Revenue Concentration

Where does your organization get its support?  Do you charge fees to program participants?  Or do you rely on contributions from individuals?  Do you have an annual fundraiser that brings in most of your support for the year?

Nonprofit organizations receive funding from various sources.  Some of the more common revenue streams are as follows.

• Individual contributions
• Corporate contributions
• Government grants
• Foundation grants
• Membership dues
• Program service fees
• Fundraising events
• Investment income
• Endowments
• Rent

Depending on your organization, it may receive support from all of the above sources or only one or two of those listed.  Knowing where your revenue comes from is important for managing the organization.  Organizations that receive a large amount of support from a single source or only a few sources may have a concentration risk.  For example, if an organization relies on annual contributions from a single foundation and that foundation decides to change its focus, the nonprofit is forced with finding alternate resources to continue to carry out its mission.  Or if an organization relies on government programs and there is a change in political leadership the funding may be reduced or lost altogether.  This may lead to an interruption in programming for the nonprofit.  If your organization is dependent on a specific revenue source, it should reduce its risk by implementing a plan to address an unexpected drop in this support and increase its revenue diversification.

Posted by: Carrie Minnich, CPA