The Challenge

A $100-million-dollar nonprofit accumulated a liquid reserve of $120 million, and The Board was at odds as to what their next steps should be. Some believed the reserve was excessive and were concerned about potential IRS problems, negative ratings by watchdog groups, and constituent perceptions about a large war chest. Others expressed concerns about looming and uninsurable risks and the obvious need for future strategic investments. Unfortunately, the organization’s prior strategic planning process had not adequately considered the financial impact of looming risks and opportunities. To provide a clear strategy, the organization needed an experienced, unbiased arbiter to map out a sound financial reserve strategy.

Approach

Based on T&T’s demonstrated expertise in nonprofit finance, risk management, and strategic planning, we were brought in to develop a 5-point strategic risk-based approach for the client’s reserve planning with the objective of identifying and quantifying risks, as well as opportunities in the form of strategic investments. Working closely with senior management and program heads, we looked at the future cash outlays necessary for mission success over the next 5-10 years. We also benchmarked the client’s liquid reserve against similar nonprofit organizations. 

Results

By working together through this process, we achieved board and senior management consensus on the potential future cash outlays and the future of the reserve strategy. This documented process also deters constituents, watch dog groups, and the IRS from making uninformed assessments about the reserve. And, perhaps most importantly, risks are now identified, accepted, and factored into reserve planning, and the age-old board member comment of “we were blindsided” is minimized.

INSIGHTS & RESOURCES

Tax-Exempt Organizations and 2017 Tax Reform

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Uncategorized11/23/2017

Dear Friends in the Tax-Exempt Community:
Below is a brief overview of the key tax reform proposals relating to tax-exempt organizations. As you know, Congress is currently putting together legislation to effect significant tax reform with a timeline of having it enacted this year. Although Congress is still negotiating, the following reform proposals may impact your […]

Royalty Income of Nonprofits is Being Targeted for Taxation!

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Uncategorized11/20/2017

The Senate Finance Committee’s version of the Tax Cuts and Jobs Act includes a number of items that would impact nonprofits.
Perhaps the most immediately significant is the provision that would call for taxing the revenue generated from royalties related to licensing a nonprofit’s name and/or logo. Royalty revenue has traditionally been exempt from income taxes. […]

How Could Federal Tax Reform Impact Nonprofits?

Posted on , updated on

Exempt Organization Tax11/17/2017

Uncategorized11/17/2017

By:  Doug Boedeker, CPA, Partner
It has been a challenge staying current on the twists and turns involved with the proposals for Federal Tax Reform. Many of the ideas within the tax reform package have a direct impact on nonprofit organizations.
Charitable deductions, executive compensation, employee fringe benefits, and intermediate sanctions are just some of the “hot […]

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