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Four Myths of Nonprofits

Uncategorized / September 21, 2015

Four Myths of Nonprofits

Cindy Bergvall, CPA

Over the years we have found ourselves as auditors and advisers having recurring conversations with clients and Boards about these common nonprofit myths.   A frank discussion with your board can dispel some of these misconceptions.

1.  A profit is bad.  Your nonprofit needs a reserve of funds for cash flow; for future projects; and to ride out fluctuations in funding–such as a state budget impasse.  A profit is good, and it should be understood why the organization has a profit.  A client had trouble getting grant funding because the grantor thought they had too much in savings.   They actually only had 3 months of expenses saved.  In their specific case, perhaps the funder only wanted to support nonprofits with desperate need.    While some funders do look to support nonprofits in a start-up stage or through a difficult time, most funders want to invest with a sustainable organization.   Communication in this case is key with funders and donors.

2.  You should go after the wealthy members of your community for Board members.  Often when the topic of recruiting new board members comes up, the group will brainstorm names of business owners who could be on the Board solely for the potential money they could bring to the organization.   Your Board members do have a fundraising role, but first and foremost your Board members need to be passionate about your mission.   Then look at the talents the Board members bring to the governance of your organization.   Consider the time they have available to be active and committed.  A passionate, active, and committed Board member will be your strongest asset, and may actually contribute more than a figurehead whose seat remains empty each month because they are too busy to attend meetings.  Cultivate these individuals as key donors or ‘friends of’ the organization instead.

3.  The closer your program percentage is to 100% the better you are running your nonprofit.  A fundraiser made the mistake of telling one of our accountants that “100% of your donation will go to the program”    They were quickly admonished.   An organization needs money to run the organization-to keep the lights on, to pay administrative expenses, etc.   You also need money to raise funds. Unless you are an all-volunteer organization, with all other expenses donated, a model of 100% of the funds raised going to programming isn’t realistic.

4.  The best way to raise funds is to write grants.    Giving USA’s report of 2014 giving shows that 72% of all contributions come from individuals.  8% are from bequests from individuals.  15% are from foundations (of which a number are family foundations) and just 5% are from corporations.   Grants play a role in your organization’s funding streams but it should not be a major role.  Individual donors are more likely to give year after year, and as you build a strong relationship with your donors, these gifts can increase over the years.  The best way to raise funds is with a well-rounded development strategy that isn’t too dependent on any one funding source.

None of these myths are surprises to nonprofit leaders.   We need to be diligent about educating our Board Members to educate the community.    The more knowledge the community has about the way nonprofits function, the more engagement we can count on.

The Catalyst Center for Nonprofit Management provides customized Board training programs and Board Boot Camp to help your Board stay on top of the diverse nonprofit issues.

Ten Simple Things You Can
 Implement Now to Strengthen Your Board 

Elizabeth Vibber, MS

Sometimes the simplest changes can have the greatest impact.  Here are ten simple suggestions, based on governance best practices that you can implement into your board practices.

Some of these you might already be doing, others may seem impractical for your group.  The idea is to engage your board at a deeper level, especially during these difficult times.

1.  Have your Mission and Vision statement on every board agenda.  A subtle reminder to all board members that the mission is central to all board discussions and decisions.

2.  Start each meeting with a Member Minute (or a Mission Moment). Here each board member spends a minute explaining what they have done since the last meeting to serve the organization: secured a donation, made an important contact, read an article, etc.

This exercise should only take about 15 minutes of your meeting, but will be well worth it by encouraging your board members to think about and promote your organization outside of the monthly meetings.  Board members will learn from one another-and your organization will be the beneficiary.

A mission moment is a variation on this theme and invites an outside stakeholder (client, friend, donor, etc) to share with the board what the mission means to them.

3.  Introduce a By-law Amendment that limits the number of other boards your members can serve on.  I am always amazed to hear of individuals who sit on 3 or 4 Boards.  Where do they find the time?  How are they able to balance the tasks of your organization with their other commitments?  Now if you have a Board Contract which clearly states the expectations for sitting on your board, and you hold your members accountable, this could be a non-issue.  For other organizations this may be the nudge the ‘over-committed members’ on your board need to move along.  At the very least, it should make for an interesting discussion.

4. Create a ‘Face page” for each of your board members in your board manual.  Although boards meet on a regular basis, they don’t always get to know one another on a deeper level.  A ‘Face page’ or bio page would include more personal information for board members such as hobbies or previous work/board experience.  This is another way to build camaraderie on your board, not to mention discovering the hidden talents of your board.  These Face Pages belong in the board manual and aren’t for public viewing.  Don’t forget the picture!

5.  Use a DA or Devil’s Advocate card at each board meeting.   Each meeting someone different is given the DA card and their job is to play the devil’s advocate on issues before the board.  This straightforward yet powerful tool can be used to avoid the pitfalls of those boards inclined to ‘group think’; to correct a flawed decision making process; or simply to give a voice to members of the board who may be less inclined to share an opposing view point.

6.  Create a FAQ for new board members created by current board members.  Remember all those questions you had but were afraid to ask when you first joined the board?  Or maybe you did ask them and you saw in the eyes of your fellow members that they didn’t know the answer either.  This is also a terrific tool to use when recruiting new members as it provides a glimpse into the culture of your organization!

7.  Make sure all of your board members have business cards with the organization’s mission statement on the back.  What better way to get your cause into the hands of your board member’s friends & acquaintances?

8.  Decrease the number of your committees and increase the number of your task groups.  Task groups are established to accomplish a specific objective-within a specified time frame.  Once the objective is completed, the group dismantles.  Task groups give boards greater flexibility, engage members more efficiently and allow issues to be tackled immediately.

9.  Create a strategic plan dashboard tracking 3-5 critical indicators to the health of the organization and update monthly showing a 12 month trend for each.  Dashboards are designed to provide a simple visual overview of the health and direction of any organization that has financial statements, i.e. balance sheets, income statements (also known as profit and loss, or operating statement) and cash flow statements.  These graphics give the non-financial persons in your organization a clear picture of the finances.

10.  Ask each board member to think of the single most important issue that they feel the organization should focus on in the next year and have them write it on an index card.   Now, shuffle the cards and read them out loud to begin a strategic discussion.  This last tip is pretty self-explanatory and a great way to begin the annual review of your strategic plan.

To learn more about how the Catalyst Center can work with your organization or to schedule a mini-training for your board, please contact Liz Vibber at [email protected]