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Nonprofit Tips for Governing in Uncertain Times

Uncertainty - The New Paradigm

Nonprofit organizations continue to be in a stage of uncertainty regarding the long-term impact of COVID-19 and have entered the new paradigm. Every organization made quick adjustments with remote working for employees and volunteers. The question is, "Are employees and volunteers efficient and productive?"

Working at home is much better for some people, as they are more efficient and productive, while others struggle. The more significant issue in the future is a reluctance by some to return to the office. As teams have adopted technology, there is a comfort level of working remotely, which is here to stay. With that comes an increase in technology needs.

Creating innovative solutions to serve clients in a hybrid world will continue to be the focus. This paradigm switch creates the necessity to evaluate your processes, procedures, programs, staffing, and technology. In this article, we will discuss the path forward and how to not only survive but thrive.

The Path Forward

Internal Procedures:

As staff transitions to remote working or a hybrid situation, there should be adjustments to your internal procedures to maintain appropriate internal controls. In the past, it was easy to lock up the office at the end of the day and know your data was secure.

Remote working will be a long-term situation and your internal control processes will need to reflect today's work environment.

Adjustments to internal procedures and oversight should include:

  • Ensuring organizational functions are carried out as intended
  • Assessing efficiency and productivity
  • Updating and testing system and security controls

Informing Governing Boards:

Keeping your governing boards current is more critical than ever so they fully understand what is happening with your organization. Work with your board to make sure they are engaged and know the effect today's working environment has on your nonprofit.

The discussions should include what is in place now, plans for pandemic ebbs and flows, financial impacts, and public perception of your organization.

Financial Liquidity:

Many programs that helped nonprofits during the pandemic (e.g., PPP loans, Employee Retention Credit, Shuttered Venue Grants) are now phasing out. As those programs end and nonprofits continue to navigate the future, a financial roadmap should be developed.

Your financial liquidity plan should include:

  • Considering other sources of revenue
  • Having an available line of credit to be prepared for the unexpected (and the expected)
  • Reviewing competing priorities: Should we spend now in response to the immediate crisis or keep more in reserve for an uncertain future?
  • Merging with another nonprofit organization
  • Ensuring there is a financial plan B, C, and D

COVID-19 Testing Protocols:

COVID testing protocols for your employees and the constituents you serve should be in place and will vary depending on your organization.

Institute testing protocols to ensure health and safety for:

  • In-person activities
  • In-office work
  • Meetings — on and off-site
  • Performing arts (if applicable)
  • Social events and fundraising
  • Programmatic activities

Organizational Assets:

With an effect on business as usual for over a year and a half, reviewing the status of your assets is essential. If you have inventory, did that value go up or down? With supply change shortages, your inventory’s value may be higher now.

Consider the effect on organizational assets regarding:

  • Non-publicly traded securities
  • Valuation of inventory
  • Real estate (i.e., owned rental property which is now (or soon to be) vacant because the tenant went out of business)
  • Allowances for uncollectible receivables — especially pledges
  • Insurance for group activities, even with appropriate precautions, that covers liability for defense and payment of claims that infections occurred in connection with these activities

Fundraising Impacts:

At the start of the pandemic, it was a fast learning curve to survive, with quick pivots to online options. Now it's time to think about what's ahead so you can not only survive but thrive.

Talk to your donors about their ability and willingness to donate. If you have restricted gifts, talk to the donors about your organizational needs. They might be willing to recharacterize those gifts to dollars that can be used for operational needs. Many private foundations were flexible with the gifts and ready to support a general need versus a specific program.

Develop a plan for open communication including:

  • Talking with donors about potential strained financial circumstances, reduced profits, and reduced investment income. What are their limits on their ability and willingness to give?
  • Touching base with current and prospective donors about the effects of the virus on the organization
  • Sharing plans for the future and generating interest and excitement
  • Providing virtual options for donor participation to make it easy for donors to stay engaged
  • Reviewing unspent restricted gifts on hand that were given for canceled activities
  • Discussing multi-year pledges for operational support
  • Focusing on unrestricted gifts to allow the organization to survive and thrive

Investing in Technology:

Beyond the remote working needs for your staff, what hybrid options will continue for your organization? Things will never return to 100% of what they were, and consumers have quickly adapted to hybrid options. Putting on an all virtual or hybrid event requires understanding the patron's experience.

Look at best practices and invest in the technology you need to ensure a good experience. Technology investments also include cybersecurity protections, which is one of the biggest threats to all organizations. Get professional help to ensure your organization and donor information is safe and secure. Nothing is more detrimental to your organization than a security breach.

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Effect on Specific Types of Organizations

Each organization has its own challenges depending on its mission and clientele. The ability to adapt to the ever-changing environment and stakeholder needs is critical to your organization's ability to not only survive these times but to thrive in the current climate and in the future.

Communication is vital and management must continually monitor the concerns. Organizations should be posting regular updates on their COVID-19 protocols on their website and share with their stakeholders.

Social Service Organizations (e.g., food banks, soup kitchens, counseling services, and charity clinics) saw a rising demand for their services while also facing challenges in fundraising. There were high ratios of fundraising expenses to contributions raised and low program expenses to total costs. These organizations need a plan to explain their ratios to both donors and the public.

Educational Organizations faced reduced enrollment and are waiting for a return to entirely in-person instruction. Underutilized housing, dining, and meeting facilities still must be maintained. These organizations continue to deal with travel hesitancy and limited in-person group activities leading to reconfiguring meeting spaces, additional medical testing, and facilities for sequestering persons who test positive. Communicate plans to students, parents, faculty, staff, donors, alumni, regulators, and residents of the town where the institution is located. Traveling to game locations will require special care to ensure athletes, coaches, staff, and fans are meeting your requirements.

Public-Centered Organizations have shown the creativity and willingness to keep trying different ways to serve their clientele. Visual arts, performing arts, and cultural organizations are faced with limitations on their activities and local government restrictions. Virtual exhibits and performances require discussions on whether the virtual cost should be the same as in-person events. A reduction in participation means a decline in contributions and onsite sales. Many patrons are enthusiastic about returning to participating in the arts, so now is the time to capitalize on the opportunities as people welcome a return to these performances.

Surviving and Thriving

Embrace Technology:

The pandemic forced us to acknowledge technology's significant role in fulfilling an organization’s mission. Here are a few planning tips you should be working on:

  • Talk with your auditor about ways to improve internal controls
  • Utilize digital resources whenever possible
  • Review your security protocols on financial assistance systems
  • Get expert assistance to develop a cybersecurity plan

Transformation of Connectivity:

The pandemic opened a new world of connectivity to your donors and stakeholders. Nonprofits who used the power of virtual and electronic communications to disseminate their message to a larger audience had an advantage. The ability to involve donors and stakeholders across the world in a single event is powerful. Continually look for opportunities to offer new online services moving forward.

New Revenue Streams:

Private sector partnerships can be an alternative revenue source. Explore grant funding more aggressively. Perhaps your organization was fine without grants, or you didn't feel you had the time to explore the process. Now is the time to look for opportunities you might not have explored previously as a funding source.

Get creative and go after those dollars. Is now the time to join forces with organizations that provide similar or complementary services? A collaborative agreement can offer efficiencies, allowing both organizations to offer more value to achieve their missions. Acquisitions or mergers are also ways to build a more vital organization.

Every nonprofit has its own identity and passion for its mission. Still, sometimes it makes sense for organizations to align, creating one vital organization to carry on into the future.

Use of Data Analytics, Tools, and Assessments:

Using dashboards and benchmarking tools will provide insights on where your organization is now and trends that will help you predict the future.

The benefits of using data analytics are:

  • Defining an accurate picture of current financials
  • Comparing performance to goals
  • Benchmarking your numbers pre-pandemic, present, and future
  • Assessing goals to create plans for improvement where needed

Board and Executive Team Issues:

Do you have a senior executive team or board of directors? Engaging younger members may be more accessible with the increase in technology. Now is the time to embrace a proactive attitude. With the strain on workforce and hiring that many businesses face, you may need to expand your talent pool beyond the city or state in which your organization resides.

It is always an excellent exercise to review if your board represents the people your organization serves. Take a critical look at your board to determine the range of experience, generational representation, and diversity in race and gender. What is your succession plan for your board? Implement a policy to rotate in new board members and a proactive plan for replacing leadership members as they approach retirement.

Develop a pipeline of board and committee members to keep everyone engaged and excited about the future. The role of your board has changed and you need members who are ready to assess, adapt, be agile, and be responsive.

Board discussions should include:

  • Evaluating the core values you want preserved and the criteria by which the board can decide an issue
  • Focusing on priorities and setting goals for each meeting with specific outcomes
  • What might the future hold and how can you best position the organization for the future?
  • What is in your control and how can you leverage those things?
  • Creating issue/topic-driven meetings rather than adhering to an arbitrary calendar
  • Using consent agendas to shorten and streamline board members, which focuses on the most pressing issues

Recorded Webinar: Leading with Intent - Your Board's Role in Planning for the Future

Wrap Up

Every organization is facing the same issues and what will differentiate you is how you adapt to the new future. There won't be a complete "return to normal" as the pandemic has forever changed workforce and donor expectations.

Talk with your leadership team and enlist experts such as your accounting firm and auditor. Many times these key advisors can provide a valuable outside perspective.

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Biz Tip Topic Expert: Kirsten Houghton, CPA, MBA

Kirsten Houghton, CPA, MBA

Kirsten is a Principal with SVA Certified Public Accountants and her expertise includes the nonprofit and real estate industries. In addition to providing audit, accounting, and tax services, Kirsten also provides review, compilation, and management advisory services.

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