Hot Topics for Today's Nonprofits

from Deanna's Desk

When to File the Nonprofit IRS Tax From 990 and Why it is So Important

Are you wondering why a nonprofit must file a tax return each year and why it is so important?  Very simply, if you do not file you could lose your tax exempt status and owe hundreds of dollars in back taxes!  Please see my full article published in the May 2020 Blue Avocado Newsletter.

Are You Worried About Your Organization's Money?

Do you feel comfortable that your bank accounts and agency funds are adequately safeguarded and managed? If you have a well-documented set of fiscal policies and procedures that are adhered to, you can probably breathe easy. If not, you may want to consider developing an accounting manual.

No matter how good your current fiscal staff may be, employees come and go. But sound, written, policies and procedures can stand the test of time.

An accounting manual contains financial policies, procedures and internal controls regarding key accounting processes and how the agency’s funds and cash are handled. Not only is this important to help safeguard your organization’s cash and other funds, it will make your auditors very happy.

If it seems over whelming or it is the last thing on your long to-do list, here are some things you can do right away to begin this process.

Job descriptions – first make sure you have up to date job descriptions for all of your accounting staff as well as anyone who has access to cash, bank accounts, or any accounting function, so you know who is doing what. This includes a job description for the Executive Director and Board Treasurer.

 Separation of Duties – Next make sure that anyone who handles bank accounts or cash does not have not have full authority over these funds. Examples: 

  1.  The person issuing checks cannot sign checks. 
  2. The person making bank deposits cannot withdraw funds.
  3. The person processing payroll, cannot also set up new employee files without authorization.

• Chart of Accounts and Financial Statements – determine who will be responsibility for creating the accounting structure and issuing periodic financial reports. Establish the frequency and type of reports.

• Check signing authority – establish who can sign checks, and what amount requires two signatures.

• Handling of cash – petty cash accounts should always be monitored and approved by someone not making disbursements. Establish who will provide oversight and reconciliation.

• Credit Cards –Establish who can have cards and set maximum limits. Require receipts for all charges.

• Minimum reserve policy (liquidity) – create a policy for how much cash and near cash to keep on hand for emergencies. Usually 3 to 6 months of total operating expense is recommended. This policy is now required for your audit and is often approved by the full Board.

• Investment Policy – Determine how excess funds over and above your 3-6 months cash on hand should be invested (i.e. staggered CDs, mutual funds, Treasury Bills, money market). Also decides who handles this – the CEO, CFO, or Finance Committee. This is usually a Board policy.

• Capitalization Policy -- set an amount of expense for property and equipment that will be capitalized and depreciated over time. Often this amount is set at $2,000 or more with a life of more than one year. This helps to expense small and large equipment in the right period.

• Method for allocation of shared expense and overhead -- this is often done by using FTE ratios of each department to determine applicable share of expense. But other methods such as square footage or total department expense ratios can be used as well. The key is to have a consistent method to allocate shared costs such as liability insurance or building rent. This is also required for your audit.

Start with these policies and procedures and create a written document. You will then have the core of an accounting manual. There are other accounting processes that should be documented, but the above will give you a good start. This may be a great project for your finance committee and/or CFO. Consultants and CPAs can also help with this process and may be able to provide you with a template.

But get it done and get it approved by your Finance Committee and Board. Most cases of embezzlement or mis-spending of funds are due to a lack of internal controls and approved financial policies. Don’t let this happen to your organization!

Planning an Effective Board Retreat--Give your board some TLC!


If your nonprofit board is planning to hold an offsite retreat this year, chances are they are hoping to use this time to gain additional insight into their important role of governance and oversight. Annual retreats are also excellent times to provide additional board training and in-depth information about current programs and services. 

 Retreats can be used to help launch a new strategic plan and/or review the current one. This could be an ideal time to review and assess mission, programs, continued relevance, and long-term sustainability of your nonprofit organization.

Any one of these topics can be appropriate within a retreat setting, and can have a huge impact on planning and decision making when done in an optimal manner. In my own experience, the most impactful board retreats were led by an outside professional facilitator.

Usually, the least effective retreats are self-led by the executive director and/or the board chair.

Why? Despite the excellent skill set that the staff and board may have to facilitate a meeting, they are on the inside and often attached to the retreat outcomes. An outside professional can be more objective and offer a fresh perspective. The facilitator can also provide a safe place for everyone to voice their opinion and help navigate through issues that may need decisive outcomes.

Planning the retreat well in advance is key:

• Place – find a pleasant offsite environment where board members can where casual clothes, relax, and enjoy the experience. This could be at retreat center, a local church, a community center, or even a member’s home. Having the retreat away from the normal board room/work setting can help provide inspiration, creativity, and a pleasant, safe space.

• Topics/Theme – Select the one to three most important issues or areas needing significant board attention and set an agenda. Usually the executive director and board chair/executive committee will create an agenda with time frames, topics, and hoped for outcomes. Be careful not to pack the agenda two tightly with numerous items, or people will feel overloaded.

• Staff to attend -- The executive director may invite additional staff to attend pending the topics selected, such as the accounting manager, development director, program staff.

• Record Keeper – usually a staff person can fulfil this important role of taking notes. Even if official board business is not part of the retreat, it will still be important to summarize the meeting and include in the next board packet for review.

• Meeting Facilitator – management consultants, retreat leaders affiliated with retreat centers, or other professionals trained in group facilitation should be identified and contracted with to lead the key aspects of the retreat.

• Meals/Snacks – Thinking people get hungry! Plan for a catered mid-day meal and nourishing snacks for the afternoon. This will offer breaks and keep people engaged.

Retreats also offer important opportunities for board members to socialize and bond, which is sometimes challenging to do during regular board meetings. A well planned retreat setting will also provide your board with a little extra TLC to thank and support them for their hard work during the year.

Don’t cut this important event short due to a skimpy budget or poor planning. Even organizations on a shoestring budget can probably find an affordable location and facilitator. If it is worth the time to attend an annual retreat, it is worth the effort to plan well!   



If you are a medium to large organization and need a high level financial staff member to oversee your finances and related operations, make sure that person is well qualified. In the nonprofit world it can sometimes be challenging to fill this key position due to budget constraints. But it can be done! Generally at a minimum, it is best to seek someone with an accounting degree and nonprofit experience, as nonprofit accounting has significant differences from for-profit accounting.

Additionally, seek someone who has an MBA degree and preferably, a CPA.

Since this is a high level position with oversight for more than one function including strategic planning, budget analysis, and forecasting, you want someone who has experience and training that is over and above the level of a lead or staff accountant. But titles can be confusing when you start digging through the resumes of potential candidates. Here are a few things to know about financial job titles:

Controllers and Accounting Managers: The primary difference between a controller and a CFO (Chief Financial Officer) has to do with the breadth and level of the position. A controller is usually more directly involved with accounting oversight and the month-to-month accounting and financial reports. Controllers usually create much of the organizational budget and get very involved with the details of a budget as well as the reporting of monthly actuals. Controllers may also be have responsibility for the audits, payroll and HR related functions, as well as contracts and grants management. The controller may be the top accounting position in medium to smaller sized organizations and may also be referred to as the accounting manager. They are usually responsible for all accounting functions and the supervision of a small accounting staff. When the controller is the organization’s senior financial staff person, he/she will be the primary interface with the finance committee and the auditors.

CFOs and Directors of Finance and Administration/Operations: A CFO position usually exists in larger organizations and has oversight for the controller along with other key areas such as facilities, HR, IT, investments, and perhaps a legal team or consultant. In a medium sized organizations, this title may be called a Finance Director. The title of Director of Finance and Operations is often used when the oversight includes the above additional functions and not just accounting.

The CFO works closely with the CEO as a senior, key staff member with additional responsibilities of strategic planning, forecasting, single-year and multi-year organizational budgets. The CFO is usually the primary interface with the auditors, Finance Committee and the Board of Directors regarding financial matters. In very large organizations this role may have a title of Vice President of Finance and Operations.

Titles will vary in both for-profits and nonprofits pending the size and needs of the organization. The key is to consider the breadth of responsibility, areas of oversight, and complexity of the role performed within the organization. Make sure you have a clear job description of the duties and areas of responsibility. This will serve both you and the candidate well in determining if their experience is relevant to your needs.

Don’t sell yourself short! Wait until you find the right person for the job. If you have a vacant position, you can most likely fill it using a temporary person from a local consulting firm. Local Nonprofit Volunteer Centers can also sometimes refer consultants who are able to step in as you go through the recruiting process. Patience is truly a virtue when seeking this critical position!

Additional articles:

All About Budgets . . . 

October 28, 2018  

Are you thinking about your budget? If you are a nonprofit top executive or CFO, you probably should be! It is probably the last thing you want about as you close in on year-end fundraising campaigns or finish those key grant RFPs for this fiscal year.

But the truth is, keeping a close eye on your monthly budget and comparing it to what is actually coming in, will help you adjust your fundraising strategies and grant applications. Additionally, it will keep you and your board informed to help avoid unpleasant surprises as you move through each quarter. Here are some questions to be thinking about:

What are my organization’s costs and how do they impact my grant budget?

What is the difference between direct and indirect costs?

Can overhead costs be included in a grant RFP?

Tips for Maximizing Your Grant Budgets: All organizations have indirect costs often referred to as overhead. Most grantors will allow some of these costs to be included in the RFP (Request for Proposal). You should make sure you are maximizing the recovery of your costs by including everything in the grant budget allowed by your funder. The good news is that it is easier than it seems once you understand the terminology!

Direct Costs – These are costs that are specific to each program or department. As an example, food purchased for a food pantry would be specific to the Pantry Program. A new 10 key calculator for the accounting manager would be charged to the Administration Department, and a small laptop for your roving Development Director would be charged to the Fundraising Department.

Allocated Shared Indirect Costs These are also called overhead costs, or the costs of doing business and usually involve utilities, phone charges, internet service, rent or mortgage payments. They are called indirect because they are the typical costs required for running an organization, which cannot be pinned down to any one program or department.

% of Overhead and Administrative Costs – Some funders such as governmental agencies, may not allow the actual dollar amount of allocated indirect costs to be included in the budget, but they will allow a % of total organizational or program cost to be added as overhead. The Federal government has been allowing 10% for many years.

Keep in mind that your grant budget may look different than your annual budget and financials which will be used for audit presentation purposes. As an example, some programs may have some shared cost of items purchased in bulk for all programs. These get allocated, but as direct costs. Keep them in the direct program cost category for grant purposes regardless of how they show up on the financials as allocated costs. Then you have more wiggle room for the allocated indirect (overhead) costs. Funders have strong preferences for covering direct program costs, but they also recognize that overhead (indirect costs) are part of what it takes to accomplish your mission.

Please note that the Administrative and Fundraising Department costs do not get allocated to programs! From a generally accepted accounting standards viewpoint, these are not shared costs and not overhead. But they are part of doing business. Therefore, if your funder allows it, I suggest you include a % of these two departments along with your allocated shared and direct program costs to maximize your grant budget and recover as many real costs of program delivery as possible.

Keep Your Eye on the Ball!

Depending on your fiscal year period, it may still feel early in the year if you have a July—June fiscal year. But watch those contributions and grants as they come in. Do you need to reach out in a different way to donors or start doing some research for a new foundation grant or plan another small event for next spring? Make sure you don’t come up short. You may also want to think about revising your budget in January if new factors and budget assumptions come to light such as a large unexpected bequest or a loss of a significant grant.

Creating and monitoring a budget is an ongoing, year-round process. But the more you watch over it, the more you will be in control of it.

Dancing with Ginger Rogers -- If only private businesses could be like nonprofits!

January 15, 2018

Building a Solid Volunteer Program

August 20,2018

Volunteers are just as critical for running a nonprofit as are paid staff members. But how often do we actually have a system in place to recruit, vet, train, support, supervise, and monitor our valuable, and much appreciated volunteers? 

Limited budgets may  not allow an organization to have a full-time, dedicated volunteer manager.  However, this function can be created as a part-time position or incorporated into a key staff job for the development director, office manager, program director, or director of operations, so long as that position is allotted sufficient time for this critical function.

Volunteer management is not unlike human resources management for your paid staff.  Volunteers should complete applications with all of their contact information including emergency contact information.  For on-going program and administrative positions, make sure you do at list two reference checks.  These key volunteers often provide services as an extension of in or addition to staff functions that impact your client and community work.  

Be sure to develop a schedule for training, supervising, and supporting your volunteers.  Some organizations provide a monthly luncheon round-table for their volunteers. This provides them with an opportunity for agency updates, check-ins, and social connection to one another and staff.   Volunteers volunteer for many reasons, but top among these reasons include doing something useful and connecting to other like-minded people. 

The number one reason volunteers stop volunteering and leave a charity is because they do not feel they understand their role or have not been effectively tied into the organization's structure.   To that end, each volunteer should have a job description and know who they report to or seek out for support.  

Ideally, you will develop a volunteer guideline handbook similar to your HR Handbook.   The volunteer handbook is not as complex as the HR Employee Handbook, however, it should contain your philosophy and appreciation of the role of your volunteers, as well as expectations and general operating guidelines. 

Like all of us, volunteers like feeling appreciated.  A formal structure for your volunteer program can signal the importance of this function and provide the human contact and feedback that makes their work rewarding.  Like all other functions in your organization, the volunteer function is a key part of a successful keeping your mission alive and vibrant and should be well planned and supported!

The Boardroom is not a retirement sandbox!

March 15, 2018

Competent board members are not always easy to find, and taking the time to recruit and vet is absolutely critical. Just as you would screen, interview, check references for a staff hire, board member recruitment should be no different. Governance and oversight is a serious job with serious responsibilities. Board volunteers with diverse backgrounds and skill-sets can greatly enrich and support top leadership function. Often, volunteers who are retired from professional careers can be wonderful and welcome additions to the boardroom bringing a wealth of knowledge and insight. And, they usually have more time to commit than people who are still punching a clock.

But for some, the boardroom may seem like the next act following retirement to simply fill the hours, have new "staff" to direct , or a place to dabble in becoming a non-profit expert after a long career in private business. The board’s job is not to direct day to day operations or manage staff, but to provide oversight of the CEO and ensure the charity's mission is carried out legally, ethically, and effectively. Board members also engage in long term strategic planning, help ensure sustainability, and periodically review and refresh the mission. A board development committee chaired by a board member should continually recruit, vet, nominate, train, and mentor board members, as well as periodically evaluate overall board function. This committee is also sometimes called the nominating or governance committee.

Fortunately, there are many dedicated and skilled people who are able and willing to fill this important role. With a little bit of training, they provide the needed structure for nonprofit success. These dedicated board members often work countless hours for the benefit of their favorite charity, because they care about the mission and want to improve the world around them. Proper board training and recruitment can turn a potential retirement sandbox into a powerful vehicle that transforms a brilliant mission into a beautiful landscape of generosity and caring.