Danosky & Associates

Consulting for Non-profit Organizations

Join Our Mailing List
You are here: Home / Archives for Karen Milton

Handling Executive Transition at a Non-Profit Organization

by

By Karen Greve Milton, Senior Consultant

This is the first part of a three-part series on Executive Transitions

Ensuring a smooth transition when an Executive Director announces their departure is rarely easy, but it can be handled effectively and efficiently, leading the non-profit organization to hire a new executive who will lead the organization into the future.  Whether or not your Executive Director is long-serving, the transition steps to hiring a new executive remain the same.  For the sake of the discussion in this series, we will assume that the non-profit does not have a succession plan in place and therefore needs to hire someone from outside the non-profit to serve as the new Executive Director. 

Form a Search Committee:  The first step in this process is for the Board to form a Search Committee to oversee the search for the new Executive Director.  The Search Committee should interview fellow Board members and key staff regarding their views of the current state of the non-profit:  what is working well, what is not working well and what, in their view, should be changed.  Board members and staff also should be asked for their views of the duties and responsibilities of the new Executive Director.  This self-assessment exercise will help the Board develop a shared consensus on the future direction of the organization and define the skill-set, experience and characteristics needed in the new Executive Director.  Remember, you are hiring a new leader to take your non-profit into the next chapter of its existence and that means you are seeking a new leader who will have the vision and requisite experience to lead your organization into the future.

The data collected from these interviews can then be used to draft a job description for the new Executive Director.  The Search Committee should develop a hiring plan with a timeline to solicit applicants, interview applicants, hire and onboard the new Executive Director.  This hiring plan should be presented and approved by the Board.  Once the Board approves the hiring plan, the Search Committee should implement it so the hiring process gets underway as quickly as possible.  The hiring process most likely will take six to nine months from the placement of the job announcement to the onboarding of the new Executive Director.

During the search process, the Board should ask key Board members or Committee Chairs to take on the task of overseeing key projects, programs or events that are underway or in the planning stages.  These Board members should work with staff (and the Interim ED) to ensure that the organization continues to function, including carrying out fundraising efforts.

In part two of this series, we will discuss Appointing an Interim Executive Director

Let us know if we here at Danosky & Associates can assist you in your leadership transitions.

Springtime Brings Budget Planning for Non-Profits

by

Springtime Brings Budget Planning for Non-Profits

By: Karen Greve Milton, Senior Consultant, Danosky & Associates


Spring is here and for non-profit organizations that means financial planning for the upcoming fiscal year should be well underway. Every non-profit organization, regardless of size, should develop and implement a financial plan — an operating budget — for each fiscal year. 

Financial planning is the key to a non-profit’s success and sustainability. A well-developed operating budget allows for future use of limited non-profit resources and focuses on the priority goals and objectives of the organization. Non-profit organizations functioning without an annual budget are operating in the dark and risk being unable to navigate a changing fiscal landscape. Annual budgets shed light on the organization’s financial picture and keep the organization focused on its programmatic purpose as the fiscal year progresses.

Developing the operating budget is a team effort involving board members, staff, volunteers and other stakeholders. If the non-profit organization has paid staff, the responsibility for developing a proposed annual budget for the upcoming fiscal year falls to the staff. Board members have responsibility for reviewing the proposed budget carefully and ultimately approving the budget for the next fiscal year. Where the non-profit entity relies solely on volunteers, the responsibility for developing the annual budget falls to the board’s finance committee members or other volunteer members of the organization.

A non-profit’s annual operating budget serves as a financial management tool for the organization.  It provides a guide to the organization’s financial functioning during the fiscal year. The approved budget allows the board and staff to gauge how the organization is operating during the current 12-month fiscal year and whether adjustments to any financial assumptions included in the budget need to be adjusted. 

In preparing an annual budget for your non-profit, it helps to use a step-by-step checklist of basic steps: 

  1. Set the timeline for budget preparation, review and Board approval.
  2. Agree on the non-profit’s budget goals for the new fiscal year.
  3. Understand the current financial status of the organization.
  4. Use the current and prior fiscal years to forecast financials for the next fiscal year.
  5. Develop an income budget of anticipated revenue from all sources.
  6. Develop an expense budget of all anticipated expenses.
  7. Review the draft budget with the Board Finance Committee.
  8. Obtain full Board approval of the budget.
  9. Implement the budget at the beginning of the new fiscal year.
  10. Monitor the budget throughout the fiscal year and adjust as necessary.

You can find checklists, templates and advice from various associations and entities, such as The National Council of Nonprofits (www.councilofnonprofits.org), and Propel Nonprofits (www.propel.org), among others.  

Good budgeting signals good fiscal health and represents a key component of financial sustainability. The annual operating budget is one of the fundamental building blocks of sound financial management.  Non-profits can use the annual budget as the basis for financial reports to donors, lenders, foundations and government agencies and the new Form 990. See https://www.councilofnonprofits.org/running-nonprofit/administration-and-financial-management/budgeting-nonprofits   

A few recommended tips for getting started: 

  • Set a reasonable timeline several months before the start of the new fiscal year.
  • Identify your income by categories (individual donors, institutional donors, foundations, events, programs, etc)
  • Separate firm expenses (rent, insurance, etc.) from variable expenses
  • Major events/programs and capital projects should have their own budgets
  • Keep fiscal assumptions realistic and note them separately in the budget

Preparing the annual budget should be viewed as an opportunity to review financial priorities, assess the organization’s financial health and forecast for the future. Remember, the operating budget is not “etched in stone,” but constitutes your financial management guide for the fiscal year. It should be reviewed at each Board meeting during the fiscal year and adjusted as necessary.

The next question is whether the annual operating budget needs to be balanced. We’ll address that issue in our next article. Meanwhile, let’s get started on our spring-budgeting for your non-profit. 

When Banks Fail: Board Fiduciary Responsibilities

by

When Banks Fail: Board Fiduciary Responsibilities
By Karen Greve Milton, Senior Consultant

Late on the evening of Wednesday, March 8, 2023, a local bank in California, Silicon Valley Bank  (“SVB”), decided to sell its entire $21 billion portfolio of long-term fixed income assets, netting the bank a $2 billion loss.  At the time of the sale, SVB’s total assets exceeded $200 billion. A $2 billion loss against bank assets far exceeding that amount should not cause any concern among the bank’s depositors, right? Wrong.

The actions taken by SVB that fateful Wednesday evening turned out to have a seismic impact on SVB as well as the nation’s banking system. The SVB portfolio sale triggered a mass panic among the bank’s depositors which led to a run on the bank and ultimately, the federal government taking over the bank on March 10. Ultimately, the federal government backstopped SVB depositors with liquid assets over the FDIC-

The implosion of SVB and the recent banking crisis provide a cautionary tale for non-profit boards of directors. In his book, Ten Basic Responsibilities of Nonprofit Boards, Richard T. Ingram writes that boards of directors have a duty to “protect assets and provide financial oversight” for the non-profit organizations entrusted to their care. See Ten Basic Responsibilities of Nonprofit Boards, ch. 7, pp. 51-64.  Generally, boards carry out their fiduciary duties through a finance committee of selected board members. The finance committee ensures that the non-profit’s financial resources are managed appropriately without being subject to undue risk.  See Ingram at pp. 58-59.

The caveat about not subjecting the non-profit’s financial assets to undue risk ties into the issues raised by the March 2023 banking crisis. Under the FDIC, bank deposits — for both individuals and businesses alike—are only ensured up to $250,000. Unlike the federal government’s actions regarding SVB and Signature Bank, deposits in excess of this limit may or may not be recovered in the event of a run on the bank and an ultimate bank failure.

There may be strong business reasons for non-profit organizations to maintain liquidity of financial resources in excess of the FDIC threshold. But board finance committees need to think about the best ways to protect these financial assets within the current FDIC-insured limits. 

I am a member of a non-profit board of directors where I also serve as the organization’s Treasurer. This non-profit has its banking operations headquartered with one of the four largest banks in the country. Last year, due to complaints about the lack of customer service from the organization’s current bank, the finance committee approved a recommendation from the executive director and chief financial officer to move the organization’s banking business to the regional bank where the non-profit’s investments were being managed. The transfer of the bank accounts, for reasons beyond the scope of this article, dragged on for months and still had not occurred at the time of the SVB implosion. 

So, what actions did we take and what actions should a board finance committee take? The good news is that our investment management team reached out to us almost immediately to assure us that our organization’s investment portfolio was safe. We remained in almost daily contact with them throughout the banking crisis.

Secondly, we decided to “pause” the transfer of the organization’s bank accounts to this regional bank until we had the opportunity to re-assess the situation. Ultimately, the executive director and I asked the chief financial officer to research several other community banks near the organization’s offices and provide a recommendation to the finance committee. 

We also checked in with sister organizations to learn how they handled their banking business, including the need to maintain liquid cash in amounts exceeding $250,000. What we learned from our sister organizations reinforced for us the need to maintain bank accounts at multiple banks to satisfy our need to maintain cash amounts in excess of $250,000 and to ensure that all the non-profit’s cash resources were within FDIC protection limits.

Lessons learned from the banking events of March 2023:

  1. Develop and implement a financial plan to manage all the financial assets of the non-profit organization
  2. Engage in strong financial oversight and management of the non-profit’s financial resources. 
  3. Develop, implement, and follow financial policies pertaining to fiscal management and investment of the non-profit’s financial resources
  4. Maintain liquid cash assets in anyone banking institution within the FDIC-insured limits
  5. Consider spreading cash assets in excess of $250,000 among multiple banking institutions
  6. Investigate whether large amounts of cash resources can be invested in investment vehicles that provide both higher rates of return with the ability to liquidate these investments quickly and without penalty
  7. Bank where the non-profit can develop a strong banking relationship with good customer service.  Notwithstanding the SVB implosion, community and regional banks provide firm financial support to non-profit organizations located within their communities
  8. Be proactive about managing the non-profit’s financial resources. Ask questions. Gather information. Take the actions necessary to carry out your fiduciary duty

BECOME A MEMBER!

Like what you see? There’s more where this came from!

Become a Danosky and Associates NPO member to gain unlimited access to our library of blogs, webinars, podcasts, articles, and our virtual consultant office hours that will help your nonprofit achieve your vision and fulfill your mission. Learn new strategies and skills, such as: how to integrate your vision, mission and long-term objectives, generate new systems for innovation, build a stronger board, create a compelling narrative, reach your fundraising goals, and plan financial scenarios; along with more special surprises throughout the year. For only $49 a month (or $450 a year), you can acquire the tools you need to build a better world.

LEARN MORE!

Membership Consulting for Non-Profits

Our Mission

We provide nonprofits the guidance, support and tools necessary to build a better world.

Our Vision

Every nonprofit will have the capacity to fulfill their missions and make the world a better place. 

Who We Are

Danosky & Associates is an action-oriented, results driven consulting firm that builds nonprofit capacity, applied through an equity lens with innovative strategies for an ever-emerging future. 

Join Our Mailing List