What kinds of Challenges do Nonprofit CFO’s in NJ face today? The Tax Cuts and Jobs Act is still providing uncertainty on the federal level but are there other tax issues to consider? How can they deal with decreases in charitable contributions?
Nonprofit CFOs are seeing a systemic change in the way they need to handle their business. Tax law changes, knowledge of donors, and the search for alternative revenue are a few factors effecting how nonprofits run their business. All of these changes are forcing nonprofit CFOs to run their businesses more like for-profit ventures rather than the stereotypical nonprofit.
CFOs will need to spend time and resources educating their development departments on how the new law can impact an individual’s tax return. Development departments will then need to utilize this information and the information contained in their existing donor databases in order to craft a better “ask” of certain groups of donors. For example, an ask of donors 70 ½ years or older could be centered around receiving required minimum distributions directly from the individual’s qualified retirement account. Other donors that typically restrict gifts may be pointed by the development team to give to specified budgetary needs. Some donors may find it advantageous to bundle donations in any one year in order to meet the threshold for a higher tax deduction. Lastly, sophisticated donors could find the use of donor advised funds helpful. Whatever the case may be, in this environment, the “ask” should be more informed.
Donors today have more knowledge of the proper questions to ask nonprofits then ever before. So not only does the “ask” need to be more informed, but CFOs and development need to work hand in hand to understand the proper metrics and numbers that they need to convey to potential donors, once the donor has expressed an interest to give. CFOs and the development team need to ensure that their Organizational story is consistent, relatable, qualitative and quantitative.
In addition, CFOs need to be aware of where the money is coming from and will need to focus their development team’s efforts in the right direction. According to Giving USA 2019, individual giving is down, whereas bequests, foundations and corporate donations are on the rise. Giving by Corporations and Foundations rose a combined 12.7% in 2018 over 2017.
While focusing in part on the fundamental donation, CFOs need to begin strategizing on alternative forms of revenue to sustain the volatility in the economy. Many CFOs are moving in the direction of social enterprises. Selling goods and services in ways that provide revenues to the organization, while benefiting and maximizing their social impact is becoming an essential move for nonprofits. For example, a NJ nonprofit providing supportive employment services to adults with autism needs donations to support the deficiency of funding provided by Medicaid. This isn’t a sustainable model. Adding a profitable social enterprise such as a farm, warehousing/distribution, or even eateries can provide jobs for the adults with autism while driving profit to the nonprofit. In addition, this becomes a compelling story for Corporate and Foundation donors and grantors that can differentiate and propel a nonprofit’s growth.
There is no doubt that in this changing economy, nonprofit CFOs today have to be in the know more then ever before. Pinpointing what is important to donors, knowing how to ask for gifts and how to showcase the nonprofit’s mission and metrics are all important factors when trying to grow a sustainable nonprofit into the future.