Managing limited resources, constant change, and restrictive funding: A conversation with nonprofit consultant Dana Britto

Profile: Dana Britto, Fiscal Management Associates

Dana Britto is a Senior Consultant at Fiscal Management Associates (FMA), a national consulting firm that helps foundations and nonprofits of all kinds and sizes strengthen their fiscal operations and financial management capacity. In the four-plus years she has been with FMA, she has helped develop and lead over a dozen financial workshops – including several offered through the IFF-administered Stronger Nonprofits Initiative and MacArthur Arts and Culture Loan Fund – and provided customized, one-on-one coaching and technical assistance to leaders from over 30 organizations. Before joining FMA, she spent six years at Nonprofit Finance Fund, where she successfully administered a $1.1 million loan fund, among other accomplishments.

Britto’s work gives her a clear view of some of the biggest challenges nonprofits and foundations face nationwide. Plus, as a former nonprofit staff member herself – she worked for the transitional housing provider Homes for the Homeless after receiving her B.A. from Amherst College – she has firsthand knowledge of the sector’s unique demands. As she says, “You have to wear many hats and plug holes wherever they need to be plugged.”

IFF sat down with Britto to hear her thoughts on capacity building, why so many foundations are reassessing traditional parameters around funding, the mindset she most admires in nonprofit leaders, and more.

IFF: What does it really mean to build financial capacity – could you break down that concept for us?

Britto: FMA breaks it into three buckets. First, there’s the transactional piece around finance – the systems and tools you use, the infrastructure you set up in terms of staffing, your workflows, your internal controls, policies, and procedures. Those basics need to be tight and strong so that your fiscal unit is producing the information necessary to operate strategically and meet compliance requirements.

Second, there’s the managerial element of finance. Who oversees the internal controls and makes sure people across your organization are doing their part to keep things functioning well – and how do they go about it?

The third bucket is the strategic level of finance, which essentially means approaching your organization’s finances not just as a compliance function, but an integral part of your ability to fulfill your mission and plan for the future. It’s about understanding the resource requirements attached to your strategic goals for the next fiscal year and beyond to be able to develop a financial roadmap for how to get there.

IFF: FMA specializes in helping nonprofits and foundations. What about the finance function is special or different for those clients?

Britto: Nonprofit and for-profit finance truly are not the same. With nonprofits, there’s always a social mission involved, which means emotions are frequently a bigger part of the finance function. And emotions should be a bigger part for nonprofits because the decisions leaders make about how to use their money typically have a very human impact not just on their staff, but their constituents.

There are still plenty of organizations that take pride in the fact that 99% of their money goes directly toward serving clients – and plenty of foundations that expect nothing less. But if that’s truly the case, how are you able to ensure your ongoing ability to operate as effectively and efficiently as possible, consistently delivering mission impact?

Also, in the for-profit sector, consumers are regularly willing to pay what’s necessary to cover administration and overhead. Whether you’re buying a new phone or a pair of shoes, very often only a relatively small portion of the price you pay goes towards the raw materials and direct labor to create that good. The rest goes toward administration and overhead.

That same expectation is not necessarily carried over to the nonprofit sector. There are still plenty of organizations that take pride in the fact that 99% of their money goes directly toward serving clients – and plenty of foundations that expect nothing less. But if that’s truly the case, how are you able to ensure your ongoing ability to operate as effectively and efficiently as possible, consistently delivering mission impact? How are you managing your money and directing those resources in the way that you need to without the infrastructure needed to do so?

That has become a big focus at FMA: understanding the true cost of what it takes to run an organization and advocating on behalf of the nonprofit sector, so that foundations and other funders understand it as well.

IFF: How has that advocacy been received – are foundations starting to adopt a “true cost” mindset?

Britto: I think we’re gradually seeing a fundamental shift in the foundation world. There are several foundations, both in Chicago where I work and nationally, that are spreading the same message we are. They understand that if you restrict your grant-making practices too severely, at some point you will jeopardize grantees’ ability to deliver the results you want. Serving clients effectively requires the capacity to build and maintain infrastructure.

Let’s say you’re providing money to help an organization scale an education program. It’s not just about incrementally increasing the amount for educational services. It’s also about understanding the whole host of administrative requirements that come with serving 50 students, for example, versus 30. Depending on the billing and reporting processes involved, scaling up might require a new system, a new full- or part-time staff, or both.

So, I believe visionary foundations are looking for ways to provide nonprofits with funding to develop leadership and long-term operating capacity while also providing resources that represent more flexible capital to be used during times of uncertainty, growth, or change.

IFF: What are some other common themes you’re currently seeing in the nonprofit sector?

Britto: Almost every nonprofit is trying to do a lot with very limited resources. That’s the basic theme underpinning most of our clients’ challenges, although it crops up in a variety of ways depending on factors like your geography. For example, a few years ago, in Illinois we were facing the state budget crisis. That had a massive impact in terms of cash flow. Organizations had to front expenses for years before they were finally paid by the state. Our clients were faced with a host of tough questions, like do we cut positions now or hold out? Many are still feeling the effects.

Another common theme – and part of this is driven by funders’ priorities – is constant growth and change. Not only do nonprofits have to meet increasing demand for their services within the context of limited resources, but there’s increasing interest from funders in making targeted investments in nonprofits that support historically underserved communities.

Almost every nonprofit is trying to do a lot with very limited resources. That’s the basic theme underpinning most of our clients’ challenges, although it crops up in a variety of ways depending on factors like your geography.

This is an encouraging trend, but what do nonprofits do with those new resources? What’s the best way to meet demand? How do you assess your staffing structure – are the skills your staff needed five years ago still the skills they need today? Are your systems up to par? Do you have the data it takes to sustain these new funding relationships, which may come with extensive reporting requirements? What’s your three-to-five-year plan, and what’s it going to cost?

IFF: How can organizations plan amid so much change and uncertainty?

Britto: First, it’s important to simply acknowledge and normalize the fact that plans are bound to change. A financial model is just a projection – and projections are, by design, meant to be adjusted.

We also focus heavily on process. We don’t just hand clients a five-year financial model and say, “OK, use this.” Instead, we help them create and standardize a process for getting to the model.

That means involving the right people, so we often emphasize a cross-functional, team-based approach. We encourage our clients to move away from the idea that finance lives in a siloed office or unit that basically is a medium through which reports are delivered or information is shared – and toward a more strategic approach, where your financial planning is informed not only by your lead executives and board members, but your program staff, your development staff, your operations staff.

IFF: So, the answer isn’t to throw your hands in the air and say, “Things are always changing, so it’s impossible to plan!” The answer is to create planning processes designed to help you accommodate change.

Britto: Yes! The organizations I find most impressive and think deserve the most visibility are those whose leaders understand the importance of continuous improvement. They see their work as iterative. They accept that change is constant, change is hard, and then they do what it takes to bring their organization along to where it needs to be. They don’t view financial resilience as an arrival point in and of itself. It’s something that evolves within the context that they’re operating in.

The organizations I find most impressive and think deserve the most visibility are those whose leaders understand the importance of continuous improvement. They see their work as iterative. They accept that change is constant, change is hard, and then they do what it takes to bring their organization along to where it needs to be.

For example, if you build a cash reserve of three months, that doesn’t necessarily mean your work is done and your organization is set forever. Maybe you determine that three months actually isn’t enough given that you’re going into a capital project requiring huge cash outlays for construction – and you don’t know when pledges are coming in. You’ve built the capacity to recognize that – and the capacity to reliably generate more resources in a way that makes sense for the organization.

IFF: That kind of strategic thinking takes time, which is in short supply for busy nonprofit leaders. What recommendations do you have for people struggling to dig out of their regular daily obligations so that they can plan more proactively?

Britto: We all get stuck in that cycle of being too busy to be strategic. And the truth of the matter is that executive-level leaders inevitably get called into tasks that take them away from strategy and leadership development – a space that’s especially critical for them.

Sometimes it’s worth reminding yourself that more strategic work can help you achieve efficiencies, which can alleviate the problem. Otherwise, the busy-ness you’re experiencing could be just a form of spinning your wheels.

But a lot of it is having the confidence and clarity to be honest with yourself, with your team, and with your external stakeholders – particularly funders – about what it really takes to do the work. That can be incredibly hard for leaders who have been handling everything themselves for many years and maybe even burning themselves out in the process. And, as we’ve already discussed, I think that it’s especially easy for external stakeholders to take that work for granted. It could very well be that you need another resource – another person or system. You need to be able to communicate not just what that will cost, but why it would be so impactful to have that resource.

IFF: How can leaders build the organizational awareness – and self-awareness – it takes to get to that point?

Britto: It starts with knowing what you need to change and why. Make sure you have sufficient access to knowledge, expertise, and best practices – through trainings, coaching, and other avenues for learning. Leaders need to understand what their gaps are in their organization – and what the potential consequences of those gaps are – before they’re going to even see the need for change.

Once you understand where your gaps are, it’s about figuring out how to close them. Knowledge and best practices can get you pretty far. But depending on the changes you need to make, you and your funders may also need to seriously reconsider the resources needed to get there.

There’s another important piece: your peers. It’s critical to be very intentional about connecting with them. They can share experiments that may have worked or not worked. They might be potential partners. And they can also be a support group, which you shouldn’t underestimate. Nonprofit leaders carry a lot of pressure, coming from a lot of different directions: your staff, your board, your funders, your clients, your community. Because peers can truly empathize with you and your situation, they can help you take care of yourself and your organization.

IFF: What has surprised you after observing so many different nonprofits and foundations?

Britto: I’m continually impressed by how resilient the nonprofit sector is. FMA is a national firm, so we see that resilience on a wide scale. Even for organizations in states really hit hard by the last recession in 2008, most have found ways to adapt and deliver.

I’m continually impressed by how resilient the nonprofit sector is. Nonprofit leaders know how to get stuff done.

I think it has everything to do with the level of leadership and incredibly strong commitment to mission. Nonprofit leaders know how to get stuff done. I feel honored and privileged to witness that. It provides me with a lot of motivation, because the fact that they’ve achieved so much – despite the economic challenges of the past decade and current political turmoil – makes me determined to improve things for them. They deserve access to enough knowledge and resources so that no one there needs to work 80 hours a week or forego raises or a paycheck – something we see all the time.

I think it’s backwards that nonprofits are doing so much for society, yet the people running them must sacrifice so much individually. It’s time to reverse that trend.

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