Chapter 6.

Financial Management
For most non-profits, the primary financial goal is not to maximize
profit but to maintain a healthy balance between income and
expenses. For that reason, non-profits need to consider carefully how
the money will be used and where it comes from. Moreover, the critical
stewards of financial success for non-profits include the board, staff,
volunteers, and donors.
NPOs FAQs
All non-profit organizations likely have a few questions about nonprofit
funding strategies and the logistics behind them. Let's take a look at a
few of the most common questions that come up.

1. How are nonprofits funded?

Nonprofits are funded in a variety of ways. The most common source
of funding for a nonprofit is donations. This can come from individuals,
organizations, businesses, and sometimes government sources.
However, the majority of revenue for a nonprofit will typically come
from foundations and similar organizations.
Most non-profit donations are made by individuals who care about the
cause or those who have been positively impacted by it. These can be
smaller one-time donations or more significant multi-year
commitments.

Nonprofits also raise funds through campaigns that may seek out large
lump sums or smaller amounts over a period of time. During these
campaigns, donors are often asked to give at various levels with
varying degrees of commitment.
Some nonprofits pursue several income sources, while others stick to
just two or three.

Some of these include:

Individual Donations: Individual donations typically make up a large
percentage of a nonprofit's revenue. These are one-time or recurring
donations and can come from any individual—not just those involved
with the organization.
Foundation Funding: Foundations exist to fund specific causes, such as
education, health, the arts, and more. Organizations that qualify may
receive grants from foundations based on their funding guidelines.
Corporate Partnerships: Nonprofits and corporations may partner to
support each other's work in unique ways. Some agreements are
exclusive, while others are only partial partnerships between the
nonprofit and business partner. In many cases, corporate partners will
give the organization one-time or recurring financial support.

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2. Can a nonprofit organization make a profit?
The term “nonprofit” is a bit misleading; nonprofits can indeed make a
profit. For-profit companies can also generate revenue, which they can
use to help fund their work. However, most nonprofits focus on the
work rather than generating profits for shareholders.
Nonprofits can make a profit in a variety of ways. They may use excess
revenue to fund other projects or donate it as charitable contributions;
they may return the money to their donors through matching gifts or
reinvest any surplus into the organization.
However, unlike for-profit organizations and typical businesses, a
nonprofit can’t make a profit just for profit’s sake. If a nonprofit wants
to make a profit or any surplus revenue, that must go back into the
organization.

3. How does nonprofit funding differ from business funding?

Nonprofits have drastically different funding sources and models than
typical businesses do. This can cause confusion and misunderstandings
among business leaders regarding how nonprofits work. Nonprofit
funding typically comes from foundations, individual donors (one-time
or recurring donations), and corporate partners.

On the other hand, business funding typically comes from private

equity investors, venture capital companies, or private donations.
Nonprofit structures are intentionally designed to limit their ability to
make a profit—in most cases. Because of this restriction, most of a
nonprofit's revenue will likely come from philanthropic giving.

The primary difference between business and nonprofit models is that

non-profits do not have shareholders, and profits do not drive them.
Nonprofit organizations receive funding through individual or corporate
donations, foundation or government grants, and other sources. When
choosing which funding sources to pursue, nonprofits should consider
what kind of impact they're looking for and where their target audience
is.
For example, if a nonprofit is looking for donations from a local faith
community, it would be ideal for developing relationships with local
churches or synagogues in the area. This way, the organization can
build a relationship and be sure the donations will come from people
who know the organization and want to see it succeed.

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Financial challenges for NPOs
Financial struggles are a reality for many nonprofits, even those with
excellent programs. Many non-profit organizations rely almost entirely
on funding from large foundations or the government. Relying heavily
on those sources can make an organization vulnerable to various
issues. Financial instability is one of the biggest challenges nonprofits
faces. Many organizations have limited funding, and they will struggle
if they are unexpected without funds to cover basic operating
expenses. Therefore, Grantmakers can play a significant role in helping
relieve the financial strain on nonprofits. Still, they must be aware of
many factors that make the funding process more complicated than it
is for businesses.

The following are some common financial challenges nonprofits face

and how grantmakers can help organizations overcome them.

1. Restrictions on Funding
While most businesses focus on making profits, many nonprofits' main
focus is on fulfilling their missions. Because of this, they can have
trouble understanding why their funding sources and the grants they
receive have so many restrictions on how they can use their funds.

The organizations must often follow the guidelines of foundations in

terms of how they use the funds provided by the organizations. This
can cause problems for organizations looking to provide services not
included in their grant applications. It also adds to the difficulty of
fundraising as organizations will need to appeal to donors who may not
appreciate being limited in what they can do with their money.
Educating grantmakers on these types of restrictions can help
organizations in the long run. Creating a dialogue with them and
explaining their impact will help both parties understand each other
and work better together.

2. Misperception Around Sustainability and Growth

The lack of clarity on using funds can make organizations afraid to take
risks. The assumption is that they will not be able to sustain their
programs if they take risks.
However, many grants are meant not only for operational support but
also for development, expansion, and sustainability. Many foundations
want their grantees to grow and develop new programs to be effective
in the future.
Grantmakers must distinguish between funding programs that will
develop the organization and long-term goals such as sustainability
and whether they need to grow their program or maintain what they
have.

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The grantmaker needs to be clear on whether they want to look ahead
into the future or want the recipient nonprofit to maintain what it has.
This will help them understand how much money is needed for
operations and how much money is needed for growth. Grantmakers
can help non-profits understand this goal by giving them more
information on how sustaining their programs is essential.

3. “Too Many Masters”

Nonprofits sometimes have to follow multiple funders' rules, making it
difficult to coordinate services and programs. Especially with
government funding, organizations may need to wait longer for
approval before moving forward with their projects. This delay can
frustrate those looking to make fast and effective changes in their
communities.

Foundations may also want organizations to complete grant

applications for many different grants instead of being awarded a grant
from one foundation source. This can be overwhelming for many
nonprofit organizations, especially those that do not have large staffs
or budgets that allow them to hire consultants or additional staff
members. Grantmakers can help organizations by clarifying the
approvals and reviews an organization needs to get funding for its
programs. They can also assist in creating efficient ways for
organizations to handle multiple funders.

4. Onerous Grantmaking Practices

Nonprofits and many grantmakers often lament the varying and
sometimes onerous requirements that organizations must follow in
applying for and reporting on grants. Grantmaking processes are often
based on constantly changing guidelines and are not always clearly
communicated to organizations.
The amount of time it takes grantmakers to review grant applications
can be frustrating for receiving nonprofits and cut into their ability to
carry out the programs they want to carry out. This is especially true if
grantmaking deadlines fall around other important events in the
organization's life cycle, such as when a new child is born.

Grantmakers also need to consider whether they need more funding or

a more complete application if an organization has received many
different grants in a short time. Grantmakers can provide more
assistance where necessary and make it easier for organizations to
comply with the guidelines.

5. Knowledge Gaps

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Grantmakers should take the time to evaluate how much they know
about the organizations they are working with. How many people in
their organization understand the foundation's structure, funding
processes, and guidelines?
Many organizations apply for grants at the same time each year. This
means each foundation sends out hundreds of grant applications at a
time — and many foundations often have hundreds of applicants for
each grant.
Grantmakers need to consider why this is happening and whether
there is a better way to collect and review applications from different
organizations, so their needs do not overlap. It can also take resources
away from other priorities in the larger operations of an agency or
organization.

Both grantmakers and nonprofits fundamentally lack an understanding

of the nature of money in the sector. Although the gap may not seem
large, it is important to work together and develop better relationships
to reduce this lack of knowledge.
Four pillars to financial management
The four pillars of finance reflect the varied motives and expectations
of those who provide financial resources to not-for-profit organizations.
These pillars include Financial Health, Financial Practices and Systems,
Financial Stewardship, and Financial Risk Assessment.

1. Financial Health
Organizations need the financial resources needed to support their
projects and activities. For this reason, organizations must be
financially healthy. This means organizations have sufficient liquidity
(cash and reserve funds) to meet existing financial obligations and
anticipated future needs. It also means they are provisionally solvent
(able to pay current expenses without debt).
There is a need for non-profits to consider how much money is
unrestricted and available for use, how sufficient reserves are, and if
there are cash flow challenges or deficits. These considerations can be
integrated into the financial planning process.

2. Financial Practices and Systems

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Financial practice refers to managing an organization's accounting and
financial transactions, including grant reporting, budgeting, and
payments. It is also essential for organizations to have effective
financial management information systems that facilitate data
collection and reporting requirements. Accounting practices must
comply with applicable laws to ensure transparency in financial
reporting. These practices ensure reliable information is collected from
various sources for monitoring purposes. The ability of organizations to
develop a sound financial system based on their needs will determine
the efficiency level of their operations. A sound system is essential for
recording transactions, drawing reports, keeping records, and auditing
requirements.

3. Financial Stewardship
Financial stewardship is achieved by ensuring an organization has
sound and appropriate financial policies that are set in place
concerning the types of activities the organization’s activities, the uses
of funds, and the appropriateness of expenditures.
Financial stewardship involves procedures to ensure that financial
transactions are fair, reasonable, and ethical. Sound financial practices
involve having a well-defined budgeting and accounting system,
sufficient processes to support compliance with applicable laws and
regulations, and adequate internal control and accountability
processes. Digital technology can effectively be used in overcoming
these challenges, helping to improve efficiency in operations.

4. Financial Risk Assessment

Financial risk assessment is an essential part of good financial
management. This process involves reviewing the organization’s
financial position, identifying and assessing risks that could affect the
organization’s operations, and identifying appropriate short-and long-
term responses to such risks.
A risk assessment does not focus on how much money an organization
holds. Instead, it considers all potential sources of losses and external
events that could cause loss and considers contingencies for
addressing them. It should be performed regularly to update policies,
procedures, and routines to meet regulatory requirements.
Financial management activities of foundations can reduce the need
for costly litigation by helping to create safe and effective facilities
without legal irregularities or improper transactions.

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Developing and managing the budget
A nonprofit operating budget is a financial document that provides an
overview of how a nonprofit organization plans to spend its money.
Nonprofits are required to monitor their budget and decide if it could
be improved. This is to ensure that the programs and services they
offer meet their mission objectives. It is also important because
organizations must meet the standards of government agencies like
the Internal Revenue Service, which may require nonprofits to prove
that they are spending enough money.

If an organization needs additional funding, it is likely because it has

insufficient funding or did not spend its budget correctly. One way to
improve a budget is by requesting larger grants from donors and
foundations. Moreover, organizations need to take a larger percentage
of the funding and make a bigger reserve fund for next year. This
provides a buffer to address contingencies and unforeseen events.
The nonprofit operating budget is essentially the financial reflection of
what the nonprofit business expects to achieve over a 12-month
period. The budget includes an organization's operational and financial
activities and is required to meet the needs of its stakeholders.
If a nonprofit budget goes through an audit, it is up to the nonprofit
organization to prove that its financial records are transparent enough
to be audited successfully.
Nonprofit organizations must constantly strive for sustainability; proper
budgeting is essential to that quest. The budget is the organization's
framework for allocating resources to meet operational goals. The
budget should be aligned with the organization's mission, vision,
strategic priorities, and financial goals.

The budget process requires that a foundation be clear about who the
decision-makers are and how decisions are made in a non-profit
organization. The budget must contain adequate information, including
spending rates for each category of grants and expenditures and
information about sources, such as income sources, commitments from
other sources, or estimated contributions from donors. The use of
technology can help streamline processes and make it possible to
generate more accurate financial products such as budgets and
accounting reports.

A budget gives structure and substance to a nonprofit’s plans.

Budgeting is essential in preparing the nonprofit to create and follow a
financial plan.

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In a nonprofit budget, individuals or departments are allocated certain
amounts for operational expenses. In other words, the budget is a
means for allocating programs and services that the organization must
carry out. The key point is that each program is allocated its fair share
of resources in proportion to its importance to the organization’s
overall mission and vision. This importance can be determined by such
factors as the program's impact on its intended beneficiaries, whether
it helps achieve specific strategic goals, or how well it supports a
strategic priority.

Therefore, for non-profits, good budgeting will:

a. Help you focus on short and long-term strategic goals- A
budget allows organizations to set spending limits, keep costs in
line with revenues, and grow by using their current resources to
the maximum.
b. Make your Board members happy- The value of a budget is
that it shows what the organization has accomplished. Funds for
planned programs should be allocated based on evidence of
effectiveness.
c. Keep your donors informed- A budget should be made
available for donors to evaluate the effectiveness of their
contributions.

Ten steps to writing a budget

1. Start Early and Design a Process
Nonprofit budgeting takes time, especially if you’re new to it. The
process can seem daunting, but it’s a simple one. Even with the most
inexperienced non-profit staff, the budget process should take about
four weeks. Start by setting your financial goals and planning how
those goals will be attained. Get everyone involved in drafting a
mission statement detailing what your organization does and why it
does it.

Start working on the budget a couple of months in advance, so you

have sufficient time to collect the necessary financial and non-financial
information. You'll need time to complete full financial statements,
which provide the raw data needed to develop your budget.

2. Clarify the Context

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No matter how determined you are to have a perfect budget, it’s best
to start with an operational budget. Operational budgets provide the
most accurate estimate of expenditures and revenues and allow
people to get comfortable with the process.
It may be too early to develop an operational budget if you're a new
nonprofit. Your board may need time to serve as a consultant and
guide your organization through the process. Get your staff members
used to this process by starting slowly with step one: developing a
mission statement.

3. Don’t Operate on Assumptions

While there will inevitably be some assumptions in your budget, try to
work with real numbers as much as possible. The budget should be up-
to-date, so you’ll want to use your organization's most recent financial
statements and include only what is directly year-to-year.

As you develop your operational budget, you’ll need to consider

whether you have enough money to cover unexpected expenses. This
is where donors and grants come in. If funds are available, set aside
money for emergencies or unexpected expenses. If funds are not
available, start looking for additional revenue sources and spending
cuts. If your operations or fundraising remain steady or increase,
review the budget again with your staff members to ensure you can
maintain stability without cutting back on important programs or
services.

4. It’s a Team Effort

Involve your Board, staff, and volunteers in creating the budget. Go
over each line item and discuss the purpose and goals of each
program. Ask your staff members what would happen if any program
or service was cut or given less money, and see if new programs can
be developed from existing expenses to meet the organization’s goals.
Don’t be reluctant to develop new programs. A nonprofit’s mission
often includes mentoring youth, teaching adult classes, or providing
services to people with a disability.

5. Get the Right Amount of Detail In

Your budget should have enough lines to comprehensively understand
the financial situation. Include detail for every organizational unit,
every program and service, every activity, and all grants. Moreover,
detail positively affects attitudes by making it easier to understand the
big picture.

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6. Get Your Income Right
There’s no doubt that revenue is the most important part of the
budget, as it describes income from contributions, grants, and other
revenue sources. However, you should also focus on where income
comes from.

7. Figure Out Your Expenses

Expenses take up most of the budget, so these numbers must be
accurate. Make sure expenses are allocated to different programs and
activities and try to be as specific as possible.

8. Make Cash Flow Your Priority

The cash flow section of the budget will provide an estimate of when
you’ll run out of money. You’ll need a basic understanding of how
much money you’re bringing in and when and an estimate of your
expenses.
Your Board members should have a direct role in developing cash flow
projections, agreeing on the assumptions to use, and reviewing the
projections carefully. You should discuss how much money you will
have to make it through the year and how much you reserve to cover
unexpected cash shortfalls.

9. Separate Operational From Capital Budget

Your operational budget should be within your organization’s capital
budget, which comprises buildings, equipment, and software. Your
capital budget provides for the long-term maintenance, repair, and
replacement of equipment.

10. Don’t Forget About Non-Monetary Contributions

Your budget should not be just cash but also consider non-monetary
contributions. Non-monetary contributions include volunteer work and
gifts. Don’t forget to give them due attention!
Common categories for income.
Income categories are like buckets; they are used to highlight certain
activities. Examples include donations, membership fees, and grants.

1. Donations- Usually represent a fixed dollar amount. The donation

amount in a regular operating budget is subtracted from projected
income to show cash received. However, in a capital budget, the
donation amount does not affect the organization's net assets; only
cash income is considered.

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2. Membership Fees - Membership fees are calculated to account for
dues paid by members and any amounts paid by non-members on
behalf of members. It differs from dues paid in an operating budget
because membership fees are an annual charge beyond what is spent
on programs and services over one year. They are also monthly
charges in an operating budget. Membership fees are added to the
capital budget and represent future cash inflows for the organization.

3. Grants - Grants are money given to a nonprofit institution by

providers outside its control (Government agencies, private
organizations, etc.). Grants are only a portion of any organization’s
funding.
Conversely, non-profit organizations also have expenses, such as
payroll for staff, fixed costs, and variable costs.
Payroll for staff- Staff expenses are the largest variable costs for most
non-profit organizations. For example, a small non-profit might pay it's
executive director $50,000 annually and the rest of its staff $30,000
yearly.
Fixed costs- Fixed costs are not variable expenses, such as rent,
security, or utilities.
Expenses vary by organization and are based on the programs and
services offered by the organization.
Variable costs- Variable costs are uncertain in that they vary with use
or demand. Travel and office equipment are good examples of variable
costs because they will vary with the number of staff members and use
of the building.
Financial statements
A nonprofit entity issues a somewhat different set of financial
statements than the statements produced by a for-profit entity.
Basic financial statements include:

1. Statement of Financial Position

This is similar to the balance sheet of a for-profit entity, except that a
net assets section takes the place of the equity section that a for-profit
entity uses. It provides information about an organization's assets,
such as cash, real estate, equipment, and investments. A non-profit
entity has two categories of net assets: unrestricted (aka undivided)
and restricted.

2. Statement of Activities
This narrative description reconciles the beginning net assets with the
ending net assets. It includes all activities during the year, such as
fundraising events and capital improvements. Moreover, it separates
activities into two categories: revenue and expenses.

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3. Statement of Cash Flows
This statement shows the net change in cash during a period of time. It
is similar to the cash flow statement (reconciliation) prepared by for-
profit entities. However, it uses estimates rather than actual amounts
when determining any adjustments related to non-cash transactions,
such as depreciation and amortization of long-term assets or
purchasing land or buildings with a long-term commitment. The
statement also includes changes in account balances that do not affect
cash.

4. Statement of Functional Expenses

This statement shows how the organization uses income. It is a
detailed financial statement that shows how individual expenses are
categorized, such as program services, fundraising, and management.
Using financial ratios
Financial ratios are the indicators of the financial performance of an
NPO. They are built from items coming from a non-profit income
statement, balance sheet, and statement of cash flows. Financial ratios
allow an in-depth analysis of the financial performance of a non-profit.

There are many types of financial ratios, but only a few are presented
here:
1. Program Expense Ratio- The program expense ratio measures the
percentage of expenses a nonprofit organization spends on its core
mission. It is calculated by dividing program service expenses by total
expenses. This ratio is useful to compare among organizations of
different sizes and to indicate the level of concentration from a single
mission or a program expense perspective.
2. Administrative Expense Ratio- The administrative expense ratio
measures the percentage of expenses an organization is spending on
its management. It is similar to the program expense ratio, except that
management expenses are not divided by total expenses. It is
calculated by dividing management and general expenses by total
expenses. The management and general expenses category typically
include all administration costs, such as office rent, utilities, employee
wages and benefits, legal and professional fees, insurance, travel
expense, depreciation of assets, and equipment.

Program expenditure ratios and administrative expenses only include a

portion of a nonprofit's expenses. These ratios provide useful
information on the percentage of income spent on activities. Still, they
should be used in conjunction with more detailed figures, such as
income statement data and financial statements.

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3. Government Reliance Ratio- The government reliance ratio
measures how much an entity depends on government grants and
donations. It is calculated by dividing the current assets by the current
net income. Current assets are typically cash and investments, while
current net income is the organization's annual income statement.

4. Personnel Expense Ratio- The personnel expense ratio measures

how much an organization is paying its staff. It is calculated by dividing
the total salary and wages by the number of employees. The main
issue with this ratio is that it compares two different numbers, one of
them at constant prices (total expenses) and the other one at current
prices (salary and wages).
A formula for determining the operating expenses to revenue ratio for
a nonprofit organization:
(Total Operating Expenses)/(Total Revenue)*100
The operating expenditure to revenue ratio measures how much of an
organization's revenue goes towards its core mission-related activities.
Revenues include both private donations and government grants.

5. Fundraising Efficiency Ratio- The fundraising efficiency ratio

measures how much money an organization raises compared to how
much it spends on fundraising. The organization may spend 20% of its
revenue on fundraising expenses. However, it might still raise the
same revenue because the organization does not spend all its revenue
on certain activities.
The Fundraising Process
‘’ If I had known how much energy fundraising requires, I would have
hired more staff. It’s quite a daunting exercise, especially the first
time’’ Executive Director.
The fund-collecting management process includes identifying and
utilizing the time needed to conduct your fundraisers. The process
begins from the time an organization receives a request to hold a
fundraiser until the time the money is collected.

Fundraising may be conducted with or without employing outside

professionals to assist in the process. The fundraisers may be held off
campus by a student organization or on campus by the foundation
itself. In addition, numerous fundraising activities can occur throughout
the year, not only at one special event such as a pancake breakfast or
car wash. A nonprofit fundraising process is normally long and
involves. It will not happen in a single slam-bang campaign. It is a slow
evolution, involving many steps and many meetings.

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The fundraising process begins with the request of the organization.
The Development committee then reviews the request to determine if
the organization is eligible to receive donations. The committee uses
its knowledge of criteria based on demographics or other factors.

Managing the fundraising process involves the organization's

personnel. They are responsible for determining how much money a
particular organization needs and then book the fundraiser(s)
accordingly. The manager must prepare a plan for money collection to
include the dates, location, and time of the fundraisers. The fundraising
program will take approximately twenty-four hours (with some
exceptions).
After all, fundraisers have been completed, the money collected from
those events is placed into an account to be used by an organization.
Some of this money may be used on that specific event, and another
portion may be allocated for future events. Others may not be
allocated for use until a later date or event necessitates such use.
Consequently, fundraising strategies include assigning a committee or
specific staff member to work with the organization to help ensure that
all fundraising goals are met.

To gain financial sustainability, nonprofits must develop long-term

fundraising plans. To do this, they must actively solicit donors and
make them feel personally connected to their organization.
Organizations must raise enough money to accomplish the goals of
their respective missions. This is one of the reasons why online
fundraising is so important today. Many organizations have succeeded
by utilizing fundraising apps, creating adds, and even launching
fundraising events registrations with online tools such as Eventbrite
Integrated reporting (IR)
Integrated reporting is concise communication of an entity’s
governance strategies, performance, and prospects relevant to the
external environment that leads to developing criteria for financial and
non-financial value over the period. This is a set of integrated reports
that reflect a nonprofit organization's economics, activities, and
impact. It also includes (1) an income statement, (2) a statement of
activities, (3) a statement of financial position, and (4) an integrated
grantmaking report.
(1) Income Statement: This section illustrates the sources and uses of
an organization’s economic resources. It will list the revenue received
from program services and other sources in the current reporting
period. The expenses are from the current period until no more
expenses are left to subtract from revenue because all functional
programs for the year have been paid for.

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 (2) Integrated Statement of Activities: This section summarizes
an organization’s programs and major accomplishments during a
period or fiscal year. It describes how the financial resources
were used to obtain program services and the benefits
customers derived from the organization’s programs.
(3)Integrated Statement of Financial Position: This section shows
an organization’s assets, liabilities, and net assets as of a
certain reporting period or fiscal year. It describes an
organization’s financial condition.

(4)Integrated Grantmaking Report: This grantmaking report

gives donors a better understanding of how nonprofits use
their grants to meet their needs. Often, foundations require
nonprofits to submit this form with the original grant proposal
to understand better where their money is going.

Therefore, IR is essential since it gives donors and other stakeholders

more insight into the work of an organization, which can help with
fundraising. An integrated reporting framework is used for corporate
reporting, the sustainability report. And corporate financials are
merged to form a single integrated report. As we discussed, an
integrated report gives comprehensive information about a company’s
strategies, governance practices, and performance.

After understanding how to fund a non-profit, developing a budget, and

reporting, it is time to consider your human resources. You will carry
out staff and volunteer recruitment for your non-profit organization.
Therefore, the next chapter will discuss how to recruit, hire, and
manage human resources.

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 Chapter 7. Human resources
‘’It's not always easy for non-profits to hire the right people. You need
people with real passion who want the greater good and see the bigger
picture, and so not everybody is the product to be appointed to a non-
profit world’’ Executive Director.

Separating paid jobs from volunteer jobs is essential. A common

mistake for non-profit organizations is to mix professional and
volunteer activities, which can lead to problems. An excellent example
of a problem is when volunteers believe they are entitled to the same
privileges as paid workers.
Therefore, to separate paid jobs from volunteer jobs, you need to
practice job description, communication, and adding by-laws to that
effect. Moreover, it requires a leader who is a good manager.

The success of any non-profit organization depends on the quality of its

volunteers, but it can also depend on how it treats them. Serving as a
volunteer has many benefits, but once you become an employee in a
nonprofit organization, you will have different rights and
responsibilities than a regular worker. Once you work in the
development department of a non-profit organization, you will be
responsible for performing many tasks that require specific knowledge,
abilities, and experience.
Volunteer Recruitment.
Finding exemplary volunteers and convincing them to help can be
challenging. Some organizations train and assist large volunteer bases,
such as colleges and universities, religious institutions, corporations,
and governments. These organizations provide a way to connect the
right people with the right job opportunities.

Information is crucial when planning to recruit volunteers. A clear

understanding of what you are looking for will help make you more
successful in your recruiting process. Your local area university or
community college is a good resource for finding volunteers. These
organizations can assist you in identifying individuals who have special
skills and experience that could benefit your non-profit organization.
Another option regarding volunteer recruitment is through word of
mouth.

Various methods can be used to recruit volunteers; some will be more

appropriate for your organization than others. The key is to find the
one or two methods that work best with your organization.

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1. Needs Analysis
Before recruiting volunteers, you’ll want to build a foundation by
conducting a needs analysis to determine which volunteer roles and
staff support are needed within your nonprofit.

The primary component of a needs analysis is to evaluate the

organization’s current workforce and determine whether its current
environment is conducive to producing positive results. It also wants to
know what issues are hindering the organization’s success. You’ll want
to have a clear understanding of your nonprofit's goals and missions,
as well as its concerns. Knowing why you are gathering information
about your nonprofit and why this information is relevant and
essential.

2. Process for Volunteer Role Design

Once a nonprofit has conducted its needs analysis, it will want to
identify which roles it should consider and how these roles can help
further the organization's goals. The process for the volunteer role
design includes:
a. Brainstorming all tasks that need to be done and problems
that need to be solved.
b. Writing one task per sticky note and putting them on the wall.
c. Identifying which tasks can only be done by paid staff.
d. Removing paid staff responsibilities from the larger group.
e. Clustering remaining tasks into groups of similar duties.
f. Creating a team or position description and listing their
responsibilities.
g. Identifying which staff or volunteers will support which teams
or individuals.
h. Prioritizing; choosing teams or positions that will have the
most impact.
i. Recruiting your first volunteers.
Creating Volunteer Position Descriptions
Before volunteer recruitment can begin, one of the most time-
consuming, yet essential tasks, is developing the volunteer position
descriptions. Volunteer Position Descriptions is a document that clearly
defines what each role will do in the organization's scope. It also
includes the necessary qualifications needed to perform those duties,
evaluation and documentation procedures, training requirements, and
other pertinent details.

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This document is crucial because it is a legal contract between the
organization and its volunteers. If you share this document with your
volunteers or include it in their orientation materials, you can save
time by avoiding misinterpretation on both sides of the contract. It also
protects the organization from any legal issues that can arise.
Knowing that this document can represent a specific employment
status and serve as an approval document for volunteers' employment
is essential. The document should have specific details about the
employment status an organization seeks.
Research and choose your recruitment methods
To start, research and map out your community and your audience.
Your audience may include the community, schools, organizations, and
government agencies.
Identify organizations within your local area that may have a suitable
volunteer role you can fill. You can find these organizations by
reviewing their websites, contacting them directly, or through their
career pages. Be sure to read the volunteer section of that site before
contacting them. As you gather information, you will be able to identify
whom you can best reach with your own recruitment campaign.

You also need to determine how much money you will be able to
allocate for each type of recruitment method. Once you've figured out
which methods are most effective for your non-profit, it's time for
strategizing.
Three forms of recruitment can help, such as warm recruitment, cold
recruitment, and targeted recruitment.

1. Warm recruitment
Warm recruitment is to use your organization’s network to recruit
volunteers. You can utilize your current volunteers to spread the word
about your open positions. You can also use your organization’s
partnering organizations and community leaders to build a strong
volunteer program.

2. Cold recruitment
Cold recruitment is often done by traditional print advertising and
other forms of media. This option is more costly than warm
recruitment, but you can simultaneously reach a larger pool of people.

3. Targeted recruitment
This method allows you to create a unique and tailored message for
specific volunteers, such as students or university alumni, who are
interested in volunteering for your organization. You can also target
specific vocational groups within these demographics that have
relevant skills that match your needs.
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Identifying staff to support your volunteer program
As you develop volunteer roles, you’ll also want to identify the staff
responsible for supporting them at each stage of the volunteer
lifecycle, from volunteer recruitment to recognition. Assigning a staff
member or volunteer responsible for this job is essential. This will help
the organization avoid any conflict of interest and ensure that the
service is done. Therefore, you should also include any volunteer
management responsibilities in their job descriptions.
Staff members should also be able to provide feedback and advice
about their volunteers. The organization should also have someone to
follow up with all the volunteers they work with and ensure they are
getting the help they need.
How To Find Non-Profit Volunteers To Support Your
Mission
As technology and online giving have made it easier for people to
connect to the causes they care about, it’s provided more
opportunities for nonprofits and individuals to recruit volunteers for
their specific needs.
Therefore, you can find non-profit volunteers for your mission through:

1. Matchmaker, matchmaker, make me a match!

Nonprofits spend matching volunteers with appropriate responsibilities
based on their interests, skills, and personalities then doing…. You can
also create your own database with this information, making it easier
to find the right volunteer for the right position.

To make a match, you can start by sending out a short survey to your
online community of donors and supporters, asking about their skills
and interests related to volunteer opportunities and your
organization’s needs, or creating an easy-to-fill-out form on your
website for those interested in volunteering, with specific fields based
on skills, experience, and other demographics, that you can then sort
through for recruitment.

2. Create a Volunteer Recruitment Campaign

To recruit great volunteers, you can make an announcement on your
website and social media profiles and send out a newsletter to
members. You can also send out an email blast to those who support
your organization’s mission, asking them to share their interest in
volunteering with you.

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A volunteer management system or VMS can create a centralized
database for recruiting and matching volunteers. This tool will allow
you to manage the online process of looking for potential volunteers
and matching people with appropriate volunteer roles.
Your VMS should include a built-in search function to identify suitable
volunteers based on their qualifications quickly. A VMS is essential for
the smooth execution of any recruitment campaign.

3. Ask who you know

Ask your staff and volunteers to share your open volunteer roles with
people they know who might be a good fit for the position. Encourage
them to share your Facebook page, website posts, and tweets. You can
also encourage this behavior through personal and professional
incentives, such as providing lunch at the office for those who refer a
qualified volunteer for a position.

4. Be Creative
You can also get creative with your recruitment campaigns. For
example, you can organize a volunteer appreciation event to thank
your regular volunteers and attract potential new ones. You can also
organize a volunteer day where you invite community members to
help on a specific project that needs their support.
Promote your volunteering roles
Volunteer recruitment is a balancing act between providing
opportunities to volunteer and ensuring they are accurately filled. The
most successful volunteering campaigns have several essential
components in recruiting and retaining new volunteers. These
components include:
a) Providing volunteers with an easy and consistent process for
applying for your organization’s open positions.
b) Implementing benefits and rewards based on their participation
in the community, including various incentives and recognition
programs.
c) Using social media to advertise your organization’s volunteering
opportunities on a regular basis.

d) Giving priority to people whose assistance is needed most, such

as individuals with experience or expertise that match the non-
profit’s needs.

You can also promote your volunteering roles through:

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 a. Dedicating a part of your website to volunteering- Shed light
on the benefits your prospective volunteers will have, as well as
some testimonials from current volunteers and links to active
volunteering ads.
b. Occasionally highlight volunteering activities on your social
media- You can also share information about other volunteering
organizations in your area.
c. Share about volunteering opportunities in your e-newsletter-
This includes posting links from other organizations and causes
to share on your social media platforms.
d. Organize an in-person or virtual volunteer event- This can
celebrate your efforts to bring together volunteers and
stakeholders in your community.

Make sure volunteers know about the rules of your organization’s

volunteer program. Before you can welcome volunteers into your
organization, make sure you have a clear understanding of what they
will be able to do and how they will be rewarded for their participation.
Screen and assess the volunteers
Once you’ve recruited your volunteers, you must screen and assess
them to ensure they are a good fit for your organization. An online
volunteer management system or VMS can help you track each
volunteer and easily pull up their past activities and feedback.
If the volunteer isn’t the right fit for your organization, say they can’t
commit to the needed hours or don’t have the right skills, you can
politely decline their application while redirecting them to more
suitable opportunities to give their time. However, if they are the right
fit, you can officially accept them as volunteers.
Assessing volunteers helps you make the most of their volunteer
contributions by matching their skills and abilities with your
organization’s needs. Moreover, you can use volunteer assessments to
determine your organization's most successful volunteers at any time.

You can create a volunteer assessment questionnaire and ask your

new volunteer to participate. Volunteer assessments are best used
when you don’t have a person’s contact information because you will
ask them questions about their background, skills, and goals. You
could create a questionnaire that is short and specific. For example,
“Please complete this short survey about yourself as a volunteer for
our organization.” After that, link the questionnaire to an online form
on your website that asks questions about the volunteer’s experience
with your organization and why they want to become a regular
volunteer.

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Managing volunteers
"Managing people is about all those paradoxes: when to be stationary,
when to be fluid, when to wait, when to push, and it’s kind of an
intuitive thing’’ Donalda Jones, Founder of REALM.

Depending on the type and size of your non-profit, volunteer

management can be quite challenging. Many organizations struggle
with how they should deal with their volunteers. One of the main areas
where they struggle is in training and development. The dilemma is
whether to train your volunteers and incur training costs or whether
not to train so you can maximize the amount of time they spend
working on your programs—and leave less overhead for training
activities. Also, management needs to clearly understand what is
acceptable behavior for volunteers in an organization before you have
them attend a training session about how to be an effective volunteer.

Managing volunteers is a team effort. You have to have a clear idea

about the needs and purposes of your organization and continuously
assess whether your current volunteers are fulfilling their roles
effectively. You also must consider how best to utilize your volunteers'
skills, experience, and knowledge so that the best possible results can
be achieved with each volunteer's contribution.

You should set up formal volunteer management and retention

processes to get the best out of volunteers. Your processes will help
you create a process in which you assign volunteers tasks and provide
regular feedback on their progress. This will help ensure that
volunteers know what is expected of them by your organization and
recognize the service they have provided.

Therefore, to make volunteers work, you must:

a. Clearly define their roles and the tasks they will perform- This will
help you know what you expect from your volunteers, what skills they
have, and whether they have the required time to dedicate to your
organization.
b. Use volunteer assignments to build a positive relationship between
the volunteers and your organization- Thinking about tasks that need
to be done and matching volunteers with them will help you get people
involved in helping your organization achieve its goals.
c. Provide feedback on the volunteer’s performances- You can use a
performance management system, such as an online volunteer
management system, to provide timely feedback so that volunteers
can improve their performance on specific tasks and activities that
matter most to your organization.

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d. Build a trusting relationship with your volunteers- Establishing a
good rapport with them will help them embrace their roles and
responsibilities and feel that their participation is meaningful.
e. Recognize their efforts to encourage long-term commitment- Make
regular interactions with your volunteers to get to know them, provide
timely feedback, recognize them for their contributions, and encourage
them to continue volunteering with you.

Therefore, you can:

1. Create a solid volunteer training program
Effective volunteer management includes a volunteer training
program. Training helps to keep volunteers motivated, committed, and
performing well. A well-defined volunteer training program also helps
you get the most out of volunteers' contributions. The training process
should include information about a volunteer’s role, what tasks are
required to be performed, and how the current activities will help your
organization achieve its mission.
In addition, training should provide an opportunity for new volunteers
to practice working with other volunteers and staff members to
understand their responsibilities better and grasp opportunities to
make improvements.

2. Appreciate and reward your volunteers

Volunteers are important to your organization, and their contributions
can determine the success of your mission. Therefore, you must show
your appreciation and respect for them.
Appreciation means recognizing the time, skills, and effort volunteers
give to your organization. Recognition can take many forms and should
be given regularly when you think your volunteers are impacting.
Rewards are tangible ways to recognize volunteers, such as gifts, food
and beverages, special recognition programs, and volunteers' names in
newsletters or other publications. Although much of a volunteer's
motivation comes from acknowledging their work, this does not mean
that rewards do not play a part. Rewards can motivate people to
continue to give service beyond what they would have done without
such consideration, particularly if they feel that they have earned it.
What do to if you are struggling to retain volunteers

‘’Intellectual motivation is needed when hired, but emotional

motivation makes them stay.’’ Chuck Zuckerman, President, BCWF.

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Volunteers can be provided emotional motivation through job
satisfaction, meaning, and volunteer benefits. In addition, a regular
volunteer management program that includes performance
evaluations, rewards, and recognition is a good practice to keep
volunteers in the organization. Zuckerman suggest that providing
emotional motivation is simple: ‘’You can paint a positive picture of the
future, for example.’’ Chuck Zuckerman, President, BCWF.

Recognize that the volunteer does not work for you but for the
organization, mission, and cause.
We are all volunteers at some point in our lives. Why? It is because we
are altruistic beings. We care, and we want to help people who need
us. In short, we do not aim to work to earn a living; rather, we aim to
work because of our passion.

These tips can help when struggling with retaining volunteers:

1. Interviewing past volunteers helps to understand why they stopped
coming back to help the organization. Also, this helps to understand
more about their time spent overall. Turn this into a lesson learned.
2. Interview current volunteers- to understand their perspectives and
experience.
3. Work with current volunteers- to identify the common complaints
and issues raised. This will help to improve the volunteering
experience for new and current volunteers.
4. Present a prototype of this plan to current volunteers- the prototype
can be in the form of a new schedule, new types of tasks, or a new
organizational structure.
5. Improve the prototype based on current volunteers' feedback to
help them work well together and achieve their goals.

After staff and volunteer recruitment, our next step is to organize the
non-profit organization. We will consider all laws and key information
that will get us approved and running. Therefore, the next chapter will
discuss how to organize your non-profit.

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