That’s a very good link to share with them!
Youth organizations have traditionally been difficult to financially sustain. Funding for youth initiatives comes and goes, comes and goes. When a nonprofit or charitable organization is setup there is an immediate need for money to fund areas that receive little to no funding from funder and donors - namely costs related to accountability (accounting, reporting, audit, Exec. Dir. salary and benefits, etc.) and operations (rent/lease, utilities, cleaning, internet, training, insurance…) and thus the organization needs to have sufficient funding to pay for accountability and operations in addition to the programs and services.
Operating a nonprofit is challenging and therefore it is vital that the organization has the right level of financial planning and fiscal foresight processes and competencies within the staff team as well as on the board.
It is vital for organizations to focus on getting the right business model in place and adapt it over time and that they focus on both short-term and long-term financial planning to ensure their initiatives are oriented to sustainability.
*A quick summary of the elements of the nonprofit business model can be found below
- the revenue structure: what mix of government funding to autonomous/donations is appropriate and possible? what amount of revenue should be multi-year versus one-shot program funds to ensure stability?; what is the requirement to report on funding (sometimes this can take months of someone or more than one person’s time each year)? what skills are required in-house to manage and report on government funding? does the funding from government come with restrictions?
- cost structure: An understanding of the true and full costs of the program and the amount of funding expected will allow you to understand which programs/services produce a deficit, break-even, or surplus. It is critical that the accounting system is setup to allow for this analysis and information; Knowing the cost structure and the bottom-line is imperative. In order to understand this you need to invest in an accountant that has experience doing this work
-capital structure is an understanding of the mix of assets and liabilities required for sustainability. This structure refers largely to reserves. Setting reserves for emergency funds (ex. 3 months operating expenses), working capital (funds to offset deficits in funding to operate programs), and capital upgrades and renovations (ex. vans, HVAC, new computers, desks,). It is vital that an organization set targets for what is required in each of these three reserves and then develop strategies to implement each year that will generate unrestricted funds that can be put away in these reserves.
Also, the reserves should be unrestricted and liquid (available for use at any time) so that you can use them for the purposes you require and desire.
Infrastructure An understanding of what infrastructure, technology, accounting and database systems, ongoing training, computer software and hardware, etc. is required to ensure that infrastructure is adequately maintained and upgraded.
Regarding financial planning…
All too often the sector focuses its attention on revenues and expenses in the current or upcoming year and very little on setting short and long-term goals specific to financial resilience and stability. Long-range fiscal foresight planning is an important process and competency.
Regarding the burden of registering for a charity
It is widely known that there is an increased administrative burden for charitable organizations. The organization will need to ensure that it has the skills and capacity in-house to manage the reporting requirements in and of itself.
And finally…it is important to know…
Not every program or initiative should be an organization. We have traditionally built 1000s of nonprofits around single program ideas and the weight of scaling up and sustaining an organization is too great for many and then they close.
There is a social philanthropic deficit in Canada, donations are declining and government funding is declining as well.
Knowing this reality youth initiatives might be very wise to look to partnering with existing organizations as much as possible and until such time that there is sufficient financial strength (accumulated surplus and multi-year committed funding) to venture off as an independent organization.
The sector is moving toward more use of shared platforms, leveraged networks, integrations, consolidations and mergers (some are imposed, some are voluntary) and so developing an independent nonprofit or charitable organization should be weighed against alternate forms before you make the leap. Sustainability and impact are vital and so the form of the organization should be built around those two functions.