Nandeeta SethJournal #1
I am spending my summer interning in New York with the Nonprofit Finance Fund, a national leader in financing nonprofits, doing financial consulting for their clients.
NFF serves both nonprofits and their funders, offering an integrated package of financial and advisory services, including facilities and working capital loans and lines of credit; asset-building programs; intensive workshops; Nonprofit Business Analyses and other consultations to help nonprofit management understand the impact on their finances of management and program decisions.
I hope to be working with two client teams over the course of the ten weeks. This will entail starting with relationship building when the client comes in, evaluating their financial status, doing due diligence and giving a final recommendation – the whole cycle of an engagement. At the end of the internship, the intent is to present the recommendations to the supervisors and board members of the nonprofit client NFF serves.
We start with a diagnostic phase, analyzing the client’s financial position and pinpointing the areas that are problematic. We then move into the second phase, prioritizing the order in which the most immediate of the issues need resolution. Once the problem has been identified, we then proceed to think about its root causes and how it can be solved in the fastest and cheapest way. We then recommend solutions to clients.
I was assigned my first client on my first day – a youth services organization based in Queens. They have 18 locations in New York, out of where they serve 15,000 youth with a budget of $30 million. Their significant issues revolve around cash flow generation and efficiently managing their rapid growth. We start by meeting the senior members of their administration – the CEO, the CFO and the program director – and two of the board members. Our first step will be to conduct a diagnostic. Once we have decided where the core issues stem from, we will go about prioritizing them in order of impact and time sensitivity. Then, we will finally proceed to try to solve them.
Journal #2
As we moved in for their diagnostic, we discovered that their cash flow projections and budget was in shambles. I look at this, however, as a chance for me to take initiative and use what we learned in the accounting core course! In several ways acting more like general managers with the client than a consultant, we helped the controller work on the cash flow, the budget and the projected financials for the next few years.
The purpose of the initial analysis is to familiarize the client with their own financials, and provide nonprofit senior management and board members with illumination and guidance on ways to better balance financial management with program priorities. Through the NBA process, nonprofit leaders gain a deeper understanding of their underlying business dynamics and capital needs. They become better equipped to plan and make decisions that improve their organization’s health and viability.
After this initial diagnostic, the other tools that are utilized by NFF are program profitability and scenario planning. Using the matrix of “money vs. mission” we help organizations clarify their mission-centric objectives and align their finances, budgets and projections accordingly. We assist them to identify which of their programs are profitable and how their internal finances are allocated to each program. The scenario planning tools assist the nonprofits in identifying the various financial possibilities that could occur over the next few financial years – and how to prepare for them. The diagnostic, the program profitability model, and scenario planning tools are given to the client for future uses as well.
Journal #3
A unique aspect of the NFF model is that we are paid by the funders’ of the client, not the client itself. So NF ends up having two sets of clients – the funders, which are usually foundations, and the nonprofit itself that needs our help. While this is very beneficial for the nonprofit, it does create complexities within the NFF model. Both relationships have to be juggled, and sometimes things don’t go exactly as planned! Something similar happened during my summer as well. Due to funding constraints, the second engagement I was supposed to work on didn’t quite pan out the way we would have wanted, as a full-fledged engagement. We ended up doing only a diagnostic for the nonprofit firm. On the other hand, I got exposure to the lending side of the business, working on the due diligence for two loan requests - and built curricula for two workshops. The lending business forms half of NFF’s revenue stream so it was interesting to see that aspect of the work as well. As a nonprofit lender, NFF works to ensure that its deep understanding of the nonprofit space is brought to influence the organization it lends to. More often than not, NFF lends to organizations that have been refused funding by traditional sources of debt. The fact that NFF’s nonperforming assets approximate the same proportion as for-profit lenders, speaks to the depth of their knowledge—of the firms they lend to and their unique circumstances. It was fascinating to see the criteria on the basis of which funds are disbursed and a nonprofit considered credit-worthy. The internal processes within the firm – sending the proposal to the Board before they agreed to lend – was also very informative. I got to learn a lot about internal risk management systems and the management of non-performing assets.
I also had the opportunity to work on the curricula of two workshops that NFF conducted. Several of the foundations NFF has relationships with, request NFF from time to time, to work with all the nonprofits they fund, giving a workshop to their financial management. These workshops cover the fundamentals of nonprofit finance. The purpose is imparting a basic understanding of financial systems and statements, as well as the teaching tools for financial budgeting. The final goal is to ensure continued viability of these nonprofits.
The most interesting aspect of the internship, to me, was gaining the understanding that business principles can help nonprofits meet their mission more efficiently and effectively. No organization can meet its social goals if it is not financially viable – and this is where business comes in. Effectively coalescing understanding of business with social goals would create healthier, sustainable and more effective nonprofits. My internship with NFF added that much more depth and heft to my ability to use business in the social sector.
