An outside financial audit may seem like an extravagance to not-for-profits working to contain costs and focus on their mission. But undergoing regular audits allows your organization to identify risks early and act quickly to prevent problems.
Independent audits also provide valuable reassurance to donors. Fortunately, you can reduce the cost of external audits with good preparation.
A key fiduciary duty of your not-for-profit’s board of directors is to oversee and monitor the organization’s financial health. Some financial red flags and warning signs, such as the loss of a major funder, may jump out immediately.
But other red flags can be more subtle. Here are some of them.
Your not-for-profit’s ability to pursue its mission depends greatly on its financial health and integrity.
If your not-for-profit is growing and your executives are struggling to juggle financial responsibilities, it may be time to hire a chief financial officer (CFO).
Signs of financial distress in a not-for-profit can be subtle. But board members have a responsibility to recognize them and do everything in their power to avert potential disaster.
Pay particular attention to:
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An operating reserve is an unrestricted and relatively liquid portion of a not-for-profit’s net assets. Securing this reserve for use in emergencies or simply when your budget falls short is critical to your organization’s security and long-term survival.
Long-Term Effort
Building an adequate operating reserve takes time and should be regarded as a continuous project. Your board of directors needs to determine your not-for-profit’s policy on building an operating reserve, the desired fund amount and the circumstances under which it can be drawn down.
Reserve funds can come from unrestricted contributions, investment income and planned surpluses. Many boards designate a portion of their organizations’ unrestricted net assets as an operating reserve.
With the dawn of 2019 on the near horizon, here’s a quick list of tax and financial to-dos you should address before 2018 ends.
Check your FSA balance. If you have a Flexible Spending Account (FSA) for health care expenses, you need to incur qualifying expenses by December 31 to use up these funds or
Jen: This is PKF Texas The Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back again with Danielle Supkis Cheek, a director on our Entrepreneurial Advisory Services team, as well as our not-for-profit team. Danielle, welcome back to the Playbook.
Danielle: Thank you again.
Jen: I know there have been some pretty big changes