According to Bloomberg Tax, nonprofit organizations are seeking accounting firms for financial and strategic advice as they deal with President Donald Trump’s elimination of government funding.
Agencies have stopped grants due to Trump’s initiative to limit federal spending, jeopardizing nonprofit financing. The U.S. Agency for International Development (USAID) and organizations that depend on its funding have been hit hard. Over 80% of USAID programs were eliminated as of March, said Secretary of State Marco Rubio, Bloomberg Tax reports.
Under this scenario, financial uncertainties are driving firms including EisnerAmper, CBIZ and BDO USA to redefine their roles as strategic advisers to their nonprofit clients, aside from offering traditional bookkeeping and audit services, Bloomberg Tax explains.
Advisory teams are answering questions, monitoring the Trump administration's actions while providing guidance on how to diversify financing sources by using their panoramic perspective on the industry gained from talking to various nonprofit clients.
“We have always been auditors of nonprofits, but I would say right now we’re adding equal—if not more—value on the advisory side to try to help organizations with the best advice that we can provide,” states Candice Meth, EisnerAmper's national leader for the not-for-profit services practice.
Over 30 percent of revenue earned by charitable nonprofits, or 501(c)(3) tax-exempt organizations, emanate from government grants or contracts, based on data from the National Council of Nonprofits.
USAID cuts have affected some clients already, and others are worried about what the future looks like, said Julie Jones, managing director of the not-for-profit and education practice at CBIZ.
Accountants are no longer just preparing nonprofits’ financial reports and IRS Form 990s, states Omri Even-Tov, an associate professor at the University of California, Berkeley, in an email to Bloomberg Tax. “For many nonprofits, the accountant is the first call when government funding is disrupted,” he says.
Size is also an issue in this environment. Smaller organizations could lack diverse funding sources, notes Dan Prater, a senior managing consultant at Forvis Mazars.
Rubio recently said that his agency is aiming to proceed with “realigning certain USAID functions” to the State Department by July 1. Rubio stated on Mar. 10 that there were 5,200 contracts canceled due to cost-cutting based on “alignment with Agency and Administration priorities,” a State Department spokesperson said.
Meth notes that some clients have gotten letters stating that 80 to 90 percent of their government funds could be taken away.
Private foundations and individual donors who are concerned about their grantees have contacted EisnerAmper and worked with the firm to pay for pro bono advisory services for nonprofits, Meth states.
While nonprofits can attempt to diversify their revenue, the available pool of dollars is limited, states Anat Kendal, chief financial and business operations officer at Pancreatic Cancer Action Network.
That could increase competition among organizations for the rest of the funds, explains Kendal, who is also a member of the Financial Accounting Standards Board’s not-for-profit advisory committee.
Creative fee-for-service opportunities, where nonprofits earn money from services or products, are another avenue to access revenue streams, notes Kathleen DuBois, the national industry leader for advisory firm Wipfli’s nonprofit, government and education practice.
Accounting firm advisory practices are helpful to nonprofits given that members have exposure to broad experiences from their clientele, said Frank Krause Jr., CEO and executive director of the Federation of American Societies for Experimental Biology.
“That allows them to use that experience to identify potential areas of risk within my individual organization that an in-house CFO may not have had exposure to,” Krause states.
Contingency planning can help nonprofits gain “some semblance of control,” said Andrea Espinola Wilson, a managing principal at BDO USA.
BDO USA is advising clients during “what if” scenario planning, examining how to replace financing if it's lost, Wilson says.
Organizations have to look if there’s major doubt regarding their ability to continue operating as a “going concern”—or financially stable organization—for 12 months after their financial statements are issued, notes Brian Conner, an audit partner at Moss Adams. Funding cuts could make that “going concern” assumption trickier.
As the EisnerAmper practice works on auditing year-end financial statements, clients are learning about funding cuts, Meth said.
Depending on the client’s revenue concentration as well as their available resources, “we have to make an assessment,” Meth adds. This process takes into consideration factors including liquidity issues.
Audit partners said they’ve received questions from clients about funding uncertainties.
While Aprio assurance partner Mark Robins says that his clients usually ask technical accounting-related questions, “times are different.”
“They’re asking me, ‘What are other nonprofits doing? What can they do to try to free up resources, get more funding?’” Robins states.
Firms providing outsourced accounting and advisory services could see their own business affected as nonprofits tighten their belts. Still, Jones says that there is a continued need for accounting firms like CBIZ, specifically for nonprofits that might not have in-house consulting and bookkeeping expertise, Bloomberg Tax reports.
