Articles

88% of nonprofits involved in a merger felt that their organization was better off post merger in terms of achieving organizational goals and increasing impact.

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In its Tax Exempt and Government Entities FY 2017 Work Plan, the IRS reported on the nearly 5,000 examinations of exempt organizations it conducted in the 2016 fiscal year.

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With baby boomers — the largest and wealthiest generation in U.S. history — expected to transfer trillions of dollars worth of assets in the next few decades, this could be the right time to launch an endowment. This article explains the two main types of endowments, describes the pros and cons, and addresses managing assets and spending restrictions. “Quasi” endowments also are discussed.

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Whether or not a nonprofit uses an independent auditor once a year, it can employ moves from an auditor’s playbook to get a better view of the organization’s revenue picture. This article discusses techniques such as pinpointing year-to-year trends and benchmarking to other nonprofits, which can be useful in planning a nonprofit’s short and long-term future.

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Every organization — whether for-profit or nonprofit — is at risk of falling victim to costly acts of fraud. Nonprofits, though, have some common characteristics that can make them particularly susceptible to such schemes. This article discusses organizational weak spots and advises on ways to combat risks by implementing some simple controls.

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Microsoft’s philanthropic arm has announced that it’ll donate $1 billion in cloud computing resources over the next three years to nonprofits and nongovernmental organizations worldwide.

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The FASB recently released its first update to the financial reporting rules for nonprofits since 1993. The new Accounting Standards Update (ASU) No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, will affect the financial statements of most nonprofits when it takes effect. This article explains the standard’s new net asset classes, how liquidity and available resources reporting has changed, and the new requirements for reporting expenses and investment return. How to present operating cash flows is also briefly discussed. A sidebar outlines the FASB’s goals for the new standard.

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Success for not-for-profits (NFPs), regardless of their type or size, is built on a firm foundation of fiscal accountability and governance. NFPs can access expertise in these areas – and in the process more successfully fulfill their strategic goals – by leveraging the knowledge and experience of audit committees.

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Has your organization outgrown its bylaws? Sometimes, as a nonprofit expands and matures, the guiding rules set when it was just a twinkle in its founders’ eyes need to be revisited and brought up to date. Revising your bylaws involves more than just altering the language of rarely visited documents. The process provides you with an opportunity to look closely at how your nonprofit is evolving and whether such developments are consistent with your original mission.

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The 2016 M+R Benchmarks Study reveals how rapidly the nonprofit universe is changing in the face of online fundraising, marketing, and advocacy efforts. Currently in its tenth year, the study’s goal is to look at how nonprofits and their supporters are behaving today to help them prepare for changes in the future.

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Recently established social welfare organizations must now notify the IRS that they are operating as tax-exempt organizations under Code Section 501(c)(4) of the tax law. The new
requirement was included as a provision in the Protecting Americans from Tax Hikes (PATH) Act of 2015.

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More and more nonprofits are joining forces to better serve their client populations and cut costs. But such relationships can come with complicated financial reporting obligations. Your organization’s reporting requirements will depend on the type of relationship you enter.

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Nonprofit organizations welcome gifts of cash. But what if a donor wants to give a noncash gift, such as real estate, appreciated stock, or a work of art? Some gifts may not be appropriate for your organization, while others may have hidden costs. Having a formal gift acceptance policy in place provides much-needed structure — …

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The U.S. Department of Labor (DOL) has issued a final rule updating white collar overtime regulations, increasing the exemption thresholds and extending overtime pay protections to over four million workers within the first year. How will the new rules affect not-for-profits?

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Attorney General Lisa Madigan warns Illinois charities of elaborate donation scam. Madigan’s office has been notified by several Illinois charities that were suspicious of a potential scam after engaging in lengthy and believable email conversations with a supposed donor. Luckily, the charities did not fall victim to the scam, but passed along information in an effort to warn others.

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The following are some recent tax-related developments of interest to nonprofit organizations. Donee reporting regulations. The IRS has withdrawn proposed regulations regarding the contemporaneous written acknowledgments taxpayers must have on hand to substantiate their charitable contributions of $250 or more. The regulations would have given organizations the option of reporting the information their donors require …

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The Protecting Americans from Tax Hikes (PATH) Act of 2015, signed into law late last year, restored and made permanent several federal income-tax provisions designed to encourage charitable giving.

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The Financial Accounting Standards Board (FASB) is working on a proposal that would make substantive changes to not-for-profit financial statement reporting.* The FASB’s objective is to improve net asset classification requirements and the information provided in the financial statements and notes about liquidity, financial performance, and cash flows. This initiative represents the first effort to update the fundamental reporting model for nonprofit entities in more than 20 years.

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To properly oversee and manage a nonprofit organization, its board members need to receive accurate and timely information about the organization’s finances. But which financial information will be most helpful, and how detailed should it be? There is no single best approach. Much depends on the makeup of the board. In many organizations, not every board member has the necessary financial expertise to decipher complex financial reports. At the same time, informed decision-making and planning require a good understanding of the organization’s financial situation.

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A recent study by the Stanford Graduate School of Business in collaboration with BoardSource and GuideStar found that although many nonprofit organizations devote significant efforts to measuring performance, nonprofit directors say the efforts are falling short.

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While nonprofit organizations have rebounded from the most crippling effects of the 2008 economic crisis, the recenty published State of the Nonprofit Sector Survey* shows many still have significant challenges ahead. For the seventh year in a row, a majority of the more than 5,000 organizations surveyed reported that people — particularly those in low-income communities — are going without needed services because nonprofits can’t meet the demand.

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Does your not-for-profit organization reimburse staff and volunteers for expenses they incur while conducting business or traveling on behalf of the organization? If so, you’ll want to have a clear written policy for paying or reimbursing those expenses.

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Serving on a nonprofit board entails many responsibilities. Board members are expected to advocate for the organization, make prudent decisions, ensure the organization complies with regulations, and plan for the future. Filling a vacant seat is an important board function. Because there will always be turnover, and there may be some degree of urgency at times, it’s wise to have a recruitment process in place to help you search more effectively and efficiently whenever the time comes.

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Nonprofit directors and officers often view their personal liability exposure as much lower than that of their for-profit counterparts. Consequently, many nonprofits carry no or inadequate personal liability insurance for directors and board members. In reality, claims naming nonprofit directors and officers are as widespread as those against for-profit corporations and can cost organizations hundreds of thousands of dollars or more.

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Accepting a corporate sponsorship to help fund one or a series of events or simply to provide ongoing support for your organization’s programs and operations can benefit both the organization and the corporation — if the sponsorship is arranged properly. In addition to the corporate sponsor’s financial support, your organization may receive in-kind services and/or product donations, along with increased media attention that can boost public support for your mission. For the corporation, the sponsorship offers public recognition of the business’ charitable activities, which may help it attract new customers and enhance its reputation.

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A recent report* suggests that retaining donors remains challenging for many organizations.

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How valuable are volunteers? The quantifiable answer is $22.55 per hour.* But that number doesn’t account for the intangibles, such as enthusiasm, creativity, and dedication, that volunteers may bring to the table.

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Tax-exempt organizations generally don’t have to pay any federal income tax. But an organization that has paid employees must collect payroll taxes and timely remit them to the IRS. As tempting as it may be to use those funds to relieve financial pressures, don’t do it.

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When it comes to executive compensation and benefits, the public expects charities to be transparent and accountable. The idea that organizations that receive public support would provide executives with exorbitant compensation packages does not sit well. Appropriately documenting the process for determining executive compensation is crucial to satisfying public and regulatory concerns regarding excessive compensation. Here are some steps to help minimize risk and avoid the potential problems associated with awarding excessive executive compensation packages:

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In February, the U.S. Bureau of Labor Statistics published data on volunteering in America.* According to the report, approximately one in four Americans (25.3%) volunteered between September 2013 and September 2014

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Organizations that are tax exempt under IRS Section 501(c)(3) vary significantly in size and mission. But they all have one thing in common. All must comply with federal tax laws, including the requirement to make certain documents available to the public upon request. If someone makes a request and your organization fails to comply, an IRS audit and substantial penalties could result.

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Public companies have been required to have an audit committee for about a decade now (due to the Sarbanes-Oxley Act of 2002), and many nonprofits have started their own such committees during that time. The result? Some organizations have learned the hard way that good intentions aren’t enough to ensure an effective audit committee — both the nonprofit and committee members must fully understand the committee’s role and responsibilities.

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Nonprofit organizations typically depend on a variety of funding to keep them alive and well. They need funds to pay their bills, pay their staffs and pay for the costs of running their programs. But savvy nonprofits know that not all that’s green has equal value and flexibility. Types of funding vary greatly in how they can — or cannot — be used.

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If your nonprofit became a victim of fraud, it wouldn’t just hurt your organization’s bottom line — the infraction also could do devastating damage to your reputation. By implementing some simple controls, though, your organization can help protect itself from these risks.

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Like other nonprofits, your organization probably has searched for new sources of revenue during the recession and economic slump. Hopefully, though, you haven’t run into problems accumulating too much unrelated business income (UBI). That kind of income can subject your nonprofit to taxes — and even threaten your tax-exempt status. Here’s what to watch out for going forward on the UBI front.

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Many of your donors are now in the process of preparing their 2014 tax returns. You may also have just completed or are still preparing acknowledgement letters thanking them for their 2014 contributions. We know you are aware of the need for such letters. You may not, however, be aware of the dire consequences that may be in store for your donors if the letters aren’t received timely or are not written in accordance with stringent IRS guidelines

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Like many businesses in the for-profit sector, nonprofit organizations need to ensure they are continuing to comply with the Affordable Care Act (ACA). Organizations that fail to comply may face stiff penalties.

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In December 2014, the Obama administration finalized the Office of Management and Budget’s (OMB’s) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, commonly referred to as the Uniform Guidance. The rules are effective for new awards made on or after December 26, 2014. The Uniform Guidance has been described as historic reform that will make long-term changes to the federal government’s financial assistance programs. There are several key policy reforms

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