Author: NPFM

October 2017 NPFM Meeting: Leading Indicators: The Sophisticated CFO’s Guide to Choosing Key Performance Indicators That Matter & Dashboarding

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Leading Indicators: The Sophisticated CFO’s Guide to Choosing Key Performance Indicators That Matter & Dashboarding

A critical component of nonprofit effectiveness is the organization’s ability to identify and track meaningful “leading indicators” that serve as mile markers to tell you if you are headed in the right direction—a course charted by your strategic plan. Carla McCall, Co-Managing Partner, and Robin Leet, Business and IT Advisory Manager, from AAFCPAs provided guidance for nonprofits on the leading, predictive metrics that may have a significant impact on an organization’s operational and financial results.

We went beyond the classic financial KPIs, providing guidance on making correlations between non-financial and financial metrics. AAFCPAs also provided insights to bring clarity to your data, and tools to make more meaning out of the information in our systems through dashboarding.

Summary of Presentation:

Leading Indicators: Choosing Key Performance Indicators That Matter & Dashboarding

Carla McCall, Co-Managing Partner, AAFCPAs

Robyn Leet, Business & IT Advisory Manager, AAFCPAs

Summary

A critical component of nonprofit effectiveness is the organization’s ability to identify and track meaningful “leading indicators” that serve as mile markers to tell if your organization is headed in the right direction—a course charted by your strategic plan. The presenters provided guidance on the leading, predictive metrics that can have a significant impact on an organization’s operational and financial results.

Key Performance Indicators

The presenters differentiated leading indicators from lagging indicators. Lagging indicators are output-oriented. They are easier to measure, but harder to improve and influence, since they measure past performance. Leading indicators are input-oriented. They are harder to measure, but easier to influence.

Leading indicators tend to relate to activities undertaken by employees. The idea is to break down activity into measurable inputs. For the indicators to have the greatest impact, the whole team needs to be involved in the process of identifying inputs and measuring outcomes. We want indicators that tell us:

  • How the team performs as a whole
  • How special sub-teams perform
  • How each individual on the team performs

They offered suggestions for choosing and implementing KPIs:

  • Choose indicators that go beyond financial measurements
  • Don’t track too much at once; limit it to the most important indicators
  • As a motivational strategy, it can be helpful to gain “early yardage” by doing an activity that will get results quickly. Hit the biggest impact items first.
  • Lay out KPIs in a visually clear format, not just an array of figures
  • If it doesn’t work, try something else
  • Celebrate the team’s successes

Dashboarding

A dashboard displays information from databases, and graphically represents KPIs in real time for management. A dashboard is customized to your organization’s operations and outcomes, and serves to focus attention on the activities and decisions that matter most.

The presenters described the key functions of a dashboard:

  • Analytics: KPI metrics, to enable analysis of trends
  • Information: reports on key activities
  • Operations: To keep the organizations moving with workflow queues, quicklinks, and tasks–to enable performance of responsibilities more timely and effectively

The audience and presenters discussed the relative advantages of various platforms that enable dashboarding:

Keys to a successful dashboard:

  • Limit the number of items. Keep it focused.
  • Present high-level information. If detail is really needed, the user can always drill down.
  • Mix graphical with statistical representation

 

Meeting Presentation: KPI Dashboardinag – AAFCPAs

September 2017 NPFM Meeting: Spreadsheet Security Techniques

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Summary:
Scott Hagerty presented on how improve spreadsheet security using tools like Microsoft Excel and Google Sheets. He discussed and demonstrated methods to protect specific data or the entire spreadsheet. He also presented strategies for protecting the integrity of the data with conditional formatting, data validation rules, linking data from various sources, and other advanced spreadsheet tips.

Presenters:
Scott Hagerty is currently an IT Manager with Insource.  He is an experienced technical professional with an extensive background in software applications and hardware, workstation, server, and network-related troubleshooting.  At Insource he is responsible for managing the technical needs of his clients and drawing upon his knowledge of Windows and Mac environments to design and implement projects and solutions that best fit their specific needs.

Topics Covered During the Presentation

  • Excel vs. Google Sheets
  • Spreadsheet design
  • Spreadsheet security
  • Data integrity, protection from unintentional errors

Excel vs. Google Sheets

Excel’s advantages and features:

  • It’s the de facto standard spreadsheet application;
  • It includes powerful tools, especially in terms of macros & scripting;
  • It’s designed to function offline;
  • Excel can handle enormous datasets;
  • It’s able to link data between sheets and documents, and share selectively.

 

Google Sheets’ advantages and features:

  • It’s cloud-based: You don’t need to worry about backup, transporting files between computers, and keeping track of multiple versions;
  • Multiple people can collaborate on the same document simultaneously;
  • Files and data can be manipulated quickly and simply;
  • It covers most common Excel functions;
  • Like Excel, it can link data between sheets and documents, and share selectively.

 

Spreadsheet design recommendations

  • Show your work: That is, be explicit, label everything, and keep your steps visible.
    • Use titles — be descriptive;
    • Keep calculation components visible and label them clearly;
    • Be explicit – don’t hide too much in formulas lurking inside cells.
  • Be consistent in formatting. When possible, use templates and standardize reports.
  • Use color fill (pastels are easier on the eyes?)
    • To highlight important values or totals;
    • To communicate purpose to others.
  • Break down figures into comprehensible pieces, and use comments in nearby cells to let other users know what they’re looking at.

 

Spreadsheet security: Sharing and folder permissions

  • On a traditional file server, sharing is generally managed by mapping drive letters to different shares on the server.
    • Each user has drives mapped to home, shared, and public network shares;
    • Work with your IT department to tailor the system to your particular needs.
  • With cloud-based file sharing, such as Box, Dropbox, and Google Drive, there are additional considerations.
    • Internal sharing, within your organization, is managed by setting access levels on shared folders and files;
    • Sharing with external users who have their own accounts can be managed by granting specific permissions (such as download, upload, edit, view) to particular folders and files.
    • Options are fewer for sharing externally with users who lack or don’t want an account.
      • You can set the link to expire after some amount of time;
      • You can password-protect a file.
    • Caution: Read-only does not hide information within your spreadsheet. It only prevents changes from being saved.
  • Encrypted files and email
    • Email is very commonly used for external collaborators. Email is not necessarily secure.
    • Encrypted email is a more secure option. With this, the entire message is encrypted from end to end. To decrypt the message,  the receiver signs in through a secure portal. The system is usually set up by your IT department. You can create a method for signaling when a message is encrypted — for example, by putting a tag in the subject;
    • You can attach an encrypted folder, using zip or another archive format. An attached folder can hold several files, requires a password to unlock. It’s recommended that you provide the password through an entirely separate medium–that is, not email.
    • You can also lock or encrypt an Excel file. A password is required to unlock it, but the password can be “brute forced,” since there’s no mechanism to stop someone from trying an unlimited number of passwords.
  • Protecting & locking spreadsheets
    • You can protect a sheet within a workbook, or protect the entire workbook. This makes the sheet or workbook read-only. However, even if a sheet is locked, a reader is free to unhide hidden cells or ranges. When you protect a sheet, it prevents someone from saving changes to the same file.
    • You can protect a sheet with or without a password. If you’re mainly concerned about inadvertent changes, forgo the password.
    • When protected, the default is for every cell to be locked. If you want to allow editing of specific cells or ranges, you can manually reformat them as unlocked.
    • You can allow users to edit specific ranges with a password you provide, while the rest of the sheet remains locked. For someone to change the requirement on a range, they would need the password for the entire sheet.
    • You can track changes, which creates a record of changes made to the workbook, and allows a reviewer to accept or reject each change.

 

Data integrity: Preventing errors through spreadsheet design

  • Leave raw, source data that you want to remain unaltered in a separate, protected sheet to prevent accidental changes;
  • If data will be frequently referenced, use named ranges for transparency and easy adjustments in the future;
  • When performing calculations, use summary sheets or an additional row or column to reconcile, using control totals. For example, sum subtotals to expose any discrepancies from expected total values.
  • If preparing sheets for others to modify:
    • Enact data validations or warnings;
    • Protect or lock sheets, ranges, and cells to allow changes only where desired;
    • Hide sensitive data, either within the spreadsheet, in a separate protected sheet, or via an external link to a protected file.
  • Name commonly referenced ranges:
    • Doing so simplifies interpretation of formulas, especially when using VLOOKUP functions;
    • It also allow you to easily expand and contract ranges, for example, if you need to add additional rows or columns for time-based values.
    • When using ranges, a single change will affect all formulas referring to range.
  • Link your data:
    • Within a workbook, references are generated automatically;
    • Between workbooks (separate files), the same process applies only when the other file is already open. When linking between workbooks, make sure you know the filename and location of each;
    • Note that named ranges work both within and between workbooks;
    • Lastly, linked files are susceptible to errors or disconnections when:
      • File names are altered;
      • A file is moved to an inaccessible location;
    • When a link to another file is disconnected, breaking the link will convert it to the last known value, as a static, unlinked value.
  • Hide sensitive information:
    • When protecting a sheet, you can opt to prevent selection of locked cells within the protected sheet;
    • You can also enable the  “hidden” checkbox under the protection tab (format cells) to show the calculated value but not the formula, when a sheet is protected;
    • As mentioned, you can link to data within hidden sheets in a protected workbook;
    • You can make a summary workbook that pulls data from multiple submitted files. You can make either the source data or the summary accessible only to authorized users;
    • Quick hack for hiding data: Set the background and text colors to match each other. When you do this, the cell’s contents are visible only when selected.
  • Use data validation tools:
    • Configure drop-down lists for ranges. The choices can be manually entered, or can be set to pull from a range of cells elsewhere in the spreadsheet;
    • Data can be limited to certain calculated values, which can be set up using custom cell references;
    • If a user enters data that does not pass validation, you can configure it to stop or disallow the entry, to pop up a warning, or to pop up an informational message, which you can customize;
  • You can also apply conditional formatting to highlight values that do or don’t meet your criteria.
  • When working with multiple sheets:
    • Shift + select all tabs at the bottom (for separate sheets), and what you enter in the open sheet will be entered in the same place on all sheets.

Link to Google Form to get access to materials: Link to Insource Services

June 2017 Meeting: How to Structure Your HR Department

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How to Structure Your HR Department

Financial managers at small nonprofits often struggle to find the right resources to perform the varied human resources (HR) functions at their organizations. Fred Ritzau, of Northpoint Human Resource Consulting, addressed the various options for meeting your human resource needs, from outsourcing to an HR team on staff. Fred has experience with all sizes of nonprofit and for-profit organizations and is currently consulting at a variety of small nonprofit organizations. Mitzi Fennel, CFO at HRIA, explained how a Professional Employer Organization (PEO) works and why you may want to consider this option at your organization.

First, Fred addressed the question: do you need a human resource function at your agency? Some of the questions that go along with that issue are as follows. What is the purpose of HR in your company?

How do you manage it? Is the way you currently manage HR working for you? And finally, do you have HR goals and strategies? A lot of HR is a function of risk management: transactional, compliance, and strategic. In small non-profits, HR usually falls under the duties of the CFO. In larger organizations, the function is separated into its own department. You can think about your staff as just an expense, but it would be better to think about staff as your most important asset.

The rule of thumb is that you need one HR manager for every 100 workers. The complexity of your organization also plays a role in the level of HR that you need. Payroll processing is a financial function, but payroll input is usually an HR function. When you first decide to have an HR Dept., it is probably best to designate a person who is already working for your agency as the HR person. You want to move the organization to be more goal oriented and metric based. There are 2 main approaches to HR management: transactional vs. strategic. In hiring staff, the transactional approach is to just get the hiring done quickly. The strategic approach is to focus on getting really good at hiring quality workers. For performance management, the transactional approach is to do annual evaluations and is more forms driven. The strategic approach is to have evaluations be goal oriented, realistic, and measurable, and feedback should be ongoing. In the area of compensation, the transactional approach is to have standard wages and give cost of living increases. The strategic approach is it provide incentives, be skill based, and have variable pay rates based on desirable work performance and outcomes.

The transactional approach to employee engagement dictates that the employee follow the rules and do what they are told. The strategic approach is to encourage employee involvement through suggestions, problem solving, and participatory decision-making. For training and development, the transactional approach is to provide task training and to protect what you know. The strategic approach is to encourage continuous learning, knowledge sharing, workplace education, mentoring, and being future oriented. Finally, in the area of HR strategy and planning, the transactional way is focus only on payroll, benefits, and control. In a strategic HR system, any plans are tied to short term and long term personnel and agency goals.

The major decision factors which help you determine what level of HR you need for your agency are the following. 1) What do you want to achieve with HR? 2) How complex is your organizations? 3) Do you have plans to grow? And 4) How many employees do you currently employ? The next issue that you will need to settle is: How do you get it done? You can just add it to the list of duties for the CFO or the COO, which is not the ideal solution. You can outsource or insource a consultant. The consultant can either work a certain number of hours per week on-site or you can hire the consultant on retainer. You can hire a broker who will also provide various add-on services or more comprehensive HR

management. And finally, you can either hire a Part Time HR Director or a Full Time Director. You can also supplement an HR Director with outside expertise.

Mitzi Fennel, CFO at HRIA, explained how a Professional Employer Organization (PEO) works and why you may want to consider this option at your organization. A PEO can provide small to medium sized agencies with basic outsourced HR resources in the areas of payroll, taxes, benefits, and worker compensation, etc. Optional services can include: finding talent, training, performance management, time tracking, expense reimbursement, etc. The PEO organization becomes the employer of record. Some of the advantages of using a PEO are: relief from the burden of employment administration, provision of human capital strategy and guidance, improved employee risk management, management of employee benefits, and assistance in improving the agency’s productivity and profitability. It basically provides a single source for HR services and benefits and legal expertise. The PEO arrangement works well with an organization that has multi-site employees. You would not need an in-house HR function and it may be an opportunity to enhance employee benefits. Mitzi did caution that the service is not cheap – it may cost from $95 to $150 per month per employee. Her experience in dealing with her PEO has been that the HR support is good, the PEO has been very responsive to feed-back, and it has been good to have 3rd party involvement in the monitoring HR. Processing payroll has been a little cumbersome. It is not for everyone, but it is one more option for managing the HR function of your agency.

 

May 2017 Meeting: Steering Through Uncharted Waters: Planning in Times of Financial Uncertainty

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Steering Through Uncharted Waters:  Planning in Times of Financial Uncertainty
 

These are uncertain times for people and organizations dedicated to providing crucial services to under-served U.S. Communities. But an unclear environment does not mean we should sit still and wait.

Jihye Gyde and Nicole Curtain, two senior consultants from Nonprofit Finance Fund, facilitated a session
on concrete first steps for assessing your organization’s financial situation and options to inform
decision-making. These are uncertain times for people and organizations dedicated to providing crucial
services to under-served U.S. communities. But an unclear operating environment does not mean we
should sit still and wait. This is exactly the time to prepare our organizations for whatever change is
coming in a thoughtful, data-driven way.  Topics included: gauging your organization’s financial health,
adaptability, and risk tolerance; assessing risks and opportunities; and developing potential scenarios
and corresponding action plans.

One of the main concerns for nonprofits in planning for the future is the predictability of funding. There
are 6 basic steps that agency leaders should take when planning for an uncertain future. First, open a
dialogue with your staff, board, and stakeholders about what everyone is concerned about. Second,
assess your current financial situation, risks, and opportunities. Do a “pulse” check and focus on the
state of your unrestricted operating revenue. How many months of unrestricted cash do you have?
Determine where your agency stands financially – do you have room to breathe or do you have to take
action now? Can the agency afford to absorb a deficit? On you balance sheet, identify the drivers of
your assets and identify the drivers of your liabilities. Are your receivables collectible and are your
building and equipment being used efficiently?

Third, identify and focus on what issues are controllable by you. Start with the shortest term and
proceed to the longest term. There are financial, human, intellectual, and social capital considerations to
take into account. You need to think through the various levels of change.

Fourth, do the planning –develop various scenarios and what steps you need to take. It is important to
write down each scenario and think it through. Identify the main issues and opportunities, what are the
priorities, and identify the areas of risk, variability, and viability. Identify the range of changes that may
occur, articulate the assumption that you are making, and then create an actionable plan with a
timeline, benchmarks, and objectives and priorities. You should o a program economic analysis, do a
cash flow projection, and determine how much working capital you will need. You can do a go no-go
analysis, an if-then analysis, a decision money/mission matrix, or develop some useful management
dashboards. Senior Managers and the Board should be involved in developing the scenarios. The Board
is used to looking at actual to budget financial results, but you have to look beyond revenue and the
budget. Look at the range of deficits or surpluses that your agency can absorb.

Fifth, monitor developments and operationalize your plan. Develop the means to monitor your plan and
a way to check in with staff to monitor developments. A plan of action should include: timeline,
benchmarks, identify the information /date needed to manage the plan, and identify the staff or team
responsible for implementation.

Finally, share information and develop a culture of collaboration. The goal is not necessarily to provide
answers, but rather to foster a healthy dialog about the future. Communicate often with staff and try
not to be reactive, rather be proactive. Adopt sound financial practices which allow the agency to take
advantage of opportunities and avoid pitfalls.

 

Link to the presentation: http://www.nff.org/news/nff-helps-social-sector-leaders-prepare-change

April 2017 Meeting: Lobbying vs. Advocacy: Massachusetts and Federal requirements

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Dan O’Brien, Esq. and Karen Kent, CPA, gave a presentation about issues involved
with lobbying and advocacy by non-profit agencies in Massachusetts. Dan O’Brien,
Esq., is Vice President with The Brennan Group and has over twenty-five years of
public affairs experience in Massachusetts, including significant lobbying and lobbying
consulting experience. Dan has worked on a wide variety of issues in the areas of
higher education, financial services, and real estate and on behalf of Fortune 500
companies. He also served as a government relations professional in the Executive
Office of the Massachusetts Water Resource Authority for three years. Karen
Kent, CPA, is a Principal and a member of the Firm’s Executive Committee. Her
accounting and management consulting practice encompasses numerous clients in the
non-profit and real estate industries.  She also specializes in compliance-driven audits
and process implementation.

Some of the topics that they discussed are as follows: In this day and age — what do you
need to know about advocacy vs. lobbying to protect your organization’s 501(c)3
status?  Massachusetts vs. Federal rules reporting?    501(h) election vs. insubstantial
reporting on the 990? Tracking and reporting your staff, volunteers and organization’s
time costs? Do you, your staff, volunteers and consultants know how to manage your
advocacy to keep it separate from your lobbying efforts and stay within required limits?
The rules can be murky and the implementation of processes to manage, track, and
report your data can be messy.

First, it is important to define what acts constitutes lobbying and who is a lobbyist. On
the Federal level, a lobbyist is any individual who is either employed or retained by a
client for financial or other compensation, whose services include more than one
lobbying contract, and whose lobbying activates constitute 20 percent or more of his/her
time in services for that client over any 3-month period. Covered Federal officials
include members of Congress and their employees, committees, etc. and members of
the Executive branch. In Massachusetts, legislative lobbying is an act to influence
legislation including strategizing, planning, and research performed in connection to this
effort, and Executive lobbying is any act to influence the decision of any officer or
employee of the executive branch of the State. To be a lobbyist in legal terms, you
have to be compensated and you need to have direct contact with the official you are
trying to influence. Advocacy means speaking generally about an issues, but lobbying
involves try to advance specific legislation. If you have two or more communications
about an issue and meet the other thresholds (being compensated, etc.), then you need
to register as a lobbyist. If you write up a position paper for general education, then that
is not lobbying. If that activity is directed at advancing specific legislation, then it is
lobbying. If you or your organization belongs to an association or trade group that
lobbies, that does not make you a lobbyist.

If your agency directly hires a lobbyist, then both your agency and the lobbyist have to
register with the State or Federal government. There are hours worked and compensation
received thresholds which trigger the requirement to register as a lobbyist. The standards
are different for the State of Massachusetts and for the IRS. According to the IRS, there
are 2 types of lobbying: direct lobbying and grassroots lobbying. Direct lobbying is direct
communication concerning official action or legislation. Grassroots lobbying involves
asking the broader public to support certain causes or legislation. Reporting lobbying
activities to the IRS is not an easy task. You need to list exactly all of the costs
associated with the lobbying activities. There are different regulations for direct
lobbying and for grassroots lobbying. Check with the Secretary of State for the
Commonwealth, the Secretary of the State Senate, or the Office of the Clerk for the
U.S.House of Representatives for further information and clarification.