IMPROVING CASH FLOW, DONOR SUPPORT, AND OPERATIONAL EFFICIENCY IN NONPROFIT ORGANIZAITONS THAT OWN REAL PROPERTY

WORKING PAPER NO. 2 

By Herb Rubenstein, President, Sustainable Business Group

Introduction

Many nonprofit organizations own real property, and lots of it.  People donate real estate to nonprofits and many nonprofits require substantial building footprints to carry out their mission.  This paper outlines an innovative, yet simple approach, showing how these nonprofits can improve cash flow, donor support, and operational efficiency.  This paper builds on this the recent rise in the price of energy in the US and our nation’s need to become more energy efficient.

The Approach

Nonprofits that use substantial energy in its buildings, especially older less energy efficient buildings, would be well advised to have an energy audit conducted of their facilities.  The costs of the energy audit will vary with their complexity.  However, with a well publicized campaign by the nonprofit to its donor base (and possibly to government agencies that might subsidize such an energy audit), I believe that most nonprofits can raise in this PHASE 1, the energy audit, more money from their donors that the energy audit will cost.  At the end of PHASE 1 the nonprofit will have a roadmap on how to cut energy use and cost and will have a positive cash flow created by its development effort to get it on the right foot regarding reducing its carbon footprint and its energy use.

Donors would be told that donations in excess of the cost of the PHASE 1 energy audit, will be applied to energy reduction improvements.  Then, the nonprofit, decides what it wants to do to achieve substantial energy and cost savings.  It would then publish this list of capital improvements, physical renovations, and behavioral changes to its donor community and to the general community through its public relations activities, and start PHASE 2.  Phase 2 begins with raising money through donations and government grants to pay for energy saving physical and behavior improvements.  This phase is very open and transparent and all donors are told exactly what activities will be undertaken, and in what order, as sufficient money rolls in to pay for these improvements.

I expect that if the development campaign is done well, some nonprofits will raise more money from this development campaign than they will need to spend on energy efficiency activities. Thus, in PHASE 2, the cash flow for the nonprofit improves.

PHASE 3 is the easiest.  Energy efficiency will yield reductions in the cost of energy to the nonprofit and improve operational efficiency. Thus, in PHASE 3, which must also be highly publicized, the cash flow of the nonprofit improves.

Conclusion

Nonprofits that have significant energy bills can improve cash flow, donor support and operational efficiency by undertaking and publicizing PHASE 1, PHASE 2 AND PHASE 3 as outlined above.

The approach is simple and could provide the boost that your nonprofit needs in this very challenging economic environment.  Our nonprofit organization, THE LEEEGH, is committed to the success of nonprofits who embrace energy efficiency as a key duty of the nonprofit.  Energy efficiency will be a future key factor in continued donor support and in building the right reputation for your nonprofit organization.  And, it will improve your cash flow.

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