 Welcome everybody to another episode of the non-profit show. I'm Julia Patrick and I'm really excited that you have joined us today with Beth Farley CPA one of the partners and lead brains at iBailey Friday Beth is one of our favorite days Jared Ransom the non-profit nerd often calls it fry yay But this is a little different we've had Beth Man, she has been our champion and we have peppered her with all sorts of questions this week But Friday is a day where we round up with questions that have come in. They might be questions that we have And so we can kind of answer some of those those things that might be hanging out there and then just kind of recenter what we've done on the week We've really been talking about an interesting topic that that Started out maybe thinking it wasn't so interesting and it's about documentation and I've been Fascinating what Beth fascinated by what Beth has shared with us today And so it's been a lot of fun. Like I said, this has been a non-profit power week We only do this a handful of times every year and we take all five days all five episodes and we really drill down on one topic and So Beth has been with us every single day, which that's a heavy lift my friend. Thank you Thank you very very much Again, I'm Julia Patrick CEO of the American non-profit academy Jared Ransom the non-profit nerd will be joining us back on Monday non-profit power week as we said we have a lot of amazing partners that Support this concept with us and they include fundraising Academy at National University Blumerang your part-time controller American non-profit Academy non-profit thought leader staffing boutique non-profit nerd and non-profit Tech talk and again if you have missed any of these episodes or perhaps you want to share Some of this information with other team members or your board You can do that simply by downloading our app Finding us on streaming platforms as well as in podcast format. So wherever you like to consume your content we will be with you and You can share this knowledge completely for free Okay, Beth Farley CPA you have really Gosh you've like enlightened us this week you've reduced a lot of fear you've given us a prod in some ways Talk to us about and I know this is like a weird question But we were talking about this in the green room and I think it really bears some repeating talk to us about why I Bailey and the realm of accounting is so different now because it's more than just being in the back room doing the ledgers Yeah, absolutely, you know we Accounting started out as focusing on your financial statements and your tax returns That's always been historically and when you look at it accounting firm and you say CPA you think okay You've got your audits and you've got your 990s or I mean for nonprofits over you got your tax returns Whatever that is And really it's evolved over the years because we've become so much of a we want to be partners with our Clients we don't want to just be an outside source. It says like you said gotcha We're not there to like try to find what they're doing wrong or fix You know at the end of the year We don't want to fix things what we want to do is we want to come alongside an organization and we want to help Them with their technology with their Cyber security with their you know compensation analysis just everything that you're thinking about when you talk about strategic planning Where's this organization going and how do they get about doing that? There's a big new You know world out there about how you do those things and you don't want to be doing it How you were doing it 25 years ago and especially not how organization was doing it 50 years ago, you know, it's it's very different There's some amazing Programs out there that we utilize to help us with business planning and analysis That's a great one where you start talking about forecasting and if you're gonna add a hundred more clients How does that change your fixed or your variable cost, you know and being able to map that out? Those are really cool things that we can you know come alongside and really work and be a team with an organization You know, it's such it's got to be for a lot of organizations and maybe I'm showing my age but I Would have never thought of the accounting in the finance World as being a part of this, you know, surely we Get our data from them in so many ways the financial data But then a lot of times we have to interpret it and we you know Outside that department have to figure things out and and the number of times I've sat in board rooms where the audit comes it back or you know The accounting firm and I'll say I'd Bailey sending their their leaders to big organizations that I've sat on boards with Everybody's afraid to ask questions. No, no, so they're just like, okay. Yeah, you know I mean it and it's really a problem and I think in the nonprofit sector We got to shift our brains here to say They're not just filling out forms man. They they have some keys that we need to Use to unlock some of our potential Yeah, absolutely and the finance department. I mean, that's really the biggest thing is that when you're talking about the accounting Part of an organization it is absolutely crucial to the organization's long-term accept success Obviously a nonprofit your programs are hugely important and most of your funding should go to your programmatic Purposes we want to be serving the community, you know serving meals helping kids That's what we're doing is nonprofits and that's crucial that we're doing that appropriately But if you don't have the backbone of the organization your finances strong and the documentation strong Then you will not be able to continue because you're not going to lose funding over some of these things And that's what it really boils all down to do we have the data to get the funding? We need report on the funding we need and be able to you know continue strongly and know where we have You know reduced funds or where we need to ask for more funds understanding that when your Finance team is not getting the information they need from across the organization They can't really do their job to be able to do that Okay, so this is like a totally Left field and we're in baseball, you know world series Rouching so now that's on my mind. So I just got which I learned about you this week. You're very very important I know and Jared Ransom the nonprofit nerd got to go to The playoffs yesterday, and I did not so not that I'm bitter, but you know not at all I'm just saying so this is a super weird question. And again, I want your opinion on this I don't expect for you to to speak for the entire World of accounting and finance But are the people involved in accounting and finance, I'm not just saying I'd Bailey I'm saying the whole sector are they understanding how important that their work is and how they need to be working alongside even if they're internally functioning within an organization to to provide that information because sometimes I feel there's a little bit of reticence or They're they're protective of their data if that makes sense I mean Do you see that they're ready to go and say yeah I want to be a part of the bigger picture and and and do the strategic part or is that just me? Well like anything. I mean, I think you've got different groups of people, right? You've got some groups where yeah, the team is ready to go They understand the importance and then you've got programmatic and you've got executive level and you've got the board who yes They all understand how it needs to work together And then you have other organizations who are just really disjointed and they consider everything kind of separate So your grant writers go out and and ask for a grant and they don't talk to the Programmatic people and they don't talk to the fundraising people and they don't talk to the accounting team And now you've got this grant that you don't have the people to fund to staff it You don't have you know, but they got in money So everybody's like oh, they brought in money But that's not that maybe isn't the best place to bring in the source of funds So you have to work together as a team And and the only way you can do that is if you have the documentation to support What you what it is that the organization needs And I would say probably the saddest thing I see is that when an organization puts so much focus on the programmatic That they don't hire anybody or won't put any funds towards the finance team Because they they're like we got to be so much programmatic But if you don't have that, you know administrative piece behind it, then the programmatic does suffer in the long run Right. I that's incredibly wise And and I think it's it's really an interesting More modern way to look at how we manage nonprofits. So Um, awesome. Thank you. Well, we've got a bunch of questions that so let's get to it. And again, you're in a hot seat again You're going to be glad when this week is over because you're gonna be like no one asked me these hard questions I love the hard questions Well, you've been great with hard questions Um, this one came in during one of our first it might have come in on Monday And you just mentioned this and it was super it it totally Tweaked I think both Jarrett and I and we really been excited about it And so the question came in Beth you have mentioned a compliance calendar. What goes on it? So we're talking about you know, maybe like, um A calendar that you know a google calendar shared calendar. I'm assuming correct. Yep. Yep It could be an excel document word is a little bit harder I think to kind of organize like a calendar type, but it could be word It could be a lot of there's some software programs to manage calendars too out there So every organization can use it differently, but you really want to start looking at well What are the things that we have to make sure we get done and will cause issues if we don't get done filing your 990, right? Um, do getting your audit and getting ready for your audit Making sure that you've done payroll taxes timely and that you're paying your payroll taxes state charitable registration That's a big one for nonprofits. Obviously. You've got to make sure you're registering the right states at the right time Um, secretary of state License renewals, maybe you're a health care organization And you've got you know, when you want to make sure you're all your individuals working for you Have their license up to date because like as an accounting firm they help us to make sure our license are up to date So that's part of a compliance calendar A lot of that Right, right. Yeah, that's smart Uh grant reporting grant applications, you know, uh board meetings So it's a lot of different things It can be ones that have set deadlines that are coming from a government or it could be internal deadlines like for a board meeting You can kind of do both and there there's going to be different people responsible for that So, you know, you may be color coded, you know The cfo is responsible for these ones the ceo is responsible for this and the program director is responsible for these But they're all together so that you know, the ceo can kind of take a look and make sure that they're are being followed and met Interesting. I noticed today. I peeked to see who was uh joining us live. I know we have a couple schools On I can see where you would put on the compliance calendar You know, when teachers report when does the school year start when is the fall break? blah blah blah, you know all of that. So it's not just Accounting and finance compliance, but it it's exactly what you said in the very beginning, Beth It all feeds in and it feeds together. So, right, right Yeah, because I know some organizations have to have fingerprints, you know on their, you know As they bring in new people and or maybe annually they have to go through and make sure that they've Met, you know procurement Things so it's not just the finance piece But you've got to be able to take a look at the organization as a whole to make sure that You're not missing things And that one department hasn't kept kept up on theirs. Whereas the other department has so it's like, you know, it's it's nice to have it all together Oh my god, super genius. I told you this I think in the green room or maybe even before But I think the compliance calendar and I'm a geek I I own it I think it's like my favorite thing I've learned this year My favorite thing because I'm like so I can just see it and I can see how it weighs on you When you know, it's like niggling in the back of your mind Some things do or we were supposed to do this But if you get it on that calendar, it's just man, it's it's just so so smart Um Okay, so a question just came in and the question goes when a donor lets us know they have a planned gift We enter it into RE with a 30 thousand dollar placeholder our gift processing team won't give officers credit If if the letter documentation then the gift is for example 100k is that standard officers are upset So this kind of fits into That calendarizing or documenting and pulling through Um, and I know again, this is somewhat of a of a left field question, but it really orients us towards Strategically, what are we planning? What are we expecting? Can you talk about that briefly before we move on? Yeah, and I think it you know, it really dives into What if you decide as an organization how you're going to recognize development wins Because those I mean, that's really the driving of the question Right is that if you win a development and you get something for a hundred thousand in one fiscal year But you know, you're not going to get it for the next fiscal year when the cash actually comes in What year does that go into because that plays into bonuses Which you've got to be very careful how you structure those to make sure that it's fair to the individual in the organization But really what ties into that when you're going to recognize it It has to go back to general except the accounting principles Which is a little bit different than what we're talking about here But you can't record something before you'd be allowed to under under, you know, fazby rules and regulations, right? so That's why the upfront conversations about how things are recognized Internally within the system to make sure that you're documenting it Because you don't want to lose track of that too Even if you can't record it for accounting purposes, you don't want to say, oh You know there we had this conversation. You don't want to lose track of that So you've got a document in within the Development or with the donor software that that's there, but then recording it may be different So you have to be very clear when you have those conversations about how that's going to be recognized as a win For the organization upfront is it either when it gets recorded for accounting purposes when the cash comes in or when you know about it Which can be very different things I love it. You clear concise documentation of your policy upfront And that was day two. You know what? I love how you said you you shared amazing phraseology there And that is documenting versus recording two different things, right? But you one leads into the other and again this documentation week has been fascinating Okay, let's go to another question because This is another a little nuanced of a question and it and it's it asks How critical is it for the board to be involved in documentation? Yeah And we've talked a little bit about this throughout the week I think it's so important for the board of directors to understand their fiduciary responsibility And that does not mean that they're in there reading the policy and check marking that it's getting done on a daily basis But it also doesn't mean that they don't know if they have policies or not That's you know, that's you know, those are your extremes, right? And so it's it's going to depend on the size of the organization Do you have no employees or do you have a hundred employees? because Those can be very different circumstances on how involved the board needs to be no employees It's all board members developing these policies and procedures Um an organization can put that responsibility on the board as part of their annual evaluation of the ceo You know, what have you done ceo to make sure that these policies and procedures are being followed? Maybe it's that level because you have enough people on the team that they don't have to be involved Um, so it can really depend but they have to keep in mind that it is their responsibility to make sure that there is processes and policies that have been adopted You know, I love that you mentioned that and we touched on that briefly but You know sliding that into the job description and the job review Super important. Oh my gosh. I mean super important. Yeah, and I um, I love that and I I have to fess up I haven't seen that very often You know, yeah I think a lot of boards tend to kind of just let the organization deal with that and then you know, they're focused on Making big picture decisions, which is really what a long-term board is responsible for is you know fundraising There's a lot of different things that go into that But that's a key piece to it to make sure that those are occurring And you know, if there's an issue and they find something as the finding on the audit They have to follow up on it That's probably has to deal with your documentation of your policies and procedures and following through that they're occurring appropriately Yeah, you're smart. Well, let's go to you're doing great so far. So let's give you another question And let's see how you do because this is again a nuanced question What time of year should everything be reviewed when we're like you had a really interesting segment you did with us about what you document how you document the five w's things of that nature, but It's a heavy lift man getting this done So how do we know if we've been doing it right or we're sticking to it? you know because So often in the nonprofit sector we like woo-hoo. Yay team. We start off strong and then we do like Yeah, yeah, definitely because something else comes up. You've got some program or event that you need to deal with for sure Um, so you want to at least review your policies and procedures on an annual basis to make sure that they're still current And you're still doing all the pieces that you're supposed to be doing Um, you would also want to evaluate it if you had an addition of a team member Or a reduction of a team member. So say you went from a four member Accounting finance department to a three member. What was that fourth member? Um, have you evaluated why you're not replacing that person? Maybe you just can't find it And so now you're just shifting work around which is happens sometimes, right? And so let's make sure we've not lost any segregation of duties any review and approvals So you really don't want to wait till the year to do that Um The annually can happen at different times though because what if you have your fiscal year is june? All of your grants are due all of your grant applications new things are starting up new programs Maybe nobody has time in july august and september to do that You know as you close out the end of the fiscal year Maybe you do it in march because march is very slow for you You put it on your compilant compliance calendar and you make sure That you know somebody's looking at this and it happens whatever works best for the organization I love it. So again, my favorite new thing and it's not just a shiny object It's like a super cool concept that compliance calendar another thing to put on there when these reviews are going to take place Right. Yeah, so that you're not just like, oh, yeah We shouldn't do that. So when did we do that? Oh, that was five years ago Yeah, well, and you know, I think you made a really interesting comment and that is You know, we are in a time of change with the demographics of the labor market labor supply and retirement shifts in in how Our employees want to work and so there are a lot of things that are being rediscovered and redefined Um, and so I can see where this could just easily You know, as I say slip off the table and you're you know You're like, oh, whoops, you know until you have a problem Which goes to the next question and I think it's kind of an interesting question because I feel like Maybe um, it's part and parcel of part of this discussion And the question is how does documentation factor into the audit? Um, and I think the part b of this question is Is the audit going to find that things haven't been documented correctly? Yes, it is And and to be clear here I want to talk about the fact that you know, obviously when you think audit and in the nonprofit world We go to financial audit or single audit. You know, those are the first things we think about But you could have an irs audit You could have a grant or come and do an audit for you You could have a workman's comp audit, you know, there's a lot of things that fall under that audit framework And so if you've never had a financial audit don't tune out. That's that's the point here Okay, and you know, I gotta I gotta I gotta fess up I appreciate that you You Open the door a little bit more because yeah, I think of the financial audit Right, right. Yeah. Okay. Okay Yeah, but I've worked with organizations as we go in to do an audit and they don't have any written You know internal control policies now they have some processes They follow that says you have to have two signers or this person has to review But it's never documented anywhere So then there you do it and you're testing things and about eight months into the year It stops happening So one of those pieces stopped happening because they had a change in staff and nobody knew to pick up this review piece or that piece And um, if you've ever had a single audit, you know, it's basically like it either happened or didn't happen You know financial audits we look at materiality. I know the IRS sometimes will look at, you know Or workman's comp. I've had them look at well, you've got most of it Maybe this one is not but like a single audit for when you have federal funding You either did it or you didn't do it and that's how the federal auditors come in too when they're testing It's like either you documented that review or you didn't and if you didn't it's a finding So wow, okay It's crucial that you understand what those processes are and because it can have a significant effect on Long-term the organization Losing funding it would be the worst case scenario, right? Yeah Would you say that this is something to be more concerned After you you meet a certain threshold like maybe you're you have more than 300 employees or you're you're You're over 25 million dollars or oh, you're shaking your head like Happen at any level No threshold at all and you know you talked about earlier. I don't remember the number. How many nonprofits there are In the united states. It's a significant number. Yeah, so 1.8 million and I um, I've talked with organizations that are just starting out They have a 990 in that's all they're finally that means they have grocery seats under 50 000 And they have one person doing everything And maybe 50 000 doesn't seem like a lot but to me personally every dollar is crucial when An organization is donating And so if you have a small organization with a small board and one person's doing everything and they still 25 000 It's it's a big deal, you know If they still 10 dollars because you just didn't they went and you know They're taking themselves out and getting pedicures once a month like simple things like that You know, maybe it's not a lot I just think that you've got to understand that these Misappropriations and mispostings can happen at any size. It doesn't just happen at large organizations So you want to start an organization from day one? With considering what your processes are and you're and documenting that so that and of course it also protects the Organ the individuals too. That's everybody thinks. Oh, this is only protecting the organization No, this protects the individual Because they had somebody look over their stuff and it was approved So now if somebody else comes down and says, oh, well, we shouldn't have been doing that No, the board the staff at that time approved this as type of the expenditures they wanted to have You know, I appreciate you saying that because that's true. I can see that. I mean, I I think we think about Oh, it's just for the organization, but I like that I don't want to use the word spin, but I like that approach that yeah, it's it's for the health of Of those those working there and leadership and and the fiduciary aspect, you know, that goes all the way to the board um, okay It's so fascinating and and we haven't one of our last questions and I I haven't given you a lot of time and we don't have a lot of time left But if we can only achieve one area of documentation, what is the best place to start? So you just talked about, you know, the size of an organization and and maybe it's all volunteer or you have one person doing everything Where should we start with this? Good these good habits and good behavior You want to start with the higher risk areas and so when you think risk, you know, obviously people think fraud That's what they think is risk. But risk is also human error risk is Misposting, you know, you you post something into the wrong account because you flipped a couple numbers in the account number Which habit I've done it, you know Look at a number and I say it backwards in my head So you really want to focus on the the highest risk areas and you start with that And maybe you kind of go through all of your processes. You look at your Payroll your revenue your expenditures your, you know Compliance calendar you look at that and you just start you put them in a list in order and you go, okay This month we're going to tackle the first one next month It's the second one or quarter even if you if you just really need don't have enough time So you really want to take a look and see what's most important first Right. So it's again. It's strategy as you because you've been sharing with us Um, don't make it punitive and don't make it so daunting that um, you can't get it done You know Beth you've you've taught me and jarrett so much um, this week and I think um For me one of the big lessons is don't fear the accounting finance Sector bailiwick everything, right? Yeah, you got it as a leadership partner internally externally Let that information and that activity drive You know your strategy and and help you to be the best that you can be as opposed to just Like oh, we got it. Yeah I gotta keep my receipt Yeah, because it's it's such a you know, it's so interesting I think it's like naturally how we have kind of been programmed to think But ultimately it's such a negative behavior Because you're losing an entire um Group of people and brain trust that can help your organization and that for me has really been Beth One of the big lessons of this week for me and that's that's an unexpected lesson You know, I don't think we started out thinking that that was What was going to happen? But I know jarrett and I both have thought that Beth Farley CPA one of the partners at iBaili um, you can find them at E I D E B A I L L Y dot com iBaili dot com And they have an amazing Amount of information They have a part of their website just dedicated to non-profit Accounting and finance so take a look at it. It's free. You don't have to be one of their clients to get Uh access to these resources And it really is an amazing opportunity These episodes themselves will be uploaded. So again, if you want to share them share the link Review something that Beth um has come on to share with us. Um, you can get that information Very very simply. Um this week we've talked about so many things the overarching concept has been documentation But that really seems like it's a limited conversation and it's not you need to rethink and reframe and I think Beth You've been marvelous at this. It's been really fun Um, we are so delighted that you could join us again I'm julia patrick ceo of the american nonprofit academy Jarrett ransom the nonprofit nerd herself and ceo of the raven group has been a part of this journey with us Alongside beth again nonprofit power week. We only do it a handful of times throughout the year And we have the support of this through fund raising academy at national university Your part-time controller american nonprofit academy nonprofit thought leader staffing boutique nonprofit nerd and nonprofit tech talk Okay, beth what's going to happen next week when you don't have to get up bright and early and join us I'll be very sad because I've I've been so much enjoyed it very much. So yes It's been great and we really appreciate the opportunity to be here You've been really marvelous and um, you know You taught us so much and sometimes It I think the thing is it's been like in some ways very basic that you've given us ideas that we can achieve That we don't have to go out and hire a new team or and make a huge new investment You've given us some very logical Natural things to do and I and I have really been Captured by that. So thank you. Yeah. Yeah, it's been my pleasure It's been a lot of fun. Remember um, you can come back to us through any of our archives to get these videos These episodes of the nonprofit show That have featured i'd Bailey and beth farley cpa and one of the partners there on the team So, um, make sure that you you know, go back and share that because it's been really good information That will help you and your nonprofit achieve your mission vision and values beth, you know As you've heard us every day as we close We have this mantra and I have to tell you it means different things to me at different times of The year and the month and my life. Um, what's going on? globally politically in the sports world if you will Yeah And it goes like this to stay well So you can do well We'll see you back here next week for another episode of the nonprofit show Beth Farley and the team at i'd Bailey you've been marvelous. Thank you