Enhancing Nonprofit Sustainability Through Fiscal, Financial, Legal, and Governance Education.
Sustainability Education 4 Nonprofits (SE4N) is an education website founded on a core conviction that transformation and deliberate planning are critical to nonprofit sustainability. Our mission is to empower senior management, Board leadership, and nonprofit support professionals to drive positive change, improve organizational culture, and enhance financial sustainability through fiscal, financial, legal, and governance education.
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SE4N's A. Michael Gellman (CPA, CGMA) and Benjamin Takis (JD) jointly authored this detailed checklist to cover the essential basics of financial and legal compliance that should be part of any nonprofit organization’s sustainability planning and risk management process, including Conflicts of Interest, Internal Controls and Risk Assessment, Employment and Human Resources, Financial Reporting and Audits, Government Grants, Governance and Corporate Records, and other Key Risk Management Areas.
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Most Recent Posts
The value of a volunteer’s time for in-kind services donated to a nonprofit organization is not tax deductible, and an organization should never state the dollar value of a volunteer’s services in an acknowledgment letter. However, it may be appropriate to provide volunteers with an acknowledgment letter that generally describes the services they provided so that volunteers can deduct certain eligible unreimbursed expenses.
A gift acceptance policy fills many important roles for a nonprofit organization, including acting as a set of guidelines for fundraising efforts, a tool for risk management, and a protector of the organization’s good governance practices, mission, ethics, reputation, and culture. These characteristics are naturally sensitive to unexpected change and evolving economic conditions, so regularly reviewing and updating your organization’s gift acceptance policy is essential.
SE4N's A. Michael Gellman provides a short summary of the definition of deferred income, why deferred income is a liability on a nonprofit organization’s balance sheet (statement of financial position), how deferred income impacts an organization’s operations and cash flow, and more.
Many nonprofit organizations treat the annual Form 990 filing like a sprint at the end of a long 5K race. After the year is completed and the audited financial statements finally appear, the rush to get the Form 990 assembled and filed too often becomes a hectic “mad dash.” Formalizing the process for review and final approval of the Form 990 before filing will help to avoid mistakes, better reflect current conditions, and show the organization in the best possible light.
Charities formed outside of the United States may qualify for 501(c)(3) status so long as they satisfy the requirements that apply to 501(c)(3) organizations under U.S. law. This status makes it easier for foreign organizations to receive grants from U.S. private foundations and mitigate or avoid U.S. income tax on revenue received from U.S. sources. However, donors generally cannot use the charitable deduction under U.S. tax law for contributions made to organizations formed outside of the U.S., so many foreign organizations form affiliated “friends of” organizations in the U.S. for this reason.
Chief financial officers (CFOs) occupy a unique position of leadership within a nonprofit organization’s senior management team. Often, CFOs are viewed only as protectors of financial assets, immersed in the numbers and devoid of strategic thought. CFOs must work harder to shed these images and venture beyond the numbers to be thought leaders, advocates for strategic change, and catalysts for innovation to help organizations grow and advance their mission.
Many nonprofits are technically not subject to federal Fair Labor Standards Act (“FLSA”) wage and hour law requirements due to rules that limit FLSA applicability to organizations that meet certain “enterprise coverage” or “individual coverage” thresholds. However, this is often a moot point since nonprofits are usually subject to state wage and hour laws, many of which are built upon federal FLSA definitions and exemptions. Consequently, most nonprofits must monitor changes in federal FLSA rules carefully as these may have state law compliance implications.
SE4N's Benjamin Takis provides a short summary of the term “unusual grant” and how this concept affects a 501(c)(3) nonprofit organization’s ability to pass the public support tests on Form 990 Schedule A, and avoid being tipped into private foundation status.
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The Limited Liability Company (LLC) is a flexible and widely used entity structure in virtually every industry, from one-person businesses to some of the largest companies in the world. LLCs can also be useful as a subsidiary or joint venture vehicle for certain nonprofit programs or activities, but the use of single-member and multi-member LLCs in a nonprofit context is often misunderstood.
Monthly distribution of financial reports to the Board and finance committee is absolutely a best practice for nonprofit organizations, and I also recommend this as a must-have procedure in your accounting policies and procedures manual. Board and finance committee members have a fiduciary responsibility to help oversee and ensure the safety and proper use of a nonprofit organization’s financial assets. Monthly financial reports are a key tool for fulfilling this important role.
It is difficult to search for a single aspirational goal that works for all nonprofit organizations because nonprofits are a lot like people, with no two organizations exactly alike. However, I believe there is one aspirational goal that most nonprofits have in common: to have a long, stable, and sustainable existence. To achieve this goal, nonprofits need to commit to making a profit.
I often receive inquiries from entrepreneurs who are looking to add a philanthropic component to an existing for-profit business, such as by forming a nonprofit as a charitable arm or subsidiary of their business or starting a corporate foundation. These ideas are usually well-intentioned. However, mixing business and charitable activities too closely can make IRS approval of 501(c)(3) status an uphill battle.
During extraordinary times of hyper change, we are confronted with so many changing elements that making effective management decisions seems overwhelming and finding a starting point feels impossible.
5-Minute Lessons Videos
SE4N’s Benjamin Takis provides a short lesson on how to get a tax ID number (also known as employer identification number or EIN) for a new nonprofit organization, including tips for how to most quickly and efficiently obtain the EIN and a guided walk-through of the process using the actual online application (Form SS-4) on the IRS website.
SE4N's A. Michael Gellman provides a short lesson on the scheduling and timing of the different phases of the budget building process for nonprofit organizations, including how much time to allot for budget preparation and approval and how to structure a work plan for creating initial and final drafts of the budget, seeking feedback from staff, management, and Board members, through the end of the budget approval process.
SE4N's Benjamin Takis provides a short lesson on what new nonprofit organizations should have in mind when opening a bank account, including the preliminary steps that must be completed before opening the account and what documents and information the bank will require.
SE4N's A. Michael Gellman provides a short lesson on the importance of the segregation of duties (SOD) principle to nonprofit organizations, explaining how SOD is crucial not just for its standard checks and balances role, but also to help ensure that a transaction or process is a good use of resources, aligns with the mission, and enhances sustainability.
SE4N's Benjamin Takis provides a short lesson on what to include in donor acknowledgment letters, what NOT to include, how to handle quid pro quo contributions, and more.
SE4N's A. Michael Gellman provides a short lesson on how to approach drafting a nonprofit organization's mission statement and description for the three different parts of the Form 990.
SE4N's Benjamin Takis provides a short lesson for 501(c)(3) nonprofit organizations on how to understand the calculation of "public support" under Internal Revenue Code section 509(a)(2).
SE4N's A. Michael Gellman provides a short lesson on how to format an operating reserve policy in a way that shows your nonprofit organization's operating reserve goals in terms of both programs and percentage of budget, sets clear bottom-line budget targets, and provides a framework for operating reserve status reports.
SE4N's Benjamin Takis provides a short lesson for 501(c)(3) nonprofit organizations on how to understand the calculation of "public support" under Internal Revenue Code sections 170(b)(1)(A)(vi) and 509(a)(1).
SE4N's A. Michael Gellman provides a short lesson on cash management target policies for operating and intermediate cash funds.
SE4N's Benjamin Takis provides a short lesson on how to properly draft and maintain nonprofit Board and committee meeting minutes.
SE4N's A. Michael Gellman provides a short lesson on the benefits of adding an assistant treasurer position to your nonprofit organization’s governance structure, including ideas for how to implement this role.
Nonprofit Glossary Videos
SE4N's A. Michael Gellman provides a short summary of the definition of deferred income, why deferred income is a liability on a nonprofit organization’s balance sheet (statement of financial position), how deferred income impacts an organization’s operations and cash flow, and more.
SE4N's Benjamin Takis provides a short summary of the term “unusual grant” and how this concept affects a 501(c)(3) nonprofit organization’s ability to pass the public support tests on Form 990 Schedule A, and avoid being tipped into private foundation status.
SE4N's A. Michael Gellman provides a short summary of the definition of a prepaid expense, how prepaid expenses show up on the balance sheet, and how prepaid expenses impact the operations of #nonprofit organizations.
SE4N's Benjamin Takis provides a short summary of the term "quid pro quo contribution," how it affects a donor's use of the charitable deduction, and what obligations to apply to nonprofit organizations that receive donations that are partly in exchange for goods or services.
SE4N's A. Michael Gellman provides a short summary of the definition of accounts payable, the distinction between accounts payable and accrued expenses, and key considerations nonprofit organizations should keep in mind when dealing with accounts payable.
SE4N's Benjamin Takis provides a short summary of the 501(h) election, how it affects the lobbying limits applied to 501(c)(3) nonprofit organizations, how the 501(h) "expenditure test" is different from the "no substantial part" test, and how a public charity makes the 501(h) election.
SE4N's A. Michael Gellman provides a short summary of the definition of accrual basis accounting, its pros and cons, when accrual basis may not be worth the complication and cost, and what nonprofit organizations can do to ease the transition to accrual basis accounting.
SE4N's Benjamin Takis provides a short summary of what a “registered agent” is, why state law requires nonprofit organizations to name a registered agent if the organization is incorporated in the state or doing business in the state, and who can serve as a registered agent.