The World Health Organization officially declared the end of the COVID-19 pandemic in May 2023, yet its effects continue to reverberate through charities and other donor-dependent organizations. These entities now face challenges stemming from shifts in labor market conditions, a tightening donor environment, and an increase in the need for support from those they serve.
It is important for not-for-profit organizations (NFPs) to maintain a list of main risks, such as employee retention strategies, internal embezzlement or vendor fraud, cybersecurity threats, changes in funding, and overall shifts in public support for the organization’s mission.
Navigating the New Normal
CPAs should question their clients on how they are adjusting to the new, post-COVID-19 reality. Many NFPs are beginning to examine their structure and future, as pandemic-era aid such as Paycheck Protection Program loans dries up. These changes come with risks as funding models shift and new programs may bring increased needs for services. CPAs need to stress the importance of updating internal controls and processes to reflect new structures and missions.
Overcoming Fundraising Challenges
One central challenge for not-for-profits is ensuring sufficient funding to sustain their mission. High rates of inflation and whispers of a recession have led many reliable donors and foundations to pull back on contributions. Big donors prefer funding specific projects rather than providing unrestricted operational support.
It is time for NFPs to investigate the feasibility of multiple revenue streams. This includes adapting fundraisers to post-COVID-19 realities and collaborating with partner organizations. The Fundraising Effectiveness Project found year-over-year declines in donors and donations, with significant drops among large donors.
Staffing and Retention Issues
Attracting and retaining talented staff is another significant challenge. Not-for-profits often cannot pay as much as for-profit organizations. CPAs should consider framing staffing challenges as an ongoing risk, emphasizing the need for flexible scheduling, remote work options, and a positive organizational culture. Outsourcing accounting and bookkeeping needs can also be a cost-effective solution for many not-for-profits.
Embracing Technology
Not-for-profits tend to lag behind for-profit counterparts in incorporating advanced technology. Leaders should prioritize understanding the opportunities and risks of AI. Implementing technologies like robotic process automation (RPA) can streamline work processes, freeing up employee time and easing budget pressures. CPAs should emphasize updating policies regarding the use of these technologies, ensuring compliance with data security, grants, contracts, and data privacy rules.
Enhancing Cybersecurity
The risk of cyberattacks continues to grow, and CPAs should encourage their clients to invest in cybersecurity measures and training. Robust protections against cyberattacks are essential to avoid becoming victims and losing valuable time and money.
Safeguarding Reputation
Protecting its reputation is of immense value to an NFP. Preparing in advance how to address controversy using defined social media policies may be critical for protecting that hard-won reputation. Additionally, CPAs should remind organizations that IRS Form 990 is a public document that should align with the organization’s vision and mission.
Filling Critical Roles
As we see, not-for-profit organizations will continue to face many challenges well beyond fundraising. CPAs can play critical roles by flagging big-picture questions and risks that may escape organization leaders immersed in day-to-day operations. By providing guidance and support, CPAs help not-for-profits navigate these post-COVID challenges and continue to fulfill their missions.
HAVE QUESTIONS?
If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Darien) or email us at info@cironefriedberg.com. Or, reach out directly to Sandra Callanan, CPA.
