sticky notes and sustainability

Robert P. Seestadt CPA, Apparatus Solutions Inc. 2016

sticky notes & sustainability

designing and reading the financial face of impact organizations Robert Seestadt CPA, Apparatus Solutions Inc. 2016


This is our arts organization. We have a modest $1 million operating budget, a small building, and receive several restricted grants from our donors. Although our financial position is fragile right now, our board understands our situation and helping to raise funds needed to improve our resiliency.


a bit confusing?

let’s back up a bit…

…and learn how to design (and read) your

organization’s financial face


capitalis the cash and other assets available to an organization,

represented by


capital provides social impact

organizations with the financial

food required to sustain, grow and

have a stable operation


sustain and grow

operations

steward buildings and physical assets

deliver on promises made to

donors

repay debts and liabilities

4 ways capital is used at organizations


capital obligations

objectives


unfortunately, most nonprofit organizations are undercapitalized, resulting in a weak balance sheetFootnote research:Pew / Wm Penn Fdn. research 2008 (sector undercapitalized)TDC 2007, 2011(75%)NFF 2015 (64% under 6/12% 1 mo)

weak

strong


lack of capital causes organizational stress, poor decision-making, and financial

vulnerability


not a priority…surplus myth…poor budgeting

process

not a priority…misunderstand

depreciation…

the silence of

deferred maintenance

making promises we can’t keep…poor tracking of

restrictions and

fulfillment…lack of

oversight

borrowing to fund

structural issues …short-term thinking

causes, there are many…


a clearer picture of true capital position might help


capital obligations

objectives


obligations are the requirements to use capital

For us, each sticky note equates to $100k capital need

$100k

+

+


- restrictions- facility needs

- operating reserves

debt & payables

some obligations are plainly seen, others are more hidden


sustain and grow

operations


deliver on promises made to

donors




To sustain and grow operations, we have an obligation to assure financial stability, maintain sufficient working capital and reserves. A starting point is “months operating expenses”. Our monthly operating expenses are $50,000, so six months expenses ($300,000) might be a good starting point




to steward buildings and physical assets, sufficient capital is needed to back up the fixed assets on the balance sheet, ensuring funds are available to replace assets as they expire. For our arts organization, net fixed assets on the balance sheet are $400,000, after deducting depreciation-to-date of $100,000. This results in $500,000 of obligated capital from total net assets.



in order to deliver on promises made to donors, capital is needed for investment in obligated programs. A good starting point is total restricted net assets on the organization’s balance sheet. For our organization, this obligation adds up to $500,000




to repay debts and liabilities, capital is needed to pay vendors and service debt. The numbers come from the organization’s balance sheet. Our organization’s total debt and other liabilities equals $100,000.


now we fully appreciate the relative scale of all

obligations , which total $1.4M (14 squares)


merge available capital and

obligations to see a visage of the organization’s financial state. Here, total assets are $1

million, allowing us to fill in ten of the fourteen squares


capital and obligations change over time and are scaled to specific purposes and organization situation. This is our current financial face, updated since the last financial statement closing

Colette Rizik

I changed wording....


What does your organization’s financial face look like?

Items needed:• statement of financial position (balance sheet)• operating budget $$$• reserve goals (if exists)• sticky notes

need help? [email protected]


apparatussolutionsinc.comRobert Seestadt, CPA

[email protected] Solutions Inc.

2016

Government & Nonprofit

sticky notes and sustainability