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Mar 19
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Understanding Nonprofit Leadership Structures

By | Nonprofit | No Comments
Understanding Nonprofit Leadership Structures

When people join a nonprofit, they are often surprised at the difference in the organizational structure from that of a for-profit company. They may hear about decisions being presented to a committee or a board. Who is this mysterious board? Who makes up the committee, and why does a committee have the authority to approve a project?

Unlike many institutions—for-profit companies, schools, and the military—nonprofits rarely follow a top-down leadership style. Instead, depending on whether we’re talking about an accountability hierarchy or a voluntary association, the chain of command differs significantly among nonprofits.

Nonprofit vs. For Profit Reporting Structures

Nonprofits can vary considerably in their ultimate reporting structure. They typically have directors, managers, and other leaders who guide the daily activities of their departments. Like a for-profit company, people report to those managers, and their managers handle daily activities like signing off on marketing campaigns, creating work schedules, and more.

While a for-profit corporation may have a board of directors or shareholders, most have a typical hierarchical structure. Workers report to managers, managers to directors, directors to vice presidents or c-suite leaders, and all roads leading up to the CEO, who answers to the board or shareholders.

Types of Organizations and Their Leadership Hierarchies

There are many types of nonprofits, and every kind of organization is accountable to different members or groups.

Member-Governed Organizations

Many unions and small organizations follow the leadership hierarchy of member-governed organizations, which may also be called “member-driven” organizations because the members guide them. The membership has the final authority over the organization. Members may elect the board of directors, who govern between meetings of the members, but the board may not overrule member decisions.

Board-Governed Member Organizations

This hierarchy finds the board governing the organization. Members elect the board, and then the board leads. Some decisions, such as budget decisions, may be reserved for the members. The board must follow strict bylaws governing its decisions, and often, it can only act after a majority vote is taken at a properly called meeting. Many homeowner associations follow this leadership pattern.

Non-Member Organizations with Self Perpetuating Board

In this structure, the board governs the organization. The board chooses its successors, hence the term “self-perpetuating board.” Members contribute financially but have no say in the daily decisions of the organization. Museums are a good example of this type of hierarchy, with members contributing donations, entrance fees, and the like, but the museum’s governing board handles all the major decisions impacting the organization.

Committee Structures: Executive Committee

Lastly, some organizations follow a committee structure. Large organizations may have a board of directors and an executive committee. Often, the executive committee is comprised of the organization’s leaders and selected board members. The committee is supposed to be guided by the board, but often, the roles reverse, with the executive committee taking the lead.

Review the Bylaws

This is why it is vital to refer to a nonprofit’s bylaws to understand its leadership hierarchy. It’s not as simple as a daily org chart. There may be someone making daily decisions over accounting, finance, operations, marketing, and the like, but big decisions, like pivoting to new programs, making major infrastructure investments, and the like, may require the board’s vote in order to proceed. The bylaws are the ultimate guide to those who have the final say at a nonprofit.

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.

Mar 12
0

Tips to Choose the Right Auditor for Your Organization

By | Accounting, Audit, CPA, Nonprofit | No Comments
auditor working at desk with spreadsheets, computers, and calculator

The right auditor is much more than a CPA. Auditors provide valuable guidance and ensure donors, members, and constituents trust that your organization is a good steward of their finances. These tips will help you find the right auditor for your needs who is both well-versed in nonprofits and a good cultural fit for your organization.

Find Potential CPA Firms

The first step is to find potential CPA firms who provide auditing services. You can look online for local firms or ask other nonprofits who they use and like. Your employees may also suggest companies or individuals with whom they have worked in the past.

It is vitally important to find an auditor who specializes in nonprofits. Nonprofit accounting has unique requirements and regulations, such as fund accounting and compliance with IRS Form 990. A CPA familiar with these aspects can ensure accurate financial reporting and adherence to relevant laws.

CPAs with nonprofit experience can also provide valuable insights and recommendations tailored to the organization’s unique financial situation. This can include guidance on improving internal controls, financial management, and strategic planning.

Lastly, because nonprofits are subject to various regulations and compliance requirements. A knowledgeable CPA can help navigate these complexities, reduce non-compliance risk, and identify potential issues before they become significant problems.

Develop Questions

To ensure that you have an apples-to-apples comparison of CPA firms after you’ve completed your research, develop a set of questions to ask each firm. This approach is similar to a request for proposal (RFP) process. Consider your organization’s needs. Some potential questions may include:

  • Can you provide references? May I contact them?
  • Who will I be working with?
  • Do you work on site, or do you need remote access to materials?
  • What is the typical audit process your firm uses?
  • What can I expect during the audit?
  • What do you provide me with afterwards? How long will it take?
  • How much does it cost?

Depending on your needs, you may also have other questions to add to this list.

Consider a Formal Request for Proposal

A request for proposal (RFP) is a formal document issued to multiple possible vendors. It outlines your organization’s background, the project you have available, and the scope of work. It also includes a due date for the project and response requirements, such as references or case studies demonstrating experience with previous projects.

Responses are written following the outline given to vendors in the scope of work. The resulting documents help compare the relevant credentials of all potential CPA firms. Because the RFP requires all responses to be written in the same format, following identical guidelines, the results provide an apples-to-apples comparison among respondents, allowing you to sift through what makes one stand out above the others.

Gather all the responses, whether through a formal RFP process or a sit-down meeting with questions. Then, meet with your team and consider the answers. Your final selection should weigh all factors, including the firm’s relevant experience, assessing its approach, and comparing prices.

Consider Cultural Fit

Lastly, consider the cultural fit of the CPA with your organization. The best credentialed expert will not be effective if you feel intimidated or rushed when you work with them. Look for someone with whom you feel good rapport, a CPA who communicates clearly, who listens patiently, and who isn’t afraid to answer questions.

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 20
0

Signed Executive Orders That Nonprofits Need to Know

By | Nonprofit | No Comments
Signed Executive Orders That Nonprofits Need to Know

The official formalities were barely over when President Donald Trump signed a flurry of executive orders (EO), many of which reversed Biden administration policies impacting nonprofits. Below, we share details of key EOs of the new administration. We recommend that you explore the ones applicable to your organization and consult with your team on the steps you need to take in response.

Bear in mind that this is a fluid, evolving situation. There are already legal challenges to some of the EOs, which may or may not put them on hold. It would be prudent to watch the news and set up Google Alerts for specific topics and EOs that impact your organization so you can track the current status.

Diversity, Equity, and Inclusion Rescinded

Trump’s newly signed executive orders reversed Biden’s EOs and memorandums, including those directly related to diversity, equity, and inclusion initiatives. The most significant impact will be on federal programs. Under the Biden administration, three EOs expanded DEI in federal programs. Trump has reversed this policy even though these orders stood up to court challenges.

A related Executive Order from Trump has directed the Office of Management and Budget and the Office of Personnel Management to coordinate with all federal agencies to terminate DEI programs in federal agencies, including equity-related grants and equity action plans. Although private sector DEI grants are currently unaffected, this may change soon as the administration has indicated a willingness to change these as well.

Immigration and Birthright Citizenship

Birthright citizenship was granted as part of the 14th Amendment to the United States Constitution in 1868. It was enacted to ensure enslaved people born in the United States could be granted full citizenship. The interpretation of this Amendment has been expanded over the years to include any children born on American soil, including children born to non-citizen mothers or fathers. The new EO seeks to end this right and make children born of non-citizen parents, even if such children are born on American soil, not U.S. citizens. The American Civil Liberties Union (ACLU) has already challenged this highly controversial EO in court. Many law scholars also believe the EO is unconstitutional.

Additionally, President Trump issued a sweeping executive order entitled “Protecting the American People Against Invasion.” This order directs relevant federal agencies to remove undocumented immigrants from the country, create statewide Homeland Security Task Forces and detention centers, identify all “unregistered illegal aliens,” block federal funding to sanctuary cities, and ensure that undocumented immigrants do not receive any public benefits.

Executive Order Potentially Impacting Government Contracting

President Trump also signed executive orders to mandate that federal workers return to full-time, in-person work, implement a federal hiring freeze, and change the federal workforce, allowing career employees to be more easily fired for “insubordination.” Additionally, these orders remove pay transparency and equity requirements for federal workers, contractors, and subcontractors and freeze any outstanding regulations pending review.

Census

Trump also rescinded Executive Order 13986: Ensuring a Lawful and Accurate Enumeration and Apportionment Pursuant to the Decennial Census. This EO required all persons, regardless of citizenship or immigration status, to be counted in the Census. The National Council of Nonprofits previously submitted an amicus brief when this issue was heard by the U.S. Supreme Court for the 2020 Census.

More Executive Orders to Come

It seems like every day another flood of orders comes from the new administration that changes or reverses the previous administration’s orders. Other EOs issued by the Trump Administration include removing the United States from WHO, the Paris Climate Accords, changing EV vehicle mandates, and more. More are expected to come in the days and weeks to follow.

Nonprofits: Watch and Prepare

If your organization relies upon federal funding, it is vital to assess these EOs as they are announced for any possible impact on your organization. The new Department of Government Efficiency (DOGE) is examining grants, funds, and expenditures and suggesting cuts to save money. Freezes on funds are imminent and the list of possible freezes changes daily. The legality of many EOs has been challenged and court briefs filed. Watch the news and prepare your organization as best as you can by monitoring the situation and discussing the potential ramifications of these changes, especially to your services and budget.

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 18
0

Budgets Evolve, and That’s Okay

By | Accounting, Accounting Software, Budget, Nonprofit | No Comments
Budgets Evolve, and That’s Okay

It’s a strange but true statement: your budget will never be “right.” You’ll be over budgeted on some items and under-resourced on others. Predicted income will exceed expectations, or there will be a shortfall. Unexpected expenses mount on specific projects.

And all of this is okay. Budgets evolve, and that’s not only okay, it’s also expected. Here’s why budgeting should be viewed more as a business planning activity and less a “once and done” accounting function. Thinking strategically about budgeting and planning and working all year long with your budget as a business tool, will help your organization thrive.

Budgeting as a Business Planning Activity

Many people think of budgets as the purview of the accounting department. The best budgeting process, however, is collaborative. Program managers should work with the accounting team to analyze their budgets. The ensuing discussion around budget items should encourage reflection and analysis about program activities, focusing on those that support the organization’s mission and margin-generating activities.

For example, as you plan the annual budget, you may find that some program activities performed below expectations. Reviewing the data together, accounting and program leaders can decide if continuing the program makes sense or whether it should be changed in some way. Sitting down together to review the budget opens the door to important conversations that can lead to significant improvements. This reflection process is a healthy part of business planning and goes beyond financial planning.

Best Practices for Nonprofit Budgets

Budgets are “living documents.” This means that they grow and change over time. A good budgeting process allows for flexibility. Part of sound budgeting practices is regularly checking budgets and updating them based on the available data.

Here are some best practices for checking and updating nonprofit budgets:

  1. Regular Review: Schedule regular budget reviews with program areas, such as monthly or quarterly reviews, to compare actual income and expenses against the budget. This helps identify any discrepancies and allows for timely adjustments.
  2. Adjust for Changes: Be flexible and ready to amend the budget as needed. Financial positions can change throughout the year, so it’s important to update the budget to reflect new realities.
  3. Track Cash Flow: Monitor cash flow closely to ensure the organization has enough funds to cover expenses. This includes tracking both incoming and outgoing cash.
  4. Use Technology: Utilize budgeting software and tools to streamline the process and improve accuracy. These tools can help automate calculations and provide real-time data.
  5. Document Assumptions: Clearly document the assumptions made during the budgeting process. This helps with understanding the basis of the budget and makes it easier to explain any variances.
  6. Plan for Contingencies: Include contingency plans in the budget to account for unexpected expenses or changes in funding. This ensures the organization is prepared for any financial surprises.
  7. Communicate Regularly: Keep open lines of communication with all stakeholders about the budget status and any changes. Transparency helps build trust and ensures everyone is on the same page.

By following these best practices, nonprofits can maintain a healthy financial position and effectively manage their resources.

As you can see, budgets aren’t once and done. They evolve. Frequent feedback, adjustments, and discussions allow for much-needed planning and flexibility that helps an organization succeed.

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.