5 Key NonProfit Risk Management Strategies

  

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Welcome to my first of many monthly interviews with influential people in the nonprofit community. My goal will be to have them share something that they are successful at in hopes you can learn some best practices and implement in your organization.

Nancy Woodruff Ment, CEO
Andrus Children's Home: Yonkers, NY
Andruschildren.org
Nancy's Bio
LinkedIn

As CEO, Nancy has been instrumental in reshaping the organization’s profile through two key mergers, with the Center for Preventive Psychiatry and with Family & Community Services, Inc. Ms. Ment came to Andrus in 1987 as the Director of Clinical Services. Her career has encompassed numerous operations and executive positions in child welfare and mental health in the greater New York area. Please click her name above to get more biographical information.

1) Tell me a little about your leadership team and how risk management fits in? 
For the past 25 years, I have been in a leadership position with ANDRUS and the CEO for the last nine years. We have grown from a single site, single service for 57 children taking no public revenue to a multi-site, multi-service organization serving 2,500 children and families annually and dependent upon public sources for about 85% of our revenue. To accommodate change on that scale, we have had both to engineer and absorb change on our leadership team to be certain we have the skills and capacity in place to manage the risks that come with an expanded mission. Our management team can adapt to the world around us. We have found that it isn’t good enough to have leaders with narrow skill sets, however refined they may be. We need people who think broadly, scan for areas of vulnerability, understand how pieces fit together and value a robust team approach in addressing risk. 

2) What are some of the key areas of risk that you focus on and why? 
ANDRUS serves children who are inherently vulnerable. Our treatment philosophy is anchored in the belief that children should always be and feel safe. Safety, for us, begins with having the right people to fulfill our commitment to safety. We focus on HR processes to recruit, screen, train and supervise staff. We closely monitor our medical and psychiatric care practices because of the risk they carry. Physical plant maintenance, financial management and regulatory compliance is increasingly onerous. We devote an incredible amount of resource to addressing any concerns children, families and funders express about the care we provide. Respectful and timely attention to small matters fuels prompt corrective action, assures a reliable referral base, can prevent a lawsuit and best of all, gives disenfranchised clients the sense that their feelings matter.   

3) What are some of the outcomes you have seen by focusing on risk? 
We have built more depth and diversity on our leadership team with people who thrive on the challenges that this work and these times present. Our planning processes are more comprehensive and effective because we try to anticipate where risks lie. We have also found ourselves spending more on the front end to prevent expense at the back end.

4) What resources do you use to assist you and your team with Risk management? 
We have strong legal representation, auditing services, benefits consulting and insurance brokerage.  We have a kind of unspoken rule of thumb that any consultants and specialists we use are people we admire both personally and professionally. The work we do is highly driven by values and we want to engage with others who reflect the character and integrity for which we want to be known. Running a not for profit like ANDRUS demands nonstop on the job training. We seek consultants who are reliable in making sure we always have the most current information, the best options for managing risk and take the time to help us learn. 

5) What is the one strategy you use the most when managing risk?
Time. Even if you have a good knowledge base and access to the best advice, there is no substitute for simply taking the time to think through an issue and create an effective plan.

*Special thanks to CEO Nancy Woodruff Ment for her insight on risk management and team leadership. If you would like to view Andrus' website, just click the ANDRUS logo above.

12 Ways to Show Employees You Care

  

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Like me, I am sure all of you always try to keep employees motivated, happy, and engaged. This can be a challenge on top of all the other responsibilities we as leaders need to focus on.

As part of my planning process each year I always try to schedule some time to send notes to employees. Either for something I heard about from a client or a coworker. I actually have written some notes and sent them to their homes. Not a lot of effort but it goes a long way.

Our company holds an employee appreciation breakfast each month on the final Thursday. We provide breakfast and a short agenda that includes the following:

1. Open conversation, Networking
2. Celebration of special days - Birthday, anniversaries, milestones, promotions, professional development and other celebrations
3. We celebrate any new accounts that have joined Rollins in the last month
4. We read out any accolades received from clients about team members
5. We ask all team members to thank any fellow team members for any special effort on their part. This is always a great love fest!
6. We briefly review any official Rollins messages we need to share.

We have been doing this for 10 years now and it is the highlight of our month. Getting everyone in the same room once a month to share positive news is always a great motivator.

Click the button to the right which will provide an outline of 12 ways in which you can show employees you care. Instead of trying all of them, try at least one and bring more on as you can.

 Please take a minute to leave a comment below.

3 Human Resource Strategies to Reduce Health Insurance Costs

  

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We are deep into open-enrollment season, that time of year when many companies roll out changes to their health insurance plan. Some of the changes will be increased costs, higher deductibles and narrower networks.

It is more important than ever to communicate these changes to your employees pro-actively and find ways to minimize the cost increases. This can be accomplished at open enrollment meetings. It is a great time to inform employees what is happening to the benefits program being offered, what is happening within your organization and what is happening that will directly affect them.

We use this time with our clients to build a message that delivers the news with as much positive slant as we can. It’s hard to tell them that their contribution is going up or that the co-insurance is changing and have it come across positively. There are 3 strategies to to soften the financial impact on employees with plan design changes.

One of the ways is to implement a tax savings account such as a Health Savings Account (HAS). Simply said, this is a tool that increases the plan deductible for everyone which reduces the plan cost. Your organization sets aside some of that savings to offset for everyone's increased deductible. This is usually a win win for everyone.

Another one of the tools we use is plan design. We find so many times that plans offer only one plan and it is the “Cadillac” plan. The plan is the best one available but also the most expensive. A quick study of utilization will tell you if offering lower cost plans as an option is a better way to go. This will reduce the cost for everyone.

Another strategy is to implement a Wellness program. This will have a long term effect on your human capital investment but also your health insurance costs. There are many ways to start a wellness program and many resources that go with it. But it must be a culture change within your organization.

So these are three strategies you can use to reduce your costs, improve employee morale and communicate a positive message.

Preventing Conflicts of Interest in Nonprofit Organizations

  

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A conflict of interest arises when an individual's or organization's professional duties conflict with personal interests. For public companies, a conflict of interest can definitely cause some serious problems to arise, problems that can even lead to job termination. Nonprofits along with private individuals must be especially weary of these mishaps and protect themselves at all cost. The Internal Revenue Service is the entity that strictly regulates conflicts of interest pertaining to nonprofits.

The revised 990 asks not only about whether the nonprofit has a written conflict of interest policy, but also about the process that a nonprofit uses to manage conflicts and how the nonprofit determines whether board members have a conflict of interest.

• Minutes of board meetings should reflect when a board member discloses that s/he has a conflict of interests and how the conflict was managed, such as that there was a discussion on the matter without the board member in the room, and that a vote was taken but that the “interested” board member abstained (board members with a conflict are “interested” – board members without a conflict are “disinterested”).
• A process used by many nonprofits to find out whether any board member (or staff member) has a conflict of interests, is to circulate an annual “conflict disclosure questionnaire” that asks board and staff members to disclose existing conflicts and reminds them to disclose any that may evolve in the future.

 Sample Conflict of Interest Policy from www.execusite.com

Consent Agenda- How Using One Will Make Your Meetings More Effective

  

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Many members of non profit organization as well as for profits find themselves experiencing the feeling that they may have already witnessed or experienced the current board meeting they are attending. For those who don’t know that is called déjà vu or in many cases the just the lack of a working consent agenda.

To start you off a consent agenda or consent “calendar” is a time saving tool that groups together routine items and resolutions that would otherwise not need consideration or debate due to a unanimous decision. Consent agendas should be used when there are a number of non-controversial business items on which the board needs to vote on that do not need anymore time or discussion other than “Any objections?... Then they are adopted.” Freeing up valuable time by allowing all items to be approved without separate discussion allows you to gear your efforts towards more important issues.

Consent agendas are used by both non-profit and for-profit organizations whose boards have a lot of routine business to approve and who’s goal is to use board members' time wisely and efficiently. Standard, routine, non-controversial, and self-explanatory are adjectives that describe typical consent agenda items. According to the Support Center for Nonprofit Management the following are some examples of what belongs on a consent agenda:

• Approval of the minutes
• Final approval of proposals or reports that the board has been dealing with for some time and all members are familiar with the implications.
• Routine matters such as appointments to committees
• Staff appointments requiring board confirmation
• Reports provided for information only
• Correspondence requiring no action

A consent agenda only serves its purpose if the topics and documentation for items in the consent agenda are distributed to board members well in advance of the board meeting. All participants can then go through items and decide if they believe anything in particular needs to be discussed further before being voted on.

Here’s how a typical consent agenda is handled:

1. The Chair will present the consent agenda before the members and ask if anyone wishes to remove any of the items. If any member wants a separate vote on any item or simply wants to discuss an item, that item must be removed from the consent agenda. In such a case, the Chair will reiterate which item is to be removed from the consent agenda and whether to take the issue up immediately or to place it under its “regular” category heading for that meeting.

2. The Chair then asks if there are any other items are to be removed. If there are none, the Chair will motion: Items numbered (listing remaining item numbers) are before you. If there is no objection, these items will be adopted. (Pause, to see if there is an objection.) There being no objection, these items are adopted.

3. The consent agenda items will be individually itemized in the minutes so that a complete record of the resolutions, reports, or recommendations is contained.

 
Here is an example of the motion to adopt:

I would love any feedback on these topics, please feel free to leave a comment.

References

Support Center for Nonprofit Management

Midwest Center for Nonprofit Leadership

Picture By HikingArtist.com 

What Does Cyber Liability Cover: 6 coverages you should know about

  

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You cant pick up a newspaper today without reading about an organizations computer system getting hacked.

Non profits are not immune from this. If someone really wants to breach your security they will. Many of you store private data from clients, employees and donors. What would you do if that data was compromised? What if an employees laptop was stolen that contained some of this data?

Certainly you must practice good risk management to help with control and prevention. But in the event it happens to you there is an insurance solution.

Below is a post that helps to describe the insurance that is a risk transfer tool to help with the costs involved with breach of security and other related Cyber Risks.

This post was written by my partner, John Moccia, Founder of Innovation Guard. I hope that helps.

The whole reason that cyber liability insurance has become a hot risk management topic is because the evolution of business insurance has been out paced by our usage and dependance on technology.  The standard policy for Property and Liability, that every company has today, is virtually the same as the policy that they would have had 25 years ago.  Sure there have been minor updates, but for the most part, some of the biggest risks businesses face today are not covered by their insurance.  Basically every business uses a computer system to manage its finances and billing, store customer information, control marketing and PR programs, communicate with clients, store client data, manage human resources and employee info – and on and on…..and the fact is that traditional business insurance policies don’t address the significant impact there would be on a company if their systems were compromised.

The insurance industry has recognized some of the shortcomings for many years (loss of data not being covered by property insurance – because property as defined in insurance policies must be tangible to qualify to be covered –  has been a heated topic for as long as I can remember).  A few insurers have offered cyber policies to address these concerns for many years.  However, only recently have more carriers followed suit and produced their own cyber liability insurance coverages.  Eventually standard business policies will have to address their shortcomings, but until then, a separate insurance policy must be considered as you evaluate your overall corporate risk.

What Does Cyber Liability Cover? Well, each insurer that offers Cyber Insurance does it a little differently, but six key coverage areas seem to be consistent:

1. Data Loss & System Damage– Your current property policy covers damage to the computer itself – but not the data stored on them.  Doh!
2. Business Interruption - Loss of Revenue from downtime after a hack, denial of service, virus…that causes a temporary or long-term shutdown in your operations.
3. Notification Expenses – Almost every State has notification requirements – your company must disclose any breach to parties whose private information was, or is reasonably believed to have been, acquired by a person without valid authorization.  You may also have to provide ongoing credit monitoring.  This could generate significant expenses to your organization.
4. PR/Crisis Management - You’ve experienced a security breach, been out of business for a week, notified thousands of clients, vendors, etc of the breach…..better do some spinning Stat!  Hire a PR firm and do some marketing and public relations to minimize the damage to your brand.
5. Content Liability – Anything associated with the content of your website, blog or other web presence from copyright and other IP claims to slander to invasion of privacy.
6. Regulatory Investigation Expense – With the new notification laws having been enacted and privacy legislation constantly changing, there is always the chance that you could get a knock on the door from a friendly civil servant.  Most policies exclude governmental or regulatory investigation costs.  Bummer.  Make sure your cyber policy includes it.

As a business owner, you really need to think about the insurance dollars that you are spending to transfer your biggest risks - would the premiums you are paying for traditional business interruption coverage be better spent on a cyber policy?  Where are you more likely to have a loss?  And I know what you’re thinking – OK, how much does cyber liability cost.  The costs will vary based on the type of business, the sensitivity of the data in your possession, the controls you have in place and the limits of coverage that you select.  The lowest premium I have seen for this type of policy has been $1,500.

One final note:  insurance policies are just one way to transfer risk……for example we provide our clients with access to a proprietary, internet platformwith tools and resources to help them prepare for cyber risks.  Anticipation and preparedness can go a long way toward mitigating losses.  Included on this platform is a simple online assessment to test your vulnerability, a hotline to speak with a security expert and an incident roadmap to guide you through your response to an adverse cyber event.

Thanks to John Moccia and Innovation Guard for these 6 cyber liability coverages

5 Critical Changes for Nonprofits in Dealing with Foundations

  

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I had the pleasure of moderating a panel discussion for the Association of Development Officers Annual Conference in Tarrytown, NY. The theme of the conference was “Differentiation in the New Philanthropy World” It was a great day of idea sharing and included a wide range of breakouts regarding this topic. More than 200 people from the non profit community in our area attended and walked away with the latest ways to respond to the ever-changing landscape in philanthropy and differentiate their organization when interacting with donors, foundations, supporters and the public. We were pleased to be a sponsor to support such a worthy organization.

My panel included Naomi Adler, Esq. CEO, United Way of Westchester and Putnam, Melinda Burge, Executive Director of The Community Fund of Bronxville, Eastchester and Tuckahoe and Adam Kintish, retail market manager and VP, TD Bank (Adam represented their foundation). Their grant funding budgets range from $200,000 to $5,000,000, giving us wide range of capacity.

Even with these differences, they all agreed on some common changes that are taking place within their organizations and also the way in which they work with grantees.

Non Profits find themselves in a perfect storm:

• Less funding from all sources
• Tough economic times which are creating more demand for your services
• Stricter guidelines and accountability from funding sources
• Increased transparency and reporting requirements
• Changes in technology – email, social media have created a new level of speed and access to information
• Increased competition for dollars from many non profits

Here is what I heard from the foundations regarding their challenges:

• They are under extreme pressure from their own funders and their need for accountability has increased.
• Due to less available funding they have had to cut back in many areas, including infrastructure and allocation amounts.
• Because of decreased capacity and resources that their funded non profits face, they find themselves having to offer more services to them, adding more strain to their foundation.

So what has this done to the way in which they allocate funds and work with grantees?

1. It is critical that they receive very clear, concise submissions that include everything they asked for. Sounds basic, but it must be easy to find the information and no grammatical errors. Less is more. But clear!
2. You must include the critical numbers and they must show that you are making a difference in your area.
3. Communication is critical. Keep the foundation up to date proactively on how you are doing. Give them the information they want before they ask for it.
4. Know when the foundation board meets. Just prior to that meeting is a good time to send an update
5. Bring a mix of people to the table when meeting with a grantor to provide a deeper bench and broader personalities to help deliver the message. CEO and board members are sometimes a great addition to the Development Officer.

I hope that these 5 principles help you when working with foundations with grant requests. This panel was put together with the guidance of Sharon Guss Pollack and Joanne Essig Stewart, Partners with Goodworks Advisory group, LLC. Please feel free to reach out to Sharon, Joanne or myself for more information.

Sharon Guss Pollack
Email: spollack@goodworksadvisorygroup.com

Why Non Profit Risk Taking Will Pay Off

  

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We spend much of our time working with non profits talking about avoiding risk, transferring risk and mitigating risk. Certainly this always makes sense. But at the same time your organization must also become “Risk Aware” not “Risk Adverse”. Taking risks must be part of your every day life. It equates into “Organizational Success”. This will lead to innovation, possible new strategic partnerships, mergers and/or growth.

At the same time you need to have an excellent risk management program. This will enable your organization to achieve a proper balance between prudent risk taking and the paralysis of trying to avoid all or most risks. I see this often at the board level. Instead of looking down all the time at data and information, turn and look out the window and dream a bit about what could be. The board room is a place where you can think of opportunities and imagine all the possibilities.

A nonprofit that takes more risks than it avoids can innovate and explore uncharted paths to accomplish its mission, while remaining alert to emerging threats that must be avoided in order to protect critical assets.

In my post last June “12 Hallmarks of a Risk Aware Non Profit” I talked about the 12 Hallmarks that make up the list. Today I am going to focus on Hallmark #1 – Takes More Risk Than It Avoids. These Hallmarks were developed by Melanie Lockwood Herman, Executive Director of The Nonprofit Risk Management Center in Leesburg, Virginia. Take a minute to jump onto their site and learn more. In future posts I will share more of the 12 Hallmarks.

Here are the 12 Hallmarks

1. Takes More Risks Than It Avoids
2. Heralds A Risk Management Champion
3. Guided By Reality, In Addition To Scary Headlines
4. Is Bold But Smart
5. Cultivates a ‘Can-Do’ Attitude Among Paid and Volunteer Staff
6. Sees The Whole Iceberg Not Just The Tip
7. Understands That Hindsight Isn’t 20:20, But It’s Better Than A Blindfold
8. Tells It Like It Is
9. Is Transparent With Insurance Partners
10. Values The Journey, Not Just The Destination
11. Engages The Board In Battle
12. Looks At Risk From Everyone’s Perspective

In the equation of success, risk-taking does not equal making mistakes. Nonprofits that demonstrate Hallmark #1 know that. They take more risks than they avoid because they know that informed and thoughtful risk taking is an essential component of organizational success. Therefore, they take risks—all the time.

The Process

1) To manifest this Hallmark, your nonprofit will:

• Encourage thoughtful risk-taking:
• In a staff meeting, commend someone who has taken a risk.
• Create an award that is rotated monthly (or given when deserved!) for a staff person who took a risk.

2) Raise awareness of risk-taking:

• Ask a staff member to tell the rest of the staff about a risk taken at work and explain what happened. What was the outcome? What did you learn?
• Inspire the board’s awareness about risk-taking that occurs by describing when and how taking thoughtful risks is encouraging innovation and moving the organization forward.
• At any opportunity, engage the board in discussions of risk versus reward and the value of risk-taking.

3) Evaluate risk-taking: Explore why some risks do not pay-off but others do.

• Keep track of the risks the organization has taken and those it has avoided.
• Evaluate which risks resulted in positive outcomes—and which ones did not. Then think about why—and whether there were better alternatives.
• This works well as the topic for discussion in a staff meeting, or as a warm-up during the strategic planning process, or as a task force project.

Picture by Jam Adams from Flickr

I would love any feedback on these topics, please feel free to leave a comment.

How to Increase Nonprofit Funding - 5 Best Practice Traits for a Board

  

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At a recent luncheon for the Association of Development Officers, collegues and I listened to a very informative presentation from Don Crocker, CEO of the Support Center for Non Profit Management. Don has been able to crystallize what I believe most non profit organizations strive to attain. Don touched on three important aspects essential to all non profit boards. Aspects including a board that is functioning well, one that brings needed value to the organization, as well as a board that supports the leadership team in all ways.

Right now more than ever due to dramatic economic downturn (severity and length still a question), increased regulation (Auditing, IRS 990, other), late and slow payments, credit markets tight, an environment full of fear and cynicism, and increased public scrutiny, boards now more than ever need to reorganize and rally for the common good of the organization.

As Don said during his presentation, status quo is no longer enough nor is it acceptable. Building this new board can take several years. A long sometimes frightening task, but one that can be best tackled piece by piece.  He referenced a few members from organizations that have done this very well, one being Geoffrey Canada.

Geoffrey Canada is the president and CEO of the Harlem Children's Zone in Harlem, New York. He has done a terrific job turning the organization and its board around. It was only 4 short years ago that he realized that 95% of his organizations revenue was funded by government sources. Looking at a downward spiral, Geoffrey took it upon himself to make a change. He began rebuilding his board, bringing in many new members that have now instilled a new found sense of value and support to his organization. The Harlem Children’s Zone now receives most of their funding from various foundations, corporations, individuals, and other sources causing the government funding to be only 28% of their operating revenue.  

Listed below are Don’s lists of the traits for the board of the future:

• Increased Board engagement is NOT optional!  Board must step up and govern and they must be “in-charge” of hiring and firing competent management.
• The Board as a body and as individuals must sharpen their understanding and ownership of finances.
• Board members must up their activity in engaging new supporters &   stewarding long-term supporters.
• The Board leaders and CEO must communicate openly and often.
• The Board must organize itself and its individual members to be effective and efficient, set clear goals for itself, and regularly measure its progress toward results.

Since having heard Don speak I have talked to many clients about this topic. There are mixed reactions to this. One of the big stumbling blocks is that many non profit boards still have not enacted term limits or don’t enforce them. It is hard to bring in new board members if there is not a spot to put them.

I would love any feedback on these topics, please feel free to leave a comment.

Photo By Okeefew from flicker.com
Don Crocker can be reached at:
Phone: 212-924-6744 ext. 306
Email: dcrocker@supportcenteronline.org

9 Nonprofit Business Threats That Keep Executives Up At Night

  

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Last week I had the pleasure of holding a non profit alliance meeting with the leadership team of 8 non profits. Ranging in size from a budget of $20,000,000 up to more than $240,000,000, it was amazing how similar their operations were at the core.

Carrying out their mission was the number one goal for all of them. But given these crazy times, things are not like they used to be. Cost cutting, the need for efficiencies and plain hard work is something they are all dealing with.

The meeting was facilitated by me along with Matt McCrosson, partner of O’Connor, Davies, Munns and Dobbins, LLC. Also present was Dan Alcott, Partner with Dorf Law Firm, LLC. The purpose of the meeting was an open forum and sharing of best practices in several different areas. Matt, Dan and I supported the discussions with our perspective on best practices we see for all of our clients. The agenda included specific items having to do with Financial, Legal and Risk Management areas.

As part of the meeting we asked all the attendees what was one thing that kept them up at night. Many were repeated by several members. I have listed them below with some additional comments.

• Lack of a current strategic plan – The group agreed that any plan that was more then a year old does not reflect the current state of affairs they are operating in.
• Concern that revenue is not enough to cover expenses – Donations are down, interest income is down and endowment income is down. At the same time the need for mission is on an increase. There is a lot of pressure to cut expenses, which sometimes translates to staffing cuts and elimination of programs. Since the goal of nearly all non profits is mission driven, there is an in balance between the financial needs and being able to keep the mission going.
• Compliance issues - Just when you think you understand the issues and are compliant, things change. Some specific issues of concern voiced are new 990, GAP, NYPMIFA and HR related issues.
• Complexity of contracts – Some organizations were better aligned here than others. But they all agree this is a huge area of concern. They do not want to assume too much liability and want to try and transfer as much as they can. The larger non profits have in house general council who spends a large portion of their time reviewing and signing off on all contracts. They include employment, purchasing, independent contractors and joint venture agreements. We have seen so many times loose contracts controls resulting in negative financial results for non profits.
• Volunteer risk management – Everyone agreed that this is a critical area and needs attention. Many of these organizations use thousands of volunteers every year. Controls range from every volunteer signing a wavier to no waivers at all. It was agreed that waivers do perform a level of protection and should be the normal practice. Training, orientation, soliciting feedback and screening should all be in place.
• IT Strategies – There was a lot of discussion about aligning the IT strategies with those of the organization. Sometimes the IT department is not kept up to date with the mission efforts and therefore they don’t provide the right kind of support and system design to match the business (mission) goals.
• Network security. It is clear that no matter how diligent you are, you are always behind the hackers. The IT departments are concerned about keeping up to date with equipment upgrades, evaluation of new software products and the risks associated with data breach and security issues.
• Financial reporting software – This was discussed extensively among the participants and is a very critical area for everyone. There is a huge direct and indirect cost to maintaining the systems and staying up to date.
• Fraud – There was a lot of discussion about white color crime. Several of the participants have had occasion to determine that this was going on. Two of the 8 participants both prosecute to the fullest extent of the law. Making sure that you have the proper checks and balances in place is important as well.

Many of these topics are worthy of more information going forward and I plan on doing that.

I would be happy to hold another one of these meeting for local non profits. I will tell you it was very helpful to everyone who attended. In fact we are scheduling a follow meeting with this same group in the early part of 2011.