Recession proofing: six actions governments and not-for-profits should take to prepare for revenue shortages

Governments and not-for-profit organizations are the bedrock of stable communities during uncertain times. Due to the COVID-19 crisis, public servants and civil leaders around the country have quickly mobilized to maintain essential services, ensure the safety of citizens, protect their workforce and jumpstart programs to mitigate negative local economic impacts. New challenges requiring immediate responses emerge daily and public sector leaders are increasingly focusing on planning for long-term effects and the subsequent recovery.

In order to insulate your organization from financial hardship, consider the following six proactive measures. These recommendations are based on lessons learned from the Great Recession as well as the current actions being taken by public leadership.

Conduct a revenue stream analysis

Revenue projections across all sectors are rapidly evolving due to the COVID-19 emergency response efforts. Immediate and sustained revenue shortfalls are now a reality. Tough decisions may have to be made regarding expenditures, or alternative funding sources may need to be sought. Regardless, organizations should develop a new forecast before engaging in any long-term response planning. Consider the following:

• Review existing projections to determine what areas might be most significantly impacted, for instance, sales tax revenue that will be impacted by growing unemployment
• Proactively consider increasing user fees and other revenue sources, particularly where fees do not cover cost of service provision.
• Seek philanthropy related to emergency response efforts and expenses
• Establish an internal system for monthly departmental revenue forecasting

Analyze future expenditures

Emergency costs can quickly become unmanageable without adequate planning and analysis. Difficult decisions have already arisen and will continue to as leadership traverses an uncertain expense and supply chain landscape. When navigating uncertain expenditure streams and rising long-term costs, you should:

• Revisit all expenditure plans, including your capital improvement plan, and consider the “necessary” or “essential” nature of each expense