Best Practices Case Study

Organization: Entre Hermanos

Capacity Building Area: Financial Capacity

Organizational profile

Entre Hermanos came into being by the initiative of a group of gay, lesbian, bisexual, and transgender Latinos/as that saw the need for social, educational, and health support services in their community in the spring of 1991. By December of 1992, the group was organized and carried out various activities to raise funds to cover the its operating costs. These activities were done in cooperation with the Washington Latino AIDS Coalition, a group affiliated with People of Color against AIDS (POCAAN).

In April of 1993, the group functioned independently, directing several activities for the community. That year, Entre Hermanos affiliated itself with POCAAN, a nonprofit organization the offers prevention and educational services against HIV/AIDS for people of color. In May of the same year, we held our first contest to elect a Latina Queen. That same summer, we incorporated a lesbian group and participated for the first time in Seattle’s LGBT Pride Parade.

Toward the end of 2001, we received a charter by the State of Washington to operate as a nonprofit organization, through the corporate status offered by IRS Section 501(C)3. Since then, we continue to grow, thanks to our personnel, Board of Directors, volunteer corps, and educational and recreational activities. Looking forward to our 15th year of service to the Latino LGBTQ community, we continue marching into the future, always progressing and offering more services far and wide to Latinos in the State of Washington.

Programs include:

  • Atrévete (Dare) is our HIV/AIDS/STD prevention and education program targeting men who have sex with men.
  • ¡Quien fuma, pierde! (You smoke, you lose!) is a program to raise awareness and educate about the harmful effects of tobacco on our health and the great economic impact it has on the LGBTQ community.
  • Free HIV Testing: We offer free HIV/STI testing to Latino men who have sex with men.
  • Mujeres Diversas (Diverse Women) is a support group by and for women who get together to strengthen ties of friendship and cohesion, as well as bring forth initiatives towards LBT women’s welfare.
  • Yo Soy! (I am!) is a program for youth in search of their identity and healthy recreational alternatives: Social, sport, and educational activities that build communication between the generations.

Organizational situation

Five years ago when the current Executive Director came into leadership the organization had strong internal financial controls. The organization had previously experienced financial mismanagement (10 years ago), and had worked diligently in previous years to restore confidence in the organization, including: financial policies that incorporate checks and balances between Board and Staff, system for checking contract compliance, and standardized use of Quickbooks.

The two areas that the organization was still challenged by were:

1)      Budgeting. Because the organization’s budget was primarily constituted by one contract from a single funder, the organization did not conduct a comprehensive annual budgeting process that planned for the upcoming year.

2)      Cash flow. Again, because the organization was primarily dependent upon one contract (which is set up on a reimbursement basis), and because the organization had no cash reserves, sometimes there was a challenge to meet payroll or other necessary expenses.

Solution

Cash flow was the first immediate issue to address. Here are the major steps taken by the organization:

1)      The first step was to begin to research and write a number of grants, both public (government) and private (foundation), in an effort to diversify the number of income sources the organization had. There was also an emphasis on writing grants that supported general operating costs (unrestricted money) instead of program costs (restricted). And they also began to host a monthly event at a local bar that brought in individual donations. Doing this began to ease cash flow in the following ways:

  1. Money was received at different times of the month from multiple sources, instead of one check monthly from one source;
  2. Unrestricted money offered more flexibility in using resources where they were most needed.

2)      The organization identified regular administrative/operating costs, and the timing of these payments. Doing this allowed the organization to predict upcoming expenses and how they would be covered. The organization began doing cash flow projections (analyzing expected expenses and expected income) for planning purposes.

3)      The organization began slowly investing in a cash reserve account. Over the past five years that account has grown to $35,000, representing about two months of operating expenses. This provides a cushion for the organization and allows for ups and downs in income.

4)      The organization also began looking for opportunities to pay expenses in one lump sum instead of in installments. Liability insurance is one example: Initially they made monthly payments to cover this expense, and then moved to a one-time payment. Doing this simplified their financial planning.

5)      Greater focus on grants management. The ED has worked with staff to track the progress of grants: how much time is left on the grant, is the organization meeting deliverables, and is money being spent down appropriately. This is related to cash flow in that grant money that is reimbursable needs to be spent in a timely way. If this does not happen, the organization may leave grant funds on the table and not be able to collect.

To address budgeting the organization began to do several things differently:

1)      The ED and key staff began to have a stronger collaborative relationship with the Board of Directors to track the budget and plan for unexpected expenses, loss in resources, or shifts in how money needs to be spent. The Board receives monthly financial reports to look at and discuss, as well as the monthly invoice to their largest funder, which offers a lot of financial detail.

2)      Quarterly they look at the results of their largest individual donor event: hosting Latino Night at a local bar. If there are fluctuations to income, they make adjustments to the event accordingly so they still meet their goals; for instance, they may engage a higher profile band to help boost attendance.

3)      The ED and key staff have developed an annual budgeting process to proactively develop the following year’s budget:

  1. Finance staff develops a draft budget based on the previous year’s income and expenses, as well as what is already committed for the coming year.
  2. Program goals are reviewed with an eye towards making sure that any necessary expenses are budgeted for.
  3. The draft budget is presented to the Board of Directors along with a discussion of what grant decisions are still outstanding. There is then significant discussion addressing questions, concerns and ideas Board members have.
  4. The budget is updated incorporating any changes from the Board of Director discussion.
  5. The budget is finalized and presented to the Board for approval within one month of the new fiscal year beginning.

Results

As a result of this work, the organization now enjoys much stronger cash flow, and is able to adequately cover expenses and staff salaries. There is also better communication across the agency related to financial issues, and greater knowledge across the Board and Staff in terms of what it takes to run a financially strong organization.

Resources you used and/or recommend

  • Quickbooks and Excel

Best advice and recommendations

  • Seek out solid mentorship. Look for organizations that are like-minded and similarly sized or a bit ahead of where you are. Ask lots of questions, and ask if they will share there processes, templates, policies, or worksheets.
  • Be on the lookout for scholarship opportunities for classes or memberships. The ED received a scholarship membership to the Northwest Development Officers Association and learned a lot by participating.
  • Look for training and workshop opportunities, either online or in person.
  • Serve on other organization’s Boards of Directors for the purposes of studying the inner workings of the organization as well as serving the community.

Go back to the Grantee Resource page.