There is much anxiety, concern and trepidation currently in the not-for-profit industry due to a number of factors both internal and external. As CPAs, we focus our attention not only on basic services such as audit and tax, but also on management-related issues that impact our clients, including:
Risk Management and Reputational Risk
Reputational risk holds special significance for the not-for-profit sector, whose public persona often determines their ability to successfully serve their constituents and access necessary funds.
Recent surveys of management and Boards of not-for-profit organizations, as well as members of the public who monitor, donate or volunteer their services, rate reputational risk as the top governance priority for not-for-profits.
Cybersecurity has long been a top concern for the private sector and government agencies, but not-for-profit organizations are now realizing the importance of cybersecurity to their operations.
Compromised security has both short term and long term effects on not-for-profits – resulting in loss of confidence of donors, program participants and other third parties going forward.
Internal controls on fiscal and other areas
Many not-for-profit organizations believe that internal control systems and policies are not operationally critical, are satisfied with the controls already in place, or believe their team members are trustworthy. They are further deterred by the cost to implement more formal controls. However, a good internal control system is a powerful component of a successful organization.
Strong internal control systems can deter fraud, which assures financial information reliability – something that is increasingly important in this era of greater transparency and oversight.
To handle non-fiscal risks, organizations should implement an Enterprise Risk Management process, which evaluates all of an organization’s inherent risks on operational issues.
Many organizations continue to struggle with accountability for the timing, classification and utilization of unrestricted and restricted revenues.
Budgeting and effective forecasting
Benchmarking actual results against budgeting and forecasting is more critical than ever in this environment of increasingly constrained revenue.
Governance between management, Board and third parties
Governance properly administered is the bedrock of today’s not-for-profit organization. The way in which management and Boards serve an organization, and their commitment to excellence in good governance, plays a significant role in setting a tone of integrity and ensuring the ultimate viability of organizations and their programs.
The not-for-profit industry has recently become a focal point for additional oversight and control by funding agencies and government entities. It is vital that all not-for-profits make effective, transparent governance a key aspect of their operations. As time goes on, these challenges will not go away – they will only become more acute. It is imperative to establish an effective response to them in order to ensure the sustainability of any not-for-profit. If you think your organization may need to reconsider its priorities in a given area, please reach out to one of our knowledgeable professionals to discuss the best steps for moving forward.