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Friday, February 19, 2016

It’s Checkup Time for Nonprofits

Posted by Michael Boulton

Most nonprofit organizations have passed the halfway mark of the fiscal year, which makes this an excellent time for a financial checkup. How are you tracking towards budget? Are your fundraising goals on track? Is cash flow tight? Have you filed your Form 990? Have you given any thought to your fiscal year 2016 financial statement audit (or is your 2015 audit not even done yet)? There are many questions to ask, and hopefully you can tackle each of them as you settle into 2016.

To support your checkup, below are some insights into the current environment for nonprofits. These may be helpful for you, or if you are already considering them, they may serve as validation of your current efforts.


2015 was a pretty good year for nonprofit fundraising efforts, and fundraising methods are steadily expanding. How did your organization perform compared to the stats below?

According to the 2015 Blackbaud Charitable Giving Report:
•Overall nonprofit fundraising grew 1.6% in 2015―a modest increase, but still growth. Results by sector and giving method were a bit of a mixed bag.
•Not surprisingly, following continued economic recovery, faith-based organizations generated a 3.9% increase in giving.
•Arts organizations and K-12 education giving was relatively flat from 2014, up 0.5% and down 1%, respectively.
•Online giving grew 9.2% from 2014, with sector-leading arts organizations up 8.3% and K-12 education up 12.3%.
•Some 14% of all online giving in 2015 was from mobile devices. This surprised me because I thought that figure would be higher, but regardless, it’s still a noticeable amount.

Giving in general is increasing, but the methods donors use continue to change. Mobile is just one of the newer methods. Another change we are seeing is the greater use of donor-advised funds (DAFs). We recently published an article on this exact topic, noting over $70B under management in DAFs. The takeaway: There’s lots of money sitting in DAFs waiting to be distributed to nonprofits. Make sure your organization is marketing this as a giving option for your donors.

I believe online giving is only going to keep increasing. Donors will continue to contribute to crowdfunding campaigns and use mobile devices to quickly give to their favorite charity. (I doubt I’m alone in thinking I would be glad to see my church start accepting Mass intentions from my iPhone…)

This is also a good time to review your gift acceptance policy. The fundraising waters can be choppy, so seek expert advice if you need assistance creating a policy (as a starting point, here is a great resource from the National Council of Nonprofits). Also ensure you are accurately tracking those special event tickets. Special events such as galas and golf tournaments are often a quid pro quo – so don’t forget the quo! What donors receive in exchange for the ticket purchase is crucial in keeping proper records.


For those June 30 fiscal year-end nonprofits, now is the time for an important status check on your budget (or actuals, for that matter). A common pitfall of nonprofit budgeting is too much ownership at the top. Delegate, empower, and listen to those all throughout the organization. Program managers, department heads and team leaders should all have a stake in the budget. Appropriate ownership delegation is important to ensure budgets are an effective tool, so make sure those team leaders are aware of their budget status and have a plan in place to see it through for the rest of your fiscal year.

Budgeting and forecasting software can make your life much easier, so this is also a good time to consider such a tool. For example, Adaptive Insights can help with budgeting and forecasting, and enable you to monitor your organization’s expense habits, staff and overhead planning, and key performance indicators.

Form 990

You likely filed your Form 990 recently or plan to file it very soon. As you’re probably aware, there is a short question and answer section on the form regarding whether each member of the board of directors received a copy of the 990 prior to filing. This is an easy win for the organization and an easy way to engage in a discussion with your board, so make sure they review a copy of the filing. Just as important, make sure they understand what they are reading! Solicit the help of your CPA to explain the information in a concise and simple manner. This practice should not simply be a “check the box” task for the board. Rather, it is a perfect time to re-evaluate your organization’s mission statement, program descriptions, financial results and compliance-related activities.


If performed appropriately, your annual financial statement audit should be an effective tool for your organization, not a burden. The audit should serve its purpose by providing assurance on your financial statements, but should also provide valuable feedback on your operations, policies and procedures. Similar to your Form 990 discussion, the annual audit is a great time for reflection and strategic discussion amongst your organization, your service providers and your board.

At this time of year, it’s all about preparation. Don’t let that audit sneak up on you – start planning now. Proactively reach out to your auditor instead of waiting for them to start the process. Make sure you have your contract signed, onsite fieldwork timing scheduled, and a very detailed and clear timeline for completion (there’s nothing wrong with holding them accountable as much as they hold you accountable).

While you’re comparing your fundraising growth to the Blackbaud stats above, don’t forget to schedule time to compare notes between your finance group and development department. A common audit finding we see is a lack of collaboration between the finance and development teams. If you don’t have accurate fundraising data from the development team, you simply can’t produce reliable financial data.

All in all, be proactive and strategic with your annual audit. Because let’s face it, the more you put into it, the faster it will be completed. And, your timely (and accurate) financial reporting will have your board, bankers and donors applauding.

If an annual audit is not necessary for your organization, this is still an ideal time of year to take a close look at your financials and internal operations. Do a self-audit, and if you want an independent, unbiased set of eyes, consider bringing in a CPA for a nonprofit internal control assessment.

How Armanino can Help

We work with over 450 nonprofit organizations, so whether you are a religious organization, performing arts center, private school or social services organization, we can help you navigate these and many other issues. As the largest California-based CPA and consulting firm, and the 19th largest in the country, we have the depth and expertise to help nonprofits of any size. We also take the time to truly understand your organization and your challenges. We know nonprofits, so whatever your needs are, we can help.

I wish you well as 2016 rolls on, and please do not hesitate to reach out if you have questions or would like additional information.


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