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Nonprofits cut costs, aim to be more open

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Most nonprofits responded to the troubled economy and heightened scrutiny in 2009 by cutting costs and taking steps to be more accountable, a new survey says.

Among 465 nonprofit officials responding to Grant Thornton’s seventh annual National Board Governance Survey for Not-for-Profit Organizations, 87 percent reduced expenses, 57 percent reduced personnel, and 53 percent delayed capital projects.

And 56 percent revised their strategic plans to reflect the economic downturn.

Nonprofits also adjusted their investments, with 58 percent rebalancing their investment portfolios and 39 percent changing their investment policies, up from 27 percent in 2008.

“Many organizations have reduced their positions in alternative investments and are maintaining much higher cash positions than in previous years,” Frank Kurre, national managing partner of Grant Thornton’s Not-for-Profit and Higher Education practices, says in a statement.

“Unfortunately as the market improved in the last half of calendar 2009,” he says, “many organizations did not fully benefit since they had shifted out of equities into more conservative cash and fixed-income positions.”

Among many policy changes they made in 2009, 55 percent of nonprofits established formal policies for their board members to review the Form 990 they file with the IRS, up from 22 percent in 2008.

Seventy-three percent now have formal policies to review executive compensation, up from 71 percent in 2008.

And 30 percent of nonprofits report a key way their board’s agenda changed in 2009 was to spend more time evaluating the performing of their chief financial officer, while 24 percent said they paid more attention to evaluating board performance, and 14 percent became more focused on evaluating the executive director/CEO or director of development.

Fifty-two percent of nonprofit audit committees met with their auditor two or three times in 2009, up from 44 percent in 2008 and 35 percent in 2004, and only 35 percent met with their auditor only once, down from 40 percent in 2008 and 54 percent in 2006.

Seventy-four percent of audit committees included at least one certified public account as a member, up from 66 percent in 2008 and 24 percent in 2006.

“There was an enormous uptick in governance activities among not-for-profit boards since 2008, due to increased scrutiny of not-for-profit organizations, instances of fraud, changes to Form 990 and an intensified push for not-for-profit transparency,” Kurre says.

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