What corporate donors like

Corporations are looking more closely at how well nonprofits are managed before deciding whether and how much to donate. This is a growing trend we see in our accounting, tax and consulting work for nonprofits across the country. Companies want to be comfortable that their donations will be used efficiently and effectively so that their association with the nonprofit will reflect favorably on them. Therefore, nonprofits increasingly need to demonstrate strong governance to maximize donations from corporations.

Here are five suggestions for doing that:

1. Focus on information technology risks.

Given IT’s significant risk potential, assign risk management for this function to a board committee, logically as part of the audit committee’s charge. This might include adding someone with information technology expertise to your audit committee.

- Advertisement -

If you don’t have a large IT department, consider using an outside consultant to help evaluate IT risks and recommend solutions.

2. Factor insurance in your risk considerations.

One of the largest risk-management investments nonprofits make is insurance coverage. Consider inviting insurance brokers to present to your audit committee every few years. They can bring invaluable insights into changes and developments in the insurance market.

3. Become more transparent with tax compliance.

Review your Form 990 filing with the audit committee and make the full document available to the board. Included in this review, if applicable, should be the Form 990-T, Exempt Organization Business Income Tax Return. Unrelated business income tax can be a large source of risk for your organization, given that you must decide what to report as unrelated or related. Invite your tax consultant to the audit committee meeting to review these forms.

For nonprofits with state income tax exposures, there should be a more in-depth discussion about your jurisdictional filing judgments. The conversation should consider two elements: in which states do we file and why.

Some organizations may make the decision not to file in states with small exposures. If the audit committee understands the state income tax exposure dynamics, committee members may have a better grasp of the judgments management makes.

4. Ensure greater benefit-plan oversight.

As the plan sponsor and fiduciary, your organization bears responsibility for the accuracy of its benefit plan. Consider enlisting your audit committee to help meet assist in meeting the regulatory requirements involved in benefit-plan financial reporting.

Audit committees can help address compliance concerns by reviewing recent benefit-plan audit reports or at least a summary of them. An audit report should indicate which areas need to be improved. The report can also help guide future risk-management efforts.

5. Consider the risks of outsourced services.

Many nonprofits have the misperception that because a service is outsourced, it does not need internal controls. The responsibility for the service, regardless of who performs it, remains with your organization.

Your audit committee can ensure that you have adequate controls over outsourced services, including vendor performance or conformance. •

Michael Burns is the nonprofit practice leader at CBIZ Tofias, which has offices nationwide, including in Providence and Boston.

No posts to display