Devil's Advocate

This article was written by Liz Vibber, my associate and strategic consultant with Bucks County Center for Nonprofit Management. It first appeared in Blue Avacado about a year ago. It is a great technique to help your Board make better decisions.

Wouldn’t it be wonderful if all Boards had 20/20 hindsight to assist them in making decisions? If they could clearly see the obstacles a project will encounter in time to make the necessary adjustments?

Absent a few sprinkles of fairy dust, using the Devil’s Advocate technique might assist boards in identifying such obstacles. A Devil’s Advocate is someone who takes an opposing view to test an idea or project the board is considering. Rather than simply participating in a board discussion, the DA’s job is to purposely ask questions and argue against the idea. By responding to these questions, the board is forced into healthy debate as they consider arguments they might never have thought of had it not been someone’s (the Devil’s Advocate’s) specific task to try and challenge the board’s thinking.

Your board can use this technique during every meeting or only when important issues are up for discussion. After explaining the technique, randomly select a board member and place an index card marked DA or Devil’s Advocate in front of them where all can see it. Throughout the meeting, this person should be asking questions to test the soundness of the decisions the organization is considering. A couple of caveats-holding the DA card does not give this board member the ability to block or hold decisions from a vote, nor should the board hold it against the designated DA for asking tough questions. You can’t be annoyed with someone whose ‘job’ it is to question the wisdom of an idea—can you?


Example-
For example, a small suburban nonprofit organization was considering expanding their adult program services to include children. This 25 year old agency had successfully been serving adults in accordance with its mission, but lately, at the insistence of one very vocal board member, was wondering if it could better serve the community by expanding its offerings to children. By using the DA card over the course of several meeting discussions, the agency realized that the additional licensure, insurance, and educational knowledge that would be necessary to be obtained in order to offer youth services outweighed the tangible benefit. Using this technique they were able to ask and answer a series of tough questions which ultimately clarified that their goal was ‘increased’ service delivery, not necessarily ‘expanded’ service delivery. The agency was then able to accomplish this by instituting transportation services to a neighboring bus depot. This solution increased their client base by 7% in the first year and their profits by 4% (after factoring in the additional costs). This provided the agency with growth that was acceptable to all, with the added benefit of having a wider geographic service area without the costs of ramping up new programs.

Excited by using the DA technique, board members went out of their way to prepare thoughtful and intelligent arguments resulting in healthy debate. After the first meeting using this technique, the board began to ‘pass’ the DA card around the table giving more individuals the opportunity to offer challenges to the proposal on the table—all under the cloak of security the DA card offered.

The Realities of the New Form 990

This past Wednesday we had our roundtable on the new Form 990. Most of our attendees were looking at filing the Form 990 for the first time this year. Some of the items we talked about:
• Making sure that the mission description on page 1 and the program descriptions on page 2 fit within the space provided so that the reader of the Form 990 can readily access that information and does not have to turn back to the Schedule O.
• Several of the participants noted that they received contributions from donors who found them on Guidestar, emphasizing the importance of putting your best foot forward with your Form 990
• Reviewing the necessary policies-document destruction, whistleblower, conflict of interest, Form 990 review procedures, compensation setting, gift policy
• Noting that key employees are those with significant management responsibility who also receive more than $150,000
• Compensation reporting also health benefits, the deferral of income-including pension and other retirement pay
• Discussed functional expenses and the importance of reviewing your allocations
• The effect of contributions from special events on the special event income

A few of the nonprofits who do not have to file the new 990 yet, said that they would probably file it instead of the Form 990-EZ because they wanted the extended information available to their stakeholders. Those who had already filed the new form 990 agreed. They noted that even though it was a lot of work to put together, they wanted the information presented.

Board Member Review of Form 990

In preparation for our Roundtable Discussion this Wednesday about the IRS Form 990 I have been thinking about some common issues from this past year related to the form.

One of the questions on the IRS Form 990 is did the Board review the 990 before it was issued. Your Board may be wondering what they should do in that review process. While some of the areas may vary depending on your organization, the following list is a good starting point.

1. Review the statement of program service accomplishments. This is where your strongest story is told. Do you include service statistics and outcome measures?
2. Review the functional expense schedule looking at the % of program expenses compared to total
3. Scan questions on pp. 3, 4, and 5-do you have all the necessary policies? Review the discussion of the compensation policy in Schedule O
4. Review officers, hours per week, and related compensation
5. Read Schedule O. Is everything explained the way you want it?
6. Schedule G-for IRS purposes, these contributions related to a special event, are in the contribution section and not included with the special event revenue—so your event shows a “loss” on Schedule G
7. Review independent contractors as applicable
8. Look at Schedule L and Schedule R if these are applicable. The IRS is concerned about situations where someone with influence over the organization would be paid amounts that exceed the value of the services rendered.

Pursue Individual Donors

We’ve been looking at individual donations and Haiti. What about what we see in our local area? We work with over 100 nonprofit agencies and prepare over 700 tax returns for individuals. While it is a small population, observations can still be made:

• You don’t have to write a grant application to ask individual donors for money
• Individual donations are not normally restricted for specific purposes so you can use individual donations (in most cases) for general operating monies
• Individuals will typically give to the same charities year after year and most tend to be life long donors
• A nonprofit with about a $1 million budget with a good planned giving program in place for 10 or more years receives on average $50,000 annually. This has been our experience. However, I do not know the national statistics on this.
• As a percentage of their income, lower income individuals give more than higher income individuals. While we note this at our CPA firm, it actually mirrors the same documented national statistics
• Charities that are less dependent on government money and foundation money are more stable, survive the rough times better, and have more people resources to devote to their mission because they don’t have to file mountains of government paperwork or find new foundations to support them every few years.
• A surprising number of very nice, caring people don’t give--at all.
• When individuals talk about charities that they have had some relationship with, they say “If they asked me to give money, I would”
  

Haiti and Individual Giving – and how it relates to you

I still continue to be amazed and moved by the generosity of so many in reaching out to Haiti and to reflect on the value of individual donors. We as nonprofits work so hard applying for grants when we should be putting that effort towards reaching individuals. In my last post I listed some important truths about giving illustrated by the outpouring for Haiti. What do these mean to your nonprofit?

• Communicate the need
• Communicate why you are effective at meeting that need—build your donor’s trust
• Pursue individual donors
• Make it easy. Make sure donors can give securely and easily through your website
• Look into a text campaign—a good fit for certain events or causes
• Invite people to participate at various levels of giving
• Repeat---Pursue individual donors. Put more energy into this than pursuing corporate donors, foundations, and government grantors.
  

A client recently had their first annual appeal. They raised $12,000 increasing their total contributions by 5%. Not a bad start for their first year. Most of their contributions had historically come from foundations and corporate funders. Tomorrow the nonprofit I serve with is going to look into getting the “donate now” button on our website and we are working on a grant application. I’ll keep you posted on the outcome of each.

Haiti and the Message about Individual Donors

As of January 21, over $305 million had been raised just eight days after the earthquake struck Haiti. This CNNMoney article goes on to discuss where the money came from and how it was raised.

The outpouring of donations for Haiti, and before Haiti, for the victims of Hurricane Katrina and the tsunami illustrate a number of important truths about giving.

• People will give and give generously to a demonstrated need-they will give to hurting people in the US and they will give to people in need around the world.
• People give to organizations they trust
• The potential for individual giving is greatly untapped-for such a large amount to come in, in such a short period of time shows that people have money to give. Some people may have given sacrificially (another lesson for another time) but most probably will not miss the donated funds.
• People give when they process is easy. It is estimated that over half of the donations have been online contributions. The American Red Cross reports over 60% has been received online and 15-20% through its text campaign. That means that only 20-25% of the funds have come through the mail.
• A little goes a long way-by January 16, 700,000 people responded to the American Red Cross text campaign with donations of $10 each
• Although the giving includes corporate gifts the American Red Cross noted that about 15% of the donations are from corporate gifts—meaning 85% are from individuals. Individuals have historically represented the largest percentage of givers.
  

Yes, the circumstances noted are catastrophic, and have received a tremendous amount of media coverage, and the need is immediate. But then again, you aren’t trying to raise $305 million in eight days.

More Than Great Cookies (in honor of Girl Scout Cookie Month)

What are we best in the world at? This was the key question that the Girl Scouts of the USA asked as they began their transformation several years ago. www.girlscouts.org. It’s a great question that Organizations should ask periodically to refocus on their core mission.

Over time, nonprofits can find that they have drifted from their mission. Whether it’s following the greatest need or chasing the greatest dollars, an Organization can realize that they aren’t exactly doing what they initially set out to do. This is not necessarily a negative. If the needs of the community have changed and the Organization has changed to meet those needs, the nonprofit is relevant to its community. However if the mission changed in the process of pursuing funding, the nonprofit may be off track. Depending on the cause of the mission drift the Organization may need to restate its mission to better communicate what they do or get back on track.

The luncheon speakers at the BoardSource Leadership Forum were Kathy Cloninger, the CEO of Girl Scouts of the USA and Connie Lindsey, the National President of the Girl Scouts of the USA. In their own words they shared the process of “taking a deep look at the brutal truths facing the movement”. It was a challenging process but they were committed to complete transparency and steadfast in making the changes happen. Their goals were twofold: 1-to have a relevant purpose; and 2-to create a simple, faster business system. The process is described on their site.

The answer to the question? Girl Scouts creates leaders. 75% of women in leadership positions were once Girl Scouts. In the end the Girl Scouts emerged with some significant structural changes and a new definition of Girl Scouting—“Girl Scouting builds girls of courage, confidence, and character, who make the world a better place.”

What are you best in the world at?