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By: Carey Freimuth, Caritas Financial
In our last post, we discussed the importance of nonprofit Boards creating and maintaining an Investment Policy Statement (IPS). This article discusses the role of an IPS in the relationship between boards and their financial advisors.
A recent survey found that among private foundations with $1 to $10 million in assets, 30% did not have an IPS and additionally, 35% were not working with an advisor. These lapses can lead to a breach in fulfilling one’s fiduciary responsibility.
What is the role of the board vs. financial advisors?
The Board: it is up to the board to actively oversee an organization’s financial performance. According to the Prudent Investor Laws, the board or organization needs to adopt investment policies, thoroughly vet its financial advisors, and regularly review performance to fully fulfill their fiduciary responsibilities. While this sounds daunting and time consuming, board members can delegate some of those responsibilities to an advisor. This increases the investment oversight, especially if the board members lack sufficient time to dedicate to this responsibility. This protects both the organization and the board members: if followed, the individual members of the board and the organization are less likely to be liable for the actions of investment underperformance. While it seems straightforward, many boards are lax in updating or reviewing the IPS (or even creating one!), reviewing performance, and monitoring their advisors.
Financial Advisors: Advisors can help provide board members with confidence they are doing good while acting responsibility. The board can delegate investment decision making to an advisor to help with faster decision-making, implementing a more goals focused strategy to improve risk management, and better track progress against goals. Moreover, many officers and trustees welcome additional education on the standards of care that they must follow as fiduciaries of the organization.
Like many people in their role, board members can be uncomfortable with all of the responsibilities and processes that need to be addressed in order to protect the organization and their position within the organization as a fiduciaries. An IPS lays the foundation for an organization’s overall governance structure to ensure that fiduciaries are fulfilling their obligations. A good IPS should clearly define the relationship between the advisor and client right from the start. These expectations give advisors a better sense of what the clients expect in terms of volatility and returns, while helping to educate clients on realistic outcomes and the importance of staying the course in challenging markets.
In sum, this division of labor that allows boards to supervise third-party advisors and the advisors to do the work of actively investing an organization’s assets creates a solid check and balance. And once your organization has an IPS in place that is reviewed regularly, you can feel more confident you are fulfilling your fiduciary responsibilities.
Best of Luck,
 Source: Association of Small Foundations 2013
By: Carey Freimuth, Caritas Financial
A primary responsibility of board members is to serve as trustees of the organization’s assets by exercising due diligence to ensure that its financial situation remains sound. But while fiduciaries need to protect an organization’s assets, they also need to ensure that aversion to risk doesn’t compromise the mission of the organization over the long term.
The old adage ‘cash is king’ doesn’t always apply in the world of investments. While many fiduciaries believe they are being prudent by conservatively investing all the organization’s assets in cash, this can actually lose them money in real dollar value. Simply put, the compounding effect of inflation over time results in erosion of the organization’s purchasing power.
What is an IPS?
The board needs to weigh the options and establish guidelines and policies that minimize their exposure to identified portfolio risks such as a lack of diversification or a level of volatility that is mismatched with the IPS’s stated goals and time horizon. This is where the Investment Policy Statement (IPS) comes into play as an important document by which investment decisions are based. In its most basic form, an IPS is a document which sets forth in writing how an institution’s money is to be managed by presenting financial objectives in the context of how much risk the fiduciaries are willing and able to bear. While an IPS should be customized to meet the needs and mission of the organization, the document should include:
Why have one at all?
An IPS is essential to an organization’s strategic and financial growth. They offer three major benefits:
1. Provide financial discipline in tough times. An IPS instills discipline in times of market volatility by clearly defining the goals and objectives of the portfolio while outlining a specific plan and strategy to manage the funds in order to reach those goals. It can also be used as a tool to manage and minimize any risks identified throughout the process.
2. Maintain strategic intent. A sound, thoughtful IPS is crucial to advancing the strategic intent of the organization while helping fiduciaries mitigate potential risks to the assets. It helps everyone focus on the mission of the organization and provides continuity in decision making.
3. Reassure donors. By maintaining discipline during tough times and staying true to your organizational mission, you can demonstrate to potential donors your commitment to managing the assets with care, skill and prudence. When a donor contributes money, they do so with the expectation that the board will invest wisely and use that money to further the mission of the organization.
The best way to give donors confidence in this is through the creation and regular review of an IPS.
Example of IPS template:
 While the document is not meant to be changed frequently, it should be periodically reviewed to ensure all language is up-to-date reflecting current fiduciary standards and long-term objectives. For example, the Uniform Prudent Management of Institutional Funds Act (UPMIFA) of 2006 replaces the Uniform Management of Institutional Funds Act (UMIFA) of 1972. It is important to review an IPS to ensure it fully captures the updates of such legislation.
By: Delia Coleman, Forefront
I’m really excited to be a part of ACN’s Annual Meeting and celebration of the sector – this has been a tough year for the nonprofit sector and any day spent sharing our successes and learning from each other is an important one. But our successes don’t exist in a vacuum. Our gutsy wins exist in an openly hostile budget environment, a competitive field, and within a city and state struggling with big problems.
And that’s the environment we already know about. What about the issues the sector is only just barely aware of? How are we supposed to get ready for those? What are the strategic decisions our sector, and individual organizations, are going to be forced to make?
And what if we could anticipate those decisions and prepare now?
While the primary external factor for Chicago nonprofits today has been around funding and budgets, there are other issues looming in the distance: the further privatization of services, nonprofits losing out to for-profit providers, the cultural taboo against talking publicly about mergers & acquisitions (or other types of strategic partnerships) while outside pressure mounts for the sector to do more work with fewer resources.
These outside pressures force a moment for our sector. It’s not a moment to rethink our purpose, no. We are still here to turn places into communities through education, healthcare, arts and culture, youth development, protecting our environment, or caring for the most at risk. But perhaps it is time to think about what place-making and community-strengthening need to look like in a future that is rapidly approaching. Our programs, our partners, our business models – all of this may need to look and perform differently if we are going to remain the invisible hand holding up our communities.
Maybe we won’t be so invisible, then. And then things can really start changing.
These success stories at your Annual Meeting are more than success stories – they’re bellwethers for a sector that needs to find a way to move nimbly from mere Survival and Sustainability to Thriving in a highly competitive environment.
I can’t wait to see these stories grow and take root. I hope I’ll see you there.
Delia Coleman Vice President, Strategy & Policy Forefront
By: Catherine Seibel, Impact Assessment for Foundations and Nonprofits
Without question, the most rewarding part of serving on the Board for ACN has been the relationships I’ve developed with fellow members. During my tenure I have met dozens of smart, professional and engaging consultants who are committed to social justice. I am proud to call these folks my colleagues and my friends.
But more than that, I’m lucky to have a “team” behind me as I navigate the world of running a small practice. As an independent consultant, it’s imperative that I can turn to peers with all sorts of questions. In the past year alone, I’ve sought advice from ACN members on contract negotiations, finding a good insurance agent, how best to respond to RFPs, and the ins and outs of social media engagement!
In short: I consider my ACN membership to be a core part of my business. And it is with this in mind that I am excited and proud to announce a remarkable opportunity for consultants to nonprofits and foundations. ACN and the Donors Forum have recently announced a new partnership that allows those who join or renew with both organizations to take advantage of an array of complementary Member benefits, as well as discounted dues to both organizations.
I believe that this partnership provides an exceptional opportunity for members of both organizations to develop their consulting practice in meaningful and strategic ways. Or, as Robin Berkson, VP of Membership at Donors Forum put it: ACN supports consultants as they navigate their profession, and Donors Forum supports consultants as they navigate the sector. With complementary access to four professional development seminars per year, a profile on our website’s “Find a Consultant” page as well as a host of members-only web resources, ACN members enjoy a host of benefits to assist in the everyday world of nonprofit consulting. Donors Forum, meanwhile, provides free reference services by Donors Forum’s professional Librarians, updates on public policy developments, and the latest research on nonprofits, philanthropy, and the sector as a whole.
In addition to these benefits, this dual membership also expands our members’ network of colleagues. Beyond the questions about insurance agents and social media, we’re well aware that “you never know where your next lead will come from” – and so it only makes sense to for members of both organizations to expand their network to include peers from across the sector who can both share insights and provide collaborations.
To both new and renewing members of ACN and Donors Forum: I invite you to take advantage of this fantastic opportunity. I look forward to getting to know you.
For more information, contact Zach Korotko at Donors Forum, email@example.com or 312-327-8948; or Michael Long at ACN, firstname.lastname@example.org or 815-621-1150.
By: Catherine Seibel, Impact Assessment for Foundations and Nonprofits
It has taken me some time – and no small amount of deep breathing – to realize that nonprofit organizations don’t really want my services (Sounds like I have a fantastic business model on my hands, doesn’t it?). Almost exclusively, organizations contact me because of some type of external pressure: either a program officer has asked about measurement, or a proposal requires an evaluation component, or a foundation is offering support to conduct an assessment of a specific program.
As a result, nonprofits often feel a sense of urgency to do something quickly to satisfy funders, without a real consideration of the type of sustained learning that a rigorous, thoughtful evaluation can provide to the organization’s board and staff.
With this in mind, what follows are three essential steps to dealing with a sudden external pressure to evaluate your programs.
1. Talk to Your Funders. Your program officer wants you to succeed. They have invested in your organization and your people, and they are actively engaged in your accomplishments. To that end, it is well worth your time to have a conversation with them about what, specifically, they’d like to know. In some cases it might be as simple as a map of the communities that you serve or a few numbers indicating satisfaction with a new program. In my experience, funders very rarely expect a huge, expensive system of data collection (especially at the beginning). It could very well be that you already *have* the data that they’re looking for, and simply need to present it differently.
2. Start Small. For social service organizations with multiple programs and diverse client bases, it doesn’t make sense to launch an enormous evaluation for every group (even if you had the time and the money!). Your best bet is to choose one or two programmatic elements and begin with those. Have you recently launched a new initiative? Started at a new site? Have a program that you’re thinking of expanding to other locations? These might be good places to start with an assessment.
3. Match Methods with Programs. I listened in on a webinar a while back where a group of nonprofit professionals were talking earnestly about how to incorporate randomized, pre- and post-tests into their evaluation. This blew me away for a number of reasons, not the least of which was that these folks were providing grief counseling – not exactly an area where you want a control group who doesn’t receive services! It prompted me to develop a talk entitled, “Grief is Not a Randomized Drug Trial: Considering Alternatives to a Pre- and Post-Test Assessment” that focused on developing metrics and methodologies that make sense for your specific type of program. I cannot stress enough that evaluation is never a one-size-fits-all situation.
1 (again). Talk to Your Funders. Once you have identified one or two programmatic elements to focus on, and have identified the methods that are best suited to measuring their impact, present them to your program officers. Oftentimes, program officers don’t have any more training than you do in evaluation. In my experience, if you can show funders that you’re asking the right questions about your effectiveness – and that you sincerely want to learn from the answers – they are eager to meet you in the middle.
Best of Luck!
By: Amy Wishnick, Wishnick & Associates, LLC
Infrastructure: “The underlying foundation or basic framework (as of a system or organization)” as defined by the Merriam-Webster Dictionary. Not particularly alluring.
The esteemed panel of nonprofit professionals speaking at the ACN’s 2015 annual meeting shared many worthwhile insights about current issues and trends in the nonprofit sector. One in particular that resonated was the importance of infrastructure. The point made in the discussion was that, to paraphrase, infrastructure should not be ignored; it is imperative for mission fulfillment.
Mission fulfillment – programs and services – now we’re talking. Yet, without support, the infrastructure, they would not be as significant and might not even exist.
Highly developed programs and services can only go so far if any aspects of an organization’s infrastructure are less developed. Why? Because all aspects of an organization are intertwined. Let’s use a restaurant as an example. We all have had an experience at a restaurant with a terrific chef, a stunning menu, and a beautiful room that, sadly, had a slow kitchen, a disinterested wait-staff, and – you fill in the blanks. If we think of a restaurant’s concept and food as mission and program and the rest as the infrastructure, we see how critical these things are to success. Without a solid infrastructure – a smoothly functioning front of the house, a knowledgeable and dedicated staff, the right kind of visibility in the community, and attention to the bottom line – no restaurant will survive. Divine food alone cannot ensure success.
If we substitute mission-driven organization for restaurant, and we were donors not diners, we wouldn’t make a second contribution. If we were clients, we might not avail ourselves of the services again. Not only is attention to infrastructure crucial for organizations, it underscores the importance of the work we do as capacity builders and providers of consulting services focusing on board development, governance, fundraising, strategic planning, finance and accounting, grant writing, marketing, communications, evaluation, volunteer management, operations, human resources, technology, and more. Without these critical aspects, an organization’s mission would have no support. In our experiences as nonprofit consultants, we know how important infrastructure is. In addition to compelling missions and meaningful programs, our clients must have:
We are privileged to be welcomed by our clients, to get to know their organizations intimately and to develop relationships built on trust so that we can work together to safeguard success and sustainability.
Infrastructure. Not particularly alluring. Imperative.
By: Catherine Seibel, Impact Assessment for Foundations and Nonprofits
Listening to Kelly Kleiman speak about developing a contract with a nonprofit client is like being splashed in the fact with cold water. At ACN’s fall program “The Nitty-Gritty Details of Running a Consulting Practice”, Kelly pulled many of us out of our kitten-hugging, social justice reverie to remind us that, “Until they’re your client, you have to recognize that your interests are inevitably at odds. You can’t wish for harmony – you have to set up a structure to assure you’re harmonious.”
An attorney by training and [board development consultant] by trade, Kelly reminded the audience that negotiating a contract with a potential client is both a science and an art. Beyond the obvious elements, a well-structured agreement reflects a number of more subtle efforts on the part of the consultant.
Why goes into a contract? ACN’s Code of Ethics dictates that our members: 1) Ensure that, prior to accepting any engagement, there is mutual consultant/client understanding of the objectives, scope, work plan and payment arrangements; and 2) Agree in advance with a client on the basis for fees and expenses and charge fees that are reasonable and commensurate with the services delivered and the responsibility accepted. Or, as Ms. Kleiman puts it, to “have a meeting of the minds when we really haven’t had a meeting of the minds yet.”
As for how it’s structured, Kleiman uses the first paragraph is to listen as closely to what the client said and then try to reiterate it back to them – “It’s a test of my ability to actually listen” – to make sure that everyone sees the project in the same light. If you can’t get to a contract that you can both agree on, it’s a canary in a coal mine – understand that it’s not a good fit, and walk away.
What doesn’t go into a contract? For the simplicity’s sake, Kleiman merges her proposal and contract into a single document. A few pieces of advice:
How do you negotiate a price? Remember that your contract is a negotiating document. If you go in to the negotiations with your minimum number and they counterbid, you’ll feel ripped off. Instead, consultants shouldestimate out how long the project will take – and then add 1/3 for all the contingencies that you can’t anticipate. Ask yourself if the number is both legitimate and something you’d be willing to come down from.
One member noted – with nodding agreement from others – is that a peculiar feature of nonprofit consulting is the frequency with which we are approached by potential clients asking for the discounts or pro bono services we offer. When this happens, remind the nonprofit that consulting is not a hobby or a philanthropic endeavor, but rather our career.
How do you ensure organizational buy-in? Once consultants enter into an agreement, they approach the project in good faith, believing that the organization’s leadership has agreed on the consultant’s scope of work and will continue to work toward the agreed-upon goals. As a safeguard, Kleiman suggests a few strategies: asking the Executive Director and Board Chair to sign the contract; expecting partial payment up front; and billing the client monthly (“If they’re paying on a schedule , they’ll work assiduously”).
Kleiman noted that a peculiar feature of working with smaller organizations that clients may have an outsized expectation for the results that a consultant can produce. For example, less savvy clients may assume that experienced marketing consultants can get secure a story on the front page of the Tribune. The best way to meet – or pleasantly exceed – client expectations is to manage them from the start.
Remind your client that they are paying you for your best effort, not a specific outcome. Think of it this way: you wouldn’t pay a doctor who promises to cure your disease, or a lawyer that guarantees a win in court. As a consultant, only guarantee that which over you have complete control – e.g., number of meetings, a final report or strategic plan. If you encounter clients who say they don’t want to pay you unless you produce desired results, turn and run. They will never be happy.
Failure to Pay
One of the most difficult scenarios faced by an independent consultant is failure to pay. Obviously, your contract is your first line of defense – your agreement should memorialize their promise to pay you for your services. Beyond that, Kleiman notes that her contract includes a 15% late fee. While she often refrains from enforcing the clause for short-term delays, she adds that “the unspoken part is that I’ll stop working when you need me the most.”
Remember that failure to pay is a breach of contract – and your response is stop delivering services if they won’t deliver money. For those of us who become very identified with our client and its mission, this can be difficult to enforce. But. Kleiman, notes, “Do whatever you need to do to make peace with your conscience, but don’t be a patsy.”
Who does what? When? (And Don’t Ask How)
During the group discussion, three additional themes repeatedly emerged. First was the notion of scope creep – what do you do when a client “adds 19 other things to the project”? Again – make sure your contract specifically addresses this contingency. Include a clause specifying that the client and/or the consultant has a right to renegotiate. By appending the proposal to the contract – including what each party is accountable for – you have a specific working document to point to. Anything beyond the initial scope can be discussed, agreed upon, and billed separately. Aside from this, consultants simply have to stand firm to their agreement – “If you don’t want mission to creep, just stop working.”
A second raised by fellow consultants was the notion of what to do when the client isn’t holding up their end of the bargain – e.g., not producing the required documentation, responding to e-mails, meeting agreed-upon deadlines for specific work products. Kleiman suggests that if you’re not getting what you need from the client, “send a letter where there’s a pressure point” – let the leadership know that they’re paying you for less than they bargained for. Avoid being penalized for the client’s breach.
And finally – what if a client specifies how a project should be completed (for example, in my line of work – evaluation – clients often begin by saying that they need a survey, without considering what kind of information they want from respondents)? Remember – you as a consultant decide how to get from point x to point y; “If they want to tell you how, tell them you need a 401k and a health plan.”
As consultants, we are obligated to provide the best possible service to our clients – but not to the detriment of own professionalism, reputation – or sanity.
By: Theresa Lipo, Philanthropy Consulting
For any consultant, generating and following up on leads sometimes takes a back seat to doing client work; after all, it “makes sense” to focus on customers that are currently paying you! But at ACN’s fall program, “The Nitty Gritty Details of Running a Consulting Practice,” ACN Member Bonnie Massa reminds us that lead generation must be a scheduled and essential part of our workday. Without leads in the pipeline, a consultant can become too reliant on individual clients and without a pool to sustain business if one client should disappear.
As one of our program facilitators, Bonnie provided participants with four essential steps to successful lead generation:
Know Your Customer: who are the clients that satisfy you the most? What industry are they in and what are their characteristics (size, structure, service area, etc.)? Conversely, what have been your most unproductive or unsuccessful client relationships? Identify yours and determine if they share characteristics that will help you decide what time of clients you want to avoid in the future. The result of these exercises will be your prospect profile.
Find “Look-a-Likes”: With your new customer profile, you can now go and seek out organizations that are similar in characteristics. Finding them is easy – go back and determine how you found your clients to dateand won their business. Affinity groups, social media, and old-fashioned one-on-one networking are the best ways to identify look-a- -like clients.
Reach out and Touch: Now that you’ve found them, how do you reach organizations that might need your services? First, compose an “elevator speech” that tells potential clients what you do and who you do it for. Make it specific, compelling, and focused on their needs: Rather than saying that you raise money for mid-size nonprofits, tell potential clients that you help youth-focused organizations identify and secure federal government funding. Second, get your name out there. LinkedIn is essential as are other social media platforms, but only as long as you work to remain active by writing blogs or newsletters, participating in webinars, and commenting on relevant professional articles. These activities will get you noticed online and lead to referrals in your field.
Track Activities and Results: Make lead generation a regular part of your work schedule by tracking your activity and successes with customer relationship management (CRM) software – or even a simple Excel spreadsheet.
Integrated into these activities is your Key Performance Indicator or the number of leads you need in the pipeline to ensure that your business continues to thrive and grow. By using the steps above, you can ensure that you reach your target by making lead generation a regular and essential part of your business.
By: Bonnie Massa, Massa & Company, Inc.
Non-profit organizations who are interested in securing a product or service frequently distribute a request for proposal (RFP). In response, potential consultants spend hours of non-billable time putting together a proposal, submitting it, and then sitting back and waiting for a response. Experience has taught me that this is an incredibly counterproductive approach that wastes the valuable time of organizations and consultants alike, especially if the work or project an organization purchases is infrequent or never been purchased before.
An RFP requires potential consultants to provide a description of their deliverables, timelines for completing them, and an estimate of the costs involved. This is akin to doing business at a drive-in window. The organization creates an “order” for exactly what they believe they need, forcing the consultant to take the “order” and create a proposal without knowing the circumstances that led to the need for consultants to be summoned. Fine for burgers but bad for business! An RFP obliges consultants to develop all of these items without affording them the opportunity to get to know the people, problems, and culture that are all part of understanding why the organization is looking for a consultant to begin with. On top of that, a poorly-conceived or poorly-written RFP will inevitably solicit fewer proposals, and/or proposals that are off the mark. In these cases, everyone has wasted their time. Lose – lose!
RFIs, on the other hand, collect information about the potential consultant’s background, abilities, and experience – in other words, with a focus on the consultant’s skills! The organization uses this information to decide whether to consider them for an upcoming project. By focusing on the most important element of a consultant-organization relationship – the extent to which they “fit” with one another – an RFI demonstrates the organization’s desire to find the right consultant and the organization’s respect for the consultant’s time and resources by requesting only the basic information needed to move forward with the process. Win – win! Why not use this “free” consulting time to talk to two or three consultants and ask them questions that help the organization sharpen its own knowledge and sense of what is needed?
Here are five reasons why the RFI is a better tool for the organization and the consultant:
What I am describing, without actual examples to protect the guilty, is that RFPs don’t work for most organizations or consultants so let’s use a better tool! If you’re a non-profit leader whose goal is to find a partner who can help you reach your goals, then it’s important to share information and really learn if this is a good fit.
If you’re a consultant, seriously consider whether it is worth your time to answer some rote questions that may not be on target. Next time you get an RFP – ask for a meeting with the organization. If they are unwilling to meet with you to learn about your expertise and your personal style before committing to a relationship, what have you learned about the organization and what it will be like to work for them?
Bonnie Massa is President of Massa & Company, Inc. and Vice-President of Member Services and Development for Association of Consultants to Nonprofits.
ACN offers an RFP template on its web site to assist organizations with finding a consultant among its members. If you agree with Bonnie that an RFI is a better tool – let us hear from you below and we will offer an RFI tool on the web site.
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