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March 16, 2016

Nonprofit Boards Missing Financial Red Flags, Report Says

A new report on New York charity operations warns that the collapse last year of one of the city's biggest social-services providers could be a harbinger if boards do not improve their financial oversight and risk management, Politico New York writes. The study by SeaChange Capital Partners, a merchant bank serving nonprofits, and consulting firm Oliver Wyman, is the second in recent weeks to assess area charities' fiscal health in the wake of the shutdown of FEGS, which declared bankruptcy last year.

The new report notes that as many as 40 percent of New York nonprofits have no cash reserves and thus little margin for fiscal error. "Many trustees do not understand the financial condition of their organization or how it compares to its peers," the authors write. “Distressed nonprofits have very limited ways to recover, so trustees must do all they can to reduce the risk that their organization becomes distressed in the first place."