Governance

As a goal-oriented nonprofit, you invest resources to produce outcomes. The outcomes are variable and unique to you. They might include things like the creation of more effective environmental educators in your state or province, greater equity and justice in the solution of environmental challenges, and legislation favorable to your causes.

Regardless of the outcomes you seek, though, the resources you invest are always time and money--and remember, time is money. Elsewhere we talk about how to measure the outputs of your work--your return on investment, or ROI. Here we focus on planning and tracking the inputs. 

Budgeting

The tool you use to plan and track your inputs is your annual budget. Like a strategic plan, a budget is a guidance document. Created at the beginning of each new fiscal year and approved by the Board, it expresses your intent. In it, you predict the amount of income you anticipate through earned revenues, charitable dollars, and interest income, and the amounts you intend to spend on everything from staff salaries and insurance to Zoom contracts and printer cartridges. Because conditions change during the course of the year--staff members depart, fundraising events get rained out or are unexpectedly successful, pandemics create financial havoc--you should track and monitor your budget on a regular basis, and adjust it if necessary. To do so, even the smallest organizations have turned to financial management software like QuickBooks and Sage Intacct.

Creating a Funding Plan

Most nonprofits think in terms of a "fundraising" plan rather than a "funding" plan. However, there are three sources of potential income for any nonprofit: the money you are given (through memberships, donations, grants, raffles, in-kind contributions, or whatever other sources you have), the money you earn (by holding conferences and webinars, selling publications, doing consulting, etc.), and the money your money earns (in bank accounts and--most often--endowments). Assuming your affiliate has been around for at least a little while, the best predictor of the amount of funding you can achieve in the immediate future is the amount you have achieved in the recent past. So, when creating a funding plan (which you should do in conjunction with developing your annual budget), start there. Then look at trends that are likely to affect your organization's income. While it is okay to challenge your team to increase revenues, be careful about making unsupportable assumptions about what is possible. Just because you intend to "try harder" does not mean you can double your charitable giving in one year, for instance. What is the key to predictable, sustainable income over the long term? Diversification. The less you depend on any one source of income, the less you can be blind-sided by the unexpected failure of that income--whether it is a canceled annual conference or the decision of a foundation to change their giving priorities to the exclusion of your organization.

Fundraising

If you are like most NAAEE affiliates, a big chunk of your operating revenue comes from charitable sources. Those sources include individuals (including your members), foundations, businesses, and a variety of government entities. You may also get support from a partner or partners, whether that is in-kind (that is, goods or services that have cash value, like office space or computers) or cash. There is no "right" or "wrong" mix of contributed income sources; they all have pros and cons. Your challenge is to be strategic in assembling a mix that fits your organization and the opportunities it has.

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Donors: Pros

Members: Share your goals and values, easy to find

Other individual donors: Share your goals and values, often give over many years

Foundations: Relatively easy to identify, often give large amounts

Businesses: Easy to find, can sometimes provide valuable products and services

Governments: Easy to identify, often give large amounts

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Donors: Cons

Members: Mostly have limited financial means

Other individual donors: Harder to find, have many competing priorities

Foundations: Tend to fund programs and short-term initiatives rather than general operations, often have competitive application processes

Businesses: Get lots of requests, sometimes have "greenwashing" agendas

Governments: Often have competitive application processes and cumbersome reporting requirements, giving patterns change as politics change.

Fundraising Resources

There are literally thousands of sources of information about nonprofit fundraising: books, articles, websites, videos, and organizations. Some of the specialized ones are listed under the more specific topics below. Those listed in the "Deeper Dive" section of this topic are reliable general sources.

Government Funding

Government funding for environmental education nonprofits can come from many sources and levels. Most affilates will think first of funding through the U.S. Environmental Protection Agency because nonprofits are frequent beneficiaries. There are other federal agencies that offer special grant programs that may be tapped, though--especially for special projects. The National Oceanic and Atmospheric Administration (NOAA), for instance, offers Environmental Literacy Program grants, and creative approaches may find funding through sources as diverse as the Institute of Museum and Library Services (IMLS) or the National Science Foundation (NSF). These are all competive programs, though, and most are not tailored specifically to affiliate needs. There are also some opportunities for funding from state and local sources: the Environmental education Council of Ohio, for example, receives funding from the Ohio EPA-Office of Environmental Education. Similar opportunities exist in Canada.

Financial Statements

"Follow the money" is good advice for nonprofits as well as investigators. Because your Board members are ultimately responsible for the financial health of your affiliate, they should be reviewing detailed financial reports on a regular basis, and part of their training should be a session on how to read and understand them. Regular reports should include a Statement of Activities (similar to the Profit and Loss common to commercial businesses), a Statement of Changes in Net Assets (similar to Profit and Loss by Functional Area), a Statement of Financial Position (similar to a commercial Balance Sheet), and a Statement of Cash Flow.

Audits and Financial Reviews

Independent audits and financial reviews are two tools you can use to get expert, outside analysis of your financial practices. They are normally conducted by a Certified Public Accountant (CPA), who examines your financial records and practices and evaluates them compared to "generally accepted accounting principles" (GAAP). An audit is more in-depth (and more expensive) than a financial review. Does your affiliate need either one? Maybe, but not necessarily. The IRS does not require nonprofits to get independent audits, but some states do require them for organizations over a certain size. In addition, some foundations require audits from applicants before they will consider awarding grants to them. Audits, even for small nonprofits, can cost upwards of $10,000. Financial reviews are less. If a potential funder wants to see your most recent audit, check and see if they will accept an independent financial review instead.

Insurance

There are two types of insurance that most affiliates should carry. One is called "Directors and Officers Liability," commonly referred to as a "D&O" policy. This is insurance for your Board and its individual members. Believe it or not, nonprofit Boards and Board members get sued all the time for all kinds of things: wrongful termination of employees, discrimination, harassment, failure to maintain appropriate financial records, and many other actions and inactions. The benefit of D&O coverage is that it pays for your defense, even when the allegations are baseless, as well as paying for settlements when you are found liable. If you serve on a Board that doesn't carry D&O insurance, your personal assets may be at risk. The second type of insurance that most affiliates shoul carry is "General Liability" coverage. If a member is injured on a field trip that is part of a conference you have hosted, or a donor trips and falls down the stairs at your fundraising dinner, this is the policy that pays for those claims. There may be other types of insurance appropriate for your affiliate to carry. (Auto insurance to cover volunteers who drive as part of their work for you is an example.) Talk to an independent insurance broker, who can assess your needs and help you find policies to cover them.

Federal, State, and Provincial Reporting Requirements

Nonprofits, even though they are not required to pay income taxes, are not free of the scrutiny of the tax collectors! There are accounting practices and financial reporting rules that your organization must follow by law, wherever you are located. While they are not complicated, they are not optional. Either your Executive Director (if you have one) or your Board Treasurer (if you are an all-volunteer organization) should invest time in understanding them. The most important things to know are that restricted funds (given by a donor for a specific purpose) and unrestricted funds (available to be spent for any organizational purpose) must be tracked separately in your accounts, and an annual report similar to your personal income tax filing (some version of IRS Form 990) must be submitted every year. Canadian not-for-profits have similar requirements overseen by Corporations Canada. On a more local level, most states and provinces have reporting requirements as well.