Three Things Every Fundraising Professional Should Be Prepared for in 2013
Fundraising professionals, regardless of an organization’s size and scope, play a vital role in the overall success of a nonprofit. With overwhelming economic uncertainty and increased scrutiny, nonprofits are required now more than ever to be effectively governed.
There are several key factors that nonprofit fundraising professionals should be prepared for in 2013:
For several years now, expanded disclosures about nonprofit executive compensation practices have been made publicly available through the filing of the Form 990. Best practices dictate that organizations have a process in place for determining the compensation of the CEO, officers and key employees. This includes the review and approval by an individual independent of the process, comparing salary and benefits to data available from comparable organizations, and documentation of the deliberations and decisions that are made to substantiate the compensation provided.
As a fundraising professional, you should know how the organization answers questions about executive compensation on their Form 990. More importantly, you should know enough in the event that a donor questions you about the organization’s executive compensation.
You might also consider how your organization’s executive compensation compares with similar organizations where you are located and monitor how the public perceives the organization’s compensation practices based on media reports, social media, and ratings made by charity rating organizations.
To access your organization’s Form 990, and that of other nonprofits, Guidestar can prove to be a helpful resource. To find information specific to executive compensation visit page 7, Part VII, and Schedule J, Compensation Information within the Form 990.
Management of a well run nonprofit organization should critically assess the risks the organization faces. When scandals involving nonprofit organizations become public, even the most well-known, well-respected nonprofits have trouble recovering their fundraising efforts to pre-scandal levels.
A comprehensive risk assessment includes identifying risks, evaluating the likelihood and severity of the risks and the steps to be taken to mitigate the risks. Ideally the assessment should be updated annually. Identifying risks should be done broadly and should include financial and compliance risks, as well as reputational risks.
Some of the risks that nonprofits face include:
- Fraud or misuse of assets.
- Violations of law and compliance requirements.
- Economic risks that could impact revenue streams or the sustainability of the organization’s programs.
- Risks associated with chapters or affiliated organizations.
- Risks associated with the use of volunteers or protecting the individuals who benefit from the organization’s programs such as youths, the elderly or the mentally ill.
Once the risks are identified and an assessment is made of the likelihood and severity, management should develop a plan for addressing the high threat/high impact risks to the degree possible within the organization’s means.
This is where you as a fundraising professional play a vital role. Make sure you understand the risks the organization faces, and what role you’ll play should one of these risks impact your ability to raise funds for the organization.
In order to be prepared, ask your CFO or internal auditor for the organization’s risk assessment. If your organization does not have one, consider what things might cause the organization trouble. Develop a plan for communicating with other members of management in the event that one of these circumstances occur, and consider what positive message you can deliver to any donors who might be influenced by the circumstance.
U.S. Debt Reduction Debate
The deadline for the so called ‘fiscal cliff’ came and went but the uncertainty over reducing the size of the U.S. debt and the impact on government spending and tax reform still looms. One thing is certain: the debate is far from over and its impact on the nonprofit sector will be far reaching and is difficult to measure.
There are two areas where nonprofits are likely to be impacted: decreased government spending on discretionary programs could increase demand on the nonprofit sector’s resources and programs; and tax reform that impacts charitable deductions which could reduce contribution revenue. As a fundraising professional, you should be aware of the impact these possibilities pose to the organization, and determine ways to alleviate these risks.
Consider working with the finance staff to model possible impacts. If your organization anticipates a decrease in the amount of federal funding received, or an increase in demand for the organization’s services as a result of decreased federal spending on a particular program, this will likely increase the demand for fundraising dollars. Further, if comprehensive tax reform is made, changes in the deduction for charitable contributions may also impact your ability to raise funds for the organization. You can be instrumental in helping your finance staff model possible outcomes for the organization.
It’s never too early, or late, to know the basis of your organization’s Form 990, to get ahead of the risks facing your nonprofit and to understand the impact that the fiscal cliff may have on your organization. Lessen the pressure to be a successful fundraising professional for your nonprofit in 2013 and prepare by mastering these three key factors.
To stay abreast of the latest discussions related to tax reform and the charitable deduction, read this blog post outlining the most recent House Committee on Ways and Means hearing.
(Editor’s Note: And of course, you can stay updated with charitable deduction issues and AFP’s work on this issue here on the AFP website!)
Laurie Arena Rocha, assurance partner for BDO USA, LLP’s Nonprofit & Education Practice has more than 18 years of experience in all phases of client service and accounting practices. Her professional focus lies in auditing nonprofit organizations, including colleges and universities, governmental entities, and employee benefit plans. She has made over 100 presentations to nonprofit boards in the past two years and is widely regarded for her ability to explain complex financial concepts to nonfinancial individuals, and focus board member attention on the areas on risk. She is a regular speaker on topics ranging from accounting and auditing for nonprofits, employee benefit plans, compliance and OMB Circular A-133 audits, Board governance and women in the profession for organizations such as the American Institute of Certified Public Accountants, Maryland Association of College Business Officers and the Greater Washington Society of Certified Public Accountants. She also serves as an advisory member to the audit committee of a national charity. She is BDO’s regional leader for the BDO Women’s Initiative. Laurie received her B.S. in accounting from the University of Maryland. She is also a regular contributor to BDO’s Nonprofit Standard blog and The Nonprofit Standard Newsletter.