Smart noNprofits know that donor giving is often reflective of the health of the financial markets.As a result of the current economic malaise, many organizations have honed their strategies in the event of economic rumbles by taking more effective measures to protect themselves, according to Greg Allender, managing director and business unit president at CBiz Accounting, Tax and Advisory Services in Bethesda, Md.
"A lot of the audit and finance committees [at nonprofits] are really putting their foot down and saying, 'We need to take a more conservative approach,'" said Allender, who oversees his firm's not-for-profit practice in the Washington, D.C., metro area. "Ten years ago, several of the audit and finance committees weren't doing as good of a job as they are today with their endowment fund management and overall operational budgeting. I think they're doing a much better job."
Mary Case, leader of the not-for-profit and government industry group at Seattle-based super-regional firm Moss Adams, agreed, adding that she has seen organizations tighten up their administrative belts.
"Organizations seem to be very focused, and some of this might be because of the new accounting standards, on good governance and fiduciary action," she said. "Organizations have really stepped up to the plate and looked at their processes and procedures."
DONOR GIVING DOWN
While many nonprofit organizations may have improved their internal controls, operating more like a business, experts say that overall giving has decreased - especially for those social service organizations that are dependent upon smaller donations given by individuals.
"What our clients have seen, particularly the public charities, is that for the smaller donations - the $100, the $700, the $1,000 - they're seeing those down in numbers. But also the average gift is going down, too," said Jim Thomas, assurance partner and leader of the Chicago nonprofit services group at Clifton Gunderson. "Where they're seeing the biggest impact really isn't with the big major gifts. Those donors are still going to give because they've made an investment in their favorite organizations [and] they've made it a part of their estate plan or their planned giving. So they are generally going to go through with that."
Mario Urso, partner-in-charge of The Bonadio Group's tax-exempt division in Rochester, N.Y., said that his clients have seen a reduction in inquiries, giving and gift size over the last six to eight months.
"For higher-end donors, often they give gifts of appreciated property because of the tax advantage," said Urso, who primarily works with larger organizations. "When the market goes bad, as it has, the amount of large giving that takes place - the multi-million-dollar gifts, the gifts of stocks, the gifts of real estate - doesn't happen. Large donors are looking for the tax advantage, generally. They do care about their causes, but they certainly want to make a wise gift and get the maximum tax advantage."
NFP OPTIMISM SINKS
According to the Philanthropic Giving Index recently released by the Center on Philanthropy at Indiana University, nonprofits are somewhat less optimistic about the present and future fundraising climates than they were six months and a year ago.
"However, many donors still want to give," said Eugene Tempel, executive director of the Center on Philanthropy. "Nonprofits should take this opportunity to diversify their funding sources, create or strengthen their major gift programs, and find new ways to communicate the impact of their missions on those they serve."
Julia Baird, director of the nonprofit practice group at Moore Stephens Lovelace PA in Miami Lakes, Fla., said that donors are still giving - albeit primarily to those charities they are most passionate about.
"I think when you get to the United Way and large organizations that have a much broader mission and provide services to a wide range of people, that's where you'll see more of the cut," Baird said, adding that organizations that focus on a specific cause - autism, for example - are growing and seeing support. "In general, people are giving less, but still giving for very specific things. Very wealthy individuals, from what I've observed, will continue to give; it's just a matter of where they are going to focus their funding."
WHERE CPAS CAN HELP
Those CPAs working with nonprofit organizations are finding that the types of donations that their clients are receiving are changing as the demand for dollars grows tighter. More donors are giving "restricted" funds, or monies earmarked for a specific program, group or initiative, instead of leaving the donation open to be used as the organization sees fit.
"I think donors are getting smarter as well, along with the organizations, as far as making sure there's accountability in place for the money that they provide," Allender said. "I often have clients who are required to track any restricted monies that they get in so they can provide an accounting to the donors. A lot of donors do say, 'Hey, we provided you $50,000 three years ago. I want to know how much money has been spent on the programs that have been earmarked, I want to know how much money is left and I want to know how much money you've earned from the corpus.' So if you don't have good records, you're in trouble."
As a result, many nonprofits have sought out the counsel of their CPAs for advice on how to strategize and proceed.
"Many of the nonprofits struggle to have a strong financial team in house, so they rely on their professionals to be some of their closest business advisors," Thomas said. "It's more to be a sounding board. Getting the organizations to slow down, take a deep breath and to remember that they're in it for the long haul. These organizations have been around and they've gone through this before. If they're able to go through this period keeping in mind their mission statement, they will be fine."
Still others have taken it upon themselves to respond to the economic challenges by cutting back on already-lean budgets. For example, Case said that some nonprofit clients are scaling back staff members to part-time or working four days a week instead of five. She has seen organizations combine administrative offices to save resources, and expenditures such as travel and training are likewise being slimmed down.
"There's a temptation to kind of drop the marketing, but you really can't do that," Case said. "It's very important that [nonprofits] measure and communicate results, the effectiveness, tell the story well. Communicate factual data and differentiate yourself."
