Education Archives

Strategic Thinking For Your Nonprofit’s Year-End

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.

Conflict Within Your Nonprofit – Handle With Care

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.

Surviving an IRS 501(c)(3) Audit – Five Rules

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.

IRS 501(c)(3) Audits – 5 Potential Sources

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.

The Challenges of Expanding Your Nonprofit

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.

Safeguard Your Mission: How to Protect Your Nonprofit from Fraud

Fraud is a word that conjures up many images in your mind. Maybe your definition of fraud is someone lying to you, stealing from you or conspiring against you while pretending to help you. All of these are true…and it can happen to your nonprofit if you don’t know how to protect it.

Those who seek to harm or defraud you can come from both inside and outside your nonprofit. Either can be devastating to the health of your organization, both financially and psychologically. Let’s take a look at both scenarios and I’ll give you some tips on how to avoid becoming a victim.

Outsiders. For anyone who hasn’t been victimized by an outsider, it can seem like a remote concern. “Surely we can spot a scam”, you tell yourself. Ask any victim of Bernie Madoff how easy it is to be taken. Just among our clientele at The Foundation Group, we have a Florida nonprofit that invested its entire endowment in a sure-thing Madoff fund. It’s all gone…every penny. Granted, this one was hard to spot. Madoff made-off for many years right under the noses of regulators! But it doesn’t take a Bernie Madoff to cause severe damage to your organization.

How Much Is Too Much? The Limits of Benevolence

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?”

Answers to Reader Questions (July ’09)

At the end of every newsletter, we put out the call for “topic requests”. We have used quite a few reader questions or topic suggestions for article topics.

Some questions or topics do not require a whole article to answer or discuss. We save those to make a multi-topic article from time-to-time. That’s what we’re going to do today. Keep sending your questions or topics and make sure that you read our blog articles for more information on other topics. On to the questions…

Q: Can any or all of the nonprofit’s board members live out of state?

A: While not required by federal law, many states have residency requirements for a corporation’s board members. No states require that all board members live in the state of incorporation, only the registered agent is required to live in-state. Our suggestion is that at least one board member live in the state of incorporation.

Charitable Solicitations – Time to Get Compliant!

Charitable Solicitations Registration. “Never heard of it,” you say. Well, you are not alone. As astounding as it may seem, estimates of noncompliance range from 85-95% of charities and nonprofits nationwide. This level of noncompliance has persisted primarily because of 2 reasons: 1) lack of communication between state agencies and 2) grace. But, the times…they are a changin’. It is time to get compliant!

What is it? It is helpful to start by explaining what we’re talking about. 42 states and the District of Columbia require nonprofit organizations that raise or intend to raise financial support from the public to register with that state’s Charitable Solicitations Department. This department is typically run from within the state’s Attorney General’s office, though some originate within the office of the Secretary of State.

Your 2009 Nonprofit Survival Guide

You’ve seen the news. You know it’s tough out there. Just this morning I saw the following headlines on my Chronicle of Philanthropy RSS feed: “Charitable Donations Fell by Nearly 6% in 2008”, “Ford Foundation Offers Buyouts to One-Third of Employees”, and “Robert Wood Johnson (Foundation) Offers Buyout to 40% of its Employees”. Tough stuff indeed. I’m sure that you have your own stories about what the current economic situation has meant to your family and friends. So, the question is this: Is there any way to survive, maybe even thrive, in such circumstances? We resoundingly say, “Yes!” Consider this your 2009 Nonprofit Survival Guide.

First off, stop listening to the news. I mean it…turn it off. I’m not advocating locking yourself into a cave and shutting out the world. But, the constant drumbeat of negativity takes its toll on you after a while. I saw a great sign on a realty office near my home the other day. It said, “We have decided not to participate in this recession.” What a great message! The half-empty folks driving by no doubt scoff at such a sign and call it denial. I call it taking responsibility for your own success. The facts around them may not have changed, but at least for this one realty office in Mt. Juliet, Tennessee, they aren’t making excuses. So what about you? Yes, it’s harder to win than to lose. But you have people (or animals or something) that need what your organization brings. Determine to make it.