Trying to Do Well While Doing Good
June 27, 2017
In this EisnerAmper podcast, Candice Meth, National Leader for EisnerAmper’s Not-for-Profit Services Practice, gives Dave Plaskow some insight on the concerns of Not-for-Profit board members. They also discuss EisnerAmper’s annual survey, Concerns About Risks Confronting Boards, which covers addressing risk and crisis planning, succession planning, the disconnect between not-for-profit boards and management, sustainability, and cybersecurity as it pertains to Not-for-Profits.
DP: First, Candice, tell us a little about the concerns report. What is it, what does it survey?
CM: Sure, so each year, EisnerAmper solicits feedback from board members of corporate entities, not-for-profits, etcetera, and we asked them to discuss what’s really at the forefront of their minds in terms of concerns. We partner with the national association of corporate directors to distribute the survey, and we’ve gotten some really interesting results this year.
DP: Good, good. Now let’s kick off with some succession planning. That’s a big issue for all companies. But this year’s survey contains some interesting data pertaining to not-for-profit boards. Tell us about that.
CM: Right, so the numbers indicate that nonprofit board members see succession planning as the most important overall risk. Twenty six percent responded to that area. They also see it as the most challenging risk to implement, with 19% saying it as the most challenging. Furthermore, not-for-profit boards have by far the least confidence that organizational leadership can manage senior management succession planning, so here they really feel like they actually need to be more involved, because they don’t trust the executive leadership to oversee the succession planning.
DP: Interesting. Why do you think that’s the case?
CM: I think it speaks to the fact that not-for-profits tend to direct their often very limited resources towards mission, and there’s less of an emphasis on investing in things like recruiting, succession planning, and cybersecurity. However, there really should be a long-term strategy in place, and it’s becoming extremely difficult to compete for donations in today’s world without these things.
DP: So, we’ll often see a disconnect between the board’s agenda and management implementing that agenda. What are some areas where we see the biggest disconnect?
CM: I think the top area is sustainability, and that’s really the buzz phrase in our industry right now, and that goes hand in hand with the long term financial management. Succession planning is certainly a close second and that is followed by a prioritization of strategy. Unfortunately, we have all seen the headlines of charities who provide much needed services, but are shutting down because they have a lack of funding, so sustainability is really important to focus on.
DP: So, as a financial expert in the nonprofit area, what would you advise clients here?
CM: Well, specifically for succession planning, we always talk to our clients about knowledge transfer and how important that is, that some of the senior members of staff pass along their knowledge that might not be documented to the younger members. We suggest clients create things such as accounting manuals to help the leadership, and also cross-training of staff is very helpful. Another tactic is to examine and minimize return on investment with respect to fundraising. So, here, when clients talk to us about their sustainability, we explain to them that they should be trying to get creative in terms of how they’re looking for those future funds. Are they doing the most cost effective methods for fundraising, are they really targeting that younger donor base that is essentially going to start replacing the baby boomers? So, in that area, we try to help them think outside the box and also be cost-effective in the methods they’re employing.
DP: Now, not-for-profit boards also see a particular challenge when it comes to internal functionality, correct?
CM: Yes. I think that goes, again, to a lack of sufficient resources, specifically for human capital. It’s a juggling act, of course, between spending money on mission oriented programs and making an impact on your mission, but also allocating enough resources within the budget for additional staffing and job development.
DP: Another topic that I’d like to touch on that’s huge right now is cybersecurity. We’ve seen a lot of that in corporate America – with Target. We’ve seen a lot lately at the governmental level with the WannaCry attack. Tell us about cybersecurity and what boards are thinking, what nonprofit boards are thinking about.
CM: And, Dave, it’s sad to say, but unfortunately, it seems like nonprofits are the new favorite target for these hackers with respect to cybercrime, and I think that’s probably because of their donor database that has a lot of personal identification information. Certainly, many nonprofits cut high volume of checks, and it really also ties back to, unfortunately, the lack of resources that nonprofits may be able to employ to obtain the most sophisticated methods to combat cyber-attacks.
DP: So, along those lines, Candice, what about crisis preparedness?
CM: So, here is a really interesting response from the survey, where one of the most startling statistics is that only 4% of board members felt that they were well prepared to manage the organization’s next crisis.
DP: Wow, so it sounds like they have a little work to do there. Switching gears a little bit, there were some interesting findings that pertained to diversity. Tell us about those.
CM: So, when asked what types of dynamics are significant risk factors to a board’s effectiveness, the majority, 38% of non-for-profit board members said lack of diversity tied with ineffective decision-making, and then finally followed by unhealthy power dynamics – thirty five percent of people responded to that – are really what is driving this. And, I think we have to take a step back and really understand what they mean by diversity. So, for nonprofits, I want to stress that we’re not just talking about gender diversity or race, but also a diversity in background. Nonprofits thrive from having board members who are both passionate about the mission, but also bring expertise to the table, such as finance or legal. However, attracting a diverse board membership is no easy task.
DP: So, based on all of what we’ve learned in these concerns reports, all of the different areas, the important areas, whether it’s succession planning, or cybersecurity, or diversity, how has EisnerAmper had to adapt with respect to how it services not-for-profit clients?
CM: So, we’re really doing this in two ways. Prior to the beginning of our audit work with our clients, we’re having conversations with the management and on the board level, and we’re asking them questions about cybersecurity, about the risk assessment that the board’s done, and then our firm has a wonderful expert cybersecurity team, and we’ve seen this year many of our clients prior to the start of the audit asking for an assessment as part of their due diligence. Additionally, we discuss succession planning and documenting of policies and procedures frequently with our boards. Finally, we’ve been doing a lot of thought leadership with these topics, we’ve been writing blogs, we’ve been presenting webinars, we’ve been doing public speaking engagements throughout the sector, and I really want to encourage our listeners today to log onto the EisnerAmper not-for-profit web page and download any materials that might interest you, and please sign up for our free webinars that are open to the general public, and actually are eligible for one hour of CPE, should you need it.
DP: Great, well, Candice, thank you for all this great insight.
CM: Thank you so much, Dave.
DP: And, thank you for listening to the EisnerAmper’s risks confronting boards podcast. Visit eisneramper.com to read the complete results from our concerns about risks confronting boards survey, as well as listen to our podcasts on a host of other topics.