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Q&A #40 – How should nonprofits acknowledge donation checks received after December 31?
The short answer is that donors are permitted to treat a charitable contribution as made on the date it is placed in the mail via U.S. Postal Service, even if the check is not delivered or cashed until the following year, see Treas. Reg. § 1.170A-1(b). While it is not the charity’s responsibility to establish the date of delivery in the acknowledgement letter, you want to be as helpful as you can be to your donors. This can lead to some tricky situations.
Q&A #39 – How should a small-staffed nonprofit address audit findings on segregation of duties?
Addressing segregation of duties findings in an audit is a common challenge for small-staffed nonprofits, and this issue can best be mitigated by proactive front-end outreach and communications with your independent auditors and audit committee, and by submitting a formal written Management Response to be included in the auditor’s Management Letter before the final draft is issued.
Q&A #38 – Is a nondisclosure agreement better than a confidentiality policy?
A nondisclosure agreement (“NDA”) would very likely be more protective than your employee handbook and Board policies. Employee handbook and Board policies addressing confidentiality are helpful because they establish the understanding, culture, and expectation that sensitive information must be kept confidential. However, the remedies for a violation of a confidentiality policy are quite limited.
Q&A #37 – Should my nonprofit use a Consent Agenda for Board meetings?
There is not one uniform answer to this question for all nonprofits, but the consent agenda is used and recommended by many organizations and nonprofit consultants. The consent agenda is a powerful tool that can save precious Board meeting time and keep the focus on strategic matters where Board discussion is most needed. However, a consent agenda can be tricky to implement, so it is important to be thoughtful about this practice.
Q&A #36 – What Board committees are recommended for a newly formed nonprofit?
Like a lot of things in life, less is more. Generally, for a new nonprofit, especially a small organization with seven or fewer founding Board members, I recommend starting with one governance-focused committee and one key program committee. This results in a tight governance structure consisting of a Board of Directors supported by two standing committees.
Q&A #35 – Is proxy voting allowed for nonprofit Board members?
You should check your applicable state nonprofit corporation statute, but proxy voting is generally not permitted for Board members. In many states, it is challenging to find a clear answer to this question in the statute, but proxy voting by Board members of a nonprofit organization is widely considered to be a poor governance practice that should be avoided.
Q&A #34 – What does it mean to have ex officio Board members?
The term “ex officio” is widely misunderstood and misapplied in the nonprofit community. Many people understand “ex officio” to be synonymous with “non-voting,” but this is not accurate. “Ex officio” is a Latin term that basically means “by virtue of office or position.” This means that “ex officio” Board members get a seat on the Board automatically because they hold some other specific position. “Ex officio” does not mean “non-voting.” While ex officio Board members often serve in a non-voting role, this is not the case by definition.
Q&A #33 – How can we improve Board member engagement with virtual meetings?
Good for you for monitoring Board member engagement, and yes, there are ways to improve engagement and enhance the effectiveness of your organization’s Board meetings. Now that the novelty of virtual meetings has worn off and become a part of our accepted lives for the foreseeable future, making a concerted effort to assess virtual meeting performance and adopt new practices is critical to the overall health of your organization.
Q&A #32 – Should I incorporate my nonprofit in Delaware?
It is a very common assumption that all corporations should be formed in Delaware. However, Delaware’s reputation as being the ideal state of incorporation comes from the world of for-profit corporations and has little relevance to nonprofits. Delaware holds no particular advantages for nonprofit corporations, so my rule of thumb is that you should generally incorporate where you foresee the organization carrying out most of its programs and activities, except in special circumstances.
Q&A #31 – Should a nonprofit scrap and replace a strategic plan adopted prior to the pandemic?
Although this sounds counter-intuitive, as of now the answer is no. The world around us is still changing in unexpected ways with unprecedented volatility. Nonprofits are continuing to learn to pivot and adapt to new approaches. The best way to measure performance and outcomes and communicate on management’s actions taken is to compare results and changes to your old strategic plan.
Q&A #30 – Can a 501(c)(3) organization engage in advocacy related to state ballot initiatives?
Assuming your organization is a 501(c)(3) public charity (rather than a private foundation) you are generally free to engage in advocacy related to state ballot initiatives, up to certain limits. This is because advocacy related to referenda, ballot initiatives, constitutional amendments, and similar procedures is generally considered a form of “lobbying” on legislation, rather than a political campaign activity.
Q&A #29 – Can the executive officer of a 501(c)(3) organization express personal opinions about the election without endangering the organization’s tax-exempt status?
Yes, it is your right as an individual to speak about the election in your personal capacity, and the Internal Revenue Code prohibition against political campaign intervention by 501(c)(3) organizations is “not intended to restrict the free expression on political matters by leaders of organizations speaking for themselves, as individuals” (see IRS Rev. Rul. 2007-41). However, you will need to be careful to avoid speaking in a way that could be attributed to the organization.
Q&A #28 – Can a 501(c)(3) organization engage in public advocacy related to Supreme Court appointments?
The answer is generally yes, 501(c)(3) organizations are allowed to advocate for or against the appointment of Supreme Court Justices. However, you must be very careful in your communications not to cross the line into endorsing or opposing a candidate for public office in the process. This can be tricky because the line between permissible and prohibited activity is very hazy.
Q&A #27 – Can a 501(c)(3) organization have a political candidate speak at its virtual conference?
The safest approach for a 501(c)(3) organization is to avoid having political candidates (or their staffers/surrogates) speak at any organization event, whether virtual or in-person, particularly when the event is so close to an election. There are certain circumstances where this could be allowed, but these circumstances are limited and always subject to a “facts and circumstances” gray area.
Q&A #26 – Should a nonprofit keep track of donated services?
The answer is always yes, keeping track of donated services is very important. You are correct that the Form 990 does not allow inclusion of in-kind gifts of services (only in-kind gifts of goods). Nonetheless, tracking and recording in-kind gifts of services will have significant benefits for your organization.