Donor fatigue is a phrase not-for-profits are painfully aware of, especially in light of an overly active hurricane season that produced the Katrina disaster.
With roughly $1.7 billion already given to hurricane relief
efforts, scavenging for remaining donor dollars has been a
difficult task for many organizations.
Particularly hard hit are smaller, local charities that rely more heavily on donations from individuals than their national counterparts.
The dual crisis of last year's south Asia tsunami and this year's hurricanes in the Gulf Coast regions could very well lead those organizations to tighten their belts, or at least keep a watchful eye on their finances.
That's because their survival could be at stake, said Arthur
Kobrin, senior audit manager at the Goldstein Lewis & Co.
accounting firm in Boca Raton, Fla. Kobrin manages audit and
related services for not-for-profits and public companies.
"We need to look at what is going to be happening in the future," said Kobrin, as Hurricane Wilma bore down on south Florida. "Are they going to raise enough funds in the next 12 months to be around? They may need to reduce their expenditures if they want to survive."
Or they can try to increase funding by reviewing whether
outstanding pledges are collectible, and getting confirmation that future donations are valid, he said.
"They don't like to decrease their programs, because people are looking for those programs to be supported," Kobrin said. "If they have to cut back, it doesn't help the community."
Conversely, not-for-profits such as the Red Cross, which provide aid in times of crisis, may be overwhelmed with donations. It may be even more overwhelming trying to keep track of the dollars.
For those relief organizations, Kobrin said, they need to guard against mismanagement by making sure the money coming in has a specific purpose tied to it, and that the recipients receiving the funds are actually eligible.
There also should be documentation from the donor to verify the intent of the donation, and a review from the agency regarding where the money is going, Kobrin said.
Even government entities are recognizing the importance of
oversight, as reconstruction costs in Louisiana, Alabama and
Mississippi are expected to run as high as $200 billion. The
federal government will supply the bulk of the financial support.
With so much money at stake, Louisiana State Treasurer John
Kennedy has called on the state to hire one of the "Big Four" accounting firms to help the state with the accounting and auditing of federal funds flowing into the state as part of the recovery effort.
Proposals were submitted in early October, and the contract is set to begin Oct. 31.
In a written statement, Kennedy said, "we need checks and
balances and rechecks and rebalances."
In that vein, Kobrin is certain not-for-profits will adopt
similar operating procedures included in the Sarbanes-Oxley Act that governs public companies. One of his larger clients already is starting to institute certain parameters of the law that requires directors to be independent of the corporations.
"They feel it's going to eventually have an effect," Kobrin said of the charitable organizations, "so they feel they might as well be at the forefront and not behind the eight ball."