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

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 . . .

Outsource Your Bookkeeping!

The most strategic decision you make regarding how to staff your accounting department may be to not staff it at all. Well, at least not with employees of your organization. Outsourced accounting -- having the accounting done by an outside person or firm -- isn't new, but it is getting a second look as nonprofits search for ways to cut office costs.

We've written here before about using accurate and timely financial information to manage your organization well. But the question for many executive directors is: how do I get that financial information? While a good in-house bookkeeper is probably better than an outsourced bookkeeper, an outsourced bookkeeper is much better than a bad in-house bookkeeper.

"For a long time I had various people in the office do it," one executive director said. "But they didn't have the skills and as we grew we needed real skills. Then I hired an MBA and only much later did I find out that MBAs don't know how to do accounting or bookkeeping. Then I hired an accountant but he didn't know anything about nonprofit accounting and got our grant reports all screwed up. Then I hired a controller who could talk a good game but could never seem to get anything accomplished and in fact ended up suing us for wrongful termination. Finally I hired an outside bookkeeper who is doing a great job."

Many executive directors find it difficult to find someone with the right skills to prepare invoices (for government or clients), produce financial statements, and analyze financial data to answer management questions. And finding such a person at an affordable rate is even more challenging.

What does outsourced bookkeeping look like?

The term outsourcing may sound . . .

Board Insurance: Do You Really Need It?

We wanted an expert's view on what nonprofits need to know about Directors & Officers (board) liability insurance, so we asked Susan Bradshaw, VP at the Nonprofits Insurance Alliance Group. (And don't miss the link to a free booklet on D&O at the end of the article):

In today's tight economic environment, nonprofits are facing tough budget decisions, and one expense that often comes up is D&O insurance (Directors & Officers liability insurance). How should a board of directors think about this insurance?

Some statistics from our 10,000 insured nonprofits that will get your attention:

  • About 1 in 100 nonprofits each year will file a claim under D&O insurance
  • Average cost of a settlement in a D&O claim: . . .

Benchmarking and Analyzing Salaries: A Fast How-To

Everyone's heard of benchmarking and salary analysis, but what are some easy tools to use? This article is adapted from a chapter in The Nonprofit's Guide to Human Resources by Jan Masaoka, to be published by Nolo Press in the fall of 2011.

To illustrate ways to analyze salaries, let's look at a simplified example of an environmental research organization. First we'll chart salary ranges, then add benchmark salaries, and then look at two ways to look at analyzing individual salaries.

The five salary categories in this fictitious organization:

  • Senior Executive: members of the management team and department heads. Salary range . . .

Alternatives to Strategic Planning

In Part 1 of this two-article series, we discussed some of the ways in which strategic planning processes have served nonprofits poorly. One key reason is that strategic planning is the primary organizational change process that nonprofits know about, that boards are comfortable with, and that funders will fund. In this article we give some alternatives, in part because it's helpful just to have choices when facing organizational decisions.

Strategic planning -- when done appropriately for your organization -- can be exactly the right tool for the job. But too often strategic planning is undertaken for reasons that would be better served by other methods: "engaging" the board, "getting everyone on the same page," getting buy-in from stakeholders, and so forth. And sometimes when boards are unhappy with their executive director, the one thing they and their executive can agree to is to undertake strategic planning.

Different processes are better for different types of decisions and challenges. Here are some tips to strengthen any process well as some specific alternative planning processes.

Focus on the questions that need answers

Begin a planning process by asking this: What are the four or five questions to which we must have unambiguous answers by . . .

Stick With Old Media: Not Cool But It Works

In the age of social electronic media, media expert Holly Minch dares to defy the Twitter evangelists and makes the case for the power of traditional print and radio:

There's tremendous strategic value in traditional media . . . yes, still! Three reasons why writing press releases and pitching reporters are still worth it:

1. Third-party validation. As pithy as your latest tweet is, as fun-filled as your latest Facebook update is, there's one thing that social media simply can't give you: third-party validation. Don't forget that more than 58 percent of people get their news from television and 34 percent read the newspaper. Face it: an article about you in the Chicago Times will impress your funders and donors; a post on your Facebook page won't.

2. A reach . . .

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