Tivoni Devor’s “Getting Good Done” column focuses on new models of enacting impact.
Timing is everything, especially in nonprofit accounting.
The end of June represents the close of the fiscal year for many nonprofit organizations, which is why June 30 may be the most important day in the nonprofit sector you’ve never heard of. This day is extremely important for nonprofits as it is the last chance they have to balance their books.
Nonprofits can choose any day to be their fiscal year start date, and usually it’s based on their funding or activity cycle; most choose either Jan. 1 or July 1. Many that get any type of government funding are on the same fiscal year cycle as their state and local government. Locally, that’s July 1 in Pennsylvania and in Philadelphia.
Many nonprofits tie their “year-end” fundraising campaign to Dec. 31 because that’s the fiscal year end for individuals like you and me and many corporations; it’s when donors want to maximize their tax deductions and it also coincides with the season of giving that most donors participate in.
But it’s incredibly important for nonprofits to raise money in June so that they can close out their year as strong as possible. (Full disclosure, the organization I work for, Urban Affairs Coalition, operates on a July 1 fiscal year.) The 2017 report “The Financial Health Of Philadelphia Area Nonprofits” from The Philadelphia Foundation explains the delicate balance sheets of nonprofits. A few of the more pertinent findings:
- More than 40 percent of the nonprofits are running at a loss or producing no surplus funds at all.
- Fewer than 40 percent of organizations have more than six months of cash or operating reserves, while a quarter of nonprofits have a month or less in cash reserves.
- Around 7 percent of the region’s nonprofits are insolvent, which means their liabilities exceed their assets.
While balance sheets don’t seem as important as outcome infographics to the average donor, nonprofits without strong financials have a harder time getting a line of credit with a bank or securing funding from foundations that are looking at the organization’s finances to see if they are economically stable. Losing funding or the ability to manage cash flow issues because of bad finances only exacerbates the financial problems of nonprofits and puts them into a starvation cycle.
From our Partners
Even if you can’t make a significant donation to your favorite nonprofit by the end of the month, consider making a pledge. The nonprofit can record the pledge as a receivable on their books, giving them a stronger balance sheet, and you will have an entire year to complete the pledge.
So before you disappear to the shore this summer, be sure to make one more donation or pledge to your favorite nonprofit — before June 30, 2018.-30-
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