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Date: February 7, 2014

Your YWCA Finances…What Board Members Need to Know

Rita Ryder, YWCA USA DAS

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Welcome!!

• Introductions:– Your name

– Your YWCA

– Your role

• What’s a key financial issue/question you’d like us to address today?

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The “Board Hat”----Duties

The Duty of Care– A standard of competence—”prudent person”– Stewardship of the organization

The Duty of Loyalty– A standard of “faithfulness”– Undivided allegiance when making decision– Don’t use information for personal gain– Act in best interest of the organization

The Duty of Obedience (or “Compliance”)– Faithfull to the organizations mission– Assure adherence to laws– Public trust and stewardship

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Who’s Responsible for the Money?No Money, No Mission!!

Board: Critical Fiduciary Responsibility • Safeguard financial assets and legacy

• Assure that funds spent appropriately For charitable purposes, mission, goals Achieve impact Account for appropriately

•Fundamental CEO/ED responsibility – Design/Implement financial policies, systems, practices

– Financial planning, recordkeeping, reporting

– Financial performance Financial Vitality----key to Board + CEO/ED success!

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Strong Financial Stewardship: A Blueprint

Financial

Management: A Priority

• Expertise• Systems• Structure• Policies

Programs: High-Impact

Cost-Effective Mission-Driven

• Relevant• Strong

outcomes• Financially

viable e.g. good revenue mix

Assets : Preserved Expanded

• Endowment• Reserves• Buildings/ capital

Community Engagement:

Deep and Wide

• Fund raising• Volunteerism• Program

participation• Public policy

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Key Board Question

How does the Board fulfill it’s governance responsibility to secure financial vitality for its YWCA

while....

Avoiding MMM (the micro management mode)?

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Board/ED Points of Financial Oversight

The AnnualBudget Plan

MonthlyBudget Reports

Annual Audit

AssetReports

Key DataAnalysisTrends

“Dashboards”

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1. Your YWCA Annual Budget What Do The ED and Board Need To Know?

• Are We Putting Our Money Where Our Mission Is? (especially our “investment” dollars)

• Does Budget Support Financial Health (living within means)?

– It’s a “balanced” budget

– Revenue realistic (esp. fundraising, grants)

– Expenses realistic

– Appropriate infrastructure/administrative support

– Consistent with our Strategic Plan

• Are We Making Effective, Efficient Use Of Funds?– Cost per client served

– Cost per “unit of service” e.g. bed-night care)

– Cost per outcome achieved

– Are we “to scale”?

Tren

ds…

….

Risk

s……

..Opp

ortu

nitie

s

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Numbers to Look At: Annual BudgetMoney / Mission

Expense Budget,By Program Area

% Expense Budget,By Program Area

“Investment”(Subsidy) By

Program Area

Live Within Means

Total Revenue –Total Expense

Revenue This year,Last year

Expenses This Year, Last Year

Effective/EfficientUse of Funds

Cost PerClient Served/Per Outcome

Cost PerService Unit

% ofCapacity

met

Scale% Need Met;

Cost Efficiency

Reasonable Admin Support

% Overhead Rate

Key AdminSkills Available

Community Support

# Donors# Major Donors

Total Raised # Volunteers, Hrs. of service

Trends Any significant trends, shifts in areas above

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A YWCA Budget Process (Illustrative)

Finance Committee

Reviews

CEO Reviews Outcomes,

$ Performance

Board/Finance Committee

Approve Budget Assumptions

CEO/CFO Prepare Budget

Assumptions

Staff DraftsBudget

(+ Analysis)

Implementation, reporting

Board Reviews,Approves

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Is Our Budget Performance on Target?

•Actual revenue/expense to date….esp. “key drivers”•End of year projections/forecasts•Explanation of variances

If Not, What Are Our Corrective Action Plans?

Important ED/CEO Responsibilities:

•Report timely, accurate information—with analysis•Come to grips with issues: be direct and honest with Board •Come to the Board with approaches for dealing with problems

2. Monitoring Your YWCA Annual Budget What Do The ED and Board Need To Know?

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A Reporting Approach (Illustrative)March, 2014 (25% of budget year)

MARCH YTD BUDGET % BUDGET VARIANCE YEAR END EST RevenueLine Items

Total Revenue

ExpenseLine Items

Total Expenses

NET *******Client #,

Outcomes

Narrative:Explain key variances (e.g. large line items, + or - 5%)Plan for addressing key variances, achieving a balanced budget by year-end

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If You’ve Got A Problem..What Kind Is It?• Is it a short-term or one time budget issue? e.g.

– A short gap in government grant funding – Costs of gearing up a new program/ending an old one– Temporary drop in service levels

Or……

• Is it a “structural” budget problem? – Your basic budget just doesn’t work. Expenses significantly exceed income– Too many programs, programs not designed efficiently, too dependent of unstable revenue sources– Budget too small to justify overhead– Facility costs, deferred maintenance increasing

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So You Have a “Structural” Budget Deficit??Recalibrating Tools. Not Rocket Science, But Hard to Implement

IncreaseIncome

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RE-EVALUATE PROGRAMS

ReduceExpenses

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Some Budget Balancing Approaches

Increase Revenue

•New grants e.g. veterans•Expand fundraising•Maximize assets e.g. rental space•Expand client income mix e.g. childcare•Change program model/increase fee income e.g. housing

Explore Efficiencies/Cost Reduction•Technology advancements e.g. payroll, hr, fr•Outsourcing admin functions•MSW students, interns•Strategic Alliances

Reassess Programs: Focus, Prioritize

MacMillan Matrix: Relevance, Fit, Competitive Position, Economic Viability

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3. Your Annual Audit Reviewing and Accepting

• Reliability Of Financial Records, Systems– Reporting of your numbers (statements)– Unqualified or qualified– Notes– Management letter– Questioned costs

• Your YWCAS Financial Health (Analysis)– Annual result positive? – Do you have sufficient of cash to pay bills? – Are you overly dependent on Gov’t. funding?– Assets growing or declining?– Administrative support/costs---just enough? – Trends

Process: Audit/finance committee reviews in detail; Board hears report from auditor, senior staff: Reliability + Health

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Some Ratios to Measure Your Financial VitalityFrom Your Audit or 990

RATIO FVTF STANDARDNet Operating MarginDid you have a profit or loss for the year?

+2-5%

Cash on Hand“Defensive Interval”…How long could you operate with no revenue?

3-6 months

Govt. DependencyHow reliant are you govt. grants?

Less than 50%

Self-Sufficiency % Revenue generated by YWCA: fees, donations, rentals, etc.

50%+

Assets; total, trend Increasing

Community SupportHow invested is the community in the YWCAs work?

10%-30%, based on budget size

Administrative Support (overhead)Just enough—sufficient, not excessive

10-25%

Fundraising CostsAppropriate to resources raised

Varies: experience; point in fundraising growth; 2ndary benefits

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4. Reports on Assets Monitor and Steward Your Assets

• Investment Reports—Are we prudent, Productive?– Policies and performance

– Investment of funds by asset class

– Earnings, and earnings compared to benchmarks

• Buildings and Facilities– Condition

– Maintenance/replacement needs

– Value

– Investment plan

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Some Final Thoughts

• Timely reports, with analysis: critical to the Boards governance and Instills confidence: Board, CEO, community

• Structural budget problems don’t fix themselves, get worse

• YWCAs assets: our legacy, our future. Don’t:– Invade the Endowment Fund– Borrow against assets e.g. refinance your building– Neglect your property….defer maintenance

• Support ED/CEO: training, staff/volunteer resources; problem solving (and avoid MMM)

• Celebrate your progress towards financial vitality!

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Some Resources

YWCA USA. www.ywca.org. Go to “Intranet”.

•Click on “Resource Library” then “Financial Vitality”. •Click on “Training and Events”, then “Webinar Documents” for Fundraising, Grant, Financial Management sessions.

Council of Non-Profits. www.council of nonprofits.org

Non-Profit Finance Fund. www.nonprofitfinancefund.org

Board Source. www.boardsource.org

American Institute of Philanthropy. www.charitywatch.org

Guidebook for Directors of Non-Profit Corporations, Third Edition. American Bar Association, 2012.