy and distant things for CYD. Their focus was always on the here and now. I loved CYD for that but, like many, I knew the train wreck was inevitable. No agency can keep operating in the red, no matter how righteous their mission, or tireless their efforts.

If CYD was to survive, its leadership needed to put financial management first and client services second for as long as it took to get things straight.

On July 24th, the Planners and Grantwriters Roundtable sponsored by the Nonprofit Center of Milwaukee conducted a panel discussion on emergency fundraising and crisis management for nonprofit organizations. The #1 message had to do with how to prevent a financial crisis by building a strong, watchful board, developing financial reserves capable of sustaining the agency for six to nine months, maintaining diversified funding, building good relationships with funding sources and banks before a crisis occurs, and investing in strong financial management services.

In that session, panelists recognized that many agencies feel that all funding must go directly to client services; that investing in infrastructure or financial reserves is somehow taking resources away from clients. I’ve heard this from organizations I’ve worked with. “We can’t afford to build reserves, we have to serve more people.”

That sounds great but, frankly, if an agency runs aground financially and has to close, it won’t be serving anyone.

It’s a tough message for nonprofits to swallow especially those that are extremely mission-driven and wrapped around the ethos and history of a charismatic founder.

Nonprofits shouldn’t be run like businesses. That’s not my point here. They should be run like nonprofit organizations that conform to generally accepted best practices for that sector. The Nonprofit Center of Milwaukee and many other resources are available to help struggling organizations get back on track. It can be done but not without serious effort and the willingness to make substantial organizational changes.

CYD’s credo of “Love in Action” is important for Milwaukee; let’s hope the agency can find a way to more solid and sustainable financial footing so it can keep doing what really needs to be done.


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What Comes First: Mission or Money?

A mission-driven organization is a thing of beauty; that is, until the checks bounce. Then it’s just another organization that thought running on dreams was more important than having money in the bank, an organization where the director used the Scarlett O’Hara Accounting Manual and decided, everyday, to think about it tomorrow.

Harsh?  Maybe.

Most new nonprofit organizations, like small businesses, are established out of the hopes and dreams of a founder or a small founding group.  These are people who are fundamentally mission-driven.  Maybe they’ve experienced the problem they are trying to solve or they’ve spent months and years working as a volunteer to save a community.  Whatever the core motivation, they are setting up a nonprofit organization in order to bring their hopes and dreams to scale.  That’s wonderful and so important to our community.

Right away, though, there is risk.  And the risk is this.  Like new entrepreneurs, new nonprofit directors get carried away with the work they are doing.  They are all about getting their office space and logo, applying for grants, and running their programs.  Almost guaranteed is that setting up a sound financial system will be their last priority. Few people understand nonprofit financial management and fewer yet are interested in learning. This includes nonprofit directors who are reluctant to avail themselves of workshops or technical assistance because it would require opening their situation to outsiders and admitting that their management shortcomings.

Like a college kid with a credit card, it doesn’t take long for a new nonprofit organization to get in very tangled financial trouble.  And because it is extremely difficult to find board members with financial management experience, it is common for a board of directors to aid and abet an organization’s poor financial management while focusing its energies on the program and fund development.  It doesn’t take long before it’s impossible to provide funders with correct accounting of expenditures, some vendors don’t get paid in order to pay other vendors, cash flow and payroll become crises, and the annual audit becomes a nightmare.  It is truly a slippery slope if good systems aren’t set up at the start.

I really love nonprofit organizations and the people who work in them.  I admire founders as much as I admire scrappy entrepreneurs.  Both nonprofit and business start-ups need to keep one single imperative in mind.  And, yes, it is more important than mission.

#1 Rule:  Keep the money straight

If the money is straight, if financial systems are in accordance with the best practices of nonprofit management, the mission can flower.  Money’s a mess, the mission won’t matter.

It’s that simple.



Need help with nonprofit financial management?  A good place to start is the Nonprofit Center of Milwaukee.




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