At our firm’s annual CPE Day, GYF was honored to host a panel of executives who shared their experiences working for, or alongside, nonprofit organizations. Mark Wolstoncroft, a Partner of GYF’s A&A Services group, moderated an engaging discussion that focused on the challenges facing nonprofit organizations in today’s financial landscape.
Panel participants included:
- Emmie Calland, Chief of Staff for the Pittsburgh Foundation, which promotes philanthropy and connects donors to community needs in the Pittsburgh area
- Nathan Gressel, Chief Executive Officer of George Junior Republic (GJR), which provides residential and community-based programs for individuals, youth, and their families
- Stephanie Samolovitch, Founder & Executive Director of Young Adult Survivors United (YASU), which provides support to young adults impacted by cancer
- Megan Troxell, Partner of GYF’s A&A Services Group, who has over 20 years of experience providing assurance and financial consulting services to nonprofit organizations
Funding Challenges
Because 30%-40% of all nonprofits in Pennsylvania receive significant levels of government funding, the State budget impasse and the recent federal government shutdown increased the financial strain felt by these organizations. Nate noted that GJR’s funding was significantly impacted by these events since the organization is 90% funded by the state and county with a federal match. Emmie added that these matters affect those experiencing poverty the most. The government budget cuts have caused an increased need for the support services that nonprofit organizations provide, and meeting those needs is made more difficult with the simultaneous reduction in funding received.
Organizations have been forced to deal with the repercussions from the government shutdown with high interest loans and cost-cutting measures, and must respond to the challenge through resiliency and creativity. Some strategies nonprofits have utilized to address this challenge include diversifying revenue sources, acquiring different grants, and collaborating with other organizations.
Financial Transparency
Nonprofit organizations are frequently subject to economic and regulatory changes, which can present heightened challenges for organizations with personnel who may not have finance backgrounds. Stephanie shared her experience starting her nonprofit organization, noting that leaning on experts for guidance can help with financial management and accountability. She noted that it is important for nonprofit leaders to be aware of changes while looking to the Board of Directors and other experts for oversight, support and advice. Collaboration with the board and service providers allows management to continue to learn, adapt and grow and can improve organizational efficiency.
Compliance
Emmie pointed out specific items that The Pittsburgh Foundation reviews for a prospective grantee organization, such as complete financial statements with an audit (if required), up-to-date tax filings, an annual budget, and program-specific budgets for programs requesting support. Other characteristics that grantor organizations generally look for are a balanced budget, liquidity, board oversight, and spending aligned with the impact or mission of the organization. She explained that prospective grantee organizations should strive for their expenses to be mission-aligned to best match the needs of the constituents and to demonstrate that the organization is sustainable and capable of stewardship.
Nate’s advice for compliance management is to have a good plan in place, including strong leadership, transparency to allow for checks and balances, and effective internal controls. He also noted that it is important for organizations to not be afraid to ask the tough questions internally. Compliance is the backbone of the organization, highlighting its integrity and strengthening the nonprofit’s overall reputation.
Common Accounting Issues
Megan, who serves quite a few nonprofit organizations, said that two common accounting issues for nonprofits are accounting for donor restrictions, and changes in funding streams. Tracking donor restrictions and how they are fulfilled can be difficult due to restriction complexities such as program-specific, time, or permanent restrictions. She noted that it is important to recognize the restrictions and track restricted donations as they are used. Further, changes in funding streams can happen frequently, so organizations should continually evaluate them for appropriate treatment as a contribution or a revenue exchange transaction, depending upon the associated stipulations. One way to tackle these accounting problems, she said, is for non-profits to be proactive in asking questions and seeking guidance from their accounting services providers.
Strength in Communication
Communication across all levels of any organization is fundamental to operating successfully. Everyone in the organization supports the overall mission, and what validates everyone’s purpose in the organization is knowing how their work has an impact on the bigger picture. Open communication among all team members is essential to recognizing each person’s role and contributions. Communication within the leadership team is also important. It can be especially difficult to execute the day-to-day services while also planning for the future of the organization. Clear communication and the utilization of tools that help all parties understand the organization’s financial performance can help leadership to make informed decisions.
Audit Preparation
Clear and through communication also helps an organization to be better prepared for an audit. Megan noted that active engagement by the organization’s leadership with the audit process benefits the audit team as well as the organization. Questions asked early in the process can help guide the auditors’ responses to best serve the organization. Megan also recommended that advance preparation, including organization of records and documentation of transactions, allows for the audit to be conducted timely and efficiently for both parties.
Click here to access copies of the slides, links to resources and a video of the presentation
About GYF’s CPE Day: The firm presents this program each year to bring together clients, friends of the firm, and other professionals who are interested in gaining knowledge. The day is always filled with interesting presentations and great networking opportunities, and is generally attended by 300+ guests. If you have any questions about the material covered, or other issues we did not have time to address, please reach out to your GYF Executive or contact the office at 412-338-9300. We look forward to seeing everyone next year!
