As an increasingly competitive market propels nonprofit organizations to greater sophistication, accounting firms are finding new ways to serve these more robust clients.
"There's been an uptick in how CPAs have to service nonprofit clients," explained David Rottkamp, audit partner and not-for-profit practice leader at New York-based Top 100 Firm Grassi & Co. "There's a need to provide the full suite and extend past auditing and preparation of tax returns into business advisory services -- policy and procedure manuals, looking at infrastructure, including things like governance activities, board meeting on fiduciary [concerns], helping with IT solutions."
Much of this is communicated from the top down, continued Rottkamp, who has served the not-for-profit sector industry for more than 25 years and counts 125 nonprofits among Grassi's clients. "One thing that drives a lot of the items is the board's involvement. Most board members come from the commercial world ... they see what's happening in the commercial, retail and publicly traded worlds and look for the organization to implement best practices through the nonprofit sector.... Compliance follows along with that."
As roughly 70 percent of Grassi's clients are funded through government contracts and Medicaid, they encounter specific compliance issues around regulations like the HIPAA Privacy Rule, which Rottkamp said the firm identified as a specific area of need - and thus as an opportunity -- three to four years ago through its professional services industry relationships with attorneys, bankers and investment managers.
New compliance issues continue to arise, according to Lori Budnick, partner and director of the nonprofit services group for New England-based Top 100 Firm BlumShapiro, who points to the Financial Accounting Standards Board's proposal of new structures for financial statement displays as something that "could dramatically change the way financial statements in nonprofits are accounted for and shown. We may need to be helping clients implement the change. It's similar to what happened in the 1990s when net asset accounting came forth, and it went from fund accounting to net asset accounting."
In the meantime, business advisory opportunities abound for nonprofit clients, with firms like Washington, D.C.-based Top 100 Firm Raffa offering classes and thought leadership geared toward the sector as a whole.
"We look for gaps of information in the sector and try to help out," said managing partner Tom Raffa of the Raffa Learning Community, a series of complimentary and fee-based training seminars in accounting, technology and human resources conducted by firm experts both in-person and online.
NEW WAYS TO SERVE
Raffa acknowledged that some of the 3,000 to 4,000 members of the Learning Community might eventually join the firm's roster of 700 to 800 nonprofit clients: "Sometimes we hold a class and people follow up. In a technology class, the marketing guys might get three to four people out of 20 that follow up and turn into leads. But often the people are not clients, and work with other CPA firms but come continually to these classes. Eventually, it could help. If they come to the class and you hold yourself as an expert in an area, and they need help, they might come back to you."
Regardless of conversion method, these clients can be a big win for well-equipped firms. "People have come to realize that nonprofits represent themselves with good business," Raffa explained. "We can work with them in the off-season and be more flexible with nonprofits. How we best attract nonprofit clients is to think of the array of services we offer that another firm doesn't. We might lose [a client] because of audit rotation, but we can help them with technology, HR, government consulting, or executive search and placement."
Grassi has similarly capitalized on its depth of service to retain and find new ways to work with clients. "A large nonprofit brought us in for our technology knowledge on the compliance side," Rottkamp shared. "We straightened that out and met their needs, and from that we became their external auditors. You can come into working with nonprofits in a variety of different ways - you could do audit or tax work and develop that into other advisory services, or come in from the advisory services side." Accounting firms approach nonprofits from this advisory role so they can keep up with their clients' business needs.
"In advisory services, it's not just compliance but a general business model of what [the nonprofit clients] are, what they do, and how we can make them better," Rottkamp continued. "It's a very competitive nonprofit market out there, especially for certain types of businesses, and they're all fighting for government money and contributions. They want to maximize their money and come in with the services they provide, and look to us to help run their business as well."
BlumShapiro often consults with their approximately 300 nonprofit clients at a programmatic level, said Budnick: "We are helping nonprofits strategize relative to programs, whether it's programs that are not being profitable, or programs that may need some strategic revamping, if you will. We do general business planning with them, whether they need assessments or help evaluating the operational structure of some sort of new programmatic objective, or to design a good operational structure using technology to help improve data flow."
The firm has found this to be an especially viable point of contact as the nonprofit sector mirrors another trend of the for-profit world - an increase in merger and acquisition activity. One multi-service social services agency client, for example, acquired an organization that had two shelters for women, along with a small program for young girls. The agency chose to phase out the girls' program, and the local Boys & Girls Club took it over.
"We are really kind of working together to identify how a program can still exist, but maybe not within the organization," Budnick explained. "On our end, we helped with the financial planning relative to that." BlumShapiro also provides nonprofit clients with risk assessments, which cover general, fraud and IT-related risks.
"There have been a lot of fraudulent activities in nonprofits in the last five years," Budnick continued. "Once they start opening up the newspaper, board members are saying, 'Are we exposed to that?' We've been pressing them to do these [risk assessments] for years, and they're now starting to buy into it."
THEY NEED BRANDS, TOO
Five years ago, board members might have been equally surprised to find themselves in another section of the paper -- the ad pages, which, together with other marketing efforts, have become a greater necessity in today's tougher economy.
The need has swelled enough that Raffa added marketing services to its practice within the last five to six months. The firm emphasizes branding for those three to four current clients, having recently gone through its own rebranding effort. "It gives a leg up in that sector, as nonprofits typically have not spent a lot of money because people are concerned that the money doesn't go into the programs," Raffa explained. "The thing within this country is that nonprofit clients are not supposed to be risk-takers, and shouldn't be pushing that much. We get them used to the idea of spending a little more money on doing something they're not used to doing, in order to become larger and serve more people. The tasks they have are overwhelming, but the dollars often aren't. Business grows through branding, advertising, taking risks -- and getting the best talent you can."
That last category being one that many multi-service accounting firms hope they can help fulfill.
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