Financial Administration

In nonprofits, fundraising is not for the sake of fundraising, but for financing the operations. Fundraising is considered a totally separate field from financial management, or financial administration, yet that is essentially where fundraising should begin, from the context of financial administration as part of a budget plan.

With this line of thought, fundraising professionals teach to communicate their needs not in terms of words like administration, overhead and salaries, but rather using words like funding operations and costs of projects. (Naturally, many donors will want to see that the funds are managed responsibly and efficiently, which may be referred to as stewardship, so financial management is not just good for saving money but also for transparency and inviting more donations.)

The nonprofit organizational fundraising effort should begin with budgeting, which in a developed organization is the function of the financial officer, using excel sheets and charts. Finances are categorized and accounted for in one way for the sake of reporting to the tax authorities, and in perhaps a different way in terms of cash flow (how much money is at hand, to be used for immediate expenses), and perhaps in another way for oversight of directors. When the finances are laid out in a comprehensive manner, you may find ways to cut costs, and that is already a way of improving your finances without fundraising.

Another next atypical option for financing is the concept of partnerships and volunteerism. When you have laid out your budgeting and project needs, instead of looking for ways to bring in actual money, you can seek in-kind donations. For example, someone could donate office space, vehicle use, services and appliances, before proper fundraising.

Partnership or cooperation mean working with other nonprofits together on a project, sharing costs. Unlike in the business world where whoever gets the actual money makes profit, in the nonprofit worlds, the value or profit in terms of meaning and not money can be shared by more than one beneficiary. If nonprofits and communities with joint interest and assets that can be shared, such as infrastructure, or manpower for a project, both organizations save money and take credit rightfully for an achievement.

Another important sphere of generating funds is by business ventures, which may be social business, secondary business income, investing in shares, and more. In Israel, nonprofits are encouraged to engage in quasi-business activity. This may be renting office space off hours, or using equipment and spare time for extra income, but register as a business and pay normal taxes on that income. An organization can also sell services and products, to the government or to the public, in a field or manner that is entirely in line with the official objectives of the organization as a nonprofit, and for such income then business taxes are not paid, as it is neither donation income nor business income.

To strengthen all the above, it is even a regulatory obligation, if you are certified, to manage a budget, with periodical board meetings to follow-up on the budget and write a protocol recognizing changes and insight. In an audit, you will be held accountable to have a paper trail for these periodical protocols, on top of an annual budget meeting, just before the turn of the year, apporving the budget plan for the upcoming year.

Fundraising is inseparable from financial administration and organizational due process, because in order to generate and maintain proper income of donations over time, the organization must be transparent, authentic, reputable and accountable. Transparency and authenticity have everything to do with trust and credibility. The best fundraising tool is a highly efficient and effective organization.

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