Financial Management for Non-Profit Organizations An Overview
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Transcript Financial Management for Non-Profit Organizations An Overview
Financial Contingency Plans
(Managing Risk During Difficult Economic Times)
YWCA Southwest/Delta Region
Regional Conference
January 31, 2009
Presented By Cheryl Black, TANO c 3 Accountant
Texas Association of Nonprofit Organizations (TANO)
Introduction
Introduction
Class Survey
Plan for the session
Participation
Questions
Breaks
Review agenda
Agenda
What is risk management?
How do nonprofits prepare for a financial
contingency plan?
What items should be in your
organizations plan?
Wrap up – Q&A
Risk Management
What is Risk Management?
A way of preventing losses
Income loss
Reputation loss
Services provided loss
We manage risk everyday
Baby gate at the top of stairs
Pets on a leash
Expiration dates on food containers
Flu shots at beginning of cold weather
Risk Management (continued)
For nonprofits risk management responsibility is
distributed to different departments
Board of Directors
Strategic planning
Budgeting
Policy formation
Program
Staff orientation
In-service training
Case Management
Facility
Preventive maintenance
Preparing Your Organization for a
Financial Contingency Plan
Analyze loss exposures
Examine which risk management techniques
work best for your organization
Select one
Implement
Monitor and Evaluate
Change the culture of your organization
Analyze Loss Exposures
Determine potential hazards or causes of
loss
One area affected may ripple across the entire
organization
Calculate the financial consequences
Prioritize levels of impact (high, medium, low)
Needed to accomplish exempt purpose?
Maintain revenue stream(s)?
Ensure ongoing operations?
Examine Which Risk Management
Techniques Work Best
Avoidance
Don’t engage in particular activity
Control by –
Loss prevention – reduce frequency of loss
Loss reduction – reduce severity of loss
Segregation –
Separation – internal controls
Duplication – backups, cross training
Examples – on-call staff, redundancy in IT systems
Examine Which Risk Management
Techniques Work Best (continued)
Retention
Accept the risk and pay for it
Expense within the annual budget
Dip into reserves
Borrow
Transfer both legal and financial responsibility
Insurance
Select One
Be candid and transparent
Express divergent views and follow them
through to understanding
“Through the process we achieved a much
better understanding of our critical functions”
Implement
Technical
Those who have technical expertise in that area
Managerial
Those who have the authority to:
Engage multiple departments
Cross-organizational coordination
Monitor and Evaluate
Regular review (weekly, monthly, annually)
Detail people – generate data to correctly analyze
risks
Big picture people – use intuitive sense of when
decisions are right or wrong
Change your
Organizational Culture
Establish objectives, strategies, roles and
responsibilities
Decisions now will have consequences far
later
What’s your organizational tolerance
level?
Balance drive for mission fulfillment vs.
need to operate with accountability
Current YWCA
Financial Contingency Plan
“The Local Association has a
contingency plan for maintaining
solvency during financially
challenging times.”
Items to Consider for Your
Financial Contingency Plan
Insurance
Directors & Officers (D&O) Insurance (Board acting as the governing body)
Errors and Omissions (Staff working with HR and payroll)
Protect your data
Computer and electronic data processing
File cabinets
Items to Consider for Your
Financial Contingency Plan (continued)
Cash and Investments
Cash deposit risk
FDIC insured
Several different banks
Investment risk
Investment policy established
Investment spending policy in place
Items to Consider for Your
Financial Contingency Plan (continued)
Cash Flow considerations –
Perform cash flow projections on a regular
basis (weekly, monthly)
How many months of expenses can be
covered by current cash?
Negotiate payables
Items to Consider for Your
Financial Contingency Plan (continued)
Evaluate your current strategic plan
Is your strategic plan responsive to current
economic conditions?
Will changes to the current year’s plan affect
your long term goals?
Budget conservatively
Assume cash will arrive late
Assume bills need to be paid sooner
Items to Consider for Your
Financial Contingency Plan (continued)
Revenue – review and optimize
Dependent on one source?
Consider way to diversify
Don’t over diversify (start up costs, fixed assets)
Review revenue changes
Investment losses
Government funding
Reimbursement rate could increase/decline
Foundations – multi-year grants
Individuals
Individual giving historically has not declined much
during recessions
Items to Consider for Your
Financial Contingency Plan (continued)
Programs – review and optimize
Establish priorities
What’s fundable?
Are deficit programs important to the
mission?
What is the cost of each additional client
served?
Items to Consider for Your
Financial Contingency Plan (continued)
Maintain visibility
Avoid “fake it ‘til we make it”
Develop donor relationships
Donors don’t disappear, but become more cautious
and compare
Can turn into endowment gifts (to sustain your
organization the next time)
PR $$’s vs. advertising $$’s
Avoid “interrupt” methods (telemarketing, direct
mail)
Pursue “permission” based methods (search
engine optimization, blogging)
Maintain web presence
Items to Consider for Your
Financial Contingency Plan (continued)
Maintain visibility (continued)
Remind stakeholders of the mission
Offer knowledge and information
(earn and retain trust – not sales hype)
What’s the competition doing?
If they are cutting marketing dollars, increase
yours
Items to Consider for Your
Financial Contingency Plan (continued)
Focus on the “big picture” – protecting your end
users
“The goal of surviving a recession is not to stay
afloat for the sake of staying in business, but rather
to make sure you’re around to keep serving the
public, particularly in times of increased demand
for services” Clara Miller, Nonprofit Financial Fund
How are you going to respond to higher demand
for services?
“Live to fight another day”
Work to build public policy underlying the causes
your exist to address
Items to Consider for Your
Financial Contingency Plan (continued)
Downsizing plan
Furloughs
Across the board salary reductions
Outsourcing to consultants
Partnering or merging with similar
organizations
Share back office tasks
Some foundations are willing to invest in paying for
shared services
References
Risk Management for Nonprofit Organizations by Kathryn M. Vanden Berk
Winter 2003, Alliance for Children and Families Magazine
Public Relations, Investor Relations, Marketing Professionals: Do More with Less in
Tough Economic Times
http:www.guidestar.org/news/features/nmarketing_in_tough.jsp?source=jan09nwsltr
Nonprofit Risk Management Center
http://www.nonprofitrisk.org
How We Built Our Contingency Plan, by Charles R. Willis
Communications News, April, 1991
Tips for NPO’s Threatened by the Financial Crisis
PhilanTopic, September 22, 2008
Inside Philanthropy (a blog of Philanthropy Journal)
Nonprofits must gear for tough economy – September 29, 2008
Tough times create opportunity for nonprofits – August 11, 2008
Nonprofits can partner on back-office tasks – July 21, 2008
Navigating the Financial Crisis: A Nonprofit FAQ
www.nonprofitfinancefund.org
Wrap Up
Q&A
Next Steps
Financial Contingency Plans
(Managing Risk During Difficult Economic Times)
YWCA Southwest/Delta Region
Regional Conference
January 31, 2009
Presented By Cheryl Black, TANO c 3 Accountant
Texas Association of Nonprofit Organizations (TANO)