Just yesterday, I was interviewing a new student intern candidate in my office. During the course of our wide ranging discussion, the conversation turned to some of the interesting misconceptions we encounter with clients. I made the comment that we often feel like the crew of the Discovery Channel show, Mythbusters. There is a never-ending supply of well-entrenched myths and misconceptions in the nonprofit world…and dispelling them is part of our job! In this article, let’s take a look at a few of the more common ones.
MYTH: Build it and the grants will come.
FACT: Uh, good luck with that.
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Noncompliance. As the word suggests, noncompliance is the opposite of compliance. But what does noncompliance mean as it relates to your nonprofit? More important still, what is the true cost of noncompliance?
If you have been a client or follower of Foundation Group for any length of time, you have heard us hounding you to get your organization in compliance. In other words, do everything you need to do comply with local, state and federal law regarding your nonprofit. A complete list of compliance items looks rather daunting. It typically includes everything from filing your corporate annual report to properly keeping your books and records to registering with your state’s Solicitations Department. We tend to talk about these things so often, it can come across more as a series of dos and don’ts and, in the process, the true cost of noncompliance can get lost. Let me share with you some real life examples that will help you see what I mean. Each case discussed is an FG client that we have helped to clean up the mess:
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The IRS has finally announced its decision regarding the extension it promised to small charities facing the loss of tax exemption due to not filing Form 990N. Now, small nonprofits have until October 15, 2010 to file Form 990N and preserve their status. The IRS is calling this a one-time offer, so organizations that miss the new, extended deadline will be out of luck. The IRS plans to announce the list of organizations removed from Publication 78 (the definitive list of recognized, tax-exempt organizations) sometime in early 2011. Donors giving to such organizations will be sheltered until the list is published.
For those organizations under the same threat, but needing to file Form 990EZ, they will also get an extension to October 15, but will face a financial penalty.
Imagine this scenario: You are catching up on Facebook one night when you see a post from a friend. Someone you both know has been diagnosed with a horrible disease and given little hope for recovery. You find out later that this person had experienced all the warning signs…pain, fatigue, other clues…for months before they finally summoned up the courage to see their doctor. If only they had gone when they first realized something was wrong, maybe they could have been helped.
Sound familiar? Sure it does. We have all heard those stories. But what about your nonprofit? Is it possible that this very ostrich-like tendency can also plague a nonprofit? I’m here to answer that question with a resounding, “YES”! We see it everyday, and the results are just as deadly. What you don’t know absolutely CAN hurt you!
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It’s been almost two months since most tax-exempt organizations were required to file their annual IRS Form 990. As we have discussed at great length on these pages, the due date for tax year 2009 was the doomsday date for many nonprofits which had not filed Form 990 for three consecutive years. Now the numbers appear to be rolling in…
According to today’s Chronicle of Philanthropy, nearly 300,000 nonprofits are in danger of losing their tax exemptions. Approximately 196,000 have officially missed their filing deadline and another 96,500 have deadlines between now and April 2011.
Interestingly, it seems many of these organizations may not even exist anymore. When the Chronicle attempted to contact 100 such nonprofits, only 25 were found to still be operating. Of those, most had no idea about the rule changes.
To read the full article, go here.
Let’s face it. Times couldn’t be tougher for many nonprofits, especially when it comes to raising money. And in the nonprofit world, things often run in inverse proportion: The tougher the economy, the greater the need…and the scarcer the resources. So what can you do to beat the odds and secure the necessary funding to run your programs?
Let’s try a little exercise. Grab a piece of paper and write down 5 creative ideas for raising a significant amount of money for your organization. Now, take a look at the list. What do the 5 items have in common? If you are like most people, your list is mostly populated by event ideas. I bet that half of you wrote down a golf tournament!
First of all, there is absolutely nothing wrong with events. Events, such as golf tournaments, can indeed be successful exercises that raise your organization’s profile, as well as some money. But events are costly, both in terms of overhead and labor. Large events can take months to plan, scores of volunteers to pull off…and may or may not end up netting much money. Nothing like having 6 months of planning go down the drain when it rains on the big day! If you want to see big improvements in your fundraising ability, you simply must learn to think differently. Think relational instead of transactional.
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This is a conversation our staff members have with clients at least 4 or 5 times per week: The issue of a nonprofit hiring and paying an independent contractor. What is fascinating is the degree of resistance we often get when attempting to explain the way the IRS and the state see such matters. Seems like everybody has a story about how somebody else is doing things.
“If they can do it, why can’t I?”
The reason businesses (including nonprofits) like to use independent contractors is simple: it saves on employment taxes. The problem lies in the fact that the person your nonprofit is paying is not an independent contractor simply because you want her to be. Whether or not someone is legitimately an independent contractor depends upon a set of well-defined rules. And understanding these rules can save you a lot of headache with Uncle Sam.
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What a mess! Now that May 17, 2010 has come and gone, we are waiting to see just how many 501(c) organizations around the country have lost their tax exemptions. For those of you who have been keeping up, you know that May 17 was the due date for filing Form 990. Additionally, under federal law passed in 2006, organizations failing to file Form 990 for 3 consecutive years were set to automatically lose tax exemption. May 17 was, for most nonprofits, the due date of the third year. Up to 1/4 of all nonprofits were at risk.
So, how many got their filing in on time and how many did not? We just don’t know yet. Here is how this whole thing is supposed to work:
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Doomsday is coming…May 18, 2010 to be exact. No, it has nothing to do with the Mayan calendar ending (that’s 2012!). May 18 is the day that nearly 1/4 of all US nonprofits find that the IRS has automatically revoked their tax exempt status. If you are doing the math, that is nearly 400,000 nonprofits. At The Foundation Group, we have sounded the alarm numerous times over the past several months. It seems like people don’t start paying attention until it is nearly too late.
Consider this quote from Diane Aviv, president of the Independent Sector, a nonprofit trade group: “It’s going to be an unholy mess once these organizations realize what’s happened to them.”
We implore you to pay attention now before it is too late.
So, why is this happening, what does it mean…and how can you avoid being among the 400,000?
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So…you want to start a nonprofit. Fantastic! That puts you in pretty good company. In any given year, as many as 75,000 applications for 501(c)(3) tax exemption are filed with the IRS. Less than half survive the process, but there is certainly no lack of interest in doing something charitable.
But what does it really take to start a nonprofit? What are the non-negotiables that simply must be in place in order to get started with any hope for success? In this post, we are going to explore 5 essential questions that need answers before you get started on your journey.
1. Why are you doing this? Let’s begin where the rubber meets the road. Are you doing this to meet a need that exists in your community? To use the buzz word of the day, are you looking to “give back” in some way? Are you looking for a more fulfilling career path? If this is a religious nonprofit, do you feel “called”? It is likely that one of these questions fits your situation…and one is not necessarily better or more “right” than another. The point is this: If you do not resolutely know the answer to this question, you are not ready to start a nonprofit.
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Friend of FG, Sandy Rees
Developing a proactive, comprehensive fundraising plan to make sure your organization is fully funded is just one part of a total plan for your organization. There is another plan you need to create – one that is just as important and could make your fundraising goals easier to reach.
The plan I am referring to is a marketing plan. It is your game plan to communicating with your donors, potential donors, media, public officials and anyone else that matters to your organization.
To effectively market your organization, you must first know a few things about yourself:
Determine what business you are in. Can you boil your mission statement down to something really short and sweet? For example, Habitat for Humanity is in the business of building decent, affordable homes for families in need.
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Difficult people. Whether it be a co-worker, a neighbor, or even that very special “in-law”, we all have them in our lives. Chances are, you will have one serving on your nonprofit’s board of directors…if not now, eventually. Sort of like death and taxes, there is a certain inevitability to it. Given the volume of questions we get about this subject, I suspect you already know that. The question is, how do you deal with this situation? In this post, we are going to explore some steps to make this tough situation manageable.
Find the source of the conflict. This can be more difficult that you might think. The temptation is to focus on the person and label them a malcontent or even a troublemaker. Maybe that is true, maybe not. We all bring our baggage to the table…some of us have a carry-on, others a steamer trunk! Certainly, if every interaction with this person creates conflict, there is a very high likelihood that he or she is a lot of the problem. But in your rush to judgment, don’t overlook legitimate concerns and observations. Continue reading →
We all have our moments of discouragement. There are times when we are getting beaten up so badly that we would rather throw in the towel than continue to get pummeled. This situation can occur in just about any area of our lives…personal and professional. But what do you do when it happens in your nonprofit? How do you know when to press on or when to give it up?
As it happens, I had this very conversation a few days ago with an acquaintance of mine who runs a small nonprofit ministry. He and his wife started the organization about 15 years ago and what little momentum they had back in the early days has long fizzled out. They find themselves practically alone in keeping it going. Anymore, they are struggling to figure out why they even keep on trying. Bill is very discouraged and, for the first time, is seriously thinking about hanging it up. Maybe you are there, too. How do you know what to do? Predictably, the answer is not so simple.
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Just yesterday, I was interviewing a new student intern candidate in my office. During the course of our wide ranging discussion, the conversation turned to some of the interesting misconceptions we encounter with clients. I made the comment that we often feel like the crew of the Discovery Channel show, Mythbusters. There is a never-ending supply of well-entrenched myths and misconceptions in the nonprofit world…and dispelling them is part of our job! In this article, let’s take a look at a few of the more common ones.
New IRS 1099 Rules Set to Hit Charities Hard
So what are the new rules and why are they so bad? We’ll explain that, but let’s first take a look at what the current rules are.
Under current law, a business is required to give a Form 1099-MISC to any independent contractor who is paid $600 or greater in a calendar year. An independent contractor is defined as a non-corporate business entity, such as an sole proprietor or partnership. For most businesses, this doesn’t create much of a burden. That’s all about to change…
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