Healthy non-profit funding requires long view

The Gazette Opinion Staff
Published: March 9 2014 | 12:01 am - Updated: 1 April 2014 | 9:20 am in

By John Myers and Rich Patterson

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A common planning mistake often plagues non-profit organizations. They create a future funding crisis by constructing a new building without planning for increased long-term operating costs. Governments frequently make the same error.

This happens, in part, because it is easier to find money to build or buy something than it is to pay for its care following the dedication.

A common scenario is for a new executive director to propose a building project. Architect renderings entice boards to approve it and raise money needed for construction. Securing contributed money is never easy, but buildings appeal to donors, perhaps because they are tangible. Also, many grant sources specify that their money be used only for construction.

COSTS OVERLOOKED

The cost of operating the building is often overlooked during planning, or a board believes the new structure will be so popular that thousands of new visitors willleave enough money to cover expanded operating costs. New buildings do attract increased attendance but seldom enough to cover operating costs, nor is that attendance sustained over many years.

Dedications are happy events where people congratulate themselves for their success. Then the executive director and staff turn over. Board terms end and new people are elected. The building’s newness fades and attendances lags, just as exhibits need to be replaced, the roof leaks, and all sorts of items wear out or break.

The new executive director and board face a daunting task finding people willing to give money to replace soiled carpet, an obsolete exhibit or a leaky roof.

Well-managed non-profits recognize that an expanded facility inevitably increases operating costs. They develop pro-forma budgets and a realistic long-range plan that assumes the cost of both building the facility and maintaining it in outstanding condition.

The Indian Creek Nature Center recognized the funding dilemma during past capital campaigns. One was to purchase and protect a woodland. The other was to purchase a home and storage sheds. In both cases, the Nature Center expanded its total goal to cover the purchase cost and new endowed assets in a perpetual care fund managed by the Greater Cedar Rapids Community Foundation.

The result was a newly protected grove of trees and a perpetual land care fund to generate annual income to maintain trails, remove litter and periodically check the property. The homestead campaign enabled the organization to buy the home and land and establish an endowment to pay for structure care.

The Nature Center is now embarking on an ambitious $7 million campaign to build a new headquarters (Amazing Space project). It will combine ecologically sustainable building features with financial sustainability.

3 KEY STEPS

To enable superb long-term building care the Center planned the following three steps.

l First, durable materials will be used throughout. For example, quality steel roofing costs more than asphalt shingles but lasts much longer. The steel costs more initially but because it is so durable its long-term cost is substantially less than a cheaper roof that needs periodic replacement. Often a higher upfront cost is much less expensive in the long run!

l Second, the building will combine energy efficiency with renewable energy generation to minimize utility costs. This also increases construction costs but dramatically reduces long-term expenses. A dollar spent on insulation, for example, is an investment in perpetual cost reduction. The Nature Center’s building will be “net zero energy,” meaning technology will yield a near-zero utility bill.

l Third, no matter how efficient and durable a building is, the floor still needs to be mopped and virtually everything eventually wears out. The solution is to create a building care endowment, a pool of invested money with the sole purpose of creating a perpetual flow of money for care.

Adding an endowment component to the project adds hundreds of thousands of dollars, sometimes more, to the campaign goal and makes fundraising more difficult, but it is the responsible way to proceed and ensures that the structure will be well maintained.

As fundraising methods evolve, new tactics become available to raise endowment funds. Many of these new methods, such as 100+ Men/Women That Care, create large, one-time donations that can be directed toward sustained endowment.

Finding contributions is easier said than done but the Indian Creek Nature Center board and staff are committed to long-term financial sustainability as we demonstrate ecological sustainability. Strong non-profit directors and boards should be challenged to do the same.

John Myers is Indian Creek Nature Center director and Rich Patterson is recently retired director. Comments: jmyers@indiancreeknaturecenter.org or tbnature@aol.com

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