All posts by Mike Sperling

ASU 2025-05 — New guidance to help ease credit loss accounting

Summer 2026

Recently, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-05, which addresses the measurement of credit losses for short-term receivables and contract assets. This update is important for nonprofits because it simplifies how organizations apply the current expected credit loss (CECL) model. Here’s a brief summary of the ASU.

Scaling back complexity

ASU 2025-05 builds on ASU 2016-13 (Topic 326), which introduced the CECL model. Although the original version of that model improved reporting accuracy by requiring nonprofits to estimate credit losses over the life of an asset, it also added complexity for organizations responsible for making those calculations. For instance, under ASC 326, nonprofits were required to include historical loss experience, current conditions and reasonable forecasts of future economic conditions in their credit loss estimations.

ASU 2025-05 allows nonprofits to adopt a “practical expedient” when measuring credit losses. Basically, this election permits you to exclude collections received after the balance sheet date in your estimation of expected credit losses. You’ll still need to account for historical loss experience and current conditions, but you won’t have to project economic scenarios.

If you use the practical expedient, you’re also allowed to make an accounting policy election. Actual cash collections received after the end of the year (or after the balance sheet date, but before financial statements are available) can be excluded. Your nonprofit doesn’t need to record an allowance for receivables that are outstanding at the end of the year if they’re collected shortly thereafter.

Key features

Here’s an example of how ASU 2025-05 updates the CECL model: A community charity provides services on credit to low-income individuals. In the past, it might have had to calculate the potential credit loss for each invoice that goes unpaid. But under ASU 2025-05, the nonprofit can instead:

  • Group similar accounts receivable based on shared characteristics such as payment history, and
  • Apply a simpler, pooled approach to estimating losses.

The organization will need to disclose that it applied the expedient and accounting policy election, as well as the cutoff date for evaluating subsequent cash flows.

Notable shift

ASU 2025-05 marks a notable shift in how nonprofits account for credit losses. Be sure to update your written accounting policies to help ensure the provisions of the ASU are consistently applied. This ASU is effective for annual reporting periods beginning after December 15, 2025. Contact us with any questions or for help measuring your nonprofit’s credit losses.

Lost your tax-exempt status? Here’s how to get it back

Summer 2026

Over the past year, federal government officials have threatened to revoke the tax-exempt status of various nonprofits, including universities and charities, claiming they’re politically biased. But as the American Bar Association asserts, it’s not that easy to revoke an organization’s exempt status: “With a few exceptions, IRS procedures require individual, case-by-case IRS audits of each [tax-exempt] organization, with ample opportunity for the entity to defend itself and multiple routes of appeal.”

And, in fact, most nonprofits that lose their exempt status do so not because they violate political activity or similar rules, but because they fail to file Form 990s for three consecutive years. Such automatic revocations are common, particularly with newer nonprofits. Fortunately, it’s possible to regain your status.

Regular and retroactive reinstatement

If your organization is a 501(c)(3) charity and you lose your exempt status due to an automatic revocation, you’ll need to complete Form 1023, “Application for Recognition of Exemption Under Section 501(c)(3)” to regain it. Smaller nonprofits (typically organizations with $50,000 or less in annual gross receipts and $250,000 or less in assets) can use the streamlined Form 1023-EZ.

Note that unless you apply for retroactive reinstatement, your organization’s activities between the revocation and reinstatement dates will be considered taxable activities. Thus, any contributions given during that period won’t be deductible by their donors — and all income to your organization will be taxable. For this reason, you probably will want to apply for retroactive reinstatement, effective on the date of the automatic revocation. Just file the applicable form within 15 months of the date of the IRS revocation letter or the date the IRS posted your organization’s name on its website, whichever is later.

Statements and fees

When you file one of the longer forms, your organization will be required to attach a detailed statement that provides a reasonable cause for failing to file Form 990s in each of the three consecutive years. For example, perhaps your organization’s activities are substantially performed by an all-volunteer staff that isn’t knowledgeable about IRS compliance.

The statement should also describe:

  • The facts that led to each individual failure,
  • The facts that led to continuous failures,
  • How the failures were discovered, and
  • Any steps you’ve taken to avoid or mitigate them.

In addition, attach to your form: a statement that describes the safeguards and procedures put in place to avoid future failures; properly completed and executed paper tax returns for all taxable years during and after the consecutive three-year period your organization failed to file; and an original declaration dated and signed under penalties of perjury by an authorized person such as one of your nonprofit’s officers or directors. You’ll need to provide evidence to support all material aspects of the claims you make in your statements.

All organizations seeking reinstatement must pay a specified application fee. For Form 1023, it’s $600, and for Form 1023-EZ, it’s $275.

How long?

Most nonprofits that lose their tax-exempt status are anxious to restore it as soon as possible to avoid negative effects on their eligibility for donations and grants. In general, reinstatements take between three and six months when submitting Form 1023 and one to three months when using Form 1023-EZ. However, recent IRS staffing cuts and temporary government shutdowns may increase application processing times. If the IRS asks you for additional documentation, it could further delay your reinstatement date. Contact us if you’re having trouble regaining your tax-exempt status.

When what looks like an EBT isn’t necessarily off-limits

Summer 2026

How much do you know about excess benefit transactions (EBTs)? You probably understand that if your nonprofit provides financial benefits to certain people, it can result in IRS scrutiny and severe excise taxes. So you also probably have policies in place to curb or prohibit financial transactions with “disqualified persons.”

But the truth is, not every transaction between a disqualified person and a nonprofit is necessarily prohibited. If the IRS questions one of your organization’s transactions, you may be able to fight back using a rebuttable presumption.

Defining terms

EBTs are generally defined as transactions in which a nonprofit (other than a private foundation) provides a benefit to a disqualified person that exceeds the value of the consideration received in exchange for the benefit. Let’s unpack some of these terms.

In general, disqualified persons are:

  • In a position to exercise substantial influence over the organization’s affairs over the past five years, such as voting board members and top management,
  • Certain individuals who belong to a disqualified person’s family,
  • Disqualified persons of the nonprofit’s supporting organization,
  • Donors or donor advisors involved in the organization’s transaction with their donor-advised fund (DAF),
  • Investment advisors to a DAF sponsoring organization, or
  • Entities of which a disqualified person has a 35% or greater stake doing business with the nonprofit.

A disqualified person who engages in an EBT is liable for an excise tax equal to 25% of the excess benefit. If the transaction isn’t promptly corrected after the tax is imposed, an additional excise tax of 200% of the excess benefit is imposed. An organization manager who knowingly participates in an EBT could incur an excise tax equal to 10% of the excess benefit, up to $20,000.

Consideration received by a disqualified person might include money, property or the performance of services. Although EBTs often involve unreasonable employment compensation, other transactions may also be off-limits.

EBT transactions can range from a nonprofit paying a disqualified person’s personal expenses to agreeing to let the person use its property for personal reasons to making a loan to (or accepting a loan from) the person. Other transactions that the IRS might flag are revenue-sharing arrangements, payments to for-profit corporations owned by disqualified individuals and the transfer of assets to or from an entity controlled by a disqualified person, including loans.

Rebutting presumptions

If the IRS accuses your organization of a prohibited transaction, you may be able to establish a “rebuttable presumption” that the transaction isn’t an illegal EBT. A rebuttable presumption is a legal principle that assumes something to be true unless proven otherwise.

EBT regulations presume fair market value in arrangements involving employment compensation, property transfers and property use rights. For a transaction to qualify, your organization’s authorized body (for example, its board of directors) must be composed entirely of individuals without a conflict of interest. The authorized body needs to do three things:

  1. Approve the transaction and its terms,
  2. Obtain and rely on appropriate comparable data (such as an independent compensation survey) before making its determination,
  3. Adequately and concurrently document the basis for its determination (including the terms and approval date).

Comparability data is particularly important. If you satisfy the above requirements, the IRS must produce significant contrary evidence about the data’s relevance to rebut the presumption. Be sure to consult your attorney about your legal position and any litigation strategies.

Obtaining adequate data

If you run a smaller nonprofit, you may worry you wouldn’t be able to obtain adequate comparability data. However, IRS regulations provide some relief to nonprofits with annual gross receipts of less than $1 million. If you qualify, your authorized body will be considered to have appropriate data if it details compensation paid for similar services by three similar organizations in your community or in communities like yours. Contact us for help with obtaining such data and for more information about avoiding potential EBTs.

5 critical KPIs for nonprofits in uncertain times

Summer 2026

Reduced government funding, stubbornly high inflation and other macroeconomic factors have left a sizable number of nonprofits feeling financially vulnerable. It’s true that some forces are beyond your control. But thoughtful planning and tracking can provide a measure of stability. If you don’t already, consider monitoring key performance indicators (KPIs).

Why they matter

Financial decisions and planning can seem especially fraught right now. Will a misstep put your organization and its programs at risk? KPIs help establish a solid, data-driven foundation for evaluating financial options and making decisions. They provide a more up-to-date, granular and actionable snapshot than you typically can obtain from your financial statements.

Moreover, diligent KPI monitoring provides you with the flexibility to respond promptly to threats and opportunities. For example, one or more KPI can open up a clear view into your operational efficiency (or lack thereof) and tell you whether you’re well-positioned to withstand financial challenges.

And don’t forget about nonprofit watchdogs, such as Charity Navigator and Charity Watch. They incorporate KPIs and financial metrics in their ratings. So staying on top of your KPIs might sustain or improve your reviews. You can similarly use KPIs to assure stakeholders that your nonprofit is meeting their financial expectations.

Metrics to monitor

Nonprofits can choose from hundreds of potential KPIs, but some are more relevant than others. Consider tracking some or all of the following ratios:

1. Fundraising return on investment (ROI) (funds raised / fundraising expenses).

Fundraising is the lifeblood of most nonprofits. ROI shows the average dollar amount raised for each dollar spent on fundraising and can help you determine which fundraising campaigns or marketing channels are worth continuing.

Those with a ratio of at least 1.0 are generally considered cost-effective. This means you might want to discontinue fundraising strategies with lower ratios. With ROIs in hand, you can persuade your board to eliminate even cherished campaigns that might have been successful in the past but are no longer making the grade.

2. Operating reserve (unrestricted net assets / annual operating expenses).

Do you have sufficient unrestricted funds on hand to continue operating without incoming revenue? The operating reserve ratio indicates the period of time your organization could continue to pay operating expenses using reserve funds. A ratio of 0.5 says you could cover six months of expenses with your reserve. A ratio of 1.0 suggests you could go a year on reserve funding alone.

3. Current (current assets / current liabilities).

The current ratio reflects an organization’s liquidity. It measures your ability to pay short-term debt obligations (those due within the next year) with cash on hand and other current assets. A ratio of 1.0 or greater generally should be your goal.

4. Overhead (overhead expenses / total expenses).

Many donors prefer to contribute to charitable organizations that keep overhead low — the lower, the better. Executives may believe this attitude oversimplifies things (try, for example, to run a nonprofit without overhead!). Even so, it’s worth keeping an eye on overhead, particularly as individual and corporate donations become more critical to nonprofit funding.

There’s no universal target for this metric because individual organizational factors strongly influence overhead ratios. But a ratio greater than 35% could be a red flag and warrants further investigation.

5. Program expense (program expenses / total expenses).

Another donor preference is high program expense ratios. This preference is founded on the belief that higher ratios mean more dollars go directly to fulfilling an organization’s mission.

You likely want most expenses to be attributed to your nonprofit’s programs, too. But even Charity Navigator says there’s scant evidence that a program expense ratio greater than 70% leads to greater impact. Still, bear in mind that certain donors may seek out organizations with program expense ratios of at least 70%. In some circles, 85% or higher is considered prime.

Valuable insight

Financial statements will continue to play an important role in your leadership’s decision-making. But every organization can also benefit from tracking carefully selected KPIs. They provide valuable insight into what’s driving your nonprofit’s financial numbers and make it easier to identify noteworthy trends — and act on them.

Should your nonprofit adopt AI?

Winter 2025

AI ImageArtificial intelligence (AI) is rapidly transforming everyday life. But what can it do for nonprofit organizations? And do the potential benefits outweigh risks and costs? This short article looks at the issues.

Possible advantages

AI software is now used for a wide variety of purposes — including machine learning, large language processing and predictive analytics. Nonprofits have integrated AI into their operations to, for example, create personalized email campaigns based on past donor behavior and build predictive models identifying future community needs.

The primary advantages of using AI generally fall under the following categories:

Streamlining repetitive tasks. Nonprofits often are run by a lean staff. AI can help reduce your staff’s workload and free up time for mission-critical activities by automating administrative duties. These include scheduling, data entry, expense tracking and email follow-ups. Chatbots may be able to handle routine donor inquiries, and AI-powered grant management systems can sift through eligibility criteria — often more efficiently than humans.

Reducing costs. By automating manual processes, AI may significantly reduce your operational costs. Predictive analytics can optimize staff scheduling, thus reducing overtime and improving retention rates. AI can also analyze donor databases to identify patterns that would otherwise require hiring expensive consultants. Over time, such efficiencies can deliver substantial savings while improving outcomes.

Engaging Donors. AI excels at personalization — critical for engaging donors. With the right tools, you can segment supporters, predict giving patterns and deliver tailored messages. AI-driven platforms can suggest the most effective timing and channels for outreach, increasing the likelihood of repeat donations.

Potential drawbacks

AI adoption carries risks. AI algorithms have been known to perpetuate bias unintentionally, leading to inequitable service delivery and donor targeting. So transparency is essential. You’ll need to inform stakeholders when you use AI for decision-making and communications.

Keep in mind that reliance on automation could raise questions among your staff about job displacement. Data privacy and security are also pressing concerns, especially when handling sensitive donor information. If you adopt AI tools, increase data security protections.

Then there’s the cost. You’ll need to budget for software subscriptions, training and integration with existing systems. Pilot programs may be the best option because they enable you to test tools on a small scale before making a larger investment.

Values and fiscal limitations

By reducing repetitive tasks, cutting costs and deepening donor engagement, AI can strengthen your organization. But be sure to manage AI risks thoughtfully. Ensure the technology you choose aligns with your organization’s values and fiscal limitations.

When outsourcing accounting might make sense

Winter 2025

AI ImageIf your nonprofit is paring back its budget and even laying off staffers, you might want to think about outsourcing some functions. Start with accounting and financial tasks. It can be less expensive to outsource them than to pay employees to perform them. Also, work associated with such functions often benefits from the oversight of experienced outside professionals.

Reasons to consider it

Nonprofits may outsource accounting work, such as payroll processing, because they lack the staff resources to perform such time-intensive tasks or because the work poses a fraud risk if undertaken in-house. Many nonprofits also outsource obligations such as financial statement preparation and tax compliance because they lack an internal CFO or the expertise to execute high-level financial work.

Most outsourcing solutions are scalable, allowing you to outsource all or only some functions as your staff, financial and technological resources change. Options might include outsourcing payables, receivables and cash transaction processing; account reconciliation; financial statement, budget and forecast preparation; tax and grant reporting compliance; and communication of financial matters to your board.

Finding a service provider

To find an outsourcing partner, ask for recommendations from other nonprofits in your community and professional advisors, such as your attorney and banker. Higher-level work may call for hiring a CPA firm, while an outsource partner could handle routine tasks. For example, consider using a payroll service. Look for providers with extensive nonprofit experience, ask for references and follow up on contacting them.

When vetting potential service providers, make sure you talk with the manager or partner who’ll oversee the work you intend to outsource — even if that person won’t actually perform the job. This can help provide continuity of service and be a valuable resource to your nonprofit’s senior management and board.

Also, discuss cost. This can vary widely depending on your needs and factors such as your geographic location and niche. Services might equal or even exceed what you’d pay an experienced accountant internally — or might cost less. Keep in mind, however, that with an outside firm, you pay only for the amount and level of services you require. Accounting employees, on the other hand, could spend time doing work that someone at a lower pay level could perform. Outsourcing also saves your nonprofit the expenses associated with a regular employee, such as payroll taxes and health insurance.

Make a smooth transition

Once you’ve settled on a provider, discuss how financial data will flow. For example, will your nonprofit send information to the company, or will the company’s personnel perform the work in your office? If a vendor’s unfamiliar with your accounting software, it may need to perform some tasks onsite, at least initially.

Be prepared for other possible transition issues. Generally, there’s a learning curve as a service provider familiarizes itself with a client’s policies, procedures and systems. You can help smooth the way by assigning the vendor or firm to a single point of contact within your organization.

The buck stops with you

Keep in mind that even if you engage a full-service CPA firm, financial governance remains the responsibility of your nonprofit’s board of directors. External service providers can provide financial and accounting advice, but the buck ultimately stops at your board and executives.

Nonprofits can’t afford fraud losses

Winter 2025

ImageHow to help prevent common schemes

There’s little evidence that the incidence of occupational fraud is higher for nonprofits. However, nonprofits are less likely to be able to handle financial losses associated with fraud. According to the most recent research by the Association of Certified Fraud Examiners (ACFE), the median fraud loss per occupational fraud incident is $145,000 for all organizations — an amount that could easily shut down a charity. That’s why it’s critical to understand the risks and to implement and adhere to strong internal controls.

Mitigating threats

A general lack of financial and staff resources can make smaller nonprofits particularly vulnerable to fraud. Nonprofit leaders generally place greater trust in their employees than for-profit managers do. Some nonprofit managers may, for example, rubber-stamp expense reimbursement reports, allow unsupervised staffers or volunteers to handle cash donations, and neglect to distribute accounting duties among various employees. This kind of oversight (or lack of oversight) is a mistake.

To mitigate fraud threats, evaluate your organization through the eyes of a criminal. If you intended to steal, where would you focus your efforts? Where are the weak links? These are the primary security gaps you must address with internal controls.

For example, many organizations still receive donations in the mail. If one staffer is responsible for opening envelopes, recording contribution amounts and depositing donations, that person could easily commit fraud. So you need to devise mechanisms to help prevent such skimming. One common antifraud control, segregation of duties, requires that two or more people be involved in the process of collecting, recording and depositing checks. Also recommended: Investigate the backgrounds of anyone who’ll be handling money.

Regular compliance checks

Unfortunately, the existence of controls doesn’t guarantee they’re being followed. Although internal controls provide a deterrent from wrongdoing, they can sometimes be circumvented. Nonprofits, by their nature, are geared toward “doing good,” not making money. So, staffers may not be looking for possible financial irregularities. And when budgets are tight — something common in the nonprofit world — leaders often cut resources dedicated to controls and fraud prevention.

Regular compliance checks can help ensure control procedures are being followed. The key is to find out which rules are routinely ignored — and why. Say, for instance, that your employee handbook mandates two levels of approval for expense reimbursement requests. If staffing shortages make following this rule difficult, ask board members to step in when a second signature is required. Another possible solution is to outsource specific tasks.

How to train stakeholders

Another effective antifraud control is employee training. During your onboarding process, inform staffers and volunteers about typical schemes in the nonprofit sector and teach them how to prevent, identify and report possible fraud. Because fraud perpetrators are constantly finding new ways to steal from their employers, initial training should be updated with annual refresher courses. In fact, you might want to ask employees to sign an annual ethics pledge to keep such issues top-of-mind and reinforce the idea that your organization takes fraud prevention seriously.

The ACFE has found that approximately 43% of nonprofit frauds are revealed by tips from staffers, board members, vendors, clients and the public. To encourage such tips, offer potential whistleblowers an anonymous fraud-reporting mechanism (via web, phone or email) that’s available 24/7. Investigate every tip and report the outcome of tip investigations (withholding the names of whistleblowers and others involved) to your nonprofit’s stakeholders.

Don’t cut these costs

If economic uncertainty or reduced financial support is leading your nonprofit to take cost-cutting measures, be careful not to target critical fraud prevention resources or policies. Make sure you’re able to maintain segregation of duties and supervise staffers and volunteers who perform financial tasks. And though network hacking schemes are more likely to be perpetrated by outside criminals, spend what you must to keep all security software current.

A mixed bag: How OBBBA could affect charitable donations

Winter 2025

ImageThe new tax and spending law, known as the One Big Beautiful Bill Act (OBBBA), contains several provisions that directly affect nonprofits. In particular, the impact of OBBBA’s charitable giving incentives is expected to be significant. So it’s important for nonprofit leaders to understand these provisions and their likely consequences.

Fundraising-friendly provisions

Let’s lead with the good news: The OBBBA establishes a permanent deduction for taxpayers who don’t itemize their deductions, beginning in 2026. Up to $1,000 for single filers and $2,000 for married couples filing jointly can be taken as a charitable deduction when filing annual tax returns. Eligible donations must be made to tax-exempt public charities. Gifts to private foundations or donor-advised funds don’t qualify.

Because the Tax Cuts and Jobs Act (TCJA) of 2017 nearly doubled the amount of the standard deduction, fewer taxpayers itemize their deductions than before that law was signed. And the OBBBA increases the standard deduction even further (for 2025, $15,750 for single filers and $31,500 for joint filers). Until now, that meant nonitemizers forfeited deductions for charitable contributions. Researchers at Indiana University and the University of Notre Dame have determined that charitable giving fell by $20 billion in 2018, the first year the higher deduction took effect. Many within the nonprofit sector hope a universal deduction will encourage more nonitemizing middle-income households to donate.

The OBBBA also makes permanent the limit on cash contributions. Taxpayers can deduct contributions to public charities up to 60% of their adjusted gross income (AGI). Pre-TCJA, the limit was 50% of AGI.

Disincentives for giving

But the OBBBA also includes several provisions that are considered likely to reduce incentives to give. For starters, beginning in 2026, the law imposes new “floors” on charitable contribution deductions for both individuals who itemize and corporate taxpayers. The floors reduce the previously deductible amounts. Here’s how:

Individuals. For an individual taxpayer, the new floor is 0.5% of AGI. So a donor with an AGI of $100,000 can’t deduct the first $500 ($100,000 × 0.5%) of donations made that year.

Corporations. The floor for corporate deductible donations is 1% of the corporation’s taxable income. Researchers at Indiana University’s Lilly Family School of Philanthropy estimate that the corporate floor will reduce corporate giving by about $45 billion over 10 years. The OBBBA also renews the existing limit that restricts corporate deductible donations to 10% of taxable income.

Although corporations can carry forward contributions that exceed the limit for the following five years, contributions that are disallowed because of the 1% floor can be carried forward only from years in which total contributions exceed the 10% ceiling.

Impact on high-income donors

The OBBBA may also disincentivize donations from high-income donors by effectively capping the value of itemized deductions for individual taxpayers in the highest tax bracket (37%) to 35 cents per dollar, versus 37 cents per dollar pre-OBBBA. This cap becomes effective starting in 2026.

Indiana University researchers examined the impact of this limit on high-income donors, who they characterize as exceptionally responsive to tax incentives. Such donors are responsible for more than half of all itemized charitable giving. Researchers project that the limit will reduce giving by at least $4.1 billion per year and may jeopardize as much as $6.1 billion.

Also, the OBBBA permanently increases the estate and lifetime gift tax exemption to $15 million, or $30 million for married couples, for 2026 ($13.99 million and $27.98 million for 2025). These amounts will be adjusted annually for inflation. Therefore, reducing estate tax liability is expected to play a minor role in motivating charitable donors

Adjusting to a shifting landscape

Depending on your nonprofit’s historical sources of support, 2026 could bring significant changes to your financial prospects. We can help you navigate the shifting landscape proactively, so you don’t have to scramble to adjust to new OBBBA provisions.

Fundraising in a new environment

The effects of the One Big Beautiful Bill Act’s revisions to the deduction limits and tax incentives for charitable giving may call for you to overhaul your nonprofit’s traditional fundraising strategies. Begin with scenario planning, mapping out how donor behaviors might change. Consider the different potential impacts and how they’d affect your bottom line in the short- and long-term. How might an uptick in donations attributable to the new universal deduction weigh against a decline in gifts from corporations and taxpayers who itemize?

You may need to retool your fundraising efforts to appeal to existing and potential middle-income donors. Educating these individuals about the benefit of the universal deduction is a critical first step, as many will be unaware of it. Greater effort may be required to engage itemizers and corporations as well. You should focus on your programs’ outcomes to help donors see past the negative tax impact of deduction floors.

Effective onboarding for your nonprofit’s board members

Fall 2025

Welcoming new members onto your nonprofit organization’s board is more than a formality. It’s a critical process that determines how effective and engaged they’ll be over the long term. Here are some practical steps to help ensure your onboarding strategy empowers new board members and prepares them to make meaningful contributions.

Clarify roles and provide resources

Start by articulating the board’s responsibilities and individual directors’ roles. Most board members will probably bring professional experience, but they may not be familiar with the nuances of nonprofit governance. Share board member job descriptions that outline fiduciary duties, meeting conventions, committee service and fundraising expectations. New members should also receive an onboarding packet that includes:

  • Descriptions of your organization’s mission, vision and strategic plan,
  • Recent financial statements and budgets,
  • Bylaws and governance policies,
  • Meeting schedules and past minutes, and
  • Key staff and board member bios.

Such documentation enables new directors to understand your organization’s current position and long-term objectives. If you conduct performance reviews of board members, make sure they understand that the job’s responsibilities also involve accountability. You don’t want to spring performance reviews on these unsuspecting volunteers!

Introductory meetings

Onboarding isn’t only about sharing information. It’s also about building relationships. Schedule a welcome meeting with your board’s chair and your nonprofit’s executive director to provide a personalized introduction. Arrange for a board mentor or peer liaison to serve as a go-to resource for questions. And consider hosting informal gatherings or lunches to help integrate new members socially and foster a sense of community.

To ensure that new board members understand the nuts and bolts of the position, host a formal orientation session. Provide new members, particularly those from outside the nonprofit sector, with training on the basics of nonprofit accounting and fundraising. Attendees should be encouraged to ask questions, provide feedback and share their motivations for joining your board.

This is also a good opportunity for new members to learn about the various standing committees and decide where they’d like to serve. It’s essential to let them choose where they want to direct their energy, but you may want to steer them toward a committee that aligns with their skill sets and experiences.

Following up

The onboarding process doesn’t end after one board orientation or introductory meeting. Be sure to follow up with members at regular intervals to assess how they’re acclimating to the role and to provide additional resources and support as needed.

Succession planning — How would your nonprofit handle a leader’s departure?

Fall 2025

Even in an egalitarian organization where each staffer’s contributions are valued, the departure of an executive director (ED) or other senior leader can be devastating. If your nonprofit doesn’t have a succession plan, such an event can be even more traumatic. The services, relationships, finances and the very existence of an organization may be threatened. If you haven’t already done so, plan now for a smooth and orderly transition.

Significant consequences

Succession planning shouldn’t be limited to your ED position. Include every employee who’s considered indispensable and difficult to replace due to experience, institutional knowledge, donor relationships and other characteristics. Ask whose departure would have the most significant consequences for your organization and its ambitions. When you look at it that way, you can see why succession planning should be broader than you might first consider. In addition to the ED, you may need to develop plans for high-level staff (for example, the development director) and even board members.

Also, keep in mind the various departure scenarios. Some leaders may announce their retirement a year in advance, giving you plenty of time to plan. However, in other circumstances, a leader could unexpectedly die or become disabled, rendering them unable to perform their job. Consider how you’d handle a sudden leadership emergency. You might, for example, want to nurture relationships with nonprofit headhunting agencies, should you need their services at some point.

Focus on the future

Successors must have specific qualifications to carry out your organization’s short- and long-term strategic plans and goals, which their job descriptions might not reflect. Review and refresh job descriptions to account for any changes to your size, offerings and needs — and keep these descriptions updated.

Remember that succession planning is future-focused, and you should consider the current jobholder’s experience and qualifications only as a starting point. What worked for the last 10 or 20 years might not cut it for the next 10 or 20, so build some flexibility into your nonprofit’s roles.

Groom potential successors

Although you shouldn’t publicize jobs until they’re available, you might want to start grooming potential internal candidates before the need arises. Identify “high potential” employees with the ambition, motivation and ability to move up substantially in your organization. You can assess your staff using performance evaluations, discussions about career plans and other tools to determine who might be qualified a year or several years from now.

Once you’ve identified potential internal candidates, make individual plans for each. Action plans might include job shadowing, which can provide you with insight into how a person would perform in the position under consideration. Also offer mentoring and coaching. For example, if you assign someone a special project, follow the staffer’s progress closely and provide constructive feedback throughout the assignment.

Important: Avoid leaving potential leaders in holding patterns. If they don’t receive timely promotions or other growth opportunities, they may pack up their skills and qualifications and go elsewhere.

Formal document

Although succession plans usually aren’t legal documents, your plan should be a formal, written document that you can easily share with board members and others who may be privy to the details. You should also share the plan’s existence with key stakeholders, including employees, grantmakers, and donors. This will assure them that your nonprofit is prepared and likely won’t be knocked off course if a leader suddenly leaves.