Archive for the ‘Commentary’ Category

It seems that there has been some confusion regarding last week’s article on IRS Form 990, particularly Schedule O.  In this short article, I want to expand a bit on that discussion and clear up some misconceptions.

We had a caller last week take us to task for hyping Schedule O as some kind of monster.  His comments (paraphrased) were along the lines of,

“You guys have some nerve.  You are intentionally trying to create confusion to increase your business.  I looked at Schedule O and it’s no big deal.  It’s a blank form!”

Point taken..sort of.  Yes, it is true that Schedule O is a mostly blank form with a bunch on lines on it.  But no, we are not hyping anything at all.  First of all, that would be a disservice to our clients.  It would also be a very short-sighted business plan.  The truth is that, like everything related to 501(c)(3), things are more complex than they appear.

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For those who don’t know, Foundation Group has a free, weekly email newsletter that goes out to approximately 16,000 nonprofit subscribers.  This week we sent the Christmas story from the Gospel of Luke…yeah, the same Bible story Linus reads in A Charlie Brown Christmas.  Interesting isn’t it, that in the history of our newsletters, we have never received the overwhelming amount of positive feedback that we have the last couple of days. In this time of stress, cynicism and over-commercialization, the simple message of hope still resonates the most…

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Thanksgiving is a wonderful, home-grown holiday.  It is a time for family and friends, eating way too much and, most importantly, a time for reflection about all the things we have to be thankful for.  I heard someone mention this a few days ago, and it is very true:  Thanksgiving is about the only major holiday in America that is not, almost cannot be, commercialized…so much so that retailers just overlook it and start hawking Christmas stuff about 1 minute after Halloween ends!

Instead of just looking at what you are thankful for personally, how about reflecting upon a few things your nonprofit can be thankful for this year?  Here are three things if you cannot think of any:

A giving spirit. The citizens of this great land give more to need around the world than all other countries combined.  Sure, we are a blessed people…rich by the standards of most other countries.  But did you know that as a percentage of GDP, private philanthropy in the US is 1.7%…2 1/2 times the percentage of the next highest countries, Canada, Great Britain and Australia (average 0.7% each).  Other wealthy nations barely register on the radar by comparison.  Did you know that 3 out of 10 Americans gave to the tsunami relief efforts a few years back?  That ordinary citizens donated $1.4 billion to 9/11 charities in the days following the attacks on New York and Washington, DC?  That nearly four times that amount has been donated to Katrina relief efforts?  Even in these tough economic times, the number of people giving to charity has not decreased, only the amount they can afford to give.  That’s something to be thankful for.

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In case you missed our blog about this story earlier in the year, the nanny-state strikes again.  Back in January, we told you about a new consumer “protection” law, the Consumer Product Safety Improvement Act, that was going into effect that would effectively put thrift stores out of business.  Many retailers of second-hand items, including many in the nonprofit world who operate thrift stores, protested loudly.  The Consumer Product Safety Commission backed off a bit, not only delaying the implementation, but also exempting second-hand sellers from mandatory lead testing, a previous requirement that would devastated the industry.

Well, the topic is in the news again.  Seems that  even though the testing requirements have been relaxed, the potential financial penalties for selling a recalled or otherwise unacceptable product has not.  Imagine this scenario:  Someone comes to your thrift store (or yard sale) and purchases a child’s toy.  Unbeknown to you, the toy was recalled a couple of years ago due to child choking hazard.  You could be facing up to $15 million in fines!  Yes, that is the number 15 followed by 6 zeroes.  Nevermind that no one choked on the toy.  If that happened, then you have the parent’s civil suit to worry about.

Again, it seems we’re facing a situation where big government knows best and John Q. Public takes it on the chin.  This wildly out of proportion law puts an undue burden on all resellers, especially charity thrift stores.  If this at all matters to you, contact your Senator, your US Representative and the Consumer Product Safety Commission and make your voice heard.  It works…just ask ACORN!

For the whole story, see New Government Policy Imposes Strict Standards on Garage Sales Nationwide

Bad seeds?

The Association of Community Organizations for Reform Now, aka ACORN, was, until the past year, a relatively unknown organization to most Americans.  Founded in 1970 and based in New Orleans, Louisiana, ACORN’s most visible face is that of a 501(c)(3) public charity ostensibly advocating for low- and moderate-income families in the areas of neighborhood safety, voter registration, health care, affordable housing, and other social issues.  ACORN also has a non-charitable arm that lobbies for primarily left-wing causes and candidates, as well as dozens of affiliated splinter groups.  ACORN’s “charitable” division receives millions upon millions of dollars in federal grant money each year.

ACORN’s profile increased dramatically during last year’s presidential campaign, with then-Senator Obama’s candidacy and subsequent victory, himself having been a community organizer with close ties to the group.  The problems for ACORN started when numerous chapters were busted for voter registration fraud.  Estimates go as high as 400,000 falsely registered voters, including Mickey Mouse and Paul Newman.  ACORN’s voter registration program is under investigation in 14 states, with over 30 indictments having been handed down so far with likely many more to come.

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September 15, 2009 is Foundation Group’s 14th birthday.  As one of the founders of this company (the other being Mr. Blair Dudley), I’ve been here since day one.  Believe me…there are days when it seems like a lot longer than 14 years!  But most of the time, it is truly hard to wrap my head around the fact that we’ve been doing this for so long now.  Plus, so much has changed over the years…

Since many of our readers are new to the Foundation Group family of friends and clients, the occasion of our birthday is a great opportunity to share a little of our story…who we are, where we came from, and why we do what we do.  At the end of our tale, we will let you know about a special gift we are providing during the month of September, but don’t skip ahead just yet .

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The idea for this article came from my good friend, Belinda from Madison, Alabama.  A few weeks ago, she wrote us an email asking the following:

“Due to the economic downturn and, with the increasing requests for benevolence assistance, are there guidelines for churches and non-profits on what they can assist with and how much?”

Great question, Belinda.  I know others are asking the same thing.  Benevolence is synonymous with charity.  It’s the very definition of it.  But, there is a definite line between charity and what the IRS calls inurement (or private benefit).  This economic recession has caused many churches and charities to be overwhelmed with requests for help.  So, what follows are some things to consider when asking, “How much is too much?”

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This opinion piece is from the Wall Street Journal, March 3, 2009.  We are reprinting this timely article as a wake up call to charities of the battles to come.  Philanthropy has its enemies indeed.

By Naomi Schaefer Riley

Nonprofit leaders are reeling from the recent news that President Barack Obama’s proposed budget would limit tax deductions on charitable contributions from wealthy Americans. But now the philanthropic world has something else to worry about. Today the National Committee for Responsive Philanthropy (NCRP), a research and advocacy group, will release a report offering “benchmarks to assess foundation performance.” Its real aim is to push philanthropic organizations into ignoring donor intent and instead giving grants based on political considerations.

The committee is part of a rising tide of politicians and activists who are working to change the face of American philanthropy — and not for the better.

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If there is one constant in life, it’s change.  And most people don’t do “change” very well…even the IRS!  The new 2008 Form 990 is a complete, top-to-bottom overhaul of the form (as we’ve discussed in previous posts).  As we talk with more and more clients/prospects, we’re really starting to see some trends develop…most of them not good.

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On January 24, 2009, National Heritage Foundation filed for Chapter 11 bankruptcy protection in federal court.  Is this the end for NHF?

Read the Forbes story here

National Heritage Foundation, NHF, was founded by J. T. “Dock” Houk as a 501(c)(3) fiscal agency for nonprofits using a donor-advised funds scheme.  NHF operated under the premise that people shouldn’t have to be burdened by the regulatory compliance headache of running their own 501(c)(3) in order to do good and charitable things.  One could just start an NHF “foundation” and have donors give directly to NHF, but designate the funds to their “foundation”.  “Foundation” is in quotes because that is NHF’s terminology.  NHF “foundations” are not considered true foundations. The idea was that by signing up with NHF, people could have what looks like a charity, but piggy-back on NHF’s tax-exemption.  In theory, the “foundations” were an extension of NHF’s charitable mission.  In return for its efforts, NHF took a small percentage of the donations for operating expenses.

Read New York Times article on NHF from 2000

Like so many theories, NHF’s didn’t work so well in practice.  Early on, NHF aggressively promoted the idea that “foundation” directors should pay themselves well, even if they were the primary donor.  In other words, you could start a “foundation” to do whatever, donate to your own “foundation” tax-deductibly through NFH, then pay yourself for your good deeds.  Needless to say, this generated enormous controversy within charitable circles and drew the ire of the IRS and Congress.  But technically, there was no law directly prohibiting such since these “foundations” were part of NHF and, in theory, NHF controlled the expenditure of funds.

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Got your attention? Good…because what we’ve got to report on will shock you…and could have a devastating impact on some charities and the families that depend on them.

Congress, in a stroke of genius that was too smart by half, passed the Consumer Product Safety Improvement Act in August 2008. It takes affect February 10, 2009. The public is only now becoming aware of the draconian nature of the statute.

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This is installment #2 in our ongoing series on leadership.  Our first installment was more of an introduction.  In this post, we are going to explore the concept of governance vs. management.

Governance and management:  For many, these are interchangeable terms.  They shouldn’t be.  And in far too many nonprofits, the leadership fails to understand the difference.  Properly separating the concepts of goverance and management can be critical to the success of your endeavor.

Governance is leadership of the big picture.  Primarily the responsibility of the board of directors, governance describes the notion of governing. Several ideas are simultaneously embodied in the concept of governance, including: mission establishment, strategic development, planning, goal setting, responsibility, accountability, oversight…the list goes on.  Most successful organizations rely on a group of individuals with a diversity of talents who collectively chart the course for the organization and actively pursue the accomplishment of its mission.

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The word “leader” conjures up a variety of images:  your old Little League coach, a military general, your boss…even the president of the United States.  Regardless of who (or what) comes to mind, there is the common thread of someone who leads.  But what does leadership really mean?  Certainly it means more than just being in charge.  And in the setting of a nonprofit organization, is the meaning different?

I would submit that while the meaning is not so different, the goal of leadership often is.  For example, in a for-profit setting, the goal is the financial success of the company.  Sure, there are other intermediate goals and purposes.  But when you get down to brass tacks, it’s about the money.  The leaders expend their energy leading employees and influencing prospective customers in an effort to make a profit.  In politics, the goal may be the establishment of a political agenda.  Leaders attempt to influence voters to support their particular brand of government.  Just look at the current election cycle.  Not that pandering is the same as actual leadership, but I digress…

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Mark your calendars!  Sunday, September 28, 2008 has been declared “Pulpit Freedom Sunday”.  Sponsored by the Alliance Defense Fund, the Pulpit Initiative is a bold, stick-in-the-eye movement encouraging pastors to defy the ban on political endorsements by churches.

“For so long, there has been this cloud of intimidation over the church,” ADF attorney Erik Stanley said. “It is the job of the pastors of America to debate the proper role of church in society. It’s not for the government to mandate the role of church in society.”

The  IRS has mandated since 1954 that in order for churches to maintain federal tax exemption, they must not intervene in political campaigns.  The ADF says that amounts to an assault on the First Amendment.  Other groups, like the Americans United for Separation of Church and State, disagree, call it a “stunt” that is part of a larger goal of getting conservative candidates elected.

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