WEBVTT - The Part Nobody Shows: How Real Wealth Is Actually Built 0:00:00.200 --> 0:00:03.440 Welcome to Money and Wealth with John O'Bryant, a production 0:00:03.680 --> 0:00:10.440 of the Black Effect Podcast Network and iHeartRadio. Hey, Hey, hey, 0:00:10.480 --> 0:00:13.399 everybody is John Hope Bryant And this is Money and 0:00:13.520 --> 0:00:18.800 Wealth from the Black Effect Network on iHeartRadio, part of 0:00:18.840 --> 0:00:24.360 my season three of the Money in Wealth podcast series. 0:00:25.520 --> 0:00:30.680 And this is a very important and powerful. 0:00:30.200 --> 0:00:33.640 Episode because it gets you behind the curtain. 0:00:35.080 --> 0:00:38.640 All too often we see the hype, we see the 0:00:38.680 --> 0:00:42.919 press releases, we see some leader whoever it is you admire, 0:00:45.200 --> 0:00:50.199 going to red carpet events, going on a plane in 0:00:50.240 --> 0:00:52.320 front of a plane, and some people are flacid. I 0:00:52.360 --> 0:00:56.480 don't do that, Try not to do that, showing off 0:00:56.520 --> 0:01:01.120 their bobbles. I try to do that either or just 0:01:01.960 --> 0:01:05.360 in meetings or or celebrating. But you very rarely see 0:01:05.959 --> 0:01:08.759 what has to happen behind the scene for sustainable success, 0:01:09.600 --> 0:01:16.479 which is excellence in execution, excellence in operations, an excellence 0:01:16.720 --> 0:01:18.119 in financial management. 0:01:19.560 --> 0:01:22.080 And so who is the man or woman. 0:01:23.319 --> 0:01:25.720 In this particular case, a man, sometimes it's a woman, 0:01:25.800 --> 0:01:30.039 by the way, behind the mission who's running in my case, 0:01:31.720 --> 0:01:35.720 a seventy five million dollar social impact enterprise or budgets 0:01:36.000 --> 0:01:39.280 go vaslates between seventy five million and fifty million. I 0:01:39.360 --> 0:01:41.839 don't know what's going on in the society and the economy. 0:01:42.880 --> 0:01:44.640 Four and a half billion dollars invested. This is just 0:01:44.680 --> 0:01:49.280 Operation Helped. Brian Group Ventures is my holding company and 0:01:50.440 --> 0:01:53.720 is a for profit leg and is a nonprofit leg. 0:01:53.880 --> 0:01:57.480 Most people know of my nonprofit work, by the way, 0:01:58.000 --> 0:02:02.120 the firewall between those two entities, and we'll talk about 0:02:02.160 --> 0:02:04.840 that maybe a little bit in this conversation. I literally 0:02:04.880 --> 0:02:08.800 have different team members for different operations because it's too 0:02:08.919 --> 0:02:13.280 legal bodies. The one who runs the biggest body, the 0:02:13.320 --> 0:02:17.720 one has grown the most over thirty years because I 0:02:17.760 --> 0:02:20.440 spend the most time there is Operation Hope. And the 0:02:20.480 --> 0:02:26.600 guy behind that is Brian Betts. I just recently published 0:02:26.800 --> 0:02:30.440 He's my president and chief financial officer. Recently published a 0:02:31.040 --> 0:02:35.079 piece on Brian Journal at Brian Green Venture's website. On 0:02:35.160 --> 0:02:39.680 our twelfth consecutive four star Charity Navigator rating, it's like 0:02:39.720 --> 0:02:42.160 getting up. It's like having a triple bond a rating, 0:02:42.240 --> 0:02:46.000 triple bond rating on a firm on Wall Street. It's 0:02:46.000 --> 0:02:49.000 the best rating you can get as a nonprofit. The 0:02:49.040 --> 0:02:52.720 guy behind that, who makes that magic happen is the 0:02:52.760 --> 0:02:54.840 guy that you're seeing on the screen right now you're 0:02:54.840 --> 0:02:59.160 about to hear from If you're in your car, you're gardening, 0:02:59.200 --> 0:03:02.920 you're walking, you're whatever you're doing, you need to stop 0:03:03.080 --> 0:03:05.640 and take notes or come back with a piece of 0:03:05.680 --> 0:03:09.639 pad or your iPad, your iPhone and grab a notepad 0:03:09.680 --> 0:03:12.760 with some friends, because you're about to be schooled on 0:03:13.360 --> 0:03:18.200 what's behind the curtain of a vision made real. 0:03:18.320 --> 0:03:21.280 Brian DA's welcome to the Money in the World podcast. 0:03:22.160 --> 0:03:24.320 That Deer. I'm excited to be here for that. 0:03:25.560 --> 0:03:28.720 I love me some Brian Betts. He's a good man. 0:03:29.840 --> 0:03:34.360 President and chief financial officer of about sixty percent of 0:03:34.400 --> 0:03:38.520 everything I do, which is Operation Hope. Brian, that's a 0:03:38.560 --> 0:03:45.320 pretty weird title. President and chief financial officer. I haven't 0:03:45.360 --> 0:03:47.920 seen that many times. I don't know if I've ever 0:03:47.960 --> 0:03:50.600 seen it at all. But before we get into that 0:03:51.000 --> 0:03:54.640 combination and why that works for us and what does 0:03:54.640 --> 0:03:57.120 that mean. By the way, can you back up and 0:03:57.120 --> 0:04:00.360 tell the audience a little bit about what as you 0:04:00.400 --> 0:04:03.840 did before you got to Operation Hope and what we 0:04:04.000 --> 0:04:06.520 just found out just a few minutes ago, even though 0:04:06.520 --> 0:04:08.360 we you know, I've known each other for a long time, 0:04:08.880 --> 0:04:11.320 we just found out a moment ago about the common 0:04:11.360 --> 0:04:14.640 thread between your professional life and my personal life. 0:04:15.200 --> 0:04:19.240 Yeah, so, you know, I started off in public accounting 0:04:19.720 --> 0:04:24.200 after I graduated with college, did the role at a 0:04:24.600 --> 0:04:29.400 large top six CPA firm, international CPA firm for a 0:04:29.440 --> 0:04:32.520 couple of years. That's usually what an accounting person aspires 0:04:32.560 --> 0:04:35.000 to is go out and get that big public experience. 0:04:36.000 --> 0:04:38.320 And then went to work for Corporate America for almost 0:04:38.400 --> 0:04:42.640 fifteen years and various different roles in accounting and finance 0:04:42.720 --> 0:04:47.160 and strategic planning in different organizations. And you know we've 0:04:47.200 --> 0:04:51.000 shared before that that just didn't fulfill me. You know, 0:04:51.120 --> 0:04:54.320 how can I take my skills and my talent and 0:04:54.400 --> 0:04:56.880 really get that other piece I was missing, a self 0:04:57.360 --> 0:04:59.680 sense of fulfillment. And then that's where I fell in 0:04:59.720 --> 0:05:05.000 love with nonprofits. Everybody's focused, everybody's here to make a 0:05:05.040 --> 0:05:08.640 difference in the world, and the people, the culture, and 0:05:08.720 --> 0:05:12.440 the satisfaction you get from working for a nonprofit I 0:05:12.480 --> 0:05:14.800 couldn't get anywhere else. And that is where I found 0:05:14.839 --> 0:05:16.840 my sweet spot. I always liked to joke I found 0:05:16.880 --> 0:05:19.320 my people. I finally found my people. I got into 0:05:19.360 --> 0:05:22.840 the nonprofit industry, But before I came to Operation Hope, 0:05:22.880 --> 0:05:25.480 I worked with a nonprofit that really focused on the 0:05:25.520 --> 0:05:29.640 problem of homelessness, and you and I were just briefly talking, 0:05:29.720 --> 0:05:33.320 but you know, the face of homelessness is usually most 0:05:33.360 --> 0:05:36.159 people think of the person on the street, under the bridges, 0:05:36.360 --> 0:05:37.520 under the overpasses. 0:05:38.200 --> 0:05:40.200 But that's just the chronic homelessness. 0:05:40.440 --> 0:05:43.880 Yeah, small percentage of the people that are actually homeless. 0:05:44.279 --> 0:05:48.880 There are so many more people that are living with friends, families, 0:05:49.600 --> 0:05:54.279 and weekly hotels, couch surfing. There are so many more 0:05:54.320 --> 0:05:59.160 people that are unhoused. Then you can you can realize 0:06:00.000 --> 0:06:04.000 imagine that that problem just compounds itself. So after spending 0:06:04.120 --> 0:06:07.520 seven years and working in that industry, which I loved, 0:06:07.680 --> 0:06:11.120 helping the people, what I saw was how many people 0:06:11.279 --> 0:06:15.839 are on the verge of entering into a downward cycle 0:06:16.080 --> 0:06:19.279 of homelessness. So I always like to give the example. 0:06:19.320 --> 0:06:22.719 You have a single mother working a job. She gets 0:06:22.720 --> 0:06:27.000 a flat tire, she can't go to work, she can't afford. 0:06:26.800 --> 0:06:29.240 To pay for the tire. She loses her job. 0:06:30.080 --> 0:06:33.239 Two weeks later, three weeks later, she can't pay her bills. 0:06:33.839 --> 0:06:36.880 Eventually she's going to get an eviction notice. Eventually she's 0:06:36.920 --> 0:06:40.440 going to lose housing. Maybe she can stay with family 0:06:40.480 --> 0:06:43.479 and friends. But once you get that eviction on your record, 0:06:44.200 --> 0:06:46.839 it's going to be a higher security deposit. If you 0:06:46.880 --> 0:06:49.680 can find somebody that's going to rent to you, then 0:06:49.960 --> 0:06:51.800 they may have a higher rent. It may not be 0:06:51.920 --> 0:06:54.360 in the location you want. There's just so many more 0:06:54.560 --> 0:06:58.040 challenges by having that eviction on your record that you 0:06:58.080 --> 0:07:04.159 start this downward spiral gets so expensive, so difficult financially 0:07:04.240 --> 0:07:04.760 to get out of. 0:07:05.160 --> 0:07:05.800 But then we're not. 0:07:05.720 --> 0:07:08.960 Even talking about the spiritual emotional impact to that individual 0:07:09.040 --> 0:07:12.600 that the family uned it, that they experienced once they 0:07:12.640 --> 0:07:15.440 start that cycle. So we were talking before that. You 0:07:15.480 --> 0:07:18.800 were sharing that you were homeless at one point, and 0:07:18.880 --> 0:07:22.240 that's the common thread we were talking about. And I 0:07:22.280 --> 0:07:25.280 didn't I knew you were homeless, and I knew I 0:07:25.360 --> 0:07:27.000 worked in homelessness, but I don't think we ever put 0:07:27.000 --> 0:07:28.000 the two pieces together. 0:07:28.720 --> 0:07:34.080 Yep, and what And luckily I got out and you 0:07:34.200 --> 0:07:41.000 transitioned to uh to my forever story. Why president and 0:07:41.080 --> 0:07:44.520 chief financial officer here at Operation and Hope and why 0:07:44.520 --> 0:07:47.360 does that work? And what for the audience's sake? Right 0:07:47.440 --> 0:07:49.920 up front, what is a chief financial officer? They call 0:07:49.960 --> 0:07:54.080 it CFO in Lingo, What does that mean? And how 0:07:54.120 --> 0:07:56.080 is that different from your role as president? So First 0:07:56.080 --> 0:07:58.320 of all, why president chief financial officer? 0:07:59.160 --> 0:08:03.080 Okay, So you know, as a financial literacy organization, we 0:08:03.320 --> 0:08:07.480 have to set the example of living a very financially 0:08:07.680 --> 0:08:13.560 sound business model. So if that is our main mission 0:08:13.720 --> 0:08:20.119 driver and representing and actually doing what we preach, making 0:08:20.120 --> 0:08:23.080 the CFO of the president makes. 0:08:22.880 --> 0:08:25.680 Sense in this organization. You know, marry the two together. 0:08:25.800 --> 0:08:27.800 That is one of the most critical things you can 0:08:27.840 --> 0:08:32.439 do for a nonprofit. There's so many nonprofits doing fantastic work. 0:08:32.640 --> 0:08:35.960 Where they struggle is on the business side of making 0:08:36.000 --> 0:08:40.520 sure they don't overextend themselves. There's always going to be 0:08:40.600 --> 0:08:44.200 more need than you could ever address, So you have 0:08:44.280 --> 0:08:46.679 to treat it like a business. You know, nonprofits there are 0:08:46.720 --> 0:08:48.480 still a business and you have to run it like 0:08:48.520 --> 0:08:51.320 a business if you want to continue to help people 0:08:52.000 --> 0:08:55.200 on a long term basis. Otherwise you're going to find 0:08:55.200 --> 0:08:58.680 yourself in like most like startups that struggle. If you 0:08:58.679 --> 0:09:01.360 don't have a sound financial model, then you're not going 0:09:01.440 --> 0:09:02.600 to have a strong business model. 0:09:03.200 --> 0:09:05.760 So he just says something really important. I want to 0:09:05.760 --> 0:09:10.080 slow it down and repeat it that a nonprofit is 0:09:10.080 --> 0:09:12.800 still a business and you've got to run it like 0:09:12.880 --> 0:09:16.600 a business. I'm gonna go one step further, a nonprofit 0:09:16.800 --> 0:09:20.920 is a corporation like any other corporation. 0:09:21.800 --> 0:09:23.640 You simply apply to the. 0:09:23.720 --> 0:09:28.800 IRS the Internal Revenue Service for a non profit exemption. 0:09:29.760 --> 0:09:34.160 There are different kinds of exemptions. One for foundations, one 0:09:34.200 --> 0:09:40.200 for academic institutions. There's a special exemption for churches. We 0:09:40.360 --> 0:09:44.319 have a five to one C three exemption. 0:09:45.040 --> 0:09:47.960 Right. That's a that's that is a. 0:09:47.720 --> 0:09:53.120 Programs and services based nonprofit versus a giving money nonprofit 0:09:53.960 --> 0:09:57.959 like a foundation, but it's still a corporation and versus 0:09:58.160 --> 0:10:02.280 the profits going to the share private investors and going 0:10:02.280 --> 0:10:07.440 in their pockets. Our profits go to our shareholders, which 0:10:07.480 --> 0:10:11.520 is the community. The community is our shareholder and goes 0:10:11.880 --> 0:10:17.720 and is reinvested through programs and services in the community. 0:10:18.240 --> 0:10:21.360 A little known fact, whereas a for profit company wants 0:10:21.400 --> 0:10:25.600 to retained as much earnings as possible and distributed to 0:10:25.679 --> 0:10:30.880 its for profit shareholders, a nonprofit is judged by how 0:10:30.960 --> 0:10:34.840 much of the money goes to programs and services versus 0:10:35.520 --> 0:10:40.360 going to operations or held back and retained, which one 0:10:40.360 --> 0:10:42.600 could argue as operations. 0:10:43.080 --> 0:10:46.079 So we have a very high program to. 0:10:46.440 --> 0:10:50.800 Expense ratio and administration expense ratio, which is also complements 0:10:50.800 --> 0:10:56.439 of Brian Bett's leadership of about eighty eight percent or so, 0:10:56.440 --> 0:11:01.080 So eighty eight eighty seven percent of all of every 0:11:01.160 --> 0:11:04.400 dollar that comes in goes right out to programs and 0:11:04.440 --> 0:11:08.000 services helping people, and the rest of it is for 0:11:08.120 --> 0:11:12.439 useless things like me. We then also have reserves and 0:11:12.720 --> 0:11:15.520 we've started in an endowment and things like that. Maybe 0:11:15.559 --> 0:11:18.240 we'll have time to get into that. But he's the 0:11:18.280 --> 0:11:21.040 first thing he's said is that you as a nonprofit 0:11:21.080 --> 0:11:23.880 in financial literacy, we thought we had to over index 0:11:24.000 --> 0:11:25.319 on proper management. 0:11:25.520 --> 0:11:27.920 So the president in this. 0:11:28.000 --> 0:11:31.960 Case should also be really in all fairness and really 0:11:32.040 --> 0:11:34.720 unfairness to Brian, who really has three roads. 0:11:35.320 --> 0:11:35.760 President. 0:11:35.760 --> 0:11:37.600 I didn't give him the third title. I want to 0:11:37.600 --> 0:11:41.800 break him out. You know, President, he's really chief operating 0:11:41.800 --> 0:11:47.560 officer and chief financial officer. You really cannot be chief 0:11:47.600 --> 0:11:52.600 financial officer and president without actually also managing the operations 0:11:52.600 --> 0:11:56.120 because they all sort of elegantly work together. I'm founder, 0:11:56.720 --> 0:12:04.079 chairman of the board the governance organization, right and chief 0:12:04.080 --> 0:12:08.360 executive officer, which leads the management team. Those are three 0:12:08.440 --> 0:12:13.600 different roles, two different functions. Founder is not really a role. 0:12:13.640 --> 0:12:16.000 It's a role, but not a function. Chairman of the 0:12:16.000 --> 0:12:18.400 board is a function, but it is separate in a 0:12:18.440 --> 0:12:23.120 part from management. Right, the board should not be managing 0:12:23.120 --> 0:12:28.040 the organization, and then management is what we're talking about. 0:12:28.080 --> 0:12:30.800 I'm chief in this particular role, in this particular conversation, 0:12:30.880 --> 0:12:35.679 I'm chief executive officer. Brian is number two as president 0:12:36.720 --> 0:12:40.640 and chief financial officer. Okay, Brian, what does chief financial 0:12:40.679 --> 0:12:45.520 officer mean? And who's on your team? 0:12:46.000 --> 0:12:49.679 So if we break out my role into two different areas, 0:12:49.720 --> 0:12:53.280 we'll just focus on the chief financial officer. So, as 0:12:53.360 --> 0:12:57.600 chief financial officer, you really have two different functions you're managing. 0:12:57.960 --> 0:13:00.800 One is your traditional accounting function. 0:13:01.760 --> 0:13:06.880 How do we capture activity, translate that into financial statements 0:13:07.520 --> 0:13:10.719 and provide those for public viewing or to banks for 0:13:11.320 --> 0:13:13.960 if you have a loan or to the SBA. Everybody's 0:13:13.960 --> 0:13:15.800 going to want to see your financial statements. So how 0:13:15.880 --> 0:13:19.480 do we record our activity in accordance with all the 0:13:19.480 --> 0:13:23.960 standards and regulations and issue financial statements on a regular basis. 0:13:24.559 --> 0:13:28.880 That is one piece, But when you throw in the CFO, 0:13:29.040 --> 0:13:30.760 there's another piece that you've got to think about, and 0:13:30.800 --> 0:13:34.880 that's the finance function. And the finance function is really 0:13:34.960 --> 0:13:38.400 looking ahead to make sure you're not going to run 0:13:38.440 --> 0:13:42.760 off the road, whereas accounting is traditionally looking back at 0:13:42.800 --> 0:13:45.680 a period of time. So with the cfo's role, he 0:13:45.800 --> 0:13:49.520 is to marry both looking back at history, making sure 0:13:49.559 --> 0:13:52.520 you're understanding how you got to where you are today, 0:13:53.080 --> 0:13:57.520 but you cannot neglect looking forward of where you think 0:13:57.600 --> 0:14:00.600 you're doing. And traditionally that is really in a world 0:14:00.679 --> 0:14:04.040 of what we call forecasting or projecting. Where are we 0:14:04.160 --> 0:14:08.360 projecting growth? Where are we projecting expenses to grow? How 0:14:08.400 --> 0:14:11.440 can we become more efficient? And you really have to 0:14:11.520 --> 0:14:16.160 partner with every function in the organization to understand what 0:14:16.200 --> 0:14:20.800 does the organization need to continue to grow, scale and thrive. 0:14:21.320 --> 0:14:23.280 You've got to be partners with them. You've got to 0:14:23.400 --> 0:14:26.960 listen to what they need. You can't be the role 0:14:27.000 --> 0:14:29.520 that always says no. You have to be the voice 0:14:29.560 --> 0:14:34.200 that says, why, let me understand and let me prioritize 0:14:34.280 --> 0:14:38.600 all the organization's needs in terms of importance. Because with 0:14:38.720 --> 0:14:41.840 any company, there's always limited funds and you want to 0:14:41.840 --> 0:14:43.560 invest in everything, but that's not. 0:14:43.440 --> 0:14:45.480 Always possible, So you have to. 0:14:45.480 --> 0:14:49.440 Prioritize your investments in yourself and in the business. 0:14:49.960 --> 0:14:58.040 As CFO, who's on your team and what are their roles. 0:15:00.400 --> 0:15:01.880 You're talking about just the CFO. 0:15:02.480 --> 0:15:06.640 Yes, yes, So I have a senior vice president of 0:15:06.720 --> 0:15:10.440 accounting and finance that manages a team of about six people. 0:15:11.160 --> 0:15:13.040 We have a staff accountant. 0:15:13.400 --> 0:15:17.200 We have an accounts payable person, think of accounts payables. 0:15:17.200 --> 0:15:19.440 All the bills that come in have to be entered. 0:15:19.480 --> 0:15:21.560 We have to vet the venitors. We have to check 0:15:21.640 --> 0:15:24.600 their IRS, their tax ivs with the IRS to make 0:15:24.600 --> 0:15:26.360 sure we're not paying someone fraudulently. 0:15:27.600 --> 0:15:29.720 We've also got an accounting manager. 0:15:29.360 --> 0:15:31.640 That does a lot of the clothes for the monthly 0:15:32.800 --> 0:15:33.920 financial statements. 0:15:34.320 --> 0:15:35.680 We also have a grants manager. 0:15:35.920 --> 0:15:39.000 If you're getting money from a federal government, state government, 0:15:39.120 --> 0:15:43.640 local government, you really should invest in a specific role 0:15:43.720 --> 0:15:48.400 that really does grant reporting. People that are investing money 0:15:48.440 --> 0:15:52.440 back into your organization to deliver on outcomes and impacts, 0:15:52.760 --> 0:15:54.520 they're going to want to see that you spent the 0:15:54.600 --> 0:15:58.960 money as well as provided the outcomes and impacts according 0:15:59.000 --> 0:15:59.440 to what. 0:15:59.320 --> 0:16:00.320 You said you to do. 0:16:01.200 --> 0:16:05.120 So we also have payroll. You know, everybody loves to 0:16:05.120 --> 0:16:07.000 get paid. We've got to make sure everybody gets paid. 0:16:07.400 --> 0:16:09.960 But what you don't see behind the scenes, especially with 0:16:10.080 --> 0:16:13.880 Operation Hope, is we're in forty two states. That means 0:16:13.920 --> 0:16:18.320 forty two states. We have to file payroll taxes. We 0:16:18.440 --> 0:16:21.960 also have to file in some jurisdiction local payroll taxes, 0:16:22.040 --> 0:16:22.800 and you also have. 0:16:22.800 --> 0:16:24.560 To file unemployment taxes. 0:16:24.600 --> 0:16:26.920 And you also have to make sure you're registered with 0:16:27.080 --> 0:16:30.560 the Secretary of State to do business in that state, 0:16:30.800 --> 0:16:37.200 also register to solicit donations for a charitable organization. So 0:16:37.240 --> 0:16:40.120 there's a lot more behind the scenes from the compliance 0:16:40.120 --> 0:16:43.200 standpoint that you've really got to make sure you're setting 0:16:43.240 --> 0:16:46.520 yourself up and adhering to all the regulations. There are 0:16:46.560 --> 0:16:51.760 some parishes and jurisdictions that have local payroll taxes on 0:16:51.840 --> 0:16:54.320 top of taxes, so you've got to really have a 0:16:54.360 --> 0:16:58.160 good handle on what all's required for you to physically 0:16:58.240 --> 0:17:01.280 begin a state and operate in that state. And then 0:17:01.360 --> 0:17:03.240 in the world we live in today, you've got to 0:17:03.280 --> 0:17:07.359 also understand what does it mean to provide services virtually 0:17:07.840 --> 0:17:10.480 into a state where you don't have a physical presence. 0:17:10.640 --> 0:17:16.040 Are there any other regulations that require specific compliance issues there? 0:17:16.160 --> 0:17:20.280 So we've got a team that is small but mighty, 0:17:20.400 --> 0:17:23.040 but they handle a lot of that infrastructure to keep 0:17:23.119 --> 0:17:26.120 us in line with compliance, because the last. 0:17:25.920 --> 0:17:28.040 Thing we want to do is end up on the 0:17:28.080 --> 0:17:29.040 news as. 0:17:28.880 --> 0:17:30.879 A bad nonprofit and doesn't know how to run its 0:17:30.920 --> 0:17:34.840 business and not complying with federal laws and regulations. 0:17:34.560 --> 0:17:37.679 Particularly particularly as a financial literacy nonprofit. 0:17:37.400 --> 0:17:42.119 Especially as a financial literacy nonprofit. So I think, you know, 0:17:42.200 --> 0:17:46.760 nonprofits overall get more scrutiny because you know, donors have 0:17:46.840 --> 0:17:51.480 a lot of optionality of where to invest their resources 0:17:51.720 --> 0:17:55.000 into solving so many problems that we have in the 0:17:55.040 --> 0:17:57.960 world today, and you've got to be good stewards of 0:17:58.080 --> 0:17:58.680 that funding. 0:18:00.560 --> 0:18:03.080 So let's back up a little bit. We've covered a 0:18:03.119 --> 0:18:08.199 lot of ground pretty quickly here. So you're saying that 0:18:08.280 --> 0:18:11.320 you have six team members, to be clear for the audience, 0:18:11.320 --> 0:18:16.600 we have hundreds of employees. But he's saying of those employees, 0:18:17.359 --> 0:18:22.680 six of them are just on his finance team, whereas 0:18:22.960 --> 0:18:26.080 there are another three hundred plus three fifty or something 0:18:26.080 --> 0:18:27.240 plus on his. 0:18:27.560 --> 0:18:30.800 Presidents under his president's role. 0:18:31.160 --> 0:18:34.320 So we'll come back to that, on his chief financial 0:18:34.320 --> 0:18:39.199 officer role, a team of six. Explain, Brian, please, how 0:18:39.480 --> 0:18:42.440 finance is different from. 0:18:42.119 --> 0:18:44.159 Actuary, our audit. 0:18:44.200 --> 0:18:47.840 Let's be very specific, the audit function versus the finance function. 0:18:48.440 --> 0:18:50.160 Why that's those two things are important. 0:18:50.520 --> 0:18:54.280 Yeah, So with when you hear the word audit. That 0:18:54.440 --> 0:18:57.359 is usually you can do it internally. You can internally 0:18:57.560 --> 0:18:59.359 audit your transactions. 0:19:00.119 --> 0:19:02.560 Not even important. Some people are listening is going I 0:19:02.600 --> 0:19:04.760 don't need to do an audit. Who cares about that? 0:19:05.200 --> 0:19:08.159 Why is an audit? Why paying for an audit? We 0:19:08.200 --> 0:19:11.720 pay seventy thousand dollars or something less than might check 0:19:11.720 --> 0:19:14.480 me it's more than that probably now because of our 0:19:14.600 --> 0:19:18.760 size for an annual audit. Why invest seventy grand fifty 0:19:18.760 --> 0:19:22.520 grand of your small organization two grand in an audit. 0:19:24.000 --> 0:19:27.120 So there's a couple of reasons that are like mandatory. 0:19:27.440 --> 0:19:30.200 So if you get over a million dollars in funding 0:19:30.240 --> 0:19:33.840 from a federal government agency or multiple federal government agencies, 0:19:33.880 --> 0:19:35.399 you're required. 0:19:35.359 --> 0:19:38.159 By law to have that audit done. 0:19:39.240 --> 0:19:42.000 If you get financing through a bank, whether that is 0:19:42.040 --> 0:19:45.359 a turn loan, whether that's a line of credit, they're 0:19:45.359 --> 0:19:47.520 going to audited financial statements. 0:19:47.840 --> 0:19:49.040 And then, of course, like we. 0:19:48.880 --> 0:19:54.800 Were talking about earlier, our donors require a sense of validation, 0:19:55.200 --> 0:19:59.280 So an audit really is a third party coming into 0:19:59.359 --> 0:20:05.360 your organismation and validating that your financial statements reflect what 0:20:05.400 --> 0:20:06.560 you're actually publishing. 0:20:07.160 --> 0:20:10.480 So it's all about trust. Trust. The maorifi. 0:20:10.920 --> 0:20:15.600 So our audit partners look at our internal controls to 0:20:15.640 --> 0:20:19.080 make sure the process is working right, and then they'll 0:20:19.160 --> 0:20:23.640 validate the end numbers. So that requires confirmation from banks 0:20:23.720 --> 0:20:27.760 on what's sitting in the bank accounts, confirmation on your investments, 0:20:28.520 --> 0:20:32.560 looking at if you bought any land building, computer equipment, 0:20:33.280 --> 0:20:35.240 is it really on the balance sheet or should it 0:20:35.240 --> 0:20:39.280 belong on the income state. Also, they're very careful about 0:20:39.359 --> 0:20:43.639 revenue recognition. You know, when can you actually say you 0:20:43.760 --> 0:20:47.960 have revenue? Is it based off of a contract? Is 0:20:48.000 --> 0:20:50.679 it did you book it in the period that you 0:20:50.840 --> 0:20:53.639 said that the contract states, or did you book it 0:20:53.680 --> 0:20:54.880 too early or too late. 0:20:55.359 --> 0:20:57.320 Let's let's lead out. Let's let out. He's starting to talk. 0:20:57.359 --> 0:20:58.080 He's got to talk. 0:20:58.040 --> 0:21:04.680 Lingo, So audience, he revenue revenue you would described as income, right, 0:21:05.080 --> 0:21:07.000 and there's two types of income. 0:21:07.480 --> 0:21:09.360 There's cash income. 0:21:10.119 --> 0:21:13.400 I got the cash right now and I as he 0:21:13.400 --> 0:21:15.919 heard you heard the phrase I booked it booked it 0:21:15.960 --> 0:21:18.439 means he put it on the balance sheet and the 0:21:18.520 --> 0:21:22.840 income statement. Now there's another kind of income, and it's 0:21:22.880 --> 0:21:27.639 a cruel income. It's not cash right now, it's a 0:21:27.680 --> 0:21:33.040 crude income. It's revenue. But let's say, somebody commits a 0:21:33.080 --> 0:21:39.520 million dollars to your organization over five years, they paid 0:21:39.560 --> 0:21:45.000 two hundred thousand dollars today, that's cash income. They are 0:21:45.040 --> 0:21:47.480 going to give you two hundred thousand dollars a year 0:21:48.600 --> 0:21:51.480 over the next four years for a total of five 0:21:51.600 --> 0:21:56.320 years to a total million dollars. Now, all of that's 0:21:56.320 --> 0:22:00.280 income revenue, some of it is cash. 0:22:00.320 --> 0:22:02.760 Two hundred thousand. You book that as cash. 0:22:02.760 --> 0:22:05.320 It goes on your income statement in your balance sheet, 0:22:05.600 --> 0:22:08.199 really through your balance sheet. And he'll explain maybe what 0:22:08.240 --> 0:22:11.040 a balance sheet is and what does that mean. And 0:22:12.119 --> 0:22:17.879 the eight hundred thousand is a cruel income and it 0:22:18.000 --> 0:22:20.960 shows up in a couple of different places interestingly enough 0:22:21.080 --> 0:22:23.679 on you in your financials. But for the sake of 0:22:23.720 --> 0:22:28.840 this making this really simple at the moment, I gotta 0:22:28.880 --> 0:22:29.280 be careful. 0:22:29.359 --> 0:22:30.360 I say the following thing. 0:22:31.240 --> 0:22:34.439 Nonprofits are the only entity I'm aware of that have 0:22:34.600 --> 0:22:38.560 what I call legal double books. Now, if you gotta 0:22:38.640 --> 0:22:41.199 clip this, anybody listening to us on social media, if 0:22:41.200 --> 0:22:43.439 you're gonna clip this, clip the whole thing. Don't just 0:22:43.480 --> 0:22:47.200 say John Bryant says he's got double books. A nonprofit, 0:22:47.240 --> 0:22:50.760 any nonprofit, not Operation Hope, has legal double books, and 0:22:50.880 --> 0:22:56.400 meaning you have a cash register that says I got 0:22:56.400 --> 0:22:59.840 this money today or this year. You also have a 0:23:00.040 --> 0:23:03.840 cash register that says, here's my cruel income. Cruel in 0:23:03.960 --> 0:23:07.080 cash income, which is a combination of all of my 0:23:07.240 --> 0:23:11.480 commitments to the organization, which also include things like in 0:23:11.800 --> 0:23:16.479 kind commitment. And maybe he'll get to that as well. Okay, 0:23:16.720 --> 0:23:19.360 let's back up, and why don't you drill as deep 0:23:19.400 --> 0:23:22.159 as you want, Brian on anything. I just said you 0:23:22.200 --> 0:23:25.200 probably should go deeper on the cash versus a cruel piece. 0:23:25.960 --> 0:23:26.600 Yeah. 0:23:26.960 --> 0:23:29.080 I don't think it's a conversation for today. 0:23:29.119 --> 0:23:31.080 But John, I would even challenge you that we've got 0:23:31.119 --> 0:23:32.399 three sets of works. 0:23:32.440 --> 0:23:33.560 Okay, go ahead. 0:23:33.560 --> 0:23:38.080 One, like you said, cash basis, so really tracking what 0:23:38.119 --> 0:23:39.800 comes in the bank account. 0:23:39.480 --> 0:23:40.919 And what goes out the bank account. 0:23:41.040 --> 0:23:41.280 Yep. 0:23:41.600 --> 0:23:44.160 That is your cash basis. That is how you're paying 0:23:44.160 --> 0:23:47.640 your bills and when you're getting paid. The cruele basis 0:23:47.720 --> 0:23:51.280 is what you were talking about saying, Okay, I've got 0:23:51.280 --> 0:23:53.320 a donor that's gonna give me a million. 0:23:53.040 --> 0:23:57.639 Dollars paid out in cash over five years. 0:23:57.880 --> 0:23:58.120