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This article is in a Q&A format. We gained so much insight from it and we wanted to share it with you.
The following is an interview conducted by Peter Kramer, Senior
Associate, Nonprofit Finance Fund, with Otis Bullock, Executive
Director, Diversified Community Services. This is a cross-post from the
Nonprofit Finance Fund blog. To read the original post, go here.
Illuminating Financial Dynamics for Improved Nonprofit Management: An Executive Director’s Experience
Otis Bullock tells me that it can be a challenge “to pair a great
business model with great programming”. As the executive director of
Diversified Community Services
(“Diversified”), an organization that serves children and families in
the Point Breeze neighborhood of Philadelphia, he knows firsthand the
challenges of balancing the abundant needs of his community and
constituents against the constraints of limited or uncertain public and
private funding.
It’s a balancing act that requires the relentless stewardship of
financial assets and continual monitoring of financial and program data.
Otis knows well that sound financial management is grounded in access
to reliable and timely information about his organization’s annual
performance, revenue and expense dynamics, balance sheet health and
liquidity. He has found
Financial SCAN, a comprehensive new standard for financial health analysis, to be a helpful tool in his financial management toolbox.
Here, Otis shares his experience using financial data and analysis to guide his organization forward in challenging times.
PK: How does Diversified achieve its mission?
OB: Rooted in South Philadelphia and embracing the philosophy of the
settlement house movement, our mission is to enable children, youth and
families to realize their fullest potential and achieve self-sufficiency
in safe neighborhoods. We’re recognized as the “go-to” organization in
South Philadelphia because we bring people together regardless of
religion, race, or ethnicity in a spirit of friendship to make our
neighborhood a better place to live.
We believe in and act for economic and social justice so that people
have the opportunities to advance economically, socially, educationally,
and personally. Our community-building efforts promote physical,
economic, and social development – improved housing and safety, as well
as increased financial resources for individuals and the community as a
whole.
PK: As the new executive director of Diversified, what are
the biggest obstacles your organization faces in effectively connecting
money and mission?
OB: Our biggest obstacle in effectively connecting money and mission
is a past inability to pair a great business model with great
programming. Diversified is very well known for its work in the Point
Breeze community, especially our work in early childhood education and
youth development. However, we have not yet figured out a way to make it
profitable; mostly because the word “profits” was never in our
vocabulary. As a result, great programs with tremendous impact on the
community could become significant drains on the budget.
PK: That’s certainly a reality that most nonprofit leaders
face. What financial planning and management strategies have you
employed to overcome these obstacles?
OB: One of the things that we have done, with the help of NFF, is
look at our budget more strategically. We’ve become more proactive about
our financial and programmatic priorities. We started breaking our
budget down by programs, instead of solely analyzing overall revenue vs.
expenses. This allowed us to see the profitability of each program that
we provide. If programs are losing money, we are forced to make tough
strategic decisions as to whether we should keep them and whether they
are core to our mission. Breaking the budget down this way forces us to
make tough (but important) decisions to keep the budget in balance with
our mission.
PK: You’ve recently used our Financial SCAN tool. How have you incorporated it into Diversified’s financial analyses and management?
OB: I used Financial SCAN to create a snapshot of Diversified’s
fiscal health before I took my current position as executive director. I
then used it to easily explain our fiscal health to the board. It can
help an organization to think strategically about its finances, as well
as programs. I’m able to compare my organization’s fiscal health to that
of peer organizations. I’m able to use Financial SCAN to easily explain
to my board and financial staff why profitability is important – even
for “nonprofits”. My organization never thought about strategically and
proactively planning its financial future until I presented them with
Financial SCAN.
PK: You mentioned the peer analysis function of Financial
SCAN. What have you learned about your financial condition relative to
your peers’?
OB: Compared to my peers, I’ve found that my organization is in good
shape. However, our position is very volatile. The report helps
illustrate that 85% of our revenue comes from government sources, which
leaves us in a very vulnerable position considering the constant threat
of government budget cuts. Liquidity in our organization is pretty good.
But in looking at our SCAN, I see that our organization does not have
the means to weather another government budget-cutting season. For that
reason, we’re becoming much more proactive.
PK: What can you tell us about your future plans? What’s next for Diversified?
OB: We have begun a complete assessment of our entire organization.
As a part of our internal strategic planning process, our future fiscal
health is front and center in those discussions. That hasn’t happened in
the past. For many organizations, conversations about desired impact
happen with little regard for past financial history and the budget.
Financial SCAN has helped my board assess the business and financial
implications of our future plans.
