Nonprofit Bookkeeping Test

If you're not an accountant yourself, it can be hard to hire a qualified bookkeeper. How can you tell if an applicant really knows bookkeeping? CPA Dennis Walsh created this terrific assessment test you can give candidates for bookkeeping and accounting jobs. We especially like the chart at the end that shows what training is called for based on which questions were answered correctly or incorrectly:

This 21-question quiz samples from general bookkeeping knowledge as well as nonprofit bookkeeping and compliance matters. Use this assessment test as part of your hiring toolkit as well as for identifying staff training needs. Take it yourself and see how you do!

The Nonprofit Bookkeeping Assessment Test

We recommend that you give an applicant 20 minutes to complete the assessment test. The ability to make accurate choices under time pressure is an important indicator of suitability for this type of work.

1. Which of the following regarding the Statement of Financial Position is true?
a) It is also known as a balance sheet . . .

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How to Hire Your First Development Director

The only thing worse than not having  fundraising staff is having bad fundraising staff. To help you avoid the mistakes many others have made in hiring development staff, we’ve stolen a script of a scene with consultant Leyna Bernstein as she talks with an executive director contemplating hiring fundraising staff for the first time.

Olivia (the ED), in a tired voice: As you know, I'm the executive director of a nonprofit, and we've decided we need to hire a development director. We don't have any dedicated fundraising staff right now, and I spend too much of my time raising money. I just can't keep this up.

Leyna, eyebrows raised: So . . .

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The Founding Fathers Write a Grant Proposal

"Just look at this second sentence!" groaned Samuel Adams. "'We hold these truths to be self-evident  .  .' This flies in the face of 'evidence-based practice'! We'll never get funded!"

Another delegate had a different complaint: "This mission statement is way too long!" he wailed. "Mr. Jefferson, no one will ever read this 'Declaration of Independence' of yours."

In the meantime, George Washington had been working up a budget for the revolutionary war (earlier called the innovative war). His initial figures . . .

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All-Volunteer Organization Resources

All-Volunteer Organizations (AVO) are some of the most invisible -- and most powerful -- nonprofit organizations around. Supporting them is a priority for us at Blue Avocado; here is a list of the articles of particular relevance to AVOs:

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Four Ways to Remove a Board Member

Occasionally, a board member needs to be removed from the board. In some cases, a conflict of interest or unethical behavior may be grounds to remove an individual from the board. In other cases, the behavior of a board member may become so obstructive that the board is prevented from functioning effectively.

The best boards often have strongly felt disagreements and heated arguments. Challenging groupthink and arguing for an unpopular viewpoint are not grounds for getting rid of a board member. But if a board member consistently disrupts meetings or is otherwise destructive and  demoralizing, it may be appropriate to consider removing the individual from the board:

1. Personal intervention

One-to-one intervention by the board president or other board leadership is a less formal solution to managing problem board members. If a board member has failed to attend several meetings in a row, or has become an impediment to the board's work, the board president can meet informally with the board member in question. In person or on the telephone, the board president can request a resignation. Examples:

  • "I respect your strong opinion that we have made the wrong decision about . . .
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First Person Nonprofit: A Day in the Life of a Major Gifts Officer

So exactly how do you lead someone up to a $1 million ask? The director of major gifts at a large regional environmental organization agreed to tell us everything . . . as long as we didn't reveal her name or organization.

And best of all: post your questions to her in the Comments section and she'll answer them there at the end of the week!

Major gifts aren't the right strategy for every organization, but we can still appreciate how this fundraiser talks about her job:

Q: Can you walk us through a major gift ask?

A: Well, here's an example. We sent our board members a list of new members, and one of them knew one of the people on the list, although not very well at all. But he knew that this person had a large capacity to give. So he sent that person an email saying

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Alligators in the Boardroom and Urban Legends About Nonprofits

An influential but under-the-radar form of popular culture is the urban legend. Like the mythic alligators in the New York sewers or the man who woke up in an ice-filled bathtub without a kidney, nonprofits are the victims of urban myths and legends. Common assumptions -- just by being passed along through so many people -- gain a measure of credibility just by their frequent telling and longevity. This Board Cafe article may be useful for your fellow board members, your neighbors, and others.

Urban Myth #1: Nonprofits can't make a profit. Truth: In fact, the Internal Revenue Service (IRS) guidelines do not say that nonprofits can't have profits, but they do clearly state that any profits can't be simply distributed to board members (as corporate profits are to shareholders). The IRS requires surpluses ("profits") to be reinvested in the organization's work. Such cash reserves -- built through . . .

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In Search of Unicorns: Finding & Hiring Grantwriters, Part 1

Part 1 of 2

My small agency can't afford to hire a full time fund developer. How do I look for a grant writer? I have talked to a few who either want to be paid by the hour or receive a percentage of the grant. I am perplexed. Any suggestions?
--Wes Mukoyama, Yu-Ai Kai, San Jose, California

Everyone's heard of unicorns, but almost no one has ever seen one. Like Wes, almost everyone in community nonprofits thinks it would be great to have a grantwriter. But it's rare to find and work successfully with this rare creature. Why is it so hard?

In this issue of Blue Avocado we'll explore why hiring grantwriters seems to be a hit-or-miss proposition, and what to think about doing instead. In our June 1 issue, Part 2 will lay out a blueprint for finding and contracting with outside grantwriters.

Why it doesn't work very often
Community nonprofits have a harder time succeeding with grantwriters than

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Charity Raters Part I: Charting the Bad and the Bad

Wouldn't it be great if there were an objective rating system so that donors could choose the best nonprofits to donate to just as investors use rating agencies to pick the best companies to invest in? Don't answer; it's a rhetorical question. Here's what you need to know about some of the best-known charity rating organizations:

In this Part I of a two-part article, we take a fast look at six charity raters -- Charity Navigator, Charity Watch, Better Business Bureau, GuideStar, Combined Federal Campaign (CFC) and Great Nonprofits -- and who they rate and the criteria they use to rate them. In Part II in our next issue, we'll cover what you should do to manage your nonprofit's ratings, and what we should do collectively as the nonprofit community.

1. Charity Navigator is the heavyweight: the best known and the most often quoted. As a result, they are influential beyond just how they rate individual nonprofits.

Who they rate: About 6,000 of the largest U.S. 501(c)(3) nonprofits with revenue of more than $1 million including public support of more than $500,000

Rating types:

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Ask Rita: Do We Need Insurance for Our Volunteers?

Dear Rita: I recently read an article that said it was a good idea to have insurance for volunteers. I thought volunteers had immunity in both federal and state laws. Should I be doing something to protect my nonprofit? Signed, Curious in California

Dear Curious: Volunteer immunity laws are common, but they almost always contain a provision that the volunteer's immunity only applies to claims that exceed the insurance policy limits carried by the nonprofit. That means both the nonprofit and/or its volunteers need to have coverage available . . .

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Who's the Boss? The Board or the Executive?

There is an abundance of advice for nonprofit boards and EDs that speaks to the advantages of "partnership" and "open communications." But sometimes that advice just doesn't feel like enough.

Who's the boss? The board or the executive director/CEO?

The answer: it depends on whether the board is acting as a body, or whether board members are acting as individuals. The key is remembering that the board is different from board members.

It's not the board president who hires the executive director; only the board as a whole can do that. The treasurer doesn't approve the budget; the board as a whole does that. In other words, when the board is acting as a body, it is the boss. The executive is answerable to that body.

On the other hand, when board member act as individuals, they . . .

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Grantseeker's Guide to Foundation Affinity Groups

Like the mysterious Freemasons and their Grand Lodges, foundation affinity groups feel open and warm to insiders, but to outsiders they seem to be secretive, cloistered societies with their own coded languages, titles, and hierarchies. Rick Cohen first tells us about the lodges -- er, affinity groups -- then gives practical advice on how to make this knowledge work for your nonprofit:

You can't be a member of a foundation affinity group unless you are on the staff or board of a foundation. Their conferences are forums where grantmakers discuss what they should be funding . . . but you can seldom go unless you're a foundation person.

Why should you care? Because knowing how to work within their circles is an important way to get insider information about foundations and to get your organization a positive profile among grantmakers . . . in short, to help you and your cause raise money from foundations.

First we'll discuss the different types of affinity groups, then give some specific tips on how to make the most of them for your nonprofit, including ways . . .

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Text Generation Leaders: Using Mobile Phones for Nonprofit Outreach

There are more people with cell phones than people who use Twitter . . . so then, why is there so much more nonprofit talk about Twitter than about reaching constituents and donors through their cell phones?

We talked with a non-neutral Doug Plank of MobileCause to learn more about the benefits of using cell phones to reach people. MobileCause provides services that make it easier for nonprofits to use mobile phones.

Q: Why should nonprofits read this article about cell phones, anyway?

A: People are connecting with you through their mobile phone whether you know it or not: 40% of people will experience your website for the first time through their phone, and 30% of all American adults read their email on their phones.

But we don't have anyone's mobile phone numbers! And they'll be mad if we call them!

First, you are not going to phone them. You are going to communicate with them by text. You are going to poll them, give them information that they've asked for, and thank them by text. And sometimes you will ask them to volunteer and give by text.

Probably the most important thing you can be doing now is building . . .

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Through the Valley of the Shadow of Failure

Cate Steane is the executive director of  Family Emergency Shelter Coalition (FESCO), a nonprofit for families between homelessness and a home. With 60 people -- most of them children -- in its care every night, she went through a harrowing organizational crisis and lived to tell her First Person Nonprofit story about it:

Exactly a year ago, I told my board that we were on a path to end the fiscal year with a loss of $137,115, or 11% of the budget. Cuts in our government contracts for services had been brutal; foundations were retrenching in response to their investment losses, and individual donors were bowled over by the recession. Not good news, but we had some reserves and we would somehow muddle through.

But two months later . . .

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High Pay for Nonprofit Execs? Analysis of 100,000 Salaries

Everybody has an opinion about whether nonprofit executives are paid too little or too much, but almost nobody has any real data outside their own experiences. At last! Economist Linda Lampkin (left) analyzed 100,000 nonprofit CEO salaries and has a definitive (if a little statistics-wonky) answer:

Sometimes it seems that the whole credibility of the charitable sector hinges on the issue of compensation. So what exactly is too much pay? And who is getting it? A colleague and I decided to analyze Form 990 compensation data to bring some real numbers to the discussion (database info at the end of this article).

The IRS says nonprofits must pay "reasonable compensation" but there are few specific guidelines other than that total compensation must be compared with "what ordinarily would be paid for like services by like enterprises under like circumstances." "Like enterprises" means organizations that provide similar types of services and have similarly sized budgets. Using the ERI Economic Research Institute database of compensation data from Form 990s in 2009 (the most recent full set available), we calculated the mean and median salaries for almost 100,000 CEOs of charities, by revenue size:

Analysis of 100,000 nonprofit CEO salaries

[1] Mean is the mathematical average, calculated by adding up the data points and then dividing by the number of data points.[2] Median is the midpoint of the data, so the number of data points having values greater than or equal to the median is the same as the number less than or equal to it.[3] Standard deviation, a measure of the variability of the data, is the average amount by which individual data points in a data set differ from the arithmetic mean of all the data in the set.

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Treasurers of All-Volunteer Organizations: Eight Key Responsibilities

More than half of the nonprofits in the United States are estimated to be all-volunteer organizations. Here is a wonderful, succinct guide for the 600,000 + treasurers of such organizations:

My time as treasurer of a faith-based nonprofit was a labor of love. Starting out as an all-volunteer organization with a $20,000 budget, we developed financial systems, workable budgets, and demonstrated accountability. We served families affected by incarceration and there's no greater personal reward than seeing people realize they have real hope for a better life. In just three years the budget grew to over $330,000.

However, there was stress as well. As a CPA I found myself the recipient of unnerving deference at times. I frequently fell short in communicating financial information to board and staff.  But the outcomes made it all worthwhile.

This experience helps me appreciate one of the many unsung heroes of our time: the treasurer of the all-volunteer organization (AVO).  AVOs are among the most important and most invisible building blocks of our communities. Members of all-volunteer organizations read to children, care for the dying, get clean water legislation passed, serve as . . .

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Matrix Map Part II: The Strategic Imperatives

In this article, Steve Zimmerman continues presentation of the Matrix Map model from the book Nonprofit Sustainability: Making Strategic Decisions for Financial Viability.

In our last Blue Avocado column, we introduced the Matrix Map, which you can use to create a visual representation of your organization’s business model. Comprised of all your organization’s business lines (activities), the Matrix Map illustrates how your activities work together towards both programmatic impact and financial viability. For many board members, the Matrix Map provides sudden clarity on how the organization’s different activities inter-relate. But beyond helping them understand the business model, the Matrix Map can help nonprofit leaders strengthen it. 

You’ll recall that putting together a Matrix Map calls for plotting your organization’s business lines according to their mission impact and financial profitability. Depending on where an activity is placed on the map, a strategic imperative emerges. These strategic imperatives are the actions . . .

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Board Cafe: Meaningful Acts of Appreciation for Boards and Staff - 7 Do's and 2 Don't's

"We [board members] do this huge amount of work, and we're volunteers, but the staff never seems to have any response but criticism for us not doing more!"

"I'm the executive director, and the board just seems to focus on what we haven't accomplished, instead of giving me credit for all the things I have accomplished!"

How many times have we heard (or thought) something similar? Despite admonishments to "give positive feedback," it often seems that efforts between board and staff of appreciation feel trivial at best, and even hypocritical or enraging at worst. What are some ways to express authentic appreciation that are meaningful to the recipient, and send the right message about values? Seven quick ideas:

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The Governance/Support Model for Nonprofit Boards

Board Cafe logoMuch of the confusion about board responsibilities is confusion between what the board does (as a body) and what individual board members should do. Most of the prescriptions for boards confuse the two, saying "The board should _____" without making the distinction. This straightforward model for boards has been embraced by thousands of boards across the United States:

There are two fundamentally different types of nonprofit board responsibility: governance and support. Depending on the responsibility, three types of switches occur:

  • Who's the boss
  • Whether the board is acting as a body or as individual board members
  • Who the board is representing

Let's look at both types of responsibility, and the three types of switches.

The governing role

On one hand, the board, acting as the representative of the public interest, governs the organization. In this role the board has several key responsibilities, including financial oversight, hiring/evaluating the executive director, and making the Big . . .

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Conflict of Interest . . . or Conflict of Loyalty?

"Conflict of loyalty" is a useful concept and term that gives us another dimension to work with than simply conflict of interest:

In our legitimate desire to avoid conflicts of interest in nonprofits, we typically make two oddly opposite mistakes:

  1. We narrow "conflict of interest" to a strict legal definition and focus only on matters that involve personal financial gain, and
  2. At the same time we are too quick to label any kind of relationship at all as a conflict of interest.

But often, the "conflicts of interest" in nonprofits do not involve personal financial gain. Consider the board member whose commitment to rights for people with disabilities leads her to serve on the boards of two such organizations. At Board A she hears about a new grant opportunity that is opening up at a local foundation. Should she tell Board B about it, or is she obligated not to mention it?

Or what about the deputy director of a nonprofit theater who sits on the board of a battered women's shelter: two very different fields. He's just met someone he thinks would be a great board member for either organization. Should he suggest this person to both, or to which one?

In another example,

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