Navigating Hyper-Change in Nonprofit Financial Strategies

This webinar by Fiscal Strategies 4 Nonprofits, LLC explores the impact of hyper-change on financial health and continuity in nonprofit organizations. It covers key aspects for evaluating organizational readiness, funding vulnerability, and demand fluctuations. The session provides strategies for effectively communicating decisions affecting financial health and offers a five-phase action plan for navigating uncertain times.

• Nonprofit
• Financial Strategies
• Hyper-Change
• Sustainability Education
• Communication

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1. FS4N Fiscal Strategies 4 Nonprofits, LLC Navigating Uncharted Waters During a Period of Hyper-Change SE4N Sustainability Education 4 Nonprofits Impact on Financial Health and Continuity April 22, 2020 Speaker: A. Michael Gellman, CPA, CGMA, CFSO Fiscal Strategies 4 Nonprofits, LLC Sustainability Education 4 Nonprofits mgellman@fiscalstrategies4nonprofits.com www.se4nonprofits.com www.fiscalstrategies4nonprofits.com 1

2. Impact of Hyper-Change on Financial Health and Continuity 2 We are faced with the Challenge of Responding to Hyper-Change SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

3. Impact of Hyper-Change on Financial Health and Continuity 3 This webinar will provide Fiscal and Financial Framework and Communication Strategies and Guidance for Financial Professionals and Senior Management and their Nonprofit Organizations During this Time of Uncertainty SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

4. Impact of Hyper-Change on Financial Health and Continuity 4 LEARNING OBJECTIVES Discuss how hyper-change impacts planning and decision making Explore the key aspects of evaluating if your organization is well positioned, financially healthy, and strategically ready for a sustained period of stress and uncertainty Discuss how hyper-change impacts: Vulnerability of your funding sources Demand volatility pressure - increased and/or decreased programs/services SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

5. Impact of Hyper-Change on Financial Health and Continuity 5 LEARNING OBJECTIVES continued Discuss strategies for nonprofit organizations that are financially in a strong position vs. a weak position Explore effective ways to message and communicate with your board important actions and decisions that effect the financial health and continuity of the organization SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

6. Impact of Hyper-Change on Financial Health and Continuity 6 Five Phase Action Plan 1. Finding a Starting Point 2. Three Key Critical Factors to Consider and Plan Around 3. Timing and Implementation 4. A Word About Operating Reserves and Financially Strong vs. Financially Weak Organizations 5. Establishing a Framework SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

7. 7 1. Finding a Starting Point SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

8. 1. Finding a Starting Point 8 During extraordinary times of hyper change, we are confronted with so many changing elements that making effective management decisions seems overwhelming and finding a starting point feels impossible. SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

9. 1. Finding a Starting Point 9 During Uncertainty Make Protecting Financial Position Number One Priority SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

10. 1. Finding a Starting Point 10 Until we can get our arms around: Timing/Pace of Change Scope of Change Impact of Change We Have to Adopt a Conservative Approach and Favor/Over-Weight The Impact of Management Decisions Have on Protecting Financial Assets SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

11. 11 2. Three Key Financial Critical Factors to Consider and Plan Around SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

12. 2. Three Key Financial Critical Factors to Consider and Plan Around 12 Assessing an Organization s Current Financial Position and Impact on Continuity Step #1 Financial Health and Assessing Strengths and Weaknesses Step #2 Vulnerability of Your Funding Sources Step #3 Demand Volatility Pressure for Increased and/or Decreased Services SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

13. Step #1 Financial Health Assessing Strengths and Weaknesses 13 Assessing an Organization s Current Financial Position and Impact on Continuity * Reference the Attached Template for: ( Phase 4 ) Financial Health Assessment and implementation Framework SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

14. Step #1 Financial Health Assessing Strengths and Weaknesses 14 The Health of a Nonprofit Organization Only Shows Up on the Balance Sheet Short List Balance Sheet Strengths Short List Balance Sheet Weaknesses Special Emphasis on Operating Reserves SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

15. Step #1 Financial Health Assessing Strengths and Weaknesses 15 Special Emphasis on Operating Reserves Formal Operating Reserve Policy Informal Establish a Temporary Operating Reserve Goal More Insights on Operating Reserves Later ( see Phase 4 ) SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

16. Step #2 Assessing the Vulnerability of Funding Sources 16 A Very Difficult Discussion ( Most Important Assessment ) Best Method: Separate Into 3 Categories by Retention Sensitivity SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

17. Step #2 Assessing the Vulnerability of Funding Sources 17 Retention Sensitivity Give Each Category a Theme ( Name ) 1. Rock Solid: ( 80% to 100% Retention ) 2. Vulnerable: ( 50% to 80% Retention ) 3. Shaky: ( 0% to 50% Retention ) SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

18. Step #3 Demand Volatility Pressure on Services, Events, Programs, Activities 18 Demand Pressure Sensitivity Most Impacted by Hyper-Change 1. List Top Five ( in order of change magnitude ) Services, Events, Programs, Activities ( specific to your organization ) 2. Separate Into Two Categories Controllable List First Uncontrollable List Second SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

19. 19 3. Timing and Implementation SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

20. 3. Timing and Implementation 20 I Find Adopting the Strategy of Super-Short- Term vs. Short-Term Very Useful: Provides: Sense of Purpose Sense of Action Sense of Calmness A Thoughtful Action Path Forward SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

21. 3. Timing and Implementation 21 Super-Short-Term vs. Short-Term Helps to Bifurcate Action Plans Into Two Phases Phase I Super-Short-Term Immediate Action Start Now through Next 30 Days Phase II Short-Term Short-Delay Action Start in Next 30 Days to 60 Days SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

22. 3. Timing and Implementation 22 Super-Short-Term vs. Short-Term Provides Both a Sense of Purpose through Immediate Action Steps and a Sense of Calmness that We Will Continue to Read and React to Changing Situations All Around Us SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

23. 23 4. A Word About Operating Reserves and Financially Strong vs. Financially Weak Organizations SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

24. 4. A Word About Operating Reserves and Financially Strong vs. Financially Weak Organizations 24 It Could Be an Over-Simplification ( I Firmly Believe in this Concept ) The Key to Assessing a Position of Financial Strength vs. a Position of Financial Weakness Operating Reserves SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

25. 4. A Word About Operating Reserves and Financially Strong vs. Financially Weak Organizations 25 Using Operating Reserves as a Benchmark SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

26. 4. A Word About Operating Reserves and Financially Strong vs. Financially Weak Organizations 26 Organizations that Have Substantial Operating Reserves Have a Whole Different Set of Options and Tactics to Consider than Organizations that are Under-Water with Little to No Operating Reserves SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

27. 4. A Word About Operating Reserves and Financially Strong vs. Financially Weak Organizations 27 Financial Strength vs. Financial Weakness Organizations with Operating Reserves Understanding Operating Reserve Goal When and How to Meter-Out Use Operating Reserves Expense Containment Strategies Organizations Without Operating Reserves Expense Containment Strategies SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

28. 4. A Word About Operating Reserves and Financially Strong vs. Financially Weak Organizations 28 Financial Strength Organizations with Operating Reserves In a Good Position with Options to Consider However In the Most Difficult Position How to Use a Limited Resource During a Time of Great Unknown with Rapidly Changing Conditions and Timing SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

29. 4. A Word About Operating Reserves and Financially Strong vs. Financially Weak Organizations 29 Financial Weakness Organizations with Little to No Operating Reserves Must Move Quickly to Expense Containment However Do Not Have to Worry About Burning Through Assets they do Not Have Straight Path to Downsizing Operations to Lower Funding Realities for the Foreseeable Future SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

30. 30 5. Establishing a Framework SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

31. 5. Establishing a Framework 31 Financial Health Assessment and Implementation Framework Worksheet Step One Financial Health Assessment Step Two Operating Reserve Position Step Three Financial Health Driven Actions SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

32. 5. Establishing a Framework 32 Financial Health Assessment and Implementation Framework Worksheet Step One Financial Health Assessment Assessing Balance Sheet Vulnerability of Funding Sources Demand Volatility Pressure Services, Events, Programs, Activities SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

33. 5. Establishing a Framework 33 Financial Health Assessment and Implementation Framework Worksheet Step Two Operating Reserve Position ( set the scale to your organization ) Weak Less than 3 Months Neutral 3 Months to 6 Months Strong Over 6 Months SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

34. 5. Establishing a Framework 34 Financial Health Assessment and Implementation Framework Worksheet Step Three Financial Health Driven Actions ( set the scale to your organization ) Super-Short-Term Actions Now to 30 Days Short-Term Actions 30 Days to 60 Days SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

35. 5. Establishing a Framework 35 Financial Health Assessment and Implementation Framework Worksheet Walk Through the Framework Worksheet SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC

36. Conclusion 36 This assessment will give the board of directors confidence that the senior management team has taken a thoughtful and objective approach to quantify near-term decision making with a conservative bias of protecting the organization s financial position during a time of hyper-change. SE4N Sustainability Education 4 Nonprofits FS4N Fiscal Strategies 4 Nonprofits, LLC