Nonprofit board members: Watch for financial warning signs
In addition to widespread federal funding cuts, many not-for-profit leaders are concerned about a possible economic downturn. If you’re a on the board of directors for an organization whose finances aren’t in good shape, its ability to fund critical programs — or even remain operational — could be severely undermined. You and the rest of […]
Preparing for a financial crisis? Build up operating reserves
You never know when your nonprofit might experience a financial blow. With the current efforts in Washington to slash expenses, some nonprofits have already lost federal funding and more may lose it in the near future. But that’s not the only risk. A significant grant from a foundation or state government might not be renewed, […]
Making cost-allocation decisions for your nonprofit
Cost allocation probably isn’t your favorite task — particularly if your nonprofit has many activities. Yet the process is critical because donors and funders want to know how your organization uses its financial resources. In addition, you likely need to comply with Generally Accepted Accounting Principles (GAAP), which are determined by the Financial Accounting Standards […]
Bank reconciliations are your nonprofit’s first line of defense
How often do you reconcile your organization’s internal financial records against your bank statements? Bank reconciliations are an essential internal control procedure that busy managers sometimes overlook or neglect. Here’s why it pays to perform them regularly. Operational benefits Weekly or monthly bank reconciliations can improve the accuracy of your organization’s financial records. You may […]
Reminder: Profits and cash flow aren’t the same
Profitable businesses often experience cash flow shortages, particularly if they’re experiencing rapid growth. Business owners may wonder why they owe taxes when they regularly struggle to find cash to cover their bills. The answer can be found by understanding the key differences between profits and cash flow. Operating activities Profits are closely related to taxable […]
Board independence is about more than avoiding conflicts of interest
Are your not-for-profit’s board members independent? Your immediate response is probably, “of course!” But contrary to what many nonprofit leaders and staffers might think, director independence goes beyond avoiding conflicts of interest. In fact, the IRS has a four-part definition of independence. If a majority of your organization’s board members don’t meet all four criteria, […]
Eyes on the income statement
When reviewing their income statements, business owners tend to focus on profits (or losses). But focusing solely on the bottom line can lead to mismanagement and missed opportunities. Instead, you should analyze this financial report from top to bottom for deeper insights. Think like an auditor Review your company’s income statement with an auditor’s mindset. […]
Welcome charitable pledges — and account for them properly
The difference between financial pledges and donations is relatively simple: Pledges are promises to donate sometime in the future, and donations provide immediate support for your not-for-profit organization. What’s not so simple is accounting for pledges. After all, a promise to donate isn’t a guarantee that you’ll receive the money when the contributor says you […]
Why private foundations need to avoid self-dealing
If you’re a leader of a private foundation, you’re probably aware of the prohibition against self-dealing transactions between foundations and “disqualified persons.” But what constitutes self-dealing? And who exactly counts as disqualified in this context? It’s important for you to know because financial repercussions for violating the rules can be severe. Who is disqualified? The […]
Update on a possible universal charitable deduction
During the COVID-19 pandemic, Congress temporarily enabled individual charitable donors who didn’t itemize federal income tax deductions to deduct up to $300 in contributions in both 2020 and 2021. This universal charitable deduction galvanized many donors who might not otherwise have supported charities in those years. However, the deduction expired after 2021. A bipartisan group […]