Choosing an Auditor

Steven K. Stucky, CPA, Sikich LLP

Being part of a non-profit organization, you know how important it is to timely and accurately report your financial information. These include how much money you are receiving in donations and for what activities those funds are being used. Though many non-profits are not required to have audits performed, your organization’s bylaws may require one.

How do you go about selecting an auditor?

1. Qualifications: First and foremost, find a few potential candidate firms that have the capabilities for which you are looking and dig into their qualifications. Who are the individual staff members with whom you’ll be working directly?
2. Experience: Do they have audit experience in the non-profit sector, or even better, do they have dedicated teams that only work with non-profit organizations? What is their reputation in the industry?
3. Geography: Is it important to have a local auditor, or can you work remotely with one? If you want a local auditor, does the firm have an office in your geographic area?
4. Education: Regulations and laws are constantly changing. How do your audit candidates keep current in the non-profit sector? Are they personally involved with any non-profit organizations at the leadership level?
5. Services: Is it possible that you’ll want or require other services in the future, other than audits? If so, look into a firm that can provide a wide range of services—whether that’s additional tax-related services or even human resources, marketing or technology consulting. Keep in mind that these additional services do not create a conflict of interest with the audit.

The bottom line: Choose an auditor with whom you are comfortable working. Take the time to request proposals, examine what each firm has to offer, engage in interviews with candidates and ensure that your selection is the best fit.

FMI, contact By Steven K. Stucky, CPA; Partner, Sikich LLP. Steven can be reached at 317-842-4466 sstucky@sikich.com.

Surprise People!

Those were the parting words of Michael Kaiser, the President of the Kennedy Center (for the performing arts) and a nationally recognized guru in revitalizing and rejuvenating struggling arts organizations. He joined a panel of local arts leaders in discussing the importance of arts to our community and strategies to strengthen local arts organizations. The session was initiated by Kathleen Hacker of UIndy and took place before a full house at the DeHaan Fine Arts Center on the UIndy campus. Dennis Ryerson, former publisher of the Indy Star was moderator. I have read several of Mr. Kaiser’s books, including “Art of the Turnaround” and really appreciate his perspectives. A few of his comments that stood out to me:

General
- Build a positive cycle based on “Great Art, Well Marketed” that creates a “family” of active supporters that “attracts funds” through attendance, donations, and sponsorships and supports more “Great Art”.
- Plan your programming several years out so you can be ambitious and rally support
- Most organizations should be doing something to surprise their “family” and the community at least four times each year – large arts organization should aim for monthly.
- There are not too many arts organizations but many are not providing “Great Art, Well Marketed”.
- Institutional marketing, making a name for the organization, is at least as important as marketing specific performances in building financial support.

Economics
- There are limited economic efficiencies possible in the performance of most art forms.
- Our venues limit our options – locking ourselves into a facility limits our flexibility and earned income potential.
- It would make a dramatic difference if arts organizations put the same energy into developing managers, audiences, and resources, as they put into developing their programs, artists, and artistic directors.
- It is common for a mainstream arts organization to raise 60% plus of its support from individual donors and corporations, that % drops to 8% for arts organizations in minority communities who are mainly supported by government and foundations.

I refrained from asking him my question about whether there have been any communities who have recently established United Arts Funds or workplace giving programs to promote arts in a broader context to their communities. Cincinnati and Louisville created the first programs in 1949 and now they exist in more than 60 U.S. cities raising $10s of millions of dollars, and just as importantly, visibility and buy-in for the arts. Maybe he would respond to an e-mail.

For more information
- History of United Arts Funds (Cincy efforts www.theartswave.org)
- Michael Kaiser’s efforts in training and educating arts leaders at www.ArtsManager.org
- Jay Harvey at the Indianapolis Star did a nice job capturing the conversation.

Be part of 'Walking for Dreams 2013', Raise $$

Last year, over 1500 walkers raised over $100,000 for the 35 participating nonprofits. Over the past 8 years, close to 100 organizations have raised hundreds of thousands of dollars, in total. I have been involved since the 2nd or 3rd year. 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 $400 upfront fee, but then the Sycamore Foundation plans, manages, and runs the event and your organization keeps the remainder of funds that you raise. 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.

I have discovered that 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 'harmless' 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 your organization signed up for the May 19, 2013 event, visit: www.WalkingforDreams.org.

4 Questions to Manage Non-profit Staff Turnover

By Joyce Grenis, Senior Vice President of Human Resource Consulting Services, Sikich LLP

The 2012 Nonprofit Employment Trends Survey found that as the economy begins to rebound, non-profit leaders anticipate an increase in employee turnover. Whether these employees decide to leave because of their salary levels, personal reasons or overall dissatisfaction with the organization, one thing is certain—the focus will be on reducing turnover as a critical way to save money and retain top-quality workers.

1. Who are my top performers, and what is the risk of losing these employees? You should understand what keeps these individuals at your organization. Do you know what they want in their careers? And more importantly, can you give that to them?

2. Am I recognizing top performers, or do I treat everyone the same regardless of level of performance? Although high-performance employees like to be recognized financially, they also enjoy non-financial recognition. Do you have an incentive program in place, or a regular newsletter that highlights great work?

3. Are my employees’ salaries and benefits competitive in the sector? Work with a human resources professional to determine what is considered competitive in terms of non-profit salaries and benefits. Are your salaries in line with the market? Do you offer benefits that help your employees, such as comprehensive medical insurance, flexible work schedules and health and wellness programs? If your organization is behind, it’s probably time to rethink this part of your HR function.

4. Do I have supervisors/managers who understand how to motivate the staff? More than 1 million working individuals in the United States participated in a Gallup poll that found the number-one reason why people quit their jobs—their boss. Take a deeper look into how your supervisors and managers are leading their direct staff. Start with an employee satisfaction survey (it can be anonymous) and ask employees what would motivate them. When results are in, make sure management knows what is expected of them, and provide ways they can motivate the staff better based on survey answers and what is realistic for the organization.

For more information on HR related resources for non-profit organizations, such as compliance and compensation, please contact Joyce Grenis in our Indianapolis office at 317-842-4466 or visit www.sikich.com/hr.

Sikich LLP
Accounting // Advisory // Technology // Managed Services

View the 2012 Nonprofit Employment Trends Survey.

Contribution Versus Exchange Transaction - BKD Insights

All not-for-profit organizations fortunate enough to receive government and private grants must read, interpret and comply with those grant agreements. One of the key issues to address at the inception of a grant is whether the grant represents a contribution or an exchange transaction; the accounting could vary significantly based upon the classification.

Accounting Standards Codification (ASC) 958-605-55 provides guidance to distinguish contributions from exchange transactions. In general, the accounting and reporting of grants is determined by the underlying substance of the transaction. The term "grant" is used broadly and can refer not only to contributions, but to assets transferred in an exchange transaction. Each grant agreement should be carefully reviewed in making this determination, as it may be entirely a contribution, entirely an exchange transaction or a combination of the two.

An example of an exchange transaction that involves a private resource provider would be a corporate entity that sponsors research and development at a research university. The grant agreement includes the corporate entity's right to retain the propriety rights to the exclusive knowledge gained from the research, including patents, copyrights or other privileges. The value retained by the corporate entity is more than incidental and, therefore, would qualify as an exchange transaction.

An example of a transaction considered to be in part a contribution and an exchange would be a transfer of land to an NPO at a price significantly lower than its fair market value with no unstated right or privileges accruing to the donor. The difference between the fair market value and amount paid would be a contribution, and the amount paid would be considered an exchange transaction.

Read the full article to learn the six distinguishing characteristics.

A Grant Officer's Pet Peeve

We don’t solicit entries from guest writers beyond our sponsors but every once in awhile someone will offer something that seems too interesting to pass up. Following is an abbreviated version of a note I received from a program officer in a local foundation, used with permission. It might prompt you to inquire with your funding representatives about how they want to be kept informed of your efforts and give you an extra incentive to scrub your mailing list. Bryan O.

Dear Executive Director:
It is that time of year when you, your board, and staff are focusing on end of year appeals to your donors. Your grant officers are certainly pleased that you are working to tell the story of your organization’s work and impact, and to inspire support. This year, would you please take time to clean up your mailing list? For example, I should not be receiving your annual appeal in my role as your grants officer. There are days when we receive many copies of the same appeal, addressed to each and every staff member who has ever worked for the foundation – or so it seems.
I recently saw a Facebook post from a not-for-profit that was so happy to have a volunteer preparing their annual fund letters. This morning I got that organization’s annual letter here at the foundation. The mailing was sent with full first class postage and included a 2 page letter hand annotated with underlining, notes and exclamation points; an annual fund insert, and a return envelope. Your appeal to me represents time and money that are going straight to the recycling bin.

Your grants officers want your organization to succeed in all aspects of your organization’s work—programming, community impact, funds development. Please don’t undermine our confidence in the first two by failing to attend to the details of the third.

With every good wish for your success,

Your Grants Officer

Indiana Philanthropy Day: November 15 sponsored by: Johnson Grossnickle and Associates

As your organization enters the end-of-year fundraising push, please take advantage of Indiana Philanthropy Day’s outstanding educational and networking opportunities on Thursday, November 15, 2012 from 8:00 a.m.- 4:30 p.m. at the Hilton Indianapolis Hotel & Suites, 120 W. Market Street, Indianapolis.

The purpose of Indiana Philanthropy Day is to recognize and celebrate the great contributions of philanthropy and expand knowledge through education and networking. Keynote speakers include Tom Ahern (Ahern Communications) presenting “Smart Donor Communications and Maximizing Return on Investment” and Dan Pallotta (Pallotta Team Works) presenting “Nonprofits Need to Invest and Innovate.” The day’s agenda includes educational breakout sessions, the Indiana Philanthropy Awards Luncheon, and many networking opportunities.

Click here to view the full agenda, registration details, and education session descriptions.

Please join us in congratulating this year’s Indiana Philanthropy Awards winners - see full list.