Nonprofit Harvest

In my last post I shared some New Year’s Resolutions, and TechSoup had a similar idea with a series of technology resolutions, including #3: This Year, We Will Manage Our Finances Better.  This is a great resource that rounds up available nonprofit financial management and accounting options.  It explains the different products (with links to their TechSoup pages) and even has some resources to help you find the best software to meet your needs. For anyone unfamiliar with TechSoup and their nonprofit discounts, add that to your 2010 to-do list.

Here are a few other things for that to-do list.

Assess Your Hyperlocal Conditions

We can all agree that local conditions vary. I just returned from a brief vacation to sunny Florida, and these words have never felt more true.  Nonprofit Quarterly took used idea as the theme for their Winter 2010 issue.

Local Conditions

There are many factors that impact your nonprofit, such as your funding sources, field of service, and the needs of your constituents.  Let’s think of these as the local conditions. The Minnesota Council of Nonprofits and Minnesota Council on Foundations have updated information on how the economy is affecting funders and Minnesota nonprofits in general. National Organizations such as The Foundation Center, NFF (view information from 2009 or take the 2010 survey), and the National Council of Nonprofits all have good resources that can help you take action.  However, these reports can only take you so far.

Go Hyperlocal

The most useful information is the “hyperlocal” conditions - what is happening on the ground at your nonprofit. As our ED, Kate Barr, says in her article for Nonprofit Quarterly:

“In all forecasts, ‘local conditions vary,’ and the most relevant information is the situation at an individual nonprofit organization. Only by clearly understanding its own financial position, strengths, and risks can a nonprofit develop strategies to respond to the economy and plan for the future.”

How can you get a handle on the conditions at your nonprofit? Our Assessment of Recession Risk and Preparedness for Nonprofit Organizations is a tool designed to help you quickly assess your organization. By answering these 20 questions, you will identify potential risk factors, immediate priorities, and proactive steps to take right away. Keep in mind; this is a first step, not an in-depth organizational assessment.

Whatever is happening on the ground at your organization, the Recession Preparedness Assessment provides useful information to help you better understand what’s happening and develop strategic responses. You can read the full article in Nonprofit Quarterly or download the Assessment from our website.

Re-Set Your Internal Controls

Internal controls are another factor that can impact a nonprofit’s stability. Smaller organizations in particular are often cited for lacking adequate segregation of duties in management letters.  Blue Avocado’s recent article,  Five Internal Controls for the Very Small Nonprofit, is a great starting point to help you strengthen your internal controls.  CPA Carl Ho outlines five main categories that are crucial, and do-able, for even the smallest organizations:

1. Set the control environment
2. Assign responsibilities
3. Physical controls - lock it up
4. Cash, always have two people count it together
5. Reconcile the bank statement

Read the whole article for additional suggestions and examples.  For more on this topic, you can participate in our webinar on February 22nd, Financial Policies for Internal Control.  You’ll receive sample board and management policies and learn how to customize them for your organization.

Know Your True Program Costs

More on everyone’s favorite topic - overhead! (If you missed our past blogs about overhead, and why we think it’s an overrated metric, start here.) Last week the Chronicle of Philanthropy hosted a discussion on Making Smart Decisions About Overhead Costs.  What cannot be said enough is the importance of knowing (and then budgeting for) the true, full costs of your programs and operations. As Daniel Stid of The BridgeSpan Group stated:

It goes without saying (but perhaps we should say it!) that having a clear view of the full direct and indirect costs of delivering a program is essential. We often encounter situations in which clients have failed to budget even for their full direct costs let alone so called overhead.

It has to be said, explicitly, because too many organizations do not know the actual costs of delivering their services.  We have a workshop dedicated to this topic, and I encourage any Minnesotans with questions to attend our April training Calculating True Program Costs.  If you don’t live here, or don’t want to wait until April, check out Nonprofit Cost Analysis: Introduction from the BridgeSpan Group.  It’s a thorough introduction and very helpful, although it may not be the most accessible to those without a strong financial foundation.

Update Your Bookmarks!

Intrepid nonprofit accounting guru and friend of the blog Alan Strand has has moved. Not-For-Profit Accounting remains a helpful resource, but for new content from Alan visit Nonprofit Accounting, a resource from the Nonprofit Center in Washington State.

Training for Minnesota Nonprofits, And Beyond

This is an exciting time at Nonprofits Assistance Fund. This week we unveiled our new webinar trainings, which have been in the works all summer.

Photo Credit: jurvetson on flickr

We’re looking forward to having our trainings available to nonprofit leaders across the state of Minnesota, as well as our friends all over the country.

If you have been hoping your friendly nonprofit finance geeks (that’s us!) would visit your neighborhood, the wait is over.  Participate in our webinars and share any thoughts you have about the experience.  We are very excited about this expansion of our training program and want it to be as helpful as possible.  Your participation and feedback will make it a stronger service.

As online learning and communications tools continue to evolve, we’ll do our best to take advantage of new ways to serve the nonprofit community. We’ll continue to ask how technology can enhance our work and deliver services to nonprofits in and outside of the Twin Cities metro area.  If you have ideas for us, share them here, on our facebook page, or contact @NAFund on twitter.

Additional Online Training Opportunities

There are many other online learning options for nonprofit staff and board members.  Here are some interesting opportunities that you can explore to take your work to the next level:

• Foundation Center’s Events Archive (their podcasts are also available on iTunes)
  
• Chronicle of Philanthropy Live Discussions 
• Pro Bono Partnership of Atlanta videos and webinars on nonprofit legal issues
• Arts Enterprise: Art as Business as Art course from UW-Madison and the Artful Manager,  Andrew Taylor (podcasts available through iTunes U)

Reconsidering Your Budget

Last week, Jeanne Bell wrote an excellent article for Blue Avocado, Focus on the Destination, Not the Route (Budget)!   In a nutshell, she is arguing that, especially in an uncertain economic climate, rolling projections and organizational goals are more valuable than an annual budget.

She offers great rationale for why this shift in focus matters, as well as some practical steps to get started, included:

Do a revised projection at the end of the current quarter, and have the management team and the board discuss it. Consider these questions:

• What are the key discrepancies between what’s in the budget and what we now believe is going to happen?
• Given this information, do we need to expect a different financial outcome for the year than what the budget was meant to achieve?
• What changes need to be made in the management of any revenue or expense items?
• What implications are there for the next fiscal year, given the projected financial result of this year?

Nonprofit Harvest: Employee Benefits

This week’s Chronicle of Philanthropy Live Discussion was on Employee Benefits at Nonprofit Groups.  It was a timely discussion, especially given a recent report by the Johns Hopkins Listening Post Project (a summary is available on MCF’s Philanthropy Potluck blog).

The discussion pointed out some useful resources to help nonprofits consider ways to limit costs while still providing benefits and professional development opportunities to their employees:

• Rethinking Benefits for Nonprofit Employees from CommonGood Careers:
• Nonprofit Workforce Action Agenda from Listening Post Project

Employee Compensation

Recently there’s been a lot of chatter about nonprofit wages in the blogosphere and beyond. Debating these questions is important, but in this age of tight budgets, are there any steps an organization can take to improve employee compensation right now? Especially for lower wage employees who are critical to an organization’s success, but are sometimes left out of this conversation.

Blue Avocado gets to the heart of the matter in the article Low-Wage Workers and Nonprofits:

While raising salaries would be, by far, the best way to support these important staff, doing so isn’t possible for most nonprofits: certainly not in the short term, and often impossible for the long term given business models and funding constraints…

Although the challenge of providing adequate compensation to low-wage employees may seem overwhelming, especially during a financial crisis, the fact is that nonprofits, consultants and funders can consider a number of helpful options without torpedoing the budget.

The article offers a range of options, which fall into three main categories:

• Steps to take relatively quickly at little or no cost
• Intermediate steps
• More far-reaching steps

These ideas are not intended to replace a real conversation about wages, especially one that goes beyond executive compensation.  But they are a place to start. Add your thoughts and suggestions here or leave a comment at Blue Avocado.

Related HR Resources

Not-For-Profit Accounting shares some information from the intersection of HR and accounting.  This post unpacks the sometimes woolly world of employee classifications — exempt vs. nonexempt, independent contractor vs. employee — and provides information on payroll systems.

If you have specific questions about nonprofit account, I suggest submitting them to Alan.  His regular Q&A feature is a great resource for financial managers.

New Resource Collection

Blue Avocado has compiled all of their articles about nonprofits and the economy. Visit this archive for information on financial management, HR, and more.

Harvest

• IRS Form 990 Filing Tips: Part VI, Governance 
• Nonprofit Policy News | May 2009
  • Federal Legislative and Regulatory Developments
  • IRS makes public its 2009- 2013 strategic plan
• Free Foundation Center Widgets
• Charities Loosening Strings on Arts Grants

The administrative cost ratio, always the topic of heated discussion, is in the news again. Not-For Profit Accounting blogged on the topic this week, unpacking the accounting jargon and rules:

A nonprofit’s expenses are classified by what they were used for within the three broad categories / functional areas of administration, program and fundraising.  Program costs are considered direct expenses, expenses that have a direct effect on fulfilling the mission of the nonprofit organization.  Administrative costs are indirect expenses, they affect the mission of the organization indirectly.  The organization can’t get by without those expenses but, according to the IRS and others, they have no direct effect on the mission.

This point, of course, can be argued and I think it is where much of the confusion resides when talking about classifying nonprofit expenses.  But this is the world we operate in and those are the rules, so it is best to make sure we understand the rules so we can present our numbers in the most honest fashion to show what it costs to do the work we do.

He also contributed his take on what the ratio really means:

One financial ratio used in isolation is no true measure of any organization.  Only by looking at both the numbers and the program outcomes can we judge whether an organization is effective or not.

There’s too much at stake right now to use this ratio alone to measure effectiveness, let alone as a way to compete with one another for already diminished resources.  Kate brought up a similar question last year in her post, Irrelevant Ratios:

We need a two-step retirement plan. First is to jointly stop using the ratio as a way to distinguish our organizations from others, in an unhealthy type of competition, as in “our administrative ratio only is 5%, so your donated dollar will go farther with us.” The second is to find a better way to convey the quality and effectiveness of the work that you do, which requires a real method of evaluating and communicating the programs and impact on clients.

Administrative costs are part of doing business.  It takes time and money to run an effective organization, and being efficient with those dollars is not the same as being effective with them.

End of Session Resources

• Weigh-in on unallotment before Governor acts from MCN’s Nonprofit Policy News
• The Legislature has Left the Building, Pawlenty’s Poised to Make Cuts-What’s a Nonprofit to Do? from Philanthropy Potluck

This Week’s Harvest

• The Cohen Report: Finding Nonprofits in President Obama’s FY2010 Budget
• Philanthropists Set Spending Deadlines from the Wall Street Journal
• New to the Nonprofit Sector? Here’s a BRIEF Overview from Nonprofit Leadership 601
  
• Survival Strategies for the Arts from Blue Avocado

The Federal Budget

On Thursday, May 7th the Obama Administration presented their 2010 federal budget.  Here are a few resources to help you understand how these budget decisions may impact your organization.

• The Chronicle of Philanthropy has a good overview, Nonprofit Groups Receive Mixed Results in Obama’s Budget.

• Minnesota Budget Bites participated in the telephone budget briefings that highlighted key aspects on the budget.  Read their takeaways here.

• Learn more about what this budget means for your state with the OMB’s state by state fact sheets.
  • Minnesota

• If you’re on Twitter, follow the conversation under the #budgetnp hashtag

2009 Giving Forecast

This week the Minnesota Council of Foundations issued an update on how Minnesota’s foundation are responding to the economic crisis.  I suggest carefully reviewing the information to see if your funders giving priorities or guidelines have changed.

For organizations outside of Minnesota, the Foundation Center is doing a great job of gathering information and analysis on the philanthropic community, including a similar giving forecast for national funders.

Foundation Updates

• Despite Decline in Assets, Foundations Are Responding to Those Affected by Recession

• Responding to Economic Turmoil in the Arts

This Week’s Harvest

• Filing the E-Postcard?  The deadline is next Friday, May 15th.

• Nonprofit News Roundup: Laws and Money from Not-For Profit Accounting

• What’s the Point of a Nonprofit Board, Anyway? from Blue Avocado

• The Chronicle of Philanthropy and the Nonprofit Finance Fund are offering a special series of live discussions on Financial Management in Tough Times.
  • Thursday, May 14: Financing options
  • Thursday May28: New ways for arts organizations to finance their operations
  • Thursday June 11: The changing role of foundations
  • Thursday June 25: Making capital campaigns work in the recession

Serve America Act

National Volunteer Week honors the important work of volunteers in our communities.  It seems fitting that President Obama signed the Serve America Act during this time.

In addition to encouraging service, the legislation includes capacity building resources specifically designed for small to mid-sized organizations. For more information, read Kate’s thoughts or learn more about the Serve America Act.

Volunteer Management Resources

We know that volunteers provide a great boost to nonprofits, but they also require specific management resources.  Here are some tools to help nonprofits get the most value out of their volunteers:

• Tracking Volunteer Time to Boost Your Bottom Line: A Complete Accounting Guide from Blue Avocado
• Value of Volunteer Time from Independent Sector

Nonprofit Accounting

Speaking of accounting systems, Alan at Not-For-Profit Accounting makes an excellent case for their importance:

We go into the sector because we care about the mission, making a difference, building community, or any other number of reasons.  Not so we can crunch numbers.

But some people are shocked when they realize just how much regulation, filing and paperwork comes with a tax exempt status…The more time it takes to hammer those reports together, the less time you have to do other things like mission and fundraising work.  The harder it is to compile good financial information, the greater the likelihood of it not being as accurate as it should be.  As has been stated more than a few times,  you can’t figure out what you are going to do financially if you don’t know where you stand right now.  Good cash flow planning and budgeting can only be done if you have a system in place that can get you usable information in a timely fashion.

His post, Why You Need an Accounting System also provides resources to help you get you started.  For more ideas on what questions to ask if you need to develop your own system, read Help! We need an accounting system!

This Week’s Harvest

• Two-Thirds of Foundations to Reduce Grantmaking in 2009 from PhilanTopic
• Helping Themselves from the Wall Street
• The Recession Brings Tough Challenges and Opportunities, Say Experts on Socially Run Businesses

If you are looking for volunteer opportunities in the Twin Cities metro area, I suggest visiting HandsOn Twin Cities or MAP for Nonprofits.