Nonprofits stressing over compliance with new finance rules, regulations

• DOI: http://doi.org/10.1002/nba.30250
• Date: 01 November 2016
• Published date: 01 November 2016

NOVEMBER 2016

7

NONPROFIT BUSINESS ADVISOR

© 2016 Wiley Periodicals, Inc., A Wiley Company • All rights reserved

DOI: 10.1002/nba

Industry News

Nonprots stressing over compliance

with new nance rules, regulations

Nonprot executives are increasingly concerned

about compliance with the various nance-related

rules and regulations that govern the sector, according

to new research by nonprot software rm Abila. The

report, coming on the heels of new federal rules on

overtime pay, deferred compensation and new account-

ing standards for charities, highlight the headaches

such changes can be for the nation’s nonprots.

Key ndings from the report include the following:

• Managing the complexity of multiple revenue

sources is a major challenge. According to Abila, man-

aging money from multiple sources—each with their

own rules and restrictions—is very complex. This was

cited as the biggest nancial challenge by nonprot

nance professionals surveyed.

• Compliance is a cost burden. Almost two-thirds of

nonprot nance professionals report that compliance

has become more burdensome and costlier in recent

years, and almost a quarter say they spend 10 hours a

month on compliance alone. Further, about half think

their organization’s growth will just lead to increased

compliance challenges.

• New rules and regulations cause dread. According

to the report, nonprot nance staff stress about the

implementation of new rules and the impact they will

have on the organization, including the possibility it

will increase compliance costs.

• Fraud is an ongoing concern. While the majority of

organizations put signicant effort into fraud prevention,

including separating duties that need to be separated

to prevent fraud, just 38 percent say members of their

management and board of directors are very educated

on how to avoid fraud, and 34 percent say their orga-

nization undertakes actions that put it at risk for fraud.

• Audits are time-consuming. More than half of

nonprots say they require more than two weeks to

prepare for an audit, and that burden is compounded

by multiple audits in a year, which some 36 percent of

nonprot nance professionals claim they face.

“Any time there are rules and regulations changes, there

are added costs—both in terms of time and money—

for nonprot organizations,” said Dan Murphy, senior

manager of fund accounting strategy for Abila, in

announcing the research. “Maintaining compliance,

mitigating fraud and preparing for audits add even more

layers of complexity for organizations. We found there

are a number of areas where nonprot organizations

need to sharpen their focus, better equip their teams with

specialized training and technology and ensure they are

For the second year in a row, Houston, Texas, leads

the nation when it comes to the performance of its non-

prot sector, according to a study by Charity Navigator.

In its study, Charity Navigator compared the

median performance—both nancially and in terms

of accountability and transparency—of the largest

nonprots in the 30 largest metropolitan markets of

the country. Houston took the top spot, followed by

St. Louis; Tampa/St. Petersburg, Florida; Dallas;

and San Diego. In contrast, the lowest-rated were

Colorado Springs, Colorado; Pittsburgh; Seattle;

Indianapolis; and Cincinnati at the bottom.

According to Charity Navigator, Houston led the

eld in a number of categories, including the level of

contributions its nonprots garnered for the year, at

$4.3 million, followed by Los Angeles ($4.1 million)

and Dallas ($3.8 million). That’s compared to the na-

tional median of about $2.9 million, the study showed.

“The consistently exceptional performance of

Houston charities conrms what people in Houston

already know,” said Michael Thatcher, president and

CEO of Charity Navigator. “The city’s number-one

ranking in our study is directly related to nancial

strength and ethical behavior exhibited by Houston

charities, a result of the hard work of both informed

donors and responsible nonprot leaders.”

To view the full rankings, visit http://www.charity

navigator.org. ■

Houston nonprot sector leads country, study shows

(See RULES on page 9)