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A Window of Opportunity for Collaboration Between Nonprofits is Opening
Numerous changes have been thrust upon nonprofits in quick succession this year. While these changes have brought on stark challenges, they have also opened up new possibilities for collaboration between organizations. This window of opportunity may not be open for long, so nonprofits should act now to take a serious look.
Q&A #24 – When must a newly-classified private foundation start complying with the 5% minimum distribution rule?
This seemingly simple question is actually quite complicated. Private foundation status comes with numerous new rules, restrictions, and reporting requirements (the 5% minimum distribution rule is only one of many new requirements that you need to be aware of), so you are on the right track if you are starting the planning process for this transition as early as possible.
Adapting your Senior Executive Transition Plan to a New Reality
If your organization has long-standing and effective top senior management team members (CEO, Executive Director, COO, CFO, etc.) approaching the end of their tenure and you have a thoughtful transition plan in place – good for you. However, even the best plans might need adjustments, considering that recent circumstances have changed materially for most organizations. Consequently, reviewing your senior executive transition plan to take advantage of new opportunities and adapt to new hurdles is a most prudent course of action.
Q&A #23 – Is it better to file a late Form 990 or file an incomplete Form 990 by the deadline?
The short answer is that you should wait until your Form 990 is complete and accurate before filing, even if it is late. In the worst-case scenario, you may have to pay late filing penalties. Also, be aware that your organization’s tax-exempt status will be auto-revoked for failure to file for 3 years in a row, so a late filing can trigger this revocation if you have already failed to file for the previous 2 years.
The First Page of the Form 990 Is Key to Making a Good First Impression
An organization’s Form 990 is universally recognized as a key source of information by the general public, including constituents, donors, grantors, sponsors, and governments. Yet, I often feel that many nonprofits are not paying enough attention to whether the Form 990 adequately tells the complete story about how hard they work to fulfill their mission.
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Annual Budget Process Assessment: Is Your Budgeting Process Helping to Drive Results? [SUBSCRIBERS-ONLY]
Stepping back once a year to take a high-level assessment of your budget system is both a best practice and a proactive exercise.
There are five important questions to keep in mind as you work through the assessment process.
Q&A #22 – How should I communicate with my Board during tough times in between Board meetings?
Balancing regular and new communication pathways to the Board of Directors is the key to providing information in between Board meetings. I suggest leaning slightly towards over-communicating vs. under-communicating. Organizations that do not currently send out Board reports in between Board meetings (where the Board meets quarterly or less frequently) should immediately consider adding monthly Board reports that include financial reporting and performance updates.
A Case Study in the Risks of Fiscal Sponsorship
Nonprofit Quarterly recently covered an interesting case of fiscal sponsorship gone wrong. As originally reported by a local news website, Baltimore Brew, the case involves an organization called Strong City Baltimore. This situation is an unfortunate reminder that fiscal sponsorship presents many risks if not done correctly. In particular, the case exposes an often-overlooked reality that fiscal sponsorship cannot work if the fiscal sponsor does not have the capacity and experience to handle the immense responsibility of administering funds for a variety of sponsored projects.
Q&A #21 – Which state’s laws govern our telecommuting employees?
You have correctly identified an extremely complex issue for which you will certainly need individualized advice. The issue of which state employment laws govern telecommuting employees impacts your organization’s responsibilities on a wide range of laws including but not limited to unemployment insurance, income tax withholding, wage & hour laws, workplace safety, anti-discrimination, and paid and unpaid leave.
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EBOOK: Nonprofit Legal Basics Primer [SUBSCRIBERS-ONLY]
This 48-page primer provides an overview of the key areas of nonprofit law governing 501(c)(3) organizations, including federal tax law requirements, state nonprofit corporation and tax law, fundraising laws, and employment law basics. This primer is tailored for organizations that are incorporated and operated in the District of Columbia, but many of the subject areas are useful for organizations based in other states.
Q&A #20 – Which state’s laws should govern our contracts?
The short answer is that it is generally up to the parties to select the state whose laws will govern interpretation of the contract, and there is no one “correct” state that you have to select. Only in rare instances will a court override the state of governing law specified in a contract. Which state is the best choice is a more complicated question that depends on the circumstances.
Staying on Course: What to Do If You Are in the Middle of a Multi-Year Transformation Plan
Good for you if you started a major transformation plan before the pandemic hit. While the pandemic forced many nonprofits to quickly pivot to change mode, your organization is in the relatively good position of having already embraced and started this process. Now the challenge is how to stay on course while recognizing that the world around you has changed.
Q&A #19 – What’s the difference between an MOU and a contract?
In my experience, the concept of a “memorandum of understanding” or “MOU” is widely misunderstood in the nonprofit community. The same goes for similar terms like “memorandum of agreement” (MOA) and “memorandum of intent” (MOI).
Q&A #18 – Is it reasonable to use the same CPA firm to do our audits for more than 6 years?
This is a very common and important question that must be considered on a regular basis. The key to the answer is defining and establishing what is the “regular basis” in your governance related financial statement audit management practices.
What I Look For When Deciding to Donate: An Attorney’s Perspective
The unprecedented social, economic, and public health upheaval of the past few months has led many people across the country to make heart-felt charitable donations (to the extent they are financially able to do so). Many would-be donors are looking to support nonprofits working in cause areas that may be unfamiliar to them, such as organizations providing COVID-19 relief, scientific research organizations, and organizations that combat racism.