Website Offers Free HR and Risk Materials

Jim Quaid, CPA

The Nonprofit Risk Management Center (the Center) in Leesburg, Virginia, has launched a new website featuring an extensive array of human resources and risk materials for not-for-profit organizations. The Center generally focuses on effective risk management for not-for-profits, helping organizations identify and manage risks that threaten their missions and their operations.

Its new HR and Risk Resources Center is designed to help not-for-profits increase their capabilities relating to human resources and organizational risk. The searchable resources currently include checklists, infographics, worksheets and videos on topics such as how to manage employee turnover and when to hire an interim executive director.

Do wealthy donors in mixed-income areas give more?

A new study published online by the peer-reviewed Public Library of Science (PLoS) examines whether the relationship between income and so-called “pro-social behavior” (such as charitable giving) depends on economic inequality. The researcher used IRS tax data to analyze income and charitable donations at the ZIP code level.

According to the study, higher-income individuals behave more “pro-socially” when local inequality is high — contrary to some previous investigations that have reached the opposite conclusion. Such individuals generally are more likely to donate and are more generous in absolute terms when giving. The researcher also found that the “positive interaction” between income and inequality generally applies to volunteering.

Where to find not-for-profit AI tools

Microsoft has released a new suite of artificial intelligence (AI) solutions and improvements to its Microsoft Cloud for Nonprofit. The tools are intended to improve how fundraisers engage with donors and manage campaigns. Microsoft says they will help organizations overcome long-standing issues with accessing data and using it to form actionable insights based on fundraising analytics.

The new solutions include a fundraising performance dashboard that uses real-time data to provide users with interactive views of campaign performance, donor conversion and similar critical fundraising analytics. Microsoft has also added streamlined communications and engagement tools to its existing not-for-profit product. Microsoft plans to release AI-based donor propensity tools that will give fundraisers the ability to do predictive forecasting of fundraising goals with data modeling and identify the donors most likely to donate to a campaign or cause or to contribute a major gift.

For more information, contact Jim Quaid at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.

Not-For-Profits: Do Your Due Diligence Before Taking Out a Loan

Ken Tornheim, CPA, CFE

Most Americans take out loans at some point in their lives, whether it is to buy a house or to grow a small business. Even not-for-profit organizations commonly apply for loans. However, just because other not-for-profits have debt does not mean your organization should take out a loan at least not before performing thorough due diligence. This newsletter will cover some factors to consider.

 What are the risks and rewards?

The primary drawback to a loan is that you must pay it back. In addition, you will have to pay interest. And rates for not-for-profits tend to be higher than those for commercial businesses because nonprofits often do not have comparable financial resources and are, therefore, considered riskier by lenders. Expenses associated with certain loans for example, for appraisals, closing costs and attorneys’ fees may add up quickly, and your nonprofit may be required to make a significant down payment.

On the other hand, once you are approved for a loan from a reputable lender, you know you will get the funds. Further, applying for a loan may require less time and effort than applying for grants, holding fundraising events or wooing major donors. Chances are you will get the money sooner, too.

What type of loan should you consider?

Many not-for-profits operate in environments where revenues peak and dip throughout the year. Expenses may not correspond with this cycle, though, which can lead to cash flow crunches. For example, not-for-profits often see a big jump in donations around year end or receive grants in lump sums. A revolving line of credit may be a suitable type of loan to provide needed liquidity in these situations.

Cash flow issues also can arise less predictably. A previously reliable funding source might dry up with little or no notice. Likewise, a natural disaster could hit at a time when cash reserves are low. In such circumstances, you may want to consider a bridge loan, typically lasting no longer than one year. Bridge loans are used to fill a funding gap until more permanent financing is secured.

Longer-term loans can be an option for capital purchases (for example, equipment or facilities upgrades) or projects such as a new building. You may intend to finance the project with a capital campaign. However, campaigns can take longer than anticipated, and pledges might not materialize. A longer-term loan can help you avoid delays as the project progresses.

Similarly, you can come across mission- or operations-related opportunities that require prompt action. Perhaps office space you have had your eye on suddenly becomes available, or you encounter an attractive strategic opportunity. Bridge loans or longer-term loans may prove useful to finance these opportunities.

What is in the application?

To increase your odds of securing a loan quickly, collect necessary information before reaching out to lenders. Lenders generally want to see your plans for the loan proceeds. They will require you to provide several years of tax filings and audited financial statements; reports of pledges, receivables, accounts payable and outstanding debt; and a description of major funding sources. You will also need to provide a board resolution approving the loan.

Additionally, you may need to submit information about your organization’s history (including articles of incorporation and bylaws), short and long-term strategic plans, programs, funding, a list of management, and a list of the board of directors. Finally, prepare cash flow projections showing a repayment plan.

Related Read: Are Your Operating Reserves Enough?

Whatever you do, act prudently

Whether your not-for-profit needs to borrow money to maintain status quo or to take on a new project, know that securing a loan can be difficult and may require you to be persistent and tenacious. If you are able to get a loan, make sure to maintain excellent records and carefully manage your financial resources.

Of course, loans are not the answer to every cash gap. If you have been running a budget deficit for several years, adding debt usually is not advisable. Even if you can obtain a loan, the interest rate likely will be high. You are generally better off reducing expenses and raising revenue.

For more information, contact Ken Tornheim at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.