The Financial Health of the CDC Sector

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March 3, 2010

With over 70 community development practitioners in attendance, the Community Development Innovation Forum convened on February 26, 2010 to discuss the financial health of the Massachusetts CDC sector. Bill Pinakiewicz from Nonprofit Finance Fund presented the findings based on a survey that was distributed to 25 Boston-area CDCs.

Pinakiewicz began by acknowledging the unique role that CDCs play in developing healthy communities, citing CDCs’ emphasis on nurturing community residents to build leadership and respond to social challenges. Despite the importance of this role, CDCs are facing a number of challenges, notably a changing economic climate and difficulties in identifying new and alternative business models to adapt accordingly to economic pressures. CDCs are under growing financial stress, indicated by levels of liquidity that are at historic lows, decreased unrestricted net assets, decreased working capital and fewer days of cash on hand. Pinakiewicz stated that the absence of working capital threatened CDCs’ ability to sustain their programs. He thought CDCs need to focus on liquidity and that some aspects of the CDC business model needed to be restructured. He also recommended more consistent financial reporting in line with the Strength Matters Initiative and indicated that organizations should separate operating and non-operating activities.

A panel discussion followed Pinakiewicz’s presentation including: Geeta Pradhan, Program Director at the Boston Foundation; Jeanne Pinado, Executive Director of Madison Park Development Corporation; Phil Giffee, Executive Director of Neighborhood of Affordable Housing (NOAH); and Paul Jurasheck, Chief Financial Officer of the Jamaica Plain Neighborhood Development Corporation. The panelists mentioned the absence of local financial training as particularly problematic and stated that the CDC sector must evaluate how its social service activities can function and produce profit independent of real estate development. The resulting discussion indicated the need to review how CDC real estate development projects are financed and how organizations are funded to do their real estate development work and other activities. Panelists and audience members indicated a desire to re-convene the Real Estate Working Group of the Innovation Forum to come up with recommendations for CDCs, public and private funders.

The forum ended with remarks from Boston LISC Executive Director Bob Van Meter, who stated that Boston LISC and MACDC and would continue to support CDCs in their efforts to develop business models as they cope with the changing economic climate. Read more about the Community Development Innovation Forum and access the full report and Bill Pinakiewicz’s presentation here.

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