Prediction of Nonprofit Dissolution

Fiscal Management Associates (FMA) is a management consulting firm based in New York City that empowers nonprofit organizations with fiscal management, accounting, organizational, and technological knowledge and skills. One significant segment of FMA’s client base includes private grant making foundations, which have routinely asked FMA for help in assessing the risk that a potential grantee will dissolve during a grant term. The Capstone team predicted and quantified the probability that a nonprofit organization will cease to operate through a statistical model. After an extensive literature review and interviews with NYU faculty and nonprofit consultants, the team identified IRS revocation of tax-exempt status as the most reliable indicator of nonprofit failure. The team gathered data on nonprofits in NY State and defined independent variables from public tax filings. The team then specified a theoretical equation to explain non-profit failure and formulated a hypothesis about the relationship between variables of interest.