Financial Training Pilot with Denise Harlow, CAP

Report
Financial Leadership
Development: Tools for Board,
Executive Leadership, Fiscal, and
Program Staff
Region 8/10 Conference:
Celebrating the Past... Looking to the Future...
May 13-15, 2014
Boise, ID
Denise Harlow, CCAP
Community Action Partnership
202-595-0660
[email protected]
A special thank you to Kay Sohl and CAPLAW for your role in the
development of the Financial Leadership curriculum presented here today.
Agenda
Current Environment
Financial Leadership Development Program
Dashboards for Reporting
Joint Development for Program and Fiscal Staff
Financial Calendar for the Board
Current Challenges
Increased need
Federal and state budget cuts
Political environment
Head Start competition
Negative publicity
Heightened funding source
expectations
Current Challenges
 Increased emphasis on:
 High-performance organizations
 Directing resources to organizations that can
most effectively serve high-need communities
 Evidence-based practices
 Accountability
 Outcomes
 Financial and governance
 Proposed CSBG Organizational Standards
 Integrity
Financial Leadership
Board
Ever-increasing pressure to provide oversight
Finance Committee
Audit Committee
Treasurer
Staff
CEO/ED
Fiscal Staff
Program Staff
Emerging Leaders
Sustainability???
Your CAA’s sustainability on a scale of 1 to 5
1
2
3
4
5
Signs of Financial Health &
Sustainability
 Achieve mission
 Liquidity – cash when needed
 Positive Net Assets
 Especially Liquid Net Assets
 Compliance
 Maintain & document
Sustainability Factors
 Effective leadership
 Community support
 Effective risk management
 Compliance
 Viable business model
 Timely access to key info
 Clear, timely decision-making process
CAA Sustainability Roadblocks
Compliance-focused budgeting
Use or lose it funding
Multiple grant period complexity
Arbitrary limits starve infrastructure
Business model analysis distorted by focus on
compliance
Your CAA’s Sustainability Rating
Preliminary sustainability rating
Your most significant financial strengths
Most significant sustainability limitations or threats
Impact of related entities on your financial health &
sustainability
What is the Financial Leadership Program?
 The Financial Leadership Program (FLP) provides a
structured curriculum, self assessment tools, and a peerto-peer discussion process to help CAA Executive
Directors, CFOs, and Board Leaders to work together to
improve the financial health of their organizations and
develop effective dashboards to measure progress.
 Initial curriculum developed by CAPLAW and Kay Sohl in
2012
 Piloted via video training by the Community Action
Partnership in collaboration with Kay Sohl and CAPLAW in
2013
 Round two of the pilot in 2014
Goals of the Financial Leadership
Training Curriculum
Increase sustainability & resiliency of CAAs
Increase effectiveness of Board/staff financial
leadership
Identify financial drivers & progress indicators
Clarify context for evaluating indicator
Support the development of effective dashboard
for your CAA
Training Process
Webinar presentations
Structured discussions:
 With your team
 With other teams
Follow-up work for your CAA
Follow-up support
Brilliant dashboard emerges!
At the end of the process…..
Program Information
Financial Information
Strategic Information
Dashboard
Why Use Dashboard Reports?
Draw attention to key information
Bring focus to priorities
 Draw attention to key information
 Bring focus to priorities
2
•
•
•
•
Why net assets matter
Restrictions on net assets
Setting net asset goals
Key net asset progress indicators
•
•
•
•
•
Net assets
Cash position
Income diversification
Key business drivers
Net income
3
•
•
•
•
•
•
Key cash indicators
Cash position drivers
Understanding your cash flow
Lines of credit
Impact of restrictions on use of cash
How much cash do you need?
Annual Expenses ÷ 365 days
= 1 day of Cash
Cash Balance ÷ 1 Day of Cash
= Days of Cash
Annual Expenses
÷ 365 days
= 1 day of Cash
Cash Balance
÷ 1 Day of Cash
= Days of Cash
$975,000
2,671
160,000
60 days of cash
4
• Understanding your cost structure
• Risks and rewards in your governmental funding
agreements
• Private support & the cost of fund raising
• Earned income & business ventures
• Key drivers in your business model
•
•
•
•
•
•
Sources of income
Uses of resources
Financial impact of specific programs
Opportunities to generate surplus/profit
Risks for generating losses
Return on investment of unrestricted resources
• Lines of business/cost centers
making positive financial
contribution
• Lines of business/cost centers
making negative financial
contribution
• Cash flow impact of each line
• Fund Raising, as well as Programs,
functions as a line of business
• Need clarity on the contribution of
each line of business to overall
financial condition
• Does your CAA have clear strategies to increase
Unrestricted Net Assets?
• Does your CAA have any funding agreements that allow
generating a surplus?
• Does your accounting facilitate determining the full cost
of each service?
• What are the key drivers that have the greatest impact
on your financial success?
5
•
•
•
•
Impact of risk management on sustainability
Risk identification
Risk management strategies
Key indicators of effective risk management
Building Your Dashboard
Board roles and info needs
Why less is often more
Identifying significant indicators
Compared to what?
Graphic strategies and pitfalls
Potential Dashboard Audiences
Board
Finance Committee
Executive Committee
Executive Director
Top Management Team
Program Teams
Board Roles
 Set mission & priorities
 Oversight
 Liaison with the community
 Resource availability
Core Board Concerns
 Financial health & sustainability
 Progress toward strategic goals
 Risk management
 Hot spots
Nonprofits Assistance Fund
Board Financial Engagement
Functions
 Compliance- maintain accountability
 Evaluation- ask ???, understand info
 Planning- use info, ahead
 Action - decision-making
Financial Leadership Roles
Executive Director
Ensure effective operation & compliance
Identify & communicate key financial drivers for
the CAA
Identify risks & opportunities
Identify & evaluate strategic options
Engage Board, staff, and community in setting
direction & evaluating progress
Financial Leadership Roles
CFO / Fiscal Director
Communicate financial health & trends
Ensure compliance
Identify financial drivers, risks, opportunities
Support strategic engagement of Board, CEO,
Management team
Develop, analyze, & recommend financial
strategies
Financial Leadership Roles
Finance Committee
Strategic review of financial statements
Monitor overall financial health
Analyze risks & opportunities
Partner with management to develop
sustainability strategies
Recommend financial strategies, policies, and
priorities to full Board
Great Dashboards
Highlight key issues for specific audiences
Make trends visible
Identify issues for exploration
Focus discussions
Bummer Dashboards
Too many indicators
Mismatch info to audience
Graphic distortion
Meaningless comparisons
Never get finished
Income by Type
Financial Indicators
Balance Sheet
Income Statement
Target
Surplus/(deficit) YTD
This monthLast month
Program
Fees
10%
Last
year end
$270,000
$390,842
$340,908 ($570,240)
Surplus/(deficit) year-end forecast $270,000
$30,937
$250,987 ($570,240)
Earned income ratio
11.5%
10.3%
11.8%
13.0%
New grants success ratio
50.0%
35.0%
33.0%
50.0%
Days cash on hand (unrestricted)
45
43
28
51
Reserve funds balance (1 month
payroll)
$250,000
$200,000
$150,000
$250,000
Current ratio
2 to 1
5.8
4.2
6.2
AR aged over 90 days
15.0%
22.3%
23.5%
20.0%
United
Way
14%
Individual
Contributi
ons
4%
Governme
nt Grants
&
Contracts
56%
Corporate
/
Foundatio
n Grants
16%
Cash Flow
$800,000
$700,000
$600,000
Program Indicators
Target
$500,000
This monthLast month
Last
year end
$400,000
$300,000
Weatherization Contracts (monthly
goal)
20
21
22
15
Head Start enrollment
100
60
58
109
Actual
Projected
Monthly job placements
30
11
14
32
Target = $615,000 minimum
Financial Health & Sustainability
Indicators
 Cash position
 Net assets
 Income diversification
 Net income
 Key business drivers
Income Distribution- Compared to What?
Government
Earned
Foundations
Individuals & Business gifts
Income Distribution Comparisons
Trends
Targets
Benchmarks
Earned/ Contributed ratio
Net Income
Unrestricted & Temp Restricted
Cost Center focus
Contribution to overhead
Drain on unrestricted resources
Key ratios:
 Units of service compared to personnel costs
Cost to raise $1
Planning and Forecasting Indicators
 Cash flow projections
 Budgeting process benchmarks
 Spend-down projections by funding source
 Strategic planning goals
Related Entity Indicators
Financial health
Cash position
Key drivers
 Occupancy
 Collections
Debt coverage ratio
Compliance
Reputational risk
Strategic Goals: Progress Indicators
Program
Financial
Infrastructure
Identity & visibility
Leadership transition
Program by Program Indicators
Units of Service
Demographics
Quality
Comparisons
 Trends
 Targets
Individual Donor Indicators
 # of donors
 Average gift size
 % of donors retained
 New donors
 Tiered donor giving trends
Infrastructure Indicators
 % of completion on major improvement
projects
 # of days without accident
 # hours of system down time
Identity/Visibility Indicators
 Website analytics
 Facebook friends
 Posts
 Open rate for e-news
 Media coverage
Leadership Transition Indicators
Leadership demographic trends
Recruitment targets
Transition preparation timeline
Governance and Board Engagement
Indicators




Committee Participation
Giving/Fundraising Participation
Most Recent Executive Director Evaluation
Most Recent Board Self-Assessment
Achieving Visual Impact
 Less is more
 Font & color matters
 Match graph format to info conveyed
 Multiple dashboards for different audiences
Dashboard Graphic Strategies
 Stoplight – red, yellow, green
 Pass/fail
 Grades & scales
 Pie Chart
 Line Graph
 Scorecard
Community Action Partnership
Dashboard Tool
Entering Information
Graph 2: Net Assets
Unrestricted
Temporarily Restricted
6-30-11
9-30-11
$1,121,100
$1,131,100
$100,000
$250,000
Unrestricted vs. Temporarily Restricted Assets
1,200,000
1,000,000
800,000
Unrestricted
600,000
Temporarily Restricted
400,000
200,000
0
6-30-11
9-30-11
Discussion ???
 Most significant indicators for your Board?
 Comparison strategies for key indicators?
 Graphic approach?
 Separate dashboard for Board Committees &
Management Team?
Financial Leadership Development
Curriculum
As a Statewide Cohort
 Involvement of State Association
Self Directed
Team
Facilitator
Timeframes
Outcomes
FLP Components
 One-day training for CAA Teams including Executive Director,
CFO, & Board Leader
 7 training segments
 Workbook & structured exercises for each participating CAA to
assess their own sustainability & develop new strategies & tools to
strengthen their financial health
 Discussions with other CAA Teams (Only in State Cohort situations)
 Guidance in developing Dashboard tools
Financial Leadership Self-Directed
Training
Self-Directed Training
The training participant works through the exercise on their
own
The help of financial facilitator is still recommended
The Partnership will provide additional support in the form of
training materials, dashboard examples, and
implementation checklists
Advantages of the FLP
Self Directed-Training Format
 Allows for agencies to tackle difficult financial concepts
at their own pace
Re-watch videos, or re-wind portions for clarification
 Allows for continued refinement of the financial
dashboard based on the participating agency’s needs
 Based on a wealth of experience from other community
action agencies and subject matter experts.
 Limited investment to implement the FLP will yield
significant help with difficult financial challenges
Both Formats Engage CAA Teams
Executive Director
CFO/ Fiscal Director
Board Treasurer/Finance Chair
FLP State Association Roles in
Self-Directed Format
Locate and suggest a financial expert
Facilitate participant implementation
Provide follow-up support
Conduct participant evaluation
Before the Self-Directed Training
 Establish the financial dashboard team
With the help of the State Association obtain the services of a
financial expert that can assist in evaluating the financial
documents and dashboard drafts
It might be necessary to find a person that can “champion” this
project to ensure that it doesn’t get buried under competing
priorities
 Establish Time-Frame that does not extend beyond three months
This process requires a good deal of work from everyone involved
and as the time extends it becomes easier for other project tasks to
take precedence
 Obtain the necessary financial information and place in a format that
can be shared with the financial team
Key Financial Documents for both the
Self-Directed and Group Methods
Most recent audit – full report
Recent Board Financial Statements
Statement of Financial Position
Balance sheet
Statement of Activities
Statement of Cash flows
Budget to actual comparison
Narrative financial report
Additional Information
 Current agency-wide Budget
Format used to present to the Board
More detailed format used by staff
 Financial Information from related entities like affordable
housing entities or business ventures
Applies to CAA work done through separate business or
partnerships
Examples include a separate non-profit corporation or tax
credit partnership
Any other ongoing financial information from related entities
Uses of Key Financial Documents
 Statement of Financial Position
 Used in general discussion of net assets and defining net worth
 Portion of net assets available for operation
 Invested in fixed assets
 Board designated reserves
 Balance Sheet
 Discussion on cash flow
 Calculating days of cash
 Current Ratio
 Statement of Activities
 A detailed look at increases and deceases in net assets
 Examples of alternate formats Statement of Activity formats that show actual to budget and year end projectio
 A detailed look at the how to calculate unrestricted net assets
 Indirect Cost Rate
Uses of Key Financial Documents
 Statement of Cash flows
 Calculating days of cash
 Trends in Days of cash
 Budget to Actual Comparison
 Trends in Days of cash
 Budget Narrative
 Context for expenses
 Agency Wide Budget
 Cost Allocation
 Indirect Cost Rate
 Financial Information from related entities like affordable housing entities or business ventures
 Discussion on the impact of the related entities can impact the sustainability of an organization
Getting in the Right Mindset
 Conversations to have with your Board finance committee
How financially healthy is your CAA
How sustainable is your CAA
What are your current indicators of your financial health
Do most Board Members feel comfortable in their understanding of
financial reports?
Getting in the Right Mindset Financial
Leadership Team
 Ask top management to discuss:
 perceptions of financial health and sustainability
Usefulness of current financial information
Other information they would find helpful
Other information they would like the board to see on a regular
basis
Getting the Most Out of the
Self-Directed Training
 Create a time for your financial leadership team to meet
Multiple meetings will be necessary as participants work
through videos
Follow-up time should be included as part of moving through
the self-directed training
Multiple revisions of the dashboard may be necessary and
can be included as part of the allotted follow-up time
Training Guides
Training Guides and Videos Combine to
Create a Multi-media Training Environment
Review of Key CAA Commitments for Both the
Group and Self-Directed Learning Models
Submit needed financial info in advance
Hold Board & Management assessment discussions
Clear their schedules to participate fully in the training
discussions
Schedule follow-up time to prepare the info needed for
their dashboard
Schedule time for Board discussion of their draft
dashboard
Facilitator & Financial Expert Roles
Facilitator
Keep it lively & comfortable
Clarify discussion questions/assignments
Facilitate full group discussions
Financial Expert
Help apply the concepts to your financial info
Deal with accounting & reporting differences
Follow-up Assistance Process
Your team works with your CAA to identify key indicators &
comparisons:
Get hands-on help to develop your CAA’s dashboard from:
Your facilitator & financial expert
Community Action Partnership
Broader Sustainability Resource
Nonprofit Sustainability: Making
Strategic Decisions for Financial
Viability (2010)
Jeanne Bell, Jan Masaoka, Steve
Zimmerman
Fiscal Oversight combined with
programmatic oversight
www.josseybass.com
Matrix Map Analysis
Decision
Making
The Sustainable
Nonprofit
Business Model
Know Your CAA’s Impact/Profitability
Quadrants
High Mission
Impact
High Mission
Impact
Low
Profitability
High
Profitability
Low Mission
Impact
Low Mission
Impact
Low
Profitability
High
Profitability
Source: Nonprofit Sustainability: Making Strategic Decisions for Financial Viability,
by Jeanne Bell, Jan Masaoka, Steve Zimmerman
Financial Leadership Development for
Staff
 Done in cooperation with CAPLAW and
Washington Morgan Community Action
in Ohio
 Series of three webinars
 Meant to be watched as a team
 Increase Program Staff’s understanding
of the fiscal perspective
 Increase Fiscal Staff’s understanding of
the program perspective
 Walks through Grant development,
reporting, and monitoring functions.
 Team Approach
 CFO/Finance Director
 Program Director
 Planning Director
 Budget Proposal
 Program &Tracking
Budgets
 Budget Revisions
 Reports
© 2013 Community Action Legal Services, Inc. & Community Action Partnership
© 2013 Community Action Legal Services, Inc. & Community Action Partnership
82
Webinar 2
Webinar 3
Wipfli
Resources
Webinars
Toolkits
Annual Training Conference
Pre-Convention Session at
the August Convention
Soon to Come toolkit: Fiscal
Fundamentals for Executive
Directors
Fiscal Management Activities CalendarFiscal Management Associates
Summary Calendar
The Summary Builds on the Subsequent
Pages-Budget Development
Community Action Partnership Annual
Convention
Contacts and Resources
Denise Harlow
[email protected]
Andy Cruz
[email protected]
CAPLAW
www.caplaw.org
Kay Sohl
[email protected]
WIPFLI
www.wipfli.com
Fiscal Management Associates
www.fmonline.net
This presentation was created by National Association of Community Action Agencies – Community Action Partnership in the performance of the U.S. Department
of Human Services, Administration for Children and Families, Office of Community Services Grant Number 90ET0428. Any opinion, findings, and conclusions, or
recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the U.S. Department of Health and Human Services,
Administration for Children and Families.

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