Tag Archives: charitable assets

Nonprofit Radio for March 7, 2014: Society-Level Giving & Fraud!

Big Nonprofit Ideas for the Other 95%

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Page Bullington & George Durney: Society-Level Giving

Page Bullington and George Durney
Page Bullington, Tony Martignetti and George Durney

Page Bullington and George Durney, both with Blackbaud, reveal tactics for setting donors’ sights to your society giving level, whether that’s $250 or $2500. (Recorded at bbcon 2013)

 

 

 

 

 

Gene Takagi: Fraud!

Gene Takagi
Gene Takagi

“Diversion of charitable assets” can hurt you badly and embarrass you terribly. Where are the vulnerabilities and how do you protect your nonprofit? I’ll walk through it with Gene Takagi, our legal contributor and principal of the Nonprofit & Exempt Organizations law group (NEO).

 

 

 


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Hello and welcome to tony martignetti non-profit radio big non-profit ideas for the other ninety five percent. I’m your aptly named host. Oh, i’m very glad you’re with me. I’d be thrown into endo cardio fibroblast doses if it came to my attention that you missed today’s show society level giving paige bullington and george durney both with blackbaud revealed tactics for setting donorsearch ites to your society e-giving level, whether that’s two hundred fifty dollars or twenty five hundred dollars and that was recorded at bebe con the blackbaud conference last year and fraud diversion of charitable assets can hurt you badly and embarrass you terribly. Where are the vulnerabilities and how do you protect your non-profit i’ll walk through with jean takagi are legal contributor and principal of the non-profit and exempt organizations law group neo on tony’s take two i’ve got a speaking gig coming up. We’re sponsored by rally bound peer-to-peer fund-raising and by t b r c saving you money on credit card processing fees and now i introduce the interview from bb con on society level, giving welcome to tony martignetti non-profit radio coverage of bb khan, twenty thirteen were at the gaylord conference. Center outside washington d c in national harbor, maryland. My guests are george durney and page bullington. Their subject for their seminar was earning that society level gift. George durney is director of sales target analytics. Paige bullington is also a target analytics as director of professional services george page welcome thank you. Glad to be here. Yes, tony, thank wasn’t have you? George has revealed that he hopes to start up have a washington morning joe he’s actually sitting here practicing, saying good morning, washington so i don’t know how much longer he will be at blackbaud talking aboutthe time this show airs, you may be hearing him on w a m u welcome again, let’s see, we want to get that society level gift page. What’s what’s the first bit of advice or what? We’re let’s define what we’re talking about that it’s everybody underst starts at the same place. Typically when we’re talking about a society level gift we’re looking at individuals that are giving between a thousand dollars up to just under ten thousand kind of a very specific range, um and it can swing a little bit lower a little bit hyre for organizations, but that’s usually the rains that we’re looking at, ok, and we’re finding non-profits having trouble getting to that level? Yeah, it can be a challenge. They look different than other types of donors, so sometimes kind of finding them identifying them. Keeping retaining these types of donors can be a struggle, but there’s a huge payoff when you can choir and get to know donors at that level because they often are the most supportive and engaged of your organization. Ok, morning talk show host yes. What what would you like to add to the introduction? Well, and i think obviously page hit it perfectly, but one of the key things that thousand dollars donors also considered by some a mid level donor for gotten segment of their portfolio there, big on direct mail, low end donors, annual gifts they focus on major e-giving but sometimes there is a lack of strategy and focus on that thousand dollars donor-centric breaking that barrier and we did a lot analytics for today’s session breaking that barrier is critical in terms of retention in lifetime are long term value, so just a knowledge of understanding that and then having a focus on it. Is a big win, okay, so we’re not trying to get this donorsearch for one year, but there’s long term payoff teo breaking that this thing, this glass ceiling of of a thousand dollars that’s exactly right? We’ve seen hyre retention schnoll rate and hyre gains in terms of the year over year giving so it’s it’s a critical step on the path and it’s not a path where some are going to become. We’ll call it major donors and let’s to find a major donor, and everybody does it different totally tony, but let’s define it is like about ten thousand dollars there’s, some that that’s a step in the journey and others that it’s quite honestly, where they’re going to settle on and be comfortable in that level for years and can be extremely profitable in good for organizations. Tohave that group of donors okay, let’s, let’s, start with the advice, george with you. What? What’s what’s. The first advice to getting there. What? Well, actually, i’m sorry right now. You i withdrew the question sort of do we need to know where we’re starting? How do we figure out what we’re starting with? Absolutely that’s the first thing, probably the most important thing any non-profit could do, especially the smaller non-profits is have a value assigned to each donor-centric elif, you will on typically organizations do it on an annual basis, so being able to understand the potential and then what they get today out of that donor differential should help them allocate resources. So knowing that is the first step in the journey of being effective and efficient, moving donors up to that thousand dollar level and obviously retaining him and moving beyond. Okay, okay, paige, but way have this baseline, we’ve assigned values current and potential. Where do we go from there? I think the first step is to start to treat these individuals differently. We know from our research that they have different asset profiles, different demographics, and so the message you’re going to put out there, whether it’s via direct mail face-to-face cultivation or over the phone needs to look different than how you might cultivate a twenty five dollars, donor. Okay, well, let’s talk about some of the differences. What should they be? I think quite often, and this is a personal to some of the areas that i’ve worked in you have to understand and have a different type of connection with them, so understand they want to engage powerthru mission, they’re going to see themselves as an investor with your organization and making them feel that there have more of a steak, and what you’re doing is really important if you’re going to get people at that one thousand dollar level. It’s crucial. Okay, well, how do we do this? What kind of words do we use? What kind of channels do we communicate through? George is raising his hand, you know, somebody was actually walking by saying, sorry, tony george, actually, popular guy georges actually not engaged in the conversation. He’s looking at people walking past. I’m engaged in the conversation, so i will ignore george and we’ll stay with you. So what? How do we do this? Specifically? Specific communications channels what we’re gonna do, george, you’re out nastad i would say direct mail is still a great way to engage these donors. It’s probably going to be with more of a high end package and what i would call some insider information. A good example. I worked with healthcare foundation that started a fellows program and through that program, they engaged these one thousand dollars donors and prospects with insider information on where the health care system was going so that’s kind of one example a lot of organizations will do face to face but do larger scale event so it’s not that one on one that you may use with a major gift prospect, but maybe you’ve got a one too many where you have ten to twelve people in a small cultivation event again, you’re cultivating the moor is an insider, and you’re really giving them access to your leadership quite often, because again they feel different. They feel more like an investor so it’s important that you specialize and capitalize on that feeling, is there ah, size george paige mentioned one to twelve roughly over which you shouldn’t go where you start to lose that connection that yeah, there’s, no doubt about it. I don’t think there’s a magic number in terms of drawing the line on the page, has some great experience because she was doing this on a regular basis before she joined target, but one of the things we talk about is everybody has a clear definition of that major gift. Prospect, and they say one hundred fifty prospects or donors are assigned to an individual. This kind of cultivation lends itself. Paige was saying tomb or direct mail support and more over the phone, really a less of an investment initially in these donors, but an effective way to do it, and you could manage a broader portfolio. And i think this speaks to almost in a murder, and we’re seeing with some of the non-profits kind of an emerging new job title, if you will, that mid level gift officer, which isn’t that senior gift officer it’s, a little bit of a junior person, and the majority of their efforts are done over the phone or email, but yet they’re establishing personal contact, right? Those personalization. And they should be able to handle north of a thousand prospects on something like this because of the level of connectivity and cultivation. This isn’t somebody you need to go visit and spend the weekend. Okay, but let’s, let’s stick with the different channels. As you were waving to your fans in the audience a multi task paige and i were talking about channels. Yes, you mentioned you mentioned the phone. What would how would we start to engage someone there? Let’s say they’re giving it the i don’t know two hundred dollars on we want to we want to get that thousand dollars ceiling how do we start to engage them by phone? So? So the first thing is, we’ve got to identify the right person because not every is we mentioned before, not every two, fifty donors, the right one to cultivate, so once we’ve identified the right one, thank you, cultivate right then the question is its multi-channel and i and i think his page, you’re saying it’s, not just the phone, right? It’s all the channels we want to hit him with it continue to hit him with direct mail. Even online efforts create custom portals for these folks to come in, you’re really trying to connect and engage, and the phone conversation is going to be about discovery, right? Understanding who they are and why they give you right, because each donor, especially at that level, has different motivations. And you need to be able to differentiate, and we talked about it today, and we got a lot of questions from the audience that we have donors who come to events and give because thie event sponsor or their lead on the event a friend of theirs, they’re not engaged in your mission, but they gave just for that person almost attribute gift that’s probably not the person that we’re goingto invest in cultivation because they don’t have a connection game because of their personal relationship to the friend, right? And you’re not going to get that on an ongoing basis. That wouldn’t be that i won’t say we’ll get any dollars, but it’s probably not the best use of your time and not the best owner to target on and that’s where understanding and the phone becomes a great vehicle because in a direct mail conversation or it isn’t a conversation right? It’s a one way communication. I can’t assess that, but if i’m talking with somebody and i understand their priorities, i can quickly assess is this person on the path, if you will, to want to be maur engaged and committed to our organization, right? You can probably qualify the person in just a few minutes based on how well they received the call and and how engaged they are pages talking about engagement in this process, you could probably qualify them. Not that you’re gonna brush them off, you know, in a couple minutes, but within certainly within a fifteen minute phone call. If you’re able to get them that long, the un engaged person may disconnect with you before them that’s, right? If you’re able to get on the phone, stay on the phone with someone that long you can, you can tell exactly. You can weigh always say every donor is valuable, but not every donor is of equal value and it’s important to understand that value. And then there is, paige said, the engagement level and there’s ways to look at engagement in addition to just a conversation that requires some individual to sort it out. It’s attending events is a good indication the mohr events they attend, the more times a volunteer, these air, all good metrics of engagement that in and of themselves, they’re not necessary significant, but when you combine that with other information on that particular donor is paige talked about before assets age, other philanthropic giving activity while the sun you’re starting to paint pretty cystic picture of the person you want to invest cnn right, and make them really engaged. They didn’t think that shooting the good ending. 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Two, one, two, seven, two, one, eight, one, eight, three that’s to one to seven to one eight one eight three the conscious consultant helping conscious people be better business people. You’re listening to the talking alternative network. Paige, we’re talking about the whole breath of the relationship, right? As as we’re figuring out who the people are that we should invest the time exactly a lot of it starts when they’re a direct male donor away up to some of these individuals becoming major gift owner. So you really have to take a holistic look at that lifetime value of the donor, and that helps inform who you’re going to pull out for this more intimate and sort of engaged level of cultivation. So clearly your record keeping is gonna be important no it’s not going to help tohave a spreadsheet from the two thousand events well, and then one from the two thousand three events and right, and and then trying to coordinate that with a with a fund-raising spreadsheet and maybe a volunteer list. That’s that’s not goingto work well, right? You know, you hit on a key part on, unfortunately, many smaller organizations because they don’t always have the resource is needed that’s just where all that information resides on disparage spreadsheets all over the building with different people and not saving that information. More people know about their shirt size and who attended. All the events, right and event attendance and any other engagement volunteering, i’m on the board of meals on wheels. If i show somebody who comes to our events who volunteers on a regular basis and there’s assets, they’re the probability for a more significant connection and gift goes up exponentially. Do we? Paige, do we bring volunteers in to help with this process? Or is this more? Because it’s ah, a donor that in the big scheme is mid level, as george was saying, is this more suitable for staff? I think i can see both sides of that. So is george said, you know, for some individuals, the volunteer, maybe the initial no connection that’s really important to bring them in to get that first gift. Having said that, you probably need a very focused effort from staff to continue to manage a population of maybe a thousand plus donors and prospects. It’s unlikely that volunteers are going to be able to do that quite as in sort of a discipline. Fashion is your staff might be able to do okay. So maybe then bring volunteers in at the stewardship. Thank you. Point. I think that would be a great point, and then certainly, if you’re doing events, say you’re hosting a cocktail hour to get to know these individuals, the volunteers may come into play as hostess again is people that open initial doors, but for that structured prospect management, my thought is that you’re gonna lean pretty heavily on your staff to ensure that that happens. Okay? Wei have plenty of time together, let’s, let’s diving deeper into some more, some more ideas around around breaking that thousand dollars stealing. Go ahead. No one thought that struck me as we were talking earlier is we’re talking about the disparate spreadsheets and sort of where you keep your information is, i think, it’s really important for organizations to understand that you don’t know everyone don’t assume that off the top of your head, based on anecdotal information that you already know and understand who these people are. And it happens a lot when we consult with organizations will come in, we’ll do a screening and they’ll say it’s, fine that you know you’ve found cem cem, new lower level donors. We already knew all our major prospect, and nothing is more fun to me sometimes didn’t actually. Bring out a list of let’s, say, a hundred people, and have people sort of sit back in the room and dio i had no idea. Oh, i didn’t know they could given that level. So i think that’s a key point when you’re trying to develop this program that we really shouldn’t assume that you know your data as well as you think you do. You probably know it pretty well. You can always knew it better. Okay, george could be a little humbling that i have to admit that you don’t know your data and your prospects as well as you thought you did. Exactly. And i think paige is right on point what the organization needs, whether we support them or somebody else does it is they need a discipline process toe analyze that donor base and segment that don’t and without making it an infomercial, pages put together a service over the last year that we’ve had great receptivity on for smaller non-profits on a subscription basis that comes in and makes it as simple as possible puts an m on the record for a major donor and a for an annual donor and it’s at that thousand dollar level on asset size. So you have an idea of the capacity there and a recommended next ask amount or a dollar amount on that donor and something that’s simple used in the hand. You know, all of a sudden it becomes a brush in the hands of an artist if they know howto share the passion of that mission with those right people and the right channels in the right allocation, all the sun you see, huge performance improved. What kind of support? Jorge does the person who’s doing this outreach need from the organization? Maybe from leadership? Well, from leadership, they clearly need a good case for support. I think that’s it and an essential item, they need that case for support. And they also need to be able to show accountability as to what the organization is going to do with those dollars. And i think that’s fund-raising one on one. Tell me why i’m in again and then tell me exactly what you’re gonna do with that. And and, you know, most organizations have embraced that, and i think now more than ever, non-profits or more transparent than ever. And the donor’s let’s. Face it expect that because they’re getting that level of transparency on page brought it up in our session. People aren’t giving donations anymore. They’re investing right? Sure, paige, do you have? Ah, sense of how we would hold the person accountable. Who’s doing this outreach? I mean, i beyond just who goes to valladolid level within x number of months and who doesn’t? How can we assess their their effectiveness? I think you hit on one of the first points number one it’s the conversion of people from lower level giving up to this thousand dollars society level gift that would be, i would say, one of the most important primary. Second dearly of that, i would say acquisitions i mean, i think it’s reasonable too, to expect that you’re also going to bring in some new donors at this level. So it’s not just going to be sort of a conversion path, you’re also sort of out there prospecting on dh then thirdly, had states retention it’s great to get them there also want to make sure that we’re keeping them there were keeping these folks engaged, so i think you know, under those three things you form. A baseline for some really solid metrics let’s spend a little time talking about that retention because now we’ve spent time getting getting them to that level. What what’s your beginning opening advice on keeping them at that level? Well, the first thing i would say is there some great bassline knowledge that suggests that these donors wants an individual gives the thousand dollars or more? They retain it a higher percentage relative to people giving it a lower amount, so i’d first of all, just saying put it out there that you can expect ah, hyre level of retention beyond that, you’ve got a steward, these folks and i go back to earlier comments about keeping them engaged on dh that’s going to be a key, you know, we know that that once you sort of open your wallet and get engaged, it’s an organization at that level, you’ve got a higher level of inclination, but it’s not going to be automatic, that you’re going to stay there. I mean, i use myself as an example. I gave a thousand dollars to an organization for a year, they were doing a very special campaign, i felt super engaged cause i was really passionate about what they were doing after that campaign. I kind of fell off, you know why? Because of their shortcomings in keeping you engaged or for your own interests change? Yeah, to a certain degree, it was sort of, you know, we kind of finished the campaign, they shifted focus, and i didn’t really hear a whole lot about, you know, kind of the new mission and how it translated to my interest areas, and they’re great organization. It’s it’s not, you know, sharp criticism, but that’s just an example of how, you know, for me to continue giving it that level, i really needed to feel more engaged because that’s not an insignificant amount of money and my attention sort of shifted elsewhere. I think this is critical, george, especially as a campaign wraps up it’s structured around the campaign, whether the campaign is, you know, something online and quick, maybe latto great sixty day campaign. Or maybe it’s a more traditional four five year campaign. When that campaign wraps up, how do we keep? How do we keep people engaged? What were we talking about now? Yeah. There’s. No doubt there needs to be. Some transition in some constant connection and, you know it is page pointed out, it’s interesting we saw in the study that we did eighty percent of the donors, eighty two percent once they hit a thousand dollar level, eighty two percent of them retain, and about seventy percent of those actually gave mohr now that’s what’s the corresponding statistic for those under a thousand under a thousand it was about sixty five percent, and when you got lower in the pyramid or on the food chain for gifts he got in the thirties. But i think another metric is paige talked about the ability while averages is, you know, a very deceiving right, because there’s all wireframe clolery all the outlier, all the outlines on this, and we’ve seen organizations even a five thousand dollar gift level that only retain twenty or thirty percent of their donors. Even at that level, they’re retaining a relatively small percentage. A lot of times, those air event driven donors is a good example, right? They do a lot of events, they do the big galas and they’ll only retain a small percentage, and yet others air retaining north of eighty and their entire portfolio right through the organization’s pretending lo don’t lose your point, but no, they’re constantly having to acquire eggs and spend so much more money acquiring new donors to replace right, the master says, and you know, a cz you said the mathos where it’s the leaky bucket, you know, it’s leaking, leaking and i’m constantly filling, filling, filling i’m chasing and it’s hard to string together, you’re over year solid, sustainable growth without having a solid retention left. And while this thousand dollars threshold is appears to be important, it’s not magical unless you put in the discipline processes around retaining and engaging and connecting and stewarding those relationships and as page mention and you hit on it, it has to evolve right? Because i’ll get a multi year commitment because of a capital campaign. But now what’s the incentive, i’m not building a building anymore. I’m not expanding a soup kitchen. Why do you need the money? And why must i continue to give it this level and that’s sometimes that’s amore, difficult conversation and a real challenge than it is to say they were building this building because we need it and therefore you need to give to keep us sustainable. Yeah, yeah, the case for the campaign is usually hopefully pretty straight forward, right? There has to be a plan, right page for transition after that campaign. Absolutely. And i was just thinking one of the things we haven’t touched on too much in regards to steward shevawn retention is the involvement in the visibility of leadership with these donors. So george talked about you. You do have to hold them accountable. You’ve gotta have a strategic vision. But one of the things that we know from past studies and sort of deep breathing with clients after campaigns is how important it is for these individuals to see and feel that the leadership of the organization is out there sort of building the case of in the community, coming back and talking to them and engaging them with that vision if leaderships not connecting with them. It’s very likely you’re going to lose them. Okay. Well, there’s ah, there’s an answer to something i asked earlier was, you know what kind of support to the the people with the gift officers or the officer at this level need they need leadership is george said they need the vision you need concise mission so that they can convey it and well beyond the campaign. Right? Unlike a major gift, they don’t need the leadership to make the ask right. They should be responsible for that relationship. They should be able to store it, but they certainly as you pointed out, they need the tool kit and they need the commitment. Okay, we have we have a few minutes left. Either one of you. What more would you like to say about breaking this thousand dollars ceiling? Go ahead. I was just going to add it’s just important. I mean, i you know, when we were thrown out a couple of statistics and we’ve talked about how you do it, i would underscore for organizations that getting to this level securing them retaining these individuals can really help underwear under gird your mission in your vision and really provide a firm base of financial support where sometimes annual getting and even major giving to a certain degree can be a little more volatile. And this really can become sort of a study platform and a foundation that i think the importance is sort of underemphasized right now. And i’m just a big believer that it can provide a nice pool of support steady, solid donors that really could be crucial to your organization’s success. George, would you like to leave us with you know, the question we get asked all the time is how do you find these? How will i find that thousand dollars donor zoho lled income the size of the assets, the real estate that they have one other giving that they do and the more and more data you look at, the more more you realizes there is no one silver bullet there’s no one thing that you could look at and say that person has a lot of assets because he’s been study after study, people of great affluence are not necessarily all very philanthropic they give, but that doesn’t mean they’re going to give it a certain level. So there has to be a combination of the ability to give and the willingness to give and that’s where requires some level of analysis and segmentation to really get to that point as opposed to tell me somebody who’s rich, give me the next millionaire and then that’s how i have a strategy? What do you love about this work? Analytical work that you’re doing, george, you know, there’s it we can help people immediately. I feel like every time we work with a client, we’re going to make them better. There is no doubt that if they follow in using information, it’s going to make a more efficient, more effective. We had one client who was here before standing in front of you that we help. And we identified on ly about three hundred prospects. But they raised twenty one million dollars in eighteen months from those prospect that were not on anybody’s agenda. Tony, they had not. You know, they were there. Some of those folks had given five hundred thousand dollars a year forever that’s such a grand slam, you. Twenty one million dollars. Every hundred unidentified prospect, obviously on unknown process unknown prospects down right down under the view, our line of sight from there in their folks. Page, what is it you love about this work? I would ask you really the same sentiments, but i’ll put a slightly different spent on it. I my background is in fund-raising for a number of years and i did. Not have analytics. When i did it, i would have given my right arm to have had it, because i know what it does. It allows our clients to spend their time on their mission and doing what they wanted. You and we really it is what george said. We really help them. And how can you not feel good about that? I mean, i feel great every day about what i get to do. So it’s it’s a privilege to work with the team i work with, as well as the clients we work with. Paige bullington is director of professional services at target analytics. George durney, formerly director of sales at target analytics. Now host of george durney show five a m two a m on w a m u r. We’ll put you on tv and he was like, yeah, that would be prefer tv. I want to say good morning, washington good morning, washington. Thank you very much. Both of thank you notes from you. You were very good. Your audition is you now have your addition. Real way. We have it. Tony martignetti non-profit radio coverage of bb khan twenty thirteen. Thanks so much for listening. I love going to these conferences, and next one will be next week at non-profit technology conference live listener, love, let’s, start abroad this week, korea. Lots of people in korea, multiple in soul, thank you. Also, young, jean and sanju. I hope i’m pronouncing those right on io haserot live listener to love to the korean peninsula in japan. Fukuoka you’re pretty. You’re you’re very consistent listener, if it’s the same person and also takashima konichiwa here in the u. S new york, new york. Cambridge, massachusetts. Atlanta, georgia, irvine, california. Beverly, mass, jackson heights, new york. They’re out of the woodwork live listener love to each of those like these great, all these states checking in love it and, of course, those of you listening on the time shift podcast pleasantries to you love our podcast listeners as well. You know that there are two companies that helped me bring non-profit radio to you, and one of those is rally bound. They support the show and they make simple, reliable peer-to-peer fund-raising campaigns friends asking friends to give to your cause. You know, you can claim a discount as a non-profit radio listener. People have here’s an example of one of the rally bound campaigns friends circle they raised more than half a million dollars in their annual five k walk. Now rally bound is not necessarily for events like runs and walks and rides. Ah, could just be a campaign that’s, not event driven, but this one was for friends circle. And they did very well pick up the phone that i mean, you could go to their website, but i like talking. Pick up the phone, talk to joe mcgee. You’re not going to get somebody to talk to at kickstarter or indeed go go. But you will it rally bound triple eight, seven, six, seven, nine o seven. Six my friend joe mcgee. Or of course, rally bound dot com if you prefer that way. Also tea, brc cost recovery. Supporting the show. Do you accept? Credit card gift if you do, then you should talk to them because they save money on those pesky credit card fees. Trc talks to your existing credit card processor, then you don’t need to be switching, talk to your existing processor and get them to lower the fee that you’re paying on each transaction. If you, uh, if you look at your statements, you’ll see that those, uh, those pesky little fees add up. If they don’t lower your rate, then you don’t pay them there. You would talk to yourself, rabinowitz, and when you talk to him thank you for sponsoring non-profit radio trc dot com or again, i like to talk method two, one two, six double four, nine, triple xero i’m delivering a workshop on charity registration at the foundation center in new york city, the’s charity registration laws are these things that require you to register with state authorities in each state where you solicit donations. So if you have a donate now button, for instance, on your site than you’re soliciting in about half the states in the us, if you’re sending email or u s mail those air solicitations also in the states. Where those messages land, the workshop is on tuesday, march eleventh at ten o’clock in the morning and it’s free and there’s info on my block at tony martignetti dot com. And that is tony’s take two for friday, seventh of march tenth show of this year. Jean takagi is with me you know him he’s, the managing attorney of neo, the non-profit and exempt organizations law group in san francisco, he edits the popular non-profit law blawg dot com and on twitter he is at gi tak gt a k jean takagi welcome back. Thank you so much, tony, how are you? I’m doing terrific, lee, how are you doing out there in san francisco? I’m doing, actually, and i’m actually in newport beach today. Oh, newport beach is that, well, is beach. So is it south of san francisco? It’s just the valet. Okay, way south. Okay, cool. Um, we’re talking about fraud. This with this, uh, this month, the fraud, fraud losses. These things can be considerable. Yeah, absolutely. That side interrupted. You’re not interrupting at all. Go ahead, it’s. Your turn. What? You know, i was looking at the chronicle of philanthropy this morning on their online website, and one of the top stories is oxfam’s extra cheese, please. Guilty to defrauding charity and that’s about one hundred eight thousand dollars, which probably small for oxfam. But, you know, always an alarming thing for the public to see. And incredibly embarrassing for oxfam. Absolutely. There’s more than just the money here, there’s the reputation and oftentimes that’s that’s the biggest loss of all the loss of the public trust in the organization. Okay, um, well, we you know, you and i have talked about audits before isn’t an audit, it actually turns out is not going to catch a lot of fraud. Or is that right? Yeah, i think so. What some people are saying is that not its only catch about three to four percent of the frauds that that are eventually figured out by the charities. So that’s a very, very small proportion, although there’s still very good. And what an audit might do is tio provide tips on getting internal controls in place. To prevent fraud from happening. I don’t want to downplay the importance of a financial audit, but it definitely doesn’t result in the capture of a lot of the fraud that goes on. I saw something that said that a lot of fraud is found by by tips like whistleblowers. Yeah, absolutely. There. There having a good whistle blower policy is a great tip for preventing fraud and really establishing what what we like to call from, you know, from a lawyer’s perspective, the tone at the top in terms of making sure that the board has said the prevention of fraud and the integrity of the organization keeping the integrity the organization is a paramount priority is really important, and having things like a whistle for policy that strongly protective of employees that might blow the whistle on somebody commiting or defrauding the organization is really important and sometimes tip lines that air man by third party providers can also can also be helpful in allowing employees to feel that they can remain anonymous during during those tips. Oh, that’s! Interesting that’s like the makes me think of those signs on the backs of trucks. How are my driving? The exact one, eight hundred number say this guy just swerved right in front of me. The same. Okay. Okay. I didn’t know that the only seek. I guess you can outsource that. Obviously through a provider. Okay. That’s. Interesting. Um, all right. So as not surprising, your pointed leadership is key in terms of policy setting and andrea lee. Not just policies, but but the tone, right? I mean, you want you need to be perceived as unethical moral leader of this organization. Yeah, absolutely. And that should sort of be embedded in everything that an organization does. Its values should come out in all of its policies and its practices. And i think maybe the second part is really important because we could all have. I’m like the seinfeld at the sub with the rental cars. Anybody can take a reservation. But it’s, whether you can keep the reservation that’s important than here, it’s the same thing. It’s, uh, you know anybody, khun develop or, you know, download some policies and say that there the policies of our organization. But if the board takes the tone at the top and really enforces it and you know, just by even giving a presentation in front of your employees and volunteers and anybody else to say without accusing them, but say, you know, integrity is, you know, our life, blood and here the things that we want to do to preserve our integrity on dh, you know, having anti broad policies and whistle blower policies and strong internal control that’s all part of it and displaying it out in front of the staff and employees, i think that’s that’s just very important preventive measure that i think is very, very effective as well. But you also have mentioned the other part of this which is enforcement, if a nem ploy e steps over the line and transgresses somewhere, do we covered up on dh and try to rationalize on their behalf? Well, you know, we don’t pay them enough for are they having family problems, you know, or do we deal with this the way the policies call for and and you know and in a strong way hyre waiting as a lawyer, i liketo after one way and that’s like let’s comply with law let’s, make sure we report it, get our money back way. Have to take reasonable steps to do that. But when i reversed the question to you, tony tone, if you were serving on the board of an organisation and you found out that your executive director has gone through some incredibly hard times and suddenly had the opportunity and under such pressure that, you know, she decided to borrow ten thousand dollars with the intent to pay it back by the end of the month. But she didn’t, and she got caught doing that. Now, is that something you want to report to the police and, you know, have it all come out in the newspapers or do you want to do something else? First of all, i want to go on record saying, i hate when you turn these questions back on me. I want that to be said explicitly, i don’t like it one bit. No, i would i would be pretty stern. Yeah, well, do i want the publicity’s you mentioned, you know, reporting it to authorities? She certainly if this is a fireable offense, whether she paid it back or not, you can’t borrow money from the organization unless the board approves some kind of alone. And then there have to be arm’s length arm’s length terms to it, a market rate of interest returned so oh are paid back, so you can’t just borrow privately and then whether you pay back or not with interest or not it’s not right if it’s not approved by the board. So to me, this is a fireable offense. Now, would i go to law enforcement? I i probably would, but i would want to know whether this needs to be something that’s going to be made public. And if they can’t a sure something private oh oh then then i wouldn’t want to pursue it with them. I would i would talk to law enforcement, but i would i would want some kind of i don’t know if you could get a guarantee maybe maybe this is maybe it’s naive to look for, but that’s what i would want because i would not want i wouldn’t want this to be public. Yeah, and that’s the tricky part, isn’t it? Because non-profits are supposed to be very transparent with what’s going on? And they in fact have to report to the irs and the form nine ninety whenever there is a significant diversion. Of charitable assets, whether recovered or not. So wait have to report they might not report the name or the position of the person that diverted the assets in the form nine, ninety that might be a bad idea, and if they don’t have absolutely, you know, substantial evidence that that this person actually committed it and just had strong suspicions about it, then they have to be careful of defamation. So, you know, you want to approach this very carefully, but way sort of concoct also the facts and circumstances of when it would be appropriate to go to the police when it might be, you know, appropriate not to when it’s right toe hyre person and i agree in most cases, i think, you know, and an executive would have lost trust here sheer he had done that, and, you know, it would definitely be interminable effects come, but you know, if it’s going to go out to the press, that could ultimately damage our mission and our ability to, you know, conduct our charitable programs and benefit are beneficiaries and do i want that to happen, you know, depending upon the offense, maybe it’s mia kulpa, i’ll you know, fall on my sword and they will do a better job next time, but maybe it’s not covering up. Maybe i just don’t want to make a big deal out of something that i think may have been small and may have been preventable, and then something that we could easily fix so tough questions, but okay, i mean, i would agree that it should be disclosed disclosed the way it’s supposed to be, and you’re saying there’s a requirement toe reporter on the nine, ninety then i would i would do so what i meant by being circumspect about talking to law enforcement, although i said i would, but, you know, doing it cautiously was i’m trying to avoid the press, but now if somebody later on reads it on our in our nine, ninety, which is a public document, then then i would say, you know, yeah, way we dealt with it, we fired the person, and we disclose that the way we’re supposed to because you just get you discovered the disclosure you read our nine, ninety, we just chose not to go to the press, but that’s, you know, a way we don’t have. An obligation to do that isn’t isn’t that sufficient transparency? I’m turning back. Yeah, i’m asking you. I think so. You know, a cz longest year transparent where you have to be. So the nine, ninety is where you’re required to go, whether you’re required to go to the police and report a crime committed against the organization that you know, that that’s actually amore involved issue. And you may not always have to go to the police, you know, especially under the circumstances that gave me that may not be something that you go to the police for, especially if you get the money back. But it may absolutely be interminable offense that you want to terminate your executive and feel like you’ve lost all trust of that person. Oh, yeah, but anything that goes to the police has the potential for going out to the press and it’s, not the organization. That would probably bring it out to the press. But somebody else that gets wind of that story in the public record. That might be part of the police from your okay. Okay, i understand that you have some ideas about some some red flags that would suggest that there’s a hyre potential for fraud in an organization let’s talk about some of those. What were some of those? Well, i guess the three what what are identified? The three conditions that exists for when fraud takes place and charitable assets are lost is when somebody has the opportunity to divert those assets, somebody may be experiencing some outside pressures from economic situation. In our example, and somebody khun rationalize it, for example, maybe they sabelo i’ve been underpaid for five years of working here on whether it’s, you know it’s justifiable is not is not the matter, but they’re sort of self rationalized it in their own heads and windows. Things exist that’s when fraud occurs and the red flags air, having things like very poor internal controls, an environment where everybody is so trusting of one another that there are no double checks. You know, andi, um, there’s excessive control by an executive director who has the right to make dispersement without anybody looking over, you know, for his shoulder when you do have underpaid staff. If if your staff has been underpaid for a number of years and you’ve got disgruntled staff members that might be a bad sign if there’s a lack of attention paid by the board and the lack of financial management experience. Buy-in leadership. Maybe. Program directors have always been sort of raised up to lead the organization’s, because they have the highest profile and the most respect. So the programmatically. But maybe they’re not the best financial managers, and they don’t know how to spot thes problem areas, or developed the right procedures and policies to protect the organization. That’s where things go wrong, okay, we’re going, tow. We’re gonna go out for a break for a couple minutes, and when we come back, jean and i are going to keep talking about fraud and some ways you can prevent it. Aside from policies like training, for instance, so stay with us. You’re listening to the talking alternative network. What? Have you ever considered consulting a road map when you feel you need help getting to your destination when the normal path seems blocked? A little help can come in handy when choosing an alternate route. Your natal chart is a map of your potentials. It addresses relationships, finance, business, health and, above all, creativity. Current planetary cycles can either support or challenge your objectives. Time. Montgomery taylor. If you would like to explore the help of a private astrological reading, please contact me at monte at monty taylor dot. Com let’s monte m o nt y at monty taylor dot com. Are you suffering from aches and pains? Has traditional medicine let you down? Are you tired of taking toxic medications, then come to the double diamond wellness center and learn how our natural methods can help you to hell? Call us now at to one to seven to one eight, one eight three that’s to one to seven to one eight one eight three or find us on the web at www dot double diamond wellness dot com way. Look forward to serving you. Talking alternative radio twenty four hours a day. Lively conversation. Top trends and sound advice. That’s. Tony martignetti non-profit radio. And i’m lawrence paige, no knee author off the non-profit fund-raising solution. Welcome back to big non-profit ideas for the other ninety five percent to get some more live listener love huntington station, new york joined us welcome and pompel oak in the philippines. Welcome, philippines. If you’re going to, you’re going to listen regularly put, let me know howto say hello to you in your native language. I like to do that. So if you’re going to come back, which i hope you will put on the facebook page or or twitter, let me know how to say hello to you. Okay, jean, let us continue with our ah what do we what’s? The euphemism for this diversion of charitable assets? Discussion? Yeah, um some training. How about you mentioned it casually? Let’s, let’s spend a little time on some prevention through training. Terrific. Well, i think again, just identifying the problems for employees is a big part of this. The solutions that you can have towards fraud prevention, letting them know that you know that there are risks of fraud and that you’re taking steps to to address him is a good thing. So just having the training in and of itself is great, but what you should do in the training is another kind of area where you could really help yourself if you’re an organization and i think part of it is tio have the staff included in identifying what the potential risks are to the organization, on the ground on the ground. They may be the ones who best know the areas where the problems are or where possible. Fraud can take place where employees or an executive khun misuse the organization’s assets, not just their funds, but perhaps there taking equipment or inventory home on dh things of that nature, training them on internal controls, the implement policies. We talked about enforcing policies but training the fact how tio implement the policies is also just critically important. So and doing that in the training as well and doing it at all levels trained the board, train the staff and make sure your executive particularly is trained on how to spot brought on how to try to prevent it. Let’s talk about something that’s very common, like it’s. Kenny petty cash metoo reimbursements. Where do you think the you know the balance is between burdening somebody with substantiation versus trying. Teo, make make sure we have the right, internal control around our our cash is i don’t know it is one hundred fifty dollars, beyond that is it has to be done by check or something. I mean, you know, give me help me out with the petty cash reimbursement problem. I think the big problem with petty cash is allowing petty cash to go out without getting receipts coming back in, and then we’re talking about a five dollars, starbucks copies and, you know, we’re not so worried about if it’s a one time deal. But if people are starting to take from petty cash to buy office equipment like a printer, the fax machine broke down. We have three hundred bucks for a fax machine, and you’ve got that petty cash lying around and proper receipts are not brought back in. Um, that’s that’s a big problem in a very, very easy way to commit fraud. Another easy way to commit fraud is to make up expenses so somebody could say our fax machine broke down in tears. You know, jnj repair services, here’s the receipt for, you know, one hundred twenty bucks, and you just keep seeing that same vendor come up over and over again. The fax machine seems to break down. Yeah, right. Yeah. Or now. J and j does plumbing now all of a sudden, because the because the urinal, the urinal, the middle urinal is not working in jay and jay. They fixed it for us. Make sure that works. Well, they’re very talented. Well, i’m not saying that you well, you still have one on either side. I said was the middle one. So you still have the one left on the right. But jay and jay is, you know, a multi disciplinary. Ah, provider. Yeah. And actually, acronyms are very, very easy way for organizations to commit, or people to commit fraud within organizations. And, for example, if the organisation’s name has an acronym, that anybody could make up a side business or company and use the same acronym, the donors that are donating checks, teo jnj charity may suddenly find their checks being diverted and, you know, put into j and plumbing account. Have you would not know any different. Have you seen this with with clients? Have you had to deal with fraud and any of your client organizations? Yeah, usually after the fact tony’s after the frog has taken place, and the organization’s air tryingto get back to speed and know what to do next. That’s, that’s, often times where we will come in. So are you called that the crisis stage, like where it’s just been discovered, usually right after that. So there may. There may be somebody else who deals with the first level crisis, and then we’re come. We come in after, okay, any any story you can share anonymously. I always get feedback from listeners that they love stories. Any anything you khun say, that they’re being there, be a lesson learned. Um, good question, you know, there there are times when we come in after an embezzlement ah heard and and, you know, the board may have not always been paying the most attention, teo what’s been happening, so i think that learning lesson in all of this, andre, actually, from you’re learning lessons that may come up with that the board that was asleep at the time on allowed their organizations to be victimized by by fraud have got to really stand up and do something to fix that and that’s just to show to the public that they are, you know, an organization that is trying to put the best use of their their money, and they don’t let these things just look away very easily. So putting in the right system’s putting in the right people very, very important, and we’ve written some opinion pieces for the chronicle of philanthropy on the i don’t know if you remember the three cups of tea case tony yeah, vaguely. Yeah, we just have about two minutes left, jean, but yeah, go ahead, summarize it. So so basically thie executive and the founder of an organization had been using organizational assets. To promote his own book and book tour, getting very, very substantial monies for that an organizational assets were used for those purposes. Eventually he came into some sort of settlement with the attorney general of the state to rectify it. But the board it ended up looking very poorly on and had to go through a bunch of steps to re mediate that they had let it gone too far and for boards to say, hey, let’s, now talk about these things. They’re all sorts of articles, the press loves to jump on them and fraud, and, you know, if we look at fried and overall businesses, we’re talking about average organizations losing five to six percent of their total revenues to fraud, and if we took that and looked at total non-profit revenues and said the same ratio applies, we’re talking over ninety billion dollars a year, so fraud is a big deal. I don’t want to overstate the case, but fraud prevention is a big part of the board’s responsibility we talked about tone, the tone of top and just making sure that they’re exercising their fiduciary duties right at the start. It is really important, we have to leave it there. That’s a perfect place to leave it. Thank you very much. Jean takagi. He is managing editor of neo non-profit and exempt organizations law group in san francisco. You’ll find his popular blogger at non-profit law block dot com and on twitter he’s gi tak gene, thank you very, very much. Thanks. Have a great day. Thanks. You too. Next week on archive show because i’ll be at end now. Ntcdinosaur the non-profit technology conference getting amazing interviews with lots of smart people just like we did it become at and t cme already fully booked with conversations about data, the cloud your boards like c r m i don’t like econ isms. Yeah, i don’t like akron isms first because they don’t exist. They also don’t like acronyms. So of course we’re talking about constituent relationship management on social media to, of course, that at ntc, i’m gonna leave that conference with, like, twenty interviews to play very soon. And that is next week. Wednesday get there. And then thursday and friday doing the interviews rally bound and t brc keep them in your thoughts and prayers. They support non-profit radio. Please thank them. And check them out. Rally bound, dot com or triple eight seven six seven nine o seven. Six t brc dot com, or to one two, six double four, nine. Triple xero. Our creative producer is clear meyerhoff sam labor, which is our line producer. The show’s social media, is by julia campbell of jaycee social marketing and the remote producer of tony martignetti non-profit radio is john federico of the new rules. Our music is by scott stein. A special shout out to julia campbell of jaycee social marketing. Welcome, first week produced promoting the show. Glad to be working with you. Be with me next week for non-profit radio. Big non-profit ideas for the other ninety five percent. Go out and be great. You don’t think shooting. Good ending. You’re listening to the talking alternative network, itching to get anything. Cubine are you stuck in your business or career trying to take your business to the next level, and it keeps hitting a wall? This is sam liebowitz, the conscious consultant. I will help you get to the root cause of your abundance issues and help move you forward in your life. Call me now and let’s. Create the future you dream of. 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Have you ever considered consulting a road map when you feel you need help getting to your destination when the normal path seems blocked? A little help can come in handy when choosing an alternate route. Your natal chart is a map of your potentials. It addresses relationships, finance, business, health and, above all, creativity. Current planetary cycles can either support or challenge your objectives. I’m montgomery taylor. If you would like to explore the help of a private astrological reading, please contact me at monte at monty taylor dot. Com let’s monte m o nt y at monty taylor dot com. Are you suffering from aches and pains? Has traditional medicine let you down? Are you tired of taking toxic medications, then come to the double diamond wellness center and learn how our natural methods can help you to hell? Call us now at to one to seven to one eight, one eight three that’s to one to seven to one eight one eight three or find us on the web at www dot double diamond wellness dot com. We look forward to serving you. Talking. Hyre