Amid unprecedented economic uncertainty, many nonprofits are unsure how they should proceed with their programs and prepare financially. NYN Media spoke with Andrea Wilson, partner at the accounting firm BDO and national co-leader of its nonprofit and education practice, to find out what nonprofits should be doing.
This interview has been edited for length and clarity.
NYN: What are some of the biggest risks and uncertainties facing nonprofits right now?
Andrea Wilson: Even the most agile, prepared organizations have a very hard time understanding what is necessary because you know that the situation is ever-evolving and you’re never working with the same information you would have in two weeks. When I think about the organizations that are sustaining in this situation, first and foremost, they have developed a crisis management team.
It’s interdisciplinary and cross-functional throughout the organization, in some cases utilizing external resources. That will involve their programs, human resources, facilities, IT, the finance operations, development, and communications. Fundamentally, we’re working with organizations to build their contingency planning. Think about it in terms of scenarios. How long will this take? And what does that mean in terms of your operations and your financial reserves? There’s the BDO benchmarking study that found that 63% of all organizations have six months or fewer financial reserves. If you look at the economic impact of this crisis, will organizations be able to survive it?
NYN: What are the best practices for effective contingency planning?
AW: It’s critically important that organizations start budgeting and forecasting. And within that, there are scenarios. So what do we do if we lose, for example, 30% of our funding? What do we do if we lose 50%? What do we do if we can’t deliver on our programs and our programs, by the nature of our agreements and our source of funding?
NYN: What’s the best approach for organizations that can’t offer their services?
AW: I think the best approach for them is, frankly, that contingency planning, understanding their financial reserves, what they can do, and then to also adapt. If I’m a museum, can I make my museum available online?
NYN: Are there lessons from similar times of crisis that can be helpful for reflecting on how nonprofits should be preparing?
AW: In 2008, once the crisis was done, we did not see charitable giving increase fully. At that point, it took about five years for charitable giving to get back to that pre-crisis level. So how do we look at the impact on charitable giving, given the economic uncertainty and what’s going on in the stock market? Large donors have seen a dramatic decline in their wealth. Are they going to be more or less likely to give in those times?