You never know when your not-for-profit might experience a financial blow. With the current efforts in Washington to slash expenses, some nonprofits have already lost federal funding and more may lose it in the near future. But that’s not the only risk. A significant grant from a foundation or state government might not be renewed, or a major donor could decide to stop supporting your organization. If such uncertainty has ever forced you to suspend services and scramble to implement Plan B, you probably understand how important operating reserves can be.

This financial cushion can help you manage acute shortfalls. If your nonprofit’s operating reserves are low or nonexistent, start looking for ways to build them.

Written reserves policy

A formal written reserves policy is a crucial first step. Among other things, your policy should set the target amount to hold in a separate fund. Although no universal benchmark applies, six months of operating expenses will be sufficient for many organizations. Incorporate your risk appetite and current financial position into the target calculation. In general, greater risk calls for higher reserves. So, for example, if your organization heavily relies on a handful of funding sources, assess the shortfall if one or more sources were to disappear overnight.

Avoid setting your reserves target too high, though. Donors and grant-makers generally don’t favor stockpiling when funds might otherwise be used to pursue your mission. Your policy also should establish triggers for when your organization can dip into its reserves.

Windfalls and budget items

Next, consider how you’ll reach — and maintain — your target amount. If you’ve received increased donations over the past couple of years, you might be able to fully fund your reserves with unrestricted net assets. Other sources include unexpected windfalls such as large bequests.

Most nonprofits, however, need to include a line item for reserves in their budgets. This amount shouldn’t hinder day-to-day operations, but it will help you begin to make real progress toward your reserves goal. It may be necessary to cut expenses, cancel projects or divest investments to free up funds.

Remember to leave illiquid fixed assets (buildings and equipment), endowments and temporarily restricted funds out of the equation. Keep in mind that budget surpluses aren’t necessarily available to fund reserves because they might include funds already earmarked for future expenses.

Enlist support

How long it will take to build your nonprofit’s reserves depends on your goals and resources. But it’s critical to enlist the support of your board and leadership team so that contributions to the reserves fund become a priority. We can help educate decision-makers, as well as advise your organization on an effective operating reserves policy.

© 2025

You’ve probably collaborated with other not-for-profits that share your space — maybe on a special event or fundraising campaign. Some organizations go further with formal strategic partnerships that involve sharing staff, facilities and budgets. In other cases, two nonprofits with the same basic mission and values merge permanently.

Although the case for collaboration is easy to make, what about competitive behavior? After all, other nonprofits are competing with you for donations, grants, volunteers and other resources. When is competition called for?

Direct and indirect

The not-for-profit sector is saturated with organizations, so overlap in certain areas is inevitable. Therefore, monitoring and analyzing similar nonprofits makes sense, whether the competition is direct or indirect.

Direct competitors have similar missions and thus target many of the same individual donors and grant makers. This can make it difficult for your nonprofit to meet its fundraising goals. To keep tabs on these competitors, follow them on social media, sign up for their newsletters and read their annual reports. Don’t be shy about copying a good idea. Just be sure to customize it to your mission and supporters.

Indirect competition is less obvious. But, in the end, all nonprofits compete for limited money, time and attention. You may run a nonprofit school that competes for community support with everything from other educational institutions to churches, food banks, animal rescue charities and your local public radio station. If you have opportunities to collaborate with indirect competitors, great! But also make sure you know when they’re scheduling events and campaigns and how they might affect your plans.

Working with the competition

In some instances, organizations that initially appear to be competitors can turn into prospective partners. Maybe a competitor serves a slightly different population or has different geographic reach. In many cases, there’s more work to be done than a single nonprofit can accomplish. If similar organizations have access to resources, supplies or connections you don’t have — and vice versa — collaboration should be considered.

Just be sure to choose partners carefully and look out for common hurdles. Both organizations should independently arrive at the decision to join up, and the key people involved should share goals and working styles. Disagreements between former competitors, particularly between leaders used to calling the shots in their own organizations, are inevitable. So before you begin work, outline individual responsibilities and plan how to resolve impasses.

Networking is critical

At the very least, maintain good working relationships with other nonprofit leaders. Even if collaborative opportunities never quite pan out, you can only benefit from keeping your finger on the pulse of your geographic and charitable communities.

© 2024

There are many thousands of charitable foundations in the United States. And, according to technology company Foundation Source, U.S. foundations awarded an average of 33 grants averaging between $25,000 and $28,000 each in 2022 (the most recent year for which data is available). So a lot of grant money is out there for not-for-profit organizations that know where to look and how to qualify for it. Here are some suggestions.

Match your mission with their interests

Probably the most important thing to remember about foundations is that they tend to specialize, making grants to certain types of charities or in specific geographic regions. It’s not enough to be a 501(c)(3) organization — though your exempt status is important. For your nonprofit to succeed at obtaining a grant, its mission and programs must align with the foundation’s interests.

Before you apply for a grant, review the foundation’s annual reports, tax filings, press releases and any other information you can get your hands on. One place to start is the nonprofit data organization Candid’s online directory of foundations.

Once you have a list of matches, don’t just start sending out long, detailed proposals. Call your target foundations and talk to staff members about the information they need and their communication preferences. Most will be happy to provide insights into their decision-making process and shed light on your chances of securing a grant.

Finish what you start

The most successful foundation grant proposals have several qualities in common. For example, foundations tend to like projects that are well-defined and data-driven with specific goals. They also want to know that their gifts are effective, so achievement of goals needs to be measurable.

In your grant proposals, make sure you outline the project’s life cycle and how you plan to fund it to completion. Many foundations provide the money to initiate projects but expect nonprofits to use their own funds and other grants to continue them. In fact, if you hope to establish a long-term relationship with a foundation that has given you a grant, you must successfully finish what you started.

Just because a grant proposal is rejected doesn’t mean the same foundation won’t welcome future applications — and say “yes” to them. Call the decision-maker and ask that person to explain why your application was rejected. Foundation personnel may be able to provide tips on making your proposals stronger. Many organizations are competing for the same foundation funds, so tenacity is crucial.

Many priorities

If you’re worried about funding your nonprofit’s many priorities, contact us. We may be able to suggest additional ways to find new revenue and cut existing expenses.

© 2024

The reelection of Donald Trump as President and control of the U.S. Congress by Republicans are anticipated to usher in changes that could financially impact the not-for-profit sector. Whether and to what extent your organization will be affected will depend on your mission, funding sources and other factors. But in general, you may want to keep an eye on the following issues.

Exempt status of “terrorist supporting organizations”

On Nov. 21, 2024, the Republican-led House passed legislation that would enable the U.S. Treasury Department to revoke the tax-exempt status of nonprofit organizations that it claims support terrorism. Although the bill is unlikely to be taken up by the current Democratic-controlled Senate, it could potentially pass the Senate and be signed into law when Republicans take over in January 2025.

The Council on Foundations, Independent Sector, National Council of Nonprofits and United Philanthropy Forum have formally opposed the bill. They say it would give the Secretary of the Treasury unilateral discretion to designate nonprofits (including humanitarian charities and labor unions) as “terrorist supporting organizations” without having to share evidence of such activities. Accused nonprofits would be given 90 days to appeal any “terrorist supporting” designation.

Spending cuts and funding opportunities

President-Elect Trump’s campaign promises to slash spending could also affect funding availability for nonprofits that depend on federal grants and contracts. Making the situation more challenging, organizations that provide social and other essential services could experience more demand if vulnerable people lose food and housing assistance benefits. Environmental, social justice, civil liberties charities and organizations that prioritize diversity, equity and inclusion (DEI) initiatives also are expected to encounter fewer resources and increased government scrutiny.

On the other hand, certain faith-based organizations may receive greater support under the new administration. This could enable them to provide more assistance to such groups as the homeless, food-insecure and formerly incarcerated at the community level. Educational nonprofits whose programming aligns with Trump’s priorities — including school choice, STEM education and vocational training — could also receive new funding and support.

Tax cuts and extensions

Charitable donors who itemize deductions are expected to continue to be able to deduct contributions on their federal tax returns. However, the higher standard deduction under Trump’s Tax Cuts and Jobs Act (TCJA) that’s scheduled to expire after 2025 now is likely to be extended or made permanent. This would mean more taxpayers would continue to claim the standard deduction and, therefore, be ineligible to deduct charitable donations.

Congress is expected to extend or make permanent some other tax provisions that potentially could reduce financial incentives for charitable giving. For example, if the gift and estate tax exemption remains high (it’s scheduled to be almost $14 million per individual in 2025), wealthy individuals may be less inclined to donate money and assets to charity.

Possible tax law changes could also make charitable giving less attractive, such as a capital gains tax reduction. Currently, donating highly appreciated assets to charity enables donors to both save the tax they would have owed if they’d sold the assets and claim a charitable deduction for the assets’ fair market value.

Plan now

Nonprofit organizations that depend, even in small part, on federal funding or that have missions that make them vulnerable to political scrutiny should start planning now. And additional tax legislation could affect your ability to raise funds and fund programs.

You may qualify for new state, local and private foundation grants. Or we may be able to help you find other untapped sources of revenue and opportunities to cut expenses. Finally, if you at any time receive notice from the IRS or another government agency about an investigation into your finances or activities, contact us and legal counsel immediately.

© 2024

The end of 2024 is rapidly approaching, and you know what that means: You need to fundraise in earnest. According to Double the Donation, 30% of all charitable giving occurs in December. Make sure your not-for-profit organization is top of mind when people pull out their credit cards and checkbooks.

Improve visibility

Only donors who itemize deductions on their 2024 federal income tax return can deduct donations made by Dec. 31. But plenty of others are motivated by the “holiday spirit” to give. And some prospective donors may simply use the calendar as a reminder to make their charitable contributions for the year. To help ensure the charitably minded know you want — and need — their support:

Take part in Giving Tuesday. Since launching in 2012, Giving Tuesday has grown swiftly to become one of the world’s biggest fundraisers. The online event is held on the first Tuesday after Thanksgiving — Dec. 3 in 2024. In 2023, 34 million Americans participated by volunteering and donating, including giving $3.1 billion to nonprofits. If you aren’t set up to participate, go to givingtuesday.org for information.

Focus on a theme or goal. Create a giving campaign around a fun participatory theme (one example being the ALS Association’s Ice Bucket Challenge). Or focus on a specific goal, such as constructing a new facility or introducing a new program.

Check your records. Reach out to supporters whom your records reveal have habitually made year-end contributions. You can also segment your donor database according to gift size and other characteristics that suggest some past donors may be more willing to give now.

Share your stats. Analytics can engage and motivate nonprofit stakeholders, so use statistics and infographics in your year-end appeals. Stats can illustrate your organization’s historical fundraising patterns and current goals. If you update them on your website, supporters will be able to follow your progress through a particular season or campaign.

Be prepared

Attracting support is only part of a successful fundraising season. You also have to make sure you’re equipped to handle donations.

To that end, test the donation page on your website to confirm it’s easy to navigate and ready for donors to input financial information. Your site should adhere to the highest security protocols, load quickly, and be free of dead links and error messages. Ensure your donation app sends emails to thank donors and provide them with a record for tax purposes.

Also critical: being ready to process any available matching gifts. According to Double the Donation, most companies that offer to match their employees’ charitable gifts donate at a 1:1 ratio — but some are known to go as high as 4:1. You can’t afford to miss out! Provide contributors with instructions on how to request matches. Also, set up automated emails to remind donors if you don’t receive a match.

Learn from success

Finally, be sure you document everything you learn — including what works and what doesn’t — this giving season. Contact us for more ideas on boosting your nonprofit’s income.

© 2024