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.