In the nonprofit sector, the strategic planning and positioning of your organization typically involves a multitude of “What if?” questions or scenarios as well as predicting future trends. I hope you find the 10 items below helpful as your nonprofit organization and board assesses its strategies for the coming year and for securing the long-term […]
In the nonprofit sector, the strategic planning and positioning of your organization typically involves a multitude of “What if?” questions or scenarios as well as predicting future trends. I hope you find the 10 items below helpful as your nonprofit organization and board assesses its strategies for the coming year and for securing the long-term viability of your programs and services.
1. What have you done to assess the impact of demographic changes on future demand for your programs and services? For example, the aging baby-boom population certainly bodes well for elder and health-care services. However, what if it has a negative effect because of the large number of New Yorkers going South for the warmer weather and lower taxes?
2. Demographic assessments are closely intertwined with the impact of our economy on future demands for programs and services. For example, the fact that 25 percent of New Yorkers will be eligible for Medicaid as of Jan. 1, 2014, represents a dramatic shift in the distribution of wealth in New York state. The dramatic increase in poverty, coupled with a vanishing middle class, must be considered for both the short-term and long-term effects on your organization.
3. Many nonprofit organizations, largely due to an aging baby-boom population, are facing the retirement of long-tenured executives and management-team members. Every nonprofit board has the responsibility for selecting its CEO. If you haven’t had to do succession planning in the past 20-30 years, it is a challenge that requires a significant amount of board involvement and oversight, especially since the candidate pool is not as deep as it has been. What if the board is not ready for this task?
4. The stock market is continuing its record-setting climb in the face of relatively weak economic data. All levels of government are experiencing fiscal pressures that will continue to result in reductions in government spending. What if the Federal Reserve stops buying Treasury bonds each month that no one else would buy at the unreasonably low interest rates now offered? The Fed is now up to about $4 trillion on its balance sheet with its quantitative-easing program. How much higher will it go?
5. New York Gov. Andrew Cuomo, in his 2012 Executive Order (EO) No. 38, and the Internal Revenue Service have both made it quite clear that nonprofit boards must evaluate and fairly determine the compensation of the nonprofit CEO on an annual basis. What if your organization is not in compliance with IRS Section 4958 and/or Cuomo’s EO 38?
6. Technology advances continue to amaze and progress at a pace that will fundamentally change our society. For example, think of what you do daily on your smart phone compared to your comparable activities in 1980 or 1990 or 2000. What if your organization fails to see the impact of technological advances similar to the personal computer, digital cameras, and smart phones? While you’re at it, think of the incremental costs with maintaining current technologies, particularly for smaller nonprofit organizations.
7. Competition on prices for goods and services will continue to accelerate. Every organization should prepare and maintain a list of its top 20-30 vendors. The board or its designated committee should be assigned the responsibility of monitoring periodic bidding practices. Remember that government demands warrant more cost efficiencies as their budgets continue to be pressured.
8. What if the federal and state governments finally recognize that nonprofit organizations are among the largest employers in most metropolitan areas? Large nonprofit organizations typically have significant investment reserves and investment income that is never taxed. Knowing the need for incremental government revenue, it is a relatively small leap to anticipate some form of tax on the investment income of nonprofit organizations.
9. What if your computer network is vulnerable to unauthorized hacking? The technology-savvy criminal element continues to target the less sophisticated nonprofit organizations for fraud for initiating fraudulent transactions. In addition to increasing your security protections and processes, you should make sure that your liability-insurance policy covers cyber-crime. Not all of them do so without a separate rider.
10. I would be remiss if I did not mention the potential what-ifs associated with inadequate internal-control policies and proper segregation of incompatible duties. Our current economic environment has resulted in increases in employee misappropriations and malfeasance. What if your independent audit firm has no substantive experience in working with nonprofit organizations that are similar to the programs and services your organization offers?
I could go on and on. However, I encourage every nonprofit board and management team to address its strategic positioning on the topics discussed above.
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 garchibald@bonadio.com