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I am pleased with the service and patience we have received. Thanks to your service, we have greater confidence in our financial position. Professional... helpful... cooperative... and accommodating to our church's needs are characteristics that describe our experience with Patrick and Raines. They add credibility, while simplifying our church's financial management. I eagerly recommend them. Thanks again for your help. It's getting better and better.

Dr. Randy T. Hodges, Senior Pastor
Hernando Church of the Nazarene

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Keep nonprofit board meetings short and sweet

Whether your not-for-profit is continuing to hold videoconference board meetings or is back to in-person gatherings, you don’t want to waste members’ time. Board meetings need to be long enough to accomplish agenda items and keep your organization on track, but not so long that the meetings become tedious and unproductive. The key is good planning.

Cover pressing concerns

Once you’ve set a meeting date, prepare an agenda. Email board members to ask if there’s anything they want to add. This will help ensure all pressing concerns can be covered and minimize the chances of “surprise” issues hijacking the meeting.

For each item, the agenda should provide a timetable and assign responsibility to specific members. Include at least one board vote to reinforce a sense of purpose and accomplishment, but be careful not to cram too much into your agenda. Otherwise, the meeting is likely to feel rushed and some items may need to be postponed.

Email a board packet at least one to two days before the meeting. This packet should consist of the agenda, minutes from the previous meeting and materials relevant to new agenda items, such as financial statements and project proposals.

Stick to the agenda

Start with a short pre-meeting reception that allows members to chat. Some board members have little time to spare, but most will welcome the opportunity to get to know their colleagues.

Once the meeting starts, your executive director and board chair should stick to the agenda and keep things moving. This means imposing a time limit on discussions and calling time when necessary — particularly if one or two individuals are dominating the conversation.

Encourage a vote after a reasonable period. But if your organization requires a consensus (as opposed to a majority vote), the board may not be able to reach a decision in one meeting. If members need more time to think about an issue, postpone the decision to a future date and move on. Be sure to end the meeting on a positive note by thanking members for their time.

Complete post-meeting tasks

Board meetings can’t be effective if there’s no follow-up. Find answers and supporting materials for any questions that might have arisen during the meeting and make sure unresolved items are placed on the next meeting’s agenda.

Also ensure that board members are fulfilling their commitments to your organization and fellow members. If their busy schedules are impeding them, step in and help. If the issue continues, consider replacing the board member.

What matters

Your board members are likely busy professionals who volunteer to serve your nonprofit. Respect their time by focusing on what matters during meetings. Contact us if you have any questions or need any more tips by emailing Lynn@onlinestewardship.com.

© 2021


Your nonprofit may have an internal controls gap

The typical defrauded not-for-profit loses $75,000 per fraud incident, according to the Association of Certified Fraud Examiners. And that doesn’t account for the negative publicity and subsequent lost donations and support that often follow fraud. Although no preventive measure is 100% effective, strong internal controls can greatly reduce the risk that a crooked staffer or outside criminal will find gaps in your fortress.

Special vulnerabilities

Internal controls are policies and procedures that govern everything from accepting cash to signing checks to training staff to keeping your IT network secure. Most nonprofits have at least a rudimentary set of internal controls, but dishonest employees and other criminals can usually find gaps in environments where controls are only somewhat effective or inadequately followed.

Why might nonprofits skimp on controls or enforcement? Typically, they devote the largest chunk of their budgets to programming and may not allocate enough dollars to fraud prevention. This can be especially problematic in organizations where executives or board members indicate that fraud prevention is low on their priority list. Nonprofit boards may also inadvertently enable fraud when they place too much trust in the executive director and fail to challenge that person’s financial representations. Unlike their for-profit counterparts, nonprofit board members may lack financial oversight experience.

Trust is another potential Achilles’ heel. Nonprofits often regard their staff and dedicated volunteers as family. They may allow managers to override internal controls and volunteers to accept cash donations without oversight — both risky activities.

Don’t let your guard down

Some of the most common types of employee theft in nonprofit organizations are check tampering, expense reimbursement fraud and billing schemes. But proper segregation of duties — for example, assigning account reconciliation and fund depositing to two different staff members — is a relatively easy and quite effective method of preventing such fraud. Strong management oversight and confidential fraud hotlines open to all stakeholders can also reduce employee theft.

Indeed, although you should trust staffers, you should also verify what they tell you. Conduct background checks on all prospective hires, as well as volunteers who’ll be handling money or financial records. Also, provide an orientation to new board members to ensure they have a clear understanding of their fiduciary role.

Finally, handle fraud incidents seriously. Many nonprofits choose to quietly fire thieves and sweep their actions under the rug. However, this tends to encourage fraud by telling potential thieves that the consequences of getting caught are relatively minor. If an incident is hushed up, rumors could do more reputational damage than publicly addressing the issue head-on. It’s better to file a police report, consult an attorney and inform major stakeholders about the incident.

Prioritizing risks

If you’re not sure where vulnerabilities lie or how your budget can be stretched to allocate more resources to fraud prevention, contact us by emailing Lynn@onlinestewardship.com. We can help you prioritize the most serious risks and find affordable solutions for closing control gaps.

© 2021


Put some muscle behind your nonprofit’s capacity-building effort

Economic instability caused by the pandemic may have your nonprofit scrambling to find funding. But just as important is making internal adjustments that build your nonprofit’s capacity to fulfill its long-term mission. However, you may want to tweak the standard capacity-building process.

Making a case

The National Council of Nonprofits defines “capacity building” as the “many different types of activities that are all designed to improve and enhance a nonprofit’s ability to achieve its mission and sustain itself over time.” It refers to whatever a particular organization needs to reach the next level of maturity — whether operational, financial, programmatic or organizational.

Businesses regularly engage in such macro-level initiatives, but nonprofits tend to take more of a project-level perspective. The result can be instability that undermines the overall organization. However, capacity building can enable your nonprofit to strengthen its organizational infrastructure, including facilities, equipment or functions such as payroll and accounting. For example, you could target your management and governance capacity by formulating a succession plan.

Joining in

The capacity building process typically begins by identifying an organization’s strengths and weaknesses in a variety of capacities. You might want to launch client surveys or structured self-assessments where various capacities are rated on a scale of 1 to 5.

As an example, your organization might learn that its strengths include leadership from its frontline workers, and its weaknesses include outcome measurement. The next step is to devise methods to mitigate the weaknesses, right? Not necessarily, at least according to research conducted by Stanford Social Innovation Review (SSIR). The researchers say that, while that approach can indeed make poor outcome measurement less glaring two years from now, your nonprofit’s impact on its targeted populations likely won’t have improved much.

Instead, SSIR endorses a strengths- or assets-based route to capacity building. This means that you leverage your strengths, increasing their capacities significantly. So using the earlier example, you’d build on frontline leadership strength by involving worker-leaders in high-level strategic planning. Their in-depth knowledge of day-to-day activities can help shape your vision going forward. Once you’ve made the most of your strengths, you can apply them to address weaknesses in ways that best serve your nonprofit’s needs.

Bottom line

Capacity-building is a worthy pursuit for any nonprofit. But instead of focusing on inadequacies, you may want to concentrate on pumping up your strengths. Contact us for help by emailing Lynn@onlinestewardship.com for more information and additional management tips.

© 2021


HR outsourcing: Considerations for nonprofits

The global market for human resources outsourcing was approximately $32.8 billion in 2020 and is projected to rise to $45.8 billion by 2027, according to market research company Reportlinker. Should your not-for-profit join the many organizations that have already determined that outsourcing HR makes financial and operational sense? Here’s what you should consider before acting.

Take a hard look

First, decide which segments of the HR function you would farm out. Take a look at:

  • Payroll,
  • Benefits planning and administration,
  • Compliance monitoring,
  • Leave management,
  • Recruiting,
  • Training, and
  • Performance reviews.

These are all labor-intensive responsibilities where expertise counts. Transferring all or some of them to the right outside party can vault your organization to a higher level of professionalism and efficiency.

Next, perform a cost-benefit analysis. Even if the cost is more to outsource, you may decide that the extra dollars are worth freeing up staff hours for other initiatives. Factor in the drawbacks to outsourcing. Certain tasks may require an understanding of your organization’s culture and history to be effective. Also think about the impact of letting go HR people currently on staff.

Gather information

Get buy-in from your staff and board of directors before you decide to vet vendors. When you start screening providers, ask questions about the scope of their service, how long they’ve been in business and how many nonprofit clients they have in your area and sector.

Before deciding on one, make sure you understand what and how it charges — for example, by the hour or on retainer. And be clear about whether services will be provided on-site, off-site or in a combination of the two. It’s also important to set mutual expectations, including what the provider will depend on your staff and board to do. Once you’ve selected a vendor, ask your attorney to review the contract.

Don’t neglect controls

As you should do with all of your nonprofit’s operations, establish new internal controls. For example, designate an internal manager to closely monitor the outsourced work and arrange for that person and another manager (such as your executive director) to review the service’s invoices.

Contact us by emailing Lynn@OnlineStewardship.com for HR outsourcing recommendations. We can also help you implement new internal controls that reduce fraud and financial risk.

© 2021


Is your nonprofit complying with federal procurement requirements?

“Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (Uniform Guidance) applies to all not-for-profits that accept federal funding. It has been updated and amended several times, most recently in 2020. So if you haven’t reviewed your own organization’s procurement policies lately, now’s a good time to ensure you’re in compliance.

Pay attention to amounts

Uniform Guidance imposes some strict purchasing requirements on nonprofits receiving federal funds. For example, you must pay attention to the amount of a purchase because it determines the procurement methods you need to employ. “Micro-purchases” of supplies or services up to $10,000 generally can be awarded without soliciting competitive quotes. But under the 2020 changes the threshold can be increased to $50,000 — and even over that amount in certain circumstances. For procurements up to $250,000 you can use the “simple acquisition” method of comparing price or rate quotes from qualified vendors.

For purchases exceeding $250,000, you must select vendors or suppliers based on publicly solicited sealed bids or competitive proposals. Select the lowest bid or the proposal most advantageous to the relevant program based on price and other factors that impact the program performance. Also perform a cost or price analysis for every purchase over $250,000, to make independent estimates before receiving bids or proposals.

Noncompetitive proposals solicited from a single source are permissible in limited circumstances. For example, they’re allowed in the event of a public emergency where the nonprofit must respond immediately.

Multiple requirements apply

Some nonprofits have found the standards challenging. Barriers to full compliance may include staff resistance or lack of time. The standards also have multiple documentation requirements.

For example, your organization must document all procurement procedures in writing. Conflict of interest policies covering employees involved in procurement as well as all entities owned by or considered “related” to your organization need to be included. And you must keep records detailing each procurement — including bids solicited, selection criteria, quotes from vendors and the final contract price. Designing a checklist that outlines the decisions needed at each purchase level may make the process more manageable.

Compliance is critical

What might happen if you fail to fully comply with the Uniform Guidance? In extreme circumstances, you could lose your funding. Reduce this risk by regularly auditing your new procedures and processes. Contact us for help by emailing Lynn@onlinestewardship.com.

© 2021


Nonprofit fundraising: From ad hoc to ongoing

When not-for-profits first start up, fundraising can be an ad hoc process, with intense campaigns followed by fallow periods. As organizations grow and acquire staff and support, they generally decide that fundraising needs to be ongoing. But it can be hard to maintain focus and momentum without a strategic fundraising plan. Here’s how to create one.

Building on past experience

The first step to a solid fundraising plan is to form a fundraising committee. This should consist of board members, your executive director and other key staffers. You may also want to include major donors and active community members.

Committee members need to start by reviewing past sources of funding and past fundraising approaches and weighing the advantages and disadvantages of each. Even if your overall fundraising efforts have been less than successful, some sources and approaches may still be worth keeping. Next, brainstorm new donation sources and methods and select those with the greatest fundraising potential.

As part of your plan, outline the roles you expect board members to play in fundraising efforts. For example, in addition to making their own donations, they can be crucial links to corporate and individual supporters.

Developing an action plan

Once the committee has developed a plan for where to seek funds and how to ask for them, it’s time to create a fundraising budget that includes operating expenses, staff costs and volunteer projections. After the plan and budget have board approval, develop an action plan for achieving each objective and assign tasks to specific individuals.

Most important, once you’ve set your plan in motion, don’t let it sit on the shelf. Regularly evaluate the plan and be ready to adapt it to organizational changes and unexpected situations. Although you want to give new fundraising initiatives time to succeed, don’t be afraid to cut your losses if it’s obvious an approach isn’t working.

Maintaining strong cash flow

Don’t wait until your nonprofit’s coffers are nearly dry before firing up a fundraising campaign. Fundraising should be ongoing and constantly evolving. Contact us by emailing Lynn@onlinestewardship.com for advice on maintaining strong cash flow.

© 2021


Tackling volunteer liability issues

During the pandemic, your not-for-profit may have been forced to operate without your dedicated volunteers. It has probably come as a great relief to welcome them back in person. However, volunteers, like employees, represent some risk to your organization. For example, you could be exposed to lawsuits if volunteers are harmed or harm others while volunteering for you.

What’s the risk?

Allegations of negligence or intentional misconduct often motivate lawsuits against nonprofits. In certain situations, responsibility for harm may be considered automatic whether or not there’s negligence or misconduct. Nonprofits also can be held liable even when volunteers act outside the scope of prescribed duties or accepted procedures.

Still, most organizations have to manage volunteer-related risks as best they can, because operating without unpaid help would be impossible. But you can use volunteers with greater confidence by adopting certain practices. Just be sure to create policies with input from legal counsel.

How do you mitigate risk?

Your volunteer recruitment process should be almost as formal and structured as your paid employee hiring process. Before seeking volunteers, develop job descriptions for open positions that outline the nature of the work to be performed, any required skills or experience, and any possible risks the job presents.

Screen prospective volunteers according to your nonprofit’s mission, programs and likely volunteer activities. Some positions will pose few risks and your screening process can be relatively basic: Ask candidates to fill out an application and submit to an interview, and then check their work and character references. Positions that carry greater risks — such as work involving children, the elderly and other vulnerable populations, or direct access to cash donations — require a more rigorous process.

Once volunteers are on board, provide training, supervision and, if necessary, discipline. At a minimum, training should involve an orientation session to explain your nonprofit’s mission and policies. Once volunteers have begun working for you, actively supervise them.

Do you need insurance?

Adequate insurance is critical. In addition to general liability coverage, your nonprofit may want to consider supplemental policies that address specific types of exposure such as medical malpractice or sexual misconduct.

Contact us

During the pandemic, your not-for-profit may have been forced to operate without your dedicated volunteers. It has probably come as a great relief to welcome them back in person. However, volunteers, like employees, represent some risk to your organization. For example, you could be exposed to lawsuits if volunteers are harmed or harm others while volunteering for you.

What’s the risk?

Allegations of negligence or intentional misconduct often motivate lawsuits against nonprofits. In certain situations, responsibility for harm may be considered automatic whether or not there’s negligence or misconduct. Nonprofits also can be held liable even when volunteers act outside the scope of prescribed duties or accepted procedures.

Still, most organizations have to manage volunteer-related risks as best they can, because operating without unpaid help would be impossible. But you can use volunteers with greater confidence by adopting certain practices. Just be sure to create policies with input from legal counsel.

How do you mitigate risk?

Your volunteer recruitment process should be almost as formal and structured as your paid employee hiring process. Before seeking volunteers, develop job descriptions for open positions that outline the nature of the work to be performed, any required skills or experience, and any possible risks the job presents.

Screen prospective volunteers according to your nonprofit’s mission, programs and likely volunteer activities. Some positions will pose few risks and your screening process can be relatively basic: Ask candidates to fill out an application and submit to an interview, and then check their work and character references. Positions that carry greater risks — such as work involving children, the elderly and other vulnerable populations, or direct access to cash donations — require a more rigorous process.

Once volunteers are on board, provide training, supervision and, if necessary, discipline. At a minimum, training should involve an orientation session to explain your nonprofit’s mission and policies. Once volunteers have begun working for you, actively supervise them.

Do you need insurance?

Adequate insurance is critical. In addition to general liability coverage, your nonprofit may want to consider supplemental policies that address specific types of exposure such as medical malpractice or sexual misconduct.

Contact us at Online Stewardship & Accounting: Lynn@onlinestewardship.com. We can help review your nonprofit’s current insurance coverage and risk mitigation policies and identify threats you may not have considered.

 

© 2021


What nonprofit board members need to know about fiduciary duties

It takes more than dedication and enthusiasm for your not-for-profit’s cause and programs to make a good board member. The most critical duty for all board members is being a fiduciary. This means, among other things, that they can be trusted to always act in their nonprofit’s best interests, avoid unnecessary risk, make decisions thoughtfully and execute them efficiently.

Core duties

Not all board members are aware of their duties — and it’s up to your organization to ensure they understand them. In general, a fiduciary has three primary duties:

  1. Care. Board members must exercise reasonable care in overseeing the organization’s financial and operational activities. Although disengaged from day-to-day affairs, they should understand the nonprofit’s mission, programs and structure, make informed decisions, and consult others — including outside experts — when appropriate.
  2. Loyalty. Board members must act solely in the best interests of the organization and its constituents, and not for personal gain.
  3. Obedience. Board members must act in accordance with the organization’s mission, charter and bylaws, and any applicable state or federal laws.

If your board members violate these duties, they may be held personally liable for any financial harm your organization suffers as a result.

Improper transactions

One of the most challenging — but critical — components of fiduciary duty is the obligation to avoid conflicts of interest. In general, a conflict of interest exists when a nonprofit organization does business with:

  • A board member,
  • An entity in which a board member has a financial interest, or
  • Another company or organization for which a board member serves as a director or trustee.

To avoid even the appearance of impropriety, your nonprofit should also treat a transaction as a conflict of interest if it involves a board member’s spouse or other family member, or an entity in which a spouse or family member has a financial interest.

The key to dealing with conflicts of interest, whether real or perceived, is disclosure. The board member involved should disclose the relevant facts to the board and abstain from any discussion or vote on the issue — unless the board determines that he or she may participate.

Educating your board

To help your board carry out its duties, provide new members with an orientation that educates them in the basics of nonprofit finance and accounting. Also regularly provide an updated list of responsibilities that covers financial documents, compliance requirements and risk management. Contact us at Online Stewardship & Accounting: Lynn@onlinestewardship.com. 

© 2021


Making the decision to hire new nonprofit staffers

Many Americans remain unemployed due to the COVID-19 pandemic — at least 9.8 million at the end of April, according to the U.S. Bureau of Labor Statistics. But that’s expected to change quickly as employers ramp up hiring activities. If your not-for-profit will soon need new staffers, you might want to start putting out feelers now.

Obviously, the decision to hire is a difficult one considering the economic uncertainty that may remain. But you also don’t want to miss out on the best talent. Here are some issues to consider.

Needs assessment

First off, do you need new employees? Even if you plan to expand services and introduce new programs, volunteers may be capable of picking up the slack. Or current staffers may be underused on projects that are stagnating or winding down. Carefully examine your nonprofit’s priorities and consider eliminating programs that aren’t meeting expectations so that you can redeploy human resources where you need them most.

If staffers have been working from home, you may want to call them back to the office (with any necessary safety protocols) before making the decision to hire. It’s possible some won’t want to return to in-person work. On the other hand, you may find you have enough hands once everyone’s back on site.

Financial considerations

The pandemic took a financial toll on most nonprofits. Others, however, have actually experienced outpourings of support. Whatever your situation, ensure you can fit any new staffers into your budget.

Even if you can, the fact remains that nonprofits are obligated to be careful financial stewards. Donors, watchdog groups and the media demand it. So consider how you’ll make the most of any new staffing budget before you spend it.

Outsourcing options

Remember that when you hire full-time employees, the expense isn’t limited to salaries or hourly wages — you’ll also be paying for benefits. In many cases, it’s cheaper to outsource functions, particularly accounting, IT and human resources work.

Outsourcing offers the additional benefit of being temporary if you aren’t happy with the service. Underperforming employees are much harder to let go.

Making the decision

The decision to hire is likely to be one of your organization’s toughest calls this year. Employees are expensive. And probably the last thing you want to do anytime soon is lay off people due to a social or economic crisis. Contact us at Online Stewardship & Accounting: Lynn@onlinestewardship.com. We can review your financials and help you decide how to proceed.

© 2021


Nonprofits: Limit disaster damage with a plan

COVID-19 was a kind of disaster most not-for-profits weren’t prepared for. As your organization recovers from this unusual event, don’t let it become vulnerable to other, more common, threats. Every nonprofit needs a formal disaster plan for such risks as a fire, natural disaster or terrorist attack.

Isolate threats

No organization can anticipate or eliminate all possible risks, but you can limit the damage of potential risks specific to your nonprofit. The first step in creating a disaster plan is to identify the threats you face when it comes to your people, processes and technology. For example, if you work with vulnerable populations such as children and the disabled, you may need to take extra precautions to protect your clients.

Also, assess what the damages would be if your operations were interrupted. For example, if you had an office fire — or even a long-lasting power outage — what would be the possible outcomes regarding property damage and financial losses?

Delegate responsibility

Designate a lead person to oversee the creation and implementation of your continuity plan. Then assemble teams to handle different duties. For example, a communications team could be responsible for contacting and updating staff, volunteers and other stakeholders, as well as updating your website and social media accounts. Other teams might focus on:

  • Safety and evacuation procedures,
  • Technology issues, including backing up data offsite, and
  • Financial and insurance needs.

Don’t neglect planning for recovery, or how your nonprofit will get employees back to work and your office and services up and running. You may need to plan in phases that can be rolled out depending on the extent of the disaster’s damage.

All must plan

All organizations — nonprofit and for-profit alike — need to think about potential disasters. But plans are critical for charities that provide basic human services (such as medical care, food and housing) or that respond directly to disasters. This could mean mobilizing quickly, perhaps without full staffing, working computers or safe facilities.

If you aren’t sure where to start with your disaster plan, contact the Online Stewardship team of accountants at (904) 398-4747 or Lynn@OnlineStewardship.com. We’d be happy to assist you. 

© 2021


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