The Real Truth About Nonprofit Funding - Resilience & Relationships (R&R) - Stephanie Olson and Rebecca Saunders

In this conversation, Stephanie Olson and Rebecca Saunders discuss the complexities of nonprofit organizations, focusing on how to evaluate their effectiveness, the importance of transparency in funding, and the misconceptions surrounding nonprofit salaries and profits. They emphasize the need for nonprofits to diversify their income sources and the challenges they face in a fluctuating economic environment. The discussion encourages listeners to ask questions and engage with nonprofits to better understand their operations and impact.

Chapters

00:00
Introduction to Nonprofit Conversations

01:21
Evaluating Nonprofit Effectiveness

06:54
Understanding Nonprofit Funding and Administration

12:21
The Misconceptions of Nonprofit Salaries

18:22
The Importance of Diversifying Nonprofit Income

23:36
Challenges Faced by Nonprofits

28:24
The Future of Nonprofits and Community Support

30:50
R&R Outro.mp4

Transcript

Stephanie Olson (00:01.467)
Hello and welcome to resilience and relationships R &R. I am so excited you're here. I am Stephanie Olson and I'm with.

Rebecca Saunders (00:10.156)
And Rebecca Saunders.

Stephanie Olson (00:12.719)
Yes. Okay. And we are doing real talk for real life. I think that's what it is. I don't know. We should probably figure out what our tagline is because we, yeah, yeah, exactly. So anyway, we have been having so much fun doing these podcasts. I just love it because it's just like a conversation.

Rebecca Saunders (00:22.734)
So if it's not, I mean, that's good.

Rebecca Saunders (00:38.434)
really is just chatting with a friend while, you know, kinds of other people listen in and it's great.

Stephanie Olson (00:43.257)
I know. I love it. And I figured out how we can do call in later. So we're going to have to offer that, like do a live. We'd have to do it live, obviously, because yeah, because right now nobody knows, you know, that we're doing this right now. Yes, it's very top secret at any given time that we're doing this podcast. But today, today we're going to talk about something that

Rebecca Saunders (00:53.037)
Thanks.

Rebecca Saunders (00:58.776)
Sounds so tops.

Stephanie Olson (01:11.971)
I was doing a training for a group of educators. Bless you. I'll start over. I was doing a training for a group of educators and we started to talk about nonprofits and how to determine if a nonprofit was doing good work. Like, this is who I'm going to give money to. And I thought that would make a really interesting conversation because the

Rebecca Saunders (01:18.19)
Thank you.

Stephanie Olson (01:41.659)
Guy said, the way I determine who I'm going to give money to with a nonprofit is I look at how much they're giving to programming versus administration. And that sounds reasonable, but I actually had to counter him a little bit. So I thought it would be an interesting thing to have a discussion about.

Rebecca Saunders (02:08.054)
Yeah, I think so because for a lot of people that sounds perfect. That sounds like a good metric. But that's not always the case.

Stephanie Olson (02:14.471)
Yeah, exactly. No, and really what I would say, and I'm going to talk about why it's not necessarily a good metric, but I think what I would say is you want to give to an organization that is completely transparent with what they do with their funding, with their 990s, that's the tax thing that we file at the end of the year.

are, you know, just where that money goes or PNLs and things like that. And if you look at our website, you're going to see all the financials on there, but not everybody does that. And, and I'm not saying everybody has to do that, but it would be because, cause for a nonprofit, all of that is legally, we have to provide it. If somebody asks.

Rebecca Saunders (03:00.504)
But it would be nice.

Stephanie Olson (03:12.741)
And I think that's important. So here's why I said, I'm not sure if that's the best metric because number one, programming versus administration. If you were to look at our balance sheet or our P &L, which by the way is a profit and loss statement, if you were to look at that, yes, you would notice

that a lot of our, it would look like a lot of our money goes to administrative costs. However, that is because we are the actual program. And so we're the ones training, we're the ones writing the curriculum, we're the ones training facilitators and all of that stuff. And so we are actually

Rebecca Saunders (04:09.454)
Pretty much all we do is programming.

Stephanie Olson (04:12.303)
All we do, yes, truly. I mean, I guess we have marketing, marketing at which would, which is kind of could be considered both depending on what the marketing is doing. And we do have some operations things because obviously we write grants and, you know, we have an op director of operations who does all things operations. What we don't have

Rebecca Saunders (04:17.078)
I'm not going

Stephanie Olson (04:41.635)
is a building. So we all work remotely. We have no overhead when it comes to our actual facilities, even though I am constantly getting emails from people saying, hey, we'd like to clean your business or something like that. Really? Okay. Well, you could come to my house. Right. Exactly. I guess you're more than welcome to clean my house. But

Rebecca Saunders (05:02.83)
Where?

Stephanie Olson (05:10.583)
we don't have that overhead. And we really work on a shoestring budget personal, mean, our organization, because we really do focus on that programming piece. And that's where we put our money. But if you were to just look at our budget, that's the word I'm looking for, it would look like we are just paying administration, because it might look like it's in the form of salaries and things like that.

But we're it. Yeah. Totally makes sense. So.

Rebecca Saunders (05:39.598)
That sense.

Rebecca Saunders (05:44.994)
So then the person who told you this would probably see our organization on paper and think, I would not want to support that. When in reality, it's very in line with his values.

Stephanie Olson (05:51.727)
Yes.

Stephanie Olson (05:56.045)
Exactly. Now, here's the other thing that I have a question about and that I shared, because I think there's a lot of misunderstanding about nonprofits and where the money should be going and what that looks like. Because what I hear most often is 80 % should be going to programming, 20 % should be going to administration. Sure, I get that, right?

But my question is, why? Why should we, as people doing this nonprofit work, which is really hard, and we are running a business, and we're hoping to save lives? I mean, I think that really, if you look at most nonprofits, that's the mission, to save lives. Yeah.

Rebecca Saunders (06:49.088)
In one way or another, that's, yeah, what everybody's looking toward.

Stephanie Olson (06:53.063)
Exactly. And yet, we should not get paid much because we're a nonprofit. And that's where I struggle a little bit. I don't understand why. And really, that's

Being a nonprofit does not mean you can't profit.

Rebecca Saunders (07:14.582)
Say more about that because I was so surprised when I learned that.

Stephanie Olson (07:18.245)
Yeah. Nonprofits absolutely can profit. And in fact, I know of nonprofits and we're hoping to grow our reserves so that we have a strong amount of reserves that if there is a financial crisis, we can still pay the staff, we can still do what we need to do. That's what reserves are for. And I know organizations that have a

hundred thousand dollars in reserves, which I think a lot of people would be like, what? I think that's amazing. And if you can do that, the difference is that a nonprofit's profits all have to go back into the organization. So what you can't do is, you know, simply line people's pockets with money. You can't

go on extravagant vacations. Obviously, you can't, you know, it would be frowned upon if I decided that we were going to have a team building time and we all went to the Bahamas for a week and it was all inclusive and paid for. It does sound great. Yes. Let's just dream about that for a minute.

Rebecca Saunders (08:32.248)
know that does sound lovely.

Rebecca Saunders (08:37.752)
But not a thing. Anyone out there wants to sponsor a team building trip to the Bahamas? Let us know.

Stephanie Olson (08:45.019)
That would be awesome. Yes. Yes. Thank you. No, but I, that is what, and when we see nonprofits get hit, we had a situation in our hometown where one of the home top profits, one of the nonprofits, home profits, one of the nonprofits, and it's a national nonprofit. Here's where it also gets tricky. They found out that the

the top executives were making over $100,000 a year. And they were getting extreme bonuses. That's where it starts to get really problematic. And then they actually bought their board or their leadership team or some...

a trip to the World Series to watch the Cubbies play and like box. I mean, it was like extravagant.

Rebecca Saunders (09:43.342)
It's a little out there.

Stephanie Olson (09:45.423)
Yes, they got caught and it was all over the news. The CEO got fired. Now here was the hard thing. It was a national organization that had other organizations that are self-regulated. So for example, there's a national headquarters, but then there's something here, a nonprofit here.

that is its own nonprofit with its own board, with its own CEO, with its own dollars. And then even in another area in town, there is the same nonprofit, quote unquote, but totally different governance. So what happened was that this nonprofit, that's well known, I'm not going to say it, but this nonprofit

people were like, well, I am never going there. I'm never giving my money there again. The problem was it was only that one nonprofit that was using money inappropriately. The rest of the non-pro- Yes. Yes. The rest of the nonprofits were like, well, we didn't do that. So I think it's really what happens is one nonprofit blows it.

Rebecca Saunders (10:54.542)
so that it can cure all of the admires.

Stephanie Olson (11:08.525)
And across the board, people are like, well, I'm not giving any nonprofits or I'm going to. It does, it does. And I would say that most nonprofits are good nonprofits, or at least trying to use their money appropriately is what I'd say. Whether they're good at what they do, that's a whole other conversation. But I think most nonprofits use their money.

Rebecca Saunders (11:12.494)
creates that distrust.

Rebecca Saunders (11:32.344)
that bread.

Stephanie Olson (11:38.361)
appropriately, not necessarily wisely, but at least they use the funds appropriately most. But there are certainly those bad apples.

Rebecca Saunders (11:48.878)
has with anything. Yeah.

Stephanie Olson (11:51.053)
Exactly. Exactly. So I thought it was just an interesting conversation. But also, I heard somebody who runs nonprofits and also kind of is a nonprofit leader say, why in the world should somebody who's working for a nonprofit get the really crappy chair while the executive in a corporation gets the ergonomically

never say that word right. Well, how do you say that? Ergonomically. Thank you. You did good. You did good. But why should we get the chair with the holes in? I mean, like literally all the chairs, they're all donated. Yes. When we had our building or we rented a space, literally every chair, everybody sat in.

Rebecca Saunders (12:23.694)
ergonomically, I think. Now I'm questioning myself, but I think.

Rebecca Saunders (12:36.878)
the leftover donated fallen apart.

Stephanie Olson (12:49.979)
was a donated chair we got from another nonprofit. Some of them were falling apart. Some of them were good. Some of them not so good. But it's all about those donations. And I guess that would be my question. Why? Why should nonprofits make money?

Rebecca Saunders (13:10.926)
Well, and you know, that's even like a joke, more than once. Someone's, oh, what do you do for work? You know, I moved to a new state and I'm getting to know everybody so many times. What do you do for work? Oh, I work for a nonprofit, I do this, whatever. So you don't make much, huh? Like it's just a joke.

Stephanie Olson (13:23.719)
Yeah, well, and any god.

Rebecca Saunders (13:29.838)
Yes, I mean that stereotype is generally true, but it doesn't have to be that way and I think it's weird that we just accept that.

Stephanie Olson (13:39.055)
Yes, I agree. Now, I will say we are very underpaid. I mean, we are when you look at the even when you look at nonprofit to nonprofit, like we're underpaid for and we're working on that. But when when funding is tight and right now we are in, you know, economically a very difficult time and I don't know us.

Rebecca Saunders (14:07.266)
but mean, everyone, yeah.

Stephanie Olson (14:08.903)
everyone. And I don't know a single nonprofit that is doing well right now. Like, yes, we are rolling in the donations. I've not heard that from anyone. And so it's a hard time for the nonprofit world all the way around. But I do think that that is something when, if you can

give to a nonprofit, and you know they're transparent about their money, they'll answer any questions, they'll, and ask them, you know, how much do you, what does it look like? I mean, if you want to know how much do you give to programming versus administration, sure, absolutely. And I think that would look like if I got paid 80 % or you and I, our leadership team got paid 80 % of our

our budget and 20 % went to the work we did, yeah, that would be problematic. That would be problematic. But I think as long as they're answering those questions and you can ask those questions, I think it's really important to ask those questions because you want to know where your money goes. But just, yeah.

Rebecca Saunders (15:26.702)
And no one should get offended. Like if you called one of us today and asked, hey, I want a breakdown of how you're spending your money, I mean, like that's not offensive at all. It's OK. Like let's have a talk about this. And I think that's the way that pretty much any nonprofit who's trying to use those funds appropriately would respond. Like sure, let's talk about it. It's not an offensive way.

Stephanie Olson (15:38.917)
Yes.

Stephanie Olson (15:45.871)
Right. Right. Exactly. If you're, especially if you're a donor or if you want to donate, I mean, that is a totally appropriate question. Probably if you're just some random schmo off the street saying, then I probably say, here's my financials on the website. Take a look.

Rebecca Saunders (16:00.527)
That would be a little weird.

Stephanie Olson (16:14.767)
Yeah, it's, so nonprofit work is weird, I think. But I do think people think like, yeah, no, they shouldn't be giving any money to administration when also who's doing the work. I mean, you have to have some money for operations or you can't operate.

Rebecca Saunders (16:39.95)
Well, and how many times have you seen individuals who love their job, they're doing some important work, and then they leave a nonprofit because I can't support my family on this?

Stephanie Olson (16:49.627)
I've seen it, unfortunately, way too much.

Rebecca Saunders (16:53.026)
Then, I mean, honestly, it's hurting the work. It's not, it's bigger than just that one person. Because yes, we can look it out on the surface as, that person chose a different job. That's great for their family. But what about the work they were doing? What about the impact they were having? If you want to support that cause, you've got to support the people doing the cause, doing the work. I said that weird.

Stephanie Olson (17:13.019)
Yeah. No, no. Yeah, but you're right. I yeah, it's it is very interesting. And I do think, again, that whole idea that nonprofits can't profit. The other thing I would say is all nonprofits should have some sort of an income. I think there's an idea that nonprofits can't have income like I can't sell something. And that is not only a fallacy, but

I think as a nonprofit who is diversifying funding, which is important, that is one of the things I recommend to all nonprofits. What is your piece of income that is completely dependent on you with your services as opposed to a donation or a grant?

Rebecca Saunders (18:07.18)
That's so smart because donations, grants, I those things are never guaranteed and you never know when hardship's gonna strike and people are not able to give. I mean, you've gotta have some kind of other thing at play helping you.

Stephanie Olson (18:20.967)
You do. Do you remember, do you remember COVID? Okay, that was weird that I said it like that. Okay. So yeah, it was some time ago, but I actually was at someplace and the person asked who was alive when

Rebecca Saunders (18:26.154)
great, you did it.

Rebecca Saunders (18:33.528)
I've heard it.

Stephanie Olson (18:50.503)
9-11 hit and or who wasn't alive when 9-11 hit and so many people raised their hands. This was an audience of adults and I thought, my gosh, I'm old. Yeah. Well, at least you were alive. I appreciate that about you. Thank you. So someday they'll be like, were you alive when COVID hit? So.

Rebecca Saunders (19:02.414)
is in candid camera.

Rebecca Saunders (19:10.83)
I'm

Rebecca Saunders (19:19.406)
that's weird. That's real.

Stephanie Olson (19:20.615)
I know we're not quite there. I mean, I guess babies, but anyway, neither here nor there. So when COVID hit the federal government and the states were very good about providing funding for nonprofits who were doing good work. And you had to, you had to apply for a grant.

and you had to make a case. I'm not talking about like the PPP loans. Those were important too. And now we're seeing people get busted because they fraudulently applied for PPP loans and lied. And yeah, that's, that's insane to me, but so I'm not even talking about the PPP loan. I'm talking about the actual cares act loans or not loans, but

grants that they provided. so we would apply, we applied specifically for a grant for COVID that was for immediate needs. Okay. So immediate needs, applied for the grant, we received the grant for immediate needs, and it took over six months to get it.

Rebecca Saunders (20:45.4)
Glad you got it immediately.

Stephanie Olson (20:47.151)
Yes, it was so immediate. Yeah. And it was one of those things that the whole purpose of the grant was we're going to shut down if we don't get funding. And so they were like, yep, immediate needs grant. And we were so excited. We received it and we were struggling because we're like, OK, hey, remember. And they would they kept think it was.

state funding or government funding, but they were like, hey, sorry, we know that was supposed to come out this month, but this is what's going to and then we kept getting emails and kept getting emails. Finally, when we were, it was awful. Finally, when we received it, we're like, thank goodness, but that was a scary time. And I think now is a scary time with funding.

Rebecca Saunders (21:25.496)
That's a nerve.

Rebecca Saunders (21:39.906)
Yeah, that's a really good point that even when you're, even when you apply for a grant, you get it. That doesn't mean you immediately get that money and you never know how long you'll wait. I think that's a misconception out there too, that even I like, I don't know. I thought you get a grant, you get that money that day. I don't know what I used to think about all that, but yeah.

Stephanie Olson (21:48.945)
rarely.

Yeah, it could be.

Stephanie Olson (22:00.743)
Well, yeah, that makes, yeah, it can be months before you actually, it can be months that you hear whether you receive the grant or not. And then it could be months after that before you receive it. So it can be, you have to really plan for that stuff because it can be really challenging.

That reminded me, because we're experiencing all the federal freezing and stuff like that. So this is kind of a dated podcast because we're going through that right now. But we haven't had any federal funds frozen yet. However, the federal funds we receive, we can't access.

So we have a federal grant still going on, but we can't get the money. I think people don't understand how challenging it is. And it's not just nonprofits right now that are struggling. Small businesses are struggling.

Rebecca Saunders (23:08.5)
Right there.

Stephanie Olson (23:24.507)
There was just an announcement of a restaurant that had two locations in our area. They were going to open a third one and they were just hit and they were like, we've decided we're going to close all of our stores. It's really sad. But money is that. Yeah.

Rebecca Saunders (23:47.416)
And I think, I don't, just cut that out. I don't have a thought.

Stephanie Olson (23:53.519)
I'm thinking about direction to go with this because it's, and this doesn't have to be super long either, but I do think it's an important conversation and we can even have another one if you want, but.

Rebecca Saunders (24:12.472)
how to like tie it all together and have a good point.

Stephanie Olson (24:15.323)
Yeah, yeah. How about this? Okay.

Stephanie Olson (24:26.759)
So I think the bottom line with nonprofit work is that just ask questions, right? mean, know that it's definitely challenging work. And if you have questions, go back to the episode I did some time ago. Do you want to start a nonprofit? Don't. But we do great work. I love what we do. I love working with, obviously, Rebecca, but also the rest of our team is un...

Rebecca Saunders (24:56.216)
way the team.

Stephanie Olson (24:56.679)
believe we have an amazing team, but it is hard work and it is not always funding is not always a given. And so.

Rebecca Saunders (25:10.702)
can't remember. I saw this statistic somewhere. This sentence is like no information in it, but I saw the statistic somewhere that said something. No, talking about the statistics.

Stephanie Olson (25:16.711)
You

That's amazing, I saw that same thing.

Rebecca Saunders (25:23.278)
No, it was talking about the number of nonprofits that start and then within the first few years close. It is so much more challenging than people realize. And I can't remember what number that was, but I remember it shocked me as being a little high.

Stephanie Olson (25:36.133)
Yeah, I think only 80. Okay, I'm gonna actually look that up because it is how many nonprofits close in the first five years.

Stephanie Olson (26:03.576)
my gosh, okay.

Stephanie Olson (26:11.409)
So yeah, it's not a ton. I think within the first five years, 12 % of new nonprofits cease operations. So they stop. 12%, which, you know, I suppose, but within the first 10 years, around 30 % of nonprofits fail. Yeah. That's all. Yeah.

Rebecca Saunders (26:31.566)
That's what it was. Which is unfortunate.

Stephanie Olson (26:39.419)
And it's a big number. mean, that's a big number when you think about, especially non-profit and you talk about nonprofits, some of these nonprofits, like they have one employee and all the rest are volunteers or, you know, they have all volunteers. There's no staff person. So you have to be pretty dedicated to run a nonprofit. And I think that

When you look at that stat, that 30 % fail within the first 10 years, that's a lot.

We're still here, yay. Yay.

Rebecca Saunders (27:31.96)
Yeah, I think really.

I think that it's because people who start non-top, okay. I think it's because people who start nonprofits are typically very passionate about the issue, but may not realize all the things that go on behind the scenes of how to run that. And I know for me, you know, there's so much I learned just from being here for almost two years now and that I had no idea. I know almost two years.

Stephanie Olson (27:49.479)
Mmm.

Stephanie Olson (27:55.398)
Yeah.

Stephanie Olson (28:02.855)
That's amazing. I love that. That makes my day. Yeah. Yay.

Rebecca Saunders (28:07.874)
And I think that's why, like, knowledgeable about the issue, the problem they're trying to solve, very passionate about that. But there's so much that goes on behind the scenes just trying to get your nonprofit functional.

Stephanie Olson (28:20.103)
Well, and I think the other thing is that there's a lot of people who start nonprofits who are passionate about it, but don't have a business bone in their body. And instead of hiring an executive director to run the organization, they think, well, I have lived experience, so I can do this. And, you know, I mean,

we've talked about this, I have lived experience in domestic violence. Starting a domestic violence shelter would be the worst thing I could do because that is not my gifting to run one, nor would I have any idea how to do it, nor am I, that's not my, that's not my bag. And so just because I have experienced that,

doesn't mean I should do that.

Rebecca Saunders (29:19.82)
Right. Let other people handle the roles that they are more adept for. Kind of handle the things you're good at. Yeah. It takes a team.

Stephanie Olson (29:25.031)
That goes back to my whole let go to grow idea, which that would be a good conversation too. And I think the other mistake a lot of nonprofit founders specifically make is just they want to hold on to every piece.

no one can do it quite like I can, or I need to be involved in this, I need to do it. And so they're not willing to let go. And that is, I get it. But what freedom when you actually do to do what you're supposed to be doing instead of trying to do everybody else's job.

Rebecca Saunders (30:12.716)
Yeah, that makes sense. If you're holding on, then it can't grow past where you are. You need to back up. And that makes sense.

Stephanie Olson (30:17.287)
Yeah. So, yeah, so I think it's an interesting conversation. But yeah, I think I agree that if you want to give to a nonprofit, I think you should absolutely check them out and find out what they're doing with their funding. And then talk to them. But know that most nonprofits, I believe, are doing

the best they can with the finances they have. Most, again, not all, but most. And just make sure that the money's going to exactly what they say it is.

Rebecca Saunders (31:03.104)
Absolutely. And if there's something specific that you want to support, you can always offer a targeted donation too. You know, that's an option of, this one piece of what you're doing and really passionate about that, I'd like to give this amount of money toward that piece.

Stephanie Olson (31:09.393)
That's true. And then.

Stephanie Olson (31:17.595)
Yeah. And if you earmark that, they have to spend the money on that. I have heard of, I did hear a story. One of my friends gave money to a small nonprofit and they actually took that money and put it into another pot so that person would match a donation. And it's like, wait, no, that money was supposed to go to

Rebecca Saunders (31:44.546)
Fuck.

Stephanie Olson (31:47.355)
this, you can't do that. So it's also knowing the laws.

Rebecca Saunders (31:54.291)
Important to know if you're going to run a non-profit.

Stephanie Olson (31:56.899)
It is. So, yeah, I think that's a good quick conversation, but I think it's an interesting one because I think a lot of people have some questions about nonprofit. Where does money go? And what does it mean to be a nonprofit? Does it mean you can't profit? No, you actually can. The money just needs to go back into the organization. So, yeah, anything else you'd add?

Rebecca Saunders (32:22.262)
anyone listening if you have questions or you'd like to know what types of questions to ask, email us. Just reach out and we'll have that conversation more in depth one-on-one.

Stephanie Olson (32:32.391)
I love it. All right. Well, thank you. I think that was short but sweet and you get some R &R. See you next time.