 Welcome and thanks so much for joining us today. It is, I believe it is hump day Wednesday and we are thrilled to continue today's Power Week. Yes, it is nonprofit Power Week with your part-time controller and we are thrilled to have Ellie with us today. Ellie Hume, CPA and MBA, it's a lot of letters behind your name there, is the New York director with your part-time controller and we are going to hear more from Ellie here soon about financial best practices and board members. So before we get started with that, of course we want to welcome and say thank you to our presenting sponsors. We are so grateful to have your continued investment in these episodes and in the conversation globally as we continue moving forward and pressing our mission focus into our community. So thank you so much to our partners and of course to your part-time controller for providing this week's Power Up or Power Week. We have coined the hashtag power up. So if you've seen that on social media that is dedicated to these dedicated weeks. So thanks again to your part-time controller and thanks of course to Julia Patrick. We wouldn't be here without her. Julia is the CEO of the American Nonprofit Academy. I'm Jarrett Ransom, also known as the nonprofit nerd CEO of the Raven Group. And again, today our guest is Ellie Hume, New York director with your part-time controller. Ellie, welcome and thanks for joining us. Thank you so much, Jarrett. It's a pleasure to be here. I'm thrilled that YPTC is able to work with you all week long and it's been a pleasure to watch the sessions that have happened so far this week and I'm really happy to be part of it. That's neat. You know, I got a backup just a little bit. So your part-time controller, you're the largest, would you say, accounting services company for the nonprofit sector in our country? You know, I don't know the answer to that. It feels like we have to be at this point because we're growing so fast. I know Jen shared with you on Monday that we're about 325 staff members at this point. And what's really crazy about that is that 125 of them have been hired in 2021. Wow. Yes. That is fascinating. And it's dedicated, yes, it's grown so fast and it's dedicated only to nonprofits. So this is a niche market, which I just love because I'm a firm believer that you can't just place any financial person in the place of the financial needs for a nonprofit. So knowing that this is your specialty, your zone of genius as I call it is really critical to our sector. And I completely agree. That's one of the reasons why I really love working for your part-time controller because we specialize in nonprofits. And so many of our team members come to us having worked in the for-profit sector for so long and they really understand how to run a business. And they bring that business mindset to the nonprofit community. And I think there's so many people that don't realize or don't think of nonprofits as businesses and therefore they don't treat them as businesses. But my, I mean, the one thing I love to talk about is there's only one difference between a for-profit and a not-for-profit business. And it's what you do with the profits. But you still have to make a profit. You can't continue your mission if you don't make a profit. So it's really deciding all of these wonderful things that we can do and reinvest in the communities and all of the activities that help our nation, our local community, our state, our country as a whole or even abroad. I mean, we have so many clients that are doing things internationally that are just incredible. So, but we have to make a profit and I think that's a bad mindset to have. And I think that plays in kind of to the board conversation that we're gonna have today because there's oftentimes the board members who are telling the nonprofits, well, we can't make a profit, we have to break even or it's okay if we have a loss, it's not okay. Like if there's nothing left over, you can't keep going. So that's, I love that conversation. Okay, well, I think we should just like close it down right now because you just like took us to church on this. I love what you said. And I would say, Jared, you and I, we don't hear that enough. Not enough. Nonprofits need to make a profit so they can advance their mission and vision and values. So thank you for starting off that way because that just speaks to my heart but we need to really drill down in why board members should be concerned about this and that marriage because I think you're right and not enough of them come to the table understanding this. So there's so many things that we think of when we talk about board members and nonprofits but what I think most people that are on boards often just want to be associated with the great mission that is happening. They wanna have that feel good aspect of it. Maybe they're a heavy donor and that's amazing. Obviously nonprofits wouldn't be able to accomplish their mission without great donors and many of them happen to be their board members but they often forget that they have responsibilities taking on that role in an organization and they have fiduciary responsibilities to oversee the organization and make sure that it's operating towards its mission and maintaining assets appropriately in order to continue that mission. And we talk about these fiduciary responsibilities in three terms. There's a duty of care, okay? And I'm gonna read a definition because I want everybody to fully understand what these are. The duty of care requires that a board member participate actively in governance and oversight of the organization's activities, okay? They also have a duty of loyalty to the organization and that requires that board member to act in the best interest of that organization at all times and then a duty of obedience. And what this requires is that the board member work to ensure that the organization complies with applicable laws and regulations acts in accordance with its own policies and carries out its mission appropriately. And so you don't, there's so many board members that just don't understand those responsibilities. These are heavy responsibilities and it matters that you take an active role in the organization and how it operates because you can be held liable for things that can go awry. And going back to Jennifer's conversation on Monday about fraud, the board needs to know what's going on and have an understanding of internal controls and policies and procedures and review those regularly to make sure that the organization is safeguarding its assets and not creating an environment where fraud could happen. All right, so Ellie, just to be clear, you didn't just make up duty of care, duty of... I did not, these are all loyalty and obedience. That's right, they need to know these things. I didn't make that up. I read you definitions that are available online for anybody to research. If you just Google board responsibilities, this is almost always what comes up. You know, and I think so often as someone who I'm gonna say a community champion and they're invited to join a board, they feel honored, they feel privileged, they feel really grateful to have that invitation and too often these individuals may not understand the true oversight and responsibility that they're signing up for. Fiduciary could be a really scary word to someone, especially if you don't know that definition. That's right, it is scary, but I think it is actually the nonprofit organization's responsibility to fully disclose that to anyone that they're inviting to their board, what the real role is. And I think it's unfortunate that there's not enough education going on at the management and board level so that people that are on the board know what their true responsibilities are, where the responsibility definition line is between what management does versus what the board does, right? There's often a blurry line there, but you know, the executive director or CEO reports to the board, but is responsible for literally the day-to-day operations. The board is more at a higher level strategic aspect, but they do need to understand the operations of the organization. They're just not the ones making the decisions every single day. So I think, yeah. I love that you said this. And I have to say, it kind of gives me the shivers to think that YPTC and their team of 300 plus professionals, you know, I think of them, you know, looking at the numbers and looking at the books and all this, but I am stunned at how you have to know this and that you understand this is such a big issue that it's impacting the numbers. And I don't know if I articulated that correctly, but do you see what I'm saying? It's like, you know, you think about accounting and finance, it's not just the numbers. It really is an ecosystem of thought. Right, it's understanding the business and knowing like, what do operations mean in a financial aspect? How do we tell the organization's story using those financials so that management and the board can make appropriate decisions for the future of the organization? Wow, I think that's amazing. And that's like, it's such a shock in some ways. I don't know, Jared, if you think that too, to hear this, cause we don't hear this enough. No. Well, I think that's true. You don't hear it enough. You don't hear it enough. And what you just said, Ellie, made me think of the financial narrative, right? And that is actually a component of many proposals. I spent a lot of my career as a grant writer, proposal writer, and I coach people all the time now. That financial narrative is just as important as that Excel document that you're submitting with numbers. Or more important. Or more. So one of the things that we just talked about is board members, and maybe I didn't mention it, but I want to now is they don't know how to read financial statements. Yes. And I know we're gonna talk about that a little bit more, but that financial narrative is what helps you understand the numbers when you can't read a financial statement. And if you can't pick out the things that are most important to highlight for the organization as a financial professional, that you might need additional support in that area to be able to explain that. Because it is your duty as the financial team member, whether it's the director of finance, controller, CFO, whatever title you wanna have at that top level of the financial function, it's your duty and responsibility to explain that information so that the management and the board knows what's going on and can make decisions. And so that narrative is absolutely key because there's no way that you're gonna have a board full of CPAs or other financial professionals that understand a balance sheet and an income statement. It's just not possible. No, it really isn't. So when we talk about that as the best practice, that's part of an overall strategy. What are some other ideas that you can share with us so that we can make our board members more engaged and more responsibly engaged? Yeah, so number one is educating. Educate the board members. Make sure they know what their responsibilities are and make them feel comfortable enough to say, you know, I don't really know what this means. Can you please explain it to me? Because too often board members, like we were talking about earlier, Julia, they are so smart and they are experts in the field of whatever it is that they're experts in, but they might not have that expertise in financial management. You know, we work with art organizations and museums and these aren't people that went to business school. These are people that have a master's degree in art or whatever the thing may be. And it's up to them to be confident enough to say, you know what, please teach me. But it's also a good responsibility for the organization to have a education program already in place for all board members and that it's, you get it when you start, it's available to you every year. They bring on new board members to participate in it. There's a refresher often and that they're creating an environment of just being able to say what you need to say and not being afraid to ask questions. So that speaks truly to like really building your culture of inquiry. And I think that is so important regardless of how long you've been on the board, right? Because leadership will change, the board president will change or should change. And, you know, the executive director, and we all know within these last 18 months, truly digging into this culture of inquiry and putting anything on the table really goes to, as we said, some, if not most of today's show, will tie back into the previous two days of why it's important to have a relationship with your banker and why it's important to build this culture of inquiry so you can mitigate the risk of fraud. And building a culture of transparency. Yes. Because I think also what I see far too often is that the executive director is afraid to tell the board the real story. Right, yeah. And they, you know, and they're afraid for a lot of different reasons, right? But their job's always on the line if something goes awry, right? The board can fire them at any time, right? If they do something wrong. But it's really building that culture of transparency so that the board is comfortable asking questions and the executive director CEO is not afraid to go to the board and say, I don't know what to do right now. We're in this position and I need you to help me figure this out. And I'm just being honest and we, you know, we lost this big grant or, and we don't know how to replace it. We need your help with ideas. And it's really across conversation and too often I see that it's just one talk, like dictating to the other and they're not really like exchanging. You know, Ellie, I've got to ask this question. You as a professional, how do you communicate this to your clients? Cause it seems to me that a lot of times this is a discussion that only gets had when things are tough or when things are going bad. And then it seems punitive. It seems like, well, you should have been transparent. You should have been, you know. And so how do you get that to Jared's, you know, use that word culture? How do you start moving this forward so that we can be even thinking about this? So I see financial professionals as a way to bridge the gap between management and the board as well as all the other departments in the organization and starting to open up the lines of communication that way. And when we present our financial information to boards for our clients, we can often tell if there is a discomfort in the room. You can see no one is asking questions. Everybody's just nodding or the blank stare, right? So that when we go to a board meeting for the first time and we see all of these things happening, we start to ask questions for them on their behalf and talk to management about, you know, providing an education, having a conversation with the treasurer. Have they thought about providing an education to the board? Sometimes the treasurer is the only financially minded person. Sometimes they're not even a financially minded person. They just were the ones that said, fine, I'll do it because nobody else will. So, you know, we recognize that these things are happening and we will often bring up those conversations and, you know, discuss, would it be helpful for you? We think it will be, do you think it will be for us to provide an education? And, you know, one of my favorite parts of my job is training board members and management on how to read a financial statement. There's just too many people that aren't educated in that that we work with and they're responsible for this information and they need to understand it. So, we, because we do it so much, we can see just from the feeling in the room what is needed for an organization. And sometimes they're open to it and sometimes they're like, no, we're fine. We don't need that. And, you know, so we try to tweak it. We try to stick it in there whenever we can, even though they didn't ask for it. Yeah, I love it. So as, you know, as nonprofits, and we talk often how there's 1.8 million nonprofits in the United States alone. So, Ellie, these are nonprofits, as you're very well aware of all different sizes, you know? And when I say sizes, I'm thinking of staff and operational budget and really, you know, there's so many factors that come into play for these 1.8, but these best practices for, you know, financials as it relates to board members, this is best practice across the board. Is that correct? Across the board. Okay, no pun intended. Or pun intended. Yes, total pun intended. Because I think that's, you know, I talk often with clients, especially in a very grassroots setting, and I call them their 1.0 or maybe their 2.0 board. These are close family and friends before they're really able to mature into the life cycle to attracting and retaining some true rock star board members that might have previous nonprofit board service, but serving on a board again goes back to regardless of the size of the organization, regardless of the age of the organization, this board role is a very serious role to take on for any size organization. And these best practices should be considered for everyone. Absolutely. That's 100% true. And even in the really small ones, those board members are like doing the stuff, right? They are the organization. So it's even more important that they understand their responsibilities. And they also have to be careful at that level that they don't, you know, cross the line of impairing their independence. I mean, there has to be some level of unbiased when you're a board member so that you can help the organization make clear decisions. And so sometimes in those young organizations where you're a board member and you're doing everything, you have to be a little bit more careful as well. But yeah, best practices apply across the board, whether you're a nonprofit with $10,000 in revenue or one with 10 billion. 10 billion, yeah. So, Allie, let's sum. You know, we don't have that much time. I mean, it left, it's just going by so fast. All of our nonprofit Power Week episodes have gone by very fast with YPTC this week. But I want to ask you about how do we engage those board members that maybe are like, oh, I'm not on finance committee. So I don't need to worry about that. Bless you. I made her sneeze with that question. But, you know, like, how do we say, yeah, you know, the marketing and communications committee, you need to know this. How do we do that? So there's definitely a level of information that a finance committee would need that's a little bit more detailed than the high level board. So one, gauging the level of knowledge and skill set and from all the members of the board, just making it part of the orientation for all board members, regardless of what their expertise is or what committee they're gonna be conserving on, that they get an entire orientation about the organization, including the finances and that the financial professional of the organization, whether it's an in-house person or an outsourced person, that they have the ability to summarize the information in a digestible format for all levels of the organization. So management is gonna see the very detailed financial statements with that memo that describes everything, right? Then the finance committee could potentially just see the memo and a summarized set of financial statements. But when you take it to the board level for discussion, maybe it's in a dashboard format with some conversation of trends and things like that, that they really can digest in a pictorial format. A lot of people who don't understand numbers really do get the picture aspects of those things. So using those tools that are available to educate and communicate at all levels. That is very smart and I love the dashboard. Julie and I are known for these curveball questions, but I know you're gonna get out of the park, okay, Ellie? So take some stretches or whatever you need to do. One of the trends actually that we've been hearing quite a bit and maybe this was happening prior to the pandemic is to establish your budget and then to review your budget maybe quarterly so that you can allocate differently or make changes in light of everyone navigating forward and still not quite sure knowing where we're going. What are you telling clients now? What is YPTC's statement of best practice when it comes to reviewing these financials? Good question. Sure, so reviewing actual information should be done on a monthly basis. But what you just described, we call forecasting. Forecasting, okay. So when you do the budget, like if you're a calendar year, you might do your budget in September and October so it can be approved in the November meeting and that way it's in place before your January one start of your calendar year, right? So that's old information. You didn't know everything you know today, right? So you want to be able to incorporate that new information. It's great to keep your budget as a static number and understanding for benchmarking but using the tool of a forecast to be able to say, well, now I have this new information and this is what the rest of the year would look like given this new information. And whether you look at that monthly, some organizations need to look at that monthly based on the evolution of what's happening in the organization. It could be changing rapidly. I mean, think about what happened in 2020 and just everything changed overnight. That was the ideal time that we got to stop and do a forecast. What is this going to look like? But it evolves so much, you had to keep re-forecasting and keep re-forecasting. So it could be monthly, it could be quarterly, at least bi-annually, I would say no less than that. A lot of organizations wait till you're like nine months in and then they do it but I would say at least six months and then another three months so that you have a better idea of what's happening and it helps you plan for the next year too. Right. Wow, Ellie, we can be talking with you going all throughout the rest of the day because you had some amazing ideas. And again, when it comes down to our boards, they are that piece of the process that really moves an organization forward, holds it back, or ultimately I think destroys it. So thank you so much for coming on and talking about financial best practices and board members. It's been really cool to have you here to share your ideas with us. Here's Ellie's information, yptc.com. You wanna check them out. They've got a bunch of resources on there. Again, my intrepid cohort leader, whatever I wanna call her, I definitely wanna call her the nonprofit nerd because she's my nonprofit nerd, Jared Ranson, CEO of the Raven Group. And again, I'm Julia Patrick, CEO of the American Nonprofit Academy. We certainly wanna thank all of our sponsors without you. We would not be here having this discussion. Mission Business is a really cool opportunity for you to connect back into some of the thought leaders of your part-time controller. They have a brand new podcast system. It's open up to everybody, not just their clients, which is really nice because a lot of times organizations will do this but they kinda keep it close to the vest. This is open to everyone. You can find it on their website. Check it out. It's really well done. Again, this is part of a new and, well, I shouldn't say new. It's a very unique situation. We're only gonna be doing nonprofit power weeks a couple of times throughout the year. So it's a very limited drill down of ideas going around one thought. And we talked about fraud and nonprofits this week. We talked about bankers in your boat, which was riveting. And we're gonna talk about remote accounting and then we're gonna do our Ask and Answer Friday episode with all things accounting. So check us out because there's a lot of great information. Wow, Jarrett, numbers aren't so frightening today, huh? It's amazing. This entire power week has been phenomenal. And I'm just so grateful for the leadership at your part-time controller. Again, having this niche market dedicated to the nonprofit sector. Thank you for all that you do. Ellie, your team, everyone there at your part-time controller. We are so grateful. You do make financials a little bit more bearable. That is not my zone of genius at all. And so I love it when it is someone's zone of genius because that's when you really can create this perfect, truly divine partnership. So thank you for sharing your time and expertise. We're so appreciative. It's been absolutely my pleasure to participate with you ladies today and share what I love about nonprofits. And just as you said, Jarrett, we truly wanna be a partner with our clients in helping them understand their finances so that they can make the best decisions possible to continue to meet their missions. And that's what we really care about. So thank you so much. Well, hey, on that note, as we end every episode, and we have now for nearly 400 episodes, we want to remind everyone to stay well so you can do well. We'll see you back here tomorrow, everyone. Thanks so much.