For most people, the first week in July revolves around Independence Day celebrations. For many nonprofit organizations (NPOs) though, it represents the first week of their new fiscal year. Yes, on June 30, hundreds of thousands of NPOs officially started to close the books on FY 2017. Hopefully, they’ve let their finance and accounting staff enjoy some 4th of July celebrations, with an extra-long weekend. But when they return to the office, there will be plenty of work to do to close the books.
Many NPOs prefer closing their fiscal years on June 30, because it aligns better with their programmatic activities. Higher education orgs, for example, have wrapped up graduating classes and entered a summer slowdown ideal for closing the books. Healthcare and human services NPOs that receive substantial funding from grants are preparing for end of July reporting requirements, so getting in line with parallel grant cycles can really help. Others just prefer to avoid the double whammy of having fiscal closing and tax season that start in January. Whatever their reason, July marks a new financial year of opportunity ahead for many NPOs.
What will your fiscal 2017 results look like, and how will you distribute them? If you close on June 30, your IRS tax Form 990 will be due on November 15. Audits will also begin to be scheduled, which include financial statement scrutiny, especially for organizations covered under OMB’s A-133 single audit act.
- Where will your organization be presenting your results?
- Will you go beyond a normal board meeting update and provide results to your top funding stakeholders?
- Do you also publish results to your website and/or an annual report?
Keep in mind the future funders of your organization likely expect more transparency than the ones to whom you’re delivering results today.
I personally love the summertime in the sector because there’s so much great sector data that gets released. Giving USA just released it annual report on philanthropy which shows that total giving last year was estimated at $390.05 billion or just at a 2.7 percent increase YOY. Over $59 billion of those contributions came from foundations like the massive charitable giving fund that brokerage powerhouse Fidelity manages. It released its 2016 Giving Report, based on its Donor Advised Funds (DAFs) data, which spans more than 132,000 donors who recommended $3.1 billion in grants to support the nonprofit sector.
If you’re a NPO finance professional, you may want to check out BDO’s first nonprofit benchmark study, that reports 53 percent of NPOs surveyed have either zero or less than six months’ worth of operating reserves. None of these studies points to dramatic sector growth ahead, and all underscore that nonprofits are often one unforeseen funding event away from potential crisis.
Speaking of, how did your budget planning for FY 2018 turn out? Hopefully you’re starting out of the gate better than some notorious American states. Illinois, Connecticut, New Jersey, and Maine haven’t even passed their budgets, which have resulted in (likely) temporary shutdowns. If you work at an NPO in one of those states that receives substantial state reimbursements or grants, there’s more uncertainty already. Looming ahead too is the federal government budget resolution process which should ideally lead to a federal budget for FY 2018 that commences on October 1. Your organization now may be better off from a budget planning standpoint than government entities, but don’t forget they actual hold the purse strings going forward.
As the summer heat starts to move from tolerable to sweltering in the south and west, it’s time for many NPOs to consider their own environments going forward. Those that are forecasting based on a purely historical approach may end up facing a future world that doesn’t look like the past. If the beginning of 2017 has shown us anything, there has been a measured dichotomy between NPOs that are experiencing booming fundraising post-election and those that are facing funding headwinds.
You can only effectively navigate a changing environment if you have a budget plan that can be adaptable. If you’ve just started a new FY 2018 budget, then think about your checkpoints ahead where you can adjust the plan. If you’re on the cusp of starting budget planning, though, please consider how you can build a better budget. We’ve complied a guide to building a nonprofit budget roadmap that can help you wherever you happen to be in your own organization’s journey.