So - Restricted Funds are like, restricted?

I was in yet another conversation with some funders this week as they lamented the shoddy accounting practices that the recession is bringing to light in so many nonprofits and are concerned that board and even staff leaders don't understand what they are ignoring, or even condoning.

Disclaimer - I am not an accountant or attorney, so please take my comments as motivators to ask questions and gain clarity, not as specific financial or legal advice.

The concept of restricted or designated funding - Many board members, accountants, and even staff leaders do not fully understand that in the nonprofit environment, a significant amount of your revenue arrives with specific directions about how and when it will be spent. The organization is required to spend it in that way and often report the results back to the donor or funder. An example would be a foundation that provides a grant for $50,000 for a youth serving organization to conduct a summer camp.

When cash gets tight - If that $50,000 summer camp grant arrives in January, it can be tempting to use the money to pay current bills, but it is the obligation of the organization to ensure the funds are available to hire staff, buy supplies, and rent the camp for the summer.

We have a mission to accomplish - I am surprised by how casual some Executive Directors are about ignoring the concept of restricted or designated funding. While the outside world, including funders, are given the impression that their grant funds are being appropriately managed, in reality, the funds are spent as soon as they come in the door, often on non-program expenses, and that summer camp was likely paid for by the funds from a later grant intended for the next tax prep season. If the next grant doesn't come as expected, the house of cards begin to crumble, and becomes very public when the organization reaches a point where it can't make payroll yet is obligated to still provide months of services it has accepted funds to deliver.

Board member understanding - Sometimes board members are told that borrowing into future program funds is "just the way nonprofits run" and sometimes they are not told at all.

Role of the Finance Committee - The Board Treasurer and Finance Committee really need to take the lead role in stating expectations and understanding where the organization currently stands in this area. If poor practices have been used in the past, acknowledge it, make some changes and start working your way back. If staff is reluctant or evasive about sharing this information, assure them that the intent is to ensure the organization can continue its work, not to find people to blame.

Role of the Auditor - Boards heavily rely on outside auditors to reassure them that everything is "OK". However, I am hearing increasing complaints about audit firms who do not identify issues around restricted funding, other than listing it in the financial statements. It seems you would not have a difficult time finding nonprofits who have spent months ahead in restricted funds who are receiving clean audits.

Role of the Accounting Staff - The accounting staff can be in a tough position on this issue, which is why the board needs to step up and understand it. In some organizations, current bookkeeping or accounting staff do not have professional accounting backgrounds, so they may not have a clear idea of what is appropriate and what is not. In other cases, staff leadership may prohibit them from being candid with the board.

Role of the Accounting Contractor - The Finance Committee needs to ensure that they have a communication channel built with any outsourced bookkeeper or accounting contractor that will allow issues similar to this to be raised. It is part of the "trust and verify" approach that boards need to take.

Wrap-up - If you are board or staff of a nonprofit that needs to make some improvements in this area, please put the focus on the issue and reduce the tendancy to point fingers. In most cases, though the problem is being uncovered on your watch, it has evolved over a period of time and a series of short-term decisons made by a number of people. Funders know this is happening, and may even be aware your organization is doing it before the board is, so include them in the conversation if you see a way they can help.

Bryan

Are You a Risk-Aware Nonprofit?

When I first heard the term "risk-aware nonprofit" I got this image of an
organization that attempted to isolate itself from any possible loss or
risk. When I read the first Hallmark of a risk-aware nonprofit was to "Takes
More Risks Than It Avoids", I knew I was off track in my thinking. Over the
past two years, the Nonprofit Risk Management Center convened and consulted
risk management experts from the nonprofit sector to identify 12 hallmarks
of a risk-aware nonprofit organization, along with practical strategies and
tools to help turn your organization into one that manifests the hallmarks
of a risk-aware nonprofit.

This Hallmarks tool was developed to provide thoughtful guidance to board
and staff members around an area that is too often relegated to "I'm pretty
sure the Finance Committee and staff are on top of our insurance needs." The
website provides both an overview and some detail in each area to allow your
organization to more clearly evaluate whether you are responsible risk
managers.

Hallmark #1: Takes More Risks than It Avoids

Hallmark #2: Heralds A Risk Management Champion

Hallmark #3: Guided By Reality, In Addition To Scary Headlines

Hallmark #4: Is Bold But Smart

Hallmark #5: Cultivates a 'Can-Do' Attitude Among Paid and Volunteer Staff

Hallmark #6: Sees the Whole Iceberg Not Just the Tip

Hallmark #7: Understands that Hindsight Isn't 20:20, But It's Better than a
Blindfold

Hallmark #8: Tells It Like It Is

Hallmark #9: Is Transparent with Insurance Partners

Hallmark #10: Values the Journey, Not Just the Destination

Hallmark #11: Engages the Board in Their Battle

Hallmark #12: Looks at Risk from Everyone's Perspective

Read more about each Hallmark at:
http://nonprofitrisk.org/tools/hallmarks/intro.shtml 

Thoughts on Building a Prospective Donor Development Process

by Kevin Strickland, The Not-for-Profit Group for GuideStar.org

In today's tough economic environment, many not-for-profit organizations are struggling to grow donations. Taking a more strategic approach to donor development has never been more important. When our principals meet with those seeking donations, we hear common themes of why many are struggling to find new opportunities.

See whether any of these reasons apply to you:

.No time-Most of those responsible for development are busy, if there is
anyone responsible.
.Not sure whom to target
.Prospecting potential donors is a low return activity
.Prospecting new donors is frustrating

Getting new donors is tough. Making sure you have done everything possible to make it easier is not to say it will be easy. Here are some techniques being used by some of the most successful organizations:

1.Make sure your organization is targeting the right prospective donors.
2.Help people identify the best opportunities to target.
3.Build a plan for consistency and committing to the long haul.
4.Select the right approach to get the first appointment.
5.Prepare effectively for the first and second meeting.
6.Reinforce the process. Prospecting new donors is a team sport. Forget
freelancing. By creating opportunities for your organization to share market intelligence, effective calling techniques, and successful strategies, you build a process that can be managed over time. And you improve their chances for success.

Every Board's Guide to Strong Organizational Leadership in 2011 - Michael Peregrine, Atty

For those of you who do not subscribe to the Chronicle of
Philanthropy(www.Philanthropy.com) yet. As an attorney, Mr. Peregrine's
focus is primarily on the internal workings of the organization, which
misses some important externally focused roles of the board, but each is an
important point. Some are more applicable to larger organizations or
organizations doing certain types of work but the list is well worth a run
through at the next Executive Committee or Finance Committee meeting.

-Executive compensation continues to gain attention. When you set your CEO's
compensation, have a clear rationale that you feel comfortable you can
defend when the local press calls.

-Conflicts of Interest - take a look at anyone on your board who is paid or
their business is paid to provide services to the organization. Be able to
substantiate why they were chosen, independent of their board position.

-Risk Management, Defending your Brand and your Intellectual Property,
Protecting your Reputation

-Knowing the Competition - from other nonprofits, business, and government

-Take the Long View - don't get distracted in current issues unless you have
to, that is where the staff is more focused.

-Term Limits - bring fresh perspectives and reduce excess familiarity with
management. Being certain to find ways to maintain institutional memory.

-Board Structure, Size - Every few years take a look at the size of your
board, membership, and committee structure. How do you need to evolve?

-Donor Stewardship - Does the board know how the organization ensures a
donor's restricted gift is used for its intended purpose or how donors are
thanked or recognized?

-Audit Committee - Have you created an audit committee, apart from your
finance committee? Should you? What will they do?

-Qualifying Value -- Given the looming national discussion concerning
deficit reduction, the board should lead internal efforts to quantify the
mission-based contributions of the organization.

You can see the full article if you are a subscriber at:
www.philanthropy.com or read a more extended paraphrase
at:http://www.nptimes.com/11Jan/NPW-01242011.html?tr=y&auid=7661428  

Is Consensus Our Board Goal?

How many “real decisions” did your board make in the past year, beyond the budget and any routine signoffs that various funders might require? Do you ever wonder whether your primary goal, as a board, is to help lead the organization or to be sure everyone gets along and is not offended by a decision or position of the organization?

When I speak with board members of various nonprofit organizations, it seems pretty typical for many boards to go for months, even years, without posing a true decision for the board. How could this be? 

I regularly hear comments like: 

·         We always approve everything unanimously

·         It is uncomfortable to disagree

·         Decisions are made before the issue comes to the board

·         The board shouldn’t be just a rubber stamp

In contrast, I am supporting an organization through a strategic planning process who perceived everyone on the board was in general agreement and had full understanding of their program model and organizational priorities until they got into the planning kickoff discussion. Underlying perceptions and assumptions have come to light and now can be more clearly defined and stated.

If you are a CEO or board leader, these possibilities can feel uncomfortable because it can be difficult to actually get things done if every  decision is opened up to broad discussion. In addition, board members are usually not “experts” on the particular topic at hand and it takes time to appropriately equip your board team to have critical discussion and make important decisions.

A Starting Point:

·         Confirm what authority the staff leader has to make decisions – most organization decisions should be made by the CEO/Executive Director within the constraints of the budget and strategic plan

·         With the full board, define the expectations of the Executive Committee in determining what discussions and decisions come to the board. Define what decisions, if any, the Executive Committee will make.

·         Focus board discussions around future issues and high level discussions of who you serve and how you allocate resources to best accomplish your mission.

·         Don’t bring a decision to the board for approval if the CEO/Executive Director has the authority to make the decision – put it in the CEOs Report as an FYI

·         Clarify what your bylaws say about making decisions. Most boards make most decisions with the majority of members in attendance(assuming quorum). Learn to disagree with each other respectfully and allow time for discussion separate from the decision.

·         How can you better equip your board members to understand the people you serve and the way you do your work?  They will make better decisions and share your story with more confidence and clarity.

·         Do not get stuck in consensus or unanimous mode, because it can empower one or two individuals to control the destiny of the organization by withholding their votes.

·         It is important for board members who disagree to be willing to support the decision after their perspective has been acknowledged and considered.

By Bryan Orander, President, Charitable Advisor and Not-for-Profit News

Welcome to the Age of the New Normal (www.Guidestar.org )

Partly due to the Great Recession, partly due to rapid advances in technology, and in part due to changes in our cultural norms, we have entered into the Age of the New Normal. And this New Normal is affecting every facet of how nonprofit organizations conduct their businesses, from raising funds to using new technologies to workplace issues.

To stay current and viable as an organization in this Age of the New Normal, here are just a few of the questions that need answers:

· How dependent are we on government funding?

· Do we still believe that marketing and branding would make us look too much like the for-profit sector?

· Are we still trying to raise money under the rubric of being a "charity that makes a difference"?

· How well do we collect and leverage our data?

· How well do our employees work together, especially employees from different age groups?

· Are we getting the most out of our volunteers?

· What about our use of technology?

Read the “right answers” in the full article.

How could 'Walking for Dreams 2011' benefit your Organization?

Last year, 30 nonprofits recruited over 1000 walkers and raised more than $91,000. Over the past 8 years, close to 100 different organizations have raised hundreds of thousands of dollars, in total.

I (Bryan) have been involved since the 2nd or 3rd year walking for several different organizations. I think of 'Walking for Dreams' as the walk-a-thon event for organizations who: 1) aren't big enough to do their own event or 2) don't want to spend valuable volunteer or staff time on event organizing, or 3) want to gather a group of their supporters around fund raising for one particular program.

Here's how it works: There is a $300 upfront fee but then the Sycamore Foundation plans, manages, and runs the event. They even provide an on-line donation website where your walkers can form teams and receive donations. All your nonprofit does is solicit walkers to participate and raise funds for your organization. Whether you have 5 walkers or 50, it is a fun event and can raise a meaningful amount of money for the effort you invest.

Promoted as the 'Walking for Dreams Family and Pet 5k Walk', the event encompasses just a couple hours of a beautiful Sunday afternoon on the scenic Canal Walk downtown. The energy is terrific, the colors are bright, the faces are happy. Each organization is assigned a table to greet and gather their walkers plus promote their organization to others in attendance. Everyone steps out together and then winds their way through the walk route and back to food and festivities at their own pace.

A Walk-a-thon event is a great way to introduce people to your organization, a good strategy to give reluctant board members or staff a 'safe' way to talk about your organization with friends and family, and a nice time for social connection between people who care about your organization.

To learn more or get signed up for the May 22, 2011 event, plan to attend the informational meeting on Friday, January 14 at 8:30 AM at the Irvington Office Center (338 S. Arlington Avenue).  For more details you can also visit www.WalkingforDreams.org or call 317-260-0669.
Bryan