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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.
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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.
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.
The Personal Liability Risks of Nonprofit Board Service
Serving on the Board of Directors of a nonprofit organization can be a rewarding experience that offers the chance to give back to a meaningful cause while providing a learning experience and opportunities to deepen one’s connections and stature within the community. However, this positive experience comes with a level of personal liability exposure under certain circumstances.
It’s Never Too Early to Start the Process of Finding the Right Treasurer
All officer positions on the Board are important. Finding the right experience, diversity, and balance matched to your organization’s evolving needs are key drivers of performance and sustainability. However, the position of Treasurer is special and requires a unique skillset. Thus, starting the process of finding the right Treasurer early and thoughtfully will benefit your organization substantially.
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.
Q&A #25 – What’s the difference between a merger and a transfer of assets?
The key difference is that a merger generally means that the “surviving” organization takes on all of the assets and liabilities of the organization that it is absorbing, while a transfer of assets can be structured so that the surviving organization receives only the assets that it wants, without the transferor organization’s other liabilities (except for liabilities that are attached to the specific assets that are transferred, such as a transfer of real estate that is subject to a mortgage).
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.