Q: How do you address the risk of limited revenue streams, i.e., only donations and gifts?
A: Due diligence requirements are very important, and the need for borrower knowledge is greater than ever with not-for-profit organizations.
During difficult economic times, donations and contributions dry up rapidly and pledges fail to materialize just at services of not-for-profits are most needed. In addition, charitable contributions may be affected by uncertainty about the impact of the 2017 Tax Cuts and Jobs Act.
During these types of difficult times, it is extremely important for management to analyze all expenses very closely and to limit any deficit to an amount that could be offset by unrestricted cash.
Course overview: Not for Profit Analysis