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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

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financial leadership development tools for board executive leadership fiscal and program staff

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

dharlow@communityactionpartnership.com

A special thank you to Kay Sohl and CAPLAW for your role in the development of the Financial Leadership curriculum presented here today.

agenda
Agenda
  • Current Environment
  • Financial Leadership Development Program
  • Dashboards for Reporting
  • Joint Development for Program and Fiscal Staff
  • Financial Calendar for the Board
current challenges
Current Challenges
  • Increased need
  • Federal and state budget cuts
  • Political environment
  • Head Start competition
  • Negative publicity
  • Heightened funding source expectations
current challenges1
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
Financial Leadership
  • Board
    • Ever-increasing pressure to provide oversight
    • Finance Committee
    • Audit Committee
    • Treasurer
  • Staff
    • CEO/ED
    • Fiscal Staff
    • Program Staff
    • Emerging Leaders
sustainability
Sustainability???

Your CAA’s sustainability on a scale of 1 to 5

signs of financial health sustainability
Signs of Financial Health & Sustainability
  • Achieve mission
  • Liquidity – cash when needed
  • Positive Net Assets
    • Especially Liquid Net Assets
  • Compliance
    • Maintain & document
sustainability factors
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
CAA Sustainability Roadblocks
  • Compliance-focused budgeting
  • Use or lose it funding
  • Multiple grant period complexity
  • Arbitrary limits starve infrastructure
  • Business model analysis distorted byfocus on compliance
your caa s sustainability rating
Your CAA’s Sustainability Rating
  • Preliminary sustainability rating
  • Your most significant financialstrengths
  • Most significant sustainabilitylimitations or threats
  • Impact of related entities on your financial health & sustainability
what is the financial leadership program
What is the Financial Leadership Program?
  • The Financial Leadership Program (FLP) provides a structured curriculum, self assessment tools, and a peer-to-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
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 ofeffective dashboardfor your CAA
training process
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
At the end of the process…..
  • Financial Information
  • Program Information
  • Strategic Information
  • Dashboard
why use dashboard reports
Why Use Dashboard Reports?
  • Draw attention to key information
  • Bring focus to priorities
    • Draw attention to key information
    • Bring focus to priorities
strategies to build sustainability
Strategies to Build Sustainability

2

  • Why net assets matter
  • Restrictions on net assets
  • Setting net asset goals
  • Key net asset progress indicators
financial health sustainability indicators
Financial Health &SustainabilityIndicators

Net assets

Cash position

Income diversification

Key business drivers

Net income

improving cash position
Improving Cash Position

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?
days of cash
Days of Cash

Annual Expenses ÷ 365 days

= 1 day of Cash

Cash Balance ÷ 1 Day of Cash

= Days of Cash

sample days of cash
Sample Days of Cash

Annual Expenses $975,000

÷ 365 days

= 1 day of Cash 2,671

Cash Balance 160,000

÷ 1 Day of Cash

= Days of Cash 60 days of cash

your business model
Your Business Model

4

  • Understanding your cost structure
  • Risks and rewards in your governmental fundingagreements
  • Private support & the cost of fund raising
  • Earned income & business ventures
  • Key drivers in your business model
your business model1
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

current business model
Current Business Model ???
  • Lines of business/cost centers making positivefinancial contribution
  • Lines of business/cost centers making negativefinancial contribution
  • Cash flow impact of each line
beyond programs
Beyond Programs. . .

Fund Raising,as well as Programs, functions as a line of business

Need clarity on the contributionof each line of business to overall financial condition

discussion
Discussion ???

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?

risk management compliance
Risk Management & Compliance

5

  • Impact of risk management on sustainability
  • Risk identification
  • Risk management strategies
  • Key indicators of effective risk management
building your dashboard
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
Potential Dashboard Audiences
  • Board
  • Finance Committee
  • Executive Committee
  • Executive Director
  • Top Management Team
  • Program Teams
board roles
Board Roles
  • Set mission & priorities
  • Oversight
  • Liaison with the community
  • Resource availability
core board concerns
Core Board Concerns
  • Financial health & sustainability
  • Progress toward strategic goals
  • Risk management
  • Hot spots
nonprofits assistance fund board financial engagement functions
Nonprofits Assistance FundBoard Financial Engagement Functions
  • Compliance- maintain accountability
  • Evaluation- ask ???, understand info
  • Planning- use info, ahead
  • Action - decision-making
financial leadership roles executive director
Financial Leadership RolesExecutiveDirector
  • 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
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
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
Great Dashboards
  • Highlight key issues for specific audiences
  • Make trendsvisible
  • Identify issues for exploration
  • Focus discussions
bummer dashboards
Bummer Dashboards
  • Too many indicators
  • Mismatch info to audience
  • Graphic distortion
  • Meaningless comparisons
  • Never get finished
financial health sustainability indicators1
Financial Health & Sustainability Indicators
  • Cash position
  • Net assets
  • Income diversification
  • Net income
  • Key business drivers
income distribution compared to what
Income Distribution- Compared to What?
  • Government
  • Earned
  • Foundations
  • Individuals & Business gifts
income distribution comparisons
Income Distribution Comparisons
  • Trends
  • Targets
  • Benchmarks
  • Earned/ Contributed ratio
net income
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
Planning and Forecasting Indicators
  • Cash flow projections
  • Budgeting process benchmarks
  • Spend-down projections by funding source
  • Strategic planning goals
related entity indicators
Related Entity Indicators
  • Financial health
  • Cash position
  • Key drivers
    • Occupancy
    • Collections
  • Debt coverage ratio
  • Compliance
  • Reputational risk
strategic goals progress indicators
Strategic Goals: Progress Indicators
  • Program
  • Financial
  • Infrastructure
  • Identity & visibility
  • Leadership transition
program by program indicators
Program by Program Indicators
  • Units of Service
  • Demographics
  • Quality
  • Comparisons
    • Trends
    • Targets
individual donor indicators
Individual Donor Indicators
  • # of donors
  • Average gift size
  • % of donors retained
  • New donors
  • Tiered donor giving trends
infrastructure indicators
Infrastructure Indicators
  • % of completion on major improvement projects
  • # of days without accident
  • # hours of system down time
identity visibility indicators
Identity/Visibility Indicators
  • Website analytics
  • Facebook friends
  • Posts
  • Open rate for e-news
  • Media coverage
leadership transition indicators
Leadership Transition Indicators
  • Leadership demographic trends
  • Recruitment targets
  • Transition preparation timeline
governance and board engagement indicators
Governance and Board Engagement Indicators
  • Committee Participation
  • Giving/Fundraising Participation
  • Most Recent Executive Director Evaluation
  • Most Recent Board Self-Assessment
achieving visual impact
Achieving Visual Impact
  • Less is more
  • Font & color matters
  • Match graph format to info conveyed
  • Multiple dashboards for different audiences
dashboard graphic strategies
Dashboard Graphic Strategies
  • Stoplight – red, yellow, green
  • Pass/fail
  • Grades & scales
  • Pie Chart
  • Line Graph
  • Scorecard
discussion1
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
Financial Leadership Development Curriculum
  • As a Statewide Cohort
    • Involvement of State Association
  • Self Directed
  • Team
  • Facilitator
  • Timeframes
  • Outcomes
flp components
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
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
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
Both Formats Engage CAA Teams
  • Executive Director
  • CFO/ Fiscal Director
  • Board Treasurer/Finance Chair
flp state association roles in self directed format
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
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
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
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
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 projections
    • A detailed look at the how to calculate unrestricted net assets
    • Indirect Cost Rate
uses of key financial documents1
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
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
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
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
review of key caa commitments for both the group and self directed learning models
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 & 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
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
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
know your caa s impact profitability quadrants
Know Your CAA’s Impact/Profitability Quadrants
  • Source: Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, by Jeanne Bell, Jan Masaoka, Steve Zimmerman
financial leadership development for staff
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.
slide80

Team Approach

    • CFO/Finance Director
    • Program Director
    • Planning Director
  • Budget Proposal
  • Program &Tracking Budgets
  • Budget Revisions
  • Reports
wipfli
Wipfli
  • Resources
    • Webinars
    • Toolkits
    • Annual Training Conference
    • Pre-Convention Session at the August Convention
    • Soon to Come toolkit: Fiscal Fundamentals for Executive Directors
contacts and resources
Contacts and Resources

Denise Harlow

dharlow@communityactionpartnership.com

Andy Cruz

acruz@communityactionpartnership.com

CAPLAW

www.caplaw.org

Kay Sohl

kay@kaysohlconsulting.net

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.