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Nonprofit Radio for September 26, 2022: In Nonprofits, Do We Trust?

 

Gene Takagi: In Nonprofits, Do We Trust?

Gene Takagi

Public trust in nonprofits is eroding. Why is that, what does it mean for our work, and what can the nonprofit community do about it? Gene Takagi, our legal contributor and principal of NEO Law Group, returns with his insights.

 

 

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[00:00:52.08] spk_0:
Hello and welcome to tony-martignetti non profit radio big non profit ideas for the other 95%. I’m your aptly named host of your favorite abdominal podcast. Oh, I’m glad you’re with me. I’d get slapped with a diagnosis of fragility as angry. Um if you nailed me with the idea that you missed this week’s show in nonprofits, do we trust? Public Trust in nonprofits is eroding. Why is that? And what can the nonprofit community do about it? Gene Takagi are legal contributor and principal of neo Law group returns with his insights On Tony’s take two. This is not planned, giving

[00:00:57.14] spk_1:
we’re

[00:01:41.13] spk_0:
sponsored by turn to communications pr and content for nonprofits. Your story is their mission turn hyphen two dot c. O. And by fourth dimension technologies I. T. Infra in a box the affordable tech solution for nonprofits. tony-dot-M.A.-slash-Pursuant four D. Just like three D. But they go one dimension deeper. It’s always a pleasure to welcome back Gene Takagi, you know who he is. Of course he he we owe him the introduction that he that he deserves, but you know who he is, He’s our legal contributor, Managing attorney of neo the nonprofit and exempt organizations law group in saN Francisco he edits the wildly popular nonprofit law blog dot com, which you should follow and he’s a part time lecturer at Columbia University. The firm is at neo law group dot com and jean is at G tech. Gene

[00:01:58.66] spk_1:
thanks

[00:01:59.11] spk_0:
for being back Welcome.

[00:02:00.73] spk_1:
It’s great to be here.

[00:02:03.15] spk_0:
It’s always a genuine pleasure. Thank you.

[00:02:07.78] spk_1:
We’re

[00:02:20.77] spk_0:
talking about public trust today. Uh not only your concerns, but you’re, you’re seeing evidence of. And I’m certainly reading some things too about eroding public trust in nonprofits. What what are you seeing? What are you thinking about that?

[00:02:27.69] spk_1:
You know, my first thoughts, tony is that trust really is the foundation of, of good relationships, right. No matter whether we’re talking about person to person,

[00:02:39.09] spk_0:
person to

[00:03:18.40] spk_1:
charity, you know, person to other institutions and charities I think are especially reliant on trust because if you’re asking people and groups and organizations to give money to you, um, they’ve got to trust that you’re gonna do use that money for charitable purposes, not for personal gain, not for other things, but for the charitable purposes that they want to support. And when trust erodes in our charities, that’s really a red flag and sort of a harbinger of things, bad things that could follow. So trust is really important, I think, um, to talk about. And the study, the most recent study that came out from independent sector and Edelman Data and intelligence found that there’s low trust amongst all institutions. So maybe not completely surprising, but less than a third say the trust, government, large corporations and the news media

[00:03:35.93] spk_0:
and

[00:04:08.91] spk_1:
charities, relatively speaking are better than that in terms of the trust factor, but it’s been dropping and nonprofits as a, as a sector, The trust and nonprofits now is 56%. The rest either are neutral on it or have a distrust of nonprofits, only 56% and only 36% trust philanthropy or foundations and grantmaking organizations, so that’s really, really low. And women’s trust and non profits dropped even more than than men. Um, and I think another flag to point out is our younger generations, especially gen Z

[00:04:17.56] spk_0:
really

[00:04:18.43] spk_1:
have a distrust of nonprofits. Um, and

[00:04:22.83] spk_0:
with

[00:04:23.75] spk_1:
the wealth transfer that’s expected from baby boom generation to millennials and two gen Z, that’s got to be alarming to nonprofits. And I, I think it’s just worthy to call out right now.

[00:04:35.97] spk_0:
Do you know what that number is among gen z. Trust in nonprofits that in the independent sector include that in in their survey.

[00:04:49.81] spk_1:
Well, the statistic that I, I saw that that called out to me was 57% of gen z. Americans say giving directly to individuals makes a bigger impact than giving to nonprofits. So they would rather give to individuals on go fund me or another crowdfunding site than to give to a nonprofit. They find that more trustworthy.

[00:05:16.77] spk_0:
There’s another dimension to the, to the trust, which is government, trust in nonprofits. And you could read government as congressional or, you know, I. R. S. But you know, they they, the the U. S. Government has bestowed the charitable deduction so that the money is used for, as you said, you know, for charitable purposes as disclosed in your organizing documents. And if if I’m thinking more of Congress, you know, if congress feels that

[00:05:43.59] spk_1:
the

[00:05:43.80] spk_0:
nonprofit community can’t be trusted, you know, we could start to see some erosion of, uh, clawback of some of the, the benefits that nonprofits enjoy. Tax free status, for instance, and the charitable deduction to name a couple of

[00:06:00.50] spk_1:
wildly

[00:06:01.37] spk_0:
wildly valuable ones.

[00:06:22.64] spk_1:
Yeah, and that’s such a great point because just a few days ago, there was news about a case in Minnesota where government funding to feed poor Children, um, there was a huge scandal involving tens of millions of dollars. So, um, it really speaks to two if government stops trusting nonprofits or certain government agencies and cuts funding to agencies, how harmful that might be to charities and the beneficiaries they’re trying to serve.

[00:06:35.87] spk_0:
I think that one was even worse. I think it was like $240 million dollars

[00:06:41.59] spk_1:
worth

[00:06:42.04] spk_0:
of pandemic aid money. I saw that in, in Minnesota is supposed to be going to feed Children during the pandemic and, and pocketed. Yeah,

[00:06:52.51] spk_1:
patterns there as well. It’s, it’s,

[00:06:55.94] spk_0:
yeah,

[00:06:58.09] spk_1:
it

[00:06:58.93] spk_0:
is. It’s, it’s, um, and then of course there’s always been Charles grassley. I mean, he’s been, he’s been nipping at, uh, foundations and donor advised funds for for years

[00:08:03.64] spk_1:
now. Yeah. And in fact, the whole charitable sector, I think, um, and a significant portion of our lawmakers, um, take a consumer protection perspective of, we want to protect donors, um, and not strengthening the nonprofit sector perspective they want to create laws that will per, you know, try to prevent, um, uh, fraud or misuse of charitable funds as if this is rampant amongst the nonprofit sector, which my position is, it is not, but there are certain high profile cases that hit the new york times and the Washington post and all the other newspapers. And there’s so much media coverage that focuses on scandals because that’s what’s gonna sell right. The tweet or the short snippet that people’s attention span will, will actually stop on. Um, it’s gonna sell much more if it’s a scandal rather than a long term growth in in impact. Even, you know, the, the great news that child poverty has, has been really declining in in the country, which should be huge news gets short shrift compared to some of the big scandals that we hear about.

[00:09:08.60] spk_0:
Yeah, yeah. When I name dropped Charles Grassley, I should have said Senator, senator from Iowa, Republican, senator from Iowa Charles grassley. Um, yeah, right. It’s, it’s the scandals that, that’s, that get clicks that sell papers that get attention. I remember, I’m sure you do several years ago there was a scandal among an, an organization supposedly raising money for Navy Veterans like Navy Navy Veteran Foundation or something like that several years ago, but it was very high profile. Um, what was the other, do you remember, I don’t mean to put you on the spot. It’s okay if you don’t remember because I don’t the, uh, the veterans organization that was accused of squandering, you know, tens of millions of dollars on lavish retreats and high, high executive salaries. But, but, but it it had it had great outcomes. It was, it was funding lots of veterans organizations.

[00:09:25.25] spk_1:
I think the one you’re talking about is the Wounded Warriors.

[00:09:29.11] spk_0:
Thank you. Yes. Project.

[00:09:51.07] spk_1:
And yeah, it’s, um, it’s always difficult. Um, looking at an organization through the eyes of the media, um, about how, you know, how well or unwell they did. I don’t want to create, um, you know, uh, discuss particular scandals too much other than to say that they create problems for the whole sector. So, you know, that’s, it’s just something to be aware of. And they’re not necessarily reflective of the vast majority of nonprofits out there trying to do good work and help people.

[00:10:17.64] spk_0:
The 99.99% you know, our our that’s even higher than the nonprofit radio 95% No, uh, 99.99% of nonprofits are not scandalous. And could they, could many of them be running more efficiently. Yes, but we’re not, we’re not talking about mere efficiency. You know, we’re talking about erosion of trust because of high profile crises or scandals malfeasance.

[00:10:37.97] spk_1:
Yeah, high

[00:10:39.21] spk_0:
profile,

[00:10:39.92] spk_1:
not

[00:11:55.21] spk_0:
representative. It’s time for a break. Turn to communications. They know the nonprofit community and they know pr and journalism. Both partners are former journalists peter pan a pinto, one of the two worked as senior managing editor at the Chronicle of philanthropy. And after that he was at the council on foundations. So he understands the nonprofit space very well, which means he understands your challenges, understands how important pr and being a thought leader is to to your work. And the two of them together know how to build relationships with outlets, not just with journalists, but you know, also podcasters, um, conference organizers. So they understand nonprofits, they understand communications, how to build relationships and that’s what’s gonna get you heard across all media. So let’s turn to turn to communications. Your story is their mission turn hyphen two dot c o Now back to in nonprofits. Do we trust?

[00:12:00.88] spk_1:
It takes me to another tangent though, now that you talked about efficiency, tony and that’s kind of, we’ve talked about it before and you’ve talked about it with the writers of uh, article or a letter called the overhead myth. I don’t know if you recall

[00:12:16.06] spk_0:
that many years ago. Yes. The C E O. S of charity Navigator better business. Bureau wise giving alliance and guidestar.

[00:13:08.09] spk_1:
Yeah. And you know, they were saying that we shouldn’t, you know, base ratings on a charity in terms of how worthy they are to receive funds from donors simply based on overhead ratio. You know what their admin and fundraising costs are relative to their programmatic costs and those are really wise wise words, um, that that were stated in that letter. But even today we still see organizations even high profile ones that talk about their low overhead ratio. And it can engender trust um, in their organization at the expense of trust of other organizations that legitimately have higher overhead ratios because the infrastructures and you know, the things that they need to do may be completely different. So it’s not fair to, you know, compare across the board and across the maturity of an organization. So

[00:14:06.82] spk_0:
another very valuable thing to invest in is is research, research, uh, maybe maybe going beyond research, activating a new program that, you know, that may or may not succeed, but you have to invest upfront, you know that it’s annoying the folks who hold different opinions about wise investment in technology, you know, it’s Uber should be losing money for the 1st 12 years, you know, because it’s investing in the future. Um, Tesla, you know, non profit unprofitable for many years, but you know, look where they are now, but, but in the nonprofit sector, you know, we don’t we don’t allow that that research and um, spending on innovation, we consider that overhead like, you know, like, like rent, which rent happens to be important too, but you know, something, something um, rent is not a good example, but sort of, you know, frivolous or you know, self indulgent when it could very well be research and and scaling up for for a for a dynamic

[00:14:29.60] spk_1:
future or even things like a living wage.

[00:15:22.90] spk_0:
Yeah. Good. Exactly. Thank you. Yes. Um, yeah, I I don’t like the, you know, I don’t like the double standard where we we we praise it in in some industries, but we we we criticize it uh, in in non profits. And I’m thinking specifically about investment in the future and whether that’s people or programs or even technology, technology is a is a valuable investment. It saves time. It creates productivity, makes people more comfortable at work. It enables them to work out of an office now and be remote, give them that benefit, which so many people are craving now, you know, but these are these are all wise investments, not not um, detrimental overhead.

[00:16:33.02] spk_1:
Yeah, I absolutely agree. And there’s a way to do it cheap. You could invest in technology on the cheap and that might have long term adverse consequences, including to kind of the sort of the data protection and privacy issues that can result. So if you’re really thinking ahead and investing in, not only just technology, just to be sort of more effective and efficient in the short term, the protective of your beneficiaries and your staff and others your donors in the long term, um, then you need to make more of an investment in that. And that’s another thing where, you know, we lose trust if you if you sort of blow your donor lists that are supposed to be private and you know, other big companies get ahold of it and start to target your donor base for unrelated things or even if they’re related sometimes, but not your organization and it was due to a slip on your part or your technology and information technology protocols. You can run into trouble. So again, investments have a double edged sword there. Great. But they can result in a loss of trust too if you’re not managing it properly and you compromise people’s information.

[00:16:41.40] spk_0:
Um, and also, you know, you mentioned living wage but investing in people so that people stay with your organization.

[00:16:48.75] spk_1:
All

[00:16:49.07] spk_0:
right. And that that starts with a living wage that also impacts to on technology. Uh, you know, time away professional development. You know, these are, these are investments in staff that people see and appreciate and make longevity with your organization more likely than you know, than than to to jump ship every six months.

[00:17:11.75] spk_1:
And that builds trust to write, I’m much more comfortable working with you if you’ve been with the charity for 10 years, Tony than if you were hired three months ago and there’s always a different person I’m talking to as a donor.

[00:17:31.13] spk_0:
Absolutely. Yeah. All right. You have some insights into what we as a community or hopefully even individual nonprofits can can start to think about take to their C. E. O. S. Take to their boards. This is always where you Excel gene.

[00:18:33.73] spk_1:
Well in the first steps are kind of simple. Um you know, it’s be compliant yourself, make sure your own houses in order. Um so we can sort of raise all of the issues with where you can lose trust with organizations. Um but even though 99.9% of the organizations are well intentioned, I can’t say that 99.9% of the organizations are compliant. Um so working to make sure you’re compliant Working to make sure that the tone is set at the top with the strong board of directors that is actually providing direction and oversight and not just simply helping you, you know, with fundraising and otherwise just rubber stamping the decisions of the leaders. I think it really is important that the tone be set at the top of the organization through the board of directors. A

[00:18:34.26] spk_0:
tone say say more about the tone.

[00:19:11.50] spk_1:
So the tone of placing the importance of a trusting relationship with our beneficiaries with our employees with our other stakeholders. I think that’s really important and that should be reflected in policies. So it’s not good enough to say, you know, this is what we believe in. So the, you know, one of the hot topics today is a board sets a diversity equity and inclusion policy. But if that policy just sits on the shelf and that’s the end of the discussion of it. And there are no actual changes or action plans attached to that that’s gonna maybe harm the organization more than help it. So the tone at the top means a board that is doing its role in moving that organization forward and focusing um not only on doing good work and, you know, metrics for for programmatic success, but on building trust within and outside of the organization.

[00:20:07.00] spk_0:
And that that Ceo board chair uh Ceo executive committee, if the board has an executive committee relationship is key to this. I mean, they they all whether it’s two people or the Ceo and a committee, you know, need to be uh you know, committed to the same, not only the same mission, but the same uh strategy for getting there. You know, the same commitment to the things that you’re talking about, this needs to be a a unified

[00:20:08.30] spk_1:
working

[00:20:09.10] spk_0:
group at the top between the Ceo and the board leadership.

[00:21:55.36] spk_1:
Yeah, it’s absolutely critical tony I agree. There is, however, sort of another dimension to this which adds complexity and that’s kind of the feeling amongst particularly younger generations. Again, and why there’s a little bit of distrust is too much power focused on the top of an organization without sort of distributing leadership and and the right to participate in this. You know, the bigger decisions of the organization being dispersed throughout the organization and getting input from beneficiaries about um you know, how the organization should evolve or um move forward in further its purpose if we’re not really thinking about getting other voices in it, and particularly if our boards are not very diverse, um that’s gonna engender more distrust as well um with with an organization and this leadership. So while what’s happening at the top level and the relationship between the Ceo and the chair of the board is critically important, it is really important to also make sure that leadership, authority and power is being dispersed down through the organization and that the board actually can listen to directly um input from some of the staff. Um and we shouldn’t create like a wall between board and staff completely. You know, that there’s a little bit of um new thinking on that because the old old ways is like the board should not micromanage right. We should not interfere with staff decisions, which is partly true, but it doesn’t mean that we create a complete block. So the board members don’t see the staff members and the staff don’t see the board and they just don’t know each other. So, um there is a sort of a balance there that needs to be taken.

[00:22:20.82] spk_0:
Can we, can we say a little more about that in terms of examples of how this could be done? Like you’re you’re talking about staff, but also the beneficiaries of the programmatic work. Uh is this um like, I mean, certainly beneficiaries could be members of the board or or is it more an advisory committee, but then to your point, you know, you don’t want it to just be a committee that the board doesn’t listen to. The ceo doesn’t listen to. You know, how can we uh actually execute on on some of this in terms of staff and beneficiaries?

[00:24:23.71] spk_1:
So there are a lot of different ways that it might be done and there’s no one right way for, you know, for all organizations, but getting other voices involved can be done in, you know, um through committees as you suggested, but they can’t just be advisory. If you’re really gonna disperse power, you have to give them some power even if they’re not made up of only board members and some people call any committee that is not composed of only board members, they call them at advisory committees. And because of the name, they think that they can only give advice to the board, but they don’t have any management authority. But that’s not true. You can give these other committees management authority, the way you can give a Ceo or CFO management authority, the board can delegate authority down to these other committees. These non board committees as well. So that may be one way of getting power dispersed through the organization, that that committee might be made up of some employees, some beneficiaries and maybe there is a pipeline so that some of the other people that you’d like to put onto a board, but you might not know very well, you might not have enough experience in certain things that you’d like to have them develop more knowledge of the organization and the work before they possibly a strong candidate for joining the board, but that could be a vehicle or an on ramp to being a board um board member as well. And again, creating a more diverse and stronger board with diverse perspectives and understandings of what the organization does and who it impacts. So I think there are definitely ways and we’ve seen this in other models as well. Some that have worked with some organizations and same models not working with other organizations. Hill Ocracy is sort of one example of that. What

[00:24:24.13] spk_0:
is that drug in jail? What? Hill Ocracy.

[00:25:53.62] spk_1:
Hill Ocracy is a form of management where there are still remnants of hierarchy, but a lot of decision making is made in kind of circles and circles might be employed, they might be employees and others and circles have certain autonomy over their body of decision making. So you might have a circle based on HR issues. So it’s not just one person with the final say, it’s this circle or a group in the law, we would just call it another committee. But um in hypocrisy there all circles and and this was used by some high profile for profit companies and some nonprofits, some had success with it, Some didn’t. So um there are other models out there as well, not one size will fit all, but again, there’s an administrative cost to trying to implement new models, um, but new models or maybe the way that we want to go and their movement organizations all over the place that are impacting how nonprofits and for profits are to be governed and managed. And we should be listening to some of these forces that are out there because they will gradually shape what we’re doing. You can see this by some younger people not sticking with employment as long as they were the great resignation and stuff. If you feel powerless within an organization or if you don’t feel the organization is representing what you want, your employer to be doing, they may not stay and having a little bit of say in what the organization is doing, even if it’s just the starting points because you can’t jump from point a to, you know, to the ideal point in one step, it’s gonna take a long, a long time to get there. But just to seeing that progress may be assigned to somebody to to say, I’m gonna stick around here and and find out

[00:26:35.35] spk_0:
alright creating vehicles for right people’s voices to be heard. Um, and you’re right, it’s, it’s incremental, but just the, just the showing of some progress, some initiative to uh, opening up the leadership, opening

[00:26:38.15] spk_1:
up

[00:26:41.97] spk_0:
strategic decision making, could be, it could be uh, you know, valuable to, to folks right? And encourage them to, to stay versus looking for someplace that’s more inclusive. Yeah.

[00:26:53.98] spk_1:
You know, if your Ceo doesn’t trust the board or if your employees don’t trust the ceo, how are you going to expect donors and your beneficiaries to trust the organization? So it really trust has to be built throughout the organization.

[00:28:41.45] spk_0:
It’s time for a break. Fourth dimension technologies. Are you seeing technology as the investment that it is not as an expense, but an investment in your sustainability, your staff productivity, your staff happiness, um, satisfaction, an investment in your donor relations through your crm database. Uh, it’s an investment in your organization’s work and its future. That’s what technology that’s where your technology ought to be thought of. And fourth dimension four D. For short can help you make those investments wisely so that you’re not squandering on something you don’t really need. Like maybe your backup is sufficient, but you need the multi factor authentication installed, etcetera. So you know, they can help you think through smart technology investments. That’s it four D. And you know where the listener landing pages to check them out. It’s at tony dot M A slash four D. Which by the way is just like three D. But they go one dimension deeper. Let’s return to in non profits. Do we trust? What else do you see Gene as as things we can we can think about besides this sort of distributed, I’m calling it distributed leadership or maybe you call it distributed leadership. Yeah.

[00:29:32.73] spk_1:
So other things. Maybe some simple tips guard private data. We talked a little bit about it before with technology. If you’ve got data that you’re promising that will be kept confidential. Make sure you’re guarding that. Be careful about automating and depersonalizing interactions with technology as well. Like we could have a sort of a voicemail for everybody and you know, hit one if you want to do this. It too. If you want to do this and completely not let any donor speak to any individual without, you know, spending an hour on the phone that may not be, uh, seen as something that would build trust. So we have to be careful of our uses of technology there as well in our communications. Um, if you’re going to say something, um, don’t talk the talk. If you’re not going to walk the walk, right? So don’t make promises that you’re not going to keep

[00:29:41.70] spk_0:
that for an example of that is A D. I. Policy,

[00:29:45.44] spk_1:
right? Exactly

[00:29:46.80] spk_0:
written and never, never executed or remains written once and never evolves.

[00:31:13.44] spk_1:
And if you have a campaign to engage in a particular, uh, you know, program and you don’t raise enough money. And so that program never runs, you better be explaining this to your donors. Um, why that happened. And the possibility that that might happen when you start fundraising for it. So don’t just say, you know, after the fact when they complain that said, well we didn’t raise enough. So we used your money for other things that’s not going to engender trust. Um remember your mission and your beneficiaries don’t exist in a vacuum, right? Um, so it’s not just about your organization. And if you your numbers go up, um whatever metrics that you use financial performance or number of beneficiaries served whatever they are, you shouldn’t look at it as a silo. You should be looking at the entire ecosystem in which you are participating. And that would be, you know, open up things like environmentalism like you might not think environmental, your organization’s not environmental organization, but if climate change continues and creates hardships that, you know, scientists are predicting, predicting you probably will have an impact on your mission and your beneficiaries. And so to sort of think, just, you know, outside of that, that silo you want to be thinking about what your impact of your decisions will be, not only on your organization and beneficiaries, but on your allied organizations, on the broader community and what will that do to trust as well. So,

[00:32:03.91] spk_0:
a lot of these ideas, a lot of what you’re saying could be, you know, germinating in an advisory committee, you know, how could we look differently at at our contribution to climate change and what climate change means to us in the future for our for our for our people and for our work, but also what could we be doing right now, You know, even if we’re not an environmental organization siloed as you’re saying, you know, we still have an environmental impact. So what what contribution to to minimize climate change or reverse climate change can we make as well as planning for the for the future? Uh you know, that that those kinds of conversations can come out of these um advisory committees that is that are comprised of staff and and beneficiaries. I mean, these are the folks that live the mission day to day.

[00:32:36.09] spk_1:
Yeah, I love that idea to tony Sometimes the board may not have um or feel that they have the bandwidth to sort of discuss these sort of broader issues. Um and they’re a little bit more focused. So having the help um the advisory committee on an issue like like climate change for a non environmental organization or an organization whose mission is not focused on the environment. I think that would be great.

[00:32:45.06] spk_0:
Yeah. And I want to reiterate your point that which I’ve never thought of, advisory committees can be granted policy making authority and and and change within the organization. So whatever that looks like, you know, you can bestow that that authority

[00:33:05.16] spk_1:
Absolutely, and you can give them a budget to even sort of to putting

[00:33:11.20] spk_0:
money behind it. But that that yeah, money talks. That’s a that’s a big step granting them a budget granting them some granting them authority to make change that’s empowering and an advisory committee. All right.

[00:34:01.14] spk_1:
I think, you know, one area of trust that we haven’t spoken yet, but maybe, um why I as a lawyer and talking about these things and you’re not getting it from another consultant, is that the laws can also impact trust and non profits have to decide whether they want to set a position on certain laws. And um, some of the things that I’m thinking about is the deductibility of charitable contributions. So, we’ve had an above the line contribution where non itemizers could deduct as well because of Covid. Um, but that was just temporary. Um, and now there’s sort of a push for, well, we should make a charitable contribution deductible to all taxpayers, and not just about the 10% of taxpayers who itemize, who tend to be, you know, have a little bit more wealth, or some, in some cases a lot more than those who don’t itemize.

[00:34:17.90] spk_0:
Is it that small? The proportion of taxpayers who itemize is around 10%,,

[00:34:22.34] spk_1:
10-13%, is what I’m hearing.

[00:34:24.86] spk_0:
Okay,

[00:35:52.18] spk_1:
So, um, again, you know, part of trust and distrust has to do with concentrations of power and wealth, right? And when the 1% or the .1% control so much policy control the leadership of pivotal organizations in all sectors, and in government, um, there’s going to be a distrusted institutions. Again, that, you know, one third of people distrust big institutions. Um, and, you know, that concentration of wealth and power is, is the reason why. Um so laws that sort of enforce that. So if we just give you no deductible, make make tax benefits to, to richer people who can deduct, who can itemize their deductions and not to others that may feel really unfair to the public. And another reason for distrust. So, will your organization’s, even though tax policy is probably almost no organization’s mission, it has an impact. Um, and so it may be something that organizations want to take a look at. And there are organizations like independent sector of the National Council on nonprofits and others who the Tax Policy center that that can explain this a little bit. But you you may want to take a look and see if you want to put a position on it. And one of the things that I also think, um engender distrust is when the media miss reports, the law in one area where the mis reported it is a lot of media say, charities can’t lobby and that’s just not true. Um, so charities can lobby on things like, you know, the the above the line deduction. Um, and and on other things as well, and there are just certain limits that apply, but they’re often generous, So learn a little bit more and we can build a stronger sector?

[00:36:21.84] spk_0:
Well, you and I have talked about the the lobbying limits on previous shows, is it is it safe to say that the law hasn’t changed over the past? I don’t know, 23 years maybe, since you and I have talked about this.

[00:36:34.17] spk_1:
Okay,

[00:37:06.11] spk_0:
So, so at Tony-Martignetti.com, you can search gene Takagi, you’ll find many episodes that he’s on and one or one or two are about the uh, the lobbying limits, I think, I think the last time may have been 2020 when the pre election. So we may well, with the, with the election in late The election in late 2020, so we may have done something like in mid-2020 or so on the lobbying, uh, exemption or Well, that’s not that’s not that’s not the right phrase. What the limits of lobbying and you make the you just said, you know, they are, they are generous in some cases. It’s not it’s not that it has to be a de minimus proportion of your budget or something.

[00:37:24.83] spk_1:
Yeah, the

[00:37:26.87] spk_0:
yeah,

[00:37:27.68] spk_1:
the losses insubstantial which scares the majority of charities away from doing any of it, but it turns out it can be fairly generous limits to engaging in lobbying.

[00:38:01.79] spk_0:
Okay. Um, and the point that you made before that, I was going to say something about that too. Well, sorry, what did you say? Right before you were talking about the uh, the permissibility of some lobbying activities. You made a point? Yes, thank you. The last thing we want is for Donating to charity to be perceived as, uh, as an elitist activity. That only the only the top now you’re saying whatever 10 or 13% of the population can, can give because they’re the only ones who get the advantage because they’re the only, they’re the ones who itemize their deductions. The last thing we want is for donating to charities to be perceived as an elitist activity.

[00:39:13.92] spk_1:
Yeah, absolutely. tony and with, you know, with our current tax policy, how it works. Um, then I don’t want to get too complicated with that. We are seeing a shrinking middle class. I don’t think there’s anything denying that people, most people have less discretionary income. So if we look at the fundraising statistics now, the giving statistics, we see that, um, even if giving goes up Giving from kind of the middle class and smaller donors has shrunk, um, and, and quite significantly, and it’s, it’s the people, um, that have put in huge contributions that have made up for that. So the Mackenzie Scott, you know, with, I think $13 billion dollars over the last few years, they’re making up for that. But that can change the way nonprofits run if, if it’s all about, again, elite, wealthy, powerful individuals who make the big contributions that then have the ear of the boards of these organizations that then talk about policy and they create policy or, or advocate for policies that keep that dynamic in existence. So it is problematic.

[00:40:52.59] spk_0:
It’s time for Tony Take two. My latest video on linkedin is this is not planned giving uh it’s short under two minutes. I give you an example of what is not planned giving and remind you what planned giving is, how simple planned giving is when it’s done right, when you start with simple gifts by will. But I’ve got kind of a lighthearted back way of looking at it through what planned giving isn’t in the opening. So latest video on linkedin, you’ll find me on linkedin. My name is tony-martignetti by the way that has escaped you. And uh it’s my latest video there That is Tony’s take two. We’ve got boo koo but loads more time for in nonprofits. Do we trust with Gene Takagi? Look at this dark potential that people look at at the United States as alright, the wealthy control government because of dark money and and the Citizens United decision, the Supreme Court uh wealthy control business because only wealthy people start and or run run businesses and grow them and only only white males have the access to capital to start businesses. And then and then the perception that um the wealthy control the nonprofit

[00:41:13.41] spk_1:
sector, you

[00:41:21.27] spk_0:
know, and the wealthy control of media, you know, this is all this is all very uh a very detrimental, very dark cynical way of looking at the at the country, but I’m not I’m not sure that where that’s far away from

[00:42:10.55] spk_1:
it. Yeah, I agree. tony And I think past generations, you know, including ours, you know, we’ve always kind of done better than our parents. Our parents were lucky enough to put us in that position. But the younger generations now economically um and maybe, you know health wise and mental health wise, they may not be doing as well as their parents overall and they’re questioning kind of the system because of that. Um and we maybe didn’t question it because our generation did better than our parents um in those terms. But now there is just legitimate questioning of do we need to change these policies and these dynamics and these power structures and um you know, organizations have a say in this and and use your voice, get get people to vote. Maybe that’ll be my my one of my big messages vote

[00:43:27.00] spk_0:
voting is fundamental to although, you know, in a lot of states that’s being eroded you becoming more difficult, although in a lot of states it’s easier to um you know, another thing that comes to mind when, you know, you’re talking about the generations below the the the boomers not doing as well as the one before them. Um The FDA just yesterday recommended mental health screening at regular uh regular doctor visits, like an annual annual health health checkup for everybody under 65 And and they had been considering this policy that this recommendation is just a recommendation to the medical community from from for years before the pandemic. This is not, this is not pandemic-related recommendation. They had been considering this for years before the pandemic that there’s a lot of stress and anxiety among the population under 65 and 65 is basically the baby boomer cut off within a couple of years.

[00:43:59.55] spk_1:
And then, you know, as you noted, this was even before Covid that they’ve been advocating for this and now with Covid and the mental health issues that are sort of go along with not just the disease, but the isolation that many are experiencing and long Covid, which is sort of an underappreciated under recognized problem and disabilities maybe creating more disability, disabled americans than anything. Um, since you know, the World War two, I think would be the last one. It’s just, it’s mind blowing

[00:44:01.44] spk_0:
and I and I and all this does contribute to a decline in trust in all institutions and nonprofit. The nonprofit community is a major institution in the country. So you know, that’s, that’s how this is all related

[00:44:15.09] spk_1:
to what you

[00:44:21.48] spk_0:
and I are talking about. I want to make that connection explicit that anxiety among the population creates anxiety for nonprofits and, and and distrust and disbelief in nonprofit work. Whether that’s justified or not perception is reality.

[00:44:36.71] spk_1:
Yeah, I agree. tony

[00:44:40.74] spk_0:
All right. I don’t know. So we had, we had said one of the things we’re gonna talk about is what happens, what happens if this continues? I mean, I already painted a pretty dark cynical scenario. Um, is there anything more you want to say around? You know, what, what the implications are if the community doesn’t start to help itself?

[00:46:25.73] spk_1:
Well, maybe on a more micro looking basis, it just means for a charity, they’re gonna experience diminished fundraising. Not everybody gets Mackenzie scott, Jeff Bezos money. Right. Most of them are relying upon a pool of donors, um, many of which are aging, um, and may age out of their donor pool. Um, and shrinking again, middle class, shrinking, discretionary income for many people, meaning West donations. Um, we might see more direct giving to individuals as people are saying, well, I don’t trust charities overall. I’d rather just give to my friends who say, you know, somebody is in need as crowdfunding fight sites just continue to, to grow in importance and also in in power as well. Um, and that’s just gonna be to the detriment of, you know, beneficiaries of our charity. So again, in the micro level, we make less money, people trust us less. Our employee retention is less. Um, our donor pool is shrinking and we can help less people even as the need for our services increases. So that’s kind of the dark side look of it. Um, we can try to be the nonprofit that stands out and you know, is the trustworthy non profit from, from a public perception standpoint. Um, that’s good. But again, don’t see yourself in a silo lift yourself up with all the boats in the water and, and really try to strengthen the nonprofit sector where you can, and, and advocating on some of the laws that make things more fair, I think is a good start there

[00:46:41.97] spk_0:
advocating maybe there’s a way of partnering

[00:46:45.00] spk_1:
with other

[00:46:55.64] spk_0:
organizations, not, not in all in all things. I don’t mean a legal formal partnership, but you know, if, if there’s, if there’s a way of working together for an event or, or some kind of advocacy,

[00:47:03.61] spk_1:
you

[00:47:11.44] spk_0:
know, we’ve had shows on the values of that and how to do that. Um, so that everybody, you know it, so that it’s, it’s not seen as a, as a zero sum within your, within your community that if if if someone else, some other organizations benefiting, then you’re losing. You know, that’s not the way to look at,

[00:47:25.67] spk_1:
at,

[00:47:26.47] spk_0:
at the world and and that not nonprofit support. We we all could be or a couple of couple of organizations together could be rising together.

[00:47:37.64] spk_1:
Yeah, I’ll add that the independent sector survey, the Edelman Data Intelligence survey that we mentioned at the start of the show also has some tips on building up trust within the sector. So it’s not all of dark outlook. It’s just encouraging people that the importance of this is very, very high. Um, so let’s go out and actually make things happen? So that, that dark outlook doesn’t happen

[00:48:05.70] spk_0:
within independent sector. Gene, what’s the, what’s the name of the you’re saying? Edelman data?

[00:48:11.03] spk_1:
Yeah, I think they contracted out with Edelman E D E L M A. And Data and intelligence and their third annual reports. This is an annual report is available on the independent sector website.

[00:48:26.66] spk_0:
Okay, thank you. Edelman E D E L M A N,

[00:48:30.68] spk_1:
correct.

[00:48:49.24] spk_0:
Okay. Okay. Uh, you mentioned the five oh one C four’s a little bit, but there have been a couple in the news very recently, most recently the uh, Patagonia companies, uh, sort of evolution into a uh, a new nonprofit, a new a new five oh one C four. non profit the hold fast collective.

[00:51:57.05] spk_1:
Yeah. So the founder of Patagonia and his family member, they were the principal owners of Patagonia and they decided to give up ownership of the company, but you know, they gave it not to a charity, but to a 501 C four organization. Um, it’s called the social welfare organization and for listeners who aren’t maybe familiar with it, you probably are familiar with many five oh one C four organizations themselves, like the N. R. A. Planned parenthood, the A. C. L. U. Sierra Club. So these are advocacy organizations that have kind of charitable like purposes. Um, but our can engage in unlimited lobbying and can engage in election nearing or political campaign intervention? Supporting political candidates and political parties, as long as that’s not their primary activity or purpose. So this is sort of the source or one of the big sources of where dark money comes in tony that you mentioned with the Citizens United Decision before donor that wants to support a candidate but stay hidden from public view about their support of the Can rather than giving directly to the candidate, could give to a 501 C four organization and the C Four organization can get their money’s into the candidate. And the donor that is disclosed is the C Four organization, not the donor to the C Four organization. So that’s how you can create dark money. And with the Patagonia case, it’s very clear who the donor was. So we don’t expect that to be the dark money that we’re as leery of, but it’s still, you know, a huge gift which, you know, for somebody who believes in in in the environmental movement I think is a great gift. But news media miss reporting it or some news media are mis reporting it as kind of something that doesn’t get a tax benefit because a donor doesn’t get an income tax deduction for giving to a five oh one C Four organization the way they do if they give to a charity. Um but there are other tax exemptions that apply like a gift tax exemption or in a state tax exemption. So this gift is overall saving. Um uh mr Schwinn nerd um the owner and his family probably somewhere in the realm of $800 million in taxes. Um So it is not completely a no tax benefit transaction. Again this is not to disparage them for taking advantage of a system that allows for these gifts Um to go with with some tax benefits, but it’s not just the income tax deduction that matters in in donations there for for very wealthy people like billionaires. Um the gift and estate tax exemptions which can be 40%, right? So it can be very very high higher than income tax they matter. Um and so that’s something to be aware of that. Um this is a very wealthy person who gave up much of the ownership share, I guess all of his ownership shares to this 501 C4 organization, except really importantly 2% of the gift. Overall gift was given to a trust that’s not a nonprofit.

[00:52:14.55] spk_0:
Yeah those voting, those are the 2% of the voting that are the voting shares,

[00:52:58.58] spk_1:
right? So because they’re in control of that trust with with some close advisers um they have not given control out of Patagonia, right? They still can control Patagonia. Um And again they’re taking advantage of existing law what what it allows but it allows billionaires to not give up control of their company, get an $800 million tax benefit for giving or you know $3 billion Uh to a 501 C4 organization that could spend nearly half of it on endorsing political candidates. Um So it’s kind of an interesting tax system that that allows for that.

[00:53:18.19] spk_0:
And if if you consider that, you know supportive of uh of a liberal progressive cause because the whole fast collective the the new C4 is is devoted to uh the ill effects of climate change, you know, reversing climate change, impacting climate change. Uh So if you consider that of a left cause, then there’s an example on the right side with uh mr barr seed and the marble Freedom Trust. Another five oh one C four.

[00:53:44.39] spk_1:
Yeah. And that sea forces led by Leonard Leo who maybe the person most responsible for the changing of our Supreme Court and therefore the decisions on things like abortion might be largely attributed to mr Leo,

[00:53:56.21] spk_0:
fundraiser and activist and very well connected guy in conservative circles.

[00:56:20.34] spk_1:
Yeah. And used to be Executive vice president of the Federalist Society whose mission was to change the composition of the Supreme Court. So um I I don’t think that’s controversial and that’s just what their goal was. And they were very effective at achieving that goal. But this $1.6 billion kind of same thing. There there are some tax benefits that go along with it. There’s no income tax deduction. Um and mr uh c passed away. I think this was given after his death. But another big contribution to an organization led by somebody who has immense influence and now a huge war chest that can be used for political activities. Again, the primary activity cannot be political campaign intervention. Um, but some people believe, or many people believe that means 49% of the funds can be used for political campaign intervention. And that’s kind of the source of dark money. Although again in this case we do know where the donor came from. Um, so it’s not dark in that way in terms of hidden donors, but it’s still donations that didn’t go directly to the political candidate. It went through five oh one C four first, get the tax benefits for that, which his heirs, I guess would appreciate. Um, uh, and the impact of that again, is that? Well, in both cases, very wealthy people are able to keep control with people who they trust or their family members of their money to be used for political purposes. They can’t use it for themselves to, you know, to buy huge houses and boats, but they can use it for things that were very important to them. But that means for people like us and most of your listeners, tony is like, what influence do we have compared to that individual who gave billions of dollars to influence political elections. Um, and you know, what, you know, can we change our Supreme Court sort of composition the way that they’re able to do, probably not by ourselves. So it again is, is the reason why people go, hey, these are nonprofits that they’re using to do this. I don’t trust non profits, this is what they’re used for. And charities kind of get lumped in because the ordinary, you know, people, the lay person doesn’t know the difference between a five oh one C three and five A one C four organization.

[00:56:36.19] spk_0:
Yeah, and that’s right. And it’s it’s if it’s mentioned in a in in press coverage, you know, it’s mentioned in passing that it it’s it’s an organization that’s distinguished from from uh charities. But you know, it’s like, it’s like a sentence or two. You know, it’s it’s never it’s never a focal point. So your point is correct that people just lump them all together

[00:57:00.57] spk_1:
and flows through nonprofits and that’s why we shouldn’t trust nonprofit.

[00:57:04.97] spk_0:
So the wealthy control government and they control politics and they control business and media and and nonprofits.

[00:57:18.46] spk_1:
Yeah, that’s that’s what we, We’re finding more and more is the case, but we’re trying to change policies and change minds about this so that we can see that the impact of the 99.9% out there is actually even bigger than the impact that we mentioned about a few individuals. Um, it just has to be organized. Um, and non profits are way to do that.

[00:58:21.68] spk_0:
Well, that’s a, that’s a pretty good way to close. Probably we should have closed with what our community can do. But you know, you’re suffering the lackluster host. So uh you can rewind to that section and then uh fast forward and you can end with that if you want to. Um, but but jean, you know, always thank you, you know, sort of reality, but also wisdom and inspiration. And and not only um ethereal pedagogical inspiration, but you know, ideas that we can we can we can act on. So thank you. Thank you.

[00:58:24.63] spk_1:
Thank you Tony. And your closing statement is actually always the greatest ending. So, I’m looking forward to hearing it.

[00:59:39.16] spk_0:
Okay, All right, thank you jean. Next week. Let’s see what develops and why do I even say uh, next week if I don’t know what’s coming up next week, but we’re here we are. We’re talking about trust and part of that is transparency. So I’m being transparent that I don’t know what next week’s show is gonna be, I know what the 1 to 2 weeks from now is gonna be. We’re gonna have beth cancer and Allison fine talking about their new book, but I can’t promise that for next week because well, that would be a lie and that’s going to reach the trust because they’re not on next week. Next week. Uh, it’s up in the air, but trust me, it’ll be just that’s conclusory. Just trust me now, I hope you trust non profit radio I’ll find something good if you missed any part of this week’s show, I Beseech you find it at tony-martignetti dot com responses by turn to communications pr and content for nonprofits. Your story is their mission turn hyphen two dot c o and by fourth dimension technologies I. T. Infra in a box, the affordable tech solution for nonprofits. tony-dot-M.A.-slash-Pursuant four

[00:59:48.37] spk_1:
D. Just

[01:00:03.54] spk_0:
Like three D. But they go one dimension deeper. A creative producer is Claire Meyerhoff to show social media is by Susan Chavez. Mark Silverman is our web guy and this music is by scott stein, Thank you for that. Affirmation Scotty B with me next week for nonprofit radio big nonprofit ideas for the other 95%. Here it is, Jean, go out and be great.

Nonprofit Radio for August 22, 2022: Accounting For Nonprofit Leaders

 

Tosha Anderson & Zanni Miranda: Accounting For Nonprofit Leaders

In our penultimate #22NTC show, Tosha Anderson and Zanni Miranda introduce key accounting concepts to help nonprofit leadership avoid the common pitfalls they see. Tosha is CEO of The Charity CFO and Zanni is with Nonprofit Solutions.

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[00:01:51.40] spk_0:
Hello and welcome to Tony-Martignetti non profit radio big nonprofit ideas for the other 95%. I’m your aptly named host of your favorite abdominal podcast. Oh, I’m glad you’re with me. I’d suffer the effects of pseudo papillae Dema if I saw that you missed this week’s show Accounting for nonprofit leaders in our penultimate 22. NTC show Tasha Anderson and Zanny Miranda introduce key accounting concepts to help nonprofit leadership avoid the common pitfalls. They see Tasha is ceo of the charity CFO and Zanny is with nonprofit solutions on tony take to the endowment excitement webinar, we’re sponsored by turn to communications pr and content for nonprofits. Your story is their mission turn hyphen two dot c. O. And by fourth dimension technologies I. Tion for in a box. The affordable tech solution for nonprofits. tony-dot-M.A.-slash-Pursuant D just like three d but they go on to mention deeper here is accounting for nonprofit leaders. Welcome to nonprofit radio coverage of 22 N. T. C. The 2022 nonprofit technology conference. My guests now are Tasha Anderson and Zanny Miranda. Tasha is founder and ceo of the charity cf. Oh Zanny Miranda is operations Manager at nonprofit solutions. Tasha Zani. Welcome to nonprofit radio Thank

[00:02:05.94] spk_1:
you for having us. Yeah,

[00:02:07.50] spk_2:
thank you so much for having us on

[00:02:11.89] spk_0:
pleasure. I’m glad we’re gonna talk about this. But 10 things every nonprofit leader should know about their accounting

[00:02:17.66] spk_1:
Alright.

[00:02:23.44] spk_0:
I I suspect this is an often ignored um ignored area by by nonprofit leaders until there’s some kind of a problem I guess or until the the 9 90 has to be filed, you know, so maybe once a year they become, or maybe there’s board reports, but in between all that, um I suspect it’s ignored. Uh Tasha, do I have that? You’re nodding? Is that

[00:03:12.03] spk_1:
yeah, I think, yeah, I think it’s ignored because it’s for a lot of small organizations. It’s not their primary role. It’s not what they’re experienced in. It’s not their skill set and it becomes one of those things, it’s not an immediate issue. It’s not something I’m particularly good at, it’s something I’m gonna have to teach myself and I’m gonna have to um very kind of the procrastination that I put into it. And then it’s when things kind of abrupt Show up like our 9 90 return or we realized we have an audit or our books have gotten further and further behind and now we have to hurry up and scramble for that, you know, board meeting or something to that effect. Um that’s kind of best case scenario. Um worst case scenarios are other more significant things that might come up with our accounting. Um that that all of a sudden becomes more of a priority.

[00:03:34.21] spk_0:
Like, alright, we’re focused on motivation. What are what are one or two of those worst case scenarios?

[00:04:46.20] spk_1:
Well, some of those worst case scenarios, I think more abruptly we get a lot of clients that work with us that have a lot of government funding and government funding usually includes um some pop up surprise what they call site visits. So if you anticipate uh your site visit or kind of your audit, I use the word loosely with audit. But if you expect your funder to show up on, you know, this period and then they end up coming in sooner or more regularly, either normal or whatever. They just changed their protocol and you’re not prepared for that. That then calls into question your ability to manage the program, your ability to manage the finances of that particular program. And we’ve seen organizations be at risk for losing their funding. And we’ve seen that more often than not, which we’ve kind of talked about and the original presentation that Danny and I did some of the challenges around um not just, you know, keeping caught up with the accounting, but the succession planning um in the transition. I mean, we’re in the midst of what they call the great recession. And so what organizations do that put all of their eggs in one basket with respect to this kind of swiss be nice if you will position that holds also financial management. And when those positions turn over, we’ve seen organizations find themselves really vulnerable situations and it becomes very apparent when it’s time to start sending those periodic reports to your funders or when they start to come out, when you look at your records, it’s a problem.

[00:05:06.79] spk_0:
You’re referring to the great resignation. You mean succession planning. Okay.

[00:05:16.60] spk_1:
I’m

[00:05:35.54] spk_0:
listening. I’m listening channel. I’m channeling listeners. They’re gonna say, wait, great recession. That was many years. Alright. We know we know what you meant. Alright. So Zanny, why don’t you why don’t you kick us off? We got 10 things people are supposed to know nonprofit leaders are supposed to know. So let me ask you before we kick off with our our list. Is this specifically the C the C. E. O. Are we, are we at that level? You know, listeners here are small and midsize nonprofits. So that could be like one or two people up to. I mean 100 or 250 employees could be a midsize nonprofit. Are we in the meat with this? We’re talking about nonprofit leaders. I assume we are.

[00:05:57.71] spk_1:
I

[00:05:57.89] spk_2:
actually think that this information can be for any leader that is self designated or you know, does hold one of those executive positions. I think what we share in this presentation is really about making sure everyone is on the same page across the entire organization. So it’s really for anyone,

[00:06:28.03] spk_0:
uh, with, uh, okay. But we don’t want our Ceo and other other C suite executives ignoring these things. Certainly.

[00:06:30.92] spk_2:
No. Okay.

[00:06:32.33] spk_0:
Okay. All right. So why don’t you kick us off? What’s uh, what’s your

[00:06:37.25] spk_2:
first one is definitely benchmarks and metrics and making sure that you have defined expectations about what those are and how they fit with your organization and I’ll actually pass this one over to Tasha because this is definitely her area of expertise as the C. P. A expert.

[00:07:54.23] spk_1:
Yeah, sure. Uh, so really what we mean by defining benchmarks? Oftentimes, what we see is that not just the tactical work of bookkeeping and accounting is delegated to one individual, but almost the full financial management and responsibility. Understanding how much money is in the bank account. Are we receiving the funding that we thought we were, Are we utilizing the contracts that we’ve committed to our to our funders? Really high level, even where we are with our fundraising goals. And I’ve personally been someone that kind of delegated that responsibility and financial oversight. And I just think it’s imperative whether you’re a for profit business and non profit business at the end of the day, it’s a tax designation. It’s not just because you’re a nonprofit, you should not be delegating full financial ownership and responsibility of your organization to one single person. This is really where that leadership at the ceo level or executive director level, there needs to be some understanding of what your benchmarks are. What are you trying to measure in the holding people accountable to it? And I’ve seen so often where the accountant or the bookkeeper is delegated the responsibility of the budget and they might be doing the bookkeeping in the reconciliations and all that. But is anybody really looking at that budget and holding anybody accountable to it? So what we’re really encouraging is that the leader, you need to understand where things are and what expectations do you have? What processes do you have in place to make sure that you’re moving in the right direction? So

[00:08:19.70] spk_0:
following the budget doesn’t belong with the bookkeeper.

[00:08:23.50] spk_1:
The

[00:08:23.97] spk_0:
bookkeeper does the work.

[00:08:49.29] spk_1:
Yes, the bookkeeper prepares the reports, diving into Why is this off from what we expected? That is joint ownership, frankly, in my opinion, from from the individuals that are charged with that. So your program team, maybe your fundraising team. And I recognize we’re talking with small to middle size at a minimum. The Ceo is looking at this or the executive director and so often times I see uh leadership teams that are just delegating that responsibility and they’re not really immersing themselves in the financial management, the way that I think they should

[00:09:00.00] spk_0:
be alright. You didn’t have to, you know, you two don’t have to go in sequence. You could have picked one that you’re, that you’re an expert on. You know, you don’t have to do it the same sequence. You did it in your in your in your seminar. Alright.

[00:09:13.07] spk_2:
Well, I definitely wanted to make sure Tasha kind of came from the C P a standpoint,

[00:09:18.39] spk_0:
you know, make

[00:09:21.36] spk_2:
sure they all knew, Yeah,

[00:09:22.75] spk_0:
she’s the charity. CFO so

[00:09:24.30] spk_2:
she knows what she’s talking

[00:09:26.01] spk_0:
about

[00:10:08.64] spk_2:
and I have to say I come from the small nonprofit side. So we have a mighty team of three full time and one part time person. So we are, you know, definitely representative of some of the groups that are probably listening. So and these are all things, these are all things that we have learned through working with Tasha that um are very important and we went through a transition and planning and uh had a transition in leadership which then created a transition into changing our bookkeeper um to the charity CFO. So we went through a lot of what we’re talking about in terms of the the sort of scarier situations of how did we get ourselves in this situation? What does this all mean? Where all the, you know, how do we get everybody on the same page? So we definitely learned our lessons.

[00:10:21.81] spk_0:
Let pick one that you are familiar with that you can talk about what’s next.

[00:11:23.37] spk_2:
Yeah, let me take a look. So I know that so kind of speaking about like getting into a sticky situation or number four is I would have understand my compliance needs. And I think that when you do like Tasha was saying, when you have those government funders or even really complicated funding grants from foundations, sometimes they require progress reports, they require year end um reports that can be really calm complicated to do at the last minute and they can be really complicated if you have not set yourself up for success at the very beginning. And so one of the things that we sort of have said is that you really need to take a look at what the grant is requesting from you when they’re, when you’re in that grant search process. And before you apply or maybe right after you apply, making sure that you’ve got things set up with your accountant and things set up in your chart of accounts to make sure that when you’re going through and processing and actually spending money related to these grants, you’ve got everything in place, you know, from the onset, so that it makes it a lot easier to pull those reports and to get that information instead of scrambling and going through, you know, a year’s worth of credit card receipts.

[00:11:50.57] spk_0:
Yeah.

[00:11:53.20] spk_2:
Mentioned

[00:12:17.33] spk_0:
compliance. And there’s, there’s state state laws also depending on what state you’re in. You know, there are, there are the laws that you have to be registered in each state where you solicit donations, that whole charity registration morass that I used to have as part of my practice. Um, you know, keeping keeping track of that. Um, there, there could be, uh, other, I mean, there are federal, there are federal rules that have to stay in compliance with, so there’s, there’s a lot, there’s a lot in that word, compliance.

[00:12:35.20] spk_2:
Yeah, exactly. It’s not just the funding that you get, it’s making sure that, you know, the things that you’re doing are following the law all year, not just when someone comes knocking

[00:12:43.02] spk_0:
and and Tasha, these often come up in audits right? They’ll be they’ll be uh I forget with the technical terms, but they’ll be like memo items in uh report items in an audit that you know, you’re not in compliance with something here. Things like

[00:14:10.94] spk_1:
that. Yeah, findings. And what’s really interesting. I have a funny story when so I used to be a CFO of a non profit organization and we had 14 different government contracts that were a little larger probably than maybe an average listener. We’re about, you know, 6 to 8 million a year. And uh that’s that’s that’s to me that seems large because so many organizations are much smaller than that. But really that’s not huge and what’s really, we went through every single one of our program contracts and wrote down all of the things we’re responsible reporting out to them. So not just on the financial compliance side but also like program outcomes and those sort of things. Anyway, we had five pages front and back on an Excel spreadsheet when we printed it out was five pages, front and back of all of the things that we were responsible for reporting out to someone. And so the more more complex your funding gets, whether it’s multiple foundations or government funding sources. When we hear the word audit. I think we think at the end of the year we have a C. P. A firm that comes in and does an audit. But oftentimes what people don’t realize that you may have multiple audits or inspections or reviews or whatever word you want to use for the same funding, right? You might get um, you know, kind of beat up at a local level through some pass through fun. Then you might have that sourced through the feds and then the feds might come in and do an audit, right? And then your auditors that come in at the end of the year that you hire will also do an audit. So I think that sometimes I’ve seen our clients not necessarily read the fine print of those grant agreements to know what they’re going to be responsible for doing and what frequency. So they find themselves kind of working reactively and scrambling to get that stuff.

[00:15:57.46] spk_0:
It’s time for a break. Turn to communications media relationships and thought leadership. You need one to get the other. You got to have the media relationships. So you get exposure and become the thought leader. Turn to will help you build those relationships. They’re former journalists themselves. And by the way, as you’re getting that exposure, they’ll help you craft your messaging. You get the increased exposure. You’re seen as a thought leader in your field. The thought Leader, the thought leader in your field, they can make it happen. Turn to communications, your story is their mission turn hyphen two dot c o. Now back to accounting for nonprofit leaders. You wanna know as any said, you want to know ahead of time what the requirements are. First to make sure that you can comply with them. You have the infrastructure either internally or or through a provider to do it, you know, and if it’s if it’s beyond you, then that that’s not a grant that you should be applying for because you can’t keep up with the I mean the money may look nice, but you can’t keep up with the back end requirements and you’re gonna end up in a bad situation. Okay.

[00:15:58.93] spk_1:
Absolutely. Absolutely.

[00:16:00.26] spk_2:
Absolutely. No.

[00:16:01.56] spk_0:
In advance. I’m sure this especially applies to a government, a government agency. Yeah.

[00:16:07.28] spk_1:
And that’s funny. We we talked about that a little bit in our session just because there’s money available may not be a good deal. Just what you’re doing, not just the infrastructure. Um, there’s a lot of considerations where it might make sense for an organization to not accept funding. Um, it just doesn’t make sense. And asking ourselves those hard questions before we just

[00:16:25.90] spk_0:
before, Yeah. Look, look closely at what your obligations, your responsibilities are gonna be. All right. All right, well, let’s stay with you, Tasha. Why don’t you give us another another thing. Leadership should know about.

[00:17:33.03] spk_1:
Alright. I think another thing that leaders don’t always realize again, because most leaders of nonprofit organizations, they don’t come from the financial business management side of the biz right? Oftentimes you’ll see leaders that maybe come from the programmatic side of things. Um, and that’s fantastic for a lot of reasons. But what I think some people default to hearing, well this just can’t be done or this financial report can’t be created in the way that you want. And I really encourage leaders of organizations again, to define those expectations of what they’re looking for and ask their account to develop tools that help them measure if we’re on track or not. And this is usually by way of financial reports. And I hear this all the time. Tasha, you know, I get the standard set of financial reports from my accountants. It doesn’t make sense to me. It doesn’t make sense to my board. We don’t know where we’re at, we don’t know which direction we’re heading and what I tell people all the time that financial reports, Yes, your auditors will require to look in this perfect box and it has to look exactly like that. But that’s for the outside world. Think about what your organization needs internally and create those measurements, those tools, those financial reports. That makes sense for you internally. So that you can make business decisions based upon that and what a lot of people don’t realize.

[00:17:52.75] spk_2:
We

[00:18:53.12] spk_1:
Have over 150 clients. Probably many, if not all of them have some level of customization to their reports. So they need to get reports that make sense to them, not already nonprofits have to have the same internal financial statements. In fact, you shouldn’t have the same internal financial statements and start asking yourself what do you need to see? So I’ll give you an example. I have one organization that was really, really cash strapped. They had all the revenue sources in place. They could not understand why are we cash poor, Why do we not have any money? And the reality. After a quick look at some of the financial reports, I realized they were building their funders but they were never collecting them. There were some issues with the quality of their invoicing and some problems they weren’t troubleshooting and poor training and just some other issues that are actually pretty easily fixed. But going forward once we were able to get caught up on that building, the ceo want to make sure that never happened again. So she wanted to make sure she got a detailed listing of what invoices were still outstanding because she started understanding the, the, the timing of when payments were expected to come in and once things started to go off track

[00:18:59.15] spk_0:
basically

[00:18:59.70] spk_1:
immediately, basically

[00:19:01.09] spk_0:
talking about tracking your accounts payable.

[00:19:02.88] spk_1:
Yeah, accounts receivable in this case or payable

[00:19:14.25] spk_0:
receivable? Your receivables? Yeah. I took, I took accounting for poets in college. So I do remember that, um, assets equal liabilities plus owner equity. Is that still true?

[00:19:19.74] spk_1:
That is true.

[00:19:20.97] spk_0:
Axiom still still valid. Like a law of physics doesn’t change. Okay.

[00:19:25.52] spk_1:
In the nonprofit world, we say we don’t have equity because there’s no ownership. But the concept is still the same. We called net assets in the nonprofit world, but the concept is still the same

[00:19:34.74] spk_0:
assets equals net assets. Oh no, we

[00:19:37.60] spk_1:
called the net assets. Yeah.

[00:19:39.61] spk_0:
But the other side is assets, assets equals net assets.

[00:19:43.54] spk_1:
You could do assets minus liabilities equal net assets or assets, you know, equal, you know, however you want to do the algebra of the formula, you could say in multiple different ways. But um, yeah, we say assets minus liabilities equals net assets, but

[00:19:58.75] spk_0:
assets, my stuff, that makes sense to me, assets. Everything you have minus what you owe your liabilities, which I know, I know I’m grossly oversimplifying by when I said what? You know, but again, I took accounting for poets. So you’ll have to excuse that. I’m trainable. I guess I wasn’t, uh, yeah, equals your net assets. Right. Everything you have minus what you owe is is the net

[00:20:21.20] spk_1:
okay.

[00:20:22.47] spk_0:
We don’t have to go any deeper than that. We shouldn’t.

[00:20:24.85] spk_1:
No one wants to hear that. But

[00:20:26.63] spk_0:
Not profit leaders should not profit leaders should, I’m not a nonprofit leader. So I’m not, I’m not on the hook for this. Alright. Um, name another one. Somebody. Somebody throw out another another top 10.

[00:21:32.17] spk_2:
Well, I think, um, following up to sort of, what Tasha was already saying is that you can have all those in place, but if you don’t have anyone, um, doing checks and balances or even around to take over key processes. If someone goes or if someone’s out on vacation, that’s a really major risk. You know, we were in the training or the workshop last week and a lot of people really resonated with this, you know, don’t burn out the one person you have on your team who knows how to do payroll? Who knows how to do vendor payments? Who knows how to do the bank deposits. There can’t be just one person on your team who knows how to do all these things. There needs to be some, you know, some thought to succession planning. Some thought too. Um,

[00:21:32.59] spk_0:
or not even not even succession planning, just like you said vacation.

[00:21:36.04] spk_2:
Yeah, just process documentation.

[00:21:38.00] spk_0:
You know, we got somebody goes out on maternity leave. We still have to process, we still have to process vendor purchase orders.

[00:21:52.11] spk_2:
Yeah, we had someone chat in the comments saying I’m going out on maternity leave, but I still have to process payroll, which is not

[00:21:53.91] spk_0:
great.

[00:22:14.59] spk_2:
That’s not great for your staff’s morale. So definitely just making sure you’ve got some of those basic processes written down, trained, um, cross trained with different people and having backups in place so that people can take a break and people can, you know, not have that looming over their head when they’re supposed to be on maternity leave

[00:22:20.03] spk_0:
or, or

[00:22:21.18] spk_2:
family leave, you know, it’s not sustainable.

[00:22:37.49] spk_0:
Um, I have seen that too, in, in uh, clients that I’ve worked with. I do plan giving fundraising. Um, and you know, we have, we need vendor, we have vendors, there might be, there’s, uh, you know, there’s a company that that manages the soft that provides the software for playing giving calculations. Well that purchase order has to be paid. You know, my purchase order has to be

[00:22:49.87] spk_2:
paid. It

[00:22:51.37] spk_0:
seems sometimes to be one person who can do it and we’re all, we’re all screwed if that person is busy or away or whatever. Alright, let’s stick with you. Give us another one.

[00:23:26.25] spk_2:
Sure. Another thing that you brought up was having the right software to use. So, um, you know, we found when we were in our sort of leadership transition in our, uh, you know, transition between bookkeepers. We just had someone who was, you know, taking our information and then,

[00:23:27.07] spk_0:
you know,

[00:23:27.81] spk_2:
kind of piecemeal putting it together, like looking at the paper receipts, looking at this and really it’s just not sustainable long term to do that. And there are so many options with technology

[00:23:38.44] spk_0:
now to

[00:23:39.84] spk_2:
really make the transition easier. And a lot of nonprofits do qualify for

[00:23:46.85] spk_0:
discounts

[00:24:08.43] spk_2:
for some of these larger tech companies, they have a lot of for profit people using their services. So they, most of the time will have a nonprofit discount or even offer their their software for free. And really it just becomes a matter of making sure that the people in your organization are up to speed. And um, I think Tasha had an incredible case study that she shared about what, how she saw this kind of go sideways um, in her own practice. Okay,

[00:24:35.66] spk_0:
Natasha before you tell that story, aren’t there? There’s also scores of smaller companies that are devoted to nonprofit financial management we through the years. And non profit radio I’ve had one or maybe two of them as sponsors. You know, there they’ll say that, you know, quickbooks is basically they’re they’re, they’re thinking is Quickbooks is not made for non profits. You have to be able to do fund accounting and things and you know, so we’ve got, we’ve got the software solution that’s an accounting financial management devoted to non profits. You don’t have to modify Quickbooks or Intuit or something. Or maybe intuit’s Quickbooks, I don’t even know.

[00:24:58.47] spk_2:
But

[00:25:03.05] spk_0:
counting for poets, but you know, um, so you don’t have to use these major companies that there’s smaller, smaller apps devoted to nonprofit financial management. Right?

[00:26:34.72] spk_1:
That’s right. That’s right. And it’s funny, I was gonna talk a little bit about that because I think that there are a lot of organization accountants that will say nonprofit accounting is super special and we have to have everything special. Um, and I, I don’t disagree with that completely. But the challenge is it creates a, it creates barriers for nonprofit organizations to be able to um work with some of these providers, especially if the proprietor like proprietary software or things of this nature, What I try to do with our clients is create software solutions that can work with nonprofits have a really low cost point price point on those things. And more importantly, the software is very user friendly. There’s a lot of free training resources. So we actually use Quickbooks. I’m not being paid to say that I have no formal partnership with Quickbooks, but I like the software because if they needed to bring their accounting back in house when working with us, they could find bookkeepers or accountants that have experience with with Quickbooks. And so sometimes I think it’s a matter of preference. I say as an account that has my own preferences for how I like to do things. I think it’s, I can say that, but what I think is um important for nonprofits to understand what technology is available out there to Sandy’s point and how can they use that to alleviate some of the manual um time consuming task going back to not burning out your one person that does everything. If you can find ways to autumn streamline that they can maybe focus on bigger value added work or just simply take a breather or focus on work that feeds their soul a little bit more than just doing data entry into the accounting. So

[00:26:50.44] spk_0:
Okay, Zanny said you have a story well

[00:26:51.15] spk_1:
in this particular case. Sure. Yeah, sure. So

[00:26:54.90] spk_0:
speaking

[00:26:55.97] spk_1:
of tedious work that burns people out and it’s very time consuming. So I started working with an organization way way back many, many years ago and

[00:27:04.76] spk_0:
they, this is not, this is not a story about.

[00:27:07.30] spk_2:
No not

[00:27:12.05] spk_0:
but it’s not okay.

[00:27:14.12] spk_1:
No I have a friend. No it’s

[00:27:15.73] spk_0:
not. Yeah

[00:29:06.76] spk_1:
exactly. No it’s about software and how software can change how we do things. So I started working with an organization which actually is now a client of ours um in a very contract away a few years ago and we realized that they were heavy credit card users, credit cards are debating the existence of all accountants out there for every nonprofit. I promised you can quote me on that. I’m sure. Uh And the problem is that there’s not a good system for collecting the receipts, it’s very manual. Um You have got a copy, you gotta scan, you got a code, you got to get into all the people. Anyway, they have about 20 credit cards that have hundreds if not thousands of transactions a month. The accountant, the finance director um is they hired that person for that high level skill analysis, Financial thought leadership. That person was spending a good week of her month. So 25% of her working days, reconciling and tracking down all of these hundreds of receipt if not thousands depending on the time of the year. And one of the things that we immediately realized this person actually left the organization and the organization was left scrambling trying to replace it. And one of the things we realized immediately, we could save a lot of time. If we just have software, your team is already making copies of the recedes, forwarding it to the account, the account has to use all these Softwares to stamp it with electronic approvals and all that. We could replace that whole manual back and forth email flurry of system with the software, like many of nonprofits out there now use things like expensive fi or dext or or something like this where the user of the credit card actually just takes an image identifies what type of expense it is if it’s designated to a specific funder, um, if it’s restricted or not and then submits it off to the accountant and the accountant just matches them up with what’s actually ending the bank account. So this whole flurry of hundreds and hundreds of unnecessary emails, all of this monotonous detailed work that you’re bogging your accountant down with. Um, now has freed up their time to be able to do other things. In this case, it actually saved them cost because we don’t have to do that much work and it’s not as labor intensive, but if you did have somebody in house that you wanted them to focus on higher value work that that’s more valuable to the organization. You can use technology to do that sort of thing. So I’ll echo what Danny had said.

[00:30:27.33] spk_0:
It’s time for a break. Fourth dimension technologies. The free offer. It’s still out there exclusively for nonprofit radio listeners, complimentary 24 7 monitoring of your I. T. Assets for three months. They’ll monitor your servers, network and cloud performance, they’ll monitor your backup performance all 24 7. If there are any issues, they’ll let you know ASAP and you will get a comprehensive report on how you’re doing at the end of the three month monitoring. And they’re gonna throw in a few surprise offers as well. It’s complimentary, it’s on the listener landing page, tony-dot-M.A.-slash-Pursuant mention deeper. Let’s return to accounting for nonprofit leaders. Tasha, name those couple of resources that folks could look at again.

[00:31:03.46] spk_1:
So again, I like kind of uh out of the box like package is really easy to use expensive. Fi is a really popular one. Um dext formerly known as receipt bank is one. So those are two that work really well with Quickbooks are very user friendly. Um, you can have your people that use credit cards a lot of times they’ll have like apps on their smartphones and so they just take a picture of it while they’re out spending, you know, the money rather than worrying about lost receipts and things like that. So those are two really common ones that are again, really low price point and easy to implement. Easy to use

[00:31:09.49] spk_0:
is dexter D. E. X.

[00:31:11.25] spk_1:
T. That’s right, yep.

[00:31:12.88] spk_0:
Okay. And expense if I. Okay. Yeah. Alright let’s stay with you. Tasha give us another, we’re halfway through our list by the way I’ve been keeping track,

[00:31:22.99] spk_1:
we’re not combining any of these.

[00:31:24.99] spk_0:
Alright if we end up as long as

[00:31:26.49] spk_1:
well we’ll tell you when we run out,

[00:31:29.94] spk_0:
as long as we cover the content. You know it doesn’t we end up doing them uh 10 things but we ate you know ate under eight topics as long as as long as you’re not holding back on non profit radio listeners that

[00:31:39.14] spk_1:
we’re not holding.

[00:31:40.16] spk_0:
That’s my concern. That’s my audit. That is my benchmark. Is that the content is there doesn’t have to be under 10 distinct rubrics. But we have done five anyway. Alright.

[00:34:04.12] spk_1:
Okay so the next one I would say uh that uh nonprofits don’t necessarily realize that there’s not a one size fits all with accountants. And I think I realized this when I started hiring my own accountants and staffing um the work as the charity CFO for on behalf of our other clients. And what do I mean by this like any profession accountants and their experiences, skills and expertise vary. So I kind of divide up in this 80 20. Roll the infamous 80 20 rule 80% of accounting is very transactional input output. You need somebody that’s very good at attention to detail, very consistent, very reliable thrives and routine. They like doing the same things over and over again. There are a lot of accountants out there like that. Um They do a great job Then there’s like the 20% of accounting, that’s the creative accounting but not you know, go to jail creative accounting. I’m talking moving the needle with the organization, building better budgets, building financial models, really thinking how we can implement best practices or re imagining what our accounting function can look like implementing software. For example these are the visionaries. If you will, you can probably guess which one of those I am. I find that most organizations, all organizations need both of those skill sets, the challenge is oftentimes, although the label on the title on the resume or the job is accountant or CFO or controller or whatever, but the reality is there’s two different types of accountants. Now, some people could try to do both but that’s not where their skill set is. So if you took someone like me a 20% and you put me in a job where 80% of my time is doing, you know, detailed work on routine tasks. I’m not gonna stick around for a long time, I want to do things that feed my soul and on the flip side if you take a more transactional tactical accountant, that’s really good and you expect them to solve all of your financial world problems, you’re probably not going to get as far as you would hope. And I think that many organizations think that they could hire an accountant to do all of those things and and I think that that’s not realistic and that’s why we see some turnover in these roles um or organizations struggle with, I just need somebody that does both of these things. And I don’t think people really realize that accountants are not all the same. And so many organizations, money is not such an abundance that we can just both of those accountants.

[00:34:13.35] spk_0:
So

[00:35:27.46] spk_1:
a lot of nonprofits have to decide what’s most important. How can I get both of those um Accounting needs met tactical detail because that’s 80% of the work, you know keep the wheels turning and the bills paid. Um and but how can I also get that financial thought leadership that I’m looking for. So what I’ve seen in some cases that organizations will maybe higher and operate person, I just did a podcast the other day saying like nonprofits are quitting their accountant and what I meant by that is non profits are moving um similar to Danny actually probably speak better to this than I organizations are moving to more of an operations person that’s kind of the hub and spoke and they’re outsourcing outsourcing some of that technical work right? Maybe it’s hr maybe it’s accounting, maybe it’s I. T. But you still have somebody that can maybe do some of the tactical work because they’re on the front lines. They’re interacting with the staff in a more significant way. Or maybe they’re outsourcing that financial thought leadership. Or maybe they have a financial thought leadership in house but they’re using some other staff people to help do some of the bookkeeping. So that again you keep people doing what they do best um and creating work that’s meaningful for them. So not all accounts are created the same.

[00:35:31.32] spk_0:
Not all made the same

[00:35:32.19] spk_1:
as the biggest takeaway.

[00:35:33.35] spk_0:
Alright. Um I have to ask though, are there any accountants who would say I’m in the 80%?

[00:35:39.97] spk_1:
Absolutely.

[00:35:41.15] spk_0:
I’ve got a whole team.

[00:35:42.20] spk_1:
Yeah. Yeah. It’s funny because I have 32 employees and I would say probably 70% of my staff falls into that and we need to make sure that people see a path that they can take on additional responsibilities but not so much that they’re gonna be overwhelmed. Um

[00:35:59.67] spk_0:
I thought maybe all accountants think they’re in the creative,

[00:36:03.16] spk_1:
definitely not.

[00:36:06.28] spk_0:
Not that they actually are but that they think they are. It’s it’s a self image question.

[00:36:10.31] spk_1:
Well that’s a great point. I sometimes think as accountants are known to have maybe inflated egos of herself. If I dare to

[00:36:20.20] spk_0:
say. All right. That’s that’s where it was coming. That’s where I was coming

[00:36:22.06] spk_1:
from not

[00:36:23.07] spk_0:
where they are but where they think they are. All right, well, we’ll uh we’ll concede that you’re definitely in the 20% because you you can’t run a company called the charity CFO if if you’re if you’re not be the otherwise you’d be the charity bookkeeper,

[00:36:37.98] spk_2:
you’re

[00:36:39.11] spk_0:
not the charity bookkeeper. Alright. Um Danny, you want to contribute something.

[00:38:53.16] spk_2:
Yeah. So, you know, as Tasha was talking and and sort of talking about how, you know, technology needs. Like everyone can just use decks to take a picture and know what account to send it to and have everything all easy peasy kind of ready to go and like technology takes care of it, blah blah blah. Well, you can really get yourself into trouble if you don’t actually know what the structure of your accounting system is. So let’s say you have a program person who is using dext or even just you know, trying to code something on their receipt to share with their accountant. But they put the wrong chart of accounts. Well, the accountants just gonna do what the person told them to do. Say, okay, it’s in this one you told me to put it in there. Um And you don’t want them to be creative with that. You want the budget to match the chart of accounts. You want the chart of accounts and all of the expenses to go to the right place. But you don’t really know if that’s going to happen correctly. If you don’t train the people on the ground making the expenses sending in receipts if they don’t have the right information and you’re not kind of sharing that widely and having everyone understand with the chart of just the very basic things are and what, how to code things for your accountant. You’re really gonna get way off by the end of the year, you’re gonna, it doesn’t matter what fancy technology you have or if you have a 20% or 80% accountant, they’re doing what you’ve asked them to do. And so making sure that you’ve kind of got everybody buttoned up and, and learning what the basics are for your chart of accounts. And there’s not gonna be uh, one size fits all, like list of chart of account for every organization. That’s definitely something that comes out of programming comes out of requirements from your funders, It’s all related to your specific business. So we definitely went through some growing pains as we transitioned and had to essentially redo a lot of our chart of accounts because we realized our accountant that we had previously was sort of getting a little creative about which we didn’t provide any direction. And so they got creative on each month where these different same expense was going in a different chart. And so you have to sort of figure out how to unravel that. And then if it gets too far down the line, it’s really hard to do, it takes

[00:39:22.55] spk_0:
a lot, I don’t I don’t quite understand this one that you have to, you have to, so so you can educate me the way we were all supposed to educate the people who are spending the money when you say the chart of accounts, what why? I don’t understand why this is to everybody who’s out spending money, like you said, share the structure of your accounting system with widely, I don’t I don’t see what why that’s important.

[00:40:27.22] spk_2:
So let’s say, I mean I do this on a regular basis, so this is sort of my job is to make sure everyone in our organization knows what’s going on and how things code correctly. So, you know, let’s say at the beginning of the year, we’ve coded our organization provides professional development training, leadership training and um does some consulting work related to that as well. So we take a lot of our programming and we’ll bring it in house to people. So those are two different things. We have workshops that are open to the public and we have specialized consulting work that we do. So let’s say we have a consultant or a facilitator that we’ve hired to do a workshop. Well we’ve got a different chart of accounts essentially for saying how to split that consultants time. So we have one bucket that says, oh this is our consulting expense. But if you just put it in there and say, oh that’s a consulting expense or you know, this is a hired outside facilitator that we’ve brought in. But we don’t say whether it was for our workshops or for the, you know, the on site consulting specialized work that we’ve been contractually obligated to do with an organization.

[00:40:47.28] spk_0:
How

[00:40:48.49] spk_2:
are you going to know how much you spent

[00:40:50.86] spk_0:
for

[00:41:12.37] spk_2:
each of those different program types? So you really can have, and we have the same facilitators and they do different types of work for us at at all times, but we want to know at the end of the year what was our expense for our consulting work? What was our expense for our workshops and things like that? So we have to be very deliberate and understand when someone’s sending in an invoice or sending in a receipt that they’ve sort of coded that correctly.

[00:41:50.67] spk_0:
Okay, so it’s all a matter of like allocation to the right allocation to the right uh budget line or or general program area. The way you’re describing, you know, you have to you have two distinct areas, You are Alright, so allocating expenses and revenue, obviously two to the right, you know, not just that, it’s it’s just not generic revenue, but, you know, because at the end of the year we want to know what our expenses and our revenues are like in across. Well, in your example, you know, on both sides of the work that you’re doing, right? The public workshops and also the private consulting,

[00:41:58.74] spk_2:
right? Yeah. And so that can be really complicated if you let it sort of go down the wrong path. But you’ve got one of those really complicated federal funding grants and you’re not supposed to allocated a certain amount to this program. It’s really supposed to go to this program. Um,

[00:42:16.88] spk_0:
and

[00:42:17.10] spk_2:
you can kind of, you know, can be a lot of a bigger process to undo later on.

[00:42:22.88] spk_0:
Right, do it right the first time instead of trying to do forensic accounting to try to figure

[00:42:27.65] spk_1:
out. So

[00:42:28.76] spk_2:
it’s important for people who are, who are sending in those, you know, those pictures of their receipts on decks or expense. If I too have coded it correctly, before they send it to the accountant to make sure that they understand what account it’s supposed to go into or come out of.

[00:45:01.97] spk_0:
Okay, very helpful. Thank you. It’s time for Tony Take two. I’ll be on a panel endowment excitement, fundraising and management end quote. So where are you with your endowment? Do you have an endowment? You might be at zero or maybe you have a mid size middling endowment or you’ve got a vast endowment. The other three folks will be able to help you with endowment management principles. You probably don’t have a vast endowment. I bet there aren’t too many listeners who have vast endowments, but for the outliers, there’s something for you in this panel as well, for the vast majority of folks, no endowment or teensy weensy, itsy bitsy endowment or something in the middle. I’ll be doing the planned giving fundraising part of endowment excitement, fundraising and management. I’ll be the fundraising part. Talk about how planned giving is enormously valuable for endowment starting or endowment building. The other three folks there, the smart folks in endowment management. So we got the fundraising, we got the management doesn’t matter where you are in your endowment status capacity robustness, if you like. There’s something for you. It’s August 25 at noon eastern time. Oh and I should say we are sponsored graciously by an ex unite. Thank you and next unite. So to make your reservation, you go to N X unite dot com and you click webinars and panels and if you can’t join us on august 25th at noon, sign up and you’ll get the video. Of course it’s 2022 naturally. So I hope you’ll be with us either live or archive. That is Tony’s take two. We’ve got boo koo but loads more time for accounting for nonprofit leaders with Tasha Anderson and Zanny Miranda. Tasha. Your turn. You wanna, you wanna contribute.

[00:45:49.01] spk_1:
Yeah, yeah, I’ll contribute a little bit more to that one. But to kind of sum it up for me what I tell people. There’s usually a lot of frustration. I don’t understand my accounting and I usually tell people, it’s not that you’re using quickbooks and quickbooks is not sophisticated enough. It’s that it’s not set up the right way and then the user that’s using it is limited. And what I tell people kind of garbage and not that the work is entirely wrong. Right? It’s accurate. The dollar amounts accurate, the vendor is accurate, but if it’s not in put a certain way, then you’re not gonna be able to get reports out a certain way. So you kind of have to think more globally. Uh, you know, how do you want this to come out and then you have to understand the intricacies of the system in order to get the end result. So what Danny is referring to is just understanding high level, what is it that you want to see? How is that information can be put out and then making sure that the inputs are going in the right way so that you don’t have that forensic accounting that you mentioned trying to go back and figure that out. And so many organizations go through that forensic accounting exercise every time they have a simple report. Um, a simple report.

[00:46:17.39] spk_0:
Yeah, I’ve seen some of that. I know it’s it’s expensive. It’s, it’s time consuming. Didn’t have didn’t have to have been done badly to start with. All right. Let’s move on. Let’s move on,

[00:48:42.83] spk_1:
moving on. So the next one I would say, um, that nonprofit leader should share more about their financial information in their financial position with other people within the organization. And what do I mean by that? I kind of alluded to it earlier that I have been in situations where it’s just the Ceo and I carry the weight of the financial management, the financial, he’s right. And I’m not just talking like, oh my gosh, we have enough money to make payroll. I’m talking about being the person, the point person to explain to the board why we didn’t hit our fundraising goals, why our program contracts not fully utilized, why we were over underspending and salary expenses because we have vacancies in the various departments or what have you. Um, and that’s kind of what we’re talking about. It all kind of feeds together. So if we understand what those KPI S, those benchmarks, those metrics for measuring, we have an accounting structure in place to properly categorize and track these things, not just by thunder, but by department we customize our reporting in a way that’s meaningful. Maybe that that translates to creating a income statement or a financial report, a budget actual by department and then sharing with those that run those divisions of the business, their area of responsibility. That’s where I like to get to that the fundraising, you know, professional within the organization actually gets a periodic report. So they know what they spent in order to raise the money and where we’re at and what we expected them to do the same with the program team, same with anyone else that has that area of significant responsibility. And so often I see that again, the financial person and the ceo bear that responsibility and they end up being the money. Police, can I spend money for training? No, can I do that? It’s kind of crushing for morale a little bit that you have to police every dollar spent. And in a perfect world we would include all of these individuals in the budgeting process. Okay, fundraising department, what what do you need to spend this year? And how much honey are you bringing it? Same with the program team. You know, all of the different people involved. I like to get input from them. They give me their budgets on what they believe they need to spend to meet the outcomes and the objectives that they’ve laid out to do. So if that means we need to add another staff person, if that means we need to pay for more programs, supplies or go to a couple conferences, whatever it is. Um, let me know. So that when whenever you come and say, hey, can I, you know, attend this conference this year, I can then in return say was that in your budget and assuming the cash is available, people start owning their own things and there and we hold them accountable right,

[00:49:19.57] spk_0:
Right? Like delegating responsibility for the budget that you’re responsible for rather than rather than as you said, you know, having to ask, I mean you’re, you’re empowering folks, you’re educating them and empowering them to spend their budget responsibly. And obviously, you know, that’s part of performance review and, and, and through the benchmarks and the metrics that we talked about first, we’ll know whether you’re, whether you’re doing it accurately or

[00:49:26.46] spk_1:
not

[00:49:27.23] spk_0:
wisely or not. I guess it’s probably better than accurately, but Okay, Alright. So like delegating, delegating budget responsibility and accountability as well, of course.

[00:49:39.06] spk_1:
Alright, where’s

[00:49:43.20] spk_0:
the role of the board here, Tasha in should it just be a quarterly review of of the overall financial picture? Should it be every board meeting? Let’s take a board that meets, take a worst case scenario, a board that meets monthly. Do they need to see a monthly financial picture? Can it just be quarterly, semi annual? What, what do you think?

[00:52:09.36] spk_1:
Yeah, So that’s a great question. I think it kind of depends on the organization, uh, small struggling organization, I think probably needs more oversight than one. That’s pretty well figured it out and they’re pretty mature. I would say kind of best practices that you always provide financial reports at every board meeting. Um, maybe you don’t pour over it in a huge level of detail, but the reality of the fiduciary responsibility is up there with one of the top board responsibilities. So I personally would never recommend having a board meeting for which finances were not considered solely for that reason. Um, I will say a lot of the nuts and bolts of the oversight, the financial oversight. Oftentimes happens at the finance committee level. So oftentimes the finance committees will be reviewing more detailed reports on a monthly basis, asking whatever questions they need to ask, then, you know, usually a summarized version of that information is given to the overall board. I mean, we don’t definitely don’t want to spend board time discussing why we’re overspending and office supplies. Right? When we’re ignoring the, you know, the big elephant in the room on why we’re off of our fundraising projections by 50%. I think you had those conversations before. So we want to keep it really high level. Um, but the, the details get done at the finance committee level and the, um, the, the high level discussions happen at the board level. And I’ve seen the spectrum of some boards that are really involved in the financial management so much to say that it probably crosses the, uh, you know, some boundaries in terms of your role is oversight and not actually managing the organization. Um, and then I’ve seen some words that are probably too passive, uh, and will come back around once financially the organization starts struggling. And what I’ve seen that consistent, um, a consistent presence and a consistent accountability from the board. That’s what keeps organizations in a good place. I mean, if you just keep coming in and out once things start to get a little rocky may be having some consistency and some accountability will keep the pendulum swinging from one way to the other. So to answer your direct question, every board meeting I think should have a financial review. Um even if it’s only five minutes to just update everybody on, are we on track or we off track is usually what I like to tell people

[00:52:31.79] spk_0:
and it helps to have a finance committee that’s paying closer attention. If you’re, you know, if your board is has that expertise and and frankly is big enough, you know, a five person board may not, may not be big enough to have a finance committee and you don’t want to have just one person looking at it because that that’s a mistake. I think

[00:54:00.86] spk_1:
I want to say something to before we go into the last one, I don’t want to run out of time. But what I think is the most important thing cause I wanna, I wanna validate what you’re saying that not every board is big enough to have a finance committee. Um and not every board has an abundance of accountants lined up trying to join their board. I recognize that fact, what I think is really important, what I think what I like to do for our clients is to create the financial information um presented in such a way that they can have the board can ask questions and have fruitful conversation. What do I mean by that? Oftentimes they get all these really long reports with all these numbers. They don’t actually know what any of it means. And there’s this intimidation level where many board members just don’t feel comfortable asking questions out of fear of looking silly or uneducated. Right. And so what we do, we put together an executive summary. And so I would encourage anybody listening to have their account and create some sort of executive summary to give a narrative that explains the context or what’s really going on and more of a written format. Because if you just simply give financial reports, you’re gonna keep butting up against the same problem. So what I try to do is create a process that will drive conversations at the board level. So if we write, hey, we are off from our fundraising goals. This is a red flag or you know, maybe not in those exact alarming words, but they may not necessarily interpret that just by looking at the report. So, but if somebody read that, they could say, well, what are we going to do about fundraising?

[00:54:11.56] spk_0:
Right, context.

[00:54:14.57] spk_1:
Yes. Yes. And I think that that engages boards more to have some of those financial conversations. Um, so if that’s not being done, I would really recommend

[00:54:24.64] spk_0:
that. All right. Sandy, you have, we should be wrapping up with another one or two unless we combined or something. But as long as the content is there, you have, Do

[00:54:31.81] spk_2:
you think we combined a couple, particularly around succession planning and making sure you’ve got your processes in place? Because they’re sort of,

[00:54:39.89] spk_0:
we didn’t leave anything out there. Well,

[00:56:31.28] spk_2:
there’s one thing that I think Tasha was almost alluding to and if you if you’re answering yes to any of these questions, does my organization feel siloed? Are we not getting the right reports from my accountant as my program staff and development team, not communicating any of those details about what requirements are or when reports are due. If your board is sort of questioning things and they can’t figure out what’s happening if any of those things are happening, it’s really not your accounting, it’s your culture and so making sure that across the board accounting doesn’t just stop with the accounting team. It doesn’t just stop at the Ceo or the chief or executive level, I should say. You know, it’s really a team effort. Everyone in the organization, from the receptionist to the program staff to the board president, they all need to know maybe not every single detail of course, but they need to have a general picture and an idea of what is happening in the organization. And some people need to have more information than others. Like I would say, a program staff person needs to know very detailed information about their accounting as much or as the same amount. So they can have a great conversation with the accountant to make sure that they’re on track that they’ve got their budgets aligned and sort of creating a culture where you’re unsure what the other program team is making and how much money they have to work with versus how much you have. You know, why does my executive director keeps saying no to me spending money on these things that I think will boost morale or will actually get better outcomes for our program. What’s happening is that if those are questions that you’re having, it’s really time to examine what’s happening in your culture and maybe try to change some of that, um, sort of fear or change some of that mindset around sharing information about money,

[00:56:56.55] spk_0:
accounting may not be your problem. Maybe something deeper. Sometimes technology is blamed to the technology may not be the problem that maybe the culture in the organization Zanny where is nonprofit solutions and where are you? You may not be in the same place as

[00:57:46.31] spk_2:
I know. Now, now everyone can be everywhere. Of course we are based in SAn Diego. Uh, that is not our geographic limit though for nonprofit solutions. I also live in SAN Diego. Um, but we are online, so we do a lot of virtual workshops and trainings and we can also do our contractual work. Um, so if anyone wanted to hire us for leadership training and um, we do have a lot of management training for new managers. So that is all can be done virtually and we’re now that things are starting to get a little bit easier to to come together. We used to do everything in person and so now we’re slowly getting back to in person but I would say the majority of our work is virtual so we can really be anywhere in any time zone. What’s

[00:58:04.96] spk_0:
the website for nonprofit solutions?

[00:58:06.91] spk_2:
It’s N. P. Solutions dot org.

[00:58:11.39] spk_0:
Okay, Tasha, where where’s the charity CFO, wherever you are, That’s where the charity CFO is.

[00:58:27.72] spk_1:
That’s right. Well, our office, our headquarters and all of our team are based here in ST louis Missouri. So although we work remotely with our clients, our team is centered here in ST louis. We do have not Office, we collaborate here, however, um only about 30% of our clients are here in ST Louis, the rest are all over the country from coast to coast. So we work with clients all over the place in the United States

[00:58:38.12] spk_0:
and what’s what’s the website for charity? CFO,

[00:58:40.91] spk_1:
yep, it’s the charity CFO dot com.

[00:58:44.29] spk_0:
Okay, I love I love Missouri because I lived for five years in Warrensburg. Warrensburg where where Whiteman Air Force Base is,

[00:58:53.37] spk_1:
I

[00:59:03.01] spk_0:
was in the Air Force for five years. So I lived in Warrensburg, we used to spend more time in Kansas city because it was closer but we went to some ball games in ST louis. Okay. All right. Uh Tasha Anderson, founder and Ceo of the charity CFO and Zani Miranda Operations Manager at nonprofit solutions. Thank you very much. Thanks for each of you sharing. Thank you.

[00:59:19.83] spk_1:
Got

[00:59:22.92] spk_0:
a great balance between professional C P A. And the the practicing learning client who’s who’s got some significant accounting responsibility but not a C P A. I love the balance. Thank you

[00:59:32.47] spk_1:
very much. Thank

[00:59:33.73] spk_2:
you. Thanks

[01:00:48.65] spk_0:
to our listeners for being with tony-martignetti non profit radio coverage of 22 N. T. C. Thanks so much for being with us Next week. Our final 22. NTC show your tech problem is actually a people’s problem. If you missed any part of this week’s show, I beseech you find it at tony-martignetti dot com. We’re sponsored by turn to communications pr and content for nonprofits. Your story is their mission turn hyphen two dot c. O. And by fourth dimension technologies. Their product is I. T. Infra in a box, the affordable tech solution for nonprofits, but they’ve got the free offer going on. So that is at tony-dot-M.A.-slash-Pursuant D just like three D. But they do want to mention deeper. Our creative producer is Claire Meyerhoff shows social media is by Susan Chavez. Mark Silverman is our web guy and this music is by scott stein, Thank you for that. Affirmation Scotty B with me next week for nonprofit radio big nonprofit ideas for the other 95 go out and be great

Nonprofit Radio for November 1, 2021: Risk Management II

My Guest:

Gene Takagi: Risk Management II

Gene Takagi

Gene Takagi returns to complete our coverage of the risks lurking in your employee relations; facilities; events; and vehicles. Also, what to do to keep those risks at a minimum, so incidents don’t hurt your nonprofit. Gene is our legal contributor and principal at NEO, the Nonprofit & Exempt Organizations Law Group. (Part I was on October 4th.)

 

 

 

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Guest On Charity Registration & Planned Giving Podcasts

I was a guest on two podcasts related to fundraising for your nonprofit. Links are below to The Fundraising Authority and Third Space Studio.