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Financial Oversight by Nonprofit BoardsThe Experienced, the New, and the Absent
©2009 Robert Seestadt/CFOShare LLC
cfoshare.com248.714.9400
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
Board Engagement: Communicating Financial Matters
7%
67%
57%
30%
43%
39%
52%
22%
4%
26%
13%
54%
22%
17%
46%
33%
65%
0% 10% 20% 30% 40% 50% 60% 70% 80%
No change- business as usual
Reduce staff or salaries
Freeze all hires and current salaries
Reduce staff hours (short weeks, furloughs, etc.)
Reduce staff benefits
Reduce or eliminate programs
Collaborate with another NPO to provide programs
Collaborate with another NPO to reduce administrative expenses
Merge with another organization
Reduce or refinance occupancy costs
Sell assets such as a building or securities
Use reserve funds
Delay payments to vendors
Speed up the collection of receivables
Engage more closely with your board
Funder conversations to explain situation and/or use of currentlyrestricted grants
Develop a ‘worst-case scenario’ contingency budget
Source: Nonprofit Finance Fund March 2009 survey of 47 MI nonprofit leaders; used with permission
Plans and actions to weather the recession
26%
46%
49%
26%
33%
31%
0% 10% 20% 30% 40% 50% 60%
Assistance negotiating withbanks or other lenders
Financial scenario planning
Tools to communicate financialpicture to board and/or funders
Merger feasibility analysis
Program finance analytics(revenue/expense breakdown
per program)
Assistance analyzing your currentfinancial situation
% of organizations
Which of the following types of technical assistance would be helpful now to your organization?
Source: Nonprofit Finance Fund March 2009 survey of 47 nonprofit leaders; used with permission
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
Tools for Financial Communication: Portraying the Key Message
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
Tools for Financial Communication: Presenting Financial Condition
• OnBOARD SM Nonprofit Assessment • Capital position (liquidity) and forward momentum (outlook)• Assess board focus and consensus on financial condition • Useful in reporting change over time, dynamic • Focuses attention on financial reporting and data• Identifies disagreements / opportunities; CEO vs. finance vs. outside board?
Board OversightThe experienced, the new and the absent©2009 Robert Seestadt/CFOShare LLC
OnBOARD SM Nonprofit Assessment: Capital Position
• Liquidity • Access to cash • Ability to pay bills when they come due• Adequate reserve • Balance sheet focus• “Noun”
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
• Performance-oriented• Look at recent trends and outlook • “Verb”• Are we going in the right direction with enough “mass”?
OnBOARD SM Nonprofit Assessment: Forward Momentum
Factors 0-3 4-6 7-10Cash reserves and investments
Serious concerns over short-term
Sufficient for short-term
Sufficient or better in short/mid term
Receivables & other liquid assets
Insignificant Moderate Significant
Payables and debts Aging is excessive and/or upcoming debt svc issues
Some vendor delays but reasonable aging
Current and manageable
Financing & access to outside capital
Nominal access to line of credit or other financing
Some financing available such as line of credit
Significant financing available if needed
OVERALL ASSESSMENT (0-10):
Little/no liquidity for operating needs
Sufficient liquidity for short term
operating needs
Sufficient capital for current and
mid-term operating & investment
needs
©2009 Robert P Seestadt/CFOShare LLC
OnBOARD SM Nonprofit Assessment:
Self Assessment: Capital Position
Factors 0-3 4-6 7-10Management track record in generating surplus
Mostly deficits over past 3-5 years
Balance of surplus and deficits
Mostly surpluses over past 3-5 years
Short-term financial projections
Anticipate losses in short-term
Likely near or at break-even
Projected operating surplus
Backlog & pending awards
Insignificant Moderate Significant
Budget adaptability Difficult to adjust expense structure in short-term
Some ability to manage costs to fit budgetary need
Able to materially adjust budget to fit resources
Recent trends & economic environment
Very challenging and concerning
Some hurdles, but with planning can overcome
Positive economic environment
OVERALL ASSESSMENT (0-10):
Short/mid-term outlook negative/
challenges significant
Outlook neutral opportunities & challenges are
balanced
Outlook favorable for short and mid-
term
©2009 Robert P Seestadt/CFOShare LLC
OnBOARD SM Nonprofit Assessment:
Self Assessment: Forward Momentum
Slow burn All
Cylinders
Running on
Stalled Empty
Capi
tal P
ositi
on
Forward Momentum
5 10
5
100
0
©2009 Robert P Seestadt/CFOShare LLC
OnBOARD SM Nonprofit Assessment:
Example A
Slow burn All
Cylinders
Running on
Stalled Empty
Cap
ital P
ositi
on
Forward Momentum
5 10
5
100
0
©2009 Robert P Seestadt/CFOShare LLC
OnBOARD SM Nonprofit Assessment:
Example B
Slow burn All
Cylinders
Running on
Stalled Empty
Capi
tal P
ositi
on
Forward Momentum
5 10
5
100
0
©2009 Robert P Seestadt/CFOShare LLC
OnBOARD SM Nonprofit Assessment:
Example C
Slow burn All
Cylinders
Running on
Stalled Empty
Capi
tal P
ositi
on
Forward Momentum
5 10
5
100
0
©2009 Robert P Seestadt/CFOShare LLC
OnBOARD SM Nonprofit Assessment:
Example D
Slow burn All
Cylinders
Running on
Stalled Empty
Capi
tal P
ositi
on
Forward Momentum
5 10
5
100
0
©2009 Robert P Seestadt/CFOShare LLC
OnBOARD SM Nonprofit Assessment:
Example E
Slow burn All
Cylinders
Running on
Stalled Empty
Capi
tal P
ositi
on
Forward Momentum
5 10
5
100
0
©2009 Robert P Seestadt/CFOShare LLC
OnBOARD SM Nonprofit Assessment:
Example F
Slow burn All
Cylinders
Running on
Stalled Empty
Capi
tal P
ositi
on
Forward Momentum
5 10
5
100
0
©2009 Robert P Seestadt/CFOShare LLC
OnBOARD SM Nonprofit Assessment:
Example G
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
For the “New”
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
For the “New”
• Inquiry is key to understanding • Simple is good• Response is verbal and non-verbal• Follow up • Curiosity and interest most important
Board OversightThe new, the experienced and the absent©2009 Robert Seestadt/CFOShare LLC
For the “Experienced”:Taking it to the Next Level
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
The Tough Questions
Are we meeting our potential?
Capital position
Forward momentum
Capacity utilization What is it?
“Cost to Serve”
How to Measure?
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
For the “Absent”:
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
For the Absent
• Welcome “non-accountants” to participate
• Responsibility is year-round and comprehensive
• Where to start
• Management letter as a tool
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
For You Facilitating Change in Board Oversight
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
Additional Resources:Tools and Tips
ArtServe MichiganBoardSourceBoardWALKBridgespan City Connect DetroitCommunity Legal ResourcesCompass Pointe Detroit Executive Service Corps Lawrence Tech University Center for
Nonprofit Management (Learning Circle)
Michigan Nonprofit Association
Additional Resources (not all-inclusive)
NEWNonprofit Finance Fund Society for Nonprofit Organizations
(National)United Way of Southeast MichiganVolunteer Centers of Michigan
Board OversightThe experienced, the new, and the absent©2009 Robert Seestadt/CFOShare LLC
Questions? rseestadt@cfoshare.com
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