Who’s Looking at Your Financial Information?
With all the electronic devices, websites, apps and social media, your organization’s financial information is only a click away. Do you ever wonder who’s looking at your financial information? Not-for-profits are heavily scrutinized for having too much cash, not having enough cash, declining revenue streams, increasing expenses, management and general expenses being too high, not enough money being spent directly on the program, management’s salary being too high, and the list goes on and on.
There are many watch dog groups out there accessing your information and scrutinizing not-for-profits based on a standard set of criteria and metrics. Is this really a fair way to rate a not-for-profit entity? Aren’t they all unique in their own way? Don’t they need excess cash reserves, just as a for-profit, to be prepared for an unpredictable future and achieve sustainability? Don’t they need well educated, experienced leadership to guide the organization through uncertain times, manage tight cash flows, and grow the organization? And why shouldn’t employees be paid for this leadership and expertise, just as in a for-profit?
So what can you do to make sure your organization’s financial information isn’t misinterpreted in the public’s eyes?
It is important to take the time to make sure your organization is properly and accurately presented. And there are many opportunities directly within your control to make this happen: through the information included on your website, in an annual report, in the financial statements and disclosures, and in the IRS Form 990 Return of Organization Exempt from Income Tax. Look for opportunities to educate the public about the dynamics of your organization and your mission. If you choose to post your financial information on your website, know who the users of the information are and keep the information that is out there up- to-date. And in your Form 990 ensure that the mission is properly stated and updated as changes occur. Time should be spent to ensure the expenses are properly allocated to their respective functional categories: program, management and general, and fundraising.
Also check your compliance with filing requirements to maintain your not-for-profit status in good standing. One new resource available is the Exempt Organizations (EO) Select Check the IRS added to its website, www.irs.gov. Exempt Organizations Select Check is an on-line search tool that allows users to search for and select an exempt organization and check certain information about federal tax status and filings. This consolidates three former search sites into one, providing expanded search capability and a more efficient way to search for organizations that are eligible to receive tax-deductible charitable contributions. This is one area that you should expect donors to be looking to check on your organization.
Make Sure Your Organization Stands Out in the Eyes of a Donor
Speaking of donors, with revenue streams shrinking and donor’s resources being stretched among many worthy causes, you want to make sure your organization stands out in the eyes of a donor. Your organization’s IRS Form 990 is available on several public websites (one of the most popular is www.guidestar.org) and is accessible to anyone who cares to take a look at it. Consider using this website as a marketing tool, detailing the accomplishments of the organization over the past year on the IRS Form 990 and by setting up access to make changes to your organization’s page.
Another website, Charity Navigator, launched in 2001, assesses the financial health of charitable organizations through a rating system.
Keep current with the information that is available to the public and use it to your advantage and consider how Meaden & Moore might be able to help you.