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By Scott Prentice, CPA, CFE Manager

Achieving sustainable revenue and support growth can be very challenging in today's environment. Growth may be further impeded by the recent spending cuts referred to as the sequester. The sequestration includes, among other things, a 5 percent reduction in nondefense discretionary funding which will impact many not-for-profits. The reduced funding will likely result in a decrease of services and goods provided by many not-for-profits.

To curb these reductions, not-for-profits will be forced to look at other opportunities for growing revenue and support in order to maintain current expense structures. This may also be true for not-for-profits that are not affected by the sequester. Many of these opportunities may be nontraditional to the organization but given the current economic state it is important to think outside the box in order to continue providing the current level of services and goods. One opportunity may exist in seeking new or additional state and local funding. Another opportunity may present itself in increasing awareness about the organization to expand the support base. Other opportunities may arise through joint ventures or other arrangements. Without identifying new areas of growth, not-for-profits may be forced to reduce staffing or cut programs. It is also imperative for not-for-profits to analyze current revenue sources for undue concentrations. If an organization receives the majority of its revenue and support from one source then it must have a backup plan in case that primary source was to subside.

A not-for-profit should also focus on building cash and developing financial performance benchmarks. It is important to maintain the charitable mission; however, to achieve sustainability not-for-profits must generate returns that build cash which will, in turn, provide the organization with flexibility and funds to explore various opportunities. In summary, it is essential for management and the board of directors of not-for-profits to seek opportunities that will maintain or increase revenue and support growth.

Source: Office of Management and Budget (OMB) Report to the Congress on the sequestration for fiscal year (FY) 2013



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