Protecting Resources While Pursuing your Mission: Marks Paneth’s Annual Nonprofit Industry Update

By Hope Goldstein  |  January 7, 2020

Protecting Resources While Pursuing your Mission: Marks Paneth’s Annual Nonprofit Industry Update

At Marks Paneth’s Annual Nonprofit Industry Update Seminar this past October, our Nonprofit, Government & Healthcare Group was proud to bring together leaders of some of New York’s most well-known nonprofits. I had the pleasure of co-hosting this year’s seminar with my colleague and Co-Partner-in-Charge, Michael McNee, as well as with Joseph Kanjamala, Nonprofit Partner, who first brought this seminar to life four short years ago. In that time, with the help of Joe and all of the partners in the group, we’ve seen the event grow from a morning’s accounting update to a full day of programming, one that is designed to help nonprofit CEOs, Board Members and professionals with every aspect of their organization.

This year was by far the biggest attendance we’ve ever had, and as we spoke with many of the nonprofit leaders in the room, a theme quickly emerged. Many said that while their nonprofits are experiencing programmatic growth and enjoying solid and measurable mission successes, leadership is acutely aware of the need to marshal their resources against what they see as reasonably imminent risks of recession and further pressures on donations (made clear by the impact 2017’s Tax Cuts and Jobs Act had on donors). This duality of growth and caution was discussed by several of the day’s speakers, and I found that it was echoed in Change Management for a New Era, the complete report of Marks Paneth’s Nonprofit Pulse survey findings, which we unveiled that day. In Michael’s remarks during his outstanding interview with Michael Thatcher of Charity Navigator (about which I’ll share more later), and in the results of our survey, we found evidence that executive leaders at nonprofits find themselves managing in a challenging environment that asks them to maximize their mission while conserving resources. Let me go into a bit more detail on what we learned during this fascinating full-day event.

Our featured speaker, Michael Thatcher, is President and CEO of Charity Navigator, the nationally respected evaluator of nonprofit organizations. During this wide-ranging conversation, Thatcher was asked to describe in more detail what he had called Charity Navigator’s move away from being a watchdog agency into one that, while remaining dedicated to bringing transparency into the reporting of a nonprofit’s financial health, is also committed to helping nonprofits become more accountable for their efforts to achieve their mission goals. As Thatcher said, his organization is seeking to drive nonprofits to achieve “peak transparency” and to use it as a lever for change. The goal is to help nonprofits define themselves and their missions in terms of accomplishments and effectiveness in a way that the average donor can understand. By way of example, Thatcher offered this scenario: a nonprofit is instituting a major operational change that will have an effect on revenue reporting. Thatcher’s solution – tell the story to Charity Navigator and even go so far as to put the story up on the website. Combining data with narrative goes a long way to supporting the overarching goal of transparency.

While describing Charity Navigator’s operational and funding model (it charges no fee to its more than 9,000 evaluated nonprofits, nor does it charge for access to its data—it relies greatly on contributions from individual donations), Thatcher reported on their push to increase nonprofit reporting of their results, as well as driving donor demand for impact-related information by initiating an impact information effort with its partners. This has resulted in the creation of some 17,000 nonprofit profiles containing impact data. Thatcher also highlighted the relatively new (2015) enterprise called the Charity Navigator Giving Basket, which is a donation platform allowing any Charity Navigator user to make a donation to legally registered 501(c)(3) nonprofits in the United States. The results have been remarkable: to date, almost 127,000 donors have given close to $67 million to about 25,000 nonprofits.

Thatcher then shared some more exciting news – the announcement of the 2020 launch of the Experimental Nonprofit Validator and Health Check, which “looks to open the doors to a significantly higher number of nonprofits.” The idea of the health check is to determine “if a charity can be considered healthy and worthy of a “trust indicator” issued by Charity Navigator.” The exact metrics and parameters are still being determined, and a challenge for Charity Navigator is to add the required technical capability to publish much more information from the IRS 990 data set. Thatcher stressed that it is important to note the experimental nature of the undertaking, as it is an evolving methodology.

When it came time for my own presentation during the event, I had the great pleasure of sharing the results of our Change Management for a New Era survey report for the first time. I urge our Marks Paneth clients and friends to review and download the survey results, but there are a several salient points that caught my attention:

  • Nonprofit leaders are noting an unexpected demand for services simultaneously with less available funding.
  • After some years of high staff and board turnover, most respondents indicate that board leadership and staff have stabilized.
  • Revenues are slightly up, but so are reserves.
  • Cautious optimism is being leavened by planning for leaner times ahead.
  • Time and effort are being concentrated on finding new sources of revenue, building succession plans and seeking next-generation leaders, and investing in infrastructure and technology.

Some recommended strategies emerged from the findings, notably in the planning process. Three, in particular, stood out to me: 1) exploring new digital solutions, especially in the area of developing new revenue sources, 2) investing in talent, recognizing the peril of ignoring the need to recruit (and keep!) emerging leaders, and 3) heading off risk, with almost one-third of respondents saying they’d be open to investing in risk management to address both short and long-term risks.

My two primary takeaways from the survey were first, that my nonprofit colleagues are doing well, and that they are anticipating they will continue to succeed, while managing with fewer resources; and second, if they could wave a magic wand and procure some outside support, their priorities would include (in order of preference) strategic planning, fundraising and development, benchmarking studies, board and staff training programs, employment benefits and compensation, risk assessment and planning, cybersecurity and disaster recovery plans.

I must acknowledge the outstanding contributions to the seminar made by my Marks Paneth colleagues. Our accounting update was presented by Sibi Thomas, Partner, and Matthew Estersohn, Senior Manager, who managed to make FASB facts come alive by providing context and relevance. The demystification of nonprofit tax regulations was presented beautifully (and with many laughs!) by Tax Director Magdalena Czerniawski; and a new look at how nonprofits can leverage data analytics was presented by Marks Paneth’s new Principal-in-Charge of Technology & Digital Services, Dean Nelson. Please seek them, or any Marks Paneth practitioner, out for more details.

One of the great joys of organizing this seminar is to meet and learn from friends who bring with them extraordinary levels of expertise and experience. I had a chance to catch up with many of them, including Anthony Edwards, CFO of Sheltering Arms, who has attended this seminar in years past. In his role, he is facing a challenge we hear about more and more, which is to make sense of revenue reporting changes and to educate boards on the impact those changes have. Forecasting change is what keeps him up at night, and he sees 2020 as bringing even more challenges to reporting on items like leases and contracts which will certainly impact how revenue is reported. Another CFO, Christine Thorbjornsen, at Harris, NY-based Center for Discovery serving adults and children with intellectual disabilities, told me her problems this year centered around dealing with the demands of regulations with little or no training on how to comply – she called New York State a “black hole” when it comes to regulatory clarity. Her 2020 challenges list is topped by “doing more with less” – a theme we heard throughout the day. Crystal Ward, board chair of Unique People Services, in the Bronx, New York, and a first-time attendee, was keen to learn about accounting changes in order to share what she learned with her board members and financial staff. It is always gratifying to learn that what is absorbed in such a short amount of time at this seminar is passed on to so many back in the office.

My thanks to these and so many other attendees who took the opportunity to learn and share. We at Marks Paneth are proud to have sponsored this year’s seminar and know for a certainty that the world of nonprofits remains exceptionally vibrant due, in no small measure, to the resourcefulness of its leaders and volunteers. It is our continued honor to serve them.


About Hope Goldstein

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Hope Goldstein, CPA, is the Co-Partner-in-Charge of the Nonprofit, Government & Healthcare Group at Marks Paneth LLP. Ms. Goldstein brings to her role the skills she has developed during more than 27 years of providing accounting and auditing services to her clients in the nonprofit, higher education and public sector industries. She co-leads a team of more than 60 professionals who specialize in the nonprofit industry and focus on ensuring the accuracy and transparency of... READ MORE +


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