Foundations have experienced exponential growth in their philanthropy efforts and grant sophistication over the last 10 years. And while this expansion is exciting, many are discovering it comes with growing pains.
Having worked closely with dozens of grantmaking foundations through this process, we’ve found the three most common concerns are now related to their grant compliance process, accounting software functionality, and cybersecurity practices.
Grant Compliance Process
Socially-minded foundations are increasingly looking to make an impact in more creative ways, leading to more sophisticated methods of funding and grantmaking. In the last several years, we’ve seen an evolution in philanthropy as organizations pivot to more program-related investments and grants to for-profits, individuals, and nonpublic charities.
This new approach has created many exciting opportunities for foundations, but the disruption comes with the danger of falling out of compliance while distributing grants. Third-party firms such as Clark Nuber are increasingly relied upon to provide insight and best practices for grant compliance in complex situations. Reviews like these are especially important if foundations are making charitable gifts to non-501(c)(3) public charities or program-related investments.
Established foundations, and organizations embarking on the next phase of their philanthropy journey, should be aware of common pitfalls and check that their compliance process is in proper shape and protected from scrutiny by the IRS, state officials, or media.
Accounting/Enterprise Resource Planning (ERP) Software
As foundations have grown in complexity, many have discovered their staff are spending extra time working in Excel spreadsheets and manually entering the same data into multiple systems rather than in a dedicated accounting/ERP system. This duplication of effort results in inefficient practices, inconsistent financial reports, and no time for analysis. To speed up their processes, foundations we’ve worked with have begun transitioning away from manually entering data into their accounting system and toward automation.
One common solution for foundations is determining gaps in their existing accounting or ERP system and replacing it with a modern cloud-based solution. These systems offer built-in workflows, integrate with other third-party applications, and provide friendlier user interfaces. These features can be customized to meet the unique needs of each organization to fit the processes and workflow of their accounting departments.
As with their grant compliance solutions, a large number of foundations are reaching out to CPA firms, software vendors, and consultants to evaluate their existing technology and determine if now is the time to change software providers. Certified ERP partners can work with your foundation to find the gaps in your existing software and select the software best equipped to fill them for the entire organization.
Cybersecurity
Cybersecurity remains a top risk identified for foundations of all shapes and sizes. Recent high-profile breaches around the world have organizations wondering if they are not only protecting their own data within their various systems, but also the data of their grantees.
Unfortunately, it can be difficult for organizations to know where to begin when building up their cyber defenses. Different security goals will require different solutions, and, as with all risks, cybersecurity should be optimized to ensure the benefits outweigh the costs.
As a solution, foundations can consult with IT professionals to discuss their current cybersecurity state, recurring pain points, and build a roadmap to a more secure future state. Some firms also offer staff training on common threats and penetration testing, a practice where a benevolent hacker attempts to access a client’s system to discover where the weaknesses lie.
Next Steps
The past ten years have seen foundations evolve in impressive ways to meet local, national, and global needs. Now is the time to examine those creative solutions, invest in the processes you created, and become a more resilient and influential organization.
To meet the needs of the grantmaking foundation community, Clark Nuber now offers a three-in-one service bundle to assess the strengths of an organization across the areas discussed above. Our high-level assessment is designed to give foundations peace of mind over their grantmaking compliance, the efficiency of their accounting software, and the state of their cybersecurity.
If you’d like to learn more about how this service can help strengthen your organization and its mission, visit our bundled assessment page.
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