Financial Planning for Non-profits: The Unwritten Plan.
Bruce Sekanick, FAIA
President of the Board of Trustees, The AIA Ohio Foundation

As we enter October, most of us are looking at our firms’ goals and expectations for the year and trying to figure out how we can either play catch-up or spend that extra cash that we somehow, surprisingly, earned. The same can be said for non-profit entities, like AIA components, who seek to advance and fulfill their mission. While firms rely on past clients and new work generated through their clients, non-profits tend to require a completely different approach. In an article published by the Nonprofit Consulting Group, the author discusses the need to connect the forward-looking elements of a strategic plan with the development of a financial plan. Like a strategic plan, the financial plan provides goals that allow the organization to be not only successful, but to grow in good times, and weather the bad times.

Many of our chapters have or soon will embark on the updating or development of their strategic plans. In many cases, these are focused on strategic goals that help move the organization forward and provide specific objectives for the Board to address. By linking a strategic plan to a financial plan, an organization can create a holistic approach to management. This allows organizations to be both nimble and effective. Once the financial plan is developed, the organization can make plans, through its budget, to ensure that its mission and programs are able to be executed.

For many organizations, this financial plan will require a reserve fund. Because each non-profit operates in a different way, the reserves required will be different. Many companies that advise non-profits note that the reserves, depending on the size and activity of the organization, should include operating funds that will carry the entity through unexpected cash flow shortages for between 3-6 months. This is often balanced on the high side with a reserve fund not to exceed two years. The determination of the exact needs is one of the items that will be developed as part of a financial plan.

Once an organization can align its financial plan with the strategic plan, it can begin to develop programs and budgets that focus on meeting its mission. In many organizations, the financial plan is an “unwritten” concept that the Board knows or follows, but which is not formally delineated. While this may work in good times, the question the Board needs to ask is, “will it work when you need it most?”

In the coming months, the AIA Ohio Foundation will embark on the development of a new strategic plan that will focus on the needs of the architectural profession in Ohio and the needs of AIA Ohio. As an entity that seeks to advance the profession, strengthen awareness, and support education, a strong financial plan is important to our organization. Fortunately, we have the resources of an excellent management company, AOM, and the supporting staff that helps us in the development of this plan.

While there are many issues and activities that consume the Board’s time, financial planning for the success of the organization is necessary for our survival. Resources on financial planning are widely available from banks and non-profit advisory organizations and it is our hope that like AIA’s Core Member Services, financial planning is one element that component boards will develop and embrace.