Non-Profits Archives - Page 2 of 45

Scrutinize that grant before you accept it

Non-Profits|December 23, 2025

Your not-for-profit may invest valuable time and effort in its grant proposals. So it’s understandable that you’d be thrilled when proposals are given the green light. But before you accept a grant, be sure to do your homework and ensure it won’t be more trouble than it’s worth. Unexpected consequences can include administrative burdens — and even IRS scrutiny.

Small support, big consequences

Smaller or newer nonprofits are at particular risk of unintended repercussions when they accept certain grants. But larger and growing organizations also need to be careful. As they expand, nonprofits usually enjoy more opportunities to widen the scope of their programming. This can open the door to more grants, including some that are outside the organization’s expertise and experience.

Even small grants can have big administrative consequences, such as extensive reporting requirements. You might not have staff with the requisite experience, or you may lack the processes and controls to collect necessary data. Grants that go outside your organization’s original mission can pose problems, too. For instance, they might prompt the IRS to question your exempt status.

Financial and opportunity costs

Before you accept a grant, review the potential costs. Your nonprofit might incur expenses to complete a program that may not be allowable or reimbursable under the prospective grant. As part of your initial research, calculate all possible costs against the grant amount to estimate its actual impact on your organization.

Also analyze the opportunity cost of the decision. For unreimbursed costs associated with a prospective grant, consider how your organization might otherwise spend that money. Could you get more mission-related bang for your buck if you spent funds on an existing program rather than a new one? Think about how the prospective grant will affect staffing, too. Do you have the people to handle the workload, or will you need to recruit additional staff or volunteers?

Look first

It may seem counterproductive to turn down any form of financial support. But if accommodating a grant’s terms requires staff resources that can be better deployed elsewhere or if the terms threaten your nonprofit’s exempt purpose, it may be better to take a pass. To help prevent wasted time, also consider implementing a more stringent screening policy before applying for grants. Contact us for advice on grants and growing your nonprofit’s revenue.

Putting a value on tangible property donations

Non-Profits|December 2, 2025

If a donor suddenly offered your not-for-profit a residential property, antique jewelry or inventory from a business, would you know how to value it? Perhaps you don’t receive these types of contributions often, but you also don’t want to turn them down. If a property donation relates to your organization’s tax-exempt function, it’s generally valued based on its fair market value (FMV). But there are exceptions to this rule. Let’s take a look.

Open market price

FMV typically is defined as the price property would likely sell for on the open market. If, for example, a donor contributes used clothes for a charity to distribute to disaster victims, the FMV would be the price that typical buyers would pay for clothes of the same age, condition, style and use. However, if donated property is subject to any type of restriction on its use, the FMV must reflect it. Restrictions often are an issue with donated real estate. If, for instance, real estate isn’t eligible for commercial development, that may reduce its FMV.

If donated items are unrelated to your nonprofit’s exempt purpose and you plan to sell them, their value may also be different. In such cases, the deduction value is generally limited to the donor’s cost basis.

3 factors

There are three relevant FMV factors:

1. Cost or selling price. This is the amount the donor paid for the item or the actual selling price received by your organization. But because market conditions can change, the cost or price becomes less important the further in time the purchase or sale is from the contribution date.

2. Comparable sales. This is the sales price of property similar to the donated property. The IRS may give more or less weight to a comparable sale depending on the similarity between the property sold and the donated property, the time of the sale, the circumstances of the sale, and general market conditions.

3. Replacement cost. FMV should consider the cost of buying or creating property similar to the donated item. However, the replacement cost must have a reasonable relationship with the FMV.

Note an exception: Businesses that donate inventory can usually deduct only the smaller of the inventory’s FMV on the day of the contribution or the inventory’s “basis.” The basis is any cost incurred for the inventory in an earlier year that the business would otherwise include in its opening inventory for the year of the donation. If the cost of donated inventory isn’t included in the opening inventory, its basis is zero and the business can’t claim a deduction.

Also, for tangible property donations valued at more than $5,000, donors must obtain a written appraisal to deduct their gift on their tax return. Appraisers must be “qualified,” meaning they’re experts in the area of the property being evaluated and are independent of your organization.

Multiple uses

Valuing tangible property donations isn’t only important for donors’ charitable tax deductions. You’ll also need to assign accurate values in your nonprofit’s financial statements — and these values may sometimes be different from the amounts the donors are eligible to deduct. Contact us for more information.

Make recruiting volunteers a community affair

Non-Profits|November 20, 2025

For many people, autumn is a time to start fresh. Kids are back in school and adults may have more time to pursue new hobbies and interests before the rush of the holiday season. So if your nonprofit could use some helping hands, now’s a good time to recruit volunteers from your community. Consider these best practices.

Get to know your neighbors

Is your nonprofit familiar to businesses, residents and schools in the surrounding community? People often are drawn to volunteer because they learn of a worthwhile organization that’s located close to where they live or work.

Get to know your neighbors by performing an inventory of the surrounding area. Perhaps there’s a large apartment building you’ve never paid much attention to. Consider the people who live there to be potential volunteers. Likewise, if there’s an office building nearby, learn about the businesses that occupy it. Their employees might have skills, such as website design or bookkeeping experience, that perfectly match your needs.

Once you’ve identified outreach targets, mail or hand-deliver literature introducing your nonprofit as a neighbor and describing volunteer opportunities. Consider inviting your neighbors to a celebration or informational open house at your facility. And if you haven’t already, join local Facebook groups and set up a Nextdoor.com page.

Inspire community members

By making your pitches as informative and compelling as possible, you’re more likely to inspire potential volunteers to action. Specifically, explain the types of volunteer jobs currently available, the skills most in demand and the times when volunteers are needed. Don’t forget to emphasize the rewards of volunteering — and warn about possible challenges your volunteers may encounter.

When possible, incorporate photographs of actual volunteers at work, along with their testimonials. You can make it easy for people to take the next step by including a phone number or directing them to your website or social media accounts for more information and a volunteer application.

Ask stakeholders to wield influence

Develop a system to keep your stakeholders informed of your volunteer needs. Major donors, board members and active volunteers often are influential in their communities, so a request from them may be more likely to get people’s attention.

Stakeholders may even frame a request for assistance in the form of a challenge. For example, leaders might contribute a day of volunteer service and challenge employees of their companies or members of their social organizations to do the same.

Holiday season opportunities

As autumn gives way to the holiday season, keep up your recruiting efforts. Many people like to volunteer — particularly as a family or group of friends — during the giving season. Volunteer-supported events enable nonprofits to educate the community about their missions, programs and long-term volunteer needs. These are opportunities to turn one-off participants into lasting supporters.

The right board for your nonprofit

Non-Profits|November 11, 2025

Is your nonprofit new and building its governance infrastructure from scratch? Or is it established but looking for ways to improve the effectiveness of its board? Depending on an organization’s life stage, size and needs, one board structure may make more sense than another. Let’s look at some common models.

Policy model

Policy boards are dedicated to high-level oversight and governance. They’re appropriate for more-established nonprofits where employees and volunteers handle day-to-day duties, staff programs and work with clients. The board provides a system of checks and balances that keeps the organization on track.

A policy board also generally makes strategic decisions and sets long-term goals. Board members are fiduciaries who approve budgets, monitor financial statements, oversee audits and possibly manage investments or an endowment. In addition, they help ensure the organization follows all applicable laws and regulations. This type of board usually benefits from having members with accounting and legal expertise. Board members may also be expected to cultivate donors and make personal financial contributions.

Working structure

Working boards are often found in early-stage organizations or in small nonprofits where there’s plenty to do but not enough hands to do it. Members of working boards could be tasked with everything from defining a long-term funding strategy to stuffing goodie bags for a fundraiser. They must be willing to do grunt work but be ready to switch to a more strategic mindset when necessary.

Because this type of structure is common in nonprofit startups, a working board may be responsible for defining the organization’s mission and values. Although early-stage nonprofits usually don’t have complicated financial situations, the board should, among other things:

Establish a long-term revenue model,
Keep a close eye on budgets, and
Ensure compliance with the IRS’s tax-exempt requirements.

Tax compliance includes understanding when activities might result in unrelated business income tax liability.

Hybrid approach

It’s not unusual for nonprofits to start out with a working board and then transition to a policy-style board as they gain employees and volunteers. In some cases, certain hands-on tasks, such as sourcing and hiring executive staff, remain the purview of an otherwise strictly policy board.

Hybrid boards generally are known for their flexibility. There may be times when your policy board needs to take a more hands-on role. For example, if you don’t have enough accounting staffers to segregate accounting duties, board members may need to step in to review bank statements or approve disbursements. Or they may need to assume some executive functions during a leadership transition period.

Formal definition

If your organization is attempting to switch from a working board to a policy or hybrid model, it helps to formally define that shift. Putting it in writing could also make it easier to recruit new board members, such as community leaders, who wouldn’t necessarily be interested in a more active board role. Contact us if you have governance questions.

The search is on: Finding an independent auditor

Non-Profits|October 28, 2025

Even if your not-for-profit isn’t legally required to obtain independent audits, such audits can enhance financial transparency, increase accountability and help you build trust with your stakeholders. But how do you find a truly independent auditor? Ensuring independence requires more than hiring an outside firm. The American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct can help guide you.

On the face of things

The AICPA code mandates that CPAs and their firms be independent in the performance of professional services, including audits. It requires independence in both fact and appearance. Independence in appearance calls for avoiding circumstances that would cause a third party to reasonably conclude that the auditor’s integrity, objectivity or professional skepticism is compromised.

The totality of the circumstances matters when assessing independence in appearance. Insignificant individual threats (for example, an auditor’s small contributions to a charity) can become an issue in the aggregate if other ostensibly minor threats are also in place.

When independence is threatened

The code identifies several examples of threats to independence that could arise during a nonprofit audit — and when the threat may be acceptable. An acceptable threat generally is one where a reasonable and informed third party would conclude that the threat doesn’t impair independence.

An example of a threat that could impair an auditor’s independence is advocacy. This happens if an auditor promotes the nonprofit’s client’s interests to the point of compromising the auditor’s objectivity. This could happen, for example, if an organization is pursuing a cure for an illness that afflicts an auditor’s family member.

“Familiarity” is another potential stumbling block. Be careful if a close friend or relative of the auditor holds a key position in your nonprofit. The auditor may be too close to this situation. An auditor who serves as a director or officer or who designs, implements or maintains the organization’s internal controls is also too close.

Additionally, avoid hiring someone from a firm that has previously performed nonaudit work for your organization — for example, if the firm has prepared your nonprofit’s financial statements or served as its accountant. Know, too, that auditors are required to excuse themselves if they face threats or pressures from anyone in your organization.

Other safeguards

An auditor’s firm, a professional organization or regulators can impose other safeguards, including:

Education requirements,
The potential for disciplinary action,
External review of a firm’s quality control system, and
Licensure requirements.

The AICPA code says that audit clients can implement safeguards that operate in combination with other safeguards. Your nonprofit could, for example, have an active audit committee that monitors decision-making, oversight and communications related to any independent auditor.

An auditor can implement safeguards, too, such as using different partners or engagement teams from separate offices. The auditor must document the identified threats and the safeguards applied.

Time and money

With limited time and money, your nonprofit likely wants to simplify the auditor selection process. But don’t let speed and financial constraints get in the way of hiring the right independent auditor. Contact us for suggestions.

Building a better nonprofit budget

Non-Profits|October 16, 2025

Does your nonprofit start its budget process from scratch each year or do you mostly make simple adjustments to the previous year’s budget? Either way, if your organization operates on a calendar-year basis, it’s probably time to start thinking about this annual chore. Issues such as reduced grant funding and increased service needs can take time to resolve. You may also want to address possible stumbling blocks you’ve encountered in previous years.

Banish silos

Your nonprofit may not always approach its budget in an efficient and productive manner. For example, does your organization build its budget in silos, with little or no consultation among departments? Perhaps executives set goals, individual departments develop their own budgets and accounting or finance is charged with crunching the numbers.

You might be better off approaching the budget process holistically. This requires collaboration and communication between units. Rather than forecasting revenues and expenses on their own, your accounting or finance team should gather information from all departments first, then perform their financial calculations.

Improve accuracy

Also be wary of underbudgeting. You can improve accuracy with techniques such as forecasting, which means projecting financial performance based on such variables as historical data (for example, giving patterns), economic trends, and assumptions about circumstances expected to affect your organization during the budget period (such as a major capital campaign). Forecasting generally takes a longer-term view than budgeting — say, three years versus the typical one-year budget. It also provides valuable information to guide budget allocations and strategic planning.

You might also want to perform some budget modeling, where you game out different scenarios. Consider your options if, for example, you lost the support of a major donor or weren’t able to hold a big, in-person fundraising event.

Or switch from your annual budget to a more flexible rolling budget. You’d still budget for four quarters but set certain intervals during which you’d adjust the numbers as circumstances dictate.

Provide backup

Don’t forget to back up your budget with a reserve fund. If you already have operational reserves, avoid the temptation to skip contributions to this fund during any budget period. For more help building a better budget, contact us.

Navigate the risky business of nonprofit borrowing

Non-Profits|October 7, 2025

Should your not-for-profit apply for a loan? Perhaps you want to buy new equipment or build an extension to an existing facility. Maybe your nonprofit generates revenue unevenly or you need help to recover from a financial blow.

For-profit companies often borrow extensively to grow, but they also generally produce reliable cash flow with which to repay debts. Loans to nonprofits can be riskier for both the lender and the borrower. Before your organization commits to applying for a loan, anticipate lender scrutiny and perform careful due diligence.

Cons and pros

The primary drawback to any loan is that you must pay it back. And, of course, you’ll have to pay interest. Rates for nonprofit loans tend to be higher than those for businesses because nonprofits often pose greater risk. Also, other expenses associated with loans (for example, appraisal charges, closing costs and attorneys’ fees) can add up quickly. And your nonprofit may be required to make a significant down payment.

However, once you’re approved for a loan from a reputable lender, you know you’ll get the funds. Also, applying for a loan may require less time and effort than fundraising, wooing major donors or seeking grants.

Loan options

Your funding needs and financial situation will help dictate the type of loan you should apply for. Common options include:

Lines of credit. Does your nonprofit typically experience revenue peaks and dips throughout the year? This can lead to cash flow crunches. In such situations, a revolving line of credit may be suitable.

Bridge loans. Sometimes cash flow issues can arise less predictably. A previously reliable funding source might dry up or a natural disaster could hit when cash reserves are low. In such circumstances, consider a bridge loan, which typically lasts no longer than one year.

Long-term loans. Standard loans with extended repayment schedules can be an option for major purchases or projects. You may want to finance a project with a capital campaign. However, campaigns can take longer than anticipated. A long-term loan can help you avoid delays while you continue fundraising.

Sometimes, nonprofits encounter opportunities that require prompt action — for example, office space you’ve had your eye on suddenly becomes available or you want to merge with a mission-similar organization. Both bridge loans and long-term loans may prove useful to finance such opportunities.

Preparing your application

Once you determine your financing needs, you’ll need to apply for the loan. Lenders generally ask about plans for any loan proceeds. They’ll require you to provide:

Several years of tax filings and audited financial statements,
Reports of pledges, receivables, accounts payable and outstanding debt,
A description of major funding sources, and
A board resolution approving the loan.

You may also need to submit information about your organization’s history (including articles of incorporation and bylaws), management and board of directors, short- and long-term strategic plans, and programs. Lenders often ask for cash flow projections showing a repayment plan as well.

A demanding process

Obtaining a loan can be a long and demanding process, and some nonprofits simply won’t qualify. Higher interest rates also mean borrowing can be expensive, particularly if your lender considers your organization a risky bet. Contact us for help applying for loans and to discuss other, potentially more accessible, financing options.

The OBBBA: What it means for nonprofits

Non-Profits|September 23, 2025

On July 4, 2025, President Trump signed the One, Big, Beautiful Bill Act (OBBBA), which contains several provisions that may affect your not-for-profit organization. Let’s take a look at a couple of the bigger changes.

Excess compensation tax

Since 2018, an excise tax has applied to nonprofits that compensate “covered employees” (generally the five most highly compensated employees or former employees during the tax year) in excess of $1 million. The excise tax is equal to the corporate tax rate (21%) multiplied by the sum of:

Remuneration in excess of $1 million, including salary, bonuses and deferred compensation, and
Any “excess” parachute payment.

The OBBBA expands the pool of covered employees. Starting in 2026, compensation over $1 million to any employee potentially triggers the excise tax. Although this expansion is likely to affect only large nonprofits, review your organization’s compensation policies before the change goes into effect.

Charitable contribution deductions

Your donors will also be affected by OBBBA provisions. The big news is that taxpayers who don’t itemize will be able to deduct a certain amount of charitable contributions. Currently, nonitemizers can’t deduct any donations. But starting in 2026, individuals can deduct up to $1,000 ($2,000 for joint filers) in cash donations to qualified charities. Because the new tax law makes the higher standard deduction permanent, there likely will continue to be many more nonitemizers than there were before 2018, when the standard deduction was significantly lower.

But the tax benefits of charitable giving will become a little less generous for itemizing taxpayers, also beginning in 2026. The existing 60% of adjusted gross income (AGI) ceiling for deducting cash charitable contributions is now permanent, but the OBBBA introduces a floor of 0.5%. This means that itemizers can deduct charitable contributions only once they exceed 0.5% of AGI. For example, donors with AGIs of $100,000 won’t be able to deduct their first $500 of 2026 donations.

The OBBBA also applies a 1% of taxable income floor to corporate charitable deductions beginning in 2026. However, in certain situations, corporations can carry forward the disallowed deductions for up to five years.

Although not directly related to charitable deductions, another OBBBA provision is expected to reduce wealthy taxpayers’ incentive to make charitable gifts. It makes permanent the high lifetime gift and estate tax exemption that had been scheduled to expire after 2025. The exemption will be $15 million for 2026 and annually adjusted for inflation after that.

Other items

Depending on the type of nonprofit, other tax law changes may apply. For example, the OBBBA generally raises the excise tax on private colleges and universities with net investment income of more than $750,000 per student. To learn about this and other potential financial repercussions, contact us.

Using your nonprofit’s endowment to navigate financial obstacles

Non-Profits|September 11, 2025

Even not-for-profits that make realistic budgets and hold adequate funds in reserve to cover shortfalls can run into financial emergencies — particularly if they lose a major funding source. But if your organization has an endowment, its income may be able to help ease cash-flow issues, even long-term ones.

Restrictions and guidance

Several factors determine whether you’ll be able to cover budget shortfalls with your endowment. These include investment performance, inflation and your endowment’s spending policy. First and foremost, you can’t spend income from restricted funds for just any purpose. So make sure the endowment funds you’re looking at are “self-generated” or unrestricted.

In addition, your endowment’s spending policy must conform to provisions of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA), if enacted by your state (most but not all states have enacted it). UPMIFA provides guidance about making prudent investment decisions and delegating investment management. For example, your nonprofit shouldn’t spend more than 7% of its endowment in any one year. In general, the portion you can spend includes investment appreciation, realized gains, interest and dividends.

Spending policy

Your endowment spending policy should define how much of the fund’s income can be spent on operations each year. It doesn’t, however, have to define how that money can be spent within operations.

For most nonprofits, spendable resources are defined as a percentage of a rolling average of their endowment investments (typically averaged over three to five years). This method helps even out the volatility of investment returns and prevents the endowment’s contribution to any one budget year from being significantly lower than contributions to other years. In most cases, the spendable percentage is between 4% and 7% — less when investment markets are depressed.

This approach may help smooth cash flow currently available to operations, but it doesn’t address whether the endowment fund will be able to maintain a similar level of funding for future operations. Also, because investment returns usually don’t correspond to the inflation rates that affect your operating budget, your spending policy should be based on more than recent returns.

Effect of inflation

To factor inflation into your endowment spending policy, you may wish to start with a relatively conservative, inflation-free investment rate of return. Then adjust it for inflation to arrive at a spending rate you can apply on a year-by-year basis. For example, if you determine that an inflation-free rate of return should be 3%, and the inflation rate appropriate to your sector is 2.5%, your effective spending rate to apply to your asset base would be 5.5% for that year.

It’s also important to keep a spending rate policy that isn’t directly linked to fluctuating investment rates of return. In other words, don’t allow your withdrawals from your endowment to go up just because investment growth on those funds has spiked.

Be reasonable

A reasonable endowment spending policy should preserve your principal and enable it to grow and produce income years into the future. If it doesn’t, you’re probably spending too much and need to adjust your policy. You may also need to find other funding sources to meet current operational needs. Contact us for help with your financial analysis.

Grant proposals in the age of AI

Non-Profits|September 2, 2025

With fewer federal grants available to not-for-profit organizations, the competition to qualify for funding — from all sources, including foundations — has become more intense. Now, more than ever, your nonprofit needs to submit sharp, clear and attention-getting grant proposals to potential funders. Many organizations are enlisting AI tools to generate proposals. However, it remains critical to understand the fundamentals of proposal writing.

Grantmakers have mixed feelings

A recent survey of foundations by nonprofit data company Candid found that only 10% of funding foundations accept or plan to accept applications created by generative AI. However, most of the survey’s respondents admitted they didn’t necessarily know if they’ve received AI-assisted proposals.

Many funders say they welcome tools that enable a more level playing field, but they’re also understandably concerned about the potential for ethical issues. And for many foundations, grant proposals are only one piece of a larger application process that also involves such elements as interviews, site visits and a review of financial statements.

Customizing your content

Even if you use generative AI for grant applications, you’ll need to edit any content to help ensure its accuracy and specificity to your nonprofit. You also need to ensure it’s customized to the grantmaker. Familiarize yourself with grantmakers’ primary goals and objectives, the types of projects they have funded in the past, and their processes and procedures.

Performing such research enables you to determine whether your programs are a good fit with a grantmaker’s mission. If they aren’t, you’ll save yourself the time and effort of preparing a proposal. If they are, you’ll be better able to tailor your proposal to your audience.

Structuring your proposal

Every grant proposal has several essential elements, starting with a single-page executive summary. Your summary should be succinct. You also should include a short statement of need that provides an overview of the program you’re seeking to fund and explains why you need the money for your program. Other pieces include a detailed project description and budget, an explanation of your organization’s unique ability to run this program, and a conclusion that briefly restates your case.

Support your proposal with facts and figures but don’t forget to include a human touch by telling the story behind the numbers. Offering case studies in your own words is an excellent way to augment AI-generated content and engage your reader.

Following the rules

Review grantmaker guidelines as soon as you receive them. That way, if you have questions, you can contact the organization in advance of the submission deadline. Then, be sure to follow application instructions to the letter. This includes submitting all required documentation on time and error-free.

To that end, double-check your proposal for common mistakes such as excessive length, math errors and missing signatures. Also watch out for overuse of industry jargon.

Be candid

As with most people, grantmaking decision-makers are likely to become more accepting of AI-assisted applications as they become more familiar with the technology. Some grantmakers may ask about the use of AI in your proposal. Be sure to answer honestly to avoid repercussions if the funder later learns you didn’t respond truthfully. Contact us for advice if your nonprofit is having trouble meeting its funding goals.

Scrutinize that grant before you accept it

Putting a value on tangible property donations

Make recruiting volunteers a community affair

The right board for your nonprofit

The search is on: Finding an independent auditor

Building a better nonprofit budget

Navigate the risky business of nonprofit borrowing

The OBBBA: What it means for nonprofits

Using your nonprofit’s endowment to navigate financial obstacles

Grant proposals in the age of AI

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