Not-for-Profit

The Financial Accounting Standards Board (FASB) is working on a proposal that would make substantive changes to not-for-profit financial statement reporting.* The FASB’s objective is to improve net asset classification requirements and the information provided in the financial statements and notes about liquidity, financial performance, and cash flows. This initiative represents the first effort to update the fundamental reporting model for nonprofit entities in more than 20 years.

To properly oversee and manage a nonprofit organization, its board members need to receive accurate and timely information about the organization’s finances. But which financial information will be most helpful, and how detailed should it be? There is no single best approach. Much depends on the makeup of the board. In many organizations, not every board member has the necessary financial expertise to decipher complex financial reports. At the same time, informed decision-making and planning require a good understanding of the organization’s financial situation.

A recent study by the Stanford Graduate School of Business in collaboration with BoardSource and GuideStar found that although many nonprofit organizations devote significant efforts to measuring performance, nonprofit directors say the efforts are falling short.

While nonprofit organizations have rebounded from the most crippling effects of the 2008 economic crisis, the recenty published State of the Nonprofit Sector Survey* shows many still have significant challenges ahead. For the seventh year in a row, a majority of the more than 5,000 organizations surveyed reported that people — particularly those in low-income communities — are going without needed services because nonprofits can’t meet the demand.

Does your not-for-profit organization reimburse staff and volunteers for expenses they incur while conducting business or traveling on behalf of the organization? If so, you’ll want to have a clear written policy for paying or reimbursing those expenses.

Serving on a nonprofit board entails many responsibilities. Board members are expected to advocate for the organization, make prudent decisions, ensure the organization complies with regulations, and plan for the future. Filling a vacant seat is an important board function. Because there will always be turnover, and there may be some degree of urgency at times, it’s wise to have a recruitment process in place to help you search more effectively and efficiently whenever the time comes.

Nonprofit directors and officers often view their personal liability exposure as much lower than that of their for-profit counterparts. Consequently, many nonprofits carry no or inadequate personal liability insurance for directors and board members. In reality, claims naming nonprofit directors and officers are as widespread as those against for-profit corporations and can cost organizations hundreds of thousands of dollars or more.

Accepting a corporate sponsorship to help fund one or a series of events or simply to provide ongoing support for your organization’s programs and operations can benefit both the organization and the corporation — if the sponsorship is arranged properly. In addition to the corporate sponsor’s financial support, your organization may receive in-kind services and/or product donations, along with increased media attention that can boost public support for your mission. For the corporation, the sponsorship offers public recognition of the business’ charitable activities, which may help it attract new customers and enhance its reputation.

A recent report* suggests that retaining donors remains challenging for many organizations.