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News For Nonprofits

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.

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Avoiding 501(c)(3) Founder’s Syndrome

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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How Year-End Contribution Statements Can Raise Money

It’s one of those administrative tasks that must be done every year:  mailing your donors a year-end statement of their contributions.  Even if you are receipting on a per gift basis, a year-end itemized report is a best practice that should be adopted.  If you are already doing that, good for you!  But let me ask you this…

Is your year-end donation letter making money for you?

Have you noticed that some nonprofits are still doing fairly well in this economy, even thriving, while others have suffered dramatically?  What do they know that you don’t?  While there are many contributing factors that underlie success in fundraising, I submit that the most important element is effective communication.  One of the best places to communicate is in your receipting to donors.

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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.

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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.

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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.

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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.

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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.

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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.

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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?

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