Non Profit

HICKS & ASSOCIATES, CPAs

Nonprofits

Risk Management News letter

Good intentions do not eliminate risk. Nonprofits and volunteers are being sued with increasing frequency. Natural disasters may destroy your building, disable your staff, and disrupt operations for days, weeks, or months. Unauthorized or inaccurate statements may scandalize your organization and result in lost donations. Is your nonprofit healthy enough to withstand these dangers? You can achieve good organizational health through risk management.

Commitment, communication, consistency and compassion are at the heart of risk management. Your organization should 1) commit to respecting the rights and safety of everyone affected by your operation and to establishing a risk management plan, 2) communicate its commitment to staff, clients, and the general public, 3) consistently act in accord with that commitment and 4) show compassion when something does not happen as planned.

Begin by identifying dangers and taking steps to control loss. This includes preventing injury, reducing the severity of an injury should one occur, and ensuring readily available financial reserves for claims that might arise. Nonprofit agencies can control risks by using one or more of the following strategies:

Avoidance: A well-defined mission statement makes it easier for staff to evaluate risks (which risks are integral to the mission and which risks needlessly jeopardize resources) and prioritize the use of scarce resources. Focus enhances efficiency and control over operational risks. If a risk is not integral to your mission or if an activity cannot be performed safely or be adequately insured, avoid the risk.
Modification: Proper precautions and common sense can eliminate or reduce risk. Creative modifications may simultaneously improve the quality of service and reduce risk -- such as restricting the time and place where activities can occur, adopting legally sufficient personnel policies (for both paid and volunteer staff) and effective operational policies and procedures, and establishing financial controls and an audit process.
Transfer: Someone else may accept a risk on the nonprofit’s behalf -- such as shifting the risk to someone else through "liability shields" (such as waivers and releases, contractual indemnification provisions, or immunity statutes) or buying an insurance policy.
Retention: Risk not otherwise addressed is retained. Retention by default is a common, though rarely advisable, practice. As a deliberate risk management choice, retention makes sense for small losses that will not unduly disrupt operations or affect the nonprofit’s financial base. It is also appropriate when combined with other tools. For example, your nonprofit may want to implement a loss prevention program (modification) and buy an insurance policy (transfer) with a large deductible (retention).

Your organization must also be committed to implementing and monitoring the plan. Clearly communicate the chosen risk management strategies to staff and clients so they can cooperate and comply. Be consistent in your actions to prevent speculation that someone was singled out for unlawful reasons. When something does not happen as planned, show concern and compassion. Angry people who feel that "nobody cares" are more likely to sue.

Risk management starts with acknowledging and controlling risk. It’s about finding solutions, not just looking for trouble. At its heart, risk management protects people and property. It prevents financial losses and lawsuits that distract you from your mission. By reducing those threats, it also encourages volunteers to give generously of their time and resources.

Best Regards: Joe H. Hicks Jr. CPA

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LINKS

Their are many sites on the Internet that offer a lot of information for nonprofits. The CPA firm of Raffa & Associates of Washington D.C. has an award winning site that specializes in information for nonprofits. This is the site that we go to many times to get information for nonprofits. That site is located at http://www.raffa.com/.

Information for non profits I KNOW

In addition our small business site has a lot of web site locations that have information useful for nonprofits. It is located at Business.

The Nonprofit Resource Center of Texas: http://www.fic.org/

From time to time we will add additional sites to this page.

Best Regards: Joe H. Hicks Jr. CPA