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NONPROFIT MANAGEMENT: A Checklist for Nonprofits

By Gerald J. Archibald


The election is over, or is it? These past nine months of the campaign season have been a wild roller coaster ride, which will continue certainly through Jan. 20, 2021. Party control of the Senate hangs in the balance on the Jan. 5 Georgia run-off elections. I am not in a position to have any predictions for what may occur between now and Jan. 20.

However, I do know that we are in the 10th month of a pandemic, with no clarity regarding a control date for the virus. Certainly, the efficacy and immunization length for the various vaccines are a hopeful sign.

What I can and will do in this column is describe a list of topics that I believe the vast majority of nonprofit organizations should address and evaluate during the next 90-120 days. Think of it as a checklist, but also use it as a tool for communicating management’s continued assessment of opportunities and challenges to your board of directors.

The platform for your ongoing evaluation and assessment of these topics is predicated on significant unknowns regarding future federal stimulus and the New York State budget crisis. Gov. Andrew Cuomo has mentioned state bankruptcies several times in his COVID-19 briefings. He has requested increasing amounts of federal support, between $50 billion and $78 billion, to potentially avoid a New York State financial crisis over the next 36 months. 

Periods of crisis frequently produce paradigm shifts that represent a rapid acceleration of change that is inevitable. Think about telehealth / telemedicine and remote-working environments as two examples of dramatic change that have occurred since March 15. 

My top 10 topics are as follows:

1) Occupancy costs and square footage — Every organization should evaluate its future policies and procedures regarding remote-working environments. The days of going into the office — particularly for administrative, management, and support personnel — may officially be behind us, similar to the days when Kodak film development dominated the photography industry.

2) Human resources — In the absence of significant immigration reform, we have an extraordinary situation in which many employers are experiencing difficulty in recruiting, training, and retaining qualified staff. For a typical tax-exempt organization, the process of creating a vacancy followed by the recruitment of a new employee is one of the “hidden costs” that rarely, if ever, appears as a “turnover” line item in your financial statements. The best place to start your evaluation in this area is to calculate and communicate the average cost for your organization to replace a vacant position, including the cost of employee separation as well as recruitment and training costs. Once you have a frame of reference for the average cost, you can begin to modify procedures to make your HR function more cost-effective.

3) Gifts of appreciated stock — The Dow Jones Industrial Average and the S&P 500 index have each gained more than 65 percent since the March lows. Each development office should be reaching out to both wealthy donors and the “hidden millionaires” to solicit and encourage gifts of appreciated stock prior to Dec. 31. The charitable deduction donated is worth far more now to an individual taxpayer since the Tax Cuts and Jobs Act of 2017 capped certain itemized deductions at $10,000.

4) Ranking and credit relationships — Unless you have more than three months of annual operating expenses in your cash and investment reserves, it would be wise to engage in proactive discussions with your primary bank loan officer. Specifically, he or she is aware of the downward pressure on future government funding and the increased risk of bankruptcy / receivership filings. Discussion of engaging the level of confidence of your banker regarding your line-of-credit facility and future capital-financing requirements should become an ongoing monthly or quarterly dialogue. 

5) Analytics on controllable operating expenses — Most nonprofits involved in program-service delivery spend between 60 percent and 75 percent on total expenses on personnel salaries and fringe benefits. If you recognize that depreciation expense can routinely represent at least 5 percent of operating expenses, that leaves a maximum of “controllable operating expenses” in the range of 20-35 percent. A thorough analysis of each and every controllable operating expense must be performed as you proceed into calendar year 2021. As an example, I am consistently appalled and frustrated by tax-exempt organizations that routinely spend 55 cents for each piece of “snail mail” when there are less expensive or no-cost alternatives readily available (e.g., email, social media, GoFundMe, etc.). Don’t get me started on the costs associated with preparing and mailing disbursement checks. There are numerous low-cost payment platforms that remind me of the naysayers who said that Paychex would never be successful since employers would be reluctant to share their payroll information with outside vendors. 

6) Effective utilization of social-media platforms — Most nonprofits need to transition from their constituent supporters in the Baby Boom generation in favor of the technology wizards of the Gen X and Millennial generations. Advancements in technology require that external communications and fundraising activities must be viewed through a different lens. The developing paradigm shift should also be less expensive.

7) Relationships with government-funding sources — Similar to the banking-relationship suggestion above, having a “finger on the pulse” of the impact of New York State and federal adopted budgets should trigger immediate discussion of either alternative revenue sources or the elimination of deficit-producing programs and services. An experienced, effective, and properly networked grant writer is now an essential component necessary to replace declining government-funding levels with private-sector foundation grants and other non-governmental revenue sources. 

8) Outsourcing your regulatory compliance officer — In April 2020, Section 363-d of the Social Service Law was changed to allow organizations to outsource their compliance-officer functions. This could represent a major opportunity for many tax-exempt organizations, since the compliance-officer functions do not frequently require a full-time equivalent employee. New York State has yet to issue its clarifying interpretive regulations related to the Social Service Law amendments, but an assessment of the cost-benefit of internal versus external costs of regulatory compliance should be evaluated during the first quarter of 2021. 

9) Information-technology cybersecurity and ransomware attacks — My technology experts, certainly not me, have made it quite clear that the pandemic has resulted in a potentially significant increase in the vulnerability of your technology functions, applications, and related network activities. There has been an epidemic of ransomware attacks focused on tax-exempt organizations during the course of the pandemic. There are no 100-percent guarantees of absolute security, but implementing procedures and controls that provide at least a 95-percent confidence level should be the objective of every organization.

10) Outsourcing administrative functions — Tax-exempt organizations have evaluated outsourcing administrative functions for a decade, in the hopes of increasing the level of sophistication while reducing costs and/or satisfying an internal vs. external cost/benefit analysis. The following areas are, without question, opportunities for further analysis and perhaps a different evaluation result due to rapid advancements in technology and artificial intelligence. The most popular functions that may be moved to an outsourced vendor or contractor are:

a. Human resources

b. Finance

c. Information technology

d. Billing and revenue-cycle management

e. Transportation

f. Document imaging and administrative-support personnel

g. Regulatory compliance

Please stay safe and healthy through the upcoming holidays and utilize this checklist as New Year’s resolutions for your organization in maintaining high quality, cost-effective services with desirable outcomes.        

Gerald J. Archibald, CPA, is a partner in charge of the management advisory services at The Bonadio Group. Contact him at (585) 381-1000, or via email at