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Our client portal will be unavailable from 9PM MST, April 26 until 9PM MST April 28th due to a scheduled maintenance.
Office alert – Friday March 15th, 2024.
Due to the road conditions, majority of our staff will be working remotely today.
We want you to be safe, we have a drop off at COS on 3rd floor. If you are planning to come by the Denver and Springs office please make contact with your SKR contact first.
Our client portal will be unavailable from 9PM MST, April 26 until 9PM MST April 28th due to a scheduled maintenance.
Office alert – Friday March 15th, 2024.
Due to the road conditions, majority of our staff will be working remotely today.
We want you to be safe, we have a drop off at COS on 3rd floor. If you are planning to come by the Denver and Springs office please make contact with your SKR contact first.
With baby boomers — the largest and wealthiest generation in U.S. history — expected to transfer trillions of dollars worth of assets in the next few decades, this could be the right time to launch an endowment. Nonprofits have long turned to endowments for help providing the necessary financial resources to carry out their mission, now and into the future.
All endowments are not created equal. With a permanent endowment, the original gift is usually intended to be held into perpetuity, with only certain income available for use in operations. With a term endowment, you are generally allowed to also use the principal after the designated term has ended. Either way, though, you need to consider several key issues before making the move.
Endowments appeal to nonprofits for several reasons. For example, the funds provide financial stability and can help ensure that programs stay focused on areas your board and donors rank as most important. An endowment also can reduce the headaches and uncertainty often experienced when you are forced to rely solely on work-intensive annual campaigns, special events and fundraising. Moreover, less event planning often equals more time to devote to your actual mission!
Endowments can help you attract additional donors, too. They demonstrate that your not-for-profit has earned the trust of other donors and will be around for the long haul. Endowments may also provide the added benefit of approaching donors from a position of strength and confidence, rather than neediness.
Be forewarned, however: An endowment can turn off potential donors, who might think your organization does not really need their contributions. Administrative tasks also could consume staff time, diverting it from the organization’s current needs.
Not surprisingly, endowments come with some restrictions. The Uniform Prudent Management of Institutional Funds Act (UPMIFA) lays out the standards for managing and investing endowments. You wil need to establish a written investment policy for your endowment that satisfies those standards by addressing, among other things, asset allocation and spending.
Your board’s investment committee, with input from an investment advisor, should determine the best allocation across asset classes (for example, stocks, bonds and real estate) to earn your desired return on investment. If board members do not have expertise in this area, consider hiring an investment manager to advise you. Each investment decision must be made in the context of the endowment’s total portfolio, taking into account the risk and return objectives of the endowment and the organization.
When it comes to spending, UPMIFA lets you spend or accumulate at a rate the board determines is prudent for the endowment’s uses, benefits, purposes and duration — subject to seven specific criteria. These include the purposes of the organization and the endowment, general economic conditions and the organization’s other resources. And UPMIFA lets you base spending on the expected total returns of the endowment, including earnings on original principal and appreciation.
If a traditional endowment does not seem like a good fit, do not worry — you are not necessarily out of luck. You can establish a “quasi endowment,” also known as a board-designated endowment or funds functioning as endowments. A quasi endowment could work well if your organization isn’t quite ready for a full-blown endowment campaign but wants the financial stability and other benefits associated with endowments, and has the funds to set aside for this purpose.
Unlike traditional endowments, quasi endowments are established by the board — not a donor. They are usually funded by unrestricted donor gifts or excess operating funds, and are not subject to UPMIFA. A quasi endowment may be more flexible than permanent or term endowments because the board can change its designation(s) at any time and for any reason.
If you decide to pursue an endowment of any kind, keep in mind that the arrangements are more complicated than for funds raised through ordinary fundraising or capital campaigns. You will need to make sure you have, or can acquire, the requisite expertise in areas such as drafting investment policies, managing the investments and related financial reporting.
Successful nonprofits typically proceed along a standard life cycle. Their early stage precedes a growth period that runs several years, followed by maturity. The maturity (or governance) stage generally begins around an organization’s eighth year. By this time, the nonprofit has built its core programs and achieved a reputation in the community.
But no organization can afford to rest on its laurels. In fact, mature not-for-profits often face a critical fork in the road. The next step can lead to renewal — or stagnation and eventual decline.
If you lead a nonprofit in the maturity stage, you should set your sights toward sustainability. By now, your organization should have a good handle on its current resources and be adept at forecasting its needs. From a financial perspective, that means maintaining sufficient cash on hand to support daily operations, as well as adequate operating reserves. This also may be the time to initiate your planned giving and endowment efforts to sustain programs into the future.
Your organization probably requires more funds than ever. However, a nonprofit of this age must be wary of “mission drift,” which happens when an organization begins to make compromises to generate funds rather than stick to its mission.
At this point, organizations often may need more program and operational coordination and more formal planning and communications. Your nonprofit also may explore the possibility of alliances with other organizations. Such affiliations can both extend your organization’s impact and increase its financial stability. Alliances also can help reinforce your mission focus and prevent your nonprofit from getting too bogged down by policy and procedures.
Another way to increase financial stability is to add members to your board. A mature nonprofit’s brand identity may enable it to attract more wealthy, prestigious and well-connected members. Ideally, these members will have more to offer than simply money, such as expertise in a certain area or a strong personal commitment to your mission.
As your executive director and staff concentrate more on operations, your board needs to take an even greater leadership role by setting direction and strategic policy. The board may become more conservative, though. (The boards of younger nonprofits are usually more entrepreneurial and willing to take risks because less is at stake.)
When it comes to programming, mature nonprofits must take care not to be lulled into complacency. It is important to regularly review your programming, including the actual curriculum or content, for relevance and effectiveness. Your strategic plan should focus on the long range and may outline new opportunities.
Surveys can be a good way of keeping up to date on your constituents’ needs and interests, which can change over time. The results might lead to dramatic changes. One literacy nonprofit, for example, stayed relevant to its community by shrinking its literacy programming and offering more English as a Second Language services instead.
In today’s competitive environment, any nonprofit that makes it to maturity has reason to celebrate. To continue to serve your mission, though, your organization must be strategic in both financial and program planning.
Minutes of your board’s meetings may seem like a mere formality, but they’re much more than that. Board meeting minutes reflect on your board of directors and your organization’s actions. Savvy nonprofits don’t bunt their way through creating these documents — they try to hit them “out of the park.”
Here are some best practices for developing minutes that will document your meetings clearly and accurately.
Meeting minutes should cover such fundamentals as the date and time, whether it was a special or regular meeting, and the names of directors attending as well as names of directors who didn’t attend. The minutes should record any board actions (such as motions, votes for and against and resolutions). They also should note whether a quorum was reached, whether any board members left and re-entered the meeting — say, in the case of a possible conflict of interest — and whether there were any abstentions from voting or discussions.
Additionally, minutes should include summaries of key points from reports to the board and of alternatives considered for important decisions. For instance, describe how the board evaluated bids for outsourcing IT work or chose a particular venue for a fundraising event. Another important component: The minutes should record action items — that is, follow-up work that will be needed — and who’ll be responsible. Last, all information in the minutes should be presented clearly and succinctly.
There’s no particular requirement about how much detail should be recorded in your minutes. But attorneys often advise their clients to include enough information so that they can be offered as evidence that an action was properly taken and that directors fulfilled their fiduciary duties. When in doubt about the depth of detail to include in your minutes, consult your attorney.
At times, your board likely will meet “behind closed doors” to discuss particularly sensitive or confidential issues, such as a staff dismissal or key person salaries. Details of these sessions shouldn’t be included in the board meeting minutes, although a notation should be made that the board moved to an executive session; the notation should provide the general topic of the conversation. Also be aware of your state’s Sunshine Laws that may require open meetings and outline exactly what must be documented.
Details of an executive session can be communicated confidentially in some other form. Nonprofit attorneys sometimes advise their clients not to label this communication as “minutes.”
Generally, your minutes should be ready for inspection by the next board meeting or within 60 days of the date of the original meeting, whichever comes first. IRS Form 990 asks whether there is “contemporaneous,” or timely, documentation of the board and board committee meetings in minutes or written actions.
If your organization is ever audited by the IRS, your meeting minutes likely are among the first documents the agency will request to see. Keep in mind that any attachments, exhibits and reports can be considered part of the minutes.
Meeting minutes also can serve as evidence in court. For example, if someone alleges that the board made a hasty decision in cutting a program, board meeting minutes can be used to present the data that was considered when making that decision.
Many not-for-profits today strive for transparency. But your board isn’t being open about its transactions if its meeting minutes are so abbreviated that only the keenest insider can understand the full meaning.
The person assigned to take minutes at your organization’s board meetings should produce minutes that are a straightforward and complete report of all actions taken and the basis for any decisions. Simple and unambiguous wording works best.
With that goal in mind, it’s a good idea to have a second person review the meeting minutes. That person (as well as the original writer) should ask, “Would this report make sense if I hadn’t been at the meeting, and had been unfamiliar with the issues addressed? Would I be able to see at a glance the information provided and decisions made?”
Always keep in mind that the minutes of your board’s meetings can be viewed by many sets of eyes. Make sure that they show the real score.
According to published reports, more than two dozen Virginia organizations, as well as organizations around the country, received emails from an individual in England, unknown to the organizations, offering an approximately $30,000 donation.
Here’s how the check-kiting scheme works: After receiving the original email, the nonprofit gets a check for $40,000. Another email arrives concurrently, saying that the overpayment is the result of a clerical error and asking the nonprofit to return the excess payment. A victim nonprofit might deposit the check and not know for several days that it bounced, during which time it might send a $10,000 “refund,” money that will never be seen again.
Seventy-two percent of respondents in software provider Abila’s Donor Loyalty Survey say their decision to give is affected by an organization’s messaging. In February 2016, Abila surveyed 1,136 U.S. donors of all ages who had made at least one donation during the previous 12 months.
Seventy-five percent of respondents said they prefer a “short, self-contained email” with no links, while 73% prefer a short (two to three paragraphs) letter or online article. Sixty percent prefer short (under two minutes) YouTube videos.
About 71% of respondents feel more engaged when they receive personalized content. But personalization gone wrong — for example, with misspelled names or irrelevant information — can alienate donors.
GuideStar has launched a new tier of Nonprofit Profiles called GuideStar Platinum. The no-charge Platinum tier allows nonprofits to report their progress against their missions using metrics they select. GuideStar has collected about 700 suggested metrics, but nonprofits may opt to share the metric(s) they already track and that matter the most to them. For example, a homeless shelter could report the number of people no longer living in substandard housing as a result of its efforts.
According to GuideStar, more than 500 nonprofits signed up within 48 hours of the first announcement of Platinum in April 2016.
Has your organization outgrown its bylaws? Sometimes, as a nonprofit expands and matures, the guiding rules set when it was just a twinkle in its founders’ eyes need to be revisited and brought up to date.
Revising your bylaws involves more than just altering the language of rarely visited documents. The process provides you with an opportunity to look closely at how your nonprofit is evolving and whether such developments are consistent with your original mission.
Bylaws are the rules and principles that define your governing structure. They serve as your not-for-profit’s architectural framework. Although bylaws aren’t required to be public documents, making them available to the public can boost your accountability and transparency.
Your bylaws might cover such topics as the broad charitable purpose of the organization; the size and function of your board; and the election, terms and duties of your nonprofit’s directors and officers. They also usually cover your nonprofit’s basic rules for voting, holding meetings, electing directors and appointing officers. And without being too specific, your bylaws should provide procedures for resolving internal disputes, such as the removal and replacement of a board member.
Before you attempt to revise the bylaws, make sure you have the authority to do so. Most bylaws contain an amendment paragraph that defines the procedures for changing these rules.
Then consider creating a bylaw committee made up of a cross-section of your organization’s membership or constituency. This committee will be responsible for reviewing existing bylaws and recommending revisions to your board or members for a full vote.
It’s important that your bylaw committee focus on your not-for-profit’s mission, not organizational politics. A bylaw revision is appropriate only if you want to change your nonprofit’s governing structure — not to cater to one of your leader’s pet projects.
If your nonprofit is incorporated, you’ll need to ensure that any proposed bylaw changes conform with your articles of incorporation, which spell out your nonprofit’s purpose and outline its allowable activities. For example, the “purposes” clause in your bylaws must match that in your articles of incorporation. Any new provision or language changes in your bylaws, contrary to the objectives and ideals included in your incorporation documents, could invalidate the revisions.
Wanting to change the rules about how you operate suggests that you may have drifted from your original purpose. Bylaw revisions that indicate you’ve strayed from your initial mission can jeopardize your federal tax-exempt status. By all means, make sure your bylaw amendments remain consistent with your tax-exempt purpose. And notify the IRS if they represent a “structural or operational” change by reporting the amendments on your Form 990.
In addition, review your state’s statute that governs nonprofits, because it may contain mandatory provisions that affect your bylaws. In the absence of bylaws, when faced with issues about your governance, your state may dictate a proper course of action. If you don’t coordinate your bylaws with such a statute, you may unwittingly hinder your governing board’s ability to operate.
Through the years, your nonprofit is likely to experience a number of changes: Its constituency and support may grow and its goals and priorities may shift. Your professional advisors can work with you to amend your bylaws and make sure they accurately reflect your organization as it exists today.
Dividends, interest, rents, annuities and other investment income are generally excluded when calculating unrelated business income tax (UBIT). But tax law provides two exceptions where such income will indeed be deemed taxable. And with IRS scrutiny of unrelated business income intensifying these days, nonprofits need to know about these potential pitfalls.
When a nonprofit incurs debt to acquire an income-producing asset, the portion of the income or gain that’s debt-financed is generally taxable unrelated business income (UBI). Such assets are usually real estate — for example, an apartment building with income from rents not related to the nonprofit’s mission. But the assets also could be stocks, tangible personal property or other investments purchased with borrowed funds.
Income-producing property is debt-financed if, at any time during the tax year, it had outstanding “acquisition indebtedness” — debt incurred before, during or shortly after the acquisition (or improvement) of property if the indebtedness wouldn’t have been incurred but for the acquisition.
Certain property is exempt from this treatment:
Related to exempt purposes. If 85% or more of the use of the property is substantially related to a not-for-profit’s exempt purposes, it’s not excluded as debt-financed property. Related use can’t be solely to support the organization’s need for income or its use of the profits.
Used in an unrelated trade or business. To the extent that income from a property is treated as income from an unrelated trade or business, the property isn’t considered debt-financed, as the income is already UBI.
Used in certain excluded activities. Debt-financed property doesn’t include property used in a trade or business that’s excluded from the definition of “unrelated trade or business” either because it’s used in research activities or because the activity has a volunteer workforce, is conducted for the convenience of members, or consists of selling donated merchandise.
Covered by the neighborhood land rule. If a not-for-profit acquires real property intending to use it for exempt purposes within 10 years, the property won’t be treated as debt-financed property as long as it’s in the neighborhood of other property the organization uses for exempt purposes. The latter exception applies only if the intent to demolish any existing structures and use the land for exempt purposes within 10 years isn’t abandoned.
Interest, rents, annuities and other investment income aren’t excluded from UBI if they are received from a for-profit subsidiary or controlled nonprofit. The payment is included in the parent organization’s taxable UBI to the extent it reduces the subsidiary organization’s net taxable income or UBI.
The IRS generally considers a corporation to be “controlled” if the other organization owns more than 50% of the “beneficial interest” — either stock in a for-profit or voting board positions in a nonprofit. For example, if a for-profit leases space from an organization that owns more than 50% of its stock, the lease payments are valid deductions from taxable income. But when these lease payments are received by the controlling nonprofit, they aren’t excluded from UBI.
Failing to pay UBIT on debt-financed property or income from controlled organizations could have negative consequences, ranging from taxes, penalties and interest to, in extreme cases, the loss of tax-exempt status. Your CPA can help you stay on the right side of the UBIT law.
The U.S. Department of Labor’s new overtime rules, which will make many more employees eligible for overtime pay under the Fair Labor Standards Act (FLSA), take effect December 1, 2016 — and nonprofits aren’t exempt. Even if an organization isn’t covered by the FLSA, its employees may be covered as individuals and thus eligible for overtime. Make no mistake: The new rules could have significant repercussions for the compensation of your white-collar workers — and, in turn, your ability to provide services.
The final rule increases the salary-level threshold for white-collar exempt employees from $455 to $913 per week or $23,660 to $47,476 per year. White-collar employees now can only be exempt from overtime if their jobs meet certain tests for executive, administrative or professional employees, and they also are paid an annual salary of at least $47,476.
The new rule also increases the salary threshold for highly compensated employees (HCEs) from $100,000 per year to $134,004 per year. The HCE threshold is used to evaluate the fairness of contributions to an organization’s retirement plan. HCEs must receive at least the full standard salary amount — or $913 — per week on a salary or fee basis without regard to the payment of nondiscretionary bonuses and incentive payments. But such payments will count toward the total annual compensation. The standard salary and HCE annual compensation levels will automatically update every three years.
The FLSA may apply to 1) businesses or similar entities (what’s known as enterprise coverage), or 2) individuals (individual coverage). Under enterprise coverage, the law applies to businesses with annual sales or business of at least $500,000. For nonprofits, this coverage applies only to activities performed for a business purpose (for example, operating a gift shop). Income from contributions, membership fees, many dues, and donations used for charitable activities don’t count toward the $500,000 threshold.
Under individual coverage, employees may be covered by the FLSA if they’re engaged in interstate commerce or in the production of goods for interstate commerce — regardless of whether an employee is engaging in such activities for a business purpose. For example, an employee is covered if he makes or receives interstate phone calls, ships materials to another state or regularly calls an out-of-state vendor and uses a credit card to buy food for a homeless shelter.
The new rule has obvious budget implications — the money to pay overtime to newly eligible employees will have to come from somewhere. Many have expressed concern that compliance with the rule will lead to the cutting of services.
In addition, according to the National Council of Nonprofits, organizations with government grants and contracts could find themselves in the position of having to cover higher labor costs than were contemplated at the time they entered into the agreements. They’ll be contractually bound to maintain services despite increased costs that might not be covered by the existing arrangements.
The new rule has some notable exceptions. The DOL has stated that teachers are exempt, as well as administrative personnel who help run higher education institutions. For example, academic counselors and advisors and intervention specialists aren’t subject to the FLSA’s overtime requirements if they’re paid at least the entrance salary for teachers at their institution. However, other types of nonprofits won’t be so lucky with their white-collar employees.
The DOL has also indicated that it won’t enforce the higher salary thresholds until March 17, 2019, for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. During the nonenforcement period, the DOL will engage in outreach and technical assistance efforts to these providers.
December 1 will be here before you know it. Consult with your financial advisor to determine your best course of action for minimizing the negative repercussions associated with the new salary-level test if the FLSA applies.
Nonprofits have several options available for complying with the new overtime rules. Your options include:
Raising salaries. For employees who meet the duties test, have salary near the new salary level of $913 per week or $47,476 per year and regularly work overtime, you can increase their salaries to meet the new threshold and maintain their exempt status.
Paying overtime above a salary. You could continue to pay newly overtime-eligible employees a salary and pay overtime for any hours in excess of 40 in a week.
Redistributing workloads. You can redistribute workloads to ensure appropriate staffing levels while minimizing overtime.
Adjusting base pay and paying overtime. You could adjust an employee’s earnings to reallocate it between regular rate of pay and overtime compensation. The revised pay may be on a salaried or hourly basis but must include overtime payment when the employee works more than 40 hours in a week.
The DOL doesn’t require or recommend any one approach.
Microsoft’s philanthropic arm has announced that it’ll donate $1 billion in cloud computing resources over the next three years to nonprofits and nongovernmental organizations worldwide. The donation is part of an initiative that includes providing a suite of Microsoft cloud services, expanding access to cloud resources for 900 faculty researchers at universities and reaching 20 underserved communities in 15 countries with broadband connectivity and cloud services.
Microsoft’s goal is to serve 70,000 nonprofits through one or more of the offerings in its cloud services suite by the end of 2017. The company will focus on increasing that number in subsequent years. Nonprofits must work through TechSoup (Microsoft’s partner in the donation program) to satisfy a variety of eligibility requirements to participate. To determine if your organization is eligible, visit http://bit.ly/1RSECd2.
According to the annual “Volunteering and Civic Life in America” report issued by the Corporation for National and Community Service and the National Conference on Citizenship, approximately one in four Americans, or 25.3%, volunteered with an organization in 2014 — which has remained relatively constant since the increase reflected after 9/11.
In addition, 62.5% of Americans engaged in informal volunteering in their communities, helping neighbors with tasks such as watching each other’s children, shopping or house sitting. Notably, the research also found that volunteers are almost twice as likely to donate to charity as nonvolunteers. Almost 80% of volunteers donated, compared with 40% of nonvolunteers.
Your organizations can use information in this report to help fine-tune your volunteer program. To keep your numbers healthy, you also can find out more about your volunteers’ skills and interest, and assign them to tasks accordingly. And you can offer incentives for volunteering, such as greater recognition and free admittance to your events.
A survey conducted by the Chronicle of Philanthropy — the first to measure public confidence in charities since 2008 — has found that two-thirds of Americans have a fair amount of confidence in charities. More than 80% indicated that charities do a “very good” or “somewhat good” job helping people.
A significant number of respondents, however, expressed concerns about charities’ money management. One-third said charities do a “not too good” or “not at all good” job spending money wisely, and 41% said their leaders are paid too much. Notably, half said that, when deciding where to donate, it’s “very important” to know that charities spend a low amount on salaries, administration and fundraising. And 34% said such knowledge is “somewhat important.”
Consider these statistics when you complete your next Form 990 or draft your next annual report. Are you clear about how you help your constituents while you manage your nonprofit’s money wisely?
In the wake of the most recent recession, many nonprofits are taking a hard look at their sustainability over the long term to be ready to face uncertain economic times. After all, an organization in poor financial health may find itself forced to cut programs and services when they’re needed the most. Fortunately, steps you can take now may help reduce such risks while allowing your nonprofit to fulfill its core mission.
Having a limited number of funding sources is the biggest sustainability challenge for many organizations. U.S. nonprofits typically receive funds from the government, foundations and individual and corporate donors, and often depend heavily on a few funding sources — for example, an annual government or foundation grant.
The danger in such limited reliance was amply illustrated when government and foundation support dried up during the economic downturn, and many nonprofits were forced to close their doors. The problems compounded for nonprofits serving low-income populations that could no longer provide any financial support themselves.
If you don’t have a variety of funding sources, it’s imperative that you branch out. The broader the base, the more stability and protection from economic challenges your organization will have.
A nonprofit needn’t rely solely on outside funders to improve financial sustainability. It might increase revenue by expanding its fee-based service offerings to new locations or populations. For example, an organization that provides services to children with disabilities in schools also could offer the services to children with disabilities in foster homes.
More and more, nonprofits are pursuing formal partnerships with other organizations — sometimes at the prompting of funders — to share costs. Organizations with similar missions and serving similar populations can collaborate to make better use of limited resources while reducing competition for funding. They also can more quickly scale up high-demand programs or services by joining forces.
Maintaining an adequate reserve is a key component of financial sustainability, but some organizations still lack such a fund. Even some nonprofits that have reserves haven’t established a formal policy for determining the appropriate amount, maintaining that amount and allocating funds when necessary.
Of course, having multiple funding sources is no guarantee of security — a harsh economy can have widespread consequences that affect multiple sources. Additional strategies that more indirectly affect financial sustainability include the following:
Step up branding. Strategic marketing and branding are key for promoting an organization and achieving stable financial standing, yet many organizations neglect this approach. A brand that clearly communicates a nonprofit’s mission and services helps to establish a solid reputation that builds trust among donors. This can be particularly crucial when funding pools are shrinking.
Evaluate outcomes. Donors and other nonprofit stakeholders are showing greater interest in the outcomes of programs and services and other nonfinancial measures. Often the number of lives improved has a greater impact on funders than the number of dollars spent. And they want to fund programs that are successful. By evaluating and sharing outcomes, a not-for-profit can demonstrate value, effectiveness and accountability.
Outcome evaluation also is an essential tool for decision making. You can use the process to identify underperforming programs and make necessary tweaks or to prioritize expenditures if funding declines or additional funding becomes available.
Assess your financial standing. No organization can accurately evaluate its financial sustainability without timely, comprehensive and accurate financial reporting. How can a nonprofit know how much funding it needs to support its programs and services without knowing how much it costs to operate?
In addition to providing a current picture of financial standing, financial reports should compare actual figures with historical and projected numbers. Some nonprofits also are introducing “dashboards” that give real-time financial data, ratios and trends in easily understood graphic form.
Involve the board. It’s not enough for the board to simply review financial statements before its meetings. Board members also must provide true fiscal oversight and not leave major financial decisions to staff, no matter how trusted and loyal.
Every board member should undergo training on relevant financial issues and be able to understand financial statements. The finance committee should report regularly to the full board and engage in dialogue about their reports and the organization’s financial health. The board shouldn’t merely take a backward-looking view but should also consider the future — for example, taking into account how current trends and developments might affect future plans for funding the nonprofit’s mission.
Plan for contingencies. When budgeting, every nonprofit should take the time to engage in annual contingency planning exercises. How could your organization continue to serve its mission if it suffered a 10% drop in funding? A 20% drop? Evaluating such scenarios in advance can provide valuable guidance and preserve mission-critical programs and services in times of crisis.
Achieving financial stability is a critical part of sustainability and should reflect both the organization’s mission and its financial needs. Your financial advisor can help you objectively assess and improve your nonprofit’s position.