Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Stephen Newland Part 2: More thoughts on how CFO's and CDO's can work better together.
44 Plays9 months ago
In this episode, Stephen shares more stories and advice on how development staff can communicate and work more effectively with fiscal staff.
Recommended
Transcript
Introduction to Abundant Vision Fundraising Podcast
00:00:05
Speaker
Welcome to the Abundant Vision Fundraising Podcast. Whether you are a seasoned professional or a first-time fundraiser, we have the advice you need to take your next step toward major gift mastery. I'm your host, Tom Dauber, president of Abundant Vision Philanthropic Consulting. Last week's conversation was a blast. I'm so excited to have you with me for this next segment. Let's get back to the show.
Challenges with Fiscal Officers and Restricted Funds
00:00:31
Speaker
What thing did I run into?
00:00:33
Speaker
And I won't say where, but I've been at organizations where it's actually been a challenge sometimes to get the fiscal officers. And it might be because of those restrictions we talked about earlier. Sometimes it's hard to get money spent the way you'd want it to be. Have you seen that when you interact with any of your organizations? And if you have, what things are you able to do to help i to free up that money and get it spent the way the donors want? Yeah, that's a great question. I remember I was on the board and treasurer of an organization and someone had donated some restricted funds. I forget the exact amount. It's called 250,000, but it was only to be used on building improvements. It had been on the books for
00:01:26
Speaker
in 10 to 20 years. Oh, wow. And so it just kept sitting around and sitting around and sitting around. And so you know we just kind of kept, every time we would review the financial reports, we'd be like, and yeah here's this line again, which we, um and until we finally sat down and said, how can we like think about this strategically? like Maybe there's a way we can you know we can we can release these funds or we can use it for a bigger, broader strategic initiative.
Who Should Drive Restricted Funds Usage?
00:01:55
Speaker
But I think where it starts is really good reporting, which doesn't sound sexy, doesn't sound fun, but without a good CFO kind of person getting good reports and calling it out time and time again, <unk> it's easy to get lost in the shuffle of everything else going on. And so I think just having good reports and then having financial leadership who can call that out and say, Hey, we're halfway through the year and we have maybe we spent 10% of our marketing budget.
00:02:25
Speaker
There's an opportunity here. Maybe we can make some strategic investments. So to me, that's a great way to remedy that. So in some organizations I've been in, it's really been accounting ah and the in the fiscal team that has been responsible for being focused on spending those restricted funds down. Other organizations I've been in, it's actually more driven by the development officer.
00:02:52
Speaker
going to the fiscal officer, pointing that out year after year, making those arguments. Do you have a preference on that? Do you feel like one way is better than the other? So at least how I operate, I view the finance and accounting role as we just communicate to the rest of the organization who might be responsible for, who can better know how to spend those funds than we will.
GAP vs Campaign Counting Guidelines
00:03:21
Speaker
but we're there to communicate and we're there to highlight and call out things. Everyone else in the organization is really busy, but if we can kind of highlight it and remind and call out, to me that's where finance can be the most helpful.
00:03:36
Speaker
That's great. Now, tell me a little bit about GAP, G-A-A-P, yeah and where it runs afoul of campaign counting guidelines. I find that sometimes fiscal officers with accounting backgrounds can really get caught up there. Yeah, and it's the rules we have to play by, unfortunately, when we go through audits and all that fun stuff.
00:03:59
Speaker
Let's walk through a couple of examples. At a high level, dollars secured today will almost, most of the time, are not going to equal dollars on the profit and loss statement. That creates just a lot of confusion out of the gate. It's like, well, I got this $250,000 pledge or this $250,000 grant. Why isn't it showing up on the financial statement yet?
00:04:23
Speaker
Things like a multi-year grant, let's say it's $750,000 over three years, well, you're going to recognize that in chunks of three. ah Conditional grants, let's say the funds are pledged, but until you hit a certain criteria, you can't necessarily recognize that. but Even if you've received the money, you can't necessarily recognize that on the PL if a certain condition in that grant has to be met.
00:04:48
Speaker
The thought process behind that is, if that condition isn't met, does that money then have to be given back? Or is there a portion of that would have to go back? So that's why you don't recognize it right away. ah Another one that's honestly often missed and is event sponsorships. So yeah let's say you secure, you've got your gala in spring and you secure that ah donation in January.
00:05:17
Speaker
According to Gap, you would recognize that in the month of the event because technically that sponsor, ah that event is going to have to happen for that donation to be satisfied, right? For the agreement to be satisfied. So you'd recognize it in the month of that event happens. um Another example is a pledge.
00:05:37
Speaker
If someone makes a pledge, that would be recognized right away, but there's something else going on in the finance brain with a pledge. It's, yeah, but I know there's a percentage likelihood that this isn't collected. And so the cash isn't in the door yet. And so we always keep that in mind. And it shows up on the financial statements as an accounts receivable as something that's just, we don't have the cash yet, but.
00:06:01
Speaker
Yeah, so those are just a few
Pledge Default Rates and Small Organizations
00:06:03
Speaker
examples. Speaking of that, so I once heard that the default rate on a pledge is something like 10% or less. Do you have any insight into what that number is that's evidence-based? Gosh, I don't. I really don't.
00:06:16
Speaker
Yeah, well, I'm gonna stick with that number. It seems reasonable. And I would imagine it it can be across the board. I mean, I know I've worked at very small organizations where we'd only have a handful of pledges and a lot of times they wouldn't come. But part of that reason is because someone wasn't ah Those organizations in particular did not have a chief development officer or very a sole development person. so There's a lot of value in that development role and tracking that down and saying, remember, you made this promise to give. Just reminding me. So there's a question I'd like to ask you.
00:06:54
Speaker
So this is the craziest thing that I ever heard from a fiscal person. There was a large piece of property ah donated, a fire sale type of donation. So it was valued through appraisal officially, comps and everything. It was an eight figure sort of piece of property. And they sold it to us for seven figures. The end of the day, the accountant insisted that we could only value it as a gift at seven figures. And the person's rationale was, well, what you sell something for is what it's worth. And so that's what you have to count it as in your campaign counting. Help me understand, because I never really, I mean, we got our way ultimately, but I just, I was floored. Yeah, and on that particular example,
00:07:53
Speaker
I would lean into a CPA for exact guidance on that specific example, but how I would think about it is there's a gain on that sale. So if the asset was worth a certain amount, but you were able to sell it above that amount,
Accounting for Deferred Gifts in Planning
00:08:09
Speaker
there's a gain ah component to that. You've made more money above that amount. Maybe the specifics of that required it by gap to be recognized at that.
00:08:20
Speaker
the end of the Here's how I think about it. If at the end of the day, the organization receives $10,000 $100,000 more of cash, to me, that seems crazy to not count that towards a fundraising campaign. Regardless of the accounting, if more cash has come into the organization, I don't see why that shouldn't count. That's my two cents on it. Well, you're scoring points with me, Steve, and let me tell you. Tom Dauber here for Abundant Vision Philanthropic Consulting. Fundraising can be hard work and it can be hard to mentally get into the place you need to be in order to see new opportunities. Everyone struggles with it. We are like the fish in the fishbowl who just can't see the water they're swimming in. That's when having outside expertise comes in handy.
00:09:07
Speaker
For 25 years, I've been helping nonprofits analyze their challenges, discover new ways forward, and develop clear plans that lead to greater fundraising You wisely mentioned pledges.
00:09:37
Speaker
Yeah, this one will probably, I don't know, give you an upset stomach. What do you think about revocable deferred gifts, bequests, those
Measuring and Improving Fundraising Cost Efficiency
00:09:48
Speaker
sorts of things? How do you think about those as a CFO?
00:09:52
Speaker
So, um and I guess let's maybe use a specific example on this. Would this be something that, are you referring to like writing in a will or? Exactly. Yeah. yeah um But there's no ah necessarily dollar, like strict dollar component on it, right? There might be a percentage. There could be a strict dollar, but it could be 20, 30 years. Could be 50 years, right? That's one of the soft areas and that's where it gets tricky. I mean, from an accounting perspective, you know that doesn't touch the books at all. From a development perspective, um I guess it depends on the structure of the organization. Are they trying to incentivize long-term financial sustainability?
00:10:35
Speaker
And if yes, then heck yeah, that's a huge, huge, I mean, that creates, you're making the the development officer 20 years from now's job ah a heck of a lot easier, right? And so to me, that's a soft ah measure, but a critical measure for long-term financial sustainability. But I guess it's a balance, I guess it depends on where the organization is at. If the organization is in a cash crunch and they need the money now,
00:11:04
Speaker
You might be like, yeah, that sounds great, but I need dollars in the door. Is there advice that you might have for fiscal officers in terms of what they should be keeping in mind about their fundraising team that might not be immediately obvious to them? Yeah.
00:11:24
Speaker
had my finance brain thinks about fundraising is how efficient or how inefficient did that dollar come in the door? And so just thinking about it in terms of what are the hidden costs? So we know, for example, events, they take a lot of hidden staff time that might not be calculated in the true cost of that event, but there's a chunk of staff time that's dedicated to that, but it's rarely ever calculated in the net profit of an event.
00:11:54
Speaker
Same thing with grants. Paying attention to what's that win rate on a grant because you can sink a lot of time into grants and find you've only hit a you know very low percentage win rate. So just paying attention to the different avenues that money is fundraising and then how efficient or inefficient are each of those buckets and are there opportunities to make that you know next dollar raise a little bit more efficient? Because that just creates a financially sustainable organization in the long run.
00:12:25
Speaker
Tell me more about that. So how would I know as a CFO or a CDO if my cost to raise a dollar is is where it ought to be?
00:12:36
Speaker
Yeah, it's a good question. I'd have to look up some benchmarks that are out there and it's going to probably vary by different type of nonprofit and especially will vary if you're raising grants versus an event. Where I honestly like to start is just within the organization. Hey, last year we raised, you know, a hundred thousand dollars from events and our true, you know, our hard costs were X and we think we spent, you know, 200 staff hours at this rate on it.
00:13:05
Speaker
you know, how are we looking for this year? And so just measuring, are we getting, are we improving within the context of the organization? Are we getting more efficient or less efficient every year? that to me is a good place to start, an easy place to start. That's a good way to think about it. My understanding is that across the industry, and I know it's going to vary between, you know, small nonprofits to universities and things, but the average is somewhere around 20-25% or 25 cents on a dollar.
00:13:36
Speaker
But ultimately it doesn't matter but what the national average is it matters how you're doing compared to what you did the year before right. That's right that's right and so to me that's the way it is if you i think you can have a benchmark in mind of like we know we want to reach this goal eventually but you know it might take years it might take. And just even where the organization is at, it may just be at that stage. Might be tough to hit that hit that metric, right? But but if we're if we're finding ways to improve that year over year, I mean, that's just a, that to me, that's a great way for us fiscal types and development officers to work together. That's a great analysis for the finance team to do for the development team. Because the development team can take that back and say, hey, look,
00:14:24
Speaker
We're raising more money and we're doing it more efficiently. And guess what? Finance signed off on it. So they told us it was OK. And so that's a fantastic way ah to kind of bridge that gap between the two.
Collaboration Between Finance and Fundraising
00:14:35
Speaker
Well, you know, that leads me to another question that's related. I think for a lot of us in fundraising, a lot of us feel really put upon with a lot of things to do and there's not enough hands rowing at the ore and we need more people. We need more staffing.
00:14:51
Speaker
If I'm going to make the case to my fiscal officer that I need more help, obviously it's gonna be related to that cost to raise a dollar, but how would you go about making a persuasive case to a fiscal person to put more funding behind fundraising? I would do that.
00:15:16
Speaker
uh, analysis of how much it costs to raise a dollar and going a step further and looking at that by, I'll call it like channel, whether that's major gifts, uh, grants, events, et cetera, corporate, you know, corporate donations. If, if I reviewed that with my finance person routinely and I showed them, this is important to me, to me,
00:15:41
Speaker
I have a lot of trust in that team because I know that you're trying to do this efficiently and you just need more resources. To me, that would create a huge amount of trust immediately just because you're saying, hey, finance, I know you're thinking about the full picture here of how do we get more efficient across the organization. And that's important to me too. And so to me, that just creates trust right out of the gate.
00:16:05
Speaker
And I think if you've got trust and but you don't have this adversarial relationship, it makes those discussions, I think, much the much more of kind of the rubber stamp of like, yeah, maybe not the rubber stamp. Finance always has to dig in and ask questions because that's just what we do. But I think it makes that conversation a lot easier.
00:16:26
Speaker
I think the things I've struggled with at times is that sometimes it's hard to get fiscal types to see fundraisers as a revenue center rather than a cost. And it might be because some of that money is being restricted, right? So it doesn't technically help the bottom line. If there's more scholarships, it could potentially. but That's been a challenge for me. But one thing I learned from one leader I served under, because we do like to talk about, well, it costs X, you know, 10 cents to raise a dollar, 20 cents to raise a dollar. This person flipped it around and went to leadership and said, OK, well, how much do you want to see us raise?
00:17:04
Speaker
and then said, okay, so if it's 20 cents to raise a dollar, you need to be prepared to invest 20% into us to get the 80% growth that you want. And I thought that was a really compelling and a good way to make the argument.
00:17:21
Speaker
I think it's a perfect way to make the argument, and that's where that analysis and that focus on that. If you can then piggyback on that and say, and you know, three years ago when we started this, we were at 35 cents. Now we're at this. That is a powerful one-two punch, in my opinion.
00:17:41
Speaker
All right, guys, you heard it here. If you want to grow your team, this is this is what to do. Any other tips or tricks you'd recommend for nonprofit leaders looking to promote harmony between their fiscal people and their fundraising people?
00:17:56
Speaker
I'll just highlight again one thing I mentioned earlier, and I hate to see it. I hate to see silos. We're all a nonprofit because we want to serve. We want to do good. We want to help some population or some cause in this world, right? And so just finding ways to just work together and put that cause, put that that mission, that's got to be first. It just has to be first.
00:18:22
Speaker
And if that means, hey, I don't get the funding for this fancy new finance software that I wanted, but that means that development team can go hire you know something out you know somebody else or whatever that is. I think it's just finding ways to to be willing to kind of go to the back of the line.
00:18:40
Speaker
for somebody else in the organization, not necessarily that's maybe not the right answer all the time, but versus trying to always fight for like, I've got to win, I've got to be the first, I've got to get the, I just, it never works out in my opinion. It just doesn't create a great culture. And so finding ways to just i Keep that mission focused at the organizational level, ultimate goal. Your department's important, but if you're missing the mission of the organization, then nobody's winning.
Conclusion and Contact Information
00:19:12
Speaker
That's how I look at it.
00:19:14
Speaker
Wow, I can't think of a better note to end on, Steven. That's some great advice. Thank you so much for being on the show today. Like I said, it's been great to have you on. it's It's great to just demystify, I think, some of the fiscal world that many of us fundraisers, we just don't have the first clue about. So thanks for being on the show today. Yeah, absolutely. And I appreciate everything you guys do. So we don't have organizations without you.
00:19:40
Speaker
Well, thank you. Now, let's say I've got some listeners and they're looking for a fractional CFO. How can they get in touch with you? Yeah, I like to point everybody to LinkedIn. My name is Steven Newland on LinkedIn. I try to post some helpful, simple practical tips around finance, so it's a great place to go, or MoneyPathFPA.com. as That's the best place. If you go on LinkedIn and in your executive director or your board DMs me, I'll give them a ah free financial assessment of their organization and a financial health assessment of their organization. That's great. We'll make sure that we include those in the show notes. Thanks again, Steven, for being on today. Have a great day. Absolutely. Thanks. I'm your host, Tom Dauber. Thank you for joining me as we journey together towards Major Gift Mastery on the Abundant Vision Fundraising Podcast.