Mark Koscinski CPA D.Litt. D.Min.

I have worked at several charitable organizations.  Perhaps the one I have genuinely enjoyed the most is being faculty advisor to Stitches, the student craft and crochet club at Moravian College.   One of my students asked if I would be the advisor at the beginning of the 2018/2019 academic year.  I knew extraordinarily little about crocheting, so I was surprised when I was asked.  

Not knowing what to expect, I showed up at the first meeting.  I was surprised with what I found.  The club members meet once a week to crochet articles for a hobby.   The students crocheted many hats and scarves for residents of a local women’s shelter.  This is a wonderful thing in itself, but there is another significant benefit of being a member of Stitches.

  After a little time to chat at the beginning of the meeting, the students get down to work.  A restful quiet set in, rarely punctuated with conversation. Watching the students create beautiful garments of vibrant color, I was reminded how much the world misses and needs such periods of quiet. We are constantly bombarded with noise and outside stimuli.  Having time like this is a healthy break from the busy routine of our lives.

The Moravian Chapter of Omicron Delta Kappa, the national leadership honor society nominated Stitches for the Quiet Commitment Award this year.  This was particularly apropos for Stitches.  Congratulations to the officers and members of Stitches!  I am proud to work with you, and I look forward to next year. 

I want to give a special thanks to Susan Hornak, who donated crocheted blankets and yarn throughout the year to the club.   A special thanks goes to Shelby Lawson of Lawson Accessories, who provided an internship to one of the students and took an interest in the club.  You both made a difference.

A disabled person recently sued Playboy because its website did not conform to ADA requirements. Many people chuckled when they heard this.  I too used to chuckle when I heard things like this.  Years ago, I was an executive officer at a large bank.  I chided the head of the branch network because the drive-up ATM machines had braille plaques installed.  Making light of the situation, I said “Don, why on earth should we have braille at ATM windows?  Blind people don’t drive.”   Don looked at me sorrowfully and said, “Mark, suppose a blind person is sitting in the backseat on the driver’s side?”  My condescending and insensitive attempt at humor comment left my mouth like a major league baseball pitcher’s 95 mile per hour fastball and came back to me like a 120 mile per hour line drive off the bat of a slugger.  Hopefully, my understanding of and my sensitivity to these issues has significantly improved over the years.

The internet is becoming increasingly critical to daily life.  Think how much we use it. We pay our bills with it.  Our children do their homework with it.  Those are only two small examples of how the internet has changed our lives.  There are elements of society that have been denied this life changing tool.  For example, courts have ruled blanket internet bans as a parole condition is a violation of constitutional rights.   The New Jersey State Supreme Court ruled blanket bans interfere with a necessary tool for living. Even as early as 2010, the Pew Research Center reported 82% of all Americans used the internet to access governmental services and information in one year. Justice Kagan of the U.S. Supreme Court noted the use of Twitter by the current president of the United States.  Anyone without the internet arguably is being denied participation in the political process because his or her information is being limited.

The internet has been a game changer for the those with disabilities.  You can shop by the internet now.  You can video conference with your friends and relatives.   You can even earn a college degree online if you have the time and inclination. The feeling of being completely isolated from the world if you have a mobility disability can be somewhat alleviated by internet usage.

The Center for Disease Control reports there are 61 million disabled people in the United States.  This equates to one in every four adults.  Of these 13.7% of all adults have difficulty walking or climbing stairs.  6.8% of all adults have problems doing chores on their own. 5.9% have difficulty hearing.  In short, businesses that design their websites not considering the disabled are not taking advantage of a vast untapped market.  Businesses should look critically at their websites to make access for the disabled a major priority.  Who is not looking to grow their sales and businesses? Ignoring this segment of the marketplace seems foolhardy.   Capitalism and “doing the right thing” are clearly aligned on this issue.

 

Sources (Accessed May 21, 2019):

https://www.cdc.gov/ncbddd/disabilityandhealth/infographic-disability-impacts-all.html

https://www.freep.com/story/news/local/michigan/2019/03/19/dominos-playboy-disability-ada-blind/2903564002/

Americans with Disabilities Act (ADA) and Web Accessibility Requirements for Video

https://www.nj.com/politics/2017/03/nj_supreme_court_tosses_total_internet_ban_for_sex.html

https://www.reuters.com/article/us-usa-court-socialmedia-idUSKBN19A1ZB

Government Online

Cybersecurity has become a critical issue for all organizations. A few examples can underscore the just how serious this threat has become. The military has set up the Cyber Command, a unified combatant command to defend the United States against cyberattacks from foreign powers.  The Securities and Exchange Commission has also taken great interest in this area.  Public companies are required to report any material breaches of their critical information systems, analyzing the legal, financial and reputational consequences of such actions.

 

Somehow, the message about this threat has not filtered down to some governmental entities and not-for-profit (NFP) organizations.  An amazing example of poor internal controls is unfolding in Baltimore, Maryland.  As this blog is being written, the city’s information systems have been held hostage for the last nine days.  There doesn’t seem to be any end in sight to the problem either. The city’s email and critical billing and payment systems are at a standstill. Baltimore has been reduced to receiving checks as payment. One can only imagine the accounting nightmare this will cause after everything is sorted out.

 

What is even more amazing is the city suffered a previous cyberattack.  Chillingly, that attack disabled the 911 system over a weekend period, putting people’s lives in danger.  The city had to revert back to manual processing of 911 calls. One would have thought this would have been a clear warning about the dangers of the situation.

 

Many NFPs are also in the same situation. They don’t understand or don’t have the resources to take preventive action. Even worse, some stick their heads in the sand and say they are too small to warrant attention from hackers. Nothing could be further from the truth. The information systems of one of my clients, a small church, was hacked with ransomware.  Church management wisely chose not to pay the ransom and proceeded to restore their information systems.  Sadly, not only was there inadequate protection against hacking, but there was no backup. They were forced to redo all transactions for the year.  Fortunately, the volume of transactions was not immense, and the church was able to recreate its records.  Yet, it took a lot of effort that could have been deployed elsewhere.  After all resources at most NFPs are in short supply.

 

Cyberattacks on governmental agencies and NFPs are on the rise.  Is another catastrophe such as what happened in Baltimore required for everyone to take notice of this threat?

 

 

I would like to congratulation MOCEANS CIL (MOCEANS) on holding its Annual Meeting on May 16 and the election of new directors. The organization has made incredible strides in the last year and is on its way to another successful year under its current leadership.

Congratulations is also due to the organization for another gala event held in April 2019. For more information about the gala, and the possibility of donating or volunteering for a worthy cause, please see the MOCEANs website at http://www.moceanscil.org. This is the second year the gala has been held. It is a new venture to raise community awareness of MOCEANS and to raise unencumbered funds for the organization.

MOCEANS, like many other not-for-profit organizations receives grant money from the federal and state governments. In the “fee for service” environment, government agencies limit the amount an organization can charge for its services. Citizens will appreciate the parsimonious attitudes these agencies espouse, but it does make the delivery of services by NFPs that much more difficult. It always seems resources and funds are in short supply at an NFP. This is why fundraising, in whatever form, is critical to the success of an NFP. Hopefully, events like the gala will continue to grow. Contributions to MOCEANS tax deductible. Please consider donating to a worthy cause. Information about donations is available at http://www.moceanscil.org.

Many of you are Star Trek fans and recognize the title of this blog entry was the name of the series finale of the Star Trek: TNG  television show.  By the time that episode was aired the  show had run for seven years  and 178 episodes.  The character development and the plot lines had begun to run a little thin.   It was the right time to end the show, and that was exactly what happened.  The show ended on a high note and its fans remember Star Trek: TNG fondly.

There is a lesson to be learned here for all business people.  Sometimes it is just best to end an activity.   We all know this can be a tough thing to do.  Think of a veteran baseball player  continuing  to hang on for years after he should have retired.  It can be painful to watch.  Sometimes business people will “double down”  on a bad decision.  That also can be painful to watch  as time and energy are poured into a project with no seeming return.

Why is it so difficult to end an activity?  There can be many reasons. Perhaps it was something we have been good at. Sometimes  we simply don’t want to admit we made a mistake. In both of the above cases, so much ego and self-identification can be invested in an  activity it is difficult to pull the plug even when it is evident to all but the most partial observer.

So after five years on the board of directors of MOCEANS Inc.  it is time to take my own advice and call it quits. Four of those years were spent as chairman of the board of directors.  The last year was spent transitioning to a new board and board officers.  Just as in an aging television series, ideas about organizations can run their course and fresh leadership is needed.  That is the case here.  Management and the new board deserves an opportunity to apply their creativity and come up with a new agenda to propel our little NFP to new heights.   As the Lone Ranger was wont to say: “My work is done here.” It is not done everywhere else though.  It is time to find other venues  where I can continue to contribute and give back to the community.

I have enjoyed my time at MOCEANS.  I learned about a disadvantaged segment of our population, met a lot of people, and contributed  a lot of time.  I thank everyone in the organization from my fellow board members right down to the interns I have worked with.  They are truly a special group of people. Hopefully, I have helped my fellow man.  Isn’t this what we are put on this earth for?

Hello Everyone!

As you know, I have been active in the management of a Center for Independent Living.  The president of Scooters ‘N Chairs contacted me and asked if I would include the following scholarship opportunity for students with disabilities.  The scholarship is a $1,000 award for a deserving student who must write an essay about their strength and perseverance while pursuing their education.   I thank  Scooters ‘N Chairs Company  and commend them for their assistance to our community.

https://www.scootersnchairs.com/pages/2019-student-scholarship?msID=21b3a4f2-560b-4f42-80a8-7d2b147c8889

This is our Second Fundraising Gala at MOCEANS CIL Our event last year was a spectacular success. Please consider joining us on this special day. Help our organization provide needed help to a section of society that is so often neglected.

NFP Board Chairpersons  are often asked what information the Board would like to see on a monthly basis.  The resources in a small NFP are often limited, so the answer to this question must be practical but yet satisfy the fiduciary obligations of the board.  A board needs to be informed, but should also resist the inclination to ask for “everything”.   Obversely,  even the most dedicated board member also has limited time to devote to being a volunteer board member.  In short, the monthly reporting package must deliver necessary information efficiently and on a timely basis.

What is an example of  such a board package? An experienced financial manager can often realistically produce the following information for the board every month:

1. A complete set of financial statements, including balance sheet, income statement, and cash flow statement.  Available software often makes this extremely easy to do.   One problem often encountered is the board package does not get published in a timely fashion. Often  the  financial officer will not  like to make accrual and  reversing entries during the monthly close since this may require extra work.  It is important for the board Treasurer and Chairperson  to impress on the accountant the speed of producing the information will often outweigh the minor inaccuracy the use of accruals will produce.   Remember, financial information is meant to help run the company, ideally playing both scorekeeping  and predictive roles.  Waiting until all of the information is available and certain before sending out the financial statements reduces their  predictive value  and reaction time of management for correcting  problems.   The financial statements should include year to date  and  monthly financial information compared to prior year results as well as to the budget.
2. A short commentary on the financial information.  This is the equivalent of the “MDA” in a commercial company.  In a small NFP this can be done in one page and supplemented via verbal discussion at board meetings.
3. Supplemental Schedules.  Certain information is critical for directors. Cash flow information is one example.   While software such as Quickbooks can produce historical cash flow statements,  it is often a burden to produce a cash forecast on a continuous basis.   As a substitute, directors can receive:
   1. An aging of accounts receivable.  This information is extremely critical when  the main revenue sources are state and local governments.  Payment will often lag from these entities, so cash forecasting is critical.  GAAP net income is important, but at the end of the day the staff is paid with cash receipts, and not net income
   2. An  analysis of accrued expenses and accounts payable.   The board needs to know if liabilities are piling up or if they are being paid on time.
   3. A report on any major financial commitments such as employee bonus payments or capital asset acquisitions.
4. The Executive Directors’ Report.  This too can be a relatively short report.   More complete information may be presented at the next board or committee meeting. The ED should report  significant events that have occurred or are expected to occur.  The report should include all of the good news and all of the bad news of the month, as difficult as the latter is to report.  It should contain a report on significant initiatives management has undertaken, such as grant applications, potential new sources of revenue and  as well as potential deviations from the approved budget.   It is important to understand reporting these events to the board does NOT mean the board has approved either the reported initiatives or budget deviations.  For instance, a board may want additional information before the ED can finalize and file a grant application.  Grants will often come with obligations and  the board will want to  make sure any grant will not result in a loss to the organization.
5. Minutes of Committee Meetings.  Committee meetings are an integral part of board advisory, management, and oversight functions.  Board members are entitled to know what other board members are doing, especially because committee actions often result in issues the entire board needs to deal with.

Board packages will need to be tailored to the individual needs of the board and the organization.  The package described above efficiently delivers a lot of information very quickly.  One such example is a periodic reforecast of projected results for the year compared to the original budget. Other information can be added to this package from time to time. At the end of the day  though, it is the responsibility of management to determine what  it needs to report and how much detail is appropriate.

Sometimes things do not go as well as they could in the board room. Let’s look at the situation where a management proposal is defeated by the board. Management deems it critical the proposal be passed.  Perhaps it could be a bonus or salary issue. What happens then? 

Lets focus on the parliamentary aspects of this event. Most not-for-profit boards operate under Robert’s Rules of Order (RRO).  This is a somewhat unfortunate situation, but more on that in another post.  RRO offers several options:

1. A Motion to Reconsider.  This must be made at the same session (more about this later) and by a member of the majority group.  The intent here is very clear.  This rule prevents the majority from being harassed by frivolous motions on the same subject.  You do not want the meeting to bog down into senseless voting if slightly different motions asking the same thing  are continuously brought forth until the minority convinces the majority to change its mind.  Also,  some directors may need to leave the meeting early.  This somewhat underhanded strategy calls for the minority to wait until directors voting in the majority leave the meeting.  The minority could then reintroduce the motion and ask for a vote again. The rules for the motion to reconsider protect the rights of the majority by preventing such maneuvers. 
2. A Motion to Rescind.  This motion can be done in two separate ways.   The first is to provide notice to the board management intends to bring this  issue up for a vote again.  Board members are entitled to notice of meeting, so you  are effectively telling the entire Board the proposal defeated at the last session will be brought back again for a vote.  The second method is to bring the motion up from the floor during the meeting without notice.  This process is a little more complicated.  If a motion to rescind is made from the floor without previous notice, the vote to overturn the last action of the board must have a supermajority.  This supermajority can either be: (a) a majority of the entire board, and not just the quorum, and (b) two-thirds of the quorum following the usual rules for voting.  Again, the intent is clear.  The super-majority requirements prevent the board from rehashing the same material over and over again. 

There are several practical considerations the majority must be aware of:

1. On a small board, there may not be much of a difference between a supermajority and a majority.  For instance, on a ten person board, the quorum is six.  Two-thirds of the quorum is four, sufficient to pass the supermajority rule but less than the total number of directors who rejected the initial proposal.  Again, this may strike some as being somewhat less than politically expedient, given six members have already said no to the motion. 
2. The definition of a session can be tricky.  A meeting is a generally thought of as a subset of a session.  So for instance, a session of Congress roughly equates to one year.  When there are quarterly meetings, a meeting is generally thought to be one session.  When the board meets more than monthly, a gray area exists. The larger number of meetings need to be grouped into sessions at that point. 
3. One session of directors can’t tie the hands of future sessions of the board.  The bylaws or the articles of incorporation need to be amended to do that. So, a proposal defeated during one session of the board can be brought up again during future board sessions. 

At the end of the day, parliamentary wrangling is extremely unproductive.  It is hard to imagine a circumstance where management can’t accommodate the concerns of the board. If this can’t be done, then more drastic measures may be called for. 

Board members always appreciate an efficiently run meeting.  Here are some suggestions for effectively running a not-for-profit board meeting (or any other meeting for that matter):

1. Make sure you know  the board notification requirements.  Bylaws often require a notification period prior to  a valid board meeting.  The purpose  is to make sure board members are not “frozen out” of participation because of short notice.  Each board member has the privilege of being heard at a meeting.  This can’t be taken away from them except at risk of having an invalid board meeting.
2. Determine if  phone participation is allowed.  Many organizations still frown on this method of holding a board meeting.  Nevertheless, if you are going to allow a teleconference,  send out a notice to all the directors (not just those who ask for a conference call) with the phone number well ahead of time.  Follow that up with another  email notice the day of the meeting.  Directors often are busy people and won’t have time to find the original conference call details.  Many people receive a blizzard of email on a daily basis.  Sending the conference call details again on the day of the meeting usually puts the notification on top of their email listing
3. Circulate an agenda and board materials in advance of the meeting.  Realistically, this is not always possible.  However, as much of the material should be circulated in advance  as possible.  This will often facilitate active discussion at the meeting, and will keep the meeting time down.   Prepared directors will help the chair move the meeting along. Try and send the board materials in logical groups.  Do not send information piecemeal because multiple emails have a high propensity for being lost or ignored.  It goes without saying the chairperson and the executive director of the  organization should review the materials before they are sent out.  This will ensure they are familiar with the content and contain no errors.
4. Know the quorum requirements and make sure a quorum of members will attend.   It is frustrating to drive to a meeting only to find there are not enough members present to have a meeting. In the hallowed halls of Congress it is the responsibility of the “whips” to make sure members will attend.  In a board setting,  it is the responsibility of the chairperson to make sure a quorum will be present at the board meeting, or to cancel the meeting as appropriate.  Do a headcount the day before the meeting to make sure there are enough directors coming.
5. Strive for unanimity in any votes taken.  A simple majority rules for most board votes but you don’t want to have a 5-4 voting result on a major organizational issue.  At the end of the day, you want all the board members to buy into an action.  You want the entire board “rowing in one direction” in support of management.  A divided board will not accomplish this.  In such situations, a delay of the vote for more discussion may be warranted. Members in the minority should be allowed to express their opinions and reasons for voting against the proposal.  At the end of the day, the majority may not be able to persuade the minority.  When the minutes for the meeting are published,  the position of the minority should be described.. Publish the minutes of the meeting as soon as possible after the meeting while details of the meeting are still vivid in the members memory.  This will help ensure a careful record of the meeting and its actions are recorded. The minority will acknowledge the fair treatment they have received at the hands of the chairperson and will always appreciate it. Simple courtesy goes a long way.
6. Avoid marathon board meetings.  Sometimes it is not possible to cover all of the material in one meeting.  No one wants to come from work and attend a three-hour meeting. Prioritize the topics discussed. Use committees as much as possible.  It is always possible to schedule another board meeting.  Unanimous consents are another vehicle you can use to reduce board time.
7. Finally, it is always appropriate for the chairperson to thank everyone for their participation.  Not-for-profit board members are usually not compensated for their effort.  A thank you and recognition for their time is always welcome.