The New York City Anti-Violence Project: How did this CRF organization strengthen its adaptive capacity and business model?
NFF's Community Resilience Fund was launched to provide New York City service providers with advice and money to help them survive and thrive in a constantly changing environment. As part of the our series of blogs about the Community Resilience Fund, in this post we share Part 1 of the story the New York City Anti-Violence Project (“AVP”) as it uses a Change Capital grant secure through the initiative to revamp its business for the benefit of its clients. We consider: What challenges did AVP face? What was AVP's plan for change? How did the Change Capital Grant help position its business model toward greater sustainability? Our hope is that this post and others in the series provide a look at how change capital and strategic investments of expertise and resources can begin to repair a fraying social safety net and inspire positive organizational and social change.
The New York City Anti-Violence Project (“AVP”) is an advocacy and social service organization with a mission “to empower lesbian, gay, bisexual, transgender, queer and HIV-affected communities and allies to end all forms of violence through organizing and education, and to support survivors through counseling and advocacy.” In 2013, AVP was selected as one of 17 organizations participating in the Community Resilience Fund (CRF), a $3.5 million initiative designed to strengthen nonprofits’ ability to respond to an environment of constant change. Under CRF, AVP received approximately 9 months of customized advisory services from NFF and a Change Capital grant of $250,000.
AVP faced a number of financial challenges, including a lack of clarity around the true cost of running its programs, which resulted in operational deficits. AVP also had very limited access to flexible funds or financial resources. This lack of clarity about program economics, coupled with a lack of access to flexible resources, made it difficult for AVP reliably cover its operating costs, manage cash flow or make the upfront investments (including strategic hires) that are needed to pursue new strategies.
In response to this risky operating reality, AVP’s Executive Director, Sharon Stapel, and CFO, Carla Smith, focused on securing new grants and contracts. Unfortunately, as is often the case in our sector, many of these program-related funding opportunities also required AVP to take on new expenses. As a result, while new money was coming in the door and the organization was growing its programmatic reach, the strategy of securing more grants didn’t help AVP mitigate the deficits it was generating.
To clarify the key economic drivers and dynamics that contributed to the organization’s financial performance, NFF and AVP partnered to conduct a series of financial analyses which focused on, among many other things, which of AVP’s programs generated surpluses or deficits and by how much. NFF also worked closely with AVP to think about its future, testing and refining assumptions behind its multi-year budget projections and plans.
NFF’s engagement helped AVP to identify the key drivers behind its operational deficits.
According to Ms. Stapel, “So much of the work that people know us for is our community organizing and public outreach – especially our local outreach. It was my assumption, based on the way we were writing grants, that our local outreach program was probably paying for itself and then some. As it turns out, it was running at the largest deficit of any of our programs. We had to keep doing that work – it’s one of our most popular programs that has the largest mission impact – so the question became how we could target fundraising for this particular program.”
The reflection and rigorous planning that constituted a core part of AVP’s engagement with NFF provided the organization a solid foundation from which it could pursue and make its case for Change Capital. Based on a firmer understanding of the intricacies of its business model, AVP was able to clearly articulate its plan for business model change and support its plan with detailed projections and meaningful benchmarks against which the organization could track the progress of its change. One area of the business model that AVP identified as an area that required improvement is its capacity to capture ripe and time-sensitive opportunities for unrestricted revenue from special events and corporate institutions. Prior to receiving change capital, AVP’s capacity to fundraise was limited to the bandwidth of two people, the Development Director and Ms. Stapel.
Through a competitive process open to Community Resilience Fund participants, AVP secured a Change Capital grant of $250,000 in December 2014. The Change Capital Grant enabled AVP’s leadership to make key adjustments to its business model so that the organization could better capture ripe opportunities for flexible, unrestricted funding as well as to support deficit producing or unfunded programs. Specifically, AVP used its Change Capital award to hire key staff who could cultivate and actively pursue relationships with potential funders that had expressed a clear readiness to engage with and support AVP.
Prior to engaging with NFF, AVP’s leadership had been working intently on improving its financial situation. NFF’s support, however, helped to clarify financial dynamics that had previously been unclear and had hindered their ability to cover their full costs of growth. Equipped with a better understanding of the key drivers behind the organization’s financial health and later, the Change Capital grant, AVP’s leadership implemented several effective changes to its operational practices designed to improve financial sustainability. Highlights of these changes include:
- Balancing programmatic priorities with enterprise-level health: AVP instituted a methodology to help screen out contracts that were not profitable or mission-specific. While programmatic quality remained a high priority for AVP, its leadership was now able to weave into their strategic conversations the financial implications of their programmatic decisions, including the financial impact of growing a program spurred by a new contract or grant.
- Focusing on ‘full cost’ coverage of programs and balance sheet health: Budgeting and financial projections now emphasize full cost coverage (i.e, ensuring new grants and contracts covered the full costs associated with operating the program) and the need to build a flexible cushion to help facilitate month-to-month cash flow.
- Cultivating partnerships with staff and board members to reach financial goals. Increasing levels of unrestricted net revenue -- funds that AVP could use to supplement grant funding, meet unexpected costs or pursue new strategies --became an explicit priority. To support this, leadership launched a series of basic trainings designed to highlight to program staff how budgeting processes took into account both program-specific and overall financial needs. Further, AVP leadership engaged the board in discussions about the organization’s financial health in a manner that was accessible to all board members, regardless of their financial acumen. As internal stakeholders gained a new understanding of the relationship between the organization’s financial health and ability to deliver on its mission, board members and staff members became strong partners in leadership’s efforts to identify and pursue new fundraising opportunities.
The one-time infusion of Change Capital allowed AVP to mitigate some of the risk that often comes along with business model change. AVP is using Change Capital to expand its development capacity with experienced staff so that leadership can better tailor fundraising with familiarity and focus on AVP’s enterprise-level financial and programmatic needs.
Today, AVP is projected to end fiscal year 2015 with a modest surplus. This will represent the 3rdconsecutive year the organization successfully produced a modest surplus. Now that leadership has adjusted AVP’s business model so that it is ‘surplus generating’, AVP is well positioned to build its capacity to withstand and adapt to external shocks such as shifting client needs, funder expectations or public sentiment. For example, the end of FY2017, AVP hopes to create a reserve fund to help the organization weather any political risk that may come with the shift in federal administration and that may negatively impact its federal funding.
In our next post about AVP, we'll take a closer look at how the organization is faring as it travels its new path and continues to build its ability to adapt to changes – including the planned transition of its executive director. With a surplus-generating business model, a stronger balance sheet, and a clear organizational commitment to financial stability, the organization is well poised to continue to effectively meet its mission and remain resilient in the face of continued internal and external changes.