Sustainability Investments

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Sustainability Investments

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Sustainability Investments:

Sustainability Investments The Advocacy Foundation, Inc. Atlanta Philadelphia (878) 222-0100 Voice | Data | SMS www.TheAdvocacy.Foundation © The Advocacy Foundation, Inc. 2015 (All Rights Reserved)

Biblical Authority:

Biblical Authority Matthew 25:14-30 (MSG) The Story About Investment 14-18  “It’s also like a man going off on an extended trip. He called his servants together and delegated responsibilities. To one he gave five thousand dollars, to another two thousand, to a third one thousand, depending on their abilities. Then he left. Right off, the first servant went to work and doubled his master’s investment. The second did the same. But the man with the single thousand dug a hole and carefully buried his master’s money. 19-21  “After a long absence, the master of those three servants came back and settled up with them. The one given five thousand dollars showed him how he had doubled his investment. His master commended him: ‘Good work! You did your job well. From now on be my partner.’ 22-23  “The servant with the two thousand showed how he also had doubled his master’s investment. His master commended him: ‘Good work! You did your job well. From now on be my partner.’ 24-25  “The servant given one thousand said, ‘Master, I know you have high standards and hate careless ways, that you demand the best and make no allowances for error. I was afraid I might disappoint you, so I found a good hiding place and secured your money. Here it is, safe and sound down to the last cent.’ 26-27  “The master was furious. ‘That’s a terrible way to live! It’s criminal to live cautiously like that! If you knew I was after the best, why did you do less than the least? The least you could have done would have been to invest the sum with the bankers, where at least I would have gotten a little interest. 28-30  “‘Take the thousand and give it to the one who risked the most. And get rid of this “play-it-safe” who won’t go out on a limb. Throw him out into utter darkness.’ 2

Introduction:

Introduction 3 Nonprofits face a myriad of challenges in establishing and maintaining financial sustainability, and these challenges are exacerbated for nonprofits serving low-resources, high-need communities. Here, we identify and discuss key challenges of financial sustainability for nonprofits, such as over-reliance on external funding sources, demonstrating value and accountability to funders, and promoting community engagement and leadership, as well as promising practices for meeting these challenges and achieving financial sustainability. It is the our hope that these materials will enhance the limited literature on financial sustainability in low-resource or high-need communities and will contribute to an evidence-base for promising practices, providing leaders of and investors in nonprofits the ability to support and promote growth among organizations serving those most in need.

Introduction:

4 Challenges to Achieving Financial Sustainability Many nonprofit organizations are over-reliant on external sources of funding, such as government grants, that have been cut back in recent years.   Nonprofits depend on marketing and branding efforts to help promote and sustain their programs and services, but branding considerations are often overlooked in the nonprofit sector.   Donors increasingly want access to up-to-date information about an organization's operations and finances as a way of ensuring return on their investment.   Nonprofits serving low-income communities often struggle to raise funds, as few community members have the means to contribute financial support to nonprofits . Introduction

Introduction:

5 Promising Practices to Overcome These Challenges Innovative fundraising techniques, such as giving circles and fostering relationships with investors, can help to address financial challenges.   Clear, consistent marketing and branding will help communicate a nonprofit's social mission to funders and the community in which it resides.   As a way to respond to the changing resource environment and minimize competition for funding sources, many nonprofits have formed collaborations with other organizations that have similar goals.   Engaging in evaluation activities that outline financial and programmatic outcomes as a result of funding support demonstrates the value of a nonprofit's operations and helps determine mission impact. Additionally, clearly and consistently communicating evaluation efforts and findings to funders and investors demonstrates accountability.   Establishing and engaging community board leadership and a system of community volunteers provides a resource of varied experiences and expertise while bringing a sense of ownership to the communities that nonprofits serve.   Fostering a culture of giving and addressing the "willingness to give" gap may address fundraising challenges in communities where many residents have very limited resources to spare. Introduction

Real Estate Investments:

Real Estate Investments 6 Real Estate Investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development. Real estate is an asset form with limited liquidity relative to other investments, it is also capital intensive (although capital may be gained through mortgage leverage) and is highly cash flow dependent.

Real Estate Investments:

7 The primary cause of investment failure for real estate is that the investor goes into negative cash flow for a period of time that is not sustainable, often forcing them to resell the property at a loss or go into insolvency. A similar practice known as flipping is another reason for failure as the nature of the investment is often associated with short term profit with less effort. Real Estate Investments

Real Estate Investments:

8 Real estate markets in most countries are not as organized or efficient as markets for other, more liquid investment instruments. Individual properties are unique to themselves and not directly interchangeable, which presents a major challenge to an investor seeking to evaluate prices and investment opportunities. For this reason, locating properties in which to invest can involve substantial work and competition among investors to purchase individual properties may be highly variable depending on knowledge of availability. Real Estate Investments

Real Estate Investments:

9 Real estate entrepreneurs typically use a variety of appraisal techniques to determine the value of properties prior to purchase. Typical sources of investment properties include: Market Listings (through a Multiple Listing Service or Commercial Information Exchange) Real Estate Agents and Real estate brokers Banks (such as bank real estate owned departments for REO's and short sales) Government Entities (such as Fannie Mae, Freddie Mac and other government agencies) Public Auction (foreclosure sales, estate sales, etc.) Private Sales (transactions for sale by owner For sale by owner) Real Estate Wholesalers and investors (flipping) Real Estate Investments

Real Estate Investments:

10 Once an investment property has been located, and preliminary due diligence (investigation and verification of the condition and status of the property) completed, the investor will have to negotiate a sale price and sale terms with the seller, then execute a contract for sale. Most investors employ real estate agents and real estate attorneys to assist with the acquisition process. During the acquisition of a property, an investor will typically make a formal offer to buy including payment of " Earnest Money " to the seller at the start of negotiation to reserve the investor's rights to complete the transaction if price and terms can be satisfactorily negotiated. Real Estate Investments

Market Investments:

Market Investments 11 A Stock Market or Equity Market is the aggregation of buyers and sellers (a loose network of economic transactions, not a physical facility or discrete entity) of stocks (also called shares); these may include securities listed on a stock exchange as well as those only traded privately.

Market Investments:

12 Stocks can be categorized in various ways. One common way is by the country where the company is domiciled. For example, Nestlé and Novartis are domiciled in Switzerland, so they may be considered as part of the Swiss stock market, although their stock may also be traded at exchanges in other countries. At the close of 2012, the size of the world stock market (total market capitalization) was about $55 trillion. By country, the largest market was the United States (about 34%), followed by Japan (about 6%) and the United Kingdom (about 6%). This went up more in 2013. Market Investments

Market Investments:

13 A stock exchange is a place or organization by which stock traders (people and companies) can trade stocks. Companies may want to get their stock listed on a stock exchange. Other stocks may be traded "over the counter", that is, through a dealer. A large company will usually have its stock listed on many exchanges across the world. Exchanges may also cover other types of security such as fixed interest securities or interest derivatives. Market Investments

Market Investments:

14 Trade in stock markets means the transfer for money of a stock or security from a seller to a buyer. This requires these two parties to agree on a price. Equities (stocks or shares) confer an ownership interest in a particular company. Participants in the stock market range from small individual stock investors to larger traders investors, who can be based anywhere in the world, and may include banks, insurance companies or pension funds, and hedge funds. Their buy or sell orders may be executed on their behalf by a stock exchange trader. Market Investments

Market Investments:

15 Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry . This method is used in some stock exchanges and commodity exchanges, and involves traders entering oral bids and offers simultaneously. An example of such an exchange is the New York Stock Exchange. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically by traders. An example of such an exchange is the NASDAQ. Market Investments

Endowments Development:

Endowments Development 16 A Financial Endowment is a donation of money or property to a nonprofit organization for the ongoing support of that organization. Usually the endowment is structured so that the principal amount is kept intact while the investment income is available for use, or part of the principal is released each year, which allows for the donation to have an impact over a longer period than if it were spent all at once. An endowment may come with stipulations regarding its usage.

Endowments Development:

17 The total value of an institution's investments is often referred to as the institution's endowment and is typically organized as a public charity, private foundation, or trust. Among the institutions that commonly manage endowments are academic institutions (e.g., colleges, universities, and private schools), cultural institutions (e.g., museums, libraries, and theaters), service organizations (e.g., hospitals, retirement homes, the Red Cross, the SPCA), and religious organizations (e.g., churches, synagogues, mosques). The earliest "endowed chairs" were those established by the Roman emperor and Stoic philosopher Marcus Aurelius in Athens in AD 176. Aurelius created one endowed chair for each of the major schools of philosophy: Platonism, Aristotelianism , Stoicism, and Epicureanism. Later, similar endowments were set up in some other major cities of the Empire. Endowments Development

Endowments Development:

18 Types of Endowment Funds Unrestricted Endowment can be used in any way the recipient chooses to carry out its mission. Term Endowment funds stipulate that all or part of the principal may be expended only after the expiration of a stated period of time or occurrence of a specified event, depending on donor wishes. Quasi Endowment Funds must retain the purpose and intent as specified by the donor or source of the original funds and earnings may be expended only for the specified purpose. Endowments Development

Endowments Development:

19 Oversight A financial endowment is typically overseen by a board of trustees and managed by a trustee or team of professional managers. The financial operation of the endowment is typically designed to achieve the stated objectives of the endowment. Typically 4-6% of the endowment's assets are spent every year to fund operations or capital spending. Any excess earnings are typically reinvested to augment the endowment and to compensate for inflation and recessions in future years. This spending figure represents the proportion that historically could be spent without diminishing the principal amount of the endowment fund. The financial crisis of 2007–2010 had a major impact on the entire range of endowments globally. Endowments Development

Endowments Development:

20 A quasi-endowment, or fund functioning as an endowment, are funds merely earmarked by an organization's governing board, rather than restricted by a donor or other outside agency, to be invested to provide income for a long but unspecified period, and the governing board has the right to decide at any time to expend the principal of such funds. Separately from the endowment versus quasi-endowment distinction, there's another 2-way categorization of restricted and unrestricted, which focuses on the use of the funds. As an example, a quasi-endowment might be restricted by the donor to supporting the tennis team; the use is restricted to one purpose, but the governing board could "invade principal" to support the tennis team. Endowments Development

Testamentary and Legacy Gifts:

Testamentary and Legacy Gifts 21 A Testamentary Disposition is any gift of any property by a testator under the terms of a will. Types of testamentary dispositions include: Gift (law), assets that have been legally transferred from one person to another Legacy , testamentary gift of personal property, traditionally of money but may be real or personal property Life Estate , a concept used in common and statutory law to designate the ownership of land for the duration of a person's life Demonstrative Legacy , a gift of a specific sum of money with a direction that is to be paid out of a particular fund

Testamentary and Legacy Gifts:

22 A Will or Testament is a legal declaration by which a person, the testator, names one or more persons to manage his or her estate and provides for the distribution of his or her property at death. Though it has at times been thought that a " will " was historically limited to real property while " testament " applies only to dispositions of personal property (thus giving rise to the popular title of the document as "Last Will and Testament"), the historical records show that the terms have been used interchangeably. Testamentary and Legacy Gifts

Testamentary and Legacy Gifts:

23 Any person over the age of majority and of sound mind (having appropriate mental capacity) can draft his or her own will with or without the aid of a lawyer. (Estimates of the percent of Americans who write wills before they die range from 30 percent to 50 percent). Additional requirements may vary, depending on the jurisdiction. Testamentary and Legacy Gifts

Testamentary and Legacy Gifts:

24 Requirements may vary, depending on the jurisdiction, but generally include the following requirements: Publication Sound Mind Witnesses Signature Beneficiaries Executor . Testamentary and Legacy Gifts

Testamentary and Legacy Gifts:

25 Types of wills generally include: Nuncupative Holographic Self-Proved Notarial Mystic Serviceman's Will Reciprocal/Mirror/Mutual/Husband And Wife Wills Unsolemn Will Will In Solemn Form Testamentary and Legacy Gifts

For Profit Entity Ownership by Nonprofits:

For Profit Entity Ownership by Nonprofits 26 An unrelated trade or business may be operated within a tax-exempt organization, as long as the primary purpose of the tax-exempt organization is to carry out its exempt functions. However, the unrelated trade or business may become so successful that the nonprofit organization's tax-exempt status is jeopardized. There is no bright line test to determine the maximum percentage of unrelated trade or business activity in which a tax-exempt organization may engage, however, it is widely believed that at least 51% of the tax-exempt organization's activities must be in furtherance of its tax-exempt purpose.

For Profit Entity Ownership by Nonprofits:

27 In addition to the tax benefits, there are several business advantages to having a for-profit subsidiary. First, creation of a for-profit subsidiary allows greater flexibility in compensating employees. A for-profit subsidiary may be better able to attract and retain professional staff by offering stock options and other incentive compensation arrangements that are, as a practical matter, unavailable to employees of a tax-exempt organization. Consider the example of a renowned scientist whose skills command a premium in the marketplace. Charitable fundraising might be hampered with a half-million dollar employee on the payroll; in contrast, employment of that person in a successful for-profit subsidiary might raise no eyebrows. For Profit Entity Ownership by Nonprofits

For Profit Entity Ownership by Nonprofits:

28 Another reason for establishing a for-profit subsidiary is that the for-profit subsidiary is allowed greater privacy than is afforded a tax-exempt organization. A tax-exempt organization is required to disclose the names, addresses and compensation of officers, directors, trustees and certain employees and independent contractors on its annual information return (Form 990, Form 990EZ or Form 990-PF). However, there is no general requirement for a for-profit company to disclose such information. For Profit Entity Ownership by Nonprofits

For Profit Entity Ownership by Nonprofits:

29 Other benefits include wider access to financing sources than is available to the tax-exempt organization. The for-profit subsidiary may also have a separate board of directors, with business management devoted exclusively to commercial activities. Finally, there is a significant financial benefit realized when the for-profit subsidiary makes certain tax deductible payments to its parent which, because of the parent's tax-exempt status, receives those payments on a tax-free basis. For Profit Entity Ownership by Nonprofits

For Profit Entity Ownership by Nonprofits:

30 Federal tax law permits a tax-exempt organization to have one or more for-profit subsidiaries. The tax-exempt parent organization may own some or all of the equity of the for-profit subsidiary. The extent of stock ownership affects the taxability of income from a for-profit subsidiary received by a tax-exempt parent. The tax-exempt organization must determine the organizational form of the for-profit subsidiary. The most common form has been the corporate form. For Profit Entity Ownership by Nonprofits

Other Types of Investments:

Other Types of Investments 31 Most people have heard of stocks and bonds, but there are a ton of different ways to invest your money—mutual funds, CDs, real estate...the list is seemingly endless. Here's our reference guide to all the different types of investments and what they mean. These terms generally refer to the actual stuff you're invested in, but, of course, they have specific definitions, too. They include: Assets : An owned resource expected to increase in value. Holdings: The specific assets in your investment portfolio. Portfolio : Your "portfolio" refers to all of your investments, as a group. Diversifying your portfolio means investing in a variety of assets. Asset classes : A group of assets with similar characteristics. Generally, stocks, bonds and cash.

Other Types of Investments:

32 Investopedia breaks up all the different types of investments into these basic categories: investments you own, lending investments, and cash equivalents. Ownership Investments When you buy an ownership investment, you own that asset—something that's expected to increase in value. Ownership investments include: Stocks Real Estate Precious Objects Business Investments Other Types of Investments

Other Types of Investments:

33 Lending Investments With lending investments, you buy a debt that's expected to be repaid. You're sort of like a bank. Generally, these are low-risk, low-reward investments. This means they're thought to be a safer investment, but their return is usually low. Bonds CDs Savings Accounts TIPS ( Treasury-Inflation Protected Securities) Other Types of Investments

Other Types of Investments:

34 Cash Equivalents Cash equivalents are investments that are "as good as cash”   Savings Account Money Market Fund Other Types of Investments

Other Types of Investments:

35 Alternatives REITs (Real Estate Investment Trusts) Venture Capital Commodities Precious Metals Other Types of Investments

Other Types of Investments:

36 Funds Mutual Funds Index Funds Exchange Traded Funds (ETFs) Hedge Fund Other Types of Investments

Questions and Answers:

Questions and Answers 37

Thank You!:

Thank You! The Advocacy Foundation, Inc. Atlanta Philadelphia (878) 222-0100 Voice | Data | SMS www.TheAdvocacy.Foundation © The Advocacy Foundation, Inc. 2015 (All Rights Reserved) 38

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