by Courtney Dufries
Nonprofit organizations come in all shapes and sizes. Some specialize in selected industries, such as health care, the environment, or education. Others provide technical assistance or advocacy for specific issues, such as homelessness. One organization that is critical to the success of so many community development efforts is the nonprofit developer. This issue of Partners takes a look at a handful of successful nonprofit organizations.
Managing a nonprofit organization is not an easy task. Many nonprofit developers are undercapitalized and struggle to fund long-term projects while covering short-term operating expenses. Like for-profit businesses, many nonprofit organizations do not survive and while we celebrate and feature the successes, we must also look at the reasons many fail.
A common misperception surrounding nonprofits is that their role is to resolve difficult issues by taking on more risk when, in fact, the solution is in sound business management and creative thinking to structure well thought-out transactions. Mismanagement, fraud, and internal disputes have caused the failure of more than one organization. Poor investments, including socially desirable investments, and weak internal controls have contributed as well. A strong board of directors combined with an experienced executive director or president is critical; a weakness in either area can be devastating. Many nonprofit developers begin as advocacy groups and, over time, develop the expertise needed to revitalize communities. While advocates have an important—often critical—role in promoting change, it is very difficult for any one organization to be both full-time advocate and developer.
Developers must build consensus and satisfy diverse needs to ensure a project's completion. A nonadversarial approach is often critical to obtain funds to finance the project and ensure that sufficient development fees are generated to cover overhead expenses. For this reason, most successful nonprofit developers operate in a traditional business-like manner and choose advocacy roles carefully.
Advocacy groups, on the other hand, have different funding sources and different agendas. Their role is to advocate change and their methodologies are necessarily different. Direct confrontation of issues is frequently the desired course of action. Although some advocates work quietly behind the scenes, others are out in the open, occasionally with organized protests and media coverage. Advocacy groups raise important issues and can help ensure timely and meaningful responses to significant concerns.
Nonprofit organizations are as diverse as the people in the communities they serve and all have important roles. Recognizing their importance to community development programs, we have dedicated this issue of Partners to featuring four types of nonprofit organizations that have each achieved success.
The first organization featured is a religious-based nonprofit that successfully utilized a multi-bank community development corporation, with a loan consortium, the local government, and other funding sources to assist low- and moderate-income persons in two small Louisiana communities. Consensus building was key to success.
Next, celebrating it's twenty-year anniversary, is the Neighborhood Housing Services of New Orleans, a local NeighborWorks affiliate. This NHS has developed its expertise in neighborhood renovation programs, and has become the seventh largest producer of affordable housing in the NeighborWorks network, which is sponsored by the Neighborhood Reinvestment Corporation.
Florida is home to many strong community-based organizations. To explore the business nonprofit perspective, we are pleased to feature an article on Community Equity Investments, Inc., a successful business loan fund. And while on the topic of lending, we also feature an article from a nonprofit loan fund located in Michigan that shares its experience in how loans perform, and offers seven fundamental concepts to ensure timely loan repayment.
We regret that this newsletter presents only a sample of the many fine nonprofit organizations operating today. However, since its inception five years ago, Partners has featured articles on over 25 nonprofit organizations, and will undoubtedly feature many more. Perhaps your organization will be next!