For nonprofit boards, 2026 looks to be a year of difficult questions. How do you encourage donor confidence amid economic uncertainty? Should you embrace artificial intelligence (AI) technology? If so, how do you do so responsibly while guarding against increasingly complex fraud risks? And behind all of this, one foundational question continues to challenge many nonprofits: How big should your board be? Understanding the pros and cons of small vs. large boards can help you design a sustainably sized governing body that’s equipped to engage whatever comes your way this year.

The trade-offs at each end of the spectrum

Both small and large boards come with perks and drawbacks. For example, smaller boards often facilitate easier communication and greater cohesiveness among members. Scheduling is less complicated, and meetings tend to be shorter and more focused. Several studies have shown that collective decision-making is most effective when the group comprises five to eight people. But boards on the smaller end of this range may lack the experience or diversity needed to facilitate healthy deliberation and debate. What’s more, members may feel overworked and burn out easily.

Larger boards, by contrast, can spread the workload more evenly, reducing burnout, increasing sustainability, and expanding an organization’s reach and fundraising network. Large boards also may include more perspectives and a broader base of professional expertise — financial, legal, community outreach and more. At the same time, large boards may struggle with engagement if members feel disconnected from decision-making or unclear about their roles. Larger boards also require more staffing support to manage onboarding, communications, logistics and more.

There’s no magic number

State law generally sets a minimum number of directors for nonprofit organizations. But beyond that baseline, board size is essentially a governance choice. When forming or resizing a board, nonprofit leaders should carefully consider director responsibilities, required skills and expertise, fundraising expectations, and staffing resources. A board that’s too small or too large relative to these factors can struggle to fulfill its fiduciary and strategic duties.

And while there’s a touch of wisdom in settling on an uneven number of board members (to avoid 50/50 votes), keep in mind that your board chair can break a tie when appropriate. Moreover, a split vote often signals that an issue deserves deeper exploration rather than a rushed decision.

Designing for strong governance

From a governance standpoint, growing a board is usually easier than shrinking one. Asking directors to step down can be uncomfortable, and reducing board size may require amendments to an organization’s bylaws. Many nonprofits benefit from defining a range for board size — rather than a fixed number — in their governing documents. This approach sets clear expectations while allowing for flexibility as the organization evolves. Ultimately, the “right” board size is that which supports thoughtful decision-making, meaningful engagement and long-term mission success.

© 2026

Tension between Accounting and Development teams is more than a simple workplace issue. It can have real financial consequences for a nonprofit organization. Misaligned processes and poor communication can affect financial reporting, compliance and even grant funding. Strengthening coordination between these departments may require refining procedures and fostering collaboration.

Speaking different financial languages

The first step is to ensure staff understand that the two departments often record financial information differently. Accounting typically records contributions, grants, donations and pledges in accordance with Generally Accepted Accounting Principles (GAAP). Development, meanwhile, may use cash basis accounting. This means that the two departments may produce different — but correct — sets of numbers.

For example, a donor makes a payment in February 2026 for a pledge made in December 2025. Development enters the payment amount as a receipt in its donor database in February. But Accounting records the payment against the pledge receivable that was recorded as revenue when the pledge was made in December. Receipt of the check doesn’t generate any new revenue in February because accounting recorded the revenue in December. Although each department’s records for February (and December) differ, they’re both accurate.

Building stronger connections

To truly collaborate, Accounting and Development should reconcile schedules at least monthly. If, for example, Development fails to inform Accounting about grants in a timely manner, Accounting won’t be aware of the grants’ financial reporting requirements, and your nonprofit could ultimately forfeit funds for noncompliance. Similarly, if Accounting doesn’t have the necessary information from Development to record grants or pledges in the proper financial period according to GAAP, your organization could face significant issues during an audit, also jeopardizing funding.

Schedule meetings so that Accounting can educate Development about what information it needs, when it needs it and the consequences of not receiving that information. For its part, Development should provide Accounting with ample notice about prospective activity, such as pending grant applications and proposed capital campaigns. Development should also present status reports on different types of giving — including gifts, grants and pledges. This is especially important for items received in multiple payments, because Accounting may need to discount them when recording them on the financial statements.

Creating a framework for ongoing coordination

When communication gaps persist or resistance to progress arises, it may be time to formalize expectations. Establishing clear policies and procedures can promote timely information sharing, strengthen compliance and protect funding. We can assist in designing and implementing a collaboration framework that helps ensure your Accounting and Development teams work together effectively.

© 2026

With cost-of-living concerns, interest rates and federal funding cuts continuing to be prominent in the headlines, many nonprofit leaders are understandably focused on external economic pressures. Yet some of the most serious threats to an organization’s financial stability don’t come from the broader economy — they originate within the organization itself. Executives and board members alike should stay alert to the following internal red flags that may signal deeper financial or governance issues.

Budget variances without clear reasons

After your board of directors approves a budget, it should be monitored for variances. Although some variances are to be expected, your staff should be able to provide reasonable explanations — such as funding changes or macroeconomic factors — for significant discrepancies. Where necessary, work to mitigate negative variances by, for example, cutting expenses.

Additionally, beware of overspending in one program funded by another, dipping into operational reserves or engaging in unplanned borrowing. These, plus the need to draw from your nonprofit’s endowment for funding, may mark the beginning of a financially unsustainable cycle.

Decreased donor confidence and giving

Let’s say your nonprofit has been receiving fewer and smaller donations lately. Then you start hearing from long-standing supporters that they’re losing confidence in your organization. Investigate immediately. Ask supporters what they’re seeing or hearing that prompts their concerns.

Also note when development staff approaches major donors outside of the usual fundraising cycle. This could mean your nonprofit is scrambling for cash.

Incomplete or noncompliant financial reporting

If your financial statements are untimely and inconsistent or aren’t prepared using U.S. Generally Accepted Accounting Principles, you could be heading for trouble. Poor financial statements can lead to poor decision-making and undermine your nonprofit’s reputation. They can also make it difficult to secure funding.

Insist on professionally prepared statements as well as annual audits. Members of your organization’s audit committee should communicate directly with auditors before and during the process. All board members should have the opportunity to review and question the audit report.

Unchecked executive authority

Even the most experienced and knowledgeable nonprofit executive director shouldn’t have absolute power. Your board needs to step in if an executive ignores expense limits or violates other rules of good fiscal management. The board should also question any executive who attempts to select a new auditor or make strategic decisions without board input.

How to respond

Nonprofits rarely encounter financial trouble overnight. Problems usually develop gradually, with early indicators that are easy to overlook or explain away. By paying close attention to budget discipline, donor trends, financial reporting and leadership accountability, boards and executives can identify risks early and take corrective action.

If any of these red flags sound familiar, now is the time to act. We can help you engage your board, strengthen your internal controls and review any financial and governance warning signs before they become deeper issues.

© 2026

In general, not-for-profits should work with professional financial advisors to ensure they’re complying with the IRS’s rules for tax-exempt organizations and effectively managing budgets, endowments and other financial functions. At the same time, your executives and board members need to regularly monitor financial indicators.

Certain ratios can provide early warnings that, for example, your nonprofit is overspending on fundraising, inefficiently managing cash flow or could benefit from a larger operating reserves cushion. Keeping an eye on financial ratios can also tip you off to potential fraud in your organization. Here’s a short summary of four key ratios and what they can reveal.

Spending numbers

The first ratio is the percentage spent on program activities. It indicates how much of your total budget is used to provide direct services. To calculate this ratio, divide your total program service expenses by total expenses. A result higher than 65% is widely considered to be good, and 85% and above is usually excellent.

Percentage spent on fundraising is the second critical number. It represents how much you spend to raise a dollar and is a prime indicator of overall fiscal health. To calculate it, divide total fundraising expenses by contributions. The standard benchmark for fundraising and administrative expenses is 35%.

Current and reserve percentages

The current ratio represents your nonprofit’s ability to pay its bills, providing a snapshot of financial conditions at any given time. To calculate your current ratio, divide current assets by current liabilities. Typically, this ratio should be at least 1:1.

Then there’s the reserve ratio. This tells you whether your organization is capable of sustaining programs and services during temporary revenue and expense fluctuations. To calculate your nonprofit’s reserve ratio, divide expendable net assets (unrestricted and temporarily restricted net assets less net investment in property and equipment and less any nonexpendable components) by one day’s expenses (total annual expenses divided by 365). For most organizations, this number should be between 90 and 180 days. Base your target on the nature of your operations, your program commitments and the predictability of funding sources.

Other options

Depending on your niche and mission, there may be additional ratios your nonprofit should monitor. For example, a revenue diversification ratio can tell you how much of your funding depends on a single source (no one source should provide more than 30%). Similarly, a government reliance ratio can expose a dependence on potentially insecure grants. To learn more about these and other tools for effective nonprofit management, contact us.

© 2025

Technology seems to change at the speed of light. Even a few years ago, many people had never heard of AI! Now, most not-for-profits are exploring how AI can improve their operations and outcomes. This rapid pace — and its potential risks — can be challenging for nonprofits. But there are relatively inexpensive ways to stay safe and benefit from the advantages offered by new technologies.

Controls that mitigate threats

Some tech solutions may already reduce your nonprofit’s risk. For example, cloud-based accounting software generally includes built-in controls. The software can also help you automatically track grant spending in real time so you can quickly remedy any mix-ups and avoid issues with your grantors.

More recently, advancements in AI are taking technological assistance to a new level. On the downside, AI has enabled bad actors to launch more cyberattacks against organizations. But on the plus side, AI has introduced new tools that can help organizations more quickly preempt or detect suspicious activity. In particular, AI and automation are making it easier to cost-effectively crunch massive amounts of data to identify anomalies and stop fraud.

Up your game

Many of your employees may work remotely, at least some of the time. And even if they don’t, most workers now access at least one of their employers’ networks via multiple devices. This provides hackers with greater “cyberattack surfaces” or points of entry. So if your nonprofit still uses passwords only — or even passwords plus multifactor authentication — to limit access to your network, consider adopting stronger defenses.

Role-based controls restrict access to systems or data to only those whose jobs require it. For example, only accounting staff (and certain executives) can access all financial data. Role-based controls offer different levels of access. “Just-in-time” provides users with access only when they need it and only for a limited period. Similarly, “just enough” applies the principle of “least privilege,” giving users access to only the information they need. “Microsegmentation” divides a network into discrete segments, each with its own access requirements.

Finally, “zero trust” approaches access for every user, device and connection on a per-request basis, whether inside or outside the network. Users must undergo repeated authentication. For each request, the system considers the user’s identity, location and device, along with the classification of the data sought, before granting access.

Resources are available

If your nonprofit has in-house IT support, discuss these issues with IT staffers to determine the next best steps. You may also be able to tap the expertise of board members or trusted volunteers with technology backgrounds. Additionally, we can help you analyze tech costs and assist you in implementing and improving internal controls.

© 2025