Tag Archives: finance committee

Governance At Its Best – Strengthening Your Board and Staff

November 19, 2020

In many nonprofits, there is not a clear divide between board and staff responsibilities. Then you add in long-term volunteers, founders, and advisory boards and things get even muddier. Who should have the final say on a decision? And, should you have that in writing?

Do you know how to go about strengthening your board and staff?

It’s easy to offer simple recommendations like whether the board should be fundraising (they should be fundraising, starting with themselves), but you also have to have strategies for:

Encouraging your board to respect your staff and their opinions
Reminding the staff that coaching strategies may change board and volunteer behavior faster than constant reminders
Board learning opportunities throughout the year (e.g. understanding a P & L– spend 15 minutes explaining how to read the statement –and how it represents the organizational priorities – for those who don’t work with them every day)
Creating change with buy in from staff and the board
Knowing a board president’s strengths and weaknesses. And understanding that is not always the same as the last person to hold that role.
No one person can be in charge of everything (whether that is staff, a Board President or a Volunteer). Nonprofits are a group effort, intentionally, so spend time determining how to utilize your resources.
Running the board like an organization, and not a family business
The size of your board – too large or too small will affect whether you are engaging your board members or leaving them to drift off (among other things)
Helping board members or staff see their role in creating the solution to the problems you are facing and that they may be causing
Overworking your leadership (volunteer and staff) may help you achieve more in the short term. But, in the long term, staff will leave and volunteers will burn out.
Moving forward with a decision when consensus was hard to find
Innovating change. Nonprofits can no longer rely on the status quo for support, membership or involvement
Engaging everyone in fundraising and development when not everyone is willing to ask others for money

This is not an all-encompassing list, and it is not intended to overwhelm you. Instead, it is designed to create a new dialogue around the staff table or at a board meeting about what you want to see change. In other words, help you in strengthening your board and staff. You may want to initiate a strategic plan or a board retreat to help you focus in on your priorities. But don’t let another year go by without growing as individuals and as an organization.

If you think your nonprofit would benefit from our facilitating this process, email me at abigail@merskyjaffe.com today.

If you would like to work on improving your board without counsel, you can purchase one of our books by clicking here

Originally published in 2017

Should Your Nonprofit Spend Endowment Principal to Cover Budgetary Shortfalls?

September 25, 2020

For those looking for a five-minute escape, grab a friend and play MJALibs! Fill in the blanks to play. Or just jump down to the next headline to read the rest of the article.

The endowment dream – an MJALibs fill in the blank game

Raising an Endowment

When thinking about an endowment, the possibilities seem endless. Will you have an additional $50,000, $120,000 or even $200,000 every year? Will you be able to cover budgetary shortfalls or expand your services and/or the number of people you serve? Will monetary stress disappear from staff and board meetings?

The Realities of Having an Endowment

For many organizations, having an endowment – whether inherited by the nonprofit’s current staff and board or raised in recent memory – is essential. Most of the time it does what it is supposed to. It helps the budget by providing operating revenue to be used on an annual basis. But, when the organization has a budgetary shortfall – like organizations may be experiencing or expecting during this pandemic – it can be tempting to take principal from the corpus of the endowment. Consider this a warning, it is a slippery slope.

Well, from an MJA new business perspective, it’s a great idea! Organizations often engage us to raise money after they have reduced or depleted their endowments. But, we also give advice to our clients to prevent this from happening. In fact, this is blog post based on an exchange I had with a client just this week.

The Slippery Slope

It starts with an unusual need. A new roof or, let’s say, a pandemic. You need to cover $100,000 one time. So while it feels wrong to take out principal, it may be urgently necessary. But, once you start taking out principal for the annual budget, it is then easier to go to the well again and again for capital needs and budgetary problems. It is much simpler to get board approval to take out more money than spend time and/or money on a real self-examination. That would require looking at the organization, it’s mission, the current needs of the community, reducing expenses, the annual fundraising, etc.

The reduced endowment is a future problem when the lack of annual funding is current problem.

Before long, instead of $75,000 a year towards the budget it is $40,000 – causing a larger annual deficit/budgetary shortfall every year. And then you must spend money to engage us to help you raise funds to increase your endowment. It’s a vicious cycle we are committed to assisting you to avoid.

If you do decide to take out principal, “just this once,” make sure there is a Finance policy in place. To ensure this does not happen again.

So, if you are confronting financial challenges that have you looking at the balance in your endowment as an easy answer, what do you do? It may seem hard to fundraise in this climate. It is different – but not impossible. (Here is a webinar that will give you some tips). Consider a self-examination (we offer a special Organization and Development Assessment to our clients which we can tailor to your needs).

Want Your Own Endowment?

And of course, if you want to raise an endowment, click here to schedule a time to talk. Yes, we are still raising endowments during the pandemic. Our world still needs nonprofits. Nonprofits still need funding. And donors, still have money to donate – maybe not all donors – but many still can, and want, to give.

Preventing The Glazed Over Eyes Syndrome during Finance Committee Reports

April 5, 2019

5 Nonprofit Finance Committee Responsibilities

As you can imagine, in my work consulting to a wide variety of nonprofits worldwide, I have attended more than my share of board meetings. Recently, I observed the treasurer of a client organization make the monthly financial report. As the finance committee chair presented his well-illustrated PowerPoint, I watched as most board members’ eyes glazed over. Clearly, these people had no understanding of the cash flow analysis, the report of actuals against budget or the fully-allocated, program-by-program statement of projected revenues and expenses for the balance of the year. Or why it was essential to understand these reports.

These reports should provide the members of the board with visibility into the financial management of the agency and the knowledge that is needed to make strategic decisions for the future of the organization’s programs and the people who benefit from them.

How do you prevent the surge of discomfort? Educate every board member in basic financial literacy. This will assure that all board members can function effectively in their fiduciary role to ensure the fiscal health of the enterprise. And, if board members understand what they are seeing, they are less likely to allow their attention, and eyes, to drift during these essential reports..

What are the five responsibilities of the finance committee:

1. Assure the maintenance of accurate, complete timely and meaningful financial records and statements
  - Monitor income and expenditures against projections
  - Review and recommend financial policies to the board, including ensuring adequate internal controls and maintaining financial records in accordance with standard accounting practices
2. Direct budget preparation and financial planning
  - Propose for board approval a budget that reflects the organization’s goals and board policies
  - Ensure that the budget accurately reflects the needs, expenses, and revenue of the organization
3. Safeguard the organization’s assets
  - Review proposed new funding for ongoing financial implications, recommending approval or disapproval to the board
  - Ensure that the organization has the proper risk-management provisions in place
4. Ensure compliance with federal, state, and other requirements related to the organization’s finances
  - Ensure that organization maintains adequate insurance coverage
  - Ensure that the IRS Form 990, other forms, and employment and other taxes required by government are filed completely, correctly, and on time
5. And, above all, help the full board understand the organization’s financial affairs
  - Ensure that board members are well informed about the organization’s finances
  - Educate the board to enhance each members financial literacy

That last point, “educate the board members,” is the key to it all. Not everyone who serves on a board has the same financial acumen. For the board to function well, serve the organization it leads and provide the financial oversight required, the finance committee must be sure that all members of the board see clearly and understand the finances of the agency. Providing brief educational segments to develop board members skills at every board meeting about key aspects—including financial management—of the organization’s operation should be standard operating procedure for the well-run, well-funded nonprofit.