Nonprofits – Nonprofit Auditor

Tip of the week— it’s the integrity

I recently watched an old video about Warren Buffett, wherein he described how he picks winners – that is people (company leaders) he will trust his investments with. It said he uses three criteria. He started with the second characteristic, which he called energy, then moved to a third which was intelligence. It was not just regular intelligence. It was what was termed adaptive intelligence. An example he gave was a person running towards a destination and on seeing a post in the way, taking measures to avoid the post or minimize its impact, so as to continue running towards the destination – rather simple but key. Now it was the first and most important criterion he cited, integrity that most impressed me. By integrity the Buffet meant knowing when to say no. Basically integrity meant knowing limits and not overcommitting. As an example he discussed how a child understands love. A child understands love to mean time, time spent. Integrity is therefore reflected in commitments made and time spend to correspond with the commitments. Saying no to things we claim are not as important and spending the resources on what we say is important.

As an auditor, I look for integrity in the budget figures and other similar governance documents. When I see no resources committed to a goal e.g. no full time staff or worse staff committed without awarding the needed resourcing or awarding unsteady (reactionary) resource levels, I immediately know and understand the business goal is not critical or prioritized.

Many leaders today regrettably pay lip service to goals around culture, compliance and internal controls, but they lack the resources to support it. Where is the culture budget, the compliance budget – how does our annual budget reflect commitment to stewardship. Particularly, in our nonprofit sectors, where the mission can become an easy cop out to making important business investments towards internal controls and compliance goals. Where stewardship is often about cutting cost rather than investing in robust cultures and infrastructure to support stewardship. Often it’s just that missing leadership quality called integrity and we should look for it our leaders and all our staff.

Nonprofits should consider internet isolation cloud solutions in their IT security designs

Sharing below a nice article on internet isolation cloud solutions as a paradigm for implementing security.

A boundary-less IT security defense architecture (design) is definitely one that nonprofits should consider. And the reason for this is business necessity.

Nonprofit business architectures (designs) continue to require operational and even strategic collaboration and partnerships with a variety of global and local partners. These partners are all over the world and in some cases include national governments. The data nonprofits handle includes that of vulnerable and insecure populations. To operate effectively with such populations, nonprofits must maintain relationships of trust with these clients. The trust must in turn be supported by robust data stewardship and security practices, including regulatory compliance regimes. This is because for nonprofit enterprises to be effective today and looking ahead into the future, their sensitive data will need to be shared more often. They will be more exposed to partners having different IT capabilities and a amyriad IT security postures, including no security capacity.

Nonprofit IT security designs must follow the direction of their business designs or fail to be effective in business environments and relationships they must support.

Let me know what you think of the article.

securityboulevard.com/2019/09/internet-isolation-cloud-introducing-a-new-paradigm/

Managing project start-up delays caused by donors

Some nonprofits may indeed be miracle workers, if we consider some of the results and outcomes they achieve in the world’s most difficult implementation environments. They are not magicians though, they need resources to do work. As a nonprofit auditor, one cause for underachievement of project results that I hear implementers cite is donor caused delays at startup. How frequent is the issue? I suspect it happens often enough and has been a problem for long. It is particularly important with the larger public donors. These donors fund the big multi-million dollar projects that nonprofits and their clients (beneficiaries) count on for impact at scale and for sustainable change. It is true that there are always two sides of a story but because of enormous power of the big donors I think we should expect more. As the Peter Parker principle goes: “with great power comes great responsibility”. Big donors must do a better job with timely authorization and funding of project startups!

How much do delays in launching projects cost? I suspect a lot. Impacts that come to mind include delayed and poorly timed responses to client needs (some life saving), financial and operational disruptions for resource constrained nonprofits and higher un-reimbursable cost burdens on implementers?

What can nonprofits do about this? Most nonprofit implementers seem resigned to treating this problem as “an operating constraint”, a hurdle they must deal with to do their jobs. They may well be right in their approach. However I am not convinced their approach is fully informed, in terms of the costs they wind up bearing and on their ability to exact better performance from donors. Often the donors still expect the same deliverables under the funding terms. Nonprofits should not consider themselves helpless in the matter. They can and should fight back!

Let’s see, do nonprofits analyze the effects of delayed funding within their businesses to understand which opportunities and donors to go for; what financial dispositions to take and the feedback and awareness raising to provide to donors? Do they know the types of projects where delays are more likely to be problematic, in what locations, with which client populations? Do they know what implementation models are more susceptible to the impacts of such delays, direct implementation or through other actors? Do they know what fund (award) administration strategies work best to mitigate underachievement of results in such instances and do they measure whether their staff know and adopt them? Do they know when to engage their donors on cost or no costs extensions and on other appropriate tactical responses? Do they have a general sense of how the results of projects that are authorized on time compare to those that are delayed. Do they know what impact project extensions have on expected the “value for money”? How about impacts on nonprofit volunteers and on clients?

What can donors do about the delays? Do the donors even understand the impact on their nonprofits partners and more important the missed opportunities to serve clients? Are there any accountability measures donors impose on themselves with regard to such delays and the problems they cause? Are donor agency cultures reflexive of their mandate to get help out to clients expediently and to be in service?

I think more awareness and transparency is the answer to all these questions. Let’s start there. Where I sit as an auditor, I never get a good sense that these questions have are answered. Yet good donor account management, which is a key component of fund management, calls for just this. Nonprofits leaders should require their staff to get a solid grip on the costs and impacts of delays, so they can make better decisions about funding opportunities and take steps to mitigate negative impacts. The leaders should engage donors on greater transparency. They should share the information with donors and amongst themselves. They should study and share lessons on coping with delayed funding. They should consider rating the donors with regards to expedient authorization of funding and not shy from addressing these donor performance issues. Many big public donors have multiple departments and offices, highlighting performance differences in like circumstances may also help. Nonprofits can also use carrots, they should recognize their most consistent donors with awards or simple thank you feedbacks.

Above all, how nonprofits choose to manage their donor’s performance with respect to timely authorization of funding should be deliberate and informed. What are you thoughts? If you are an auditor, have you also come across the donor delayed funding “operating constraints”.