Money for Nothing: Financial Management in Difficult Times
Estimated Reading Time: 2 minutes
By Melanie Lockwood Herman
Executive Director
For many nonprofits that are working to ride out the recession the need to cut costs and operate austerely is painful and ever-present. Yet an unintended downside of near-obsessive focus on the present may be neglect of long-term opportunities. With every available hour and dollar spent on managing with less, too little may be devoted to looking at the horizon for opportunities to “do more with more.”
The discipline of financial management is much broader than the bookkeeping and accounting functions in a nonprofit. It encompasses financial planning focused on mission fulfillment, evaluation of activities and programs to ensure that they do not drain resources away from mission-critical efforts, recalibrating resource development efforts to reflect more closely the opportunities embedded in the mission, and ensuring proper governance practices that allow for transparency and appropriate board and stakeholder involvement. Therefore, financial risk management starts with a core focus on protecting the assets of the organization but also embraces many other facets of organizational activities.
In our work assisting nonprofits across the country, the Center frequently incorporates basic concepts of financial risk management into our consulting, technical assistance, and teaching programs, irrespective of the overall focus of the engagement. Conversely, nonprofit leaders faced with diminished financial resources in difficult times can use the focus on financial trauma to ensure that their organizations are adequately addressing the basics. Is your organization adequately protecting against fraud? Is your board appropriately involved in making the tough financial and human resource choices? Are you tracking and still adhering to donor intent with regard to the use of restricted funds? Are you carefully evaluating the risks associated with new fundraising efforts?
In coping with the current crisis, nonprofit leaders must also continue to manage future risks. There are both risks and opportunities ahead, as there always have been, and the present difficulties should not cause the organization to diminish a “heads up” approach to the future, including reminding and providing guidance to staff so that the entire organization stays as healthy as possible as it emerges from difficult times.
Melanie Lockwood Herman is the Executive Director of the Nonprofit Risk Management Center. She welcomes questions and concerns at Melanie@nonprofitrisk.org or 703.777.3504.
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“Melanie Herman has provided expert, insightful, timely and well resourced information to our Executive Team and Board of Directors. Our corporation recently experienced massive growth through merger and the Board has been working to better integrate their expanded set of roles and responsibilities. Melanie presented at our Annual Board of Director’s Retreat and captured the interest of our Board members. As a result of her excellent presentation the Board has engaged in focused review which is having immediate effects on governance.”
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— Jodi Spataro, Community Foundation of Elkhart County
“The board and staff of the Prince George’s Child Resource Center are extremely pleased with the results of the risk assessment conducted by the Nonprofit Risk Management Center. A thorough scan revealed that while we are a well run organization, we had risks that we never imagined. We are grateful to know that we have now minimized our organizational risks and we recommend the Center to other nonprofits.”
— Marti Worshtil, Prince George’s Child Resource Center
Great American Insurance Group’s Specialty Human Services is committed to protecting those who improve your communities. The Center team has committed to delivering dynamic risk management solutions tailored to nonprofit organizations. These organizations have many and varied risk issues, hence the need for specialized coverage and expert knowledge for their protection. We’ve had Melanie speak on several occasions to employees and our agents. She is always on point and delivers such great value. Thank you for the terrific partnership and allowing our nonprofits to focus on their mission!