• Effective Audit Committee Guide

Community Support:
 
  • Decline in utilization of organization’s services by the local community (fewer students, patients, visitors, members or other users)
  • Decline in real dollar (inflation-adjusted) support through gifts, bequests and membership dues
  • Decline in hours of time made available by volunteers
  • Increasing incidence of turndown of grant requests
  • Criticism of the organization or its programs by public figures or media

Financial Independence:
 
  • A growing percentage of expenditures for basic operations funded by restricted grants
  • A growing percentage of unrestricted revenues committed to meet matching-fund requirements or needed to supplement restricted revenues for special projects
  • Increasing use of “next year’s” cash to pay this year’s expenses, e.g., prepaid dues, ticket sales, tuition, etc.
  • Increasing reliance on very few different sources of support
  • A growing debt burden
  • Rapid increases in fixed or semi-fixed cash costs (salaries and fringes, rent, debt service, etc.)
  • Continuing decline or deficit in operating income or unrestricted net assets
  • Continuing decline or, especially, overdraft in cash and equivalents

Productivity
 
  • Cost per unit of service rising disproportionately to inflation
  • Number of employees per unit of service rising rapidly
  • User fee rates rising rapidly (unless resulting from a deliberate management decision to reduce the amount by which such fees are subsidized from other revenue sources)

Deferred Current Costs
 
  • Proceeds of long-term debt or sales of long-term investments being used for current purposes
  • Deferring needed maintenance and/or replacement of capital assets
  • Default on debts (bonds, notes, mortgages, interest)
  • Inability to pay salaries or other current expenses – especially payroll or other taxes – when due, or borrowing to cover such amounts shortly before payment
  • Borrowing of cash or other assets from restricted funds or other diversion of restricted resources to inappropriate purposes

Management Practices
 
  • A pattern of budget cost overruns, either overall or in specific programs/departments
  • Increasing incidence of revenue shortfalls
  • Earnings on investments declining disproportionately to general trends of investment yields
  • Interest rates charged by lenders increasing disproportionately, unwillingness of lenders to lend to organization or insistence by lenders on burdensome debt covenants
  • Levels of receivables, inventory, or prepaid expenses increasing faster than related activity
  • Increasing incidence of funding source challenge or disallowance of expenses
  • Financial and operating data being provided to board members and management is delayed, unclear or incomplete. Explanations of key items and variances are unavailable or of doubtful validity
  • Failure on the part of board members or management to understand and accept the seriousness of the financial situation

Benchmarking Tool

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Contacts

William Eisig Atlantic Managing Partner 703-336-1401
Laurie De Armond
Laurie De Armond Managing Partner and National Co-leader 703-336-1453
Adam Cole
Adam Cole Partner and National Leader 212-885-8327
Lee Klumpp
Lee Klumpp National Assurance Partner – Nonprofit & Government 703-336-1497
Tammy Ricciardella Technical Director 703-336-1531
Marc Berger - BDO Greater Washington, D.C.
Marc Berger National Director, Nonprofit Tax Services 703-336-1420
 
Patricia Duperron National Assurance Practice Director-Governmental 616-776-3692
Andrea Wilson - BDO McLean
Andrea Wilson Partner; Nonprofit & Education Advisory Services Leader 703-752-2784
Susan Friend
Susan Friend National Assurance Director - Nonprofit & Government 954-626-2964
See all contacts

Nonprofit Standard Newsletter

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We Wrote The Book

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How to Read Nonprofit Financial Statements: A Practical Guide is a key resource that will help you read, interpret, and use nonprofit financial statements.
 

Video Series: Nonprofit Voices

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Benchmarking Tool

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Events

April 25, 2019
Please join BDO USA, LLP for our next session of the 2019 BDO KNOWLEDGE Nonprofit and Education Webinar Series, "Trends and Issues in the Valuation of Gifts-In-Kind."