“The key first step is to find a champion.”  That was the message today of Diane Prindle, of Briggs & Associates (Roswell, GA) at the NDSC national convention in San Antonio, Texas.  Briggs facilitates the employment of over 600 people with disabilities (“PWD”) in Georgia, and is a unique organization in the US.  Among the employers that Briggs works with is Emory Healthcare, which employs over 40 people in real, paying jobs, including people with pervasive disabilities.

What are the keys to success?

1) Identifying a champion– someone in the organization or with a connection that believes in the cause and can influence hiring decisions.  Someone who “gets it” and can open doors.  At Emory, this was Al.  At North Fulton Regional Hospital, this was David Tolleson, Roswell City Councilman and father of a son with Autism.  (David also happens to be the Executive Director of the National Down Syndrome Congress.)  As the result of David’s introduction to another councilman who connected Briggs to the CEO of the hospital (John Holland), North Fulton Regional Hospital agreed to employ 9 PWD the first day.  (author’s note:  John and I worked together when I was with Tenet Healthcare and John was the CEO of East Cooper Regional Hospital in Charleston, SC.  John has since moved up in Tenet and is now a Senior Vice President of the company in its Dallas, TX headquarters).

2)  Identify companies / industries which have jobs that are a great fit for people with disabilities.  For Briggs, this has been healthcare- specifically hospitals.  Clinical positions well suited include pump / pole collection / sterilization, operating room assistant, emergency department assistant, nursing unit supply tech, rehab peer support associate, and outpatient infusion center.  Emory has stated that employees with disabilities doing pump / pole collection / sterilization saves them $1,800 per month, because otherwise these duties would have to be outsourced and the poles would have to be rented.  Another great job is stocking medical carts, which Diane said is easier than bagging groceries at a grocery store- because it is a standardized process without the pressure of customer interaction.  Outside the healthcare industry, Briggs places PWD in jobs with law firms (typically in break rooms), companies with distribution centers and warehouses, the Georgia Aquarium (greeters, preparing food for the fish), grocery stores, restaurants and to a lesser extent, other retail opportunities.

3)  Provide job coaching for the employee with a disability.  Briggs provides job support, however, for foreseeable situations such as where the configuration of the medical cart changes.  This is an example of a situation that may not be as big of a deal for a person without disabilities, but for the same reason that PWD are good with these jobs (reliability in repetitive tasks, day in / day out), changes in routine can be more problematic.  Briggs also coaches the employees on issues and behavior expectations of the employment environment, such as privacy.  Existing company personnel need training too, and Briggs provides this in meetings to educate the staff about the worker they are receiving.  Finally, a job coach continues to provide ongoing long term support for both the employee and employer, which gives the employer confidence to make the decision to move forward on a job placement of a PWD.

4) Fit the job to the individual.  There are some jobs that PWD can do better than people without disabilities, and actually save the employer money.  Diane recounted several examples where PWD could save a hospital money by breaking down routines that required reliable repetition and patience and were well-suited to individual PWD by doing things tailored to the specific hospital, such as assembling kits in a certain way other than how it can be obtained from a vendor and eliminating items (and costs) from standard kits that are not needed.  For other PWD, administrative tasks are a better fit.  These jobs might include collating, data entry, filing, labeling and scanning.

Diane said that people with Down syndrome have the winning formula of reliability and patience in repetitive tasks, and the “lovability” factor.  A downside for them is their height- many times people with Down syndrome are no taller than around 5 feet, which is a limitation for some jobs.

Other highlights:

– Warehouse and distribution jobs for PWD have opened up with the government’ s e-verify mandate.

– Briggs is in Georgia only.  Apparently, firms of this type are in short supply or non-existent in other states.  (although, see Project Search in Cincinnati)

– Funding for Briggs, although it is a for-profit entity, includes government grants, because of the type of work they do and their 25-year track record.

What is the best way to to evaluate the effectiveness of a nonprofit? Well, certainly there are qualitative means, which require an intimate knowledge of the mission of the organization and the means used to carry out that mission, as well as data on results achieved. We would all agree that this is hard to evaluate.

As a proxy, many people turn to financial measures based on data that can be obtained from the audited financial statements or from the Organization’s IRS Form 990.

Generally, many donors evaluate organizations by looking at how much money is spent on the mission versus overhead.  On audited financial statements, this is easily done because noprofits must show expenses by functional areas on the statement of activities- that is, program expenses, fundraising expense and administrative expenses.

For some organizations, known as voluntary health and welfare (“VHW”) organizations*, the audited financial statements must also include a statement of functional expenses (“SOFE”).  This SOFE allows the reader to see the expenses by both natural categories (such as rent, salaries, utilities, etc.), but also in columns allocated between program, fundraising and administrative.

So what do you do if you cannot get your hands on the Organization’s audited financial statements.  Well, luckily, the IRS Form 990 tax return that the Organization files each year is publicly available (www.guidestar.org), and happens to include a SOFE in Part IX.  Even better, the IRS requires not only VHW organizations to present this information, but also many other organizations.

So, back to evaluation measures.  Using the functional expense information, one can do some quick calculations of efficiency.  One way is  to divide program expenses by total expenses.  A ratio of 65% is acceptable to some, although in reality for NPs in the human services and education sectors, this ratio generally averages about 80%.

Another similar way to calculate the program services ratio is to divide program expenses by total revenues (usually excluding unrealized gains and losses from investments).  A good rule of thumb here, and one used for qualification in the federal employee Combined Federal Campaign, is that this should be around or above 75% (i.e. no more than 25% overhead).  If revenues greatly exceed expenses, however, both the program and admin ratios may be artificially lowered, but it begs the question of why the organization is not spending its contributions on the program.

Because the evaluation of efficiency (“how much of my dollar will be used for the mission instead of overhead?”) is such a major consideration to most donors, it is critical that Organizations ensure that their accountants are tuned into the importance of the SOFE, and to the subjective decisions that must be made to create this financial statement.  In other words, this should not be a rote process, but rather should be done in a way that puts the Organization’s best foot forward (within generally accepted accounting principle requirements, of course).  We will get into how to best prepare and analyze this all-important financial statement further in coming posts.

 

* A VHW organization is defined as a nonprofit that is formed for the purpose of performing voluntary services for various segments of society and that is supported by contributions from the public or government, and operates to address health and welfare issues.

Excellent session today regarding engaging your Board of Directors.   Here are some nuggets:

Six keys to Board engagement from Terri Theisen of Thiesen Consulting (note:  Terri is a friend of mine who I met when we were both members of the Rotary Club of Dunwoody, and has received high praise from my clients for whom she has consulted):

1. Strategic recruiting- identify skills needed and recruit for those skills.  Be honest about the time commitment- the average for nonprofits for each Director is 2 hours per week- if unable to commit to this, may want to decline.
2. Equal and measurable expectations- Terri offered a sample of Board expectations (to be signed by each Director):

• Attend x number of scheduled board meetings (offer a conference call option for all meetings to be utilized by each member up to x number of times)
• Serve actively on at least one committee with same membership expectations for committee meetings as above for Board meetings.
• Make a personal financial cash contribution commensurate with your means to do so annually- this gift should be one of your top 3 charitable giving commitments.
• Participate in fund raising by being willing to raise funds, make connections, open doors for the organization.  Manage three relationships on behalf of the organization that will result in a financial contribution during the fiscal year.
• Set policy and strategic direction for the organization, as a Board.
• Abide by all policies and bylaws of the organization.

3.  Board’s work is done in committee.  (you would not hire 23 people and have them all work on exactly the same thing)

4.  Hold orientation for all Board members every year- first meeting of the year is excellent.

5.  Term limits- have a strong Board member enforce this (not the Executive Director)- we want to expand our fan base and get new blood / new thinking.

6.  Staff coordination and support for the Board

Terri also offered that the Board should see themselves in terms of owners of the organization in terms of their responsibilities.

Kristen Conner, Executive Director of CURE Childhood Cancer, recommended that all Board members be held to a high standard of participation and financial giving.   Honorary and Advisory Boards are good places for Directors who are unable to honor one but not both of these standards.  Theisen also suggested having an Alumni Board that meets once a year to keep former Directors plugged in.

Finally, Cindy Cheatham, VP of Consulting Services for the Georgia Center for Nonprofits offered “in NP’s, time is not money- it is both time and money that is required of Board members.”

90% of corporate strategies are not implemented successfully, according to Cathy Perry of Inward Bound Center for Nonprofit Leadership.  Why is this?  Perry warned against mission statements that are so broad and vague that they could actually describe another organization, not just yours.  She also encouraged organizations to plan based on strengths, and to be careful in planning “stretch” goals as these sometimes demoralize employers and supporters and call leadership into question when not met.

Robin Ferst of Ferst Foundation for Childhood Literacy commented that an organization needs to really study and know the needs of their constituency and make sure that planning is outward focused to ensure that planned actions will best serve these needs.  “Results Oriented Planning” was emphasized by Cindy Cheatham, VP of Consulting Services of the GCN.  This strategy starts with a focus the intended results and works backward to the needed planned actions, and also emphasizes that results must be put into measurable terms.

Results Oriented Planning and related monitoring has resulted in 20%- 30% annual growth for Junior Achievement, said President Jack Harris.  This growth was achieved without new headcount, with the exception of a position devoted to tracking / measurement of results against goals.  Harris said that strategic planning is an ongoing process throughout the year, not just an annual Board retreat. These organizations encourage “hard conversations”, commented Cheatham.

An educational session on Results Based Planning will be held on June 7 in Atlanta.

“It’s not about your organization, it’s about what your organization does better than anyone else.”  This is the starting point for branding your nonprofit’s brand.  This was the wisdom shared by Carol Cone, keynote speaker this morning at the Georgia C enter for Nonprofits 20th Annual Summit at the Georgia World Congress Center, Atlanta, GA.  Cone is the Managing Director of Edelman, and the co-author of the book Breakthrough Nonprofit Branding- Seven Principles to Power Extraordinary Results.   Cone has been called the mother of cause marketing.

Cone encouraged organizations to be clear and focused on one singular purpose in their branding, saying “focus is your friend.”  She also encouraged organizations to replace in their thinking and communications the word “giving” with “joining” and the word “donor” with “member” as the goal is not short-term transactions but long-term relationships.

Ms. Cone’s address was sponsored by Atlanta-based For Momentum, which specializes in cause related marketing.

A couple of tax administration storms are on the horizon:

1) Tax deposits coupons no longer accepted- after 12/31/10, the IRS (and thus banks) will no longer accept tax deposits with Form 8109 paper coupons.  (Note that Bank of America already does not accept 8109 coupons.)  This means businesses- including corporations, partnerships, foundations, trusts, etc.- will need to use EFTPS to make all kinds of tax payments.  My advice- sign up today and learn the system before it becomes mandatory and you are up against a deadline.  https://www.eftps.com/eftps/

2)  1099s for everyone- Unless repealed (efforts are underway), a business will be required to send 1099s not only for service vendors , but now for all vendors which you pay $600 or more annually for any combination of goods or services!  This basically means that 1099s will be required for all of your significant vendors- a massive undertaking for most businesses.  This is effective for the 2010 filing season (due to recipients 1/31/11 and to the IRS 2/28/11)!!!  Therefore, you should start preparing now:

a)  make sure you have the proper software or tracking mechanism

b)  send W-9s to all of your vendors to collect their federal tax ID (or social security number if an individual)

The IRS has published an updated Publication 1828- Tax Guide for Churches and Religious Organizations in 2010.  Topics covered include:

• Tax exempt status
• Jeopardizing tax exempt status (private inurement, lobbying and political activities)
• Unrelated Business Income Tax (“UBIT”)
• Employment tax
• Special rules for compensation for ministers
• Payment of employee business expenses
• Recordkeeping requirements
• Tax filing requirements
• Charitable contributions (recordkeeping, substantiation, disclosure rules)
• IRS authority to audit a church

This publication can be found at http://www.irs.gov/pub/irs-pdf/p1828.pdf.

One of the first provisions of the new healthcare law to become effective is a credit for the healthcare premiums of employees… and this credit is available to not-for-profit organizations.

Who is eligible?

For profit and not-for-profit small businesses- i.e. those with less than 25 FTE’s and paying average annual wages of less than $50,000. See a helpful worksheet that will walk you through eligibility at 3 Simple Steps.

How is the credit calculated?

For not-for-profits, the credit is 25% of premiums paid to cover at least 50% of the cost of health care coverage for some of its workers based on the single rate. The credit cannot exceed medicare taxes withheld from employee pay, however. The credit will be refundable for not-for-profit organizations (i.e. no tax liability necessary); however, the mechanics of claiming the credit are forthcoming from the IRS.

Useful additional information about the credit can be found at Small Business Health Care Tax Credit: Frequently Asked Questions.

Did you know that the State of Georgia requires certain nonprofit organizations soliciting donations in that state to have audit or a review, performed by a CPA, of their financial statements? Basically, the requirements are as follows:

1) AUDIT, if $1,000,000 or more received or collected in either of two preceding fiscal years.

2) REVIEW, if between $500,000 and $1,000,000 in received or collected revenue in either of the preceding fiscal years.

These financial statements must accompany the organization’s filing on Georgia’s Charitable Organization Registration Form (Form C-100), which must be filed and be approved prior to soliciting charitable contributions in Georgia, and then must be renewed every two years. Details are available at http://sos.georgia.gov/securities/charitable_organization.htm. Organizations with less than $500,000 of received or collected revenue can file unaudited financial statements with the form.

Often I get questions from small to midsized nonprofit startups or organizations preparing to be audited in the future about best practices for setting up Quickbooks. Here are some thoughts that I shared recently with a new nonprofit:

1) Use account numbers. This is critical to help your future auditors be most efficient (i.e. to keep audit fees low). Your auditors will want to electronically download your trial balance and then upload it into their audit software. Without account numbers to map the accounts, this process will take a good deal more time. Under , choose and “use account numbers”

2) Use a standardized structure for numbering accounts. Plan your chart of accounts in advance, so it will be logical and have room to grow. A simple structure would be to use four digit “xxxx” account numbers. Assets begin with 1, Liabilities begin with 2, Net Assets begin with 3, Revenues begin with 4, (optional if you expect to have it, which I don’t believe you will- cost of sales begins with 5), Expenses begin with 5 (again, I’m assuming that you don’t have cost of sales; if you did, expenses would begin with 6).

3) Keep your chart of accounts as simple as possible. Avoid the temptation to add an account for every possible category. For example, office supplies should suffice- do not add accounts for paper, toner, writing instruments, etc.

4) Consider using P&L accounts that mirror the Form 990. Form 990, Part VIII revenue categories include: Federated campaigns; membership dues; fundraising events; related organizations; government grants (contributions); all other contributions; non-cash contributions; program service revenues; and other revenue (see the Form 990 Part VIII and related instructions for more detail, which can be found at www.irs.gov). Expense categories include: Grants and other assistance to governments and organizations in the US; grants and other assistance to individuals in the US; grants to foreign entities and individuals; benefits paid to or for members; compensation of officers, directors, trustees and key employees; compensation to disqualified persons; other salaries and wages; pension plan contributions; other employee benefits; payroll taxes; fees for services (non employee)- management; fees for services- legal; fees for services- accounting; fees for services- lobbying; fees for services- professional fundraising services; fees for services- investment management fees; fees for services-other; advertising and promotion; office expenses; information technology; royalties; occupancy; travel; payments for travel and entertainment of public officials; conferences, conventions and meetings; interest; payments to affiliates; depreciation, depletion and amortization; insurance; other expenses.

5) Use only one level of accounts. Again, keep it simple. Do not use subaccounts if possible. Keep your account structure flat.

6) Use classes. Classes in Quickbooks can be thought of as departments, except that in a nonprofit environment you want to use them to segregate expenses by Program (if you have several, set up a class for each program), Management & General, and Fundraising. Every transaction you record should be coded with a Class designation (some expenses may need to be allocated on a logical basis). This will allow for the required Functional Expense tracking needed by some for audited financial and most organizations for Form 990. (Under , choose and “use class tracking”.)

7) Load your budget in Quickbooks. Any budget is better than none, but I recommend going to the trouble of budgeting by account, Class and month, and loading this detail to Quickbooks. That way, you can print reports on demand from Quickbooks showing actual results versus budget. Budgeting allows for one of the best internal controls- consistent monitoring by management and the Board of Directors.

8 ) Involve a qualified accountant. There is a temptation to try to skimp here. Your accountant, whether a full-time employee or part-time contractor, must have experience with nonprofits and keep the books up on a regular basis. Otherwise, your books may become very expensive to audit (or in the worst case- unauditable). Some expense on the front-end should pay off in lower audit fees and the ability to attract grant funds.

Bottom line- Quickbooks can be a cost-effective tool for small and mid-sized nonprofits, if implemented properly. A final caution- do not underestimate the need for effective internal controls- a subject for another blog, but nonetheless of vital importance.