Requirements:

1. The Not-for-Profit entity is Wildlife Conservation Society.
2. Research financial environment( Fund-raising environment, Registration requirements (Types of Registration) , Bank lending rates )Currency exchange rates, Inflationary conditions,Country risk )
3.Develop a fundraising strategy for the nonprofit organization
4.Forecast a three-year quarterly operating budget for the entity (spreadsheet with supporting assumptions)
5.Create a monthly Cash Flow Budget for year one (Spreadsheet with supporting assumptions)
6. Prepare a three-year annual pro forma Activity Statement and Balance Sheet (spreadsheet with supporting assumptions)
7.Calculate relevant financial ratios for the entity (current and forecast years)
8.Create scenarios for two possible investments and using discounted cash flow analysis evaluate each scenario
9.Identify two of the greatest risks that non-profit faces and assess their implications on financial performance using sensitivity analysis on your pro forma financial statements

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Introduction

Our globe is an amalgam of enticing landscapes with majestic wildlife and vast biodiversity. Such creations have provided humanity not only the joy of witnessing eye-catching sceneries but also the much required ecological system for the sole purpose of survival.

Wildlife Conservative Society is a Non-Profit/Non-Government Organization to preserve, conserve, and protect ecologically intact places with the most exceptional biodiversity and resilience to climate change. It started over a century ago from the city of New York but has expanded to over 60 countries worldwide. Till now, WCS has managed to protect 372 areas globally, including terrestrial and coastal/marine; WCS has also assisted in establishing 268 national parks over the world. (Wildlife Conservative Society, 2019)

Mission:

To protect wildlife and wild places around the world through science, education, conservation actions, and inspiring people to value biodiversity. The mission can be further elaborated in two phases;(Wildlife Conservative Society, 2019)

1. To conserve fourteen ecologically intact areas/region of land and sea;
2. To hamper the decline of six species groups, including Big Cats, Elephants, Sharks/Rays, Apes, Whales/Dolphins, and Tortoises/Turtles.

How WCS Operates:

WCS core operation spans over operating zoos and aquariums, assisting in conserving areas globally, educating and spreading awareness, collaborating with governments and institutes to help to stop the extinction of rare species, and carrying out research about veterinary science, wildlife health, and disease surveillance. (Wildlife Conservative Society, 2019)

To carry out the activities mentioned above, WCS has the following sources of revenue;

1. Charities, donations, and grants from individuals, corporations, and governments.
2. Revenue from the sale of Zoos and Aquarium tickets.
3. Merchandising and sale of other promotional stuff.

Financial Overview:

Source: Annual Report 2019

Critical Aspect:

For the successful continuation of operations, WCS direly relies on external funding, which includes donations and grants from individuals, institutes, and governments. Hence, any hindrance in the external environment, which WCS doesn’t have any control over, can severely hamper the operations of the WCS. In 2019, revenue from other sources such as zoos and aquarium ticket fees, merchandise licensing, and royalties only accounted for 32% of the total revenue generation. (Wildlife Conservative Society, 2019)

Source: RedLAC

Therefore, for the management, it is of crucial importance to be well aware of external factors. The administration should know what the critical external factors are and how they can impact the funding.

Vital External Factors Impacting on Funding:

Economy:

Operations and profitability of every organization are heavily reliant on the performance of local and global economies. The same is the case with NGOs; even the impact can be more severe as the primary source of cash inflow for most of the NGOs, including WCS, is external donation and funding.

1.      GDP Growth:

Source: Economic Intelligence Unit (EIU)

GDP growth is one the critical parameter of the health of an economy; a country having a high and stable GDP growth can be more inclined towards donations and funding to NGOs.

As currently, due to COVID-19, GDP growths of all of the countries in the world have slowed down, and it is expected that the recovery will only be possible by 2021.

2.      Unemployment rate:

As similar to GDP Growth rate, increased unemployment can also trigger a shortfall in the anticipated donations and charities. A sharp hike can be seen in 2020, which is primarily due to COVID-19; however, the impact is expected to mild by 2021.

Source: Economic Intelligence Unit (EIU)

3.      Lending Rate:

Source: Economic Intelligence Unit (EIU)

Another critical aspect of raising funds is the lending and borrowing environment. Low borrowing rates can be beneficial for NGOs as it can significantly reduce the cost of borrowing money. In developed countries, historical and forecasted lending rates are lower than those of emerging countries like India, Ghana, and Nigeria. NGOs operating globally should take significant benefit from the vast differences between the lending rates of developed and developing countries while raising or borrowing funds.

4.      Country Risk:

Source: Economic Intelligence Unit (EIU)

Developing countries have higher lending rates to compensate for higher risk; there are several kinds of risks when it comes to investing and operating in emerging countries. NGOs that do operations in countries located in Africa and South Asia need to be extra cautious regarding their risks. These risks can be due to political uncertainty, law and order situation, weak financial institutions, and rampant corruption.

Another critical aspect which NGOs should consider while raising money for projects in developing countries is how they will ensure the transparency, as there is a lack of proper documentation and weaker system of controls in emerging countries which can increase the chances of mismanagement of funds.

5.      Other Aspects – Inflation Rate and Currency Exchange Rate:

Source: Economic Intelligence Unit (EIU)

Source: Economic Intelligence Unit (EIU)

Usually, inflation and currency exchange rate are interlinked with the country’s lending rate. Unexpected high or hyperinflation rates can make forecasting difficult for NGOs, which can result in variance in budgets; the currency exchange rate also plays a vital role when NGOs are investing money from a developed country in a developing country. Usually, it is beneficial for NGOs that do business and maintain books in USD and invest in developing countries, as 1 USD can have a higher purchasing power in these countries.

Registration Requirements – Legal Aspect

Establishing a Non-Profit Organization might seem like a simple task. Still, in actuality, it is indeed severely technical and requires a lot of support in terms of legal and financial aspects. If one wants to start an NGO or NPO in the United States of America, it has to acquire a 501c3 status.(Dr. Saumya Arora, n.d.)

501c3 status:

A “501 C” organization in the USA is a Tax-exempt entity that doesn’t have to pay any kind of taxes. The most common among these organizations is “501 C 3,” which are known Profitable Charity organizations; these organizations are exempt from Federal Income Tax and hence allow donors to deduce their taxable incomes. Such exemptions only occur in cases when the organizations are doing charitable operations related to education, literary, religious, environmental, et cetera. (Dr. Saumya Arora, n.d.)

An organization can claim the status of “501 C 3” by filing and submittingIRS Form 1023. A filing fee would be charged, which would depend on the past annual gross receipts of the organization. Previous financial records and a forecasted budget would also be required while filing for this status. (Dr. Saumya Arora, n.d.)

Potential Risk for Fund Raising

Non-Profit Organizations currently face several challenges amid slowing down of the global economy, increasing requirement of transparency, growing competition among NGOs, and rapid increase in global warming.

The sluggish economic growth of the world can hinder NGOs’ abilities to raise potential funds, which can hurt the anticipated and planned programs and events. In this current time, NGOs might face the challenge of a shortage of cash inflows. Another critical problem for today’s Non-Profit Organizations is to maintain transparency over the proper channeling and utilization of donations and funds. Amid rumors of increasing corruption and mismanagement of funds have pushed the legal institutions globally to improve the regulations over raising and usage of funds collected through donations and charities.

The rapid growth rate of global warming has further intensified the operating environment for NGOs working for the conservation of wildlife and wild areas. Amid such happening, NGOs need to fasten their efforts toward their environmental causes, resulting in increased needs of funds and donations.

In order to understand the implication of above mentioned two risks; we can take assistance from the forecasted financial of WCS. There are three hypothetical scenarios; a base case, when everything happens as planned and no severe risk takes place; risk case 1, it is a case when due to COVID-19, donations shrink by 30%; risk case 2, when due to extreme increase in global warming, WCS has to spend 30% more over its global conservation program.

Fund Strategy for a Non-Profit Organization

Non Profit Organizations can’t talk about their plans and programs to support their causes until or unless they also talk about how they would raise enough funds to operationalize those plans. These NPOs and NGOs even can’t succeed in availing significant funds without showcasing their past projects.  Every new successful program or event of an NGO is a promotional change to demonstrate its effectiveness and capability to take on more such projects. There is a global need for innovative ways to spend transparently for the causes like wildlife and wild regions conservation; much of the awareness has been created by international treaties, climate change conferences, and NGOs which are working for such purposes. The ability of any NGO to raise funds successfully direly depends on its capability to strategize and carry out effective programs, harvest partnerships with governments and critical institutes, and market itself efficiently. (Latin America and Caribbean Network of Environmental Funds, 2011)

1.      Know your potential audience

Before devising any successful fundraising strategy, it is of crucial importance that the NGO knows about potential investors or donors. Following is the funding mix for NGOs working for the cause of protecting the environment;

Source: RedLAC

 

2.      Understanding the wants of potential donors:

Organizations looking to raise external funds must study and analyze the needs and wants of potential investors and donors; much of the donors look for following aspects in an NGO while making the donation decisions;

• Institutional stability
• Transparency and integrity
• Expertise
• Alignment with the donors’ objectives

3.      Clarity over the mission and goals:

After understanding the potential donors and their respective needs, NGOs should work on internal assessments and should develop a clear mission and goals. The goals should SMART; specific, measurable, attainable, results-oriented, and time-bound. (Latin America and Caribbean Network of Environmental Funds, 2011)

4.      Forecasts and budgets:

The next step is to quantify your ambitions and make estimated forecasts and budgets. A forecast would help in telling investors what this program would be able to achieve in the end and how much capital would be required to implement the plan. (Latin America and Caribbean Network of Environmental Funds, 2011)

5.      Analyze the fundraising environment:

This includes having a substantial understanding of current scenarios, including economic, political, and social happenings. This will further help in finessing the fundraising strategy and objectives. (Latin America and Caribbean Network of Environmental Funds, 2011)

6. Implement:

Now as the NGO has a clear understanding of;

• who might be the potential donors
• what are donors looking for in a donation opportunity
• what it wants to achieve
• how it will make the goals mentioned above and mission and how much it would cost
• how the external environment is working

Once an NGO has a firm grip on all the aspects mentioned above, it can proceed further by approaching potential investors and donors. (Latin America and Caribbean Network of Environmental Funds, 2011)

 

 

Possible Cases of Investments:

Let’s consider two hypothetical investment scenarios for Wildlife Conservative Society.

Investment Scenario 1:

In this scenario, WCS’s management decides to establish another national park like Borx Zoo in another city of USA. In order to build such a gigantic park, WCS would require an investment of $1 billion which it plans to collect by a consortium of donors, organizations and government. As per estimates, it will require three years to construct this park and then it would be able to receive 2.5 million visitors in the first year of its operations which will grow annually by 2% for the rest of the projected tenure. Annual operating expense will increase at 3% whereas the park management would also have to incur capital expenditure nearly equal to 10% of the total annual revenue. Following are the details regarding this investment opportunity;

 

Investment Scenario 2:

In this scenario, the management doesn’t have a strategy to collect massive amount like $1 billion to construct a park like Borx Zoo as in scenario 1; the management only have $750 million from donations and charity. The management of WCS decides to build another aquarium like “New York Aquarium” in a city of USA. It will take a construction time of two years and will attract 1.2 million visitors in its first years which will further grow at 5% annually. Annual operating expense will increase at 6% whereas the park management would also have to incur capital expenditure nearly equal to 8% of the total annual revenue. Following are the details regarding this investment opportunity;

 

 

 

Financial Results of both the Scenarios:

Investment Scenario 1:

Investment Scenario 2:

 

Bibliography

Dr. Saumya Arora, n.d. How to set up 501(c) 3 non-profit in the United States, and what are its advantages?. Funds for NGOs.

Latin America and Caribbean Network of Environmental Funds, 2011. Fundraising Strategies Fundraising Strategies, Dar es Salaam: RedLAC.

Wildlife Conservative Society, 2019. WCS General Booklet, New York: Wildlife Conservative Society.