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Self-Help Builder News October 2012 Volume 5, Issue #3 >
Diversifying your organizational income
By Joni Foster, RCAC housing and community director, and Billie Heath, RCAC self-help housing coordinator
Many nonprofit organizations look for new ways to generate revenue by offering core services for a fee or creating spinoff businesses that generates income.
A good example is the 502 Loan Packaging Pilot where grantees are using their loan packaging skills to develop applications for regular 502 loans in underserved counties in their state. RCAC’s program has 14 grantees working on this pilot and they earn a small fee for every completed loan package.
The Community Action Agency network has several examples of spinning off small business ventures from the core services. On a recent visit with RurAL CAP in Alaska, we learned of their wholly owned subsidiary, Rural Energy Enterprises which is a distributor of energy-efficient and money saving products, which began in 1987 from their weatherization and housing rehabilitation work. They franchise energy efficient products such as space heaters, water heaters, fluorescent lighting, wood and pellet stoves, and fireplaces throughout Alaska. Last year, this generated $631,027 in net income.
RCAC has developed consulting services around affordable housing development and home energy rating testing. In some rural locations, nonprofit developers are limited in either skill sets or time. RCAC can assist as a co-developer, as in the case an agricultural research group in Hawaii developing farmworker housing, or as a consultant for several nonprofit agencies on their tax credit proposals in New Mexico, Montana and Wyoming. We have assisted nonprofit clients with the conversion of manufactured and mobile home parks from private to resident ownership. Our new housing and community director, Joni Foster (JFoster@rcac.org), is our go-to person for these services.
Our newest service available in Washington and Idaho is performing confirmed energy inspections on new construction homes and energy audits for projected ratings from house plans and specs. A full description of these services will be on our website very soon. Art Seavey (ASeavey@rcac.org) is our go-to person for this service.
Recognize that generating income with fee-for-service contracts runs the potential of creating unrelated business income if it strays from your current mission. Be prepared to pay unrelated business income tax (UNIT), if it does. Sometimes it makes sense to form a separate legal entity. Always consult the right professional, such as your accountant and/or attorney before proceeding so you know the consequences ahead of time.
We would like to share other examples of fee-for-service activities or spinoff ideas that have helped grantees maintain or enhance their revenue. Please send your comments and examples to Erika Anderson, RCAC at EAnderson@rcac.org.