Archive for the ‘Education’ Category

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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I can already hear some of your sarcasm…

“Tell me something I don’t know!”

“You’re kidding!  The IRS?  Really?”

Point taken.  It seems like the IRS always wants to know a thing or two about you.  Whether it is your personal tax situation, your business or your nonprofit organization, the Internal Revenue Service seems to always be there.  We’ve spent a great deal of time educating you about the seriousness of the 2008 changes to IRS Form 990 and what they mean to your nonprofit.  Well, the screws are getting tighter with the recent release of additional changes for the 2009 return.  Specifically, it is the changes to the Schedule O that have the potential to shake things up pretty dramatically.

What is Schedule O? The name of the schedule, Supplemental Information to Form 990, sounds harmless enough.  It was introduced in 2008 as part of the overhaul to Form 990 that added Schedules C – R to what had previously been just Schedules A & B.  The purpose of the schedule is to provide the IRS with…wait for it…supplemental information about the activities of nonprofit organizations that is not captured elsewhere on the return.  What is new for the 2009 tax year is that Schedule O is required of all Form 990 filers.  This is where the game begins to change…

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The filing deadline for the 2009 Form 990 is May 17, 2010 for 501(c)(3) and other tax-exempt organizations running on a calendar year basis.  There is nothing particularly new about that.  What IS new is that this year’s filing obligation has the potential to cause an enormous amount of heartache to those nonprofits that are unaware of the requirements and fail to do what is necessary.  We touched on this briefly in our last article, but we want to expand on it a little bit.  We implore all of our clients and friends to read this article carefully and be informed.

ALL tax-exempt organizations must file Form 990. With the distinct exception of churches, all 501(c) nonprofits are required to file a version of Form 990.  We’ve been saying this over and over, but we still find that the message is not quite getting through.  To make it easy to understand, ALL means ALL.  No exceptions!

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As long-time readers of our articles know, most of our posts focus on tips and best practices for effective nonprofit management.  This post is going to be a little different.  There is so much going on right now that affects nonprofits, we thought it would be a good idea to provide you with a brief run-down of some things you need to know.  Some of it is related, some not.  Here we go…

1.  Many smaller nonprofits could lose their tax-exemption this year. How?  Tax filing year 2009 is the third year that the IRS has required the filing of Form 990-N for organizations averaging under $25,000 in annual revenue.  Prior to 2007, no filing was necessary.  IRS regulations state emphatically that any 501(c)(3) public charity that fails to file a required Form 990 for three consecutive years will automatically lose their tax-exempt status.  Unfortunately, many organizations are either still unaware or just whistling Dixie and not taking this seriously.  I expect panic to set in when letters of revocation start hitting mailboxes later this year. Read the rest of this entry »

Founder’s syndrome.  It affects nonprofits and for-profits alike.  And it can be crippling to any organization.  Understanding what it is and how to avoid it is crucial to the future of your 501(c)(3).

Taken from that most-reputable of sources, Wikipedia, founder’s syndrome is defined as, “a pattern of negative or undesirable behavior on the part of the founder(s) of an organization”.  While that can be true, we find that most cases of founder’s syndrome within nonprofits simply involve a founder with too much influence.  In plain English, it means that the universe revolves around the founder…and not in a good way.  Here is an example of the way it usually works:

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One of the things that you learn quickly when starting and operating a 501(c)(3) organization is that you have to handle money wisely.  A nonprofit is no different than any other business in that you must make ends meet.  Otherwise, your charity will cease to exist.  The current economic difficulties make this task even more challenging as we all are stretching dollars until they are see-through.

But here’s a question you probably haven’t considered:  In all of your efforts to keep the lights on, could it be that you are misappropriating funds without knowing it?  Is it possible that you are even committing a crime?  If you do not understand what the IRS requires regarding designated funds, you might be.

I cannot begin to tell you how many times we see this situation messed up.  Most of the time, it is an innocent attempt by a board or executive director to just be good stewards of the money people have donated.

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Well, we are pretty much down to it.  There are only a few, short weeks left in 2009…and during much of that time, most of us will be preoccupied with all things Christmas.  But in all the hustle and bustle, there are a few things regarding your nonprofit that require your attention.

A few weeks ago, we talked about some key, end-of-year planning topics (read the post).  Extremely important, but somewhat conceptual.  The following is a checklist of year-end forget-me-nots that absolutely require your attention.  Ready?  Here we go:

Financial records. What is the current state of your financial recordkeeping?  Good, bad…or ugly?  Hopefully it’s more good than bad.  If it’s ugly…well, you’ve really got some work to do.  The fact is, you have a legal requirement to maintain proper financial records.  If your bookkeeping status lies anywhere south of good, get it fixed.  If necessary, hire someone who knows how to do this.  The truth is, the legalities are not even the most important reason to get this right.  You cannot effectively manage your organization without consistently good financial recordkeeping.

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2009 is rapidly coming to a close.  And once again, we find ourselves amazed at how fast the year has gone by.  Funny how we have this conversation every year, but we act like it’s the first time it went by this fast.

Just as December 31 rolls around every year, so does the need to plan for your nonprofit’s year end.  With only a few weeks left in the year, don’t put off until later some of the most important things you need to be doing right now.  Let’s take a look at some key, year-end necessities.

Strategic planning. The economic uncertainty of the past year has forced many nonprofits to shift gears and even change course.  For some, it has caused an existential crisis!  What has the economic downturn meant to your organization?  The end of the year is a natural time to (re)evaluate what you are doing.  Focus on maximizing impact for a minimum of expense.  Easier said than done, no doubt.  But now more than ever, it is imperative to be intentional with everything you are doing.  “Winging it” is ineffective in the good times.  It could be fatal in the bad times.

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Boo!

Halloween is upon us…and there is no more appropriate topic that we could cover than how to effectively scare away donors.  In the, um, spirit of the season, let’s look at six ways to guarantee donors will want nothing to do with you!

Be undefinable. Keep ‘em guessing, we say.  Why box yourself into a specific purpose when you can be fluid and flexible…you know, all things to all people.  You need the freedom to pounce on whatever new cause-de-jour comes along.  Let those other nonprofits label themselves.  Not you, though…you be a chameleon.  Keep changing it up.

Be ineffective. Boy, this one gets them every time.  If you want to make a really bad impression, just refuse to accomplish anything measurable.  Rely on grand platitudes and empty rhetoric.  Plan constantly, but never, ever get anything done.  That’s waaaay too much work.  Hey, I know…just pretend you are a congressman!  Talk the talk, then talk some more!  With a little practice, you’ll be a pro at kicking the can down the street.

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The honeymoon is over.  It seems like yesterday that everyone was full of passion, vision and warm fuzzies.  You were going to save the world and nothing could stand in your way.  Now, passions have cooled, visions have diverged and the warm fuzzies have been replace with contempt and backbiting.  How did things go south so quickly?

Operating a business, especially a nonprofit, is a lot like a marriage…minus the romance.  What starts out with mutual respect and unity of purpose can descend into open hostility.  And, it can threaten your organization’s effectiveness…even its very existence.  Conflict management is an essential skill that every nonprofit leader must learn and utilize.  What follows are some key points to consider regarding effective conflict management:

Conflict is inevitable. Learn it, live it, love it.  The sooner you dispense of the notion that conflict can be avoided, the sooner you can manage the realities of it.  Conflict is inevitable because people are involved.  And where there are people, there will eventually be conflict.  Just like in marriage, you and the other leaders in your organization have different ideas, backgrounds and experiences.  These all color the way you approach life, including your approach to running your nonprofit.

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IRS Audit Division

In our last post, we took a look at five of the most common sources that could spark an IRS examination or audit of your 501(c)(3) organization (or other nonprofit).  In this article, we’re going to equip you with five rules you need to know should you get the dreaded notification that your organization is going to be examined.

If you haven’t read the prior article, go here to read it first.

Rule #1:  Don’t panic. Breathe.  Yours is not the first nonprofit to ever be audited.  You can survive this.  I’m not going to lie and say it will be a pleasant experience, because it won’t be.  But, fear causes you to react out of emotion, not logic.  Slowing down and calming your nerves will put you in a much better frame of mind to tackle the next few steps.

Rule #2:  Don’t go it alone. If you could survey every person, business and nonprofit that has ever gone through an audit, I suspect you would find near unanimity about this one.  You need professional representation.  You simply do not have the depth of knowledge or understanding necessary to do this on your own.  It is very much like being your own lawyer at a trial…and you know what they say about that:  “Fool for a client…” Hopefully the professional who helped you prepare your IRS filings is competent to represent you.  Such representation, should it be necessary, is always a part of our preparation services.  A professional understands both the law involved and usually has experience dealing directly with the IRS.  Let them handle it.

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Free t-shirts for all audit targets! (no, not really)

There is one phrase in the English language that generates more fear and trepidation than any other out there:  IRS AUDIT.  Just hearing the words is enough to cause many a fearless person to break out in a cold sweat and to shrink in terror.  It is bad enough when an individual has to deal with IRS questions.  But when it happens to a nonprofit organization, there is plenty of pain to go around.  Directors, employees, members, donors…all can be affected.  Plus, just the potential bad publicity is enough to cause nonprofit leaders to reach for the Rolaids.

So how does a nonprofit avoid an IRS examination?  It helps to understand some of the situations and events that can trigger an audit.  In this article, we are going to look at 5 sources of audits and give you advice on how stay out of Uncle Sam’s cross-hairs.

1.  Complaints. One of the most common causes of IRS examinations is a complaint filed by a third  party.  Such “whistle-blower” situations may or may not have a shred of credibility to them.  Typically, if the IRS decides to look into the allegations, it will start out as a compliance exam.  It is possible for one of these exams to progress to the status of a full-blown audit, but most do not…at least for those organizations that are operating completely above board.

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No decision you make regarding your nonprofit organization carries more importance than who is chosen to lead it.  The members of your board of directors make up the governing body of your nonprofit and are legally accountable for its actions.  Practically speaking, they are accountable to your supporters and beneficiaries to oversee the accomplishment of the organization’s purposes.  The buck stops with them…at least it is supposed to!  But that’s another article.

If you are just starting out, who should be asked to serve?  And, if your organization is already established, and vacancies on the board need filling, who should replace the exiting members?  These are questions that are asked by clients of ours quite frequently.  Understandably so.  Concerns of competency, trust, experience and compatibility loom large and demand answers.  In this article, I will attempt to answer these questions, looking first at the issue of installing an initial board, followed by a look at subsequent board positions.

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One of the most challenging situations your nonprofit organization can face is the need to expand.  It is also an exciting challenge.  Compared with the alternative of diminishing effectiveness and shrinking support, growth is a good thing.  At least it means (usually) that your programs are having a positive impact and people are motivated about your organization’s cause.

But with expansion comes growing pains.  To significantly increase your footprint or your scope (or both!) requires a huge commitment on the part of the leadership, members, staff and volunteers.  When your organization is faced with opportunities that scream “Take action!”, there are critical things you must consider.  In this post, we’re going to take a look at two scenarios:  1) location expansion and, 2) additions to program services.  Knowing what to do in these situations can spell the difference between success and failure.

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So, you want new donors?  You want to make sure that you keep getting funds from the donors you currently have?  What are you doing to make sure that both of these things are happening?  If you lack a strategy and purposeful intent to cultivate and maintain a donor base, you will certainly have money troubles.  “Form it and they will give” doesn’t work well for many nonprofits.  Here are three things to consider to cultivate and maintain an active donor base:

1)  A Compelling Purpose.

You need a compelling purpose.  Are you doing anything that a donor might want to support financially?  Are you providing your community with services that are indeed needed?  If a donor can relate to, or is interested in, the services your nonprofit provides, the donor is more likely to be happy giving to that cause.  If there are many other nonprofits in your community that are providing the same services, you will have to try harder to differentiate your organization from the other nonprofits.

Maybe your purpose IS compelling…to you.   You understand things about the need for your program that the public doesn’t easily grasp.  For example, the need being met by a homeless shelter is pretty obvious.  If, on the other hand, your organization’s purpose is to research treatments for dry-eye syndrome, you are going to be challenged trying to garner wide monetary support for your efforts.  Those with the problem will jump on board, but your work is cut out for you with everyone else.  You need to understand #3 below:  communication.  But don’t skip #2.  It’s big.

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