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Why Gift Acceptance Policies are Important and Must Be Periodically Reviewed and Updated
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.
Six Key Steps for Managing Nonprofit Corporate Governance Disputes
For most nonprofit organizations, it is a rare occurrence for internal corporate governance disputes to escalate to the point of litigation. However, court cases are sometimes unavoidable. A recent D.C. Court of Appeals decision addressed several important issues related to corporate governance challenges and illustrated some key steps nonprofits can take to better manage these disputes.
The Case for Capitalizing Portable Electronic Devices (PEDs)
Nonprofit organizations are now accustomed to living with changing conditions. Change can come in many different forms, from dramatic and fast (remote working, inflation) to subtle and out of sight (technology, rules, and regulations). A noteworthy example involves portable electronic devices (PEDs), which have seen subtle steady changes leading to lower cost with expanded performance and capacity. These changes have led to new risks that deserve special attention.
Internal Accounting Controls and the Importance of Perception
Internal accounting controls are an everyday fact of life. They protect nonprofit organizations from many types of risks ranging from theft, fraud, and diversion of assets, to errors and mistakes, to highly sophisticated scams and cyber security threats. Organizations must maintain vigorous and sustainable internal accounting control systems. However, if the perception of an organization’s internal accounting controls is weak, its ability to battle these threats will be greatly reduced.
If Theft or Fraud Happens, Do Not Make It Worse with Silence
It’s hard to find a nonprofit organization that has not been hit by a theft, fraud, or other material diversion of assets. It almost seems inevitable to happen at some point. We must continue to strengthen internal controls and stay vigilant, searching for evolving weaknesses and risk exposures. If a theft or fraud does happen, it is important to be fully transparent with messaging and avoid the tendency to go silent.
Q&A #88 – Does theft or fraud need to be reported on the Form 990?
Whether theft or fraud must be reported on the Form 990 depends on the amount, and also on the role of the individual who committed the offense. Part VI, Line 5 of the Form 990 (on page 6) requires organizations to disclose whether they became aware of a “significant diversion of the organization’s assets.” Also, if assets were stolen by a “disqualified person,” this must be reported as an “excess benefit transaction” on Part IV, Lines 25a and 25b (on page 4) and Schedule L.
Capacity Risks are Real and Need Attention
Nonprofit organizations need to wake up to the fact that capacity challenges are real and can lead to increased risk exposure. Capacity risks come from many different sources and affect organizations in different ways and at times that are not predictable. Growth and unexpected disruption are the two biggest factors impacting capacity. Expanding risk management practices to include assessments related to capacity will help your organization to meet these twin challenges safely and effectively.
Q&A #77 – Should every contract have indemnification language?
Whether indemnification language is desirable and appropriate depends on the specifics of each contract as well as each party’s bargaining leverage and tolerance for risk. It is important to think carefully about the risks that could arise from each contract and pay close attention to how the language is phrased. Depending on the circumstances, indemnification language may not be necessary, and, if drafted improperly, could cause more harm than good.
Nonprofits Should Stress Test Funding on a Regular Basis
Stress testing a nonprofit organization’s funding seems like a frightening proposition, conjuring images of doom and gloom. This is not the case at all. Regular stress testing of funding will enhance strategic planning, raise awareness of changing conditions, and stimulate an earlier call to action. All funding sources, both strong and weak, will benefit from these regular efforts.
Using Insurance Brokers as Trusted Business Advisors
Insurance brokers have unique perspectives to share and should be included on your nonprofit organization’s team of trusted business advisors (“TBAs”). Insurance brokers are an organization’s first point of contact in the selection and purchase of insurance policies, and serve as an intermediary to the insurance carriers when questions, claims, and other risk management considerations arise. This experience makes your insurance broker an important resource in many aspects of risk management.
When to Prioritize Legal Review of Your Nonprofit’s Contracts
Contracts are the lifeblood of any nonprofit organization’s day-to-day operations, just as with for-profit businesses. In an ideal world free from budget and time constraints, nonprofits would have every contract reviewed by a reputable attorney with the relevant subject matter expertise. However, for some organizations legal review is not always feasible.
![You Cannot Let Your Guard Down When It Comes to Cyber Security and Fraud [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1697715107397-1G607IL5YXDLKUWSZ0RJ/monitoring-1305045_1280.jpg)
You Cannot Let Your Guard Down When It Comes to Cyber Security and Fraud [SUBSCRIBERS-ONLY]
Attempted fraud and cyber security breaches are increasing. At the same time, distractions from our chaotic world and new operational realities are averting our attention. This is a bad mix. We need to double-down on efforts to protect our organizations. Reputations and sustainability are at risk, and navigating these threats is even harder during a time of crisis.