Wednesday, December 16, 2009

The Auditors are Coming! The Auditors are Coming!

We audit a number of organizations-nonprofits and municipalities and a few corporate entities. Every year our clients express relief when the audit is over, especially if there aren’t any major findings. We reassure the clients that we as auditors aren’t “out to get them” and they should not worry about the audit. Any findings or comments will only help to make their internal controls stronger and their organization better. However we do understand their apprehension. No one wants to have their errors written and memorialized for others to see.

Every three years we find ourselves in our clients’ shoes when we have our peer review. We are audited by another CPA firm who reviews our system and a selection of our accounting and auditing work to make sure we are following standards properly. A month ago, I was confident in the philosophy that any comments will only enhance our client service. But with the peer review starting tomorrow I completely empathize with our clients. Which reminds me of another philosophy—walking in another’s shoes is a good thing.

Saturday, December 12, 2009

Year End Tax Tips for Donors

The IRS published Year End Tips for Donors this week on their site.

  • IRA owners age 70-1/2 or older can directly transfer tax free up to $100,000 per year to an eligible charity. This provision is scheduled to expire at the end of 2009.
  • Clothing and household items donated to charity must be in good used condition or better.
  • All donations of money regardless of amount must have a bank record (typically a canceled check) or written communication from the charity. Payroll deductions can be documented by maintaining the last pay stub for the year.
  • Contributions need to be made by December 31 in order to take the deduction
  • As of this posting, just 19 more donating days!

Wednesday, December 9, 2009

Strategic Planning vs. Strategic Thinking?

In the BoardSource session “Financial Leadership in this Emerging Economy”, the presenter, John Griswold noted that the strategic plan used to be for 5 to 7 years, now it is for 2 to 3 years. To which a Board trustee from a grant giving foundation replied—“forget the strategic plan—I want to see strategic thinking”.

We pay attention to what the grant makers are saying is important to them. After all, they are a significant source of funds for nonprofits. So is this a trend that nonprofits should be aware of—should they abandon their strategic plans—those nearly year long processes that result in a large binder with fancy charts and graphs and goals, objectives, and action items?

While I did not get to follow up with the Trustee who made the comment, I think she was expressing a common frustration—the strategic plan in the nice binder that sits on the shelf for 5 years until it is time for the next strategic plan. And in between, the plan is not looked to for guidance or updated annually or considered until then.

The common sentiment—“you don’t plan to fail, you fail to plan” embodies the reasons behind a strategic plan. But Boards and management, who spend countless hours and dollars on a plan and then don’t continually use it, cannot say that “the plan on the shelf” is truly planning. True strategic planning does include strategic thinking. It is not a “one and done” event. It is a continual process of incorporating your plan into every Board meeting and updating and modifying your action steps as you strategically look at what is happening in the world around you.

So it is not an issue of a strategic plan OR strategic thinking, it is strategic planning AND strategic thinking.

Wednesday, December 2, 2009

Another Great Thing about Vermont

One of my favorite places to visit is Vermont. When people think of Vermont, they think of mountains, maple syrup, skiing, and hiking. Now something else—Vermont was the first state to enact the L3C (low-profit limited liability company). This is an innovative entity structure that has quickly gained in popularity and has been formally adopted by 5 states with legislation pending in a number of other states.

This entity combines the social mission of the nonprofit entity with the business concept of return on investment. The L3C can receive investment capital from foundations and the foundations can later receive a return on their investment. The Nonprofit Law Blog does a great job clearly explaining the details.

An entity can form the L3C in a state where legislation has been enacted and file as a foreign corporation in the state where they are located (similar to the idea of incorporating in Delaware).

The L3C offers just the right structure to meet the needs of certain industries as discussed by the Nonprofit Law Blog

As with anything new, there are some issues up in the air with the IRS as the NonProfit Times notes so the pros and cons of this type of entity need to be carefully reviewed before deciding if it is the right form of entity for your organization.

Friday, November 27, 2009

A Cornucopia of Ideas

In honor of Thanksgiving, here is a collection of ideas, thoughts, and concepts from the 2009 BoardSource Leadership Forum….

…Foundations are looking more closely at Organization’s financials, they are looking for Organization’s that are sustainable who will be around long after the grant money is used…lagging economic indicators include giving so as the economy recovers giving may still decrease…Board members should include “ask me about (my nonprofit)” in their email signature tags to raise awareness about their nonprofit….millennials are excited about the nonprofit sector and see it as a desirable life career, not just a volunteer activity…
…the new 990 is only the beginning of IRS regulations that will affect nonprofits….pay attention to social entrepreneurs who look at social change differently…things aren’t broken, they are broken open….nonprofits need to market community value…
…a problem in the nonprofit sector is the 1.5 million small, disconnected nonprofits each going their own way, nonprofits need to merge or collaborate more…the Board and the Executive Director are responsible for determining strategy, the Executive Director is responsible for executing strategy… make sure you are measuring the right things…and one of my favorites…if you haven’t failed, you haven’t experimented enough

…the list goes on, but each of these items by themselves could be a post on its own…all good food for thought---without the calories of the Thanksgiving feast!

Wednesday, November 25, 2009

Energized by the BoardSource Conference

I have just returned from the annual BoardSource Leadership Forum in Orlando, FL and I am re-energized to advance the cause of good governance. It wasn’t just the 80 degrees weather, the palm trees, the lake view, and the sound of the multiple waterfalls outside. (Although I suspect an environment like this on a daily basis could only continue to create energy) It was the reinforcement of what can be accomplished in any organization when they are established on a firm foundation.

We have worked with nonprofit organizations for over 25 years. Some organizations accomplish their goals very effectively. Their programs work, they are good at attracting donors and volunteers, and even in these difficult times, they are strategizing ways to continue on. Other organizations are not so effective. The key ingredient that is missing from the less effective nonprofits? Good governance.

The popular definition site, “Wikipedia” defines governance as: “consistent management, cohesive policies, processes and decision-rights for a given area of responsibility” We see it as the cornerstone for the foundation of a well run nonprofit.

BoardSource’s own site says it best “dedicated to advancing the public good by building exceptional nonprofit boards and inspiring board service” They accomplish this by focusing on Board governance and provide numerous resources and training on Board structure, meetings, legal issues, policies, financial management, etc.

My next couple of posts will focus on some of the great governance messages from the BoardSource conference.

Tuesday, November 24, 2009

Small Nonprofit Need to Remember to File the E-Postcard

You are part of a very small nonprofit. Keeping the books is simple, what could go wrong? Well if you don’t pay attention to the IRS filing requirements-you could lose your nonprofit status.

Small nonprofits with gross receipts of $25,000 or less need to annually submit the Form 990-N to the IRS. The form is filed online at There is no paper filing option. While there is no monetary penalty for late filing, an organization that fails to file for three years in a row, will have its nonprofit status revoked.

The filing is simple. You just need your employer identification number, name and mailing address, tax year, website (if you have one) and the name and address of the principal officer. You will be asked to certify if your gross receipts are $25,000 or less.

Not sure if you are up to date on your filings? You can search for your organization at

While it is easy to file, it is easy to forget to file. The epostcard is due by the 15th day of the 5th month following your year end. Nonprofit status will be revoked by the 3rd consecutive missed due date. This IRS provision was first effective for years ending 12/31/06. So if you are a 12/31 year end and have never filed the epostcard and do not file by 5/15/10, your nonprofit status would be revoked. Now is the time to file.

More information is available at the IRS website,,id=169250,00.html