A colleague recently forwarded an article by Clara Miller, the President and CEO of the Nonprofit Finance Fund. It’s online in the current issue of the Nonprofit Quarterly and well worth the time to read.

The Nonprofit Finance Fund provides financing, consulting, and advocacy services to nonprofits and funders nationwide. They help nonprofits find low-cost financing, when applicable, as well as providing trainings and business analysis. Clara Miller was a presenter at the 2009 Philanthropy Northwest Annual Conference.

Her article, The Four Horsemen of the Nonprofit Financial Apocalypse, touches on key “pretty bad best practices” of the sector that the current financial stress of the economy has highlighted.

Some of those practices are issues that foundations and corporate giving programs were already looking at before the 2008 economic collapse. For example, some five to ten years ago funders began asking hard questions about capital projects. While an organization might make a convincing case for a new building—which may allow it to double the number of people it could serve—more and more funders were asking if the organization could support the inevitable growth in the operating budget that would go along with doubling the number of people served.

An interesting facet of the article is that NFF’s experience has shown them that only about a third of organizations complete capital projects in healthy financial shape for the ongoing operations of those facilities. Another third manage to complete the capital project with no negative affect on assets, but struggle to maintain the operating budget needed to cope with the expanded workload. And finally, the last third find that the capital project overwhelms the organization, often leading to reorganization or extinction.

While there is more in this vein in the article, Ms. Miller’s point is not to discourage nonprofits from being bold, innovative, or from moving forward. What concerns her is that all too often the sector operates on an “…automatic pilot approach to making these decisions.”

Too often nonprofits fall into a trap of saying if helping 100 people is important then helping 200 is more important. But that equation ignores the investment of time and energy in developing the resources needed to help those additional 100 people.

When boards, and staff, of nonprofits make an explicit commitment to help twice as many people they also make an implicit commitment to garner more resources to support that work. Without those additional resources we are only cutting the same pie into more slices.

Nonprofit boards and staff must make the commitment to increase resources as explicit as the commitment to increase service. That means connecting that increase in services to a funding source(s) that care about those services and those clients.

That commitment also means having in place realistic plans regarding how the organization will prioritize its work. Is it more important to help those who may have no other place to turn or to help people who may require less assistance to meet their present need? The only right answer to that question is that your organization must grapple with it and come to a decision that it can defend and promote with funders and other supporters.