Can Your Organization Afford Change?

How do you decide if your organization is ready to expand? Can you afford that new equipment purchase or that additional employee? What about adding a new service or product line?


Answering these questions takes reliable financial information. If the necessary information isn’t there, how good will those answers be? You could gather your team and do some guessing. But should your financial decisions be based on a guess? Probably not, if you want to stay in business or sustain your nonprofit.


Three actions will start you on the path to get reliable financial information when you need it:


  1. Build a Budget – Identify income sources, such as executed contracts and purchase orders. Estimate potential income from prospects and referrals, or based on historical data — if you have it. Determine all fixed expenses, such as rent and payroll. Estimate other expenses, such as supplies and inventory. Include occasional payments, like insurance.


  1. Track Cash Flow – Your budget reflects what you expect to happen. Tracking actual income and expenses in a cash flow format provides an instant view of your organization’s financial position. A clear and immediate financial view allows for informed financial decision making.


  1. Automate Where Possible – Automation increases accuracy and reduces the time needed to get financial information. It doesn’t have to be expensive or complex. Making it work depends on keeping the information up-to-date. Set-up at the beginning takes time, but it’s a worthwhile investment.


Stop guessing! Investing time and effort to budget, track and automate your financial information really pays off in the long run. Having reliable financial information at your fingertips goes a long way toward making the necessary financial decisions to sustain and grow your organization.


Dangerous W-2 Phishing Scam

Phone and e-mail scams are a hot topic these days. Many of us have received one of those threatening calls. Some scammers even pose as IRS agents. Recently, the IRS and state tax agencies alerted employers to an insidious scam to “phish” for W-2 payroll information and steal employees’ identities.


This W-2 email phishing scam has evolved beyond the corporate world and is spreading to other sectors, including schools and nonprofits. The W-2 scam is a “twist” on the old scheme where scammers phish for wire transfer instructions by sending an e-mail to accounting staff. Some organizations have been caught in both scams and lost twice.


The IRS Commissioner, John Koskinen, stated: “This is one of the most dangerous email phishing scams we’ve seen in a long time. It can result in the large-scale theft of sensitive data that criminals can use to commit various crimes, including filing fraudulent tax returns.’’


Here’s how the scam works:  Cybercriminals disguise an email to make it appear to be from an organization executive. The email is sent to an employee in the payroll or human resources department, requesting a list of employees and their Forms W-2. This scam first appeared last year and is circulating again this tax season. Businesses that were hit last year are reportedly being phished again this year.


What to do if your organization gets phished? The IRS wants employers to report W-2 thefts immediately at so they can take steps to help protect employees from tax-related identity theft. Report all unsolicited email claiming to be from the IRS or an IRS-related function to [email protected].


Bottom line? Don’t get phished! Verify the e-mail sender before clicking on a link or providing any information.




Financial Duties of Non-Profit Boards

Last week’s blog post described some professions to keep in mind when recruiting finance-savvy Board members. This week, we talk about the financial duties of nonprofit Boards to fulfill the stewardship and oversight role known as “Fiduciary Responsibility.” Fiduciary responsibilities are legally defined. Failure to act as a responsible fiduciary has serious consequences.


At minimum, nonprofit Boards should focus on these four fiduciary duties to oversee the organization’s finances, and to avoid complications down the road.


  1. Establish Financial Policies

Documented policies are essential for establishing a common understanding and framework for overseeing the organization’s financial resources. Board-level financial policies define approval authority levels, investment objectives, risk tolerances, and risk mitigation activities to protect and preserve assets.


  1. Monitor Financial Performance

Board members must receive periodic, complete financial statements to oversee financial performance in relation to the budget, financial ratios, and other objectives. Financial oversight responsibilities can be performed by a Finance Committee but results must be reported to the full Board.


  1. Ensure Audit or Independent Review is Conducted

The Board must be familiar with financial statement audit and IRS information reporting requirements. If applicable, based on income and asset levels, the Board is responsible for hiring the auditor and receiving the audit results. Nonprofits with income and assets below the audit thresholds should consider an independent financial review.


  1. Take Corrective Action on Audit/Review Results

The results of any audit or independent financial review should be received by the Board or Finance Committee. Reported issues or risks should be acted upon. The action plan and progress on taking corrective action should be documented and reported on to the full Board.


Nonprofit Boards that address these four fiduciary duties are more likely to make appropriate financial decisions. Fulfilling these duties meets donor expectations to protect and preserve the organization’s assets and to ensure that regulatory and legal requirements are addressed.

Financial Skills for Non-Profit Boards

Nonprofit Boards are responsible for a broad range of governance activities to support the mission and sustain the organization. Responsibilities for financial stewardship and oversight, also called “Fiduciary Responsibility”, require that the Board includes members with the background and experience to make appropriate financial decisions about donated funds.


What professions give nonprofit Board members the appropriate financial background and experience? As usual, there isn’t just one “right” answer.


Consider these four professional backgrounds when looking for finance-savvy Board members:


  1. Accountant

Accounting professionals have technical training and experience that help nonprofits get accurate financial reports and understand them. Board members who work in public accounting or in a corporate setting know how to use budgets and financial statements as planning and management tools.


  1. Banker

Lenders and other banking professionals help a range of businesses and nonprofits to meet their financial needs. That experience gives bankers knowledge about financially sustaining and managing an organization. They also know about the actions necessary to achieve financial goals and assess risk.


  1. Project Manager

Project management boils down to planning, tracking and controlling the budget, schedule, and resources to achieve a goal. Project managers have organizational and analytical skills to help nonprofits plan and assess financial decisions, monitor results, and track achievements.


  1. Administrative/Chief Operating Officer

Prospective Board members with experience running a business, agency, or department provide an opportunity to increase your Board’s financial IQ. Administrators and COOs are familiar with the inputs and considerations needed to make informed and appropriate financial decisions.


Nonprofits rely on Board member knowledge and experience to make informed and appropriate financial decisions. Getting the right mix of Board members with a financial background to make appropriate financial decisions is crucial for nonprofits to fulfill their Fiduciary Respo