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Financial Management

Sep 30th, 2009
by Alan.
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MFMP-logoI have written before about creating policies for your nonprofit. Now nonprofits have a new tool they can easily use to create their own financial management policies and plans. The Nonprofit Risk Management Center has a new tool called My Financial Management Plan where users can go through up to 21 different modules on nonprofit financial and accounting topics to create a variety of policies and procedures to help manage, organize and streamline their financial operations. From the Risk Management Center:

Nonprofit leaders have spent countless hours developing the necessary components of a financial management plan. But for many organizations the components, from an annual budget, return on investment strategy, cash flow planning tool and more, remain disparate. The nonprofit lacks a cohesive plan that reflects the organization’s commitment to the effective stewardship of its assets. My Financial Management Plan was created to guide leaders in updating the components of their financial management systems and integrating these components into a cohesive plan. This powerful system features covers topics such as Board Fiduciary Obligations, Managing Fraud Risk, Managing Cash Flow, Return on Investment Analysis, Cost Allocation, Classifying Net Assets, Managing Cash Flow, Budgeting, the form 990 and Grants and Contributions.

My Financial Management Plan is a powerful tool to turn financial management strategies, policies and protocols into a plan that will help your nonprofit demonstrate both competence and accountability. Use the “Plan Modules” feature to go through the 22 system modules. Each module offers the opportunity to upload existing material from your financial management system, create new content (based on our templates or created “on the fly”), or skip sections you don’t wish to use. Use the “Manage My Plan” feature to edit your draft plan, upload supporting PDF files and view/download your plan. The system also features a classroom with easy-to-understand articles and resources on a wide range of financial management topics.

I was fortunate enough to work on this project and create a lot of the module content. I know that this will be a great tool for nonprofits to learn about what they need know about with regards to their nonprofit’s finances and creating the appropriate policies and procedures to ensure good financial stewardship. For those not ready to buy access to the program you can register with the site to receive periodic email updates on nonprofit financial issues.

If you have any questions or comments about the program please let me know via email or in the comments below.

Nonprofit News Update

Aug 20th, 2009
by Alan.
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roundupThis weeks update features a great piece on using Social Capital, more human resource topics that didn’t make it in to the last post and the latest from the Internal Revenue Service that might affect your organization.

The Power of Social Capital

The Fieldstone Alliance has a great e-newsletter and this topic caught me eye: Mapping Your Networks to Mine Valuable Resources. From the article:

After Exploring all possible options for reducing expenses and increasing revenues, many nonprofits are stymied—how can they survive this downturn? Every nonprofit has another valuable resource that they can tap—social capital. Positive, productive relationships represent social capital, which is just as important (well, almost as important) as money in the bank.

Social capital has been described as the resources available to people based on the networks their relationships give them access to. Just as a skilled plumber knows how the water is piped throughout the house, a skilled nonprofit or community leader knows how social capital flows through their networks or community.

Check out the article for more.

More on Nonprofits Human Resource Issues

Are you, or have you ever had to draft a severance agreement? This article talks about a new publication from the Equal Employment Opportunity Commission that may be of help, even though some are renaming the document, “How to Sue Your Employer.”

Exempt employees can present a challenge to employers, nonprofit or for-profit, especially when it comes to the issue of docking an employee’s pay.  Make a mistake and you can violate their exempt status and open your self up to a world of financial and legal hurt. This article and this article offer some guidance that may be of help. You should also make sure there are not any separate, or even more stringent state rules that may apply to your organization as well.

IRS Updates and News

For those who have been waiting, efile.form990.org is ready to help you through filling out your 2008 form 990. They can also help you with several state filings as well, please do pay them a visit.

The final regulations for the 990-N, the electronic post card filing for small nonprofits have been released. No changes from the draft version, but it should be noted that organizations that are required to file the form and fail to do so for three consecutive years will automatically lose their tax-exempt status. Revocations will begin in May 2010.

The latest Form 990 filing tip is all about related organizations and schedule R. What is a related organization you ask? From the IRS:

Related organizations are organizations that stand in a parent/subsidiary relationship, brother/sister relationship, or supporting/supported organization relationship. Supporting and supported organizations are defined in section 509(a)(3) and 509(f)(3). Determination of the first two relationships depends on a definition of control set forth in the Form 990 instructions glossary and Schedule R instructions. The definition of control depends on whether the organization has owners or persons with beneficial interests.

Finally, the IRS wants us to make sure we handle donated property and non-cash contribution transactions the right way. Here is a page with several more links that might be of interest to any organization that receives non-cash contributions.

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Workshop Resources, Questions and Answers

Jul 20th, 2009
by Alan.
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Questions?As part of my follow-up to recent workshops that I’ve run in the last few weeks I wanted to answer a few questions.  But first I wanted to thank Alltop.com for including this blog in their list of nonprofit blogs.  It feels great to be in such respected company!

Managing the Money, Managing the Organization

For the Managing the Money, Managing the Organization workshop in Long Beach, you can download the handouts from the event here.  For those who are interested in looking at a budget narrative I have linked to a PDF of one here.  An online search of “sample budget narrative” will reveal a lot more.

Building Financial Literacy

From part one of the Building Financial Literacy workshop in Ventura there was a question about vehicle donation guidance.  I would refer all those interested in this to this PDF from the IRS. For other IRS contributions and donation information please check the IRS links and resources to the right. For the folks who wanted information on how to value in-kind donations, please click here.

Nonprofit Summer School

Thanks to all the folks who spent the day with me talking about nonprofit accounting issues at Cal State Fullerton’s event. Many of the questions were about QuickBooks issues, I would direct you to this page of the site for more information and resources.

For more information and resources I usually mention, please check here. And if I missed your question or you have others please feel free to remind me!

More Questions and Answers – Donated Items and Services

I have received a rash of questions lately on donation and valuation information for in-kind gifts.  I mentioned my post about valuation information above.  I have another post about how to enter in donation transactions and another on valuing donated services.  I hope those help.

More Questions and Answers – Employee Time and Cost Allocation

Question: We are just starting our marketing and communications program (hiring a marketing manager, revamping our website, etc.). I do not believe that I should classify 100% of these costs as fundraising (the website is mostly about information sharing and public relations). Rather I consider classifying some as program costs, some as administrative expenses and some as fundraising depending on the activities purpose. Is that correct?

Answer: Yes. Not all of the costs described should be lumped into fundraising. The costs should be allocated between programs, admin and fundraising as appropriate.

For example, the marketing manager spends time designing some promotional materials to get word out about a particular program you do. I’d say that is a program expense. Weather particular funder allows their money to be spent on advertising is a separate matter, but the expense is still a program expense. If that same person is designing something to be used for a fundraising gala, that would be a fundraising expense. If they are designing new signage for your offices? The expenses would probably be administrative.

You can click here for many more questions and answers.

Nonprofit News Roundup

Jul 8th, 2009
by Alan.
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IRS and the 990

logo-irsAs I mentioned in the post below the Urban Institute’s 990 online is getting ready to start processing the updated form 990. They hope to be ready to go by the end of July (not the end of June as I previously mentioned in my last post).  There is a great piece in Blue Avocado about the system and a call to action to help improve it. Worth a read, especially for those thinking of jumping in and using the system.

Perhaps not everyone wants to read the IRS’s five year strategic plan?  No problem, the nice folks at Guidestar have and let us know what the Internal Revenue Service has in store for tax exempt organizations. Between what they lay out here and several recent speeches by Lois Lerner and Sarah Hall Ingram (also reported on by Guidestar in the above link) we can be pretty sure of where their focus will lie.  As the article points out, nonprofit should:

Pay the proper employment taxes on your staff; use appropriate comparable wage data to set executive compensation and document your decisions; file Form 990 promptly and accurately (and electronically, if possible); use efficient fundraising methods; and spend most of your revenues on achieving your tax-exempt purpose.

Good advice all around.

Managing in Tough Times

In case there was any confusion about it, times are still tight.  Two items from the Bridgespan Group and The Listening Post Project give us an update, and California’s budget meltdown is being replayed in other states.

Bridgespan’s piece is a follow-up to their November 2008 7 Steps article. From the opening paragraph:

The percentage of nonprofits that have resorted to layoffs has increased, as has the percentage that has made broad-based programmatic reductions. More organizations have drawn down their reserves. Nonprofit leaders appear to be optimistic about the future, though: Almost half of the respondents reported that they believe their organization will be on stronger financial footing in a year’s time.

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The Listening Post Project, from the Center for Civil Society Studies at Johns Hopkins University, released a new study, “Impact of the 2007-09 Economic Recession on Nonprofit Organizations” (link opens a PDF). From the executive summary:

Key findings from the 363 organizations responding to this Sounding include the following:

  • 83 percent of responding organizations reported some level of fiscal stress during the target period of September 2008 to March 2009.
  • Close to 40 percent of the organizations considered the stress to be “severe” or “very severe”.
  • Theaters and orchestras were particularly hard hit, with 73 percent of the former and half of the latter reporting “severe” or “very severe” stress.

The deadline to pass California’s budget came and went last week.  The Chronicle of Philanthropy has a good piece on how CA nonprofits will be effected by the state government’s game of chicken.

Nonprofit Financial Tools

I’ll try to end this post on a happier note with a couple of tips and resources! For accounting!  Leading off is a recent article from Guidestar, “Ensuring a Smooth Annual Audit.” While it may not have a lot of revelations in it it is solid advice for any organization that is planning on a annual financial audit.

Tye Bridgespan Group is offering nonprofit organizations its new Nonprofit Cost Analysis Toolkit.  This is a fine set of tools to help nonprofits understand what are the true, real, honest costs of running our organizations.  Not knowing what it really costs your organization to do all that it does makes it difficult to move forward.

More cost analysis and fiancial tools can be found in my Managing Challenging Times section.

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