I continue to see and hear about issues that our clients and others in the nonprofit industry are having with their lenders with respect to financial statements. It is becoming more evident that many lenders do not understand nonprofit financial statements due to their unique financial reporting requirements. Below are the top 5 issues that nonprofits have with their lenders.
As the implementation deadline of the new revenue recognition standards (ASU 2014-09) approaches, there are many companies and organizations scrambling to grasp the impact that the forthcoming changes will have on their financial reporting. For non-public entities, the changes are effective for reporting periods beginning after December 15, 2017. Not-for-profit entities are having an even more difficult time than others, as there are already differences in practice in various components of revenue transactions. The new revenue recognition standards do not address these differences in practice, and in fact, actually make the current differences more ambiguous.
Say that your not-for-profit’s investment portfolio has recently grown in size and complexity due to a new endowment. Yet your staff doesn’t have the time or expertise to wisely invest and monitor these funds. This is probably the time to hire an investment advisor — but how do you find the best person to make prudent investments while meeting your investment goals?
Where to start
Finding an advisor starts with identifying a pool of qualified candidates with proven track records. Experience working with nonprofit endowments is key.
Finding and retaining good board members can be challenging for not-for-profits. So it’s important not to make the job harder and more time-consuming than necessary. This starts with efficient board meetings.
The “P” word
The key to effective board meetings can be summarized in one word: planning. Once the meeting date is set, your executive director and your board chair should prepare an agenda. For each item, the agenda should provide a timetable and assign responsibility to specific board members. Include at least one board vote to reinforce a sense of purpose, but be careful not to cram too much into your agenda.
Your not-for-profit’s board members may be able to offer access to better deals or services than your organization could get on its own. However, there’s a fine line between a board member helping your nonprofit get fair pricing and the member receiving perceived or actual personal benefits. The latter can threaten your exempt status.
You’re likely thrilled when your not-for-profit receives a large gift. But when you add them up, small donations can be just as critical to your organization’s well-being. The latest trend in giving is the micro-donation, and if you aren’t already soliciting these types of gifts, it’s time to start.
Don’t think twice
Micro-donations are gifts small enough that a donor doesn’t have to think twice about making them. Many people, citing budget constraints, are reluctant to make a one-time donation of, say, $200. Yet they may not think twice about giving $20 a month via an automatic checking account deduction — even though such donations will add up to more than $200 over a 12-month period. Simply put, micro-donations make giving doable for more people.