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Monday, August 8, 2016

Nonprofit Symposium Keynote Recap: Influence Sustainable Change

Posted by Armanino Nonprofit Team

Nonprofit finance leaders may not see themselves as architects of change in the sector. But as nonprofit organizations continue to struggle with systemic challenges, such as the overhead myth and inequity, they can play a strategic role in solving these widespread problems.

“You have way more influence than you know, because the budget determines everything,” said Vu Le, founder of Nonprofit With Balls and executive director of Rainier Valley Corps, speaking at the recent Armanino Nonprofit Symposium. “We have to start moving out of this philosophy that you are just there to support the back-office stuff.”

Instead, finance leaders can take on the role of strategist for social justice at their organizations, said Le. They can strengthen the sector, by taking steps to change some of the misperceptions that surround it―such as the notion that nonprofits need to operate more like the for-profit world.

Although for-profits are often perceived as role models, Le said nonprofits need to stop trying to copy their best practices, because the two sectors are so fundamentally different. For example, a for-profit firm’s revenues grow with rising sales, but if a nonprofit helps more people, its expenses rise with no corresponding revenue bump.

Nonprofits are also judged on complicated outcomes, while for-profits are measured by units sold and other simple outputs. So when Apple sells a million iPhones, nobody asks them to measure the impact of those phones and show how their customers are using them.

The idea that overhead is the best measure of a nonprofit’s effectiveness is another dangerous misperception. Le urged finance teams to help put this harmful fallacy to rest by coming clean about their organization’s true spending.

“Stop saying 100% goes to programming,” he said. “We cannot keep perpetuating this overhead myth and then go to happy hour and complain about it…We’ve got to report full costs.”

When it comes to measurement, accurate reporting is critical because the whole sector loses when nonprofits lowball the numbers to try to outdo their peers. “If your organization has a 5% or 10% indirect rate, you’re lying, and it’s hurting the rest of the field,” said Le. “We can’t go advocating for more overhead when everyone is in this mad contest.”

To get a true picture of costs, organizations also have to discourage the “martyr complex” that prevents people from asking for the resources they need to do their jobs. Here, the finance department can empower the staff to speak up. “If they need a new chair, encourage them to get a new chair,” said Le.

Ratings are another driver of the overhead myth, and Le said that nonprofits must stop appealing to watchdog organizations, until those groups can effectively evaluate outcomes and impact.

Finance professionals are also in a good position to move the needle on the much-discussed issue of equity. Le said they can help effect real change in their organizations, by taking a close look at on-the-ground processes, such as hiring practices that perpetuate the underpayment of women and people of color.

“If you’re still using salary history and still not disclosing salaries in your job postings, that’s perpetuating inequity, and you who see this in the budget need to speak out to the HR professionals and the development staff,” he said.

These kinds of operational changes can have a big impact on the nonprofit world―whether or not the rest of the organization realizes it. “Finance professionals are underappreciated in our sector,” said Le. “But everything you do matters.”

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