Run your nonprofit like a business

By Mike Bensi, advisor, FirstPerson 

Most people who give to nonprofit causes want to see results. They want to know that their donations made a difference.

After the recession with limited resources available, nonprofits have been challenged more and more by funders to operate like businesses to further their missions.

But what does that really mean?

This summer, four nonprofits' executives participated in a FirstPerson panel discussion called Fresh Perspectives. The group shared ways to incorporate business practices into their daily operations. Executive directors from Gleaners, Hamilton East Public Library, Day Nursery (now Early Learning Indiana) and Children's Bureau provided attendees with practices they instituted and what resulted.

At the Children's Bureau, Tina Cloer, president and CEO, established goals and expectations for employees that resulted in financial solvency. Simply collecting funds on time for services is one way that allows the agency to operate in the black and know when resources will be available.

Some might argue that the Children's Bureau's mission to offer emergency, temporary shelter for endangered children, runaway and homeless youth in Central Indiana cannot not have the same cadence and outcomes as the business world. Tackling social problems isn't a steady, chartable path. Progress looks and feels different, and it takes time. Lots of time.

But as Cloer revealed, adhering to sound business principles makes a nonprofit more likely to accomplish its mission, not less. In fact, business practices like transparency and public discussions can be safeguards for a nonprofit losing sight of its mission.

Simply said, running like a business means having a disciplined approach and an emphasis toward strategy.

All four panelists said that without a strategic plan, it would be difficult to define their organization's vision. Be aware that developing a solid plan takes time. Be patient.

They all agreed that while strategic plans are not easy to create, and means asking honest and sometimes hard questions, it is one way to get input from front-line employees or volunteers.

Ted Maple, Early Learning Indiana's president and CEO, discussed how important it was to get this input. The place he started was by asking several questions to help assemble a strategic roadmap for the organization:

• Why do you work here?
• What's going well?
• What could be better?
• What should I, as a leader, focus on?

Engaging others in the changes needed allows the organization to reach its objectives and realize the vision of the nonprofit. You can go fast alone, or go far with others.
And don't be afraid to tackle this effort with your heart and your head.
At the end of the day, running your nonprofit like a business is meant to help increase the effectiveness and clarity and help achieve the mission.

Who wouldn't want that for the organization and its donors?

For continued inspiration, I'd encourage you to download the session recap: http://info.firstpersonadvisors.com/further-your-mission-run-your-nonprofit-like-a-business.


 
Mike Bensi, advisor, FirstPerson, works alongside nonprofits and small business owners to design strategic plans that enhance the employee experience. His goal is to align an organization's culture with human resources, benefits and wellness.  He has an MBA from IU Kelley School of Business and more than 10 years in progressive human resources management, including serving as the BMV's HR director.

Indianapolis nonprofit salary survey

By Bryan Orander, president, Charitable Advisors

As we put the finishing touches on the 2014 Indianapolis Nonprofit Salary Report, it doesn't seem possible that this is our third. 

And as with past publications, it is our hope that the nonprofit community will use it widely. This bi-annual project was initiated four years ago to provide Central Indiana nonprofits with data that would help recruit and retain quality staffs. Based on what was happening in other communities, we thought that local nonprofits would find this resource an important tool for making informed decisions. It also was designed to provide board and staff leadership with the information needed to effectively lead their organizations and comply with IRS executive-compensation regulations.

Again this year, there is no charge to our readers because the generosity of our sponsors - FirstPerson, National Bank of Indianapolis, Delivra and VonLehman CPA - who provided funds to help the local nonprofit community make informed decisions. Their underwriting allowed us to collect data from 321 Central Indiana nonprofits, which is one of the largest nonprofit salary surveys in the country.

In a field where 100 to150 responses is the norm, it is important to note that this year responding organizations are up from 294 in 2012. We were also able to increase the data on leadership positions to 20, up from 12, and give the sector a wider range of common position titles.  

Over the past six years, it has been rewarding to hear from area nonprofits staffs that find that the survey provides useful benchmarking information, and allows them to compare salaries and benefits. Before this survey, there was no local reference point and organizations would either use national surveys or find similar local nonprofits to use as benchmarks. 

As in the past two reports, we also asked several questions of each participant about the trends in the sector.

Similar to two years ago, nonprofits identify the major obstacle to success as lack of funding. Although this year reflected fewer organizational funding cutbacks, an increasing number of respondents said their requests for services far exceed their ability to provide.

Social Media Fundraising 101

By Lynn Sygiel, editor, Charitable Advisors

Social media can be a powerful tool, but many nonprofits still struggle with how to use it effectively in fundraising. And quantifying its effectiveness and understanding its psychology is even more difficult.

However, one Indiana college raised nearly $500,000 in a 24-hour day of giving. And while the dollar amount is impressive, the lessons learned and applicability to nonprofits is more impressive.

Joe Klen, Wabash College’s associate dean for College Advancement, came away with two clear directives from his school’s effort: Start small and get a lot of people to help.

Before launching its campaign, Klen says Wabash studied what other schools were doing, noting that they had a least a dozen models. Wabash then narrowed its focus on Illinois Wesleyan University because of its similar size and alumni population. Wesleyan had its first online day of giving last summer, and Wabash’s advancement staff watched the reaction and interaction and then traveled to Illinois in December to learn more.

While the research was important, ultimately Wabash needed to jump in and see how an online campaign would motivate people.

Starting the process in February, Wabash pulled together a campaign. It selected a date, created logos, prepared several sample emails, tweets and Facebook posts and planned the school’s overall strategy. What the team knew it didn’t want was a slick campaign, but rather a grassroots vibe.

While April 30, its choice for the day of giving, had no particular significance for the small liberal arts college, it served as the theme. The plan was to secure 430 gifts on 4/30, a number it felt was a modest but realistic goal.

More important, though, was finding the right volunteers to ensure success. While having volunteers is nothing new to fundraising, social media is a different model. First, Klen’s department identified 300 potential online ambassadors or virtual volunteers, looking for well-connected individuals who were active social media users. After narrowing the field to 175, they spent April communicating directly with these alumni, phoning and emailing them, oftentimes getting new ideas about the campaign from this group.

Well-prepared, the advancement department kicked off the campaign at 4:30 a.m. with a first email to their entire alumni pool. They hit the first target – 430 gifts -- by 10 a.m., creating an online buzz.

“When we launched the campaign, these ambassadors would spread the word to their networks. That’s really what got the momentum going, and then once people starting giving, all types of goodwill was being spread across social media,” says Klen. Mainly, the school’s virtual volunteers used Twitter and Facebook.

But Wabash didn’t stop there. If the campaign reached $43,000, there were challenge donors ready to match the gifts. A second group of donors was lined up to do the same for the next $43K, and finally they had a donor who would give $43K, if they hit 1,832 gifts, which is the school’s founding year.

 “Other people who weren’t ambassadors jumped on board and spread the word to their people,” says Klen. “That’s what we saw happen in other institutions that were really successful and were more successful the second time around.”  

Klen says scale is key. “I think if we had started at 1832 donors in a single day, it would have had a much different feel. I think for a smaller organization that doesn’t have the constituent base, starting smaller is good.”

During the day of giving, Klen’s advancement team kept a light touch, sending four emails to alumni during the 24-hour period. These were to announce the campaign, key benchmarks and the results and initial wrap-up of the campaign.

An online honor roll gave peers a chance to see in real time who was contributing. It’s different from the infamous TV telethons because it was more than just a total, and potential donors could see contributors’ names. That’s where, Klen says, psychology has an effect.

Students and staff on campus also were giving online. It was the last week of academic classes. There were campus events, like a dunk tank, that created an on-campus buzz, but also an online buzz. There were alumni who said, “Oh, I wished I knew that was happening, I would have come over for lunch.”

Besides goodwill, Klen says, the biggest gains were introducing current students to the culture of giving and creating an online reunion atmosphere. In June at Wabash’s reunion weekend, alumni  were still talking about the event.

“There is some culture of philanthropy already engrained in Wabash’s culture. The good feeling that came out of the day by rallying around the institution on a single day is the greatest success of the day. Our students saw the kind of rallying support for the institution in a single day and that will stick with a lot of them for a long time,” says Klen.

“I think that’s true for most nonprofits. Not all generations have been taught the importance of philanthropy. In part what I think we’re doing in this kind of day is we taught our students on some level how private organizations and nonprofits really work and how they rely largely on private philanthropy.”

Klen noted that Wabash was not the only Indiana school with this type of campaign. In April alone, 10 other schools had campaigns, including Notre Dame, Purdue and Valparaiso.  “I don’t want to suggest that our day was the only day by any stretch of the imagination. St. Mary’s had similar numbers,” he says. Klen believes they can all learn from each other and draw from different constituencies.

What will Wabash do the second time around? It will study schools that have done these two and three times, see what they did differently and what new lessons they learned. And Wabash has already been thinking about how to steward those first-time donors.  

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Applications for nonprofits

• Line up online ambassadors who are passionate about your cause and can build an online social media presence. Unlike Wabash, finding ambassadors’ friends with no prior affiliation to a nonprofit who are introduced to the organization has great potential. 
• For a nonprofit, competitions can work – Eastside versus Westside giving.
• By 2 p.m. Wabash’s campaign (#Wabash430 hashtag) was trending in Indianapolis on Twitter. For Central Indiana nonprofits, that kind of exposure could be huge for getting their name out there to people who may not know about them. 
• All organizations can benefit from single-day campaign. The greatest benefit beyond fundraising is creating excitement about the organization and getting people excited about giving back.

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Lessons

• Don’t pre-sell. Keep the campaign organic, grassroots and non-flashy. Wabash created a simple logo and theme and sent sample tweets and emails to ambassadors to prime the pump.
• Find the right volunteers. These needed to be individuals with large constituent social media networks who traditionally get responses to their posts.
• Create an online donor honor roll. Unlike TV telethons, peers influenced peers’ giving.
• Unlike other schools, Wabash used no raffles and hourly incentives, but rather had a cadre of donors ready to match, if the gift goal was met.
• While there was no printing budget or postage, there were credit card processing fees, which at 3 percent, amounted to about $8,000
• This type of campaign takes less planning time. Bucknell University, for example, created its campaign in nine days.
• The next day, the advancement department sent a thank you with initial results and round numbers.  

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By the numbers

• 12,000 to 13,000 was the Wabash alumni pool
• 2,329 gifts in a 24-hour period or $465,000
• 2 gifts per minute
• Nearly 100 percent online donations
• Nearly 1,000 unique donors on the day
• 900 donors made their second gift of the year
• 370 lapsed donors contributed
• 2000 to 2009: the alumni group with the highest number of donations
• 1948: one donor, 10 or more donors from every class beginning with 1961

Grooming leaders

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By Steve Rossetti, Synergy

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You hear the expression a lot: Somebody is a natural-born leader. It may refer to the battlefield, the ballpark, the political arena or the boardroom.

But is it true? In some cases, yes. Certain people may have the traits to put them ahead of the crowd. But leaders can also be trained and nurtured.

The private sector allocates billions of dollars to leadership development because it knows that skilled leaders are a powerful investment. Companies know that effective leadership is the cornerstone of every organization and can instill productivity, job satisfaction, engagement, retention and overall profitability.  Summarizing it simply, it affects the bottom line.

The value of an effective leader can be measured in many ways: retaining good employees, mentoring future leaders, creating a profitable culture that values a team approach and supporting a company’s financial growth.  There are also intangibles like garnering employees’ respect, admiration and an overall enjoyment of working for someone who has effective leadership skills. 

However, according to the Stanford Social Innovative Review, less than 1 percent of overall foundation grants went to leadership development between 1992 and 2011.

So why is something that is so critical often ignored, minimized or left to chance? How do successful nonprofit organizations look and identify leaders when they are hiring?

Although there is no magic formula that will guarantee how effective someone will be as a leader, there are a few techniques that can help. Here are three steps to help hire the right person and invest in his or her growth:

·      Establish a hiring process that includes effective screening, interviewing and assessing of job candidates

·       Invest in potential leaders by offering leadership training. 

·       Develop an evaluation program that allows managers, colleagues and employees to offer input.  

The best place to start is to have a framework assessment of the leadership position and knowledge of the qualities, skills and aptitudes a person needs to be successful in a particular position. Each candidate should go through the same interview and assessment steps, which includes a battery of questions specific for the position. Each answer should receive a numerical rating from the interviewer.  Making sure the “right” person is being selected should be more of a science than guesswork of feelings or emotions.

Once hired, individual employees should have a tailored-leadership development program that provides specific training, tests for knowledge and supports ongoing learning. Regardless of how long someone has been in a leadership role, ongoing training and coaching is essential. 

Being in a leadership role is challenging for many reasons in today’s workplace. Therefore, having an arsenal of skills and techniques can help.  A training program should include courses that strengthen skills and techniques that are needed to be a great leader in any organization.

Some areas that are essential aspects of great leadership are:  effective communication skills, performance management, motivational techniques, dealing with difficult employees and building effective and strong teams.

The third and final step is for the leader to receive feedback.  Self-evaluation and assessment is difficult, if not impossible, to do objectively and impartially. 

A tool that can be used is a 360-degree evaluation, which polls members of an employee's immediate work circle.  Most often, 360-degree reviews will include direct feedback from subordinates, colleagues and supervisors, as well as a self-evaluation.  The purpose and objective is for the leader to receive comprehensive feedback about how they are performing and provides the leader a comprehensive overview of strengths, as well as opportunities for growth.

Developing and grooming leaders is not only significant to the individual’s work experience, but borrows a page from for-profits, it’s significant for the overall health of the organization.

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Steve Rossetti is the director of training and development at Synergy. He has conducted training, consultation and executive coaching in corporate settings, school districts, correctional facilities and nonprofit organizations for over 25 years.  He attended Eastern Illinois University and earned a psychology degree and graduate degree in education psychology

National Philanthropy Day Sponsors Enable Community Celebration of Philanthrop

The 2014 National Philanthropy Day (NPD) Luncheon is on Thursday, November 13.  The Association of Fundraising Professionals (AFP) proudly holds this annual event to recognize outstanding community members who inspire change in our community through generously supporting area nonprofit organizations.   Registration is now open and will be solely online this year.

We look forward to introducing you to this year’s award winners at NPD:   Philanthropists of the Year – Barbara and Larry Kellar;  Volunteer of the Year – H. Richard Duval;  and Outstanding Youth in Philanthropy – Magnified Giving Student Philanthropy Program.

Additionally, NPD gives all nonprofits a unique opportunity to thank their own Nonprofit Champions -  benefactors and volunteers who impact their organizations.   When registering to attend NPD, indicate which of your guests are Nonprofit Champions.  They will be listed in the NPD program and AFP will provide certificates of recognition for them, which will be available for pick-up at NPD.    Keynote Speaker, Erin Gruwell’s book, can be pre-ordered as thank you gifts for your Champions, and nonprofits are encouraged to bring their own tokens of appreciation to present at NPD.

National Philanthropy Day is possible due only to our generous sponsors.   NPD sponsorship supports our entire nonprofit community by providing AFP with funding to hold educational programs and networking events to benefit development professionals, nonprofit executive directors and board members, and others who attend our sessions.  Sponsorship also allows all of us to come together – business, philanthropists, nonprofits and volunteers – at NPD to celebrate our community’s strong philanthropic spirit. 

On behalf of nonprofits in Greater Cincinnati, AFP extends sincere thanks to the following sponsors for making NPD possible:   Presenting Sponsor – Fifth Third Bank Foundation; Platinum Sponsors: Photonics Graphics, Plan-It Now, Prestige AV & Creative Services;  Gold Sponsors – Duke Energy Convention Center, and the University of Cincinnati; Media Sponsor – Cincinnati Business Courier; Silver Sponsors – Giveunity, Johnson Grossnickle & Associates, Greater Cincinnati Foundation, United Way of Greater Cincinnati; Bronze Sponsors – The Christ Hospital Foundation, Cincinnati Children’s Hospital Medical Center, Clovernook Center for the Blind, Graff Designs, MOBA Interactive, Inc. , Premier Mailing, Life Enriching Communities, March of Dimes,  Bethesda Foundation, and Streets of Manhattan; and Patron Sponsors – Arts Wave, Boys and Girls Clubs, Carol Ann & Ralph V. Haile Jr./US Bank Foundation, Catholic Inner-city Schools Education Fund (CISE),  Chanticleer Consulting, Clever Crazes for Kids, The Children’s Home of Cincinnati , Cincinnati Ballet,  Cincinnati Country Day School, Cincinnati Nature Center, Cincinnati Playhouse in the Park, Cincinnati Preservation Association, Cincinnati Youth Collaborative,  Crayons to Computers, Roman Catholic Diocese of Covington, Ronald McDonald House, St. Xavier High School, Shriners Hospitals for Children, and Talbert House.

We hope to see you on November 13 at NPD to recognize our community award winners and your Nonprofit Champions. For more information including sponsorships and registration, please visit www.afpnet.org/AFPCincyNPD. 

How to protect your nonprofit organization from fraud

By Jim Simpson, president, Financial Technologies & Management (FTM)

Four years ago when officials from a local cultural and arts volunteer organization discovered that more than $380,000 had been embezzled from its account, it was shocked. Over a nine-month period, an officer supported his gambling addiction with money from the organization’s bank account.

But according to a 2014 Association of Certified Fraud Examiners study, that is not all that unusual. In fact last year, The Washington Post analyzed nonprofits’ 990 filings from 2008 to 2012 and found more than 1,000 nonprofit organizations had checked the box indicating they had discovered diversion of assets due to theft, investment fraud or embezzlement.  

The Association of Certified Fraud Examiners (ACFE) reported the average loss is $108,000. But along with the loss of funds there is an even greater potential cost  -- damage to an organization’s reputation. 

External audits are of little help. According to the ACFE, they detect just over 3 percent of the fraud cases.  Instead, 42 percent of cases are discovered as a result of tips from employees, customers, vendors or anonymous whistleblowers.  Other top methods are management reviews (16 percent) and internal audits (14 percent). Seven percent of cases are uncovered simply by accident.

Relying on tips and happenstance to discover more than half of existing fraud cases is not good business practice. Despite having limited time and resources that make nonprofits vulnerable to fraud either internally or externally, organizations must be able to discover more cases on their own. 

Nonprofits typically have many checks and cash from numerous sources making them vulnerable to skimming and cash larceny schemes. Billing schemes are most common, and typically involve billing an organization for personal items or excessively marking up goods or services.

One step that all nonprofits should take is to develop anti-fraud controls that help decrease the cost and duration of fraud schemes.

Some anti-fraud controls include:

• Create an independent board committee to provide management independence and professional skepticism.
• Develop a process to report suspicious behavior.
• Document when compliance at all levels occurs and when it does not.
• Develop a response plan when fraud does occur.

Keep in mind that the tone from the top is important to promote an ethical environment throughout the organization to encourage self-policing.

But most importantly, nonprofit organizations need to make sure they don’t ignore fraud issues because they aren’t prepared to deal with them openly and honestly.

Nonprofits are typically most vulnerable to the following types of fraud schemes: billing, check tampering, expense reimbursements, skimming, corruption and cash larceny.

• Skimming is when an employee accepts payment but does not record the revenue and steals the money.
• Cash larceny is when an employee steals cash and checks from daily receipts before they are deposited in the bank. 
• In billing schemes, a person may set up a fake entity that bills for goods or services that the organization did not receive. Sometimes, the goods or services may be received but are marked up excessively with proceeds diverted. Another common billing scheme is to charge personal items to the organization. 
• Expense reimbursement schemes generate fraudulent disbursements. The four most common types of expense reimbursement schemes are mischaracterized expenses, overstated expenses, fictitious expenses and multiple reimbursements. 
• Check tampering is when a person physically prepares a fraudulent check. 
• Corruption is the wrongful use of influence including bribery, kickbacks, illegal gratuities, economic extortion and collusion.
  

Jim Simpson, CPA and president of Financial Technologies and Management, is a financial leader and trainer, CFO advisor, and forensic accountant to nonprofit organizations since 1999, serving over 350 nonprofit clients. He has worked as a financial advisor for over 20 years.

Security is more than locking the door

This is the second article in a series. For the first article, click here.  
 

By Dave Voris, Horizon Bank

Data Breach Investigations Report (DBIR) DBIR found that 96 percent of record breaches involved credit card numbers/data.

Nonprofits can attain a reasonable level of security against the potential risk of a breach.

In 2006 to combat these breaches, the major credit card companies launched a security standards council to manage the evolution of security standards and requirements. For more information about the standards and materials available, click here.

The credit card association has defined four levels based on volume and provides assessment tools -- a questionnaire and vulnerability scanning -- to determine potential exposure to a breach.

Level 1: Any nonprofit regardless of how credit cards are accepted that processes more than 6 million Visa credit card transactions annually is required to:

• conduct an annual on-site security audit.
• conduct a quarterly network scan.
• conduct an independent security assessor validation.

Level 2: Any nonprofit processing 1 million to 6 million Visa or MasterCard transactions annually is required to:

• For Visa: complete an annual PCI self-assessment questionnaire and quarterly network scan
• For MasterCard: complete an annual PCI self-assessment questionnaire and quarterly network scan validated by the nonprofit or a qualified independent scan vendor

Level 3: 1 million Visa or MasterCard e-commerce transactions annually is required to:

• complete annual PCI self-assessment questionnaire and quarterly network scan of the database validated by the nonprofit or a qualified independent scan vendor

Level 4: Any nonprofit with less than 20,000 Visa or MasterCard e-commerce transactions annually and ALL other nonprofits processing up to 1 million Visa or MasterCard transactions per year are required to:

• complete annual PCI self-assessment questionnaire and quarterly network scan validated by the merchant or a qualified independent scan vendor.

The end of the business day used to be simpler. Merchants would protect their stores and inventory against theft by simply locking the door. And while bolting the door was a safeguard, these same storeowners were well aware that thieves might still find a way to enter and steal valuable inventory. 

Today inventory is not the only consideration -- protecting consumers’ personal data from theft is equally important. As breaches at Target, P.F. Chang’s and, most recently at Home Depot, rattled shoppers’ confidence in the care of their personal data, nonprofits must be concerned about the storage and protection of valuable credit card information.

But what protection services exist for nonprofits and what is mandated by law?

Today the payment card industry (PCI) offers its Data Security Standard v2.0, which includes a password policy framework. Those issuing credit cards require all merchants – including nonprofits -- to protect not only the card data that may be stored on an organization’s computers, but also donors’ personal identify information. That information is worth millions and millions of dollars for thieves on the black market, and the modern day data criminal is very smart, tech savvy. 

For nonprofits, the task is to secure the data and avert the risk of theft. While computers and web connections have given us dramatic advances in productivity and communication, they have also made it necessary for organizations to change the way they protect their assets. 

While storing credit card data might make future tasks easier, it is also risky.   Organizations often prefer to keep credit card information on file to issue refunds, to process additional transactions, to settle outstanding balances, as a convenience to regular donors and to process recurring payments.  

What organizations fail to consider is the potential effects of a data breach, which can result in brand damage, loss of client trust, unplanned costs to upgrade and maintain computer systems, fines from regulatory entities, legal costs and business disruption while attending to the breach.

So what does a nonprofit do about this mess? The PCI offers some help (See accompanying box). It has set up a list of standards that companies and nonprofits must comply with depending on the amount of business they do. 

But ultimately, it is up to companies and nonprofits themselves to instill their own internal safeguards. Industry specialists recommend that organizations use a multi-layered approach for security against physical intrusion or computer intrusion.

Internal policies and controls

• Establish a security policy and train employees to follow the policy.
• Develop a system for investigating irregularities. Consider creating a security SWAT team that includes management, IT and accounting staff.
• Create a response plan for donors who believe his/her credit card information was stolen after making a contribution. Include process for talking with the credit card company and banks and logging conversations.

Technical internal controls

• Monitor access: change default logins for newly installed systems, ensure that each computer user has a unique login ID and password, and review user information to ensure all current users are valid employees or volunteers.
• Secure network: install and maintain a firewall configuration to protect their systems, then use and regularly update anti-virus software. 
• Secure personal information: TRUST3 is an independent, nonprofit organization that enables trues-based privacy for personal information on the Internet. TRUSTe or another privacy provider can help ensure that website privacy and email policies provide protection to donors, members, volunteers and employees.
• Protect transactions: identify and install an encryption technology to protect online transactions.

At the end of the day, it’s important to remember to be safe, or to weakly paraphrase former President Clinton’s one-liner,  “It’s about security, stupid.”

Dave Voris is a vice president for Horizon Bank in Indianapolis. As a senior treasury management officer, he works closely with both middle market and small business companies from a wide variety of industries.