digArticles

Category: Operational management

  • Data Security

    Data Security

    In the midst of the Covid-19 pandemic, nonprofits across the country are facing challenges that none of us have ever had to ponder, let alone tackle, before. Issues related to assisting those we serve, our staff, and volunteer teams are perhaps more pronounced than ever. Along with all of the new challenges and difficulties, there are a host of vital management and operations tasks that have always been on our plates—and continue to be on the proverbial “to do list.” Certainly, issues surrounding data risk management are among the most important.

    Scams and phishing schemes in the midst of these uncertain times are prevalent. I am disheartened and intensely annoyed by the frequent messages in my email box from fraudulent emailers masquerading as my supervisor. In fact, a few weeks into the pandemic, our organization was the subject of a phishing scheme that caused every member of our team to spend significant time adding additional layers of security to our emails to ensure that the scheme did not impact our data and our members’ data. For some, the “fix” had to be carried out two or three times, causing additional downtime and inefficiency. Additionally, our entire team moved to two factor password authentication protocol – which may be burdensome for our team, but worth it to avoid major losses. We were fortunate, though. It could have been MUCH worse.

    We offer some advice for how to manage risk through the Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector. One of the Standards states “Organizations should make every effort to manage risk.” One aspect of risk management is the security of our data and systems. A recent study by McAfee (a leading cybersecurity company) indicated that “nearly 2/3 of people who use online services (more than two billion individuals) have had their personal data stolen or compromised.” Moreover, the report highlights the growth in cybercrime and the new technologies that cybercriminals are taking advantage of. Preparedness and vigilance are key for ensuring that, even if the worst should come to pass, your organization will be able overcome challenges in this area.

    Organizations should have adequate security in place that controls access to data. Generally, this involves controlling who has access to your system through robust login and user rights management. It also includes firewalls that secure internal systems against access from the external networks (this is the internet for most systems). Security also involves user education as unattended workstations, shared passwords, or lost laptops are the most common access points for security breaches. In instances where remote access to internal systems is allowed, special care must be taken to secure these access methods.

    These are just a few suggestions for mitigating data security lapses. Nonprofits should also consider cyber liability insurance for additional protection against online attacks. For the full series of tips and guidelines on data security, as well as other guidelines for nonprofits, check out the Standards for Excellence educational packet on Administrative Policies for more useful information. The educational packet includes helpful resources on data security, what steps to take to protect your data, what to be wary of in regard to external threats, and how to mitigate a data disasters.

    This educational resource packet and the full series of all packets – including sample policies, tools and model procedures to help nonprofits achieve best practices in their governance and management – can be accessed by contacting a licensed Standards for Excellence replication partner, one of the over 150 Standards for Excellence Licensed Consultants, or by becoming a member of the Standards for Excellence Institute.

    We share our sincere wishes for your continued good health and patience as we all navigate these challenging and uncertain times.

  • Understanding Budgeting in Uncertain Times

    Understanding Budgeting in Uncertain Times

    YIKES! It’s Budget Time!

    You are all doing incredible work, finding ways to continue to provide vital services AND maintain viability even when confronting the reality that the current fiscal year’s budget is gaining greater irrelevance under the extraordinarily ‘abnormal’ operating conditions of the COVID-19 response. The current reality of what predictable expenses and revenue are, is not only different, but wholly unimagined.

    So then, what does a healthy & realistic budget process look like given that many of you are approaching the close of your fiscal year and the demands of drafting and approving next year’s budget in a time of so much ‘unknown.’

    I want to start with an observation …

    Your organization is not the organization’s budget. The organization is the day-to-day operations that put assets to work creating benefit in the world, not the prediction that was made several months ago about the sources and allocation of money for a given 12 month period (aka your budget) – nor are you the predictions you make about what the next 12-18 months might look like. The budget is just a tool we use.

    In fact, the budget process – which includes developing the financial model that represents how the organization will operate over a set 12-month period AND the monitoring of the actual operations against that model over those 12-month – is really a confidence game. Not the bad kind that they make movies about where a person builds up false confidence in a lie only to cheat someone out of their life savings, but rather the real process of creating authentic confidence in the organization and, more importantly, those who lead it.

    What we are really doing when we draft a budget is building up confidence, and comfort, about a set of assumptions, forecasts, and guesses we employ to predict the future. It is not that we have confidence in the actual numbers that show up in a budget spreadsheet, it is that we have confidence in the thinking (meaning assumptions) that produced those predictions. So much confidence, in fact, that we are willing to bind ourselves to those predictions as the basis for financial accountability for the duration of the fiscal year.

    This process helps bolster our sense of stability – a feeling most people crave – by illuminating what we can expect well out into the future. 

    In the past – you know, back in February 2020 – this made sense. We generally had a strong experiential base to step into that prediction process. The broader predictability of the external environment validated many of our assumptions AND reinforced our forecasting prowess. 

    Still, there was always a healthy dose of ‘unknowns’ and ‘what ifs’ built into this process, and for better or worse, we often took our assumptions for granted and even left them un-articulated because we ‘assumed’ they were so obvious or normal. 

    In this old budget process, we rarely had to totally revisit our assumptions or dramatically alter our predictions. Instead, we knew we would have to monitor and perhaps adjust as the fiscal year progressed, tinkering with an eye to getting as close to the original prediction as possible by the end of the year. We critiqued a deficit and/or celebrated a surplus – but rarely examined in depth the underlying assumptions we used to make the original predictions. 

    We had confidence in our assumptions and how they held true over time and, therefore, would shift our focus forward onto predicting the next year and building the next budget.

    An acceptable model, but still with cracks given the reliance on often un-articulated, and sometimes, unchecked assumptions.

    Today, that model is no longer just cracked, it is laying on the floor in pieces. A system built on predicting and codifying 12 to 18 months out does not work well when nearly everything is unknown – there is little predictability or stability to be had.

    To be clear, our current situation is not anything most of us ever imagined. And as each day passes, what we envision ‘normal’ being in the future gets a bit fuzzier.

    There are no ‘past experiences’ or ‘best practices’ or ‘examples’ of what to do. Our assumptions of how things work or will work have had the rug pulled out from under them. We have no experiential knowledge to assess whether our past and current assumptions will hold as valid or invalid in the short or long term.

    The confidence in our assumptions that our old budgeting process demanded is missing … therefore, the confidence in the predictions is missing … therefore, being comfortable with holding ourselves accountable to those predictions is unreasonable – YIKES WHERE DOES THAT LEAVE US!

    What does it look like to build a healthy, realistic budget process today, that will build the confidence we need and not bury us financially or emotionally in the future?

    First, accept that your fiduciary responsibility is not to ‘make budget’ – it is to ensure that assets are being used to effectively and efficiently advance outcomes in the community, in alignment with your values, in a way that is financially viable for as long as it can be.

    Next, acknowledge that the success of our past budgeting practices and assumptions was built on confidences we don’t currently have. We used to…

    • have clarity about what we did programmatically; what it took to do that work; and could accurately project expenses to support it
    • be able to reasonably predict a year’s worth of revenue from fees, grants, donations, and/or contracts based on our program model and past financial performance
    • had a sense of how the social, political, and economic systems would play in our favor or against us

    With much of this missing, we need to re-envision, and re-align, the budget process based on building a new set of confidences that relies on articulating and validating assumptions. We cannot expect the past budgeting practices to build the comfort, confidence, and competence we need now.

    Steps to building confidence in the next budget

    Start where you have strong competency – Programs and Operations

    Engage in scenario planning – You are good at determining what it takes to deliver your services. 

    While the external world is in constant flux with unpredictable health guidelines and economic situations now and into the near future, you still know your outcomes for people and what you value as important. You are finding new ways to advance those outcomes as best you can and are determining what those new models look like in terms of what it takes to make them work (resources, assets, infrastructure, etc). 

    You are mapping out new programming and operating models – whether you thought you were or not.

      • Continue this work assuming that there will be intermediary iterations of program delivery models that can be put in place as public health guidelines change. For each program delivery model, consider building a 1-month operating budget for the organization. This gives you a ‘modular’ type budget that you could contract or expand based on how long you think you may be delivering a specific programming model.
      • Determine several options for what the next fiscal year could look like in terms of changes in program delivery and operational support. This involves both guessing at how long you might operate under each program delivery model over the fiscal year AND noting the conditions that need to be in place to change from one model to another. For example, 1st 3 months in ‘lock-down’ model, next 3 months in ‘social-distance’ model, next 4 months in ‘small-gatherings only’ model…
        (this is an important piece of thinking to have articulated when it comes to monitoring finances moving forward)
      • Determine the financial requirements that each projected scenario requires. This ensures that the assumptions about what you can do programmatically are clearly grounded in both the external conditions that exist and the financial needs each scenario would require.

    Move to the more challenging – Revenue & Capital

    Admittedly, this is where the most ‘unknowns’ exist. So, start with what you can build confidence around.

      • What existing commitments can you reasonably rely on. What grants, contracts, and/or pledges can you expect to see during the next fiscal year (some funders are already extending grant renewals at 2019/2020 levels)?
      • If you have reserves or other restricted capital, this may be the time to put them to use as ‘revenue’ by releasing them from restriction and designating them as general operating cash for the fiscal year. (Yes, it will reduce your net assets, but it will give you needed operating funds)
      • Avoid building false confidence around past revenue models. Clearly identify revenue targets that correspond with the programming and operating model scenarios you created (see above). Identify the gap that would exist. Clearly articulate the strategy you plan to use to fill that gap and any assumptions (about economy, donors, government, etc) you are relying on to make that strategy work.

    Build ‘Predictability’ Confidence – Use A Monthly Cash Flow Budget

    Using the scenarios you created about potential programming and operating models over the course of the fiscal year, create a monthly cash flow budget for each scenario.

    This allows people to see when revenue and expenses are expected AND to see how the predicted revenue and expenses change each month based on the programming and operating model that you think may be in place at any given point of the fiscal year (see template below). It helps them know what to expect, what the operating assumptions are throughout the year, and what could change if external conditions shift one way or another.

    Sample Month-Based Cash Flow Budget

    *Any tool that aggregates data together needs to have supporting documentation with the details. For example, in the below budget, this version only has two aggregated revenue line items (Contributed Income & Earned Income). You would want to have another spreadsheet that actually broke out each of those categories in fine detail so you can track each and every revenue source and the assumptions associated with it. Click to download the sample budget.

    Create Assumption Triggers

    Throughout this process, you are building a new set of assumptions about what you will do under what conditions; the resources needed to do that; and the revenue you might be able to generate. Unlike the past, these assumptions are unvalidated. Therefore, you want to clearly identify the points at which you revisit and check assumptions and adjust your decisions and actions accordingly. Which conditions, when they present themselves, demand that you stop, pause, revisit, and readjust?

      • What change in external conditions will affect your programming and operating model?
      • What thresholds are you setting on reserve spending (both amounts and timing)?
      • What revenue expectations/assumptions do you need to track (and with what regularity)?
      • What levels of deficit/surplus will trigger conversations about revisiting your programming and operating capacity levels?
      • What will you track to determine if the financial models for our operating scenarios are accurate (are expenses and revenues tracking with your predictions)?

    Hold Yourself Accountable to a Strategy of Checking Assumptions – Not Trying to Land a Prediction

    Remember that part, way back, about budgets being guesses. They are a predication of what we think the reality is likely to be over the next 12-18 months. This is currently unknowable in an innumerable set of ways. 

    By all means, we should be creating reasonable potential scenarios and playing out their predictions over the course of the next 12-18 months. That is a responsibility of governance…

    However, we must not be bound by guesses we are making now, when the reality is likely to be different than imagined. Our greatest strength is to reassess based on where we actually are at any point in the future and what is knowable at that point in time.

    Determine what your organization’s confidence window is – AND HONOR IT! 

    This may mean that 12 months is not a projection you can be confident or comfortable binding yourselves to. It may be that you need to check in every quarter, or every month, or when one of the above triggers is reached. And at that check-in point you may need to re-code your prediction – actually modifying your budget at its core and creating a new set of projections to work towards.

    A 12-month confidence window is certainly not possible right now when it comes to actually managing cash flow (the thing that actually keeps doors open and salaries paid). Realistically, 12 weeks might be a stretch. Which means executive leadership may be focused on a rolling 12 week operating budget, tightly monitoring cash flow each week. (My guess is that every executive is doing this in some way already – because you all find amazing ways to make it work). This is your life line right now, not any projected 12 month budget.

    Course changes are highly likely as our communities adjust to new social, economic, and political realities. We must be nimble in our ability to put down past assumptions and try out new ones. Even discarding the ones we are developing right now, if the future reality invalidates them. And, not holding our feet to the proverbial budget fire that was started with outdated assumptions (no matter how new or prescient we thought they were).

    It’s All About Building Confidence

    The budget process is a confidence game. 

    • We need confidence that we will be viable. 
    • We need confidence that we are serving the community. 
    • Our staff need to know we have confidence in their strategies and ability to adjust. 
    • We need confidence that we can reconsider our assumptions and chart a different path. 
    • We need to understand how much confidence our predictions warrant. 
    • We need to acknowledge where we lack confidence and comfort. 
    • And, we need to consider different process that build up our collective confidence in the organizations we serve.
  • Communicating in a Time of Crisis

    Communicating in a Time of Crisis

    Nonprofit leaders around the country are working hard to continue to meet their important community missions in the midst of the COVID-19 crisis. With this in mind, we’ve been engaged in analysis around which aspects of the Standards for Excellence program could play a role in helping prepare a nonprofit for the turbulent and uncertain times that we are all facing. We’ve heard from nonprofit leaders that they are grateful that the Standards for Excellence program helped them to develop policies, tools, and plans that help them weather the current situation— things like comprehensive disaster plans, remote work policies, exemplary board practices, and treating donors with respect. In addition to these undoubtedly crucial areas, another key item many nonprofits are leaning on is their communication policy and their crisis communications plan.

    The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector, states that “A nonprofit should have written, board-approved administrative policies that are periodically reviewed by the board. At a minimum, these policies should address issues such as crisis and disaster planning, information technology, communications, and social media.”

    Implementing a crisis communications plan is an essential part of a nonprofit’s disaster preparedness efforts. In the event of a crisis, a nonprofit must be able to communicate with all stakeholders with confidence, speed, and accuracy. Protecting the positive public image of your organization and ensuring the public confidence are the main goals of your crisis communications plan.

    When a disaster or crisis arises, your organization should have a well-considered plan of action to communicate both internally and externally to all stakeholders, including the public and media. This plan identifies who will (and will not) speak on behalf of the organization, how the messages will be developed, how all staff and board members will be prepared to deal with inquiries, and how the response will be evaluated afterwards so that improvements can be made to the plan, as needed. While its most advantageous to have a crisis communications plan in place prior to the onset of a disaster, for those who have not taken that step, there is no time like the present- it can also be beneficial to develop your plan even in the midst of a crisis, particularly when the crisis appears to be lengthy and drawn out.

    In addition to your nonprofit’s communications plan addressing general topics like what systems the organization has in place for communications, social media usage/engagement, and who is responsible for selecting the communications system, a communications policy and plan will also address topics like, who is in charge of creating the crisis response(s)?  Specifically looking at crisis communications, nonprofits are encouraged to have contingency plans for major crisis that may affect your organization. Such a plan should also address preventative measures and adaptive measures (i.e. addresses measures to prevent the disaster and addresses measure to adapt to the disaster) and should address communications at all levels of the organization. 

    The Standards for Excellence educational packet on Administrative Policies includes helpful resources such as steps to developing a crisis communication plan, Sample Emergency/Crisis Communications Plan, and a Sample Communications Policy.   

    This educational resource packet and the full series of all packets – including sample policies, tools and model procedures to help nonprofits achieve best practices in their governance and management – can be accessed by contacting a licensed Standards for Excellence replication partner,– one of the over 150 Standards for Excellence  Licensed Consultants, or by becoming a member of the Standards for Excellence Institute.

    We share our sincere wishes for your continued good health and patience as we all navigate these challenging and uncertain times.

  • Operating at Home: Proper Controls during the COVID-19 Pandemic

    Operating at Home: Proper Controls during the COVID-19 Pandemic

    This has been an exceedingly stressful time for people, a time of uncertainty and mixed messages and having to adapt to a new style of operations. For some, this pandemic has meant that operations have ceased; but, for many, your programs continue.

    Your nonprofit’s revenue may be significantly lower for the next few months now that physical interaction is a safety hazard, and stay-at-home orders are in effect in many states. Nonprofit fundraisers and programming cannot proceed as anticipated, and many individuals are not able to work. Therefore, how you monitor, assess, and make use of your limited resources is critically important, and keeping track of your spending is even more so. The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector provides guidance here, stating: “Nonprofits should have written financial policies that are adequate for the size and complexity of the organization.  These policies should address investment of the assets of the organization, internal controls, purchasing, and unrestricted current net assets.”

    Ideally, you already have a policy for internal controls and are continuing to make use of it in these challenging times. Of course, during the COVID-19 pandemic, many nonprofits, by necessity, are finding that they must modify or revise some of their internal controls processes (whether due to staffing changes, inability to work in the physical office, or other challenges experienced in the midst of the crisis).  Any modifications you are instituting in your practices should be carefully documented.  The Standards for Excellence Code recommends that the internal controls policies should be in writing and should be approved by the board, so appropriate steps should be taken to ensure approval by the board as it is practical.  (See our resource on Remote Board Meetings.) The following guidance from our resource packet on Internal Control and Finance Policies may be helpful to consider:

    • Nonprofits should segregate duties so that steps in recording transactions are not all assigned to a single person.
    • Nonprofits should limit access to passwords and physical media.
    • Nonprofits should have a regular process for archiving transactions regularly and starting out fresh with new financial records.
    • Nonprofits should have clearly written procedures for handling transactions (checklists that can be initialed after steps are completed can be helpful).
    • Nonprofits should use sequentially numbered forms and documents, and accounting for all numbers.
    • Nonprofits should take care to review procedures regularly and update them from time to time.

    The Standards for Excellence educational packet on Internal Controls and Finance Policies includes helpful resources on what your Internal Control Policies should address, common misconceptions about why they are in place, and guidelines on what you should do.

    This educational resource packet and the full series of all packets – including sample policies, tools and model procedures to help nonprofits achieve best practices in their governance and management – can be accessed by contacting a licensed Standards for Excellence replication partner,– one of the over 150 Standards for Excellence  Licensed Consultants, or by becoming a member of the Standards for Excellence Institute.

     

    We share our sincere wishes for your continued good health and patience as we all navigate these challenging and uncertain times.

     

     

     

  • Remote Board Meetings in the Midst of COVID-19 and Beyond

    Remote Board Meetings in the Midst of COVID-19 and Beyond

    The Center for Disease Control (CDC) has published interim guidance for businesses and employers to reduce the spread of COVID-19 by managing risks of potential exposure. One measure the CDC is recommending is social distancing (remaining out of congregate settings, avoiding mass gatherings, and maintaining distance from others when possible). However, nonprofit boards must continue to govern, and meetings may be even more critical for direct service providers during these difficult times.  The Standards for Excellence: An Ethics and Accountability Code for the Nonprofits Sector encourages each nonprofit board to meet  “as frequently as needed to fully and adequately conduct the business of the organization. At a minimum, the board should meet four (4) times a year.” For all of these reasons, it is important to ensure that your bylaws provide for remote meetings, and how your state law should guide and inform your bylaws.

    To facilitate remote participation in Board meetings, the Standards for Excellence Institute’s Model Bylaws provide as follows:

    • Telephone and Electronic Participation: Directors may participate in Board meetings and vote on matters discussed therein, by means of a conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear each other at the same time. Participation by such means shall constitute in person presence of the Director at the meeting. 
    • Action without Meeting:  Any action which may be properly taken by the Board assembled in a meeting may also be taken without a meeting, if unanimous consent in writing setting forth the action taken is signed by all of the Directors entitled to vote with respect to the action.  Such consent shall have the same force and effect as a vote of the Directors assembled and shall be filed with the minutes.

    You will want to consult your state’s corporate or nonprofit law to ensure that you are acting in a manner that is consistent with the state’s regulations. 

    State law may describe that meetings can take place via remote communication and may provide additional definitions about what constitutes a meeting.  In Maryland, the home of the Standards for Excellence Institute, telephone meetings are permitted as follows: “(1) Unless restricted by the charter or bylaws of the corporation, members of the board of directors or a committee of the board may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. (2) Participation in a meeting by these means constitutes presence in person at the meeting.” 

    Essentially, as long as it is in keeping with your state law, your board can meet remotely using telephone conferencing or other technology (Skype, zoom, etc.), as long as everyone can speak and be heard simultaneously (as if meeting in person). Additionally, the board can act without meeting as long as the vote is unanimous and recorded in writing.

    The Standards for Excellence educational resource packet, Board Member Responsibilities, contains a comprehensive set of model bylaws that can be modified and customized to meet the needs of nonprofits around the country. 

    This educational resource packet and the full series of all packets  – including sample policies, tools and model procedures to help nonprofits achieve best practices in their governance and management – can be accessed by contacting a licensed Standards for Excellence replication partner, one of the over 150 Standards for Excellence Licensed Consultants, or by becoming a member of the Standards for Excellence Institute.

  • Navigating Remote Work

    Navigating Remote Work


     

    Like so many of you, I’ve recently made the change from working in my somewhat cluttered but beloved office to working remotely all the time. I have been a regular remote worker for one day a week (or one day every other week) for a number of years. This once-a-week opportunity to slip into my home office so that I could savor the peace and quiet, getting important “thinking and writing projects”  checked off the ever-present “to do” list, feels a lot different from my current full-time work from home arrangement with three kids, a barking dog, and husband all trying to get different tasks accomplished throughout the day. While I join so many others looking for the elusive quiet corner amidst the activity swirling around me, I can’t help but be grateful for my organization’s forethought  regarding remote work policies.

     

    When my organization determined that we would move our staff to full-time remote work last week in the midst of the COVID-19 pandemic, we were fortunate because we have the type of work that can be conducted online, and because we have the policies and the technology in place to accommodate such a shift. Besides double checking the laptop capability of our staff and ensuring that everyone on our team had the ability to log into virtual meetings, the logistics have, so far, been relatively seamless. Of course, having seamless logistics does not minimize the stress and uncertainty of the broader environment in which we’re living, working, and trying to stay safe and healthy.

     

    The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector states: “A nonprofit should have written, board-approved personnel policies and procedures that govern the work, actions, and safety of all employees and volunteers of the organization. The policies should cover the basic elements of the relationship (e.g., working conditions, telecommuting (if applicable), employee benefits, vacation, and sick leave). The policies should address orientation to the organization, employee evaluation, supervision, hiring and firing, grievance procedures, employee growth and development, and confidentiality of employee, client, and organization records and information.”

    We share our sincere wishes for your continued good health and patience as we all navigate these challenging and uncertain times.

     

     

    The Standards for Excellence educational packet on Personnel Policies, Employee Orientation, Compensation, and  Evaluation includes a helpful Nonprofit Guide to Remote Work. The Guide provides a list of benefits, drawbacks, and concerns, roles and responsibilities of the employers and employees, travel reimbursement, a sample remote work policy, a checklist for remote work, and a sample remote work agreement. 

     

     

    The Standards for Excellence Institute has made their Administrative Policies Educational Packet, Guide to Remote Work, and Crisis and Disaster Planning Resources free during this time. This educational resource packet and the full series of all packets  – including sample policies, tools and model procedures to help nonprofits achieve best practices in their governance and management – can be accessed by contacting a licensed Standards for Excellence replication partner, one of the over 150 Standards for Excellence Licensed Consultants, or by becoming a member of the Standards for Excellence Institute.

     

     

  • COVID-19: What Nonprofits Need to Know About Coronavirus

    COVID-19: What Nonprofits Need to Know About Coronavirus


     

    Over the past few weeks, coverage of COVID-19 (coronavirus) has dominated the news cycle. While the world has responded with swift mobilization, it is difficult to plan for the effect an outbreak could have on your community. Thankfully, infectious disease experts in Maryland and around the globe have developed advice on how to prepare for an outbreak, both personally and in the workplace.

    Some of the advice provided by the Health Department for healthcare professionals is also relevant to all of us:

    • Encourage basic infection control practices such as hand hygiene, environmental cleaning, respiratory hygiene, and cough etiquette
    • Ensure non-punitive sick leave policies
    • Strong internal and external communication

    Up to date as of March 13, 2020

  • The All-Important Budgeting Process

    The All-Important Budgeting Process


    This is part of a special series, brought to you by the Standards for Excellence Institute, to provide nonprofit leaders with a brief nonprofit governance and management tip weekly over the course of 2020. We hope these short tips will be helpful to you and the nonprofits you serve. If you have suggestions for future topics, please forward these to acmadsen@standardsforexcellence.org.

    At the end of last year, due to term limits, I ended my service as the chair of the finance committee of a nonprofit that is near and dear to my heart. It was a position that involved a lot of work and many challenges, but I am grateful for the chance to have served. The opportunity to work with the nonprofit’s experienced and dedicated finance staff made my work so much easier, and in fact, a pleasure in many cases. 

    As I look back on the term, I can’t help but recall the budget setting process with its many steps and iterations. Seeking input from the different program areas, getting buy-in from committee members – and ultimately, our governing board—were all important parts of the budgeting journey. Our budget had a variety of different program areas and line items for the expense categories. Of course, we also spent time considering and developing the income categories and determining the best ways to pay for all of the important program initiatives.  Each year, we looked closely at the budget categories and proposed amounts in each of the categories—these included pledged gifts, special giving campaigns, events income, and a variety of different types of earned revenue, just to name a few.  Unfortunately, in some organizations, the revenue side of the budget is not as well planned (and executed) as the expense side of the budget.

    The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector states “Nonprofits should have sound financial and operational systems in place and should ensure that accurate records are kept. The organization’s financial and non-financial resources must be used in furtherance of tax-exempt purposes. Organizations should conduct periodic reviews to address accuracy and transparency of financial and operational reporting, and safeguards to protect the integrity of the reporting systems” and that “the board should annually approve the organization’s budget and the organization should be operated in accordance with this budget.”

    One of the most comprehensive Standards for Excellence educational resource packets, Financial Budgeting Reporting and Monitoring, was just updated and re-released in the last few months. In the packet, you will find a sample budget (with annotations) as well as a discussion of the budgeting process and the various roles different board and staff leaders play in the process.  The packet also features resources on financial statements, audits, direct and indirect costs and much more.

    This educational resource packet and the full series of all packets  – including sample policies, tools and model procedures to help nonprofits achieve best practices in their governance and management – can be accessed by contacting a licensed Standards for Excellence replication partner, one of the over 150 Standards for Excellence Licensed Consultants, or by becoming a member of the Standards for Excellence Institute.

  • Crisis and Disaster Planning

    Crisis and Disaster Planning

    This is part of a special series, brought to you by the Standards for Excellence Institute, to provide nonprofit leaders with a brief nonprofit governance and management tip weekly over the course of 2020. We hope these short tips will be helpful to you and the nonprofits you serve. If you have suggestions for future topics, please forward these to acmadsen@standardsforexcellence.org.

    Not a week goes by when we don’t hear about some nonprofit that is tackling the impact of some type of disaster.  Whether it’s a fire, a health emergency like an epidemic or pandemic, a natural disaster, or a violent act, nonprofits big and small are tackling disasters on an on-going basis.  International disaster and relief organizations, hospitals, health and human services, food and housing organizations, and animal rescues are often a part of the first responder teams in many emergencies – and many of these organizations continue to provide support long after the immediate event.

    At my organization, I am sincerely grateful for my colleagues who head up our efforts for disaster preparedness.  The time and effort that is invested in ensuring that our emergency plans are up to date, that emergency supplies and water are replenished, that drills are carried out, that our team is trained, and that emergency communications strategies are available and ready to be employed is essential for ensuring not just the continuity of our services, but protecting the safety of our team. 

     

    The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector encourages all nonprofits to have written board-approved administrative policies addressing crisis and disaster planning that are periodically reviewed by the board.

     

    Nonprofit services are vital to many communities. So maintaining capacity to serve others is crucial. Having a crisis and disaster plan can help ensure that nonprofits:

    • Prepare for emergencies, to the extent possible
    • Respond quickly and clearly to all constituents
    • Continue to offer its essential programs
    • Resume full operations as soon as possible
    • Safeguard and protect vital organizational resources

    The Standards for Excellence educational packet on Administrative Policies includes helpful resources and samples of a crisis and disaster plan; roles and responsibilities of the nonprofits’ disaster/crisis response team; a nonprofit risk assessment worksheet; a business continuity plan worksheet; and a sample emergency crisis communication plan. 

    This educational resource packet and the full series of all packets  – including sample policies, tools and model procedures to help nonprofits achieve best practices in their governance and management – can be accessed by contacting a licensed Standards for Excellence replication partner, one of the over 150 Standards for Excellence Licensed Consultants, or by becoming a member of the Standards for Excellence Institute.

  • If Ruminating on Risk Inspires Worry, You’re Doing it Wrong

    This blog was originally posted by the Nonprofit Risk Management Center

    During a recent risk workshop, one of our participants commented, “Thinking about all of the potential risks facing my organization makes me really worried!” Her remark reminded me of the distinction between what many leaders believe is the narrow purpose of risk management and its true aim. The narrow view of risk management’s purpose is that worrying about risk inspires doing something about risk. The true aim of risk management is eloquently expressed by my long-time risk management coach and mentor Felix Kloman, who writes: “The proper goal of risk management is to build and maintain the confidence of stakeholders. That combined confidence and trust is often translated into much-needed support, financial and otherwise, when surprise inevitably hits. It is the essence of resilience.”

    Pondering risk should inspire confidence and excitement about the possibilities, not excessive handwringing. Here are some practical ways to turn your risk worries into confidence-building conversations.

    Turn the Risk Beat Around

    • Identify the positives. During risk assessment conversations and workshops, take time to identify the potential positive outcomes or consequences of downside events. When our team teaches the Risk Bow Tie technique for risk assessment, we encourage participants to divide their “Consequences” field into two sections: upsides and downsides. Remember, every risk event has potential silver linings for a nonprofit organization. Listing the potential upsides of downside events is a potent reminder to look deeper and less tentatively at risk.
    • Rethink how you’re using the term risk. Risk can be a trigger word. Instead of inspiring bold thinking about chances worth taking, many of us think about risk in the worst way. At NRMC we encourage our clients and Affiliate Members to think about risk differently: taking risk is what propels your mission forward. Acting on potential risks (as opportunities) should free up resources and lend confidence to taking on more risk.
    • Don’t bury risk. A common misconception about the path to inspiring confidence by stakeholders is that offering assurance is the best approach. We’ve seen this time and time again in presentations that convey the swept under the rug message that “we’ve got this.” At NRMC we believe that building durable confidence requires brutal honesty about what’s in the works, but not quite there yet. We also put great value on shining a bright light on mistakes and turning our focus to what’s not working. Recently, I had an opportunity to teach a workshop about “failure as an innovation opportunity,” and I’ve written about the topic of reflecting on mistakes in prior issues of the RISK eNews.
    • Take it to the board. Today’s boards want to talk about risk. As a result, most of our risk engagements with complex nonprofits culminate with a presentation of the engagement findings, and recommendations to board committees and boards. I relish these opportunities to present to leadership teams charged with stewarding the mission of an organization and steering its direction. Yet, the most important risk question for the board rarely makes it to the board room. That question is simply this: What big risks should we take in the years ahead to advance our mission?

    Surprise, like its cousin variety, is more than the spice of life, it’s rocket fuel for break-through innovations. At NRMC we believe that the nonprofit sector is uniquely positioned for innovation, and that risk should be nurtured for the life-changing, community-serving benefits it can foster. Innovation happens when bold people at nonprofits embrace curiosity, harness chance, and are brave with risk. We hope your team is making the right moves and embracing the big risks and challenges that are world changing.

    Melanie Lockwood Herman is executive director of the Nonprofit Risk Management Center. She invites your questions about risk-taking and NRMC resources at Melanie@nonprofitrisk.org or 703.777.3504.