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Operating Reserve Policies are a Perfect Vehicle for Targeting Your Budget’s Bottom-Line
Nonprofit organizations would greatly benefit from adopting a standardized policy for strategically targeting and managing their annual budget bottom-line. You could argue that there is no greater safety net for overall financial health than having a formal policy, or at least a budget working rule or guideline, for this important metric.
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.
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Three Key Planning Steps to Get a Head Start on Your Next Audit [SUBSCRIBERS-ONLY]
With disruptions from COVID-19 continuing into the foreseeable future, it is best to start planning for your next year-end financial statement audit early. Odds are that your next audit experience will be different than your last one due to the many programmatic and operational changes that most nonprofits have experienced this year. Investing some extra time in front-end logistical planning will lead to smoother sailing and better outcomes.
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.
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A Revenue Aligned Budget is the Safe Way to Go [SUBSCRIBERS-ONLY]
I feel the time is right to stretch our budget planning and begin to envision operations from the perspective of a balanced budget aligned to a conservative estimate of revenue and funding for the next 12 months. I am now advocating for using a “revenue aligned budget” strategy that is realistic in nature, obtainable, with low risk and a high degree for success.
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.
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Some Legal Issues to Consider When Trying to Get Out of Your Office Lease [SUBSCRIBERS-ONLY]
As the financial pressures on nonprofit organizations mount and many employees continue to work remotely from home, nonprofits are increasingly examining their options for getting out of their current office leases. This issue is particularly problematic for nonprofits whose current office leases are set to expire years into the future. A careful assessment of your organization’s legal rights and options is critical to navigate this issue effectively.
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.
It is Time to Be Proactive With Your Office Lease Situation
A familiar scenario has played out month after month for many nonprofit organizations during this prolonged period of financial uncertainty, remote work, and virtual programs and meetings. The time has come again to pay another month’s rent for your headquarters office. Frustrated that your office space is going mostly unused, you cut the check and feel like this is a wasted expense. While it is easy to feel helpless in this situation, it is time to start the proactive planning process and take control. There are only no options when you have convinced yourself there are no options.
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.
The Finance Calendar: An Essential Tool that is Useful to All
I need to be more grateful for my “over-worked” and “under-appreciated” finance calendar. In my experience, nonprofit organizations gain comfort from its content and a sense of order and completeness from its structure, as do their many end-users, both inside and outside of the organization.
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.
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Planning Considerations Before Launching a Capital Campaign or Building a New Endowment Fund [SUBSCRIBERS-ONLY]
Having a vision for the future with aspirations for growth and new major efforts is exciting and can spark energy and enhance a culture of vitality for your organization. Capital campaigns and building an endowment fund can be game-changing tactics, but they come with a whole new set of challenges and risks. It is easy to get excited about these types of funding but hard to have success, especially for nonprofits who have no experience raising these kinds of funds and managing their use.
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.
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Planning for the Next Annual Budget Cycle: Where Do You Start?[SUBSCRIBERS-ONLY]
Compiling the annual budget for the next fiscal year is always a challenge and requires as much pre-planning as possible. During periods of unpredictable volatility, we need to get started early and consider new strategies we might not have used in the past. Top-down budgeting and stress testing your funding sources might be the best way to get started on next year’s budget.