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News and discussion on implementing risk management

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Supporting and controlling not-for-profit revenues

It’s a rare not-for-profit that isn’t spending a great deal of its time and attention scrabbling for revenue. Members and donors need to be found, honoured and remain connected to the organization. Grants and contribution fund proposals need to be produced and pitched to prospective grantors. Special events need to be organized and promoted.

In fact, it hardly needs to be said that effective generation and management of revenue flows are almost always critical success factors for not-for-profits.

Not-for-profits that receive donations differ from other organizations in that they must ensure that all donations are properly recorded. Not-for-Profit PolicyPro includes several controls to reduce the risks inherent in receiving donations.

Sales revenues and fees for service

Many not-for-profits raise money through the sales of resources or fees for service. In this, they are not unlike for-profit entities, and the management of these processes and policies should mirror for-profit businesses. An organization that provides professional training or certification, for example, should set prices for its services based on sound marketing principles, maintain quality standards, process invoices and payments and maintain customer records. Those that provide fees for service on a government schedule, such as homeless shelters or group homes, have their own prescribed procedures for tracking and reporting services rendered, which is very similar to sales contract management.

Membership fees

Membership-based not-for-profits should have excellent member-tracking procedures, with follow-up on renewals and a range of payment options (e.g., cheque, debit or credit card). Fees should be set to balance the costs of providing member services with member fee affordability.

A membership base is a key asset of an organization, representing a captive market for promotion of services or resources, and a source of interest to prospective advertisers or sponsors. For these purposes, some demographic information on members will often be useful. However, organizations are cautioned to be familiar with the applicable privacy laws. (For more information, review the confidentiality and privacy policy in Not-for-Profit PolicyPro.)

Donations and fund development

Fund development consists of all the activities related to raising money from grantors or donors. It is similar to the sales function in for-profit organizations in that it involves managing relationships with existing sources of funds and constantly looking for ways to extend the donor/grantor base.

There are two fundamental types of fund development activities: those that are focused on a small number of large donors or grantors, and those that are broadly based. Generally speaking, fund developers exist only in registered charities because these are the organizations that can provide tax receipts for donations made. This is a requirement for foundation grants and a practical necessity for most major donors. However, government grants and contribution agreements usually do not require charitable status.

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Jeffrey Sherman

Chief financial officer, author, lecturer and professor focussing on corporate finance at Atrium Mortgage Investment Corporation, Canadian Mortgage Capital Corp., Trimel Pharmaceuticals Corporation, and Anagram Services
Jeffrey D. Sherman, BComm, MBA, CIM, FCA, is a director or CFO of several public companies and has had over 20 years of executive management experience. He is the author of Finance and Accounting PolicyPro, Not-for-Profit PolicyPro and Information Technology PolicyPro (guides to governance, procedures and internal control, all published by First Reference and the CPA). Read more
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