Finance & Strategy

Real world nonprofit finance matters, and real world thinking about strategies for financial, programmatic, and leadership sustainability. This column is written by Steve Zimmerman, principal of Spectrum Nonprofit Services.

photo of Steve Zimmerman

Survey on Nonprofit Banking Needs -- please help!

THIS SURVEY IS NOW CLOSED Thank you!

As a banking customer, you probably have two hats: one related to the nonprofit where you work or volunteer, and one as yourself. As you know, American Nonprofits is creating a credit union (a co-op banking institution) for nonprofit organizations, staff, volunteers and stakeholders can use their deposits for the betterment of the nonprofit sector, rather than for the betterment of Wall Street.

Stance: The ED's Role and Attitude in Strategic Planning

Jeanne Bell photoAn overlooked -- but crucial -- element in strategic planning is the attitude or stance that the executive director takes to the process. Jeanne Bell of CompassPoint suggests a variety of roles and stances that will be appropriate:

As we experiment with new ways of setting strategy, it is easy to lose track of the fact that irrespective of chosen methodology, the executive’s stance in strategy formation is the single most important factor in how bold, how transformative, and how enduring the decisions made during the process will be.

We nonprofit executives are often ambivalent about how best to show up to strategic planning processes:


  • Is it our job to make sure that board members feel they are establishing strategy for the staff to implement?

  • To ensure that all staff voices are heard, and that staff feels fully heard?

  • To step back and let the consultant create a series of activities to unearth the best strategic direction?

  • To listen and then promote our own ideas about strategy?

  • To use the process to get everyone aligned with the directions emerging from the management team?

Take A Fresh Look at Scrip Fundraising

Wait! Scrip is not just for churches and schools anymore. Increasingly, nonprofit cultural centers, health clinics, civil rights organizations and environmental coalitions are finding scrip to be a comparatively easy way to raise funds:

How does scrip work, anyway?

With regular scrip (which is issued as a gift card) a group -- let's say a disabilities center -- buys 50 gift cards from a grocery chain (or gas station, etc.). Each card has a face value of $100, so the total has a face value of $5,000. But the nonprofit pays only $95 per card for a total of $4,750.

The nonprofit sells the gift cards at the face value to clients, staff, volunteers, and others. In other words, a family might buy 2 gift cards worth $200 total and pay $200 for them. The family uses the cards at one of the designated businesses. If the family shops there anyway, they don't experience any difference in the expense, and the disability center nets $250 from its $4,750 investment (the typical commission for a nonprofit is 5% of the face value).

But 5% doesn't sound like much to raise!

True. But suppose you have just 15 board members or staff or volunteers . . .

Organizing the Board to Support the Revenue Strategy

Instead of focusing only on how board members can raise individual donations (or not!), think more broadly (and effectively) about how board members can support the key aspects of your organization's business/revenue strategy:

In the quest for funds, there is no shortage of advice given to nonprofits. Start a social enterprise! Get corporate donations! Raffle a house! Perhaps the most frequent and consistent advice: focus the board on getting major gifts; in fact, recruit a strong fundraising board that can get major gifts.

But pursuing a new funding stream for which you may not have the right people and competencies already is often not the best place to start. Instead, we recommend that you see how you can boost and leverage the funding streams and people you already have in place.

Let's imagine a community center with five areas of . . .

I Survived an IRS Audit

Uh oh. We are all afraid of getting audited by the IRS, but we don't really know what would happen in one. Here is the True Life story of an environmental organization's audit, how they survived, and their tips for the rest of us.

It's the phone call everyone dreads: "Hello, your organization has been selected for an IRS audit." The call came to Karl Dickson (pictured left), board treasurer of an environmental nonprofit in Milwaukee, and his caller ID showed that the call came from an unidentified cell phone. Karl's instincts were to suspect a scam.

Karl questioned the caller who told him (not very believably) that "most IRS agents don't have an office" and therefore use cell phones. She also told him they had been selected . . .

Accounting Procedures Manual Template

Has "Create an Accounting Procedures Manual" been on your To Do list for several months now? For several years? You aren't alone. We often stumble on this task for two, curiously contradictory reasons:

  • Creating an Accounting Procedures Manual seems like too huge a task to get started on.
  • An Accounting Procedures Manual is one of those things that takes a year and an hour to do.

So here's a template. Download the Word document, and everything you need to fill is in in red. So you can probably do a draft of the whole thing in 30 minutes.

Our thanks to Deborah Connors of the California Association of Nonprofits, along with Meredeth Clark (also from CalNonprofits) and Steve Zimmerman, C.P.A., for this template.

Click here to download the Accounting Procedures Manual Template in Word.

Deborah Connors is the Chief Financial Officer of the California Association of Nonprofits and its for-profit subsidiary, CalNonprofits Insurance Services, and has worked in the nonprofit sector for the past 26 years. Her personal dream on the topic of accounting manuals is to create a "manual to account for" her teenage nephews' thought processes.

See also in Blue Avocado:

Contract Wizardry: Conjuring Impact from Government Contracts

Have you ever tried to piece together eleven government contracts for overlapping programs, trying to make them fit together to fund all the costs? Or have you had six foundation grants, all for the same program area, but each requiring different line items and paying for separate, narrowly defined expenses? If so, you are either a Contract Wizard or you need to know one:

The term "contract wizardry" caught our eye in a recent article from the Bridgespan Group: "Clients at the Center: Realizing the Potential of Multi-Service Organizations," by Bob Searle, Alex Neuhoff, and Andrew Belton. To learn more, we spoke with Bob and interviewed two real-life contract wizards -- one at a $700,000 nonprofit and one at a $65 million nonprofit.

Most funders -- whether government or foundations -- fund specific programs rather than provide core support to nonprofits. For example, a government contract with the local health department may fund case worker services to people with alcohol and drug abuse problems. Another government contract -- this time with the state and on a different fiscal calendar -- may fund services to people with disabilities, including alcoholism. And a foundation grant -- again on a different timeline -- may fund a research project that includes some family-based services for people in a specific neighborhood.

The challenge for nonprofit finance managers is not any simpler than turning a human into a hedgehog, and requires . . .

Get the Most Value from Your Audit

Audits are expensive in terms of money, staff time, and board attention. CPA Dennis Walsh tells us how to wring the most value from them:

An IRS tax audit has been described as an autopsy without the benefit of death. The financial statement audit -- done by an independent CPA, not the IRS -- can be seen by nonprofits as only slightly more appealing.

Many nonprofits have annual CPA audits, but the executive director and/or the board's finance or audit committee may be unsure whether they are getting the most out of the audit. A worthwhile question for the board to ask might be: "Are we getting the most out of this significant investment of money and time?"

We have developed two questionnaires to help you answer this question. The first looks at whether your auditor is doing a good job for you. The second questionnaire looks at whether your nonprofit is doing its part in utilizing the audit. (The questionnaires can also be downloaded as a Word document; see link at end of article.)

But first, . . .

Foundation-Nonprofit "Partnerships" -- Fact or Fiction?

We are pleased to publish this article simultaneously with the National Committee for Responsive Philanthropy:

The question posed to me by NCRP for this article: "Is it possible for a foundation and a grantee to have an honest, real partnership?"

My answer: It's the wrong question. The key words in the question - honest, real, and partnership - contain so much coded meaning that the only reasonable response by a grantee is a slow blink. By using these words, we trap ourselves in a framework that ignores the material, business basis for the funder-grantee relationship. This language diverts us from understanding the key dynamic.

And unless we take a clear-eyed look at that dynamic, we won't be able to see a path towards productive, effective, and perhaps even enjoyable grantmaker-grantee relationships.

Institutional or personal relationships?

Essentially, the relationship between a funder and a grantee is one between institutions, driven by institutional interests, and fundamentally about money.

"Shared values," warm personal interactions, and nonfinancial support to grantees all are fine. But without money changing hands . . .

Comparing Cheap and Free "Donate Now" Button Services

Thinking about changing your Donate Button, or maybe getting one for the first time? Jenny Henry of Sumac Software has compiled this guide to online donation services that are cheap or free.

But first, we hear from Brady Josephson of Opportunity International Canada and his (probably typical) experiences with Donate Now services:

I was working for a start-up nonprofit -- Smart Ventures. We were looking to use the fastest-to-get-going, cheap, free, easy-to-use solution to offer a way to purchase items or to give online. We started with Google Checkout. Our thinking was that we were already using Google Analytics and other Google services, so it would be good to be able to go to one place and get everything.

What we found was their checkout purchasing was okay, but donation options were very, very limited. For example, we had a gift catalog where people could make donations that would buy bags of seeds for people in developing countries, or a chicken . . .

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