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Nonprofit

Mar 06
0

Beyond the Hype: Making Sense of AI’s Role in Nonprofit Organizations

By | Nonprofit, Technology | No Comments
person using laptop computer with AI on screen

Since ChatGPT made such a splash in the fall of 2022, companies worldwide have kept a close eye on the development of AI-powered tools. Now, you can’t turn on the news or open a social media app without seeing ads for AI-this or that or promises of AI completely changing the workforce.

Where does AI fit into the nonprofit world? How can organizations reassure their staff that AI isn’t there to replace them but can help make their jobs better?

Reassure Staff That AI Isn’t New to the Workplace

Even though ChatGPT made a big splash in the fall of 2022, AI isn’t new. In fact, you can reassure your team that they have already been using it in some capacity all along! For example, if you use PowerPoint, the popular presentation software, you may have noticed a feature called “Design Ideas.” Click the button, and the program will provide suggested designs to improve the layout and appearance of the slide. This is an example of AI already inside a program you’re already using. Another example is even more common: your cellphone. If you have a feature that fills in frequently used words when you text someone, that’s also AI in action.

So, AI isn’t some new robot that’s replacing human workers. It’s been there all along, and we’ve (mostly) welcomed it within the context of our jobs. When it’s done right, AI simply makes things more efficient. And who doesn’t want to be more efficient at their job?

Provide Staff with Usage Guidelines

Are you currently using ChatGPT and other AI tools? Chances are good that someone on your team is already using them. In that case, it is better to get ahead of the curve and provide helpful usage guidelines than to avoid the topic altogether.

  • Allow staff to use AI to generate outlines and brainstorm topic ideas: AI is great for overcoming writer’s block. Instead of facing a blank page without a place to start, use tools like ChatGPT to develop an idea or brainstorm a list, giving people a good starting point.
  • Never use AI-generated text without clearly stating it is AI-based or without reading through it to ensure it is accurate. Remember that tools like the free version of ChatGPT rely upon millions of documents but do not have up-to-date information. The system can make mistakes, incorrectly cite things as correct, and provide older information. It can also be plagiarized.
  • Include guidelines for what can be fed into AI as source material. Anything ingested into AI becomes part of its database forever—and can be used by anyone else. Any proprietary or confidential information must be kept from the tool, so it does not become part of the repository of information used worldwide.
  • Learn and experiment with prompts and keep a log of useful prompts. There’s a knack for asking GenAI the right question in the right way to obtain useful information. Once you’ve discovered it, keep a record of it. Ask your team to share best practices from their experimentations, too.

Improving Jobs—Not Replacing Them

One hundred years ago, many people worked as telephone switchboard operators. A switchboard operator manually connected cables at the phone company switchboard to make sure that calls went through correctly. Now, such things appear only in museums, replaced by an automatic switch and sophisticated call routing software. We don’t even think about connecting a call anymore—it happens in the blink of an eye, and many people take it for granted that this was always the case.

A few years from now, AI will be the norm rather than the exception. Nonprofits will look at it as just another tool, like their word processing or accounting software. It will be a way to do tasks more efficiently, but it cannot replace skilled workers. Emphasize to your team that skills are always valued and that no artificial intelligence, no matter how smart, will ever replace the creativity, ingenuity, and talent of a human being.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.

Feb 23
0

Can Artificial Intelligence Become an Accounting Expert?

By | Accounting, Nonprofit | No Comments
person using laptop computer with right hand and holding mobile phone in left hand with Artificial Intelligence screen overlay

An interesting debate has arisen among accounting professionals: Can AI become an accounting expert?

AI has been around for several years but exploded into the national consciousness in November of 2023 when Microsoft unveiled ChatGPT. This generative AI platform uses large language models and machine learning to produce natural-sounding text quickly and efficiently.

While many hailed its advent as an exciting time in computer history, others were quick to curb their enthusiasm for GenAI. There are many good uses for it, for example, to summarize transcripts of calls or to create eye-catching headlines. However, AI makes mistakes—plenty of them. We do not believe that it is ready to take the place of an accountant. Here’s why AI makes a terrible accountant.

AI Makes (Sometimes Big) Mistakes

One of the most blatant errors made by ChatGPT was its insistence to a questioner that “no country in Africa begins with the letter K.” When the questioner pointed out that Kenya begins with a K, the response from ChatGPT was a veritable word salad of gibberish. It lacked logic. It lacked discrimination. Worse, the answer was wrong.

Accountants found out the same thing, as have many other professionals. AI’s answers can be wrong. It can draw erroneous conclusions or even “hallucinate.”

AI models return answers that are heavily dependent on how the input question is worded. Questions that are too complex can return poor answers. Ambiguity can also confuse the models and return incorrect responses.

AI also lacks the ability to distinguish source materials as good or bad. Instead, it may view all documents as equal—documents published by the Journal of Accountancy could be viewed with the same gravitas as documents published by Joe Blogger (no offense if that’s your name), who doesn’t have a CPA. The response might be fine, or it might be trained by Joe Blogger’s lack of in-depth knowledge of corporate finance.

Lastly, the models can hallucinate or return gibberish. No one knows why this occurs or even how often it does, but sometimes, question-and-answer sessions with an AI model devolve into peculiarly odd conversations.

AI Lacks Firsthand Experience

Consider how much knowledge and firsthand experience the average accountant possesses. Each human being is unique, and their background and special area of expertise make them well-suited for certain tasks. A nonprofit accountant has a very different background from someone who works for a large accounting firm; each person brings to their task a unique viewpoint or lens through which they see the problems and solutions at hand.

AI models have no such discrimination. They can produce information based on the inputs of their models and the ability to draw conclusions from their databases with newer GenAI models. But they cannot reach out beyond their databases to seek information, have flashes of inspiration, or remember something that can help with an immediate problem. All of these are human attributes, and an AI model cannot replace a human accountant’s flash of inspiration or memory of a similar problem encountered years ago.

Client Confidentiality

Another area that may be problematic is client confidentiality. AI models ingest and retain whatever data is fed into them. Therefore, if you input proprietary client information—say, asking the AI model to summarize the transcript of a client call—it will retain the information. It may use that information to inform a response to someone else. And, while it probably won’t mention your client by name, you certainly do not want confidential information floating around cyberspace forever. Never share anything confidential with an AI model.

What Can AI Do For You?

It seems like everyone is experimenting with AI, and that’s fine. Treat it like an experiment, but do not rely on it for accurate answers to accounting questions. AI may be evolving, but it has a long way to go before taking your place in the corner office.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.

Feb 14
0

How to Include Overhead in a Grant Request

By | Grant Management, Nonprofit | No Comments
person at laptop computer with dashboard printouts on desk, Grant Request

If you’ve ever completed a grant request, you know that some areas can be confusing. One such example is where to include overhead. Actually, it’s not as confusing as it sounds. It involves accounting for indirect costs that are not directly tied to a specific project but are necessary for the overall operation of an organization. Overhead costs can include administrative expenses, utilities, rent, and other general operational costs.

The Problems with Underestimating Overhead

It’s vital to consider overhead when drafting your grant request. Failing to do so can cut into your margins, making it difficult to run sustainable programs. Everything from rent to utilities must be included in your costs to ensure that the grant funds adequately cover the services rendered. If you don’t include overhead costs in your grant applications, you’ll still end up paying for them, but you’ll have to find the money from other areas of the budget, such as donations.

Using the Indirect Cost or De Minimis Rate Method: Which to Choose?

There are two methods for calculating overhead: the indirect cost method and the “de minimis” rate.

  • The indirect cost method takes a percentage of overhead relative to the direct costs of the program and uses that amount to calculate overhead costs.
  • The de minimis rate is a standard percentage of the modified cost rate. De minimis is easier to calculate but potentially less accurate.

You can choose to use either method, but it is important to choose one and use it consistently for clarity.

Indirect Costs – Overhead

Overhead costs encompass indirect expenses that are not directly allocated to specific programs or projects but are crucial for the overall operations of the organization. These costs play a vital role in maintaining the organization’s infrastructure, supporting its mission, and ensuring efficient day-to-day functioning.

Administrative costs, covering items like salaries for administrative staff, office supplies, utilities, and rent, contribute to the general management and oversight of the organization. Additionally, overhead costs include expenditures associated with technology and information systems, financial management activities like accounting services and auditing, and governance-related expenses such as board meetings, legal services, and compliance activities.

Nonprofits need to strike a balance in managing overhead costs responsibly, aiming to allocate a significant portion of their resources directly toward fulfilling their mission while ensuring the sustainability and effective functioning of the organization.

Comply with Funding Policies

One important tip: When accounting for indirect costs in grant applications, be sure to comply with the funder’s policies. Some funders list a rate not to exceed, while others specify a percentage. When the allowable overhead costs aren’t specified, you have more leeway to request the needed funds and negotiate them as part of the grant process.

Provide Supporting Documents

Along with your indirect cost assumptions and requests, funders typically ask for financial information to back up the request. These may be copies of the organization’s cash flow statement, balance sheet, or similar materials. Some funders may be more stringent, and request only audited financial statements. You may also be asked to sign a form certifying that the information presented is accurate and truthful.

If the organization has some leeway to negotiate indirect costs, providing financial statements offers proof points that back up your request for funds as part of the grant process. It will demonstrate the basis upon which you have calculated the indirect costs.

Supporting Mission with Margin

Lastly, be ready to demonstrate how the grant funds, and especially the portion requested as indirect funds for overhead, support your organization’s mission. Demonstrate how your organization pays careful attention to costs. The narrative around indirect costs and overhead should be about how you will use the funds wisely, not an apology for asking for them. After all, every organization needs a place from which to work and funds to pay rent, utilities, IT support, and so on. To fulfill your mission, you need the margin—and the funding—to run programs and services. Requesting funds for overhead is a necessary step in the grant application process.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.

Jan 09
0

Major Nonprofit Trends for 2024 – With Some Surprises

By | Nonprofit | No Comments

The cheering from the crowds in Times Square barely faded away before the trend pieces hit the internet. This is one of them. However, unlike anything you’ve read before, these trends for 2024 are focused on nonprofit organizations. We’ve followed the major news stories of the past several months to bring you a glimpse of what we believe to be the most significant trends of the new year for nonprofits. Most affect human resources and management. Which of the following do you think are most applicable to your organization?

Five Trends for the New Year Affecting Nonprofits

  1. Unionization
  2. Remote Work and Management
  3. Shortage of Experienced Executives
  4. Reporting Improvements
  5. AI

Trend 1: Unionization

The Hollywood screen writer’s strike of 2023 brought the notion of unionization to the forefront of public consciousness once again. Formerly the purview of manufacturing, the notion of workers banding together to ensure fair treatment has now percolated through all industries—including nonprofits. And while the writers’ strike was more about fair payment and ensuring their intellectual property was respected, nonprofits are also facing rumbles from their workforce. Most of these rumbles come from workers who feel their requests for additional resources aren’t being met. Management—and Boards— may recognize the need for additional help, but with the current economic environment, many managers have asked staff to wait for added resources. Whether or not this waiting period ends with a further push for unionization or not remains to be seen, but the signs are there that even nonprofits may find themselves discussing the pros and cons of unionization soon.

Trend 2: Remote Work and Management

Since the start of the pandemic, the topic of remote work (and management) has been a permanent fixture in the news. Whether its companies announcing they’re moving back on campus or workers demanding more flexible arrangements, remote work has increased and is here to stay.

Nonprofits should embrace this trend. Not only is remote work better for workers, but it can also be better for organizations, too. Organizations can tap into a wider employee pool by offering remote work options. Workers who never considered joining a nonprofit may be open to it if they view remote work options as a bonus.

Online project management systems, daily check ins, and better virtual communication through instant messaging apps and cloud-based software can all make remote work a seamless and effective option for nonprofits.

Trend 3: Shortage of Experienced Executives

Baby Boomers have retired, or will retire soon, and Gen X is following quickly on their heels. Additionally, many people in positions of leadership are experiencing significant burnout. Fewer want the added responsibility of executive positions. This has led to a shrinking pool of experienced people willing to lead nonprofits. If you’re recruiting for senior leadership positions this year, allow extra time, as it can be tough to find the right candidate. As always, consider grooming qualified candidates from within—the more you provide a stable promotion track and help employees gain the necessary skills for leadership, the better your organization will be.

Trend 4: Reporting Improvements

Gone are the days when some organizations tweaked their reports to allow some “flexibility” in financing. With both an emphasis on audits and modern computing, fuzzy reporting logic is a thing of the past. Instead, look for improvements in reporting including enhanced accuracy, greater accountability, and improved analytics thanks to affordable cloud computing and public demands for transparency.

Trend 5: AI

Artificial intelligence (AI) burst into public consciousness last year, and it continues to dominate headlines. The explosion and proliferation of generative AI tools has made them more accessible than ever, but should your organization avail itself of these innovations? There are many ethical, legal, and similar considerations around the smart use of generative AI. If your organization doesn’t have an AI policy in place, it’s time to think about one. Your board and legal advisors may wish to weigh in on the ethical and legal aspects of utilizing public generative AI tools, such as ChatGPT, and ensuring that proprietary information isn’t compromised in the tool. Because what ChatGPT ingests in the form of content or queries becomes its property, not yours. This is just one small example of the many gray areas surrounding this new tool, and one which your organization must consider before employees start using it without guidance. So, for the new year, consider guidelines for employees in the use of external AI tools, and whether adding AI-based platforms to your software stack can be a help or a hindrance.

Move Ahead with Confidence into the Future

As we move ahead into the new year, we look forward to the future. Even if some of these trends are unsettling, one thing is certain: nonprofits continue to add valuable contributions to society and to the economy. Each of these trends may contribute more than first meets the eye. It’s all in how you look at things.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.