 Welcome to the nonprofit show, but moreover, welcome to the nonprofit power week where we have with us each day this week, Beth Farley, and Beth is a CPA and partner at Ida Bailey. She's joined us Monday, Tuesday. Here we are on Wednesday. The week is going by fast, and this week is dedicated again to Ida Bailey as we talk about back to basics. So Beth is here to talk to us today about avoiding risk through or with documentation. So really excited to learn more as we dig deeper into this. So again, every single day this week, we have Ida Bailey with us, Beth in particular joining us for this nonprofit power week as we dive deep into a subject. Julia, I forget how many we do a year, not many. I want to say probably no more than five a year. So this is Asia. I was thinking about this as you said this yesterday. And I don't think we do more than six. I don't either. So I mean, it's very, it's very limited, but it's super cool because there's so many times when we end an episode, Jared, I'm like, man, I wish we had more time because there are other questions and I want to dig deeper. So this is great. Great point because we are barely scratching that surface. There's so much more to that. And Ida Bailey does have a fantastic website that we'll share with you later. But Julia, it's always an honor to be here with you for those of you watching and listening. And if we haven't met you yet, Julia Patrick is here. She is the CEO of the American nonprofit academy. And I'm Jared Ransom co-host and nonprofit nerd CEO of the Raven group. Together we have produced nearly actually over 900 episodes. I'm so used to saying nearly, but we have we have crossed that threshold. So again, so much gratitude to our sponsors and partners that allow us these opportunities to have a special week like nonprofit power week with Ida Bailey. So gratitude goes out to our friends at fundraising academy at National University, Blumerang, your part-time controller, nonprofit thought leader, American nonprofit academy, staffing boutique, nonprofit nerd, as well as nonprofit tech talk. I like to recommend, you know, checking out these companies, but to remind you to their mission is your mission because they are on your team, whether you know it or not, they're here to help you. So please do check them out and say thank you because without them, we wouldn't be able to provide you these amazing free episodes and you can find them. You can pull out your smartphone right now. Go ahead and scan that QR code that you see right in front of you and download the app. You can still find all of our episodes, including yesterday's and the day before with Beth on our streaming broadcast platforms, as well as our podcast platforms. But without further ado, Beth, I am so glad to have you back. We haven't scared you away and you keep coming and returning. So again, Beth Farley CPA partner at Ida Bailey. Welcome back. Thank you. I'm excited to be here again. So, you know, we titled this time together is back to basics, right? And although we're talking about this concept in somewhat of a high-level fashion because we're digging deep, you said something over the first two days a couple times, and I want to go back and have you help us really understand these job titles. Because you mentioned, you know, CFO, controller, AP, AR, I mean, the folks that are doing tasks, now we have this element of remote servicing. Can you, before we move forward, just give us this quick overview of what these titles mean and what their areas of responsibility are? Yeah. And, you know, as we've talked about, every organization is going to be slightly different and they're going to have different levels within that. Let's talk about a startup real quick. A startup is going to probably have somebody that they would could refer to as maybe their bookkeeper. That's usually, you know, somebody who has a lot of broad knowledge about some basic accounting, they're able to get your bills paid and your payroll process and those sorts of things. As an organization grows in size and depth of complexity, typically they start to add these positions. So you've got your CFO, then you've got your controller, you've got accountants, bookkeepers, and maybe a staff accountant depending on, you know, what the organization labels them. The CFO is typically the head of your finance department. They're meeting with other C-level executives. Maybe you have a chief operating officer or chief executive officer. So this is your chief financial officer. And they're really responsible for your financial strategy of the organization. Where are you going? How are you getting there? Their big picture tend to be not in the details as much. If you then are lucky enough to have a CFO and a controller, the controller in that position when you have both of them is going to be the lead accountant. So they're usually going to be the one who's making sure your your reconciliations are done and that your budget to actual being evaluated and pushing that information up to the CFO to use in that financial strategy. Your accountants, your bookkeepers, your AR staff, whoever those are, those are going to be responsible for certain things within that organization. So you might have a lead accountant underneath the controller who is dealing with the day to day stuff. But then you have an AR person, a payroll person, an AP person. If you have all of those positions, some of them might do both. They might be AR and AP, you know, just depending on that. I so appreciate that because as you mentioned, there's a full spectrum, right? And so if it's an organization that's brand new or maybe isn't managing a lot of funds, maybe there's one person, you know, that manages all of this or maybe if it's a really large organization and a large management, you know, there could be multiple four, five, six plus in that financing. Right. Interesting. I think it also helps me to kind of frame this conversation up because the more people you have, the more tracking you have, the less people, the more work that they're doing and they're tracking more. I mean, it's kind of a, you know, how do you grow this concept and this, if you will, discipline along the trajectory of how your nonprofit grows? Exactly. And when you have a brand new nonprofit, you probably have who is considered your CEO, your president, the person on the ground with a passion who started this doing some of your accounting work, right? They're doing like everything. There's one person. I'm like a passionate, right? If they have a passion, we'll take you. Yes, exactly. And so you have been in that situation, some of these, you know, financial strategy roles and responsibility lands on the board of directors. So that's what's really important is that you've got this board of directors on every nonprofit and the buck kind of stops with them to make sure that even if you don't have the positions, the roles are still being filled appropriately. I love that you said that. I really, really do. Well, let's start off with something that Jarrett and I hear a lot about. And it's risk. I mean, you hear the word risk and already you know this is serious. Whether you really know what it means or not, it's like, okay, it's serious. So let's back up because again, back to basics. Help us understand what risk is and then how we should be following that through in our documentation. Yeah. So a lot of times people when they hear risk, they think, oh my gosh, we have the best people. I trust them. We don't have any risk. Everybody has risk. You have fraud risk, which is the one we know what he wants to ever come across, but you always have fraud risk. You have, you know, misstatements. So you accidentally post something that was supposed to go to salaries into your office supplies, something like that. So you just misstate a financial information. And you have a lot of human error too, that kind of feeds into the misstatements, but the misstatement could also be that you don't understand what, you know, an investment account should be stated at. So you've recorded that at cost, but you're on a gap based financial. So you need to look at fair value. So just a misstating your financial information because you don't have that knowledge and background to understand all the components that goes into it. It's kind of be all of those different things and you've got to evaluate which areas have higher risk. If you are an organization with a lot of cash dollars coming in, obviously that that seems obvious to most people that's that's an easy risk area to have cash go missing. But if you only get donations through checks, people think, oh, well, there's no risk there, but there is. There's definitely risk to have fraud, you know, mispostings, whatever it is still with any kind of transaction that you have. You know, I'm thinking Beth, right, there's cash, there's checks, there's online donations. Is it a risk to have multiple revenue streams and, and by streams what I'm meaning is like, you know, if we use PayPal and we use Venmo and we have stripe and we have all these different kind of merchant accounts. Does that also increase our risk. Absolutely, because you have to track all of those and, you know, from I'm a huge proponent of organization thanking everybody. I know that there's certain IRS requirements that over 250, they have to have contemporaries, you know, documentation of the thank you letter, but you never know where that next big donor comes from. So you need to understand as an organization where your funds are coming from so if you've got six different ways that the donations are coming in and you're not tracking who they're coming from, you're not able to do that thank you you're not able to you know reach out to your donors when you've got something new coming up. So the risk is that you won't know and you'll just record this a big deposit into your bank account well where's the support for that and why is it actually donation is it restricted those types of things. I think in my language, I love it. I love it even more when a finance, you know, accounting nerd speaks using nerd language because these two departments I believe Julia really need to work well together, you know, but I always say fundraising and finance because let's just make them both F words but you know, understanding the gratitude the stewardship for the donors regardless of the platform is critical. So hats off to you bet thank you. Yeah, yeah. Well and I think that's kind of an important thing as we talked through all of this is that it's an organizational team, it's not the finance versus the grant making versus the programmatic versus the fundraisers. If you guys aren't working as a team, then there's going to be difficulty, you know when it comes to end of year reporting grant reporting donor, you know reporting any of those things if you're not working together and making sure you're on the same page so everybody has a responsibility. In the documentation that creates your financial statements. So that kind of leads us to our next question and Jared, you know, kind of touched on this a little bit yesterday, but I think it's really, I want to understand this more fully and that is, is this documentation process and concept really coming from this one department or is it going across the board. And then also like, who has access to it and how sensitive is the information should everybody be able to see it. And then Jared made the comment yesterday that I it seems like a lot of this should go into performance review job description so that people understand this isn't just a best practice. This is part of your job. Right. So I talked to us about this because this is kind of an overarching concept seems like of the whole week. Definitely. I'm going to start with tone at the top. You know, we we hear that terminology a lot tone at the top but what does that mean it really, you know, goes throughout the entire organization for everything if you have an organization who believes that you need to be very ethical. That ethics from the tone at the top is going to go all the way down. And it also just, you know, when you have these documentation processes and procedures with oversight, they're going to not be as likely to look for those gaps because they know that they're not there they're being watched which is important. I mean not like you're putting a thumb on somebody but that you know everybody understands their roles and that somebody is going to be overseeing that to make sure that errors fraud misstatements are corrected. So the tone of the top really starts with your border directors a border director has a fiduciary responsibility. It's illegal and ethical responsibility to make sure that the organization is following the rules and regulations of the state that you're in of the United States of, you know, the community to an ethical responsibility you're collecting donations are you expending these donations correctly, and you can't do any of those or support that you're actually meeting your fiduciary responsibility without the supporting documentation and the processes to show that you are. Beth this makes me think of we call them the charity watch dogs right the platforms that really look at all registered nonprofits and financial transparency is a key piece of that measurement and so I just feel all of this really you know, brings that success to really contribute to the transparency is that why it's kind of baked in there if you will. Absolutely. You know, because there has been so much wrongdoing within nonprofits in the past that states will continue to create new rules and regulations to be able to kind of oversee that. And as a donor you want to make sure that you feel confident that if you're giving your money to the organization it's being used as their mission is you know that if it's for pets they're being used for pets and pets lives are being saved. You don't want to think that somebody's going off on vacation with that money. You know, so, so you so that's why those states have made those rules and regulations and so you want to make sure as a donor that they're being complied with and that starts with the board of directors. And if there's fraud I mean who's going to who is a community going to look at they're going to look at the board of directors and who is, you know, ultimately responsible for that organization. Yeah, that that governing body and the IRS looks at the board as well. Unfortunately I was involved with an organization that did have some financial mismanagement it happens right it's it's horrible I was brought in as an interim executive, and the board didn't realize that truly their fiduciary you know responsibility and the IRS was so close to like knocking on all of their doors so you don't want that to happen. You know, I'll be it seems quite simple and basic, it is so critical to that success. And I love that tone at the top like really having that tone from the board members in the board meetings and really have that trickle down through the core values and how we operate on a day to day basis. Yeah. And so if they're really encouraging this and they're putting aside time and money and effort to do this then that's going to be seen all the way throughout the organization that this is an important piece of it. You know you never want to get to a point where you've got an individual that is doing any part of the financial or programmatic documentation piece and they just say I'm just not going to do this, I don't want to. I actually knew somebody who was like well it's job security that nobody knows what I do because they can't get rid of me you know kind of thing because they just I think it was just a it's a lot of time and effort to do this so you want to be able to you know really show that the organization thinks that this is an important piece for for the organization. Absolutely. And I think one of the things that you've helped me with is that certainly I've heard you know this discussion. Okay we need documentation, but why and how does it work and that's what I've loved about this week so far is that you've really helped connect the dots so that we can understand it's not just somebody in the back accounting office saying we do it this way. It's this is why and this is how it gets used so so let's drill down a little bit on that because some of these things are I mean the task management asset aspect of it. First and foremost, gotta say love love love that compliance calendar. Yep, yep. I think it's so crucial to understand to make sure that you're meeting your compliance requirements because that's going to keep maintain your nonprofit sadness, you don't want to lose that so there's a lot of things that can go into that, depending on the state that you're in. But then when we talk about task management on top of that some of this is not compliance items. But they feed into the compliance items right so you've got daily tasks potentially that you want to look and see. You know what mail has come in and make sure that somebody's you know processing the mail maybe you pay bills weekly and so you want to track who's paying the bills, who's signing the bills whose responsibility is that on a weekly basis. Monthly you're doing bank reconciliations you're doing prepaid reconciliation. You know you're closing out your books on a monthly basis what date do you expect your team to have certain pieces done so you can close it out by the 15th by the 20th. Maybe even by the 30th but some day every month the book should be closed for the prior month right depending on the responsibilities and the needs of the organization quarterly you've got payroll taxes you've got a lot of different things there. And then annually you know you're getting ready for your audit you're getting ready for your 990 what whose roles and responsibilities are in there. And if you just say oh we've got to get ready for our audit on an annual basis and you don't give that to anybody as a task then it doesn't get done until your auditor says hey when are we we're starting in two weeks are you ready. No I think this is brilliant and I think that again it just helps everybody kind of row in the same direction I was going to say March but you know row in the same direction. Jared do you feel that when we talk about task management that you see a lot of organizations that they're kind of like shocked and we all talk about time and how fast things go and here we are you know finishing up the year. What are you seeing in organizations across the work that you do. I've seen a little bit of everything right you know in the sector 20 plus years but also serving in that interim space. I really think it comes down to the maturity of an organization systems and not just the software platforms but you know how far are we into documenting processes and how far are we into maturing this. You know I think about this to Beth when we come to board meetings some meet monthly some meet quarterly some meet every other month you know there's no set. Agenda or timeline if you will for an organization it's all different but I feel like this task management that you're talking about here also builds into that financial report for the board meetings and so I've been at some tables Julia where. You know the financials aren't ready for last month's financials so we're always reporting 30 months you know our weeks month days 30 days right. And if we're if we're reporting 30 months we really need to get on this. Yes definitely. You definitely need some help definitely need to call I Bailey you know so I think shoring up building this this calendar keeping it succinct. Really impacts that board meeting. Absolutely and and as it impacts the board meeting it impacts how you can go out and do the mission that you're doing because if you're not able to budget and plan and understand where your shortfalls are because that's an important piece to as we know we you know we have a program that's being funded by unrestricted contributions and another one that's maybe being funded by its own you know program service revenue. And so to understand where you need to fundraise is such a crucial piece and if you're not getting that information except for maybe once a year. You can't plan for that you can't get a get ahead of that and understand where your shortfalls are. And so I think that's where it's really important that we you know we keep going back to your job description and who should be involved. You know if you want to increase your number of clients that you're serving how many are you serving and if you don't have that number how can you then say we want to double that. Because you don't know how much you're serving right now and how much that's costing you to serve the thousand you're serving so how much will cost you to serve 2000 you don't know that if you don't have the right financial information and it all from the whole organization all that information has to come together. It does. Well, as you mentioned come together I cannot believe it ladies but our time is going so fast. But there is a model that you're going to share with us Beth and I feel like it's you know reminiscent of a children's book but. What is this and I'm just going to say real quick for those who don't know a million but deal you got to go read it you know you got to twist the open the peanut butter jar. You can't just like put the peanut butter on because then the jar sits on the bread right so that's what we're talking about is that when you say use the donor report to create the journal entry. Okay, what donor report from what time period is on my doing detail in my doing summary. What's the parameters of the donor report how do how do I even pull the donor report out of the donor system that we have to create the journal entry that's going to go into the accounting program. So so you really have to be very clear on what you are asking the person to do and how to do that. And that's going to allow that as you have promotions because I don't want to always say somebody left but as you have promotions as you have other things that are going on. That the new person can go in and continue the work that's already been done in the same matter that has been being done and there's not a loss of data for a time period because you had a change in staff. That makes so much sense right Julia. It does so I mean this kind of harkens back to something you talked about in our very first day together and that was establishing a policy of how you're going to document and what you're going to document in that piece I mean this is part of that right kind of filling that in so that everybody can understand why this is important and why it needs to get done. You know yeah AFP reports and they have for a long time that the average tenure of a development officer is only 18 months. And when you think about that it's such a crisis and we're seeing this bleed into other areas and and I've got to believe that's in the accounting world just with you know people retiring people. I love what you said people being promoted or going to other organizations maybe leaving the nonprofit sector and going into for profit when that staff leaves or changes. You can have a lot of problems. Yeah. And to be clear just to clarify we're we've been saying policies and procedures a lot. The policy is is that you send thank you letters to your donors. The procedure is how do you do that. What report do you pull how often do you do that. Do you do that monthly quarterly weekly daily you know. So there's there's a difference between that policy is big picture and a lot of time set by the board of directors. Think about it as like a law that gets passed and then you've got to go figure out the detail of how that law especially IRS tax coded big tax code. But how does that actually comply and you know fall out within the organization. So policy is is that bills are paid once a month. The procedure is who's doing it. Who's responsibility. How do you get the signers is this electronic those types of things. So we're kind of touching on both of those but just to separate that they're they're two different things. And they can both change is that right. Like there's still written in stone it can still evolve. Yeah. Nothing is ever written in stone. I don't think as far as the nonprofit is because even your bylaws and articles into a corporation can change as you grow. Right. So as you change as you grow as your positions change as your programs change potentially you're going to have to address both your policies and your procedures. And you should look at them at least annually to make sure that they're consistent. You know we had organizations that were doing backups on their QuickBooks file on the floppy drives. You know and you had to have about 10 of them to get the whole file and you had to put them in the right order. OK. Those who are younger probably don't know what I'm talking about now. We're in QuickBooks online. It's cloud based. We don't have to worry about backups. Are we policy or procedures still talking about backups. Obviously things need to change. Things need to change. I appreciate that. So if you've joined us today and this is your first day of the week. We are so glad you're here. Beth has been with us since Monday and has been a wonderful guest. Beth Farley CPA partner at Ida Bailey. Please check out Ida Bailey. That's E I D E B A I L L Y dot com. Tons of additional information. So while we do have a dedicated week nonprofit Power Week with Ida Bailey and with Beth in particular the website at Ida Bailey dot com provides many more resources that we can you know we're barely just touching on here for each day. This week five days but still really you know there's so much more to it. And so Beth really appreciate your insight. Appreciate your passion in this space truly finances you know as we had said earlier kind of off camera. Oftentimes that finance department does get the spotlight there often you know behind behind closed door maybe even off site in a dark corner kind of thing but really I see finance and accounting as a critical you know component a backbone if you will of the success of the organization so thank you for for shining your light on the subject and expertise. It's definitely I agree you know you've got to make sure that you've got your finances in order to know what you need and to actually support and people support you more when you have strong information to show them what you're doing. I love that. Well part and parcel of this week is we have a total of five different episodes we're talking about a lot of different things. You know tomorrow is going to be an interesting day because we're going to be talking about the dynamics of getting your staff on board with this process and how do we actually begin with hey this is a great idea this is what we should be doing and we end with it actually getting done right. We're going to be talking about that and then Friday is going to be really interesting because we're going to do our ask and answer but it's real it's going to be with Beth and so it's going to be a lot of different questions that have already come in about this process of documentation. Again I'm Julia Patrick CEO of the American nonprofit Academy been joined today by the nonprofit nerd herself Jarrett Ransom CEO of the Raven group. Again we have amazing partners that are with us day in and day out fundraising Academy at National University. Blue meringue your part time controller American nonprofit Academy nonprofit thought leader staffing boutique nonprofit nerd and nonprofit tech talk. These are the folks that join us day in and day out so we can get this really interesting and critical information to our viewers and listeners around the globe. Wow okay I I've got a witness to both of you ladies and I have a meeting with my bookkeeper later on in the week and I'm going to ask her some of these questions that I assumed we're doing. Right. Yeah. You know and I want to see your compliance calendar Julia because I know that you're working on. You know and I'm like the calendar queen I love the whole concept of the calendars. Yeah. You know you it's like an outlook it's so easy to open up a new calendar and then you can just throw things in. Oh yeah. And if it's not written down it didn't happen we're going to always say that and it won't happen if you're not notified that needs to happen. I think that's it and there's nothing worse and taking up space in your brain and your heart. I'm like what am I missing what am I missing I should have done that I've got to remember but when it's there then everybody in the team can see it so that means just magical. Well hey another magical episode ladies thank you so much and as we end every episode of the nonprofit show we like to leave with this message and it goes like this to stay well so you can do well. We'll see you back here tomorrow.