Ten Simple Tips for Good Governance (What I Learned from PANO)

The end of the year is quickly passing. At the end of October, Liz and I attended the PANO Standards for Excellence consultant training. The session was full of very beneficial information. Liz wrote this article summarizing some of what we learned on good governance in our firm's newsletter for nonprofits and I wanted to post it here as well.

1. If your Mission Statement is more than 1 sentence, it is probably too long.

2. Review your Mission Statement every three years. Document your review and approval of the Mission Statement by clearly noting it in the Minutes.

3. Your Minutes should include who was present--identified as Board or staff, who was absent, the type of meeting, what was done not what was said, the start and end times and should be signed by the Secretary.

4. Question to ask when reviewing financials “Are all the bills input (whether they are paid or not)?

5. Every organization should have a Reserve Policy. 3-6 month Reserve is recommended.

6. 3:1 ratio is minimum when looking at funds raised vs. expenses (some exceptions apply)

7. If you are soliciting gifts in other States, you need to be registered there. Use a service like Labyrinth, Inc. to assist in the process. http://www.labyrinthinc.com/

8. Conflict of Interest Policies are not just for the Board-but for anyone who has decision making authority for the organization including staff and volunteers.

9. If your organization is involved in Lobbying, even a little bit, consider making the federal 501(h) election. The h election is an expenditure test that answers the question of whether your organization is doing too much lobbying by examining how much you spend on lobbying (lobbying expenditures).

10. Invest in the Standards of Excellence Educational Resource Packets. They are inexpensive and chock-full of great information.

Upcoming Payroll Changes: Get Ready!

The Affordable Care Act included a number of changes to payroll reporting.

• On your 2011 W-2’s you will need to report the value of the employee’s health insurance. The amount reported does not affect tax liability. These are the W-2's that you will file in 2012 for the 2001 year. However you should take some steps now to get ready for next year. You need to contact your outside payroll company or your financial software company if you prepare payroll in-house, to make sure that the health insurance expense for each employee can be captured and included in next year’s W-2. Also check with your health insurer to make sure you will receive a yearend report that shows the health insurance expense for each employee.

• Starting January 1, 2011, the cost of over the counter drugs cannot be reimbursed from a Flexible Spending Arrangement unless a prescription is obtained.

20 Questions - Part III

You want to have a good system to track data so that you can use it easily in your analysis process. Here are some things to think about when you are tracking data.



Do we have a good system to track data?
14. What are the deliverables that we can communicate to the grantor? Are they outputs or outcomes?
15. How many people can we serve with the grant? How many units of service can we provide?
16. Can we clearly communicate statistics? Will charts or graphs help us pictorially represent our impact on the community?
17. Are we consistently reporting our statistics to the community? Number of people served; units of service. Is our definition of units of service consistent?
18. Are we already collecting data for other purposes that can be used for grant seeking purposes?
19. Are we protecting the integrity of the data? How is the information verified?
20. Can we use national, state, or local statistics to further communicate the benefit of the grant?

20 Questions-Part II

It can be tempting when you are desperate for funds to apply for every grant that even remotely seems close to your mission. However you need to make sure that the grant will not end up costing you more money in the long run. Here are four more questions from 20 Questions that Data and Financial Analysis can help you answer, that address this issue.


Is this grant the best fit for us?
10. If the grant is to fund collaborative work between two organizations will the collaboration be financial beneficial (or at least financially neutral) for both of the organizations?
11. If the grant is to start a social enterprise, will this social enterprise be financially beneficial to the organization?
12. If the grant is for a new program, can we afford to deliver the new program? Can it be sustainable beyond the grant period?
13. If the grant is provide a springboard to start a new program and we are expected to support the program on our own after the grant period is done (usually 2 to 3 years); what is the plan to become self supporting (sustainable)? How will we pursue donations from other sources for the program?


The last seven questions will be covered in the next post.

20 Questions that Data and Financial Analysis Can Answer

A number of my posts have been about the information that you can gain to help you better manage your organization through the analysis of data and finances. Remember that data and financial analysis is part of the picture. Most donors give because of relationships; their commitment to the cause; and/or their values. However, data and financial analysis can help answer the following questions that you and/or your donors might be asking:

How can our resources best be used?
1. Where do we most need the money? What program will benefit the greatest from this investment?
2. Which programs will be able to increase services and the number of people they serve (increase capacity) with additional funds?
3. What is the power of investing with our organization?
4. What programs have the potential to attract more funding from other sources if we expand the programs?
5. Will this grant help us attract more volunteers or help us to use volunteers more effectively—adding to our capacity with both funds (the grant money) and people resources (the volunteers)?
6. Are we using our facility, staff, volunteers, specialized resources to their fullest capacity? Is there untapped capacity that we can develop with the grant funds?
7. Do we have a “wish list” of needs and the approximate dollar cost so that we can easily and quickly respond to grant opportunities?
8. How do we compare to other organizations offering similar services?
9. Why are we the best organization to receive the grant funds?

More questions will be listed with the next post.

Grantseeking Advice for a Challenging Economy

This past Wednesday I had the privilege of being on a panel sponsored by the Margaret R. Grundy Memorial Library, the United Way of Bucks County, and the Bucks County Community College. The event was held in Bucks County Community College's Lower Bucks Campus' beautiful meeting space. As panelists we were asked to offer advice and insight to help nonprofits strengthen their grantseeking efforts.

My advice will be discussed in the next few posts. I wanted to used this post to spotlight something that I learned from a fellow panelist. Linda Goodwin from the Bucks County Foundation encouraged the nonprofits to introduce themselves to the Foundations and make sure that the Foundation knows about your organization before you ask them for money. She recommended that you include Foundations in your newsletter mailings and invite them to events. This way the Foundations know something about what you do when you approach them for funds. Linda also emphasized the value of keeping in touch with the Foundations after they award you funds. They have invested in your orgnaization and want to see you succeed.

Significant Changes to 1099 filing

Currently you are required to file form 1099 for every unincorporated vendor who provides you with services who you pay $600 or more during the year. In 2012 you will be required to file a 1099 for every vendor who you pay over $600 to regardless of the whether they are incorporated or unincorporated and whether it is for services or for products. Basically everyone you pay money to will either get a W-2 (for employees) or a 1099 (everyone else). As you are already imagining, this is a major paperwork process. By 1/1/2012, you will need to have a system in place that can track these payments so that you can send a completed 1099 to your vendors in the beginning of 2013 for the 2012 year. What do you need to do?
· Make sure you have the EIN for everyone you pay. All vendors should complete a form W-9. Start collecting this information now if you don’t have it already. This will strengthen your internal controls too.
· Make sure your financial software system can track and accumulate payments to vendors and generate the 1099’s at year end. Most systems already have this feature but if it is a feature that needs to be added, you’ll need to get in touch with the company now because adding a new feature to a software package could be time consuming.
· Look at where you use petty cash. If you use $59 in petty cash each month for park & rec supplies from the same supplier, you are going to need to give that supplier a 1099 at year end and they won’t be in your computer system. Consider using other purchasing methods.
· Talk to your auditor if you are considering using debit or credit cards instead of cash. Make sure you have strong internal controls in these areas. Tentatively the IRS is considering exempting purchases made by debit and credit cards from the reporting requirements. While it might seem like an easy solution, these payment methods have been abused and you need to make sure you have strong internal controls in these areas.
· Expenses that you reimburse employees for are also subject to reporting. If you have five employees who stay at a hotel in Harrisburg for 5 different training sessions throughout the year and you reimburse them for the hotel stay, you are responsible to report the payments made to that hotel on a Form 1099, even though you didn’t make the payment to the hotel directly, you paid employees.

Possibly this part of the healthcare legislation could be overturned or modified, but this is too large an undertaking to wait to see if this happens. It is better to proceed based on the current legislation and be prepared.

Beware of the Common Copier

Copiers don't just copy anymore—they scan, fax, and send email. And they could also end up inadvertently leading you to violate privacy rules. Nearly every copier built since 2002 has a hard drive. Everything that is copied, scanned, or emailed by the machine is stored on the hard drive. And unless you have the hard drive erased at the end of the copier lease term, private information from the hard drive could be accessible to the copier company or another organization that leases or buys the copier after you use it. The information can be accessed using software that is available for free on the Internet.

Organizations that provide social services frequently copy or scan papers that include social security numbers, wage information, or medical records. You can unintentionally violate Federal and State privacy rules if this information is accessed. The identities of your clients could be stolen.

You need to make sure that your policies for protecting that information extends to your copier too. Most copier manufacturers offer security or encryption packages for their products. Sharp and Xerox both have products that automatically erase an image from the hard drive as soon as it is printed. The cost of the product is $500—a very low cost to prevent potentially significant damages. You can also arrange to have the hard drive completely erased before the machine is removed at the end of the lease period.

Weighing the Benefits of Social Media

Today this article about how successful social media has been for some accounting firms appeared in my inbox. A few hours later I read these lines in my son’s blog.

I woke up Friday morning to a text from a friend about Cliff Lee joining the Yankees. I then checked Twitter and read numerous updates from Buster Olney about Lee to New York. I continued to turn to all sources and grabbed the remote. I turned on the television….

The first source my son checked for information was Twitter!

As a result of these two items, a few things have been running through my mind:
1. I have got to figure out how to use Twitter on a regular basis
2. If social media is helping accountants gain more business surely it can help nonprofits
3. Our future clients (for our accounting firm) and future (and some current) donors for nonprofits are using Twitter as a resource
4. While I like blogging, Facebook, and LinkedIn, I don’t find Twitter as convenient but I feel like it is something I need to be involved in.
5. Are nonprofits (and accounting firms) really missing out if they aren’t involved in social media?

I was then reminded of a forwarded article from my associate Liz Vibber about social media from the very practical and informative frogloop blog. It is a very balanced, objective look at the current value of social media and where your best efforts are spent with this communication method. One of the best points the article makes is that you build community and then use that existing community to spread your word in the online world. This is a great starting point for nonprofits that aren’t quite sure what to do about social media.

I note “current value” of social media. If today’s 20 year olds check Twitter first for up to date information, perhaps 5 to 10 years from now nonprofits will see a more significant percentage of their donations come as a result of their social media communications. Both accountants and nonprofits need to figure out the best way to make social media part of their lives. But we both need to take the time to figure out where and how that is best done.

The Data (and the Donations) are in the Details

I recently spoke with a wonderful group for a wonderful organization, the Association of Fund Raising Professionals at their Lehigh Valley conference. The presentation was “Where Can Your Limited Funding Dollars Have the Most Impact: Communicating to Your Funders the Power of Their Investment in Your Organization”.

A lengthy title, but it reminds nonprofits that their funders are indeed investors. Prior to making an investment, investors will look at the investment and make sure that it delivers a good return on their money at a level of risk that is acceptable to them. What information do your investors need to determine that their money will make the most impact in your organization?

First you need to figure out where your funds have the most impact. If you have several programs you need to look at each program separately. What are the direct costs related to that program? How many people can you serve? What amount of staff time is required to deliver your services? Can you use your staff time or your facilities or your resources in a more efficient manner to serve more people?

Once you have the financial information and the data, you need to figure out the best way to communicate that to donors and grantors. Different audiences will need different types of communication. One grantor may be interested in investing in your organization because they can see that if they provide money for staff training, the staff will be able to serve 50 more people each week. Another donor may donate because you have explained that their donation of $500 will enable your organization to build a well that can bring water to 600 people every day. And another funder may appreciate your commitment to building a stable, healthy nonprofit that continually is a community resource and they are glad to add to your reserve fund because they can evidence of this stability in your financial statements.

Financial and data analysis will not only attract more donors, it will help you manage your nonprofit better. As the saying goes, “If you can measure it, you can manage it”

You Haven’t Lost Your Status Yet

If you are a small nonprofit under $25,000 and had not filed a 990 or the 990-N postcard with the IRS in the last three years by May 17, 2010 you were at risk for losing your status. However the IRS is willing to work with these small nonprofits, so go ahead and file, even if you did miss the deadline. Instructions to file and the IRS efforts to help the small nonprofits keep their status are on the IRS website in the charity section.


The impetus behind this provision is to clean up the IRS records. It is suspected that there are many nonprofits on the IRS listing that ceased doing business years ago. There is a good detailed article on this topic at Nonprofit Newswire (which is a great daily newswire service to subscribe to)



In the week prior to May 17 we looked up some area zip codes and contacted local nonprofits we knew, that were on the list in danger of losing their status. They were unaware of the IRS Form 990-N. The most common reason was that the Board Members had changed and it is likely that any IRS notifications went to a former Board Member. See this link to look up your area

Protecting your Organization from Fraud

Last week’s headlines were all too familiar. The Treasurers of two local youth basketball leagues had stolen about $159,000 from the leagues. The thefts occurred over several years. In both cases, the Treasurers simply wrote checks out of the league accounts to themselves. This story has been repeated too many times over the last several years—in youth sports organizations, Home and School Associations, churches, fire companies, nonprofits, and businesses. The theme is the same—a trusted long time employee or volunteer steals money from the organization by writing checks to their own accounts or for personal expenses.

How could this have been prevented? The rule of two. In any organization, regardless of size or whether it is staffed by volunteers or employees, at least two nonrelated people should be involved in every transaction. What does this look like?

1. If someone writes and signs checks, then someone else receives the bank statements and reviews the canceled checks. Any unusual payee names are questioned. This step alone could have prevented numerous thefts.

2. For special events when cash is collected, there are two volunteers collecting and counting the money. They sign off on the total amount prior to the deposit.

There are numerous other controls but these two alone could reduce the amount and frequency of thefts significantly.

More Health Care Premium updates from the IRS

Under the Affordable Care Act, health coverage provided for an employee’s children under the age of 27 is now tax free to the employee effective March 30, 2010. If you have a cafeteria plan or a Section 125 plan, employees can make pre-tax contributions to this plan to pay for this benefit. See more information on this topic at the IRS website.

And the 65% subsidy on COBRA health insurance premiums has been extended past March 31, 2010. This subsidy covers employees who are involuntarily separated from their jobs between September 1, 2008 to May 31, 2010 and lasts for a period of 15 months. Eligible workers pay 35% of their premium to their former employers and the employer applies for a credit of 65% on their payroll tax return. See more information on this topic at the IRS website.

Tweeting for Your Nonprofit-Seven things to consider before starting

another great article from fellow strategic consultant Liz Vibber

Having just attended a Roundtable discussion on the basics of using Twitter for nonprofit development directors, I was struck by the potential this medium has. Of course, on the flipside, I was also struck by what a huge time drain Social Media can be—with no benefit—if you don’t invest the time in creating a following for your messages.

So where does this leave one who is interested in using this medium? Here are my Seven Things to Consider:
1. First things first-create a policy. If you’re Tweeting on your own, this probably isn’t necessary-but if you’re a large organization and you are encouraging your staff to Tweet on your behalf, consider a policy that set Tweeting guidelines on number of Tweets and content.
2. Make sure you have something useful to say. Tweeting for the sake of Tweeting gets old very fast. Most people aren’t interested in knowing that the Barista of your favorite coffee shop make your latte ‘fat’ not ‘skinny’
3. Know how much is enough. I follow one guy who must Tweet 8-10 times a day…I keep following him because every once in a while he has a nice piece that is interesting. But I’m still annoyed because he clogs up my Twitter and I may soon ‘unfollow’ him as a result.
4. Know what is not enough. If you’re going to the trouble of creating a Twitter, securing a following and finding thoughtful things to Tweet, don’t lag for weeks at a time. Try to Tweet at least once a week.
5. Manage Your Tweets. Use a tool such as TweetDeck or HootSuite to manage your Followees and Followers. These tools will also allow you to track Tweets with key words or know when someone mentions or re-Tweets you. I was especially pleased to get a Thank you from a nonprofit group who recognized that I re-Tweeted them.
6. Create a following. You have to let people know you’re out there. Thoughtfully include the ‘follow me’ button on your e-mails and organization’s website.
7. Twitter is but 1. There are many social media tools out there, and more new ones coming soon. Consider the other tools at your disposal-FaceBook, Linked-In, etc. Another advantage of TweetDeck and HootSuite is they will carry your Tweets to these other mediums so you don’t have to post the same thing in multiple places.

With these things in mind, go ahead and get started. But remember, there is so much to learn everyday so keep reading and looking for opportunities to expand your knowledge base.

New Hire Credit Form Now Available

The IRS has just released Form W-11 that will help employers claim the special payroll tax exemption that relates to certain employees hired in 2010. The employees must have been unemployed 60 days prior to the hire date. The employer will then take the credit on their quarterly payroll tax returns starting with the 2nd quarter of 2010.

The credit is equal to the employers’ share of Social Security tax or 6.2% of the payroll. This equates to a credit of $3,100 on a $50,000 salary. The employees share is still withheld from their pay and remitted and this will not have an effect on the employee’s future Social Security benefits.

Additionally if the employer retains the employee for at least a year they can claim an additional credit of $1,000 on their 2011 income tax returns. Note—exempt organizations will not qualify for the $1,000 credit.

A new hire will only qualify if:

• They were unemployed for 60 days prior to the hire date


• The workers they are replacing left voluntarily or for cause or this is to fill a new position


• They are not family members or relatives.

This tax benefit has an immediate cash flow effect as the tax on these wages is not remitted to the IRS with your payroll taxes. Also there are no minimum hours that the new employee must work.

For more information see the IRS website.

Consulting Vs. Facilitating: Clarifying Your Expectations is Key

Looking to engage a consultant to help with your strategic plan but not sure what to expect? BCCNM Strategic Consultant, Liz Vibber, outlines the difference between a consultant and a facilitator in this article.

Capacity building is defined as the "process of developing and strengthening the skills, instincts, abilities, processes and resources that organizations and communities need to survive, adapt, and thrive in the fast-changing world."
Ann PhilbinCapacity Building in Social Justice OrganizationsFord Foundation, 1996

Capacity Building is taking center stage these days among funders who are looking for nonprofits to be organizationally effective prior to funding them. As a result, many organizations are looking closely at how to be front and center on this stage. Enter planning. Strategic planning, financial planning, succession planning—all have their place in a strong, well governed organization, so the question often isn’t should we plan, but rather how should we plan?.

Two options available to nonprofits are to use either an outside consultant or a facilitator as part of your planning process. Either option should provide a measurable benefit to your planning session; your choice will depend on what you are expecting their role to be in the planning process.

Consultant
When you hire a consultant, you are in essence looking for an analysis of your situation by an expert in the field. You are paying for and receiving the benefit of their knowledge and experience in the form of recommendations and suggested actions.

According to Peter Block in his book Flawless Consulting, the primary goal of consulting is some kind of change. This change comes in two varieties:
1. Creating change in an organization of a structure, policy or procedural nature.
2. People in an organization learning something new so that they may manage themselves differently.

The question your consultant should be asking is How can I make my client more successful?.1 The consultant will be involved in the process, will make comments, suggestions and provide feedback as part of the planning process. Once the planning is complete, the consultant’s involvement may then continue into the implementation of the change for the organization.

Facilitator
When you make the decision to utilize a facilitator in your planning session, their participation will be very different. Your group will provide the expertise (resource group) and the facilitator acts as your guide to keep the process moving along. You are benefiting from the facilitator’s understanding of the planning process and her ability to assess the dynamics of the group to help the group achieve its desired results.

In other words, your facilitator will be present at the planning session, but it will be the group itself that will discuss the issue and the possible solutions. The facilitator will ensure that the group stays focused and productive, that one or two members of the group doesn’t dominate the discussion while others are silent, manage conflict, as well as model neutrality. A facilitator will help the group illustrate their future state and note the action steps; she can also act as the scribe, taking notes and organizing them so that the group is free to focus on issue and content.

The facilitator’s involvement ends when planning is complete, they do not participate in the implementation of the change; however, they may can be engaged as a ‘coach’ to continue to monitor the group’s progress on action steps.
The following chart provides a clear illustration of the differences between consulting and facilitation.

Consulting Vs. Facilitation 1

Consulting

• Analysis by an expert
• Not neutral
• The consultant offers content in the form of expert advice
• May be involved in the implementation
• Recommendations for action by consultant

Facilitation

• Analysis by clients
• Neutral
• The facilitator invites an experience and exchange in the form of process, engaging the group to stay focused and on point. The faciliatior will not engage as a reosurce expert.
• Client responsible for the implementation
• Reommendations for action by client

1 (source: I. Bens, p. 18-Advanced Facilitation)

Often the professional you choose will not only be a skilled consultant but also as a skilled facilitator. By clearly explaining your organization’s expectations for your planning session, they will be able to assist you with the choice about what is best for your group.

For more information on the information contained in this article, or for consulting or facilitation, please contact the Bucks County Center for Nonprofit Management, 215-343-2727.

New Healthcare Tax Credit for Small Nonprofit Organizations

The health care reform legislation includes a special tax credit for small businesses and small tax exempt organizations. Eligibility is determined as follows:
Must cover at least 50 percent of workers based on the single rate
Must have less than 25 full time equivalent workers
Pay average annual wages below $50,000

The credit is worth up to 35% of the health care premium costs for 2010. It phases out gradually for organizations with average wages between $25,000 and $50,000 and between 10 and 25 full time equivalent workers.

Details are still pending as to how tax exempt organizations can claim the credit. For more information see the IRS website.

10 Simple Things You Can Implement Now to Strengthen Your Nonprofit Board

The Spring issue of PANO's (PA Association of Nonprofit Organizations) features this article by Elizabeth Vibber, MS, Strategic Consultant for Bucks County Center for Nonprofit Management

One of the most frequent concerns we hear from organizations is how to keep board members engaged and motivated. We have created a list of some very simple things you can do to energize your organization’s board meetings:

1. Have your Mission and Vision statement on every board Agenda.
A subtle reminder to all board members that the mission is central to all board discussions and decisions.

2. Start each meeting with a Member Minute where each board member spends a minute explaining what they have done since the last meeting to serve the organization: secured a donation, made an important contact, read an article, etc.
This exercise should only take about 15 minutes of your meeting, but will be well worth it by encouraging your board members to think about and promote your organization outside of the monthly meetings. Board members will learn from one another-and your organization will be the beneficiary.

3. Introduce a By-law amendment that limits the number of other boards your members can serve on.
I am always amazed to hear of individuals who sit on 2 or 3, even 4 Boards. Where do they find the time? How are they able to balance the tasks of your organization with their other commitments? Now if you have a Board Contract which clearly states the expectations for sitting on your board, and you hold your members accountable, this could be a non-issue. For other organizations this may be the nudge the ‘over-committed members on your board needs to move along. At the very least, it should make for an interesting discussion.

4. Create a 'Face page" for each of your board members in your board manual.
Although boards meet on a regular basis, they don’t always get to know one another on a deeper level. A ‘Face page’ or bio page would include more personal information for board members such as hobbies or previous work/board experience. This is another way to build camaraderie on your board, not to mention discovering the hidden talents of your board. These Face Pages belong in the board manual and aren’t for public viewing. Don’t forget the picture!

5. Use a DA or Devil's Advocate card at each board meeting.
Each meeting someone different is given the DA card and their job is to play the devil's advocate on issues before the board. This straightforward yet powerful tool can be used to avoid the pitfalls of those boards inclined to ‘group think’; to correct a flawed decision making process; or simply to give a voice to members of the board who may be less inclined to share an opposing view point.

6. Create a FAQ for new board members created by current board members.
Remember all those questions you had but were afraid to when you first joined the board? Or maybe you did ask them and you saw in the eyes of your fellow members that they realize they didn’t know the answer either. This is also a terrific tool to use when recruiting new members as it provides a glimpse into the culture of your organization!

7. Make sure all of your board members have business cards with the organization's mission statement on the back.
What better way to get your cause into the hands of your board member’s friends & acquaintances?!

8. Decrease the number of your committees and increase the number of your task groups.
Task groups are established to accomplish a specific objective—within a specified time frame. Once the objective is completed, the group dismantles. Task groups give boards greater flexibility, engage members more efficiently and allows issues to be tackled immediately.

9. Create a strategic plan dashboard tracking 3-5 critical indicators to the health of the organization and update monthly showing a 12 month trend for each.
Dashboards are designed to provide a simple visual overview of the health and direction of any organization that has financial statements, i.e. balance sheets, income statements (also known as profit and loss, or operating statement) and cash flow statements. These graphic images give the non-financial persons in your organization a better understanding of the finances..

10. Ask each board member to think of the single most important issue that they feel the organization should focus on in the next year and have them write it on an index card. Shuffle the cards and read them out loud to begin a strategic discussion.
This last tip is pretty self-explanatory and a great way to begin the annual review of your strategic plan.

IRS Filing Costs to Form an Nonprofit to Decrease

Currently if you wish to form a nonprofit you are looking at a filing fee of $850 from the IRS, not to mention incorporation fees, legal fees, and accounting fees to assist you with completing the many questions on the Form 1023. If all goes well, you receive your approval. If not, you may receive correspondence from the IRS asking for more details and information. It appears this process will improve in 2010.

Later in 2010, the IRS will be coming out with Cyber Assistant. Applicants who use this online system will only have to pay an application fee of $200. The online application process will probably insure that the form is completed properly and increase the likelihood of approval the first time around. It should also reduce the need for accounting or legal assistance in completing the application.

Direct from the IRS site....

Cyber Assistant, a web-based software program designed to help organizations prepare a complete and accurate Form 1023 application, will become available during 2010. Once the IRS announces the availability of Cyber Assistant, the user fees will change again. 1. $200 for organizations using Cyber Assistant (regardless of size) to prepare their Form 1023, or 2. $850 for all other organizations not using Cyber Assistant (regardless of size) to prepare their Form 1023. IRS will announce when Cyber Assistant is available and the effective date of the user fee change. Sign up for the Exempt Organization (EO) Update, EO’s subscription newsletter, at www.irs.gov/charities, to automatically receive an alert that Cyber Assistant is available.

Devil's Advocate

This article was written by Liz Vibber, my associate and strategic consultant with Bucks County Center for Nonprofit Management. It first appeared in Blue Avacado about a year ago. It is a great technique to help your Board make better decisions.

Wouldn’t it be wonderful if all Boards had 20/20 hindsight to assist them in making decisions? If they could clearly see the obstacles a project will encounter in time to make the necessary adjustments?

Absent a few sprinkles of fairy dust, using the Devil’s Advocate technique might assist boards in identifying such obstacles. A Devil’s Advocate is someone who takes an opposing view to test an idea or project the board is considering. Rather than simply participating in a board discussion, the DA’s job is to purposely ask questions and argue against the idea. By responding to these questions, the board is forced into healthy debate as they consider arguments they might never have thought of had it not been someone’s (the Devil’s Advocate’s) specific task to try and challenge the board’s thinking.

Your board can use this technique during every meeting or only when important issues are up for discussion. After explaining the technique, randomly select a board member and place an index card marked DA or Devil’s Advocate in front of them where all can see it. Throughout the meeting, this person should be asking questions to test the soundness of the decisions the organization is considering. A couple of caveats-holding the DA card does not give this board member the ability to block or hold decisions from a vote, nor should the board hold it against the designated DA for asking tough questions. You can’t be annoyed with someone whose ‘job’ it is to question the wisdom of an idea—can you?


Example-
For example, a small suburban nonprofit organization was considering expanding their adult program services to include children. This 25 year old agency had successfully been serving adults in accordance with its mission, but lately, at the insistence of one very vocal board member, was wondering if it could better serve the community by expanding its offerings to children. By using the DA card over the course of several meeting discussions, the agency realized that the additional licensure, insurance, and educational knowledge that would be necessary to be obtained in order to offer youth services outweighed the tangible benefit. Using this technique they were able to ask and answer a series of tough questions which ultimately clarified that their goal was ‘increased’ service delivery, not necessarily ‘expanded’ service delivery. The agency was then able to accomplish this by instituting transportation services to a neighboring bus depot. This solution increased their client base by 7% in the first year and their profits by 4% (after factoring in the additional costs). This provided the agency with growth that was acceptable to all, with the added benefit of having a wider geographic service area without the costs of ramping up new programs.

Excited by using the DA technique, board members went out of their way to prepare thoughtful and intelligent arguments resulting in healthy debate. After the first meeting using this technique, the board began to ‘pass’ the DA card around the table giving more individuals the opportunity to offer challenges to the proposal on the table—all under the cloak of security the DA card offered.

The Realities of the New Form 990

This past Wednesday we had our roundtable on the new Form 990. Most of our attendees were looking at filing the Form 990 for the first time this year. Some of the items we talked about:
• Making sure that the mission description on page 1 and the program descriptions on page 2 fit within the space provided so that the reader of the Form 990 can readily access that information and does not have to turn back to the Schedule O.
• Several of the participants noted that they received contributions from donors who found them on Guidestar, emphasizing the importance of putting your best foot forward with your Form 990
• Reviewing the necessary policies-document destruction, whistleblower, conflict of interest, Form 990 review procedures, compensation setting, gift policy
• Noting that key employees are those with significant management responsibility who also receive more than $150,000
• Compensation reporting also health benefits, the deferral of income-including pension and other retirement pay
• Discussed functional expenses and the importance of reviewing your allocations
• The effect of contributions from special events on the special event income

A few of the nonprofits who do not have to file the new 990 yet, said that they would probably file it instead of the Form 990-EZ because they wanted the extended information available to their stakeholders. Those who had already filed the new form 990 agreed. They noted that even though it was a lot of work to put together, they wanted the information presented.

Board Member Review of Form 990

In preparation for our Roundtable Discussion this Wednesday about the IRS Form 990 I have been thinking about some common issues from this past year related to the form.

One of the questions on the IRS Form 990 is did the Board review the 990 before it was issued. Your Board may be wondering what they should do in that review process. While some of the areas may vary depending on your organization, the following list is a good starting point.

1. Review the statement of program service accomplishments. This is where your strongest story is told. Do you include service statistics and outcome measures?
2. Review the functional expense schedule looking at the % of program expenses compared to total
3. Scan questions on pp. 3, 4, and 5-do you have all the necessary policies? Review the discussion of the compensation policy in Schedule O
4. Review officers, hours per week, and related compensation
5. Read Schedule O. Is everything explained the way you want it?
6. Schedule G-for IRS purposes, these contributions related to a special event, are in the contribution section and not included with the special event revenue—so your event shows a “loss” on Schedule G
7. Review independent contractors as applicable
8. Look at Schedule L and Schedule R if these are applicable. The IRS is concerned about situations where someone with influence over the organization would be paid amounts that exceed the value of the services rendered.

Pursue Individual Donors

We’ve been looking at individual donations and Haiti. What about what we see in our local area? We work with over 100 nonprofit agencies and prepare over 700 tax returns for individuals. While it is a small population, observations can still be made:

• You don’t have to write a grant application to ask individual donors for money
• Individual donations are not normally restricted for specific purposes so you can use individual donations (in most cases) for general operating monies
• Individuals will typically give to the same charities year after year and most tend to be life long donors
• A nonprofit with about a $1 million budget with a good planned giving program in place for 10 or more years receives on average $50,000 annually. This has been our experience. However, I do not know the national statistics on this.
• As a percentage of their income, lower income individuals give more than higher income individuals. While we note this at our CPA firm, it actually mirrors the same documented national statistics
• Charities that are less dependent on government money and foundation money are more stable, survive the rough times better, and have more people resources to devote to their mission because they don’t have to file mountains of government paperwork or find new foundations to support them every few years.
• A surprising number of very nice, caring people don’t give--at all.
• When individuals talk about charities that they have had some relationship with, they say “If they asked me to give money, I would”
  

Haiti and Individual Giving – and how it relates to you

I still continue to be amazed and moved by the generosity of so many in reaching out to Haiti and to reflect on the value of individual donors. We as nonprofits work so hard applying for grants when we should be putting that effort towards reaching individuals. In my last post I listed some important truths about giving illustrated by the outpouring for Haiti. What do these mean to your nonprofit?

• Communicate the need
• Communicate why you are effective at meeting that need—build your donor’s trust
• Pursue individual donors
• Make it easy. Make sure donors can give securely and easily through your website
• Look into a text campaign—a good fit for certain events or causes
• Invite people to participate at various levels of giving
• Repeat---Pursue individual donors. Put more energy into this than pursuing corporate donors, foundations, and government grantors.
  

A client recently had their first annual appeal. They raised $12,000 increasing their total contributions by 5%. Not a bad start for their first year. Most of their contributions had historically come from foundations and corporate funders. Tomorrow the nonprofit I serve with is going to look into getting the “donate now” button on our website and we are working on a grant application. I’ll keep you posted on the outcome of each.

Haiti and the Message about Individual Donors

As of January 21, over $305 million had been raised just eight days after the earthquake struck Haiti. This CNNMoney article goes on to discuss where the money came from and how it was raised.

The outpouring of donations for Haiti, and before Haiti, for the victims of Hurricane Katrina and the tsunami illustrate a number of important truths about giving.

• People will give and give generously to a demonstrated need-they will give to hurting people in the US and they will give to people in need around the world.
• People give to organizations they trust
• The potential for individual giving is greatly untapped-for such a large amount to come in, in such a short period of time shows that people have money to give. Some people may have given sacrificially (another lesson for another time) but most probably will not miss the donated funds.
• People give when they process is easy. It is estimated that over half of the donations have been online contributions. The American Red Cross reports over 60% has been received online and 15-20% through its text campaign. That means that only 20-25% of the funds have come through the mail.
• A little goes a long way-by January 16, 700,000 people responded to the American Red Cross text campaign with donations of $10 each
• Although the giving includes corporate gifts the American Red Cross noted that about 15% of the donations are from corporate gifts—meaning 85% are from individuals. Individuals have historically represented the largest percentage of givers.
  

Yes, the circumstances noted are catastrophic, and have received a tremendous amount of media coverage, and the need is immediate. But then again, you aren’t trying to raise $305 million in eight days.

More Than Great Cookies (in honor of Girl Scout Cookie Month)

What are we best in the world at? This was the key question that the Girl Scouts of the USA asked as they began their transformation several years ago. www.girlscouts.org. It’s a great question that Organizations should ask periodically to refocus on their core mission.

Over time, nonprofits can find that they have drifted from their mission. Whether it’s following the greatest need or chasing the greatest dollars, an Organization can realize that they aren’t exactly doing what they initially set out to do. This is not necessarily a negative. If the needs of the community have changed and the Organization has changed to meet those needs, the nonprofit is relevant to its community. However if the mission changed in the process of pursuing funding, the nonprofit may be off track. Depending on the cause of the mission drift the Organization may need to restate its mission to better communicate what they do or get back on track.

The luncheon speakers at the BoardSource Leadership Forum were Kathy Cloninger, the CEO of Girl Scouts of the USA and Connie Lindsey, the National President of the Girl Scouts of the USA. In their own words they shared the process of “taking a deep look at the brutal truths facing the movement”. It was a challenging process but they were committed to complete transparency and steadfast in making the changes happen. Their goals were twofold: 1-to have a relevant purpose; and 2-to create a simple, faster business system. The process is described on their site.

The answer to the question? Girl Scouts creates leaders. 75% of women in leadership positions were once Girl Scouts. In the end the Girl Scouts emerged with some significant structural changes and a new definition of Girl Scouting—“Girl Scouting builds girls of courage, confidence, and character, who make the world a better place.”

What are you best in the world at?