Charities should consider creating a contingency plan to identify steps they would take to insure that their organization remains viable, even if revenues were to drop sharply. Here are some steps recommended by consultants who are working with charities on contingency plans:
Set priorities. Identify programs that are essential to the charity’s mission, and those that contribute to the charity’s financial health. Programs that meet both criteria are clearly worth saving. Those that meet neither are good candidates for cuts.
Forecast your financial future. Create best-case, moderate, and worst-case budget expectations based on realistic estimates for future spending and fund raising.
Make sure your worst-case scenario is truly worst case. Even though times are already tough, many experts expect fund raising to dip further for charities in 2010.
Identify “trip wires.” Specify actions the charity will take if revenues drop. A 10-percent drop might result in a hiring freeze. A 20-percent cut could mean a reduction in services. A 30-percent drop might mean cutting an entire program, or the loss of a critical leadership position related to programming or development.
Put specific people in charge of carrying out the plan. The contingency plan must assign responsibility for carrying out the often-unpleasant actions designed to save money. “If you take too long to implement the plan, the savings aren’t there, and it may be too late to prevent the crisis you were trying to avoid,” says Hilda Polanco, managing director of Fiscal Management Associates, a consulting firm in New York that focuses on charities.
Don’t expect miracles. Contingency planning provides a framework for making decisions — but painful decisions will still have to be made. “There’s nothing in any of this that makes it any easier,” says Alan Tuck, who heads the New York office of the Bridgespan Group. “You’re still dealing with human lives.”
