How the Heck Did I Get Here?How the Heck Did I Get Here?Financial Management for Human Service Financial Management for Human Service

ManagersManagers

Presented by:John F.X. Prior, LCSW, ACSWDirector, Quality & Compliance

Catholic Charities of the Archdiocese of Galveston-Houstonjprior@catholiccharities.org

Texas Network of Youth ServicesAugust 11, 2016

TerminologyTerminology

• Assets vs. Liabilities

• Income vs. Expenses

• Direct vs. Indirect Costs (Overhead)

• Allowable vs. Unallowable Costs

• Restricted vs. Unrestricted Funds

• Generally Accepted Accounting Principles (GAAP)

Principles of Sound Financial Principles of Sound Financial ManagementManagement

• Commitment to Quality Services

• Culture of Honesty and Ethical Behavior

• Clearly Defined Lines of Authority and Responsibility

• Sound Financial Practices

• Internal Controls are taken seriously

• Attention and Commitment of the Board to its Fiduciary Responsibilities

Elements of a Healthy Elements of a Healthy OrganizationOrganization

• Healthy Governance Function• Competent Executive Director• Sound Financial Management• Workable, Legal, Human Resource Policy• Successful Fund Development Strategy• Clear & Consistent Message• Good Programs that Advance the Mission

of the Organization

Healthy Governance StructureHealthy Governance Structure

• A Board of Directors that works collaboratively with the Executive Director

• Defines the Mission of Organization

• Develops Strategies and Policies to Achieve the Mission

• Provide an Independent Check on Management Decisions

• Connection to the Community

Competent Executive DirectorCompetent Executive Director• Positive relationship with Board Chair

• Work collaboratively with Board & Staff

• Provides a bridge to the community, funders, & clients

• Demonstrates a high level of ethical conduct, working relationships, and internal communications

• Raises $$$$$$$$$$$$$$$$$$$$$$$

Human ResourcesHuman Resources

• Comply with government laws & regulations

• Compensate people adequately

• Motivate staff to perform at their best

• Provide staff with appropriate input into decision making

Successful Fund DevelopmentSuccessful Fund Development

• Does the organization have a fund development plan?

• Is the Board involved in fund raising?

• What role do Board Members play in developing strategies?

• Does the organization have a diversified mix of revenue streams?

Clear & Consistent MessageClear & Consistent Message

How do you communicate with those who can HELP YOU

or NEED HELP FROM YOU

• Mission & Vision

• Marketing

• Communications Plan

• Public Relations

Good Programs That Advance Good Programs That Advance Your MissionYour Mission

• Respond effectively & efficiently to the urgent needs your community

• Incorporate proven models of intervention & service delivery strategies

• Operated by educated, empowered, & enthusiastic employees

• Produces meaningful results and outcomes for your community and those that you serve

Sound Financial ManagementSound Financial Management

Indicators of Financial Health

1.Absence of Reoccurring Annual Deficits

2.Cash Reserves

3.Ratio of Liquid Assets

4.Concentration of Government Funding

5.Stable and Predictable Revenue

Financial ReportingFinancial Reporting

Balance Sheet (Statement of Financial Position1) Snapshot of financial position as of specific date

Income Statement (Statement of Activities1) Snapshot of financial position during a period of time

Statement of Cash Flows Sources and uses of funds over a period of time

Statement of Functional Expenses Expenses defined by Program, Management, and

Fundraising Expenses

Financial Audit

Financial ToolsFinancial Tools• Liquidity - Balance Sheet – Current Ratios

Current Assets/Current Liabilities (1.0+)• Self-Sufficiency Ratio

Total Earned Income/Total Expenses• Fundraising Efficiency

Contributed Income/Fundraising Expense• Cost Per Unit of Services

Program Expenses/Units of Service

Financial AnalysisFinancial Analysis

• Financial Audits – Opinion LetterRed Flag – Adverse OpinionYellow Flag – Qualified OpinionGreen Flag – Unqualified Opinion

“In our opinion these statements present “fairly the financial position of Agency XYZ”

BudgetingBudgeting

• What is a Budget?– Tool for Financial Management– Plan of Action Stated in Financial Terms

• Who Develops a Budget?– Board, Executive Director, CFO, Staff???

• Budget Planning Process– Major Program Activities– Identify Direct and Indirect Costs– Estimate Anticipated Revenues

Internal ControlsInternal Controls• Organization establishes a system to:

– Review recommendations from audit or financial committees

– Management reviews are conducted by more than one person

– Makes sure that management directives are carried out

– Prevents error, mismanagement, or fraud– Safeguards and verifies assets– Segregation of duties, to the extent possible

ResourcesResources• Nonprofit Assistance Fund:

https://nonprofitsassistancefund.org • The Nonprofit Quarterly:

https://nonprofitquarterly.org/

• Nonprofit Financial Managers: http://npfm.org

• The Nonprofit Finance Fund: http://nonprofitfinancefund.org

• Guidestar: http://www2.guidestar.org

• Charity Navigator: http://www.charitynavigator.org