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
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Introduction
Class Survey
Plan for the session
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Participation
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Questions
Breaks
Review agenda
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Agenda
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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
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What is Risk Management?
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A way of preventing losses
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Income loss
Reputation loss
Services provided loss
We manage risk everyday
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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)
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For nonprofits risk management responsibility is
distributed to different departments
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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
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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
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Determine potential hazards or causes of
loss
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One area affected may ripple across the entire
organization
Calculate the financial consequences
Prioritize levels of impact (high, medium, low)
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Needed to accomplish exempt purpose?
Maintain revenue stream(s)?
Ensure ongoing operations?
Examine Which Risk Management
Techniques Work Best
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Avoidance
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Don’t engage in particular activity
Control by –
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Loss prevention – reduce frequency of loss
Loss reduction – reduce severity of loss
Segregation –
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Separation – internal controls
Duplication – backups, cross training
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Examples – on-call staff, redundancy in IT systems
Examine Which Risk Management
Techniques Work Best (continued)
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Retention
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Accept the risk and pay for it
Expense within the annual budget
Dip into reserves
Borrow
Transfer both legal and financial responsibility
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Insurance
Select One
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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
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Technical
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Those who have technical expertise in that area
Managerial
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Those who have the authority to:
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Engage multiple departments
Cross-organizational coordination
Monitor and Evaluate
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Regular review (weekly, monthly, annually)
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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
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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
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Insurance
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Directors & Officers (D&O) Insurance (Board acting as the governing body)
Errors and Omissions (Staff working with HR and payroll)
Protect your data
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Computer and electronic data processing
File cabinets
Items to Consider for Your
Financial Contingency Plan (continued)
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Cash and Investments
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Cash deposit risk
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FDIC insured
Several different banks
Investment risk
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Investment policy established
Investment spending policy in place
Items to Consider for Your
Financial Contingency Plan (continued)
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Cash Flow considerations –
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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)
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Evaluate your current strategic plan
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Is your strategic plan responsive to current
economic conditions?
Will changes to the current year’s plan affect
your long term goals?
Budget conservatively
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Assume cash will arrive late
Assume bills need to be paid sooner
Items to Consider for Your
Financial Contingency Plan (continued)
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Revenue – review and optimize
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Dependent on one source?
 Consider way to diversify
 Don’t over diversify (start up costs, fixed assets)
Review revenue changes
 Investment losses
 Government funding
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Reimbursement rate could increase/decline
Foundations – multi-year grants
Individuals
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Individual giving historically has not declined much
during recessions
Items to Consider for Your
Financial Contingency Plan (continued)
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Programs – review and optimize
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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)
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Maintain visibility
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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)
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Maintain visibility (continued)
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Remind stakeholders of the mission
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Offer knowledge and information
(earn and retain trust – not sales hype)
What’s the competition doing?
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If they are cutting marketing dollars, increase
yours
Items to Consider for Your
Financial Contingency Plan (continued)
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Focus on the “big picture” – protecting your end
users
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“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)
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Downsizing plan
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Furloughs
Across the board salary reductions
Outsourcing to consultants
Partnering or merging with similar
organizations
Share back office tasks
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Some foundations are willing to invest in paying for
shared services
References
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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)
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Nonprofits must gear for tough economy – September 29, 2008
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Tough times create opportunity for nonprofits – August 11, 2008
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Nonprofits can partner on back-office tasks – July 21, 2008
Navigating the Financial Crisis: A Nonprofit FAQ
www.nonprofitfinancefund.org
Wrap Up
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Q&A
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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)