 But to get us rolling, I'm Julia Patrick, CEO of the American Nonprofit Academy, co-host of the amazing non-profit show. Jared Ransom, my intrepid co-host will be back with us tomorrow. We wanna thank all of our presenting sponsors without you. We would not be here having these robust discussions. Okay, Ellie Hume, this is always a good thing because you're back in the hot seat with us. I am, I'm so excited to be back. Thank you so much for having me a second time. Well, it's always good when somebody says they'll come back. That means we did something right. You are the New York director. We were talking in the green room chatter. If you joined us, we were talking about commuting and being a part of the hustle and the bustle and navigating all that, really, really fascinating. I think your day must never end and certain your brain must never stop. You must always just be cranking for your clients. Yes, it does not turn off and sometimes it's hard, but I think, as I was saying, like working from home makes it easier in a lot of ways for me to compartmentalize because I can say, okay, I'm done at X time and now it's personal time. And that doesn't mean I'm not responding to emails if needed and text messages, but I can kind of close the door and put it away, which I know isn't always easy for everybody at home, but that's something that our firm really cares about for our staff is being able to separate that personal and work life. And I have found that actually working from home has made that much easier for me. Well, you know, and I would imagine you're probably fresher and more attentive and in the game when you're home. Well, yeah, think about not having a 90 minute commute. I can actually sleep in a little bit. I can't imagine. I mean, I cannot imagine. Well, let's get commuting on these topics because this is really an interesting thing. We talked to you and your team about having this episode because my thing that I see is that boards are filled with people that generally are successful in their own realm. They have large egos. They are not normally at the center of a group saying, I don't know or asking a question. And so then they come onto this board environment and they're expected to be leaders. They're expected to know all the answers and they're afraid to ask questions, especially when it comes to money. So this is why we wanted to rope you in Ellie and get these five tips. So tip number one, positive tone at the top. Talk to us about that and frame this up for us. Absolutely. So like you said, people join boards with all kinds of backgrounds and a lot of them want to participate in the mission of the organization, but they have to be aware of their fiduciary responsibilities. And part of that is understanding the financials of the organization and being a part of the conversations. And one of the biggest things about setting the positive tone at the top is not being afraid to ask questions. No question is too small or too big, but it also has to do with exemplifying ethical behavior and making sure that you're saying, we're exemplifying the behavior that we want to set the tone and the culture for the organization. And if the board and executive leadership doesn't have a positive attitude about the way the organization is run, then no one else will adapt or adopt that attitude either. Wow. This goes beyond the discussion of finances and this is just a general, as you said right out the gate, a model of behavior, something really to remind everybody throughout the year that this is why you behave a certain way and you lead a certain way. I like that you say this because a lot of times that's not what we get on the financial side. It seems like we might push things off to the financial committee or the treasurer and we're like, oh, we'll let them deal with it, but we don't as a regular group buy into that as much as we should. So I like how you're positioning that. Now, number two, proper governance system. Okay, wow, that's a huge topic and we don't always align that to the financial part. Well, you just kind of alluded to the fact that the board as a whole might be putting off the responsibilities of financial management on the different financial committees, right? So one of the things is having proper financial committees, right? In general, you're supposed to have a finance committee, an audit committee and an investment committee separate of each other. But- Okay, wait, wait, wait, blow my mind. I see these move to oftentimes put together and not separate. And that they should be separate? The idea is that they should be separate, but most boards aren't big enough to accommodate it, right? So they do often combine them, but I think to the point that you mentioned and the point of this is you can't say that that's their responsibility. I don't need to know anything. I don't have to be involved in this, right? That's the whole point about committees is, yes, you're delegating some of the responsibility, but as a whole board, you have responsibility over everything. You have to participate in the way the organization operates. And so, you know, smaller nonprofits do consolidate these efforts, right? They have to have people who on these committees though, that have a general understanding and have some background in this information. And it's okay to, and you should include the finance staff to help educate the people, not only on these committees, but at the board level as a whole, so that they can be part of a proper governance system. And it's part of it could be an orientation program for new board members. And that can entail a financial management understanding of the organization. Like here's our financial statements. Here's our 4-9-90. Let me help you understand what they mean and get feedback on how to best present that information so that the group as a large whole will understand it, that you're not just relying on that CPA who agreed to be the treasurer or the guy who's in finance who agreed to be on the finance and investment committee. Like those are great, but everybody needs a general understanding of it and providing an orientation and training is completely key to the success of the governance of the organization. You know, I love that you said that because that also seems to mean it's not a one and done thing. Not a part of the orientation because there's so much, but shoot, you know, every year before the audit is done or before the information is presented, not at the meeting where the information is presented, maybe a little bit before, so everybody can start to be, you know, processing and understanding that this, what it means to be a fiduciary. I mean, shoot, if we just started there, we just started there and then walked our nonprofit board members through that. Wow. Well, you can make it an annual process, right? You know, you have new members that come on from time to time. You shouldn't just offer orientation every time you get a new board member because there could be years. We were just talking about sometimes board members who were there for a really, really long time, right? A really long time. But it's an annual thing. Offer it to new members and existing members. There's new information. There's new policies that the organization has adopted. There's new ways of looking at the financial information, new accounting guidelines that have an impact. That's been a significant issue over the last five years of lots and lots of new accounting guidelines for the nonprofit space in particular. So board orientation is an annual effort. You can create cheat sheets and teach people how to read financial. You can do so much with that and have kind of like a resource for them to go back to. I love it. Okay, so tone at the top. That was a great tip number one. You know, tip number two, absolutely navigating us to understanding what we should be doing. Now, tip number three, define strategy and guide sustainability. Talk to us about that. Sure. So the board is the big, you know, 30 foot level kind of conversation about strategy, right? Every organization should be creating, you know, some version of like a three to five year strategic plan. And, but there has to be a financial component, right? You work so hard in these strategic planning sessions, right? I know these, you know, retreats happen for the board and they're working on the strategy of the organization and they're coming up with these great high level ideas, but then you have to put dollars to it. You have to make sense of it in terms of, well, what does this mean for our budget? How do we incorporate this into what the activities we're currently doing and then monitor the performance of those plans, adjust your strategic plan accordingly as things happen, re-forecast, re-plan and keep an eye on the budgets that go along with them. You know, you can create a budget for year one and project out three, four, five, six, that however many years, but each year you have to update it. So that's what I really mean by kind of like at the board level, you're helping define, but you also have to keep an eye on it and guide it and make sure that everything's moving in the direction that you intended or redefine what that plan is supposed to be going forward. You know, I love that you used the phrase redefine the plan because that's been one of the things that I'm hearing so often, Jared and I have spoken about this and that is the stress of all of these organizations in our sector that did all this heavy lifting, spent a lot of money, spent a lot of time doing these strategic plans and then COVID occurred and a lot of folks just left it on the shelf, literally in the binders on the shelf versus going back and saying, okay, what can we navigate? What can't we add? And so I really appreciate you bringing us back to that because I feel like there have been a lot of groups that have just said, we'll go back to strategic planning and maybe 2023, 2024. But you have to look at it as a living document. Yeah. It's not a one and done situation, you know, it's something that you always have to be going back to and saying, okay, are we delivering on the ideas that we came up with? Are we moving forward with these new strategies? Are we meeting the budgets that we set out? Are we getting the fundraising that we had hoped to get to be able to do these new initiatives? If you just have a plan for the sake of having a plan, it really is worthless. And I know people spend an inordinate amount of money on consultants to help them with strategic plans. And then that consultant disappears because their engagement is over and no one is monitoring the progress. And part of the monitoring has to be at a financial level because none of these activities actually happened without finances behind them, right? Well, and I think that, you know, I don't know, and this is a little bit of a segue, but I've had, it seems like two levels of nonprofits. Nonprofits telling me off the record, oh my gosh, our revenues have gone up and the money's just coming in to an alarming rate to where we're thinking this is not sustainable, what's gonna happen is just gonna fall off a cliff, you know, next year. And then it seems like we've had the other where, you know, they've had an absolute debacle and decline of their fundraising and they're even looking at several organizations that I've been talking with, looking at mergers or having to navigate into another organization because their fundraising has been so abysmal. It just seems like it's been so extreme during this pandemic. I've seen exactly the same thing. And I think part of this kind of strategy and sustainability issue is also thinking forward about what kind of liquidity policies do we have and reserves? Like how do we plan for the situation that you're mentioning with these mergers and acquisitions? That is, you know, coming up a lot right now, but on the flip side, there's a lot more philanthropic dollars going out the door in large, enormous amounts of money to organizations that have never received grants to that extent. So then how do they plan? What do they do with it? How do they create a liquidity and investment policy around those funds to make them last for a long time? Because like you said, it's not a sustainable model. You know, they're getting these, you know, one-time gifts and it's amazing and it's getting them out of some very difficult, challenging situations that happened in the short term, but now they have to think strategically and that would be a great situation where you redo your strategic plan and how that forecast looks for the next five years or 10 years or however long you wanna project it out. You know, I really like how you tied this back in because I'm thinking there's so many organizations that look at their strategic plan in terms of like programs and not really the financial part. So I really appreciate you talking about this because yeah, I can see where, you know, maybe your plan has gone off the rails but the reality is you still have bills and you still have revenue and you've got to address this. So, okay, tip one, two and three, amazing. So let's jump on to, this is the dun dun dun dun slide. Functioning financial department and reporting. So, look, I love this topic one because it's near and dear to my heart. This is what our firm does. And it really comes down to making sure that you have the right people on your team. And what I've seen and what we often see in the nonprofit space is people delegate financial management functions to volunteers or to basic bookkeepers who understand the transactions, the ins and outs of the organization but don't know how to take that analysis to the next level and say, okay, how do we make decisions with this information? So, you know, having the right people on your team creating efficiencies in the systems and the way that activities occur so that there's more capacity with the people on your team to take it to the next level of analysis and what do we do with the information, right? We don't wanna spend all of our time crunching the numbers when we really need to be telling you what to do with that information, okay? And then because I'm an accountant at heart, and this is really core to the success of what our firm, your part-time controller does is making sure that all of your accounts, your bank accounts and your accounts receivable and bills and everything's properly reconciled on a monthly basis because you don't know what you don't know if you didn't reconcile the account, right? If you're not doing that bank reconciliation at a minimum every single month, you're gonna be missing some things. Fraud is rampant right now. You have to be looking at your accounts constantly to make sure nothing bad is happening and the more that you spend the time on those reconciliations, so you can be really comfortable that the financial reports that you get are actually accurate at that moment in time and you're not waiting until it's audit time to do all of that work because you will have missed something nine months ago that was really important and now it's gonna take you a lot of time to figure it out or fix something that could have been easily resolved at the time that it occurred. So along with that, I've got a question for you then. I mean, we're talking about boards. We're talking about getting the right people around that table as we are now around that Zoom camera. What is that type of profile? I mean, is it somebody that is a practicing CPA? Is it somebody that works for a bank? I mean, what are the types of people that we can get on our boards that can actually help lead us in this way? Because it seems to me that this is a talent issue. It's not just on the side of the organization but those people sitting around that table. Could you give us some ideas as to what that type of person might be? I do think that accountants make good board members, right? They understand the inner workings of the financial management of an organization. They don't always understand how it pertains to a not-for-profit. Okay, good. An honest comment. So that's where the board orientation comes into play. And teaching them, okay, great. I love that you're an accountant. I really appreciate your input. I love that you understand financial management in a larger perspective, but you've got to have a partner on the inside of the organization who really can know how nonprofit accounting works and then collaborate with the financially minded people on the board and educate everybody so that they're all on the same page. I love that approach because that's something that we've not talked about. And that is this accounting is different. The accounting, I mean, even the vocabulary is different and I think that for a lot of folks when they do come from maybe a financial background or they've been invested in their own operations and then they hear these different things, it can be a little jarring. And again, it goes back to our very first comment. The lack of, or maybe too much ego, the lack of strength and saying, I'm sorry, I don't know. Define that word. Yes. And I agree, especially in like the finance world, the ego often can be like, I know all this. Why are you saying that? That's not true. But in our world, it's true. In their world, it doesn't make sense to them. So we have to figure out how to meet them in the middle, bring their knowledge up, bring our presentations down to a level that is comprehensive and explanatory so that it's really a partnership and getting to the point where we can have, you know, good financial management conversations between internal financial staff and board members. I love it. And not just that, but I think it's really important to have a sense of, you know, a sense of, you know, a sense of, you know, a sense of pining it off to that, that committee. Exactly. As you. You know, alluded to three committees. That like freaks me out. I know. I know it's like, wow, that I have to really think about that. Not a lot of time left today, which is a bummer, because I have so many questions, but tip number five that you're giving us is to cultivate transparency. If you're not a board member, you're not a board member, you're not a board member. So if you're not a board member, this one can easily slip under the radar. It can, but there's so many easy ways. To really build trust. And I look at this one more about, the public is watching. Everybody is watching. That's nonprofits serve at, you know, the, I wouldn't say the pleasure, but there's, we're serving the community and it's important work that we do. It's important to be transparent and just kind of a quote. I have no idea who said it, but trust takes years to build. Seconds to break and forever to repair. So if you are not transparent. And looking for, you know, areas of risk that you need to be mindful of and that the board needs to understand everything and be transparent to the public at the same time. That's really what we mean here. So, you know, I think it's important to be transparent. You know, a couple of big things you can share your audit and your form 990 on your website. Those are big key ways to be transparent. Conducting the compensation reviews. For key management, you know, being able to compare and make sure it's realistic with what's being offered in similar organizations. Inviting your finance staff to board meetings so that there's a sense of, you know, there's a sense of, you know, there are times things happen at those meetings that never make it back to the finance staff. And the treasurer, you know, they want us to explain finances to them so they can then go present, but then they're not bringing us back the information we need in order to help giving, help give them better information going forward. So those are a handful of things. And it's a transparency thing. So those are a lot of kind of top ideas. I love that. And you know, I think the thread that I'm hearing from you this morning is that bringing our teams into these board meetings and not having them be an us and them kind of situation that we need to be merging this talent, you know, having them present so that if we have a question, we can answer it and not wait until the next board meeting, which could be months down the road. Right. Well, you know, I've seen a lot of very successful organizations will pair a staff liaison with the different committees of the board. And so that then is the staff representative who does attend the meetings, but then they collaborate and that they, you know, you have the chair of the committee and the staff liaison and they bring the groups together. Yeah, I love that. I love that idea. And I would think especially now on the finance and the accounting side, so much has changed. So many regulations have changed the flow of money grants. You know, all of these things that are changing. If you were running a typical finance department and the nonprofit sector, you know, five to 10 years ago, I've got to believe it's been radically changed. It definitely has been radically changing the way that we interpret grant agreements is certainly one of the things that has changed significantly. That's a whole topic in itself in having the development team and the finance team communicate properly with each other about the way that you interpret the language in those documents, you know, to accountants is very cut and dry now that it's been better defined. But that's not always something that is relevant to the development folks. You know, you got your fundraising committees on the board and they think one thing and they are listening to the development team. But if development and finance aren't on the same page, everybody's going to be scratching their head when they get the actual financial statements that don't have the same amount of revenue as the development team has indicated . That's a great comment that you just made. That's like gold. We need to have you come back and specifically talk about that because we're seeing that more and more and then the frustration comes down. You know, we think, oh, we're not being, I think the funders think, oh, we're lacking transparency to your point on tip number five. And it's not really that there's a transparency issue. I think it's probably it originates from communication. Expectations and then you're, you're, yeah, I can see where you're kind of going down the drain in a bad way, so to speak. So wow. Well, you are amazing. I always learned something from you, Ali. I always, I think you always spark more questions. And so for the rest of the day, I'm going to be thinking about some of these things that you said. And I bet you are to our viewers. Here's Ellie's information. Yptc.com. You all have your own training videos. You have some amazing, amazing content on there. You have a new podcast. There's lots cooking in the financial world, isn't there? It absolutely. And I'll just say that the kind of the tips from this show that we just did came out of a larger presentation. We recently did called all the board financial best practices for boards. So that's available on our website. So I highly encourage everybody to take a peek and they'll get the full spiel about all of these points I just made. Well, you've covered a lot in 30 minutes, my friend, and we are very, very appreciative because again, as my co-host, you're at ransom and I always say, you know, you only know what you know. And so that's why we need to get people like you to come in and share your, your wisdom and really inspire us to do better and be better. So thank you so much. If you want to see more episodes and it's specific, specifically, Ellie's past time she's been with us or any of the other guests from YPTC, you can get to our archive very easily. Roku, YouTube TV, Amazon Fire TV, and of course Vimeo. We have, I mean, this is like a gasp moment. We have, I think about 800 or just a little more than 800 learning episodes. So we have 500 episodes that we're marching towards, but Kevin Pace, our interpret executive producer, has taken a lot of the content and broken it down so that if you have a specific issue, you can get to it. That's a lot of content and a lot of help and you will find YPTC has been really a part of that journey with us. So we are super, super appreciative. Again, thank you to all of our sponsors without you. As I said in the beginning of the show, we would not be here having this amazing conversation. Okay, Ellie, I'm going to witness to you. I'm going to be better at asking the tough financial questions. Thank you so much. I can't wait to have everybody do that at all of their board meetings. Well, you know, truth be told, I might be reaching out to you now and again, I might just find myself wanting to know the answer before I ask it. You know how to get me. Hey everybody, thanks so much. As we end this episode, we want to remind everyone, stay well. So you can do well. We'll see you back here tomorrow. Ellie, thanks so much. Thanks, Julia. Have a good one. You too. Bye.