2000 The NonProfit Times. All rights reserved worldwide. Used under Fair Use copyright law.

Transcription

1 The NonProfit Times The chief financial officer at a nonprofit these days has a hand in almost every organizational pot. Instead of simply adding up the numbers, many are now responsible for helping to make them. The finance and program departments have long looked at each other warily. But now, because of accounting rules that force program and fundraising to be documented differently, executives are working together whether they like it or not. This new spirit of cooperation is bringing different types of experiences to the top financial job. In some cases, the top job has gone to someone with an extensive financial background, such as a certified public accountant. Nonprofits are starting to promote executives with a grounding in all aspects of the business into the top finance job. For this edition of Executive Session, two such executives were brought together for a discussion. Kim Hessler, vice president of administration for USO in Washington, D.C., started in nonprofit development, literally opening envelopes. Chris Amundsen, chief administrative officer at United Way of America in Alexandria, Va., has a hard-core finance background. The session was moderated by Thomas A. McLaughlin of BDO Seidman in Boston and Paul Clolery, editor-in-chief of The NonProfit Times. The Executive Session series is co-sponsored by The NonProfit Times and The United Way of America. Thomas McLaughlin: The only thing we re asking you to do is talk from that which you know best, your own experience, your own ideas. It doesn t have to be theories or academically proper notions or research. If you have any of that, fine, but it s your own roles and your own jobs, experiences and ideas that are important. Kim Hessler: I m the vice president of administration, but I serve as the number two person in the organization. I provide direct supervision of all the support functions, our budget and finance area, human resources, all of our administrative support, MIS. I also keep my fingers in everything else that goes on throughout the building. I m like the chief of staff. I do a variety of things in overseeing, planning, and operational matters as well as the strictly budget and finance. McLaughlin: You started out in fundraising? Hessler: I started many, many moons ago. When I first started working in the nonprofit world I was opening mail, opening contributions. I value the time spent doing that because it s helped me develop my breadth of experience, and I can apply a lot of the things that I learned from doing that. Chris Amundsen: Unlike how USO operates, we have a team of people called an operating council. It s operating council people who are responsible for most of the major functional areas. I would consider it much more of a team approach to administering the leadership role at United Way of America.

2 So, we don t have a clear number two like Kim at the USO. People here are brought in from the field with special emphasis in specific areas. We are responsible for relating to our member base, to national corporations and individuals based upon those specific areas of expertise. I started out as CPA, so I came up from the finance end of things. I started out at a very small nonprofit, a United Way-funded agency, which allowed me a kind of grassroots feel of what nonprofit work is about. And, like Kim, I ve had a broad range of experience in the nonprofit world. To be effective, I think, we have to really understand more about what s happening in other parts of our organization. You can t do that without first-hand knowledge. McLaughlin: What are your respective roles in the organizations with regard to governance? Do you attend board meetings, do you attend some board meetings, all, none? Amundsen: All. We re an integral part. We work as a team supporting the board, so each one of the major board functions report down through our operating council. We support them at the board meetings, support them at executive committee meetings, in any type of decision-making that goes along with their volunteer role. Paul Clolery: How do you participate in board meetings? Are you there as an active participant or are you there when somebody needs an answer to something? Amundsen: We participate. The way United Way of America generally works is that volunteers will make most of the presentations to the other board members. Being a volunteer-driven organization they re the ones who report the things that are happening inside the organization to the board of directors and give that volunteer oversight. We ll prepare them, we ll work with them on committees and answer the questions that they need to have answered. McLaughlin: How many people are in that "we"? Amundsen: It s the operating council, basically 10 people. Hessler: I attend all board meetings. As assistant treasurer, I m an elected officer of the corporation. We prepare our board members. We have a peer-to-peer presentation during the board meeting and we have chairs of the finance, development and publication committees. They are all pre-briefed or have small committee meetings. Then that committee report is carried forward to the full board. Amundsen: We do the same thing. The only two exceptions are if a committee chair or member is not able to make the presentation because of schedule conflict, we ll make the presentation. The second exception to that might be if there is something where we have a tremendous amount of specific knowledge or we can answer a lot of questions, the volunteer may feel it more appropriate that we make the presentation. McLaughlin: Shifting gears, the concept of profit in a nonprofit organization is wildly misunderstood. Profitability is necessary for a long-term survival, yet this idea is still not widely accepted by many nonprofit managers and board members. Is profitability in your organizations part of a yearly plan or is it a kind of hoped-for accident? Hessler: In recent times, our emphasis has been on stability and long-term sustenance of the organization. The USO has gone through some rather rocky financial times. The USO is not part of the government and relies on contributions to carry out its mission. Obviously, we re much

3 more visible in times of conflict or war. During those times, the American people give very generously. In times where there doesn t seem to be a lot of military action and there are no pictures on the front page of the newspaper, our message tends to get lost. People really don t understand that we still have millions of young people out there defending our country. Our philosophy is that the money we raise should go to support our troops because that s the way the American people intend it. We re using other means to further secure our stability over the long term. McLaughlin: What are those other means? Hessler: The endowment fund is our major one. We started that about three years ago and we re looking to that to be a way to guarantee that we ll be there as long as the military needs us. McLaughlin: What s the strategy for developing your endowment fund? Hessler: Many studies have shown that if the USO were to go away, government or some other private organization would have to come up with something to take its place. We re really focusing on program delivery, building up our resources to ensure that over the long haul, but also in the near term, we re delivering as many programs as we can for free. That s a key word for us free. Amundsen: Our role is substantially different than Kim s organization. We are a national leadership and service organization for our 1,400 member organizations. We survive by membership investment, membership dues payments, and provide training and services to help support them in achieving the missions that they have locally. So when you talk about profit and surplus, we essentially budget all of our money to be spent every year and then the next year. We do value setting aside resources and having a stable organization, but we also have the competing value, just like Kim does, of trying to put as much money back into the local community to solve social service issues as possible. Hessler: We re also developing our baseline. What are the core programs that the USO should deliver around the world and what do they cost? That will be our baseline and we can challenge our fundraising people to raise the money just for us to do what we have to do. And then if you raise more revenue than that, we can deliver more program. If you exceed the baseline, you re doing well. So, it s a measurement not only of our organizational values and baseline, but it s also measuring how we perform as an organization. McLaughlin: What s your role in the development of those measures? Hessler: I m working with the president. We bring our key people in from our overseas operations and we meld them with our senior staff here at headquarters. We develop not only a budget for the coming year, which is certainly one of the deliverables, but we also want to secure our core mission, vision and values, determine our baseline programs and how we can deliver those effectively, and then determine our direction to build on the baseline in the ongoing years. Amundsen: Our processes are fairly similar, although we may have different ways of achieving them. We end up going through a tactical planning process that s built off data from what s called

4 our customer satisfaction survey. We survey our member organizations to ask with what services they have been satisfied, are they in agreement in the direction of where we re going, what they think we need to stop doing. We spend a lot of time not only defining mission and values, but also laying out the tactical plan that allows us to start accomplishing outcomes. Our reality is that since we work through members, we generally do not go out and raise money specifically to run our own operations. We will raise money to do national initiatives, get more money on a national basis than local United Ways may be able to get locally. McLaughlin: In many nonprofits, technology typically comes first to the administrative and finance functions. Yet, the rest of the organization typically adopts technology differently and in a more broad-based way. What role do you play in the acceptance and use of technology in your organizations and how do you use technology particularly in the financial function? Amundsen: I want to make sure this is clear. Technology is not a solution. It s a tool. That s really critical because people think technology is going to solve a lot of problems. Technology is no more than a tool to be able to produce results that you want to achieve. It can solve an issue for you like processing high volumes of transactions and providing information that s really a tool for decision-making. With that in mind, someone has to own a process. Someone has to own the outcome and then technology is applied against the problem. As far as finance and operations, we re really at a point here at United Way of America where we re integrating most of our systems. Instead of having many stand-alone systems we want to have a business operation system that integrates everything so we end up operating off of one database. That is not just a result of addressing the year 2000 issues but really looking at our systems in a totally different way. This really makes it much easier for everybody to adopt and buy into upfront. McLaughlin: Are you saying that your role is as a manager of the technology and a provider of the systems, as opposed to, if you will, a content provider? Amundsen: That s correct. We bring technology options to the table and work with the customer, the internal customer, to understand their needs, understand if there are similar needs in other parts of the organization. Based upon these needs, we start identifying tools that will address the issue. Hessler: I see my role as the person who hears what s out there, who tries to keep up with technology, who listens to ideas and tries to figure out how they best will be blended together. We have the additional challenge of a lot of our information being overseas. Our Web site has been very successful for us. We ve gotten a lot of positive feedback on it but, it must be a team approach. You can design the most beautiful Web site in the world, but if you don t have your communications people and your development people and your operations people all feeding into it, then you don t have an integrated system, and it can quickly get stale and it quickly goes bad. McLaughlin: If people don t use it...

5 Amundsen: It s counter-productive to what you re trying to do. Unless you re looking at all these needs at once people will still do things outside of the system because they don t trust it or Hessler: Or that s the way they ve always done it. McLaughlin: Shadow systems. Amundsen: That s right. That s why you have to get them involved on the front end. The reality we both know is that it takes a lot of work by the users to integrate a system because you have to change work habits, you have to change processes. McLaughlin: What I m hearing both you say is that 10,15, 20 years ago adopting technology meant getting a PC on people s desks and getting the iron in place. Now I m hearing from both of you is that challenge is behind us, that the challenge now is integrating and getting the most out of the existing systems. Hessler: Most of the time it seems like we drag people along kicking and screaming. I think it s like a lot of other things. Once you can see the value, then it becomes important to you and you tend more to put it to use to your advantage. It s like training a new employee. If you know how to do something and you can do it in five minutes, that seems a whole lot easier than training somebody to do it, which is probably going to take a half an hour. But yet, if you don t train somebody to do it, then you re going to have to keep doing it yourself and in the long run your productivity is diminished Amundsen: Users of the system, of the information, or those who have to maintain information, are the ones who come up with the best ideas of what to automate or how they can make their lives easier. So, I think you have to promote a sense of users being willing to ask the question and understand enough about what their needs are to be able to start digging around to find better solutions. Empowering staff is clearly the way to identify your best technology solutions. McLaughlin: Tell us more about those folks who can use technology in their operations. Are they just the techie wannabes who are primed and ready to look into any new technology or have you had success with getting ordinary people to adopt technology in the course of their regular operations? Hessler: We have the push from our customers the young military folks we serve. The USO was always known for delivering letters to the service people. Now we re into setting up cyber canteens overseas where the young military people can go and send s or surf the Net. So technology is also driving us on the operational side. Clolery: Kim, you talked about how USO spent lot of time getting messages back and forth between the service people and their families and how now you are setting up cyber canteens. What about competition between yourself, the Red Cross, and, say, VFW. The VFW recently was giving away phone cards to servicemen. What kind of coordination and competition do you see and how do you personally get involved in the strategy of who s doing what and do you need to be doing that? Hessler: I may not be familiar with everything that the Red Cross does but, the Department of Defense counts on them for the emergency messaging service and we don t go there. What we do is provide the means for these young people to communicate with home because we are the

6 outreach of the American people. We have worked with the VFW on these kinds of programs. They re a major sponsor of ours. There is coordination with some of our sponsors. Clolery: I m trying to get to what you specifically do in developing strategic market share and what you are doing in terms of competition. How specifically do you guide or help guide the organization to find niches? Hessler: I think it s a combination. Our sponsors bring us a lot of good ideas for technological outreach. For example, SmithCline Beecham is a major sponsor of ours, and they are supporting the Pentagon s initiative to reduce smoking in the military. We came up with the idea of having online chats where people ask questions about smoking cessation. So I guess it s generated from a lot of different perspectives, some internally, some externally. My role is to coordinate. McLaughlin: Think about a specific technological change or two, an innovation such as GuideStar.org and donor-advised funds that have the ability to dramatically transform nonprofit financial matters. What are your organizations doing or planning to do to capitalize on these kinds of developments? Amundsen: Let me broaden it just a little bit, instead of just talking about those two. It s the whole advent of the Internet being really a way to access information. There s incredible amounts of information out there if you know what you re looking for and if you know how to evaluate the information. GuideStar really allows public reporting, almost comparison, of information for many different types of organizations. I think one of the problems is that while it s great information, you have to know what you re looking for, and you have to be able to understand it. I think that is what we re struggling with and we ll continue to struggle with. McLaughlin: Donor-advised funds natural constituency would seem to be similar to United Way s DeTocque-ville givers. Do you see a threat there? Amundsen: I think what we re seeing is that our relationships with what we would call the committed donor, and very large independent givers, are growing stronger every day. I think they re seeing the value of what a relationship with the United Way can bring to them in addressing their philanthropic needs. So, I don t view it so much as a threat, although it does provide us an opportunity to provide a different way of having a relationship with some of these large donors. McLaughlin: Kim, if financial information is more readily available through GuideStar and if people can give money readily through the Internet, donor-advised funds, does that affect your organization? Hessler: Well, I think that is a positive thing. It gets back to the confidence people have in those kinds of systems, both from an informational perspective and then the actual management of funds on the Internet. There s still some hesitancy to give money through the Internet. Our donors are older than probably many of the United Ways and other nonprofits. For us, that s even a bigger hurdle. But I think it s all in positioning the Internet to be accepted by people as something that s safe. I need to know that when I put information out there or when I give a donation, the whole world isn t going to know and isn t going to come after me.

7 Amundsen: What s happening is that a lot of people are trying to raise money using the Internet with limited success. Someone described it to me once as pitching a tent in the Sahara. You re out there, but so what? How are you going to drive donors to your site? We have a whole new Internet Strategies Initiative that, working with our local United Ways, is focusing on how we provide better support to our existing customers in workplace campaigns. There are going to be, hopefully, multiple strategies that come out of this initiative. How do we help support a work place campaign and how do we develop relationships with individual donors by using this vehicle? It ll expand and go beyond that in the future but it s using the Internet now to address some of your current business needs instead of using it as this kind of catch-all that s going to create this additional money for you. Hessler: We use it as an opportunity for giving. It s one of four ways you can give to us. And unless there s a war a major disaster, relying on the Internet for a lot of revenue generation is probably a bit optimistic. McLaughlin: You each have affiliates or chapters that are separate, free standing, nonprofit, public charities. And, you each work for the central office or national coordinating body. Do you outpace the technology capabilities of your affiliates or do they outpace you? How do you keep those things in sync? Hessler: In most recent history, our affiliates have been far more successful in securing technology than we were. I m embarrassed to say that we just went from 486s to Pentiums four years ago in our headquarters. Our field operations had far better equipment then that. What we are trying to do from an applications perspective is to provide support. For example, we re hosting a USO Internet community for all of our USO sites, be it here in the U.S. or overseas. They can develop their own page, fill in their information and customize it for their local clientele. But that s really the first thing we ve tried to do on a global basis. McLaughlin: If the affiliates drove the Washington office, how did that work? Hessler: Well, they didn t really drive it. They were just ahead of us technologically. Amundsen: The issue for us is that we have 1,400 member organizations just in the U.S. and they go from anywhere from part-time volunteers who run the whole show to organizations that raise hundreds of millions of dollars and have very advanced technology. From what I ve seen, from a national perspective, is that driving a technology solution down from a national organization has not been effective. McLaughlin: Gear shift again. Let s look at, again, your role specifically. It s helpful, if not essential, for financial and administrative people in nonprofits to be bilingual, as it were, in program and in finance. Is that a fair assessment? Is that helpful? Is it necessary for people in your role? Hessler: Absolutely. I remember talking to our president and trying to explain why pledges we secured this year weren t really cash but had to be booked because of the FASB regs. His thinking was, "It s not in our bank account so how can we report it?" Those kinds of things, I think, require somebody who understands both sides and who can say "yes, but this is not your home checkbook. This is how we have to do it because..." and can explain that in layman s terms. Amundsen: I agree with you. I think it s the difference between speaking technically to your group of accountants and putting it in layman s terms, whether it s from cash to accrual type of

8 issues in the accounting world or even if it s understanding how managers can utilize resources or information to help make better management decisions. Managers have to understand enough about their program to say this is the vital piece of information that you need to be able to support your decision. You have to be able to explain technical information in a way that they can apply in their day-to-day thinking and hopefully making their part of the puzzle that much stronger to support their operations. Clolery: Exactly how did you tell people about the FASB 116 and 117 when it wasn t going to show up on the books? How long of a process was that and how integrated were you in that process? Amundsen: Well, let me put it to you this way. I m not sure everybody understands what s going on yet. The whole implementation of 116 and 117 is not well understood yet by a lot of people, especially with some of the rulings that have come down recently that really define how United Ways record transactions. We have a financial issues committee which is comprised of financial executives from many local United Ways and UWA. The committee analyzed the issues surrounding the implementation and published a booklet on how to implement FASB 116 and 117 at local organizations. McLaughlin: So we have two fully bilingual people here. How do you get that way? Is that born, is that earned, is it genetic, is it academic credential? How does one become able to play on both sides of that fence? Any suggestions? Hessler: I believe that because you re presented with opportunities that you have to deal with them from both sides. I m not a CPA and my experience is more on the fundraising side, but I know when those FASB regs came out they totally turned our organization upside down. Amundsen: Maybe it s a chromosome deficiency. I think a part of it has to do with being interested in the broader operations of how the whole business operates, and seeking opportunities where you can start getting a broader understanding. So, I think it s a willingness to take on things far outside of whatever your functional responsibilities. I agree with Kim, there are plenty of opportunities available to get that experience. McLaughlin: What is the relationship between your organizations and your outside auditors? Hessler: Our auditors are simply that. They do our annual audit and help us prepare our 990, and we don t use them for anything else. We rely on the finance committee of our board of governors for some of that. We also have great confidence in the people we ve entrusted to manage our investments. Amundsen: Our relationship is much broader than USO s in a number of different ways. Let me talk about auditors in two different ways. First, we have a team of volunteers who do an internal audit for two weeks during the year against set criteria that are established by our audit committee. Those are volunteers who come from donor companies, which we find extremely invaluable. The relationships with our outside auditors is much broader than just the annual audit. We have contact with at least our audit partner quarterly and we talk to them about things that are happening in our business, changes that we re seeing, impacts and the like. We send quarterly

9 financial statements to them so that they can get an idea of what s happening during the year and discuss major issues with them before they come out to perform the annual audit. Also, their firm works with us by providing management advisory services and consulting services, in things such areas as salary surveys and pension. McLaughlin: What is your budgeting process, operations budgeting as well as capital budgeting, but in particular operations budgeting. Hessler: I think we re going to do something a bit different this year, but in the past we ve gone out to all of our directors overseas and headquarters. We ve asked them to come in with their plan for budget year plus three. Then we convene all of our senior leadership internally for a programming, planning and budgeting meeting in early November. We discuss where we are and where we re going to be and try to put the numbers together. This year we re going to take the different approach because we will have the baseline analysis and then build on that for our out years. We look at the planning, though, as well. It s not just a number crunch drill. That is carried forward to our finance committee and then the executive committee of our board for approval before it s executed for the following year. Amundsen: Our process starts with the annual tactical plan, which is the identification of the work that s going to support our strategic plan. We look at what is going to be required to be delivered in the next year. After we identify these priorities and the deliverables, we then set the budget. McLaughlin: My last question, just a very general and open one, is there any point that either of you would like to make or concept that you d like to explore that you didn t get a chance to in our conversation? Amundsen: I think one of the things that we re seeing is that the internal function of administration, finance, all the things that Kim and I do, is a very interactive role. I ve always felt that we have to turn these functions into more customer service-type organizations. Your internal customers are who you re supporting so you have to be with them, be able to provide them information as they need it, before they need it, so that they can make the best management decisions possible. Also, get out of your office, interact with the customer and understand needs. Spend less time sitting behind your desk analyzing history and think about the issues your organization will be facing in the future. Hessler: I believe it is important for people in positions like mine to be more of a generalist, understand all of the different operations that you have within your organization, and try to figure out how they can be better integrated. I feel my background has helped me in my position at USO because I ve done a variety of things throughout my professional career. I ve written a press release. I ve printed an annual report. I ve solicited funds. I ve prepared budgets. I ve produced special events. Applying the knowledge we ve gained through the variety of experience we bring to our position is the most valuable contribution we can make to the success of our organization. Source: Accessed: September 7, 2010.