 Again, we are here for the final day, Buhu of Nonprofit Power Week, and it has been generously supported and really you've engaged with us, you're a part-time controller. So again, I'm Julia Patrick, CEO of the American Nonprofit Academy, okay. And the hot seat today is Teresa Salome. Did I say that correctly? Salome. Salome, I did not say that correctly. Salome. Thank you. Teresa, okay. We practiced this and I did the perfect fail. Director of Client Services. So you're the woman who kind of knows what all these things are cooking and with YPTC. So we're super excited to have you here, Teresa. Again, this has been Nonprofit Power Week. We have had somebody from your part-time controller on every day this week. And this was a really new concept. We're only doing this a couple of times a year, but it's a complete drill down of an idea or concept. And it's been really a lot of fun. So on Friday's Fundraising Academy, sponsors are asked and answered. We are full of gratitude for their work, as we are with all of our sponsors who continue to show up day in and day out, supporting us with our mission of Nonprofit TV. Okay, again, Teresa, let's hit it hard. We've got Carl Hudson, New York. And I forgot, where are you? Where are you located? I am Tacoma Park, Maryland. It's just outside of Washington, DC. Okay, so you've got the whole East Coast vibe. Ready to go? Carl asks, I'm about to go onto a Nonprofit Board in my community. What is the best type of financial information I should ask for before I agree to serve? Well, first and foremost, I mean, Carl, way to go. I love this question, because I think so many individuals consider or do go on boards without really understanding what their fiduciary responsibility is. I know you all talked at length about this with Ellie Hume on Wednesday. And it's a really important role that Carl is considering taking on. So, I would suggest that even before you consider going on a board, that you maybe do a little homework behind the scenes. There's lots of resources online that you can go and get some financial information. Possibly the organization's website already has 990 or audited financials there. And certainly a resource like GuideStar is one that you can go and look and typically pull down the most recent 990, get some information there. And GuideStar actually gives seals of transparency to nonprofits based on how much information they provide. So, you go on there and look and there's a seal of transparency. It goes from bronze to silver to gold to platinum. You know, if this organization has a platinum seal, you're already probably, you know, getting into a really well-placed organization. But to answer the specific question, I should really get to that, right? If they're asking for that financial information from the organization, I would definitely ask for the audited financial statements. And with that, you're gonna wanna get that management letter. You know, and Julia, I know you know what a management letter, but everyone may not know what that is. Yeah, explain that. Explain that to us. The management letter is a letter that the auditors provide to the organization that isn't necessarily included in that audited financials for, you know, distribution to the public, but give some recommendations typically to the organization, the management and the board on ways they can improve typically their internal controls. So, it didn't rise to like a level of we must include this, you know, that the audit rules dictate certain things they have to include in the audit. It didn't rise to a serious nature that had to be included in the audit, but gives you some really valuable information nonetheless. But, you know, that audit, like we already talked about with the notes that go along with the audit. Oh, that's some valuable information there that they're gonna wanna read in detail. Okay, so now let me add onto Carl's question. And first of all, I commend you Carl, not enough potential board members do this. And in it's scary because we find, and I was one of those people shamefully and early in my board service, I showed up for my first meeting and I found out that the organization was millions and millions of dollars in debt that I had no idea about. And that was on me because I should have done my due diligence. That's another episode. But I have to say, what happens, Teresa, if there's a little bit of reticence, if the nominating committee or board chair or CEO or whomever is saying, oh yeah, well, I don't know, or we'll get to that. I mean, what would that look like? It's so if there's reticence to give that information out, I would hesitate to join that board quite honestly because why wouldn't they be transparent with that financial information? And certainly once you sit on the board, as you indicated, you don't wanna surprise. You do have a financial responsibility there. So it's important to go in with your eyes wide open. And that isn't to say that if there is something that maybe is a red flag in the financials that you absolutely don't join the board. I mean, it might be an opportunity that you have a certain expertise where you can really go in and help the organization. But you wanna know what those red flags are ahead of time and talk with the board chair or the treasurer or the executive director to really understand what the underlying issues are. Okay, so Jane from Toronto, which I'm so excited international viewer, asks you this question. Regarding the financial information on a prospective board member that they could request, many organizations consider the management letter confidential. Would you recommend a confidentiality agreement before it's released? Really interesting question. That is an interesting question. And honestly, I really wouldn't have considered that before she asked that, but it might be something you wanna consider. Once you get on the board, you do have access to all this confidential information, what we're talking about before they join the board. So it might be something that the organization wants to write a policy about. Yeah, that NDA, a nondisclosure. Wow, okay, great question. I love, love, love that we have some engagement on this because it's not a slam dunk. And again, Carl, yay team, not enough prospective board members are doing this. And I think in terms of, you know, the organization Teresa, you want your new board members from day one, good to go, ready as opposed to this six months, kind of like it takes them that long to figure things out. Absolutely, you want them engaged from the moment they start with the board. And can I add a couple more things, Julia, that they should be asking for? So we already talked about the 990. There may be, you know, a more current one than possibly was online. So definitely ask for that as well. And read through that, don't be intimidated by all that tax looking form issues. You know, there's some good information there and it's accessible if you take some time. And then I would definitely ask for their current internal financial statements. I think that's gonna tell you a few things, you know, depending on when their year end is, you know, say someone, the organization has a December year end. Well, we're almost in October. So if you're looking at the audit or the 990, you're not gonna have the current information. So you're gonna wanna see the internal financial statements. You know, again, if they're willing to share those before you are on the board, which they should be, they should be a transparent situation. And also, what is the most recent internal financial statement? Unfortunately, we see this all the time. You know, this is a big reason nonprofits call your part time controller because the executive director confesses to us at that initial meeting, you know what? I haven't seen financial statements in six months. I have no idea what's going on with my finances. Interesting. Okay. That is like a gold nugget right there. I mean, I'm sorry to hear it. It kind of breaks my heart a little bit. But yeah, that's a really good comment because you know, I think, okay, the 990, you go to GuideStar, you look at it, and then you're good to go. But yeah, I hear what you're saying is that can be outdated information. And especially what we've gone through and we are going through in the last 24 months, hello, lots of things have been changing. Absolutely, absolutely. There's been so much upheaval in the last year and a half that you really do want to understand what their current position is. Yeah, yeah. Okay. I want to go to the next question and then we've had another question that's come in and we're going to try and get to that. So let's go to, oh, and you know, you don't know this about me, Tracea, but I love the name with health questions because those are always like a little drama film. So name with health from Portland, Oregon. Should a nonprofit put information about a fraudulent or internal event and internal fraudulent event in the financial statement that goes along with the annual report? Also, does that get mentioned on the IRS 990? It's a really good question. This is a great question. And unfortunately, we do know from experience that fraud does happen in nonprofits and as much as we would like to think it doesn't, it does occur. And what we try to preach to our clients is that transparency, right? The financial transparency at all times, even when it's not great news is important because it goes to your reputation as a nonprofit. And when you do have something difficult, such as a fraud, you're gonna wanna put a communication plan in place pretty quickly. You're obviously gonna be reaching out to your board immediately and talking with them. Likely you're probably gonna reach out to your attorneys as well. You really need to get sort of all the experts in the room when fraud happens and not be afraid to talk about it candidly. And again, put the plan in place. And then from that, you're gonna determine how to communicate to your stakeholders outside of the organization. It's certainly, to me, this question, they both kind of go together the 990 portion and the other because I think it's a public relations issue that you need to consider, right? That 990 has a very specific question. It asks you, did your organization become aware of a significant diversion of assets during the year? So if you have to check yes to that, and what they consider a significant diversion of assets is the lesser of 5% of gross receipts, 5% of your total assets that year end, or $250,000. So once you check that yes box, again, that 990 is out there, it's public. So you really wanna consider that. And then additionally on schedule O, which is sort of the catch all in the 990 for giving additional details on any of the questions within the 990. So on schedule O, you're gonna be required once you check yes to give details of what happened as far as the nature of this diversion. You're gonna have to give a dollar amount of what it was as far as cash or the property that was involved. And then you're also gonna have to put a corrective action on there. So I would say to name withheld that if you know you're gonna be putting out the 990, it's out there for the public. And again, what are your stakeholders gonna think? What is that gonna do to the trust in your organization? If it's on the 990 and you have not yet disclosed it to donors and others who have an interest in your organization? You've gotta come ahead. You've got to be as forthright and as quick as you can because it just permeates the community trust. Okay, well, name withheld from Portland. I hope that helps. Now, we've got a little bit of a curveball that's just come in. So this is gonna be just somebody is asking this. And I don't think, I'll say their first name, Beth. As an accountant, I'm assisting a board treasurer to set up QuickBooks and payroll, not as a board member. In order to set up QuickBooks, I have needed bank information, but do not feel like they should add me as a user if I'm not on the board. I realize I could be considered an outside bookkeeper. Would you suggest I consider to be a limited user on the bank account? It's a really good question. It is a really good question. And I can tell you what our internal policy for YPTC is, is we regularly need access to that banking information to do our job. So if you're acting as the accountant, you're gonna need to see the information, but most major banks have the role where it's just read only. So I would recommend that if she's not really part of that organization, as far as being involved in the transactional work, the safest role would be to set up through the bank, just that read only access. And then she can see anything that she may need to see as far as setting up the accounts, helping to properly set up QuickBooks, but she doesn't actually have access to process any transactions through the bank. Smart, good answer. And I hope that helps you, Beth. Okay, let's go to James in Orange County. James writes, should... Oh, this is interesting because this kind of follows along something earlier. Should our board member sign some sort of NDA that prohibits them from discussing our non-profits finances? Poor profits do this. And I'm not sure if we should too. I think this is a great, yeah, great question. Yeah. I had the opportunity to watch the session with Ellie on Wednesday and something she said stuck in my mind. She said, the only difference between a for-profit and a not-for-profit is what you do with the profits. So in other words, making the case of running the organization as a business, I think is an important one to keep in mind. There are obviously some nuances between the accounting, but as far as how you look at the business, considering the way for-profits run theirs and taking some of those best practices might be the right option for you. Now, of course, in the NDA, we touched on this a little bit. That's a legal document. You really need to go to your legal advisor and discuss this with them. And also you wanna talk with your board members, your board chair and the other executive team members to make sure that they're comfortable with how you're moving forward if you're gonna implement something like this. So, Teresa, when I see this question, I am also thinking about the very sensitive financial information about donors. And especially major investors, philanthropic investors that might be talking about their estates that might be talking about future gifts or major naming rights or things that, and this is gonna sound crass, but could be really easily poached by other non-profits. Because it's like, oh my God, we could get them to name our building. I'm telling you, I think that you're right. I think that ought to be something that should be discussed and it could become a part of your onboarding process for all of your members. I mean, you have to sign those COI, conflict of interest policies every year. You have to have other documentation that describes what your measurements are gonna be and your participation and all of the other governance. Why not add that in? I agree, and I think you make a great point, Julia, that board members on one organization are typically board members on another organization, perhaps not exactly at the same time. However, those of us who love to sit on boards are looking for organizations that need our help. Yeah, exactly. Okay, well, I mean, we have a lot more questions that have come in. So again, get your baseball bat up, sister, because we got Jane who's written, I used to write a monthly nonprofit ethics and governance column and various CFOs wrote in to ask what they should do when the executive director, oh, this is scary, revised their reports to falsify the information to the board. I have recommended that CFOs attend at least that portion of the board meeting. How do you handle such situations? Do part-time controllers attend board meetings? Yes, we definitely do. We love to attend board meetings. We love to attend finance committee meetings. And it depends on the client on their level of comfort as far as what level we're involved in those meetings. So it really is a case-by-case basis for us, but ideally we would love to attend all of them because we really are the ones who are acting as a controller or a CFO in the organization and have the most information to answer questions. We don't want an executive director out there answering something incorrectly or in this case, I mean, this question, this is very serious. So I can tell you a couple of tricks that we have learned at YPTC. When we do send the financial statements to the executive director, it's a PDF. It's something that is difficult to alter. And then additionally, sometimes a treasurer or a finance person will want to see information behind that and they'll request something in Excel, but we always have that hard copy of the PDF. So we make it more difficult because unfortunately we have run across situations where the executive director has changed our information. And if you're not at the meeting, they may or may not be presenting it as coming from the CFO or your part-time controller. So it's a very serious situation. And typically that might be something you'd have to go around the executive director and talk directly to the board chair or the treasurer about because in my mind that's just exactly like fraud, right? They're not actually taking something but they're misrepresenting the finances to the board of directors. Yeah, and I appreciate you saying that because I think that's one of the things that I learned from Jennifer is that it's not all about just taking cash or doing things with checks and stuff like that, but it could be taking resources. It could be misrepresenting information that changes the trajectory of how donors respond to you. Exactly, yes. That's a pretty heady thing. Okay, let's get on to Shane from Houston, Texas where whenever I see questions from Texas, I think of one of my favorite quotes, the higher the hair, the closer to heaven. Put that in there. Okay, Shane writes, I'm having trouble getting current board members to sign up for service on the finance committee. Yeah, would it be possible or even legal to have non-board members serve this critical function? Yeah, I'm sure when they ask for hands, they're all like, you know. Yeah, everyone's looking around. I mean, I'm just, yeah, I'm shocked at this. It doesn't work the glamorous job of working with the finance committee. So I would say there are a few things to consider. Again, this is something I would reach out to my attorney on and double check with them. I do know in certain localities, there are codes or regulations that prevent non-board members from serving as committee members. So in other words, you know, I said I was from Washington, D.C. area. In D.C., there is a non-profit corporate code which actually disallows this. So you can't do it in D.C. So you wanna be careful about that. But I think what I would counter Shane with is maybe some alternatives. You know, if you're a finance member or your board members rather are looking around, you know, trying to find something else to focus on, maybe you nail them down and say, look, I understand. The finance committee is not for everyone. Everyone doesn't have the comfort level. Everyone doesn't have the expertise to sit on that. However, don't you have a network? Come on, board member, you can help us recruit someone, you know, reach out. What are those accountants out there? And then the finance people in your network leverage this situation to help them and they're gonna be happy to recruit, right? Because it's gonna get them out of that uncomfortable situation they don't want to be in. So... You know, that's a really, I love that you said that, Teresa, because it's long-term thinking and it's not just about serving on the finance committee. It's about having people around the table that can ask the right questions, that can be talking and understanding about, you know, accounting and finance issues. I'm not saying doing the work and, you know, doing the ledger work, but have the ability to ask the questions. It's really powerful. Absolutely, absolutely. Really, really powerful. Yeah, that's a great way to look and shame, honest to goodness. Keep going, buddy, because you need these people and you need that talent around your board. Okay, another name withheld from Denver, Colorado. You know how I love those. Our long-term finance director will be retiring in Q1 2022. We want to move to a remote accounting service. Should we wait until he leaves to start fresh or do it while he's here? Our team is split on this course of action, which tells me they haven't asked him or her. Right? Yes, yes, you know, obviously. I know, but... Yeah, yeah, I think there are a few things left on set in this question, so we say, right? And obviously this is something we encounter all the time. Every time we go into a new client situation, we have to do some sort of transition. Coming in, sometimes with another outsourced accountant that's leaving, sometimes with staff that's retiring, sometimes staff is being let go. So we run into a number of situations. And clearly, the team is split on the course of action. Well, at least they're discussing what should be done at this organization. So I like that they've opened up this dialogue, but I would say at least from the question that we see here, they haven't included one important component in the discussion, and that is their new outsourced provider. I would suggest that the outsourced provider, YPTC, we make this a part of every conversation. We're talking with new clients and we're saying, hey, what is your timeline for transition? What does it look like there? What are we expecting when we walk in the door? And I would get their input on it. If you have a very good outsourced provider, they're not gonna need a lot of transition time with an outgoing finance director. They'll be able to walk in with very little. The important pieces that they're gonna need before they walk in are access, perhaps any institutional knowledge that only the finance director has. Certainly we can walk into a situation where you have to figure out how to access the accounting system and that kind of thing, but you really want to be starting the engagement that way with your new outsourced provider. You want to make it as easy as seamless and quite honestly, it costs the organization money if we don't have those pieces in place before we get there. So I would suggest that they have a candid conversation with the outsourced provider, get a plan in place, and then of course, everything needs to be communicated to the team, which this finance director needs to be prepped for what's coming to them. So this makes me think of another question for you that kind of dovetails to this and that is, if you're taking on this outside accounting services and these functions, does that necessarily mean that you're gonna be cleaning house and letting go staff? Because I mean, it seems like this is a fear-based question. Yes, yes. So what are your thoughts on that? So I can tell you what YBTC's approach is. We are never coming in as a consultant thinking, okay, how can we just maneuver ourselves into sort of a position where we're taking on everything in that accounting department. We really come in and we think, how can we make it better? How can we make this more efficient? How can we benefit the organization? How can we support the executive director, right? And that usually does not mean that the current accounting staff needs to leave necessarily. Anytime they need training and you know what, we're happy to provide it. We're happy to come in and say, you know what, you've been using this long outdated manual process. We'd love to show you how to do it easier and it's gonna save you time, bookkeeper, accountant or whoever's on staff there. And then it's gonna make everyone's lives easier, ours included. Wow. Well, hard to believe but our time is up Teresa and I'm shocked that I am saying this but I can actually keep talking to you because this has been amazing. I really, really enjoyed it. And I think that this has been the perfect way to kind of wrap up this amazing week that we've had with YPTC. You know, no money, no mission. And we've learned that this week if we're not good stewards of what the finance and the accounting world is or ecosystem within our organization is, we're really imperiling our mission and our vision. And part of this, we've had some really interesting conversations. I loved bankers in your boat, which was on Tuesday, how you get that outside voice and partnership with you for finance, best practices for boards so that your board members understand what is going on, remote accounting, what that looks like. And then of course, fraud, Jennifer, Oliver, the managing partner of YPTC kicked us off this week with really kind of giving us some frightening insight into why we need to be a lot more vigilant with our organization. So you can check that out. I also wanna make sure that everyone knows that YPTC has engaged in a new podcast that they're putting out, Mission Business. It's really well done. And you can access that. This is super cool for free. You don't have to be one of their clients. You can get that information along with a lot of other resources that they have on their website. Again, we wanna thank all of our presenting sponsors without you. We would not be here having these discussions. Non-profit Power Week. It's been super powerful. We have loved every minute of it. Thank you so much for having us, Julia. Oh my gosh, I'm telling you, we have had a blast. And you know, Jared and I are, I don't wanna say we're seasoned, but we are. And we've been doing this show now for almost two years, almost 400 episodes. And we hear a lot of different things, but we hear a lot of the same things. We heard things this week that we had not heard before and it's really given us some new things and avenues to ponder that I think all of these episodes will help us be stronger and more secure organizations. So it's been amazing from our team at, you know, the Non-profit Show to all of the team members at YPTC that supported us. Thank you, thank you so much. And as we end this week and as we end every episode, we'd like to remind everyone to stay well so you can do well. We'll see you back here on Monday, everybody.