New Challenges for Not-for-Profits -- Part 2
We are posting a four-part blog series based on an article recently published in Accounting Today, by Antoinette Alexander. Sharrard, McGee & Co., PA has had many not-for-profit clients throughout our 43-year history, and our experienced CPAs have a deep understanding of the unique challenges of these types of businesses. We look forward to answering any questions you may have after learning some of the new developments presented in these blog postings. Part 2 discusses new ways of fundraising including those focused on efforts involving crowdfunding.
Strategies for Diversification
The full impact of the TCJA on charitable giving has yet to be determined but encountering a funding disruption or losing a significant donor can deal a major blow to not-for-profits, many of which are already operating on an inadequate supply of reserves. While the proper amount of operating reserves will vary from one organization to the next — depending on size, scope and sector —a nest egg with at least six months of operating reserves is recommended. However, just over half (51 percent) of organizations surveyed fall short of this target. The “Not-for-profit Financial Priorities Benchmark 2018 Survey,” reports that 60 percent of respondents are looking to expand fundraising and development in the upcoming year.
Meanwhile, 39 percent of not-for-profits surveyed are rethinking their revenue model and income-generation strategies. Industry sources agree that diversifying funding and revenue sources and finding ways to capitalize on the generational differences in charitable giving habits is crucial. An increasing number of not-for-profits are pursuing multiyear grants, looking for ways to diversify their donor lists, and are expanding their portfolio of programs to make a broader impact and attract more donors. They are also considering selling services, documentation and goods that can generate revenue.
Crowdfunding, which can help not-for-profits reach and share their story with tech-savvy donors, has also emerged as an effective fundraising tool. According to the National Council of Not-for-Profits, the largest crowdfunding effort in the United States, as of August 2018, raised $41.6 million to assist people affected by Hurricane Harvey. A study commissioned by the World Bank predicts that by 2025, the total market potential could reach $90 billion to $96 billion per year. Crowdfunding translates to more technology in the giving process and more reporting necessary as not-for-profit strive to monitor emerging trends and engage donors where/when they are most likely to give.
Staff Report | 02/14/2019