Avoiding Buyer's Remorse
By David Liss
Special to washingtonpost.com
Friday, June 25, 2004; 12:30 PM
Ever buy something you just couldn't live without and afterwards find yourself saying, "What the hell was I thinking?" That's called buyer's remorse. It can happen with any decision you make in your life. The last place you want to have this experience is with your job.
Unfortunately, some people use their hearts and not their heads when considering jobs for nonprofits. Their motivations may be for service to others, commitment to a profession.
To make the right career decisions, do financial research on an organization before you accept a job.
Tips for Job Seekers
"Small local nonprofits compete with much larger national organizations with bigger staffs and better benefits that can offer so much more to the individual employee, " notes Sandra Renner, vice president and regional manager of the Washington, D.C. office of the Alford Group, a consulting business to nonprofits. "They can offer everything from good travel policies and vacation to health care benefits."
If you deeply believe in the mission of an organization, could you still afford to work there even if their health insurance and retirement benefits are less than stellar? Would you mind sleeping on a friend's couch every time you go on a business trip because your organization can't afford to pay for a hotel?
Do the easy stuff first. Check out the organization's Web site. Then see what the press has published about this group. A nonprofit's reputation indicates their ability to generate funds and grow membership.
Betsy Johnson, executive director of the Washington Council of Agencies, an umbrella organization of nonprofits in the D.C. area, has some rules of thumb for nonprofits and association job seekers:
- Check the staff turnover. How long has your soon-to-be boss been there? How about the CEO or executive director or your peers? Staff turnover is a key indicator of the stability and working conditions of the organization.
- Request a copy of the organization's annual report, if they have one. Better yet, get several years' worth of annual reports so you can see its progress. You can sometimes get this information online.
- The annual report identifies the diversity of their funding. How much money comes from foundations, grants and government funds? If it is largely dependent on a single source of funds, you could suffer if the primary funding organization has to make budget cuts.
- Ask to see financial statements. Has staff income had ups, downs, or is it steady?
- How old is the organization? If it's a year old, it could be a lot less stable than if it's 25.
- Do you like your potential coworkers? If the job is great, but you don't like the people you work with, you probably won't be able to work there very long.
- How many people work for the group? The fewer the number of people working in the organization, the more hats you will have to wear. This may or may not be a bad thing depending on your personal preference.
- How is your position being funded? Is it funded from operating expenses, from a special project fund or a grant?
- If the job is supported by a grant, is it a single one or a combination of them? If it is a government grant, determine when it will be renewed.
- If you are hired to work on a specific project, do you lose your job when the funding ends or can they afford to keep you longer?
Cash Flow and Debt
When considering the financials of a nonprofit, Johnson points out that cash flow concerns are different from debt problems. A cash flow problem may mean that the money will come late, she says. But when it comes, it will cover all of the relevant expenses, including your salary. On the other hand, if an organization can't pay for bills or obligations it is incurring - that is a debt. And that means that you may not get paid.
The bottom line is that you need to have an idea of how a nonprofit is managing its money and whether they have a debt or a cash flow problem.
Nonprofits can carry forward a budget surplus. This surplus goes into a reserve fund, which means money for a rainy day. A well-managed nonprofit will have a surplus or reserve in funds at the end of each year. The average nonprofit has a reserve fund worth two months.
Other nonprofits may have a zero balance or negative numbers on their books at the end of their business year. In this situation, determine how they will replenish the funding stream.
The Big Picture
Susan Goodell of Forgotten Harvest, a Detroit Michigan provider of food for homeless organizations, says a job seeker needs to evaluate a prospective noprofit employer on a high level.
- Mission. Does the organization have a strong mission? Does it have a considerable impact on the community it serves?
- Board of directors.
Find out who is on the board of directors. Members in good social standing can open financial doors in the community and keeps an organization afloat.
- Endowments.An endowment is a permanent fund that is usually held in a bank or a community foundation. Think of an endowment as a major savings account where you only the interest and not the principal can be touched. Endowments are an indication of a guaranteed cash income to an organization on a renewable annual basis. Unless an endowment exists, an organization must start fundraising from scratch every year.
Does your organization have an endowment? If so, what does it represent in revenues for the organization and where is it held?
If you really want to get down and dirty in researching the financial health of associations, Mike Olson, president of the American Society of Association Executives (ASAE), has a few suggestions for you.
- Contact dues paying members of the association in your community. They should know how the organization is spending their money and tell you about any problems that the organization is having.
- Find out if the organization's credit standing is solid and if they are paying their bills. To do this, drill down in the Web site and look at where organization has had its meetings. Check with the sales office of the hotel where the meetings were held and ask if the group is in good standing.
- Contact a company or firm that provides a promotional service to an association, such as a rental car company that offers discounts to association members. Ask about the relationship between the company and the association. If they badmouth the organization that could be a warning sign of trouble ahead.
The IRS Form 990
All nonprofits and associations with revenues exceeding $25,000 are expected to file this report annually with IRS. This report shows where money comes from and where it goes. The problem with this report is that it's notoriously difficult to interpret. Organizations in all 25 separate IRS nonprofit categories, which include associations, are required to file these forms. By law, these organizations must make these reports available to anyone who asks. These reports are the rough equivalent of an annual tax return, but are called an information return.
There's always a 'but,' isn't there? There is no one deadline for filing the Form 990 or the Form 990-EZ. Instead, the filing deadline falls on the 15th day of the fifth month after the fiscal year ends. And, any organization can automatically get a three month extension, plus an additional three month extension. So, as a result of rolling financial deadlines it is absolutely and legally possible for organizations to legitimately submit its Form 990 or the Form 990-EZ to the IRS 11 months after the end of their fiscal year.
There are four ways you can get a copy of the Form 990.
Financial documents don't paint the whole job picture. Your "homework" needs to include an understanding of the mission, vision of the organization and its standing in the community. Can you see yourself working there for five years without occasionally contemplating suicide? Can you live on the salary or would you become resentful? Would you be challenged sufficiently and grow professionally, or do you think that you might get buyer's remorse?
- Request it from the organization. They may charge you a reproduction fee.
- Inspect the organization's Web site, the form may be there.
- Check the IRS Web site. The forms and explanatory materials are available online.
- Try GuideStar, which provides free access of all posted reports to the public. They have information on 300,000 organizations from a universe of 1.3 million entities who must file Form 990s. GuideStar also extracts financial data from forms and summarizes the information.
Editor's note: This article by David Liss, was first acquired by washingtonpost.com on April 30, 2003.
© 2004 Washingtonpost.Newsweek Interactive
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