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Archive for the ‘For the Board’ Category

Reviewing Financial Reports

s_falkow

Recently, I was asked, “What are some basic steps we can do to improve our financial management?”

I was visiting a local congregation and the leaders were in the process of reviewing their financial history, operations, and current accounting controls. In the meeting I listed off about five items, but in reflection, I thought I would create an official list of financial basics for nonprofit management.

Financial Basics for Nonprofit Management:

  • Tracking of Data- by tracking data, you can determine benchmarks for growth or decline. Be sure to track participation, income, expenses, donations (and levels of giving), and long term goals (and to communicate these to leaders, donors, and members).
  • Accounting Controls-many small nonprofits rely upon 1 or 2 people to handle all of their bookkeeping. This leaves them vulnerable to fraud and usually limits financial communications. Be sure to have monthly review of finances, independent reviews of bookkeeping, limits on spending, and requirements for approval of spending.
  • 6 Months of Emergency Savings- every organization should have 6 months of cash savings available to cover expenses in an emergency.
  • Line of Credit- as organizations grow, they can improve their cash flow by taking out a line of credit or operating loan. LOC should be capped at around 3 months of expenses, and often operate similar to a credit card for an organization.
  • Multiple Income Streams-no organization should only have one line of income. By creating multiple revenue streams, nonprofits increase their stability.
  • Endowment & Net Assets– Gone are the days when a nonprofit organization should operate at a net zero. By creating endowments and net assets, nonprofits can cover the cost of their operations, allowing more of their donations to immediately  go into outreach.
  • Facility Management– Buildings cost a lot to maintain and operate. If you own a facility, be sure keep up with facility maintenance, use it as resource, and improve it as building code and mission needs change- otherwise it can become black-hole that sucks money away from your mission focus.
  • Board Development- Board members are ultimately responsible for organizations- be sure board members understand their roles and that they are giving proper oversight of staff and operations.
  • Insurance- Be sure that your organization has enough insurance to cover its liabilities for its staff, operations, facilities, and to protect the organization from lawsuits and emergencies.
  • Management & Gift Policies-smaller nonprofits often lack staff, organizational management (by laws), and gift policies which help organize and outline how nonprofit organizations operate and how donations should be accepted and used.
  • Financial Relationships– this may seem like an odd item for this list, but knowing your bank manager, accountant, insurance broker, and financial advisers personally can be critical in emergencies and/or when you need additional help.

There are many other items that could be added to this list (brand management, communications, mission focus, etc), but these are some highlights to help you review how your church or nonprofit organization manages its financial operations.

 

 

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Earlier this week Guidestar posted the results of a survey that asked nonprofits about their fundraising and operations for 2011.  Here are some of the highlights:

  • 41% of Charities saw an Increase in Giving for the first 9 months of 2011 over 2010 (28% had less income & 31% no change)
  • 65% of nonprofits saw an increased need for their services– over the past 9 months compared to 2010
  • Approximately 50% of charities have some financial stress – income, cash flow, # of donors, non-donor income

For more information, visit Guidestar’s website

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group of people

laubarnes

If you follow trends in fundraising (most people don’t), then you may remember that America saw a shift in how organizations approach small donors during the 2008 election campaign.

Prior to 2008, most organizations had mainly focused on reaching major donors- and many still do. However, in 2008, there was a major shift in how organizations began to reach out to donors who made many small and medium sized gifts.  The two reasons being:

  1. Most potential major donors have already been targeted
  2. Technology has allowed better access and communication via email, internet, and mobile communciation

Together these two shifts have allowed more and more organizations to expand their base, and thus, improve the stability and size of their fundraising work. But when we look at this trend, however, we see that it has largely been adopted by larger nonprofit organizations, and not small nonprofits or churches.

So beyond the shift, what is the big deal as it relates to fundraising for churches?

Well the main reason is that churches have often been the envy of other nonprofit organizations, for the following reasons:

  • Churches usually have a loyal base that donates weekly, monthly, etc
  • Churches make a regular ask each week, most nonprofits only get 3-5 a year
  • Religious people tend donate 3 times more than non-religious people
  • Religion accounts for the largest segment of fundraising each year
  • People who attend church are usually versed in donating habits and believe in serving other

So with the shift of other nonprofits into expanding their base of small and middle donors… churches, and other small nonprofits, will now be competing more and more for the same donors and money. This competition will not really matter for donors who are over the age of 60 and who physically give in the offering plate each week. But it will matter for donors under the age of 60, who now want more and more access to online giving and better transparency of how their gifts are used.

Thus, if you are a church leader, I would strongly encourage you to work with your financial leadership team to start reviewing how members and participates are currently donating to your church, and how you can make donating more accessible via electronic transfers and online giving. By being aware of people’s financial habits, churches can better offer ways for members to support the mission, ministry, and operations of the church.

For more information about this trend, check out a recent article in the WSJ entitled, “Strength in Numbers

 

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White Chapel

photo: edgeplot

Unlike most commercial businesses, which have a common standard by which to rate their financial operations and health, churches struggle to identify healthy financial norms.

Part of the reason for this struggle has to do with the following reasons:

  • Churches are faith based organizations
  • Church are contextual
  • Churches are organized by mixed polity (denomination or independent)
  • Churches are exempt from many IRS and government reporting requirements
  • Churches vary in size, financial support, and ministry
  • Churches don’t usually follow GAAP (General Accepted Accounting Principles)
  • Churches are run by volunteers

However, while all of these factors cause incongruity, there are a number of common ratios and principles that many churches share related to income, expense, debt, membership and worship attendance. I have highlighted a few of these in some of my earlier posts (please see: Financial Rules: Ministry Distribution), but another resource is a new financial database that was created by Capin and Crouse, CPA. (more…)

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On Monday I was interviewed by Alex Johnson, a reporter for MSNBC.com about how churches are using social media.

In the interview I really tried to stress that churches really have a great opportunity to connect with their local communities (via social media), and that the conversation was taking place, with or without their official presence.  Here is the link to the full article: “For Some Churches, The Internet Clicks; for Others It Doesn’t”

social media

some_communication

Much of article focuses on how different denominations and local churches have adapted to using social media.  But, the article also helps to spell out that congregations need to think through how they plan to use it.  It is not enough just to create a facebook page or to have a static website.  Instead, churches really need to think about their ‘brand’ and what messages they hope to convey to their potential audience.

As you read the article, here are some helpful questions to ask about your church’s use of Social Media:

  1. Who are we trying to target?
  2. What is our overall goal for using Social Media
  3. What messages should we try to communicate?
  4. How can we participate in the conversation, rather than just push out information? (more…)

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People meeting together

nateOne

The top ten list below came from the Boardsource’s website, which is a great resource for any and all nonprofit organizations.

Ten Basic Responsibilities of Nonprofit Boards

  1. Determine mission and purpose. It is the board’s responsibility to create and review a statement of mission and purpose that articulates the organization’s goals, means, and primary constituents served.
  2. Select the chief executive. Boards must reach consensus on the chief executive’s responsibilities and undertake a careful search to find the most qualified individual for the position.
  3. Support and evaluate the chief executive. The board should ensure that the chief executive has the moral and professional support he or she needs to further the goals of the organization.
  4. Ensure effective planning. Boards must actively participate in an overall planning process and assist in implementing and monitoring the plan’s goals. (more…)

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Social Media Magazine

some_communication

With so many people interacting online through social media (Facebook, Twitter, Linkedin, etc) more and more companies and nonprofits have begun to develop their own social media presence and brand.

Usually the entrance into social media happens through the interaction of members of the organization, and then maybe someone creates an ‘official fan page.’  But quickly (and informally), many churches and nonprofits have found themselves expanding and creating online content, without creating a full vision of how they wish to use and maintain their social media presence.

This topic has been on my mind this week after I was asked by a pastor, “Do you have or know of a good social media policy for churches?”

I had to respond by saying, “No, but if you give me a day or so, I can pull some notes from the social media policy at our office, and share them.”  So here goes… I have cut an paste a few suggestions that are good rules of thumbs if your congregation wishes to have a social media policy for its staff, operations, board, and members.

Social Media Policy

Intro:

XXX (insert your church or nonprofit’s name here) encourages employees, directors and other partners to adopt social media as a means to engage others in our ministry in missional ways. Whether you’re on Facebook, Twitter, writing a blog, uploading (more…)

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