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Did you miss the CRA Annual Conference?  We’ll be sharing articles over the coming weeks on each of the panels from the conference, written by ChatGPT.

Nonprofit Receiverships: The Pitfalls of Operating on Passion

CRA Annual Conference 2025 | St. Louis
Panelists: Jaime Angarita (ALTA Collaborative), Eric Moraczewski (NMBL Strategies), Ian Rubenstrunk (Spencer Fane)
Moderator: Karen Nicolaou (Harney Partners)

Nonprofit Panel 2025

Introduction

At the Commercial Receivers Association’s 2025 Annual Conference in St. Louis, one of the most anticipated sessions focused on the growing complexities of nonprofit restructuring. The panel “Nonprofit Receiverships: The Pitfalls of Operating on Passion” brought together industry experts to highlight the unique challenges that distinguish nonprofit receiverships from their for-profit counterparts.

The Nonprofit Difference

While for-profit entities answer primarily to secured and unsecured creditors, nonprofits carry an additional and often less defined responsibility: the public good. This shift in constituency dramatically alters the restructuring landscape.

Nonprofit boards and leadership must often vote themselves out of their roles—without the financial incentives available in for-profit wind-downs. This adds emotional weight to already difficult financial decisions

Nonprofit Panel 2025

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Understanding Constituencies and Options

When evaluating distressed nonprofits, the first step is clearly defining the organization’s constituency. Donors, grantors, endowment holders, and the broader community all have a voice. Panelists emphasized that the choice between appointing a Chief Restructuring Officer (CRO), initiating a receivership, filing bankruptcy, or pursuing a structured wind-down depends on the nonprofit’s unique funding structure and mission commitments.

Best practices before engaging in any restructuring include:

  • Reviewing IRS Form 990s for financial transparency

  • Analyzing annual reports and public filings

  • Leveraging publicly available nonprofit data, which is often more detailed than for-profit disclosures

    Nonprofit Panel 2025

Funding Complexities

Nonprofits typically rely on a diverse mix of income sources, including:

  • Endowments (board restricted, owner restricted, quasi-restricted)

  • Federal, state, local, and foundation grants

  • Earned income streams

  • In-kind donations and pledges

Each of these sources comes with restrictions and compliance requirements, limiting organizational flexibility during restructuring. Endowment restrictions and donor intent, in particular, create barriers to redirecting funds toward immediate operational needs

Nonprofit Panel 2025

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Governance and Leadership Challenges

The session also explored the governance realities that complicate nonprofit receiverships:

  • Boards may prioritize mission and values over financial stability.

  • Accounting and finance roles are often filled by underpaid or less experienced staff, leading to compliance risks.

  • Internal politics and power struggles can distract from organizational survival.

  • Founders’ syndrome may prevent leadership transitions when they are most needed

    Nonprofit Panel 2025

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Common Hurdles in Nonprofit Restructuring

Panelists highlighted several recurring issues practitioners should anticipate:

  • Restricted endowments and donation limitations

  • Complex accounting and inexperienced staff

  • Limited board sophistication and oversight

  • Interplay of federal and state regulations

  • Asset valuation challenges and low marketability

    Nonprofit Panel 2025

Conclusion

Nonprofits operate with passion at their core—but passion alone cannot ensure financial sustainability. The CRA Annual Conference panel underscored the need for specialized approaches to nonprofit receiverships, balancing compliance, mission integrity, and financial responsibility.

As nonprofits continue to face economic pressures, the profession must adapt strategies that protect both the viability of these organizations and the trust of the communities they serve.