Fundraising Strategy

Responding Effectively to an Economic Dependence Statement

An ‘Economic Dependence’ statement in audited year-end financial statements is generally inserted as a cautionary note when the auditors notice a high, or increasing dependence on a single funding source or revenue type.

If you’re an ED or Director of an organization that’s been advised of an Economic Dependence, Going Concern, or related advisory from your auditors, you have options (although you may feel a little trapped in the moment).

‘Economic dependence’ is a essentially a warning: diversify your revenues to secure your sustainability. The statement draws attention to risk of continued viability of the recipient organization in the event of changes/reductions in the funding criteria/formulae of the primary funder.

If this note has been inserted in your statements, you’re not alone.

Countless not-for-profit organizations across the country rely – heavily – on government and single-grant support to deliver their social mandates.  While that’s fine, the trouble begins when those sources start messing-around with their funding criteria and formulae.

…you know the story.

Here’s a list of issues to consider when you’re faced with an urgent need to diversify your revenues:

  1. What are our cash reserves – how long can we last while we transition our model?
  2. What are our marketable resources? – a listing of services/assets that the organization owns or produces may be helpful in determining new business models.
  3. What fundraising activity has worked well for us/not-so-well in the past?
  4. What fundraising activities have we not tried yet?
  5. Do we have/can we develop accountability for fundraising?
  6. Does the Board have the skill, connections, and business-savvy to turn the organization around?
  7. What support will the ED need to diversify funding sources?
  8. Do have a reliable database of prospects, members, donors, suppliers, and others?
  9. Do we have an idea of whom might be engaged as donors?
  10. What are 5 steps that we can undertake right now to turn our over-reliance on single-source revenues around?
  11. What assistance will we need?

If you’re looking to diversify your revenue mix, it’s prudent to seek-out a plan that lays-out:

  1. A diversified donor pipeline growth plan.
  2. Nurturing strategies to improve donor lifetime value.
  3. A comprehensive organizational sustainability plan.

We’d welcome the opportunity to present some ideas to you.

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