10.27.20

Not-For-Profit Group Newsletter – Fall 2020
Laurence Sophian, Charles J. Burke

Fiscal Oversight During a Pandemic          

LARRY SOPHIAN, CPA, MBA

Even during the best of times, it is easy for not-for-profit organizations, caught up in their missions, to spend too little time managing their finances. This can lead to a variety of problems, from needing to spend more time than planned on fundraising and taking time away from providing your services to — in the worst case — putting the organization out of business.

Unfortunately, none of us are living in the best of times. Many types of businesses have been severely impacted by the COVID-19 pandemic and not-for-profit organizations are no exception. Arts organizations that are dependent on sales of tickets, and other organizations whose services involve groups of people, are just a couple of examples of not-for-profits that have been particularly hit hard. Even organizations whose services have not been significantly impacted have likely had to rethink how they conduct various aspects of their operations, at least for the duration of the pandemic.    

Some of the analysis and action steps you might consider taking to enhance the fiscal oversight function during these times include:

  1. Project your cash flows for the next three, six and twelve months. It is impossible to know how long we will be living with the pandemic, so keeping close track of cash flow and cash needs for both the short- and long-term is critical. Cash flow projections are just that — projections. Even in stable times, there is a fair degree of uncertainly. Your projections should build in various scenarios — what will happen at varying levels of revenue and expenses — so that you have time to consider how you might respond to various outcomes.   
  2. Analyze your revenue and expenses by program and function. What programs can you continue to provide and what revenue can you expect to earn from these programs? What does it cost to run these programs? Include both the direct and support costs the programs require.
  3. What programs are you unable to provide during the pandemic, but will want to resume when it is safe to do so? What are the costs of maintaining the people and other costs to resume those programs at that point? If it is not financially feasible to maintain these costs until that time, how quickly will you be able to ramp up these programs when they can resume?
  4. Many not-for-profit organizations have had to replace in-person fundraising events with virtual events. The jury may still be out on how effective virtual fundraising is, but most people expect these events to raise less than in-person events. While it is less expensive to have these events, what matters, of course, is what you can expect to get from them.  The reduced expectations from these events need to be considered in your projections.
  5. With people’s social activities significantly curtailed, your volunteers may have more time to help develop the analysis and projections. Do not be shy about asking for additional help, from those with financial expertise or others.  Of course, you need to respect their time and preferences about helping you on-site versus remotely.  But, you will never know what people are willing to do without asking. The worst they can do is say no.
  6. A review of the projections and analysis should be occurring as close to real-time as possible. Management and the finance committee or board of directors should be meeting regularly, reviewing the projections and analyses, challenging the underlying assumptions, and updating them as events occur and situations change.
  7. Talk to vendors and creditors to see if they can provide any flexibility in payment terms. If you are in a tight cash flow situation, anything that allows you to defer payments can be helpful.  As with asking volunteers, the worst that can happen is that they say no.
  8. Review the terms of restricted monies. Consider approaching donors to see if they are willing to remove or ease the restrictions to help you get through this time period.
  9. Most importantly, be honest with all of your stakeholders. People are much more willing to help and work with you if they think you are being straightforward with them.

There is no question that many not-for-profit organizations will continue struggling for the duration of the pandemic. Planning for the ongoing financial impact can help your organization survive and position you to be as strong as possible as all of us come out on the other side of COVID-19.

For more information, contact Larry Sophian at lsophian@orba.com or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.


Not-For-Profits in the News

CHARLIE BURKE, CPA

Restaurant Thrives by Teaming Up With Not-For-Profit

An organization’s ability to turn on a dime and creatively adapt to changes in circumstances is critical these days. A New Jersey not-for-profit organization, Be Awesome to Somebody, demonstrated this during the COVID-19 pandemic.

The organization, which usually supports international humanitarian work, teamed up with a local boutique ramen restaurant to support first responders and health care workers. They launched two temporary, not-for-profit pop-ups selling take-out and delivery pizza and Thai rotisserie chicken at discounted prices (ramen, it seems, is not a great candidate for portable meals).

Customers could add a contribution to their bill to donate a half-price meal for first responders or someone in need. Profits were used to provide more meals. The project allowed the restaurant to bring back some employees who were laid off when it closed.

U.S. giving falls to historic lows

Is charitable giving in trouble? A survey conducted by Gallup last April found that the share of Americans who have given to a religious or other type of charity during the previous 12 months dropped to a historic low of 73%. In previous years, this figure was more than 80%. Although the April 2020 survey inquired about activity over the past year, Gallup cautions that many respondents may have answered only about their current or very recent activity, which could have been affected by the COVID-19 crisis.

The majority of respondents (66%) said they did not plan to change the amount they contributed to charity in the coming year while 25% said they planned to increase the amount. As Gallup notes, though, the duration and severity of the COVID-19-related economic downturn will be a critical factor in whether Americans are able to fulfill those plans.

For more information, contact Charlie Burke at cburke@orba.com, or call him at 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group

Forward Thinking