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Fall, 2006
In this issue: The Importance of Proper Substantiation (And Why You Should Care) In light of ongoing legislation regarding charitable donations, it is important for recipient organizations to provide donors with the required substantiation Pension Act Tightens Charitable Deduction Rules Tucked into the Pension Protection Act of 2006 signed into law this fall was a package of charitable giving incentives and safeguards. Mission Shift: Making Change Work For Your Nonprofit Serving your constituency — whether endangered species or elderly Hispanics — is your organization’s raison d’être … your mission. New Accounting Standards Could Affect Your Year-end Audit Recently released guidelines from the Auditing Standards Board (ASB) may impact the year-end audits of nonprofit organizations, requiring more extensive documentation and investigation by the auditor. Statement on Auditing Standards (SAS) numbers 101 and 103, in particular, will be effective for audits of financial statements for periods beginning on or after December 15, 2006. Nonprofit Notes
Summer, 2006
In this issue: New Roth Contribution Program Option Adds a Twist As of January 1, 2006, nonprofits that offer their employees either a 401(k) or 403(b) plan will be able to offer a new type of retirement account — a "qualified Roth contribution program" — that allows Roth Individual Retirement Account-style contributions to a 401(k) or 403(b) plan without the restrictions that limit participation in a Roth IRA. Dashboard Indicators: Are You Sputtering Or Speeding? Imagine this: Instead of wading through page after page of mind-numbing reports at your next board meeting, your board members are handed an easy-to-read document that tells them everything they need to know about your organization’s progress. Nonprofit Notes
Spring, 2006
In this issue: The Basics of Functional Expense Allocation A place for everything and everything in its place. IRS Releases Revised Form 990 for ’05 Filers Just in time for tax season, the IRS has revised Form 990, Return of Organization Exempt from Income Tax, which will impact nonprofits filing for 2005. The revisions include fairly significant changes to Form 990, Schedule A and the Instructions (Form 990 grew from six to eight pages). Nonprofit Notes And the Survey Says The results of The NonProfit Times’ 2006 Salary Survey are in, and they are decidedly mixed.
Winter, 2006
In this issue: Internal Fraud: Why It Happens (And How To Stop It) In the last issue of Nonprofit Insights, we looked at some fraudulent activities (intentional or unintentional) committed by nonprofits. In this issue, we’ll look at some common types of fraud perpetrated against nonprofits. Record Retention: Know What To Hold, When To Fold A firestorm erupted this past June when it was reported that the ACLU had improperly shredded documents. The controversy eventually resulted in the resignation of the ACLU’s chief archivist. The controversy was sparked when the ACLU moved from centralized document shredding to placing shredders throughout its offices several years ago. To be fair, some of the shredding appears to have been motivated by concern over Social Security numbers, salary information, and other personal information falling into the wrong hands. But the controversy does serve to illustrate the problems facing all non-profits when it comes to record-retention policies: Which records do you keep — and for how long? Is Your Organization Ready For An Endowment? With funding shrinking and demand for services growing, nonprofits are under new pressure to find new income sources. As a result, many are looking at endowments Nonprofit Notes
Fall 2005
In this issue: How Nonprofits Get In Trouble When it comes to fraud at a nonprofit, most of us tend to think in terms of fraud committed against the organization (purchasing and disbursement schemes, cash receipt and accounts receivable scams, etc.). Sleeper Legislative Issue: Board Compensation The Senate Finance Committee is readying legislation that will, if enacted, impose a battery of new rules and penalties on charities, other tax-exempt organizations and those who assist them. The buzzwords underlying and guiding this legislative frenzy are: accountability, transparency and governance. “Help, We Need An Audit (Or Do We?)” It’s an all-too-common situation at nonprofits: Your new executive director doesn’t like the accounting software his predecessor used and wants to “check the books” before converting to a new system. Or maybe it’s a potential major donor who wants assurance that your finances are in order before making a gift. Somebody shouts, “Help, we need an audit!” Are You Ripe for the Picking? Strong Internal Controls Can Help When it comes to fraud perpetrated against an organization, many nonprofits are ripe for the picking. Fraud seems to occur most frequently at midsize or small charities, where adequate financial controls are often non-existent. Job duties such as opening the mail, logging donations and balancing the checkbook are concentrated among only a few people. And funds are tight, discouraging employers from performing background checks on prospective job candidates. Nonprofit Notes
Summer 2005
In this issue: Board Lifecycle: Where Are You? Management literature has long recognized that organizations, like other living things, experience distinct phases of growth and/or decline. The IRS Commissioner And Nonprofit Organizations Many in the nonprofit community predict that a massive piece of legislation regarding tax-exempt organizations and charitable giving is heading our way. Others dismiss the thought, saying that not much will actually happen Succession Planning: Tomorrow May Come Sooner Than You Think Only when there is not a plan does leadership transition pose a serious threat to a nonprofit organization. Unfortunately, succession planning usually is near the bottom of a long list of other board obligations and priorities — if it makes the list at all. Accounting For Affiliates As an idea, it’s not a bad one: form an affiliate organization to raise funds or even hold assets for your nonprofit. After all, private nonprofits that are affiliates of government universities, museums, hospitals and the like do it all the time (often calling themselves something along the lines of “The University Foundation” or “Friends of the Museum”).
Spring 2005
In this issue: Are You In Compliance? Review Your Retirement Plan Now To Avoid Problems Later Here’s some heartening news: Employees at nonprofits are more likely to have pensions than their for-profit counterparts. New Substantiation Rules Required for Contributions of Intellectual Property One of the last pre-election acts by the 108th Congress was completion of its work on the American Jobs Creation Act of 2004 (Pub. L. 108-357). The President signed the measure into law on October 22. The Act contains several provisions directly pertaining to the law of tax-exempt organizations and charitable giving. Best Practices Under Sarbanes-Oxley: Lessons Nonprofits Can Learn While the Sarbanes-Oxley Act of 2002 applies only to publicly traded companies, it does set a standard of internal controls that all companies — including non-profits — could do well to follow. Form 990 Letter: Not All IRS Letters Are Cause For Alarm For most of us, a letter from the Internal Revenue Service can be a little alarming. But many nonprofits have been receiving correspondence from the IRS recently that is decidedly non-threatening.
Winter 2005
In this issue: Life Post Sarbanes-Oxley: What Your Nonprofit Can Learn While most provisions of the sweeping Sarbanes-Oxley Act (SOX) don’t apply to non-profits, many nonprofit organizations are taking steps to voluntarily comply with some critical areas of the Act’s mandates. Should yours? And, if so, how far should you take it? New Substantiation Rules Required for Contributions of Motor Vehicles, Boats and Airplanes One of the last pre-election acts by the 108th Congress was completion of its work on the American Jobs Creation Act of 2004 (Pub. L. 108-357). The President signed the measure into law on October 22. The Act contains several provisions directly pertaining to the law of tax-exempt organizations and charitable giving. Realizing the PR Potential of Your Organization’s Form 990 In this increasingly cynical age, donors have come to feel that donating requires more than lots of heart—but also lots of facts. They want to know where their money is going and how it is being administered. And your donors and prospects are being bombarded with news articles and advice from consumer advocates urging them to “do their research first” before donating to a charity. The User/Giver Ratio: How To Know If You’re Satisfying Your Constituency Serving your constituency. It’s your organization’s raison d’être … your mission. But how do you truly know if what you’re doing is meeting their needs?
Fall 2004
In this issue: Operating Reserves: Act Now - Before the Rain Comes Rainy days - they're inevitable. A major funding source dries up…an Executive Director quits…or, heaven forbid, a fire or other disaster strikes. Court of Appeals Issues Gift Substantiation Opinion The U.S. Court of Appeals for the Ninth Circuit has issued a troublesome opinion, upholding the decision by the Tax Court that payments made to a charitable organization are not deductible as charitable gifts, because the substantiation requirements were not met, in that there was an undisclosed return benefit based on donors' expectations (Addis v. Commissioner). Lessons From Sarbanes-Oxley: What Can Your Organization Learn? Sarbanes-Oxley, the landmark financial accountability and transparency legislation for corporate boards, does not specifically target the nonprofit community. Even so, because charities count on public goodwill, many experts predict that similar laws will eventually be applied to nonprofits, too
Summer 2004
In this issue: Keep 'Em Sharp: Hone Your Board With Regular Training We've all heard the adage about the woodcutter too busy to pause and sharpen his axe (he wound up beating trees with a dull piece of iron!). What Should Your Minutes Contain? At their most basic, minutes are a legal written record of what occurred during a meeting — an official record of board action. But here’s where all similarities end. Some boards go to great lengths to create a sprawling verbatim minutes document. Others subsist on hastily scrawled notes on a legal pad. Who’s right and who’s wrong? Are (Some) Tax Exemptions On The Line? Recent developments lead to the conclusion that the House Ways and Means Committee may review the appropriateness of federal income tax exemptions, at least in some areas. This could have enormous implications for the entire exempt organizations community. As Committee Chairman Bill Thomas ominously remarked earlier this year, the elimination of the exempt status of nonprofit hospitals and other institutions could create an “enormous area of potential revenue.” A-133 Update: It's Not Just For the Auditors Any More Many nonprofits mistakenly assume that the provisions of the Office of Management and Budget's (OMB) Circular A-133 are "for the auditors." Not true. .
Spring 2004
In this issue: How To Appeal to Today's Engaged Giver It's a page straight out of the dusty old book of nonprofit legend: The old guy on his deathbed leaving his estate to his foundation. Do you have "Sustainers" lurking in your files? They're out there. Lurking somewhere in your database is a wonderful group of folks willing to pledge money on an open-ended, regular basis. They're called "sustainers," and they have the potential to provide your organization with a predictable source of income with which to plan, budget and weather tough economic times. But first, you've got to ask. Rev Up Your Board by Recruiting Strategically Is your board of directors sputtering along on empty? Sorting Out the New Political Activities Requirements In the face of an election year, the IRS has issued two significant (and lengthy) revenue rulings pertaining to political activities by tax-exempt organizations. One provides guidance for determining when expenditures by exempt organizations for issue advertising are taxable as political expenditures pursuant to the political organizations rules (Rev. Rul. 2004-6). The other offers clarification of the reporting and disclosure requirements for exempt political organizations (Rev. Rul. 2003-49).
Winter 2004
In this issue: Board Selection Process Critical for Not-for-Profits The board of directors plays an integral role in a not-for-profit organization’s success. Perhaps nothing is as critical to a board’s performance as its composition. By looking for certain traits in individual members, not-for-profits can increase the likelihood of effective governance Private Foundation Payout Controversy: Larger Implications of the Dispute The House of Representatives, on Sept. 17, passed the Charitable Giving Act of 2003. The most controversial of the many proposals in this legislation to change and add to the law of tax-exempt organizations is in the House bill: the rules defining qualifying distributions for grant-making private foundations would be altered, by excluding certain administrative expenses from qualifying for the payout. Fighting Employee Fraud From Within Experts estimate that employee fraud, ranging from minor pilferage to misappropriation and fraudulent financial reporting, cost U.S. organizations about $600 billion in 2002, or $4,500 per employee. Small organizations with less than 100 employees, including many nonprofits, are most vulnerable.
Fall, 2003
In this issue: The Sarbannes-Oxley Act: What it means for Nonprofits The Sarbannes-Oxley act applies to for profit publicly traded companies. But the "trickle down" effect has implications for nonprofits. Picking the Right Accounting Software There are many possible choices of accounting software. Some are designed especially for Nonprofits. But how do you know which one is right for your organization? GAO Issues revised Accounting Standards The Government Accounting Office issues accounting standards often known as the "Yellow Book." Recently, significant changes have been made.
Summer, 2003
In this issue: Investment Policies Provide Steady Hand in Uncertain Times Many not-for-profits are finding the need for a strong investment policy more pressing than ever. In the midst of erratic financial markets and far-reaching economic uncertainty, an investment policy can bring the discipline necessary to pursue sound investments and resist short-term temptations. IRS Takes Dim View of Supporting Organizations By Bruce R. Hopkins One of the principal contemporary concerns of tax-exempt organizations is the reasonableness of compensation they pay to employees and consultants. Although the multi-factor test for determining compensation has come under fire recently by the federal courts, it continues to be the standard by which the compensation paid by tax-exempt organizations is scrutinized. Internet Resources These Web sites provide valuable information for not-for-profit managers. Handle with Care: Using Volunteers Effectively Volunteers can be among an organization’s most valuable assets, especially at a time when many not-for-profits are being forced to tighten their belts. But volunteers need to be properly managed to derive the greatest benefit from their experiences, both for them and for the organization. Communication With Volunteers Is a Two-Way Street Volunteers need information to be able to provide valuable insights and fresh perspectives. Organizations should keep them informed of organizational and staff changes, new services, and pending issues, both internal and external.
Spring, 2003
In this issue: "Making Your Board Meetings Count" Nonprofits can take several measures to increase the effectiveness of their board meetings. Board members should, for example, receive packets of information prior to the meeting so they have an opportunity to review them. Agendas should be prepared in advance, which includes setting timetables for discussing each item. And staff can send board members e-mail reminders of their assignments from the meetings. "IRS Takes Dim View of Supporting Organizations" Some Section 501(c)(3) organizations are classified as public charities by virtue of being a "supporting organization" of another public charity or charities. The Internal Revenue Service, however, is not fond of supporting organizations, sometimes going to great lengths to thwart their use. "Outsourcing Saves the Day for Many Not-for-Profits" Faced with shrinking revenues, ever-tightening resources, and mounting demands from their boards, more and more not-for-profit organizations are turning to outsourcing to stretch the dollars in their operating budgets. "Internet Resources" Selected Internet resources for nonprofit organizations
Winter, 2003
In this issue: "Charitable Remainder Trusts Can Enhance Your Planned Giving Program" "Corporate Responsibility and Tax Exempt Organizations" "New GAO Amendment Strengthens Auditor Independence Standards" "Internet Resources" Selected Internet resources for nonprofit organizations