Treasury Management in the Nonprofit World : Best Practices from Christian Children’s Fund John Zietlow, D.B.A., CCM Prof. of Finance, Lee University William J. Hopkins, CCM Treasurer, Christian Children’s Fund, Inc. Copyright 2002 John Zietlow. Portions Copyright William Hopkins, 2002.

Today’s Agenda n Let’s decide on the primary financial objective(s) n Let’s think about how cash flow patterns differ in the nonprofit arena n Let’s determine how you can make a difference to a nonprofit n Let’s hear from some financial institutions about areas for improvement

Your Turn Now: What is the Primary Financial Objective of a Charity?

Now, what do nonprofit managers say is their financial objective? n Many say “financial break-even” – revenues should cover costs n Some say maximizing revenue, reducing risk, or increasing funds raised

Christian Children’s Fund, Inc. n Cost Effectiveness n Financial Accountability n Maximization and Protection of Cash Flows n Maintaining Liquidity that ensures the future of the organization.

And academics say… n Richard Wacht: “purely financial decisions” to be driven by “cost minimization, subject to the absolute constraint of maintaining organizational liquidity and solvency over time” n My view: strive to meet an “approximate liquidity target” over time (cash flow and cash position management are keys)

Main Defining Characteristics: Nonprofit Treasury Management n Liquidity management (just documented) n Organizational size and structure n Main source of revenue n Importance of cash and cash flow management

Typical Finance Organization: Treasurer’s Office But what about small organizations? ($800,000 median revenue)

Typical Finance Organization: Controller’s Office

DIRECTOR, FOUNDATION FINANCIAL MANAGEMENT Position: Acting as the chief accounting officer for the University of Maryland College Park Foundation, the Director is responsible for all accounting functions of a rapidly growing organization. Supervising a staff of two, you will determine the appropriate delegation of duties, insure that all accounts are reconciled in a timely manner, approve journal entries, operate a computerized fund accounting system and produce financial statements for fund holders and external constituents. You will coordinate the annual audit process and prepare the F.A.S.B. conforming financials. Working with other staff members, you will insure the proper recording of receipts and disbursements and help to determine internal control policies.

What are the main sources of revenue for charities? Why is this important?

CONDUITS TRANSFORMERS

“THE BIG FIVE” Areas for Treasury Improvement n Cash forecasting n Positive pay and other fraud prevention n Sweep accounts, Segregated ST Investments Portfolios n More liquidity! n Harness the Internet

How Can I Assist a Nonprofit? n Go to work for one! n Serve on a board n Donate n Sponsor an intern at a local nonprofit n (Lenders) Understand their world

In Conclusion…