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![Investment Committees Should Be About Stewardship and Not Just Market Performance [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1707310888522-NFQ57145HZGI112G3R9W/jametlene-reskp-3Dtu6_XfqIk-unsplash.jpg)
Investment Committees Should Be About Stewardship and Not Just Market Performance [SUBSCRIBERS-ONLY]
Investment committees are often judged by how well the investment portfolio performed as compared to the market. However, investment committee responsibilities are much broader than just monitoring market performance. Nonprofit organizations will be better off if they design and focus investment committee protocols, policies and working rules around the primary role of stewardship of the organization’s long-term investment assets.
Q&A #68 – What does it mean for a business activity to be “unrelated” for UBIT purposes?
In general, an activity triggers unrelated business income tax (UBIT) if it is: (1) “unrelated” to the organization’s tax-exempt purpose; (2) a “trade or business”; and (3) “regularly carried on.” It is a common misconception that using the revenue from a business activity solely for programs in furtherance of the mission is sufficient to make the activity “related” and thereby avoid UBIT. How an organization uses the funds is irrelevant for UBIT purposes, and a business is not considered “related” unless the activity itself has a substantial causal relationship to the achievement of the organization’s tax-exempt purpose.
Aim for Transition Rather than Recovery
Nonprofit organizations are getting used to operating in a different world. Uncertainty, disruption, and volatility are now widely expected. Legacy planning systems and static governance tactics are a thing of the past. As we plan going forward, nonprofit leaders need to adopt a “Transition Planning” mindset instead of aiming for “Recovery” goals. There is no going back to 2019. To successfully navigate this new world, we need to bring on our “Transition Planning Swagger.”
Q&A #67 – When does sponsorship cross the line into advertising?
The difference between sponsorship (or more precisely, acknowledgment of your corporate sponsors) and advertising is addressed in the unrelated business income tax (“UBIT”) rules. While revenue from advertising typically triggers UBIT, revenue from sponsorship is shielded from UBIT if you adhere to specific rules. The key principle is that the acknowledgment of the sponsor must generally avoid qualitative or comparative descriptions of the sponsor’s business, products, or services.
![Empathy and Social Purpose Have a Special Place in Financial Decision-Making [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1709991964917-EVO5I5G3KHR0UM4U8LNQ/pexels-pixabay-113737.jpg)
Empathy and Social Purpose Have a Special Place in Financial Decision-Making [SUBSCRIBERS-ONLY]
Should nonprofit organizations make room for social justice, empathy, and compassion in the workplace? The answer is an absolute yes. Can financial decision-making benefit from a workplace culture that includes “social purposing”? Again, the answer is yes if you can link operational planning and allocation of financial resources with a broader set of perspectives that can surface from active “job purposing.”
Q&A #66 – Must a charity’s donation acknowledgement letter reflect the value of a celebrity’s presence?
The Treasury Regulations related to “quid pro quo” contributions (summarized in IRS Publication 1771) generally require that charities include in the acknowledgment letter a good faith estimate of the fair market value of goods or services provided to a donor in exchange for the donation, and only the portion of the donation that exceeds this fair market value is eligible for the charitable deduction. However, these regulations provide that a celebrity’s presence generally does not need to be taken into account when determining fair market value.
Returning to the Office is More than Just an HR Challenge
Returning to an in-office working environment is more complicated than many might expect. When the pandemic started, nonprofit organizations pivoted to remote working in a matter of days, driven mostly by mandatory restrictions over which we had no control. Returning to the office is not nearly so clear-cut. This time around we control the process, so we need to be extra thoughtful with our approach and inclusive with our actions.
Q&A #65 – Is it legal to implement a “use it or lose it” annual PTO policy?
Whether an organization is allowed to implement a “use it or lose it” policy for annual paid time off (PTO), under which employees would forfeit unused PTO by the end of each year, depends on the state laws applicable to where the employees work. This can be a difficult question with respect to PTO policies that combine vacation and sick leave, as some states have different rules for each type of leave. In general, it is usually permissible to have a limit on the carryover of unused leave or a cap on maximum leave accrual, but it is important to think through the details and carefully review the laws of all applicable states.
![Apply Phase-In Strategies to Triumph Over Uncertainty and Gain Acceptance [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1709992075888-Y00VREJ5F6ZMAO68BSKH/glen-carrie-tF0PZC1MFqE-unsplash.jpg)
Apply Phase-In Strategies to Triumph Over Uncertainty and Gain Acceptance [SUBSCRIBERS-ONLY]
There has been and will continue to be a lot of uncertainty in the world, most of which is outside of our control. For example, economic, safety, and health factors have been key sources of uncertainty recently, followed closely by people’s comfort levels, trust, and confidence. Applying a phase-in strategy when implementing new changes during periods of high uncertainty will tilt the success factors in your direction.
Q&A #64 – Is it appropriate to take an official action in executive session?
Whether it is appropriate to take an official action during executive session depends on what your organization and Board understands executive session to mean. “Executive session” generally refers to a private meeting of the Board (and perhaps select other invitees), which is intended to provide a space where Board members can hold candid discussions on sensitive or confidential matters. Executive session is a useful and appropriate format for some issues, but it is important to be clear about whether executive session is intended to be “off the record,” as official Board actions must ultimately be documented in the meeting minutes.
![Why Actual Timekeeping is Better Than Estimated Labor Allocations [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1709126682257-MCT1AEF950UEMB24BZKM/ales-krivec-ZMZHcvIVgbg-unsplash.jpg)
Why Actual Timekeeping is Better Than Estimated Labor Allocations [SUBSCRIBERS-ONLY]
Labor is the largest and most precious resource for nonprofit organizations. Managing labor and directing how this valuable resource will be used are the bases for the most critical management decisions. However, too often nonprofits default to using estimated labor allocations, which is a disservice and often yields misleading results. Using actual contemporaneous timekeeping is the best method to track labor hours and observe and manage the impact that labor has on operations, resources, and financial health.
Q&A #63 – Are grants from foreign charities subject to the 2% limit when calculating public support on the Form 990, Schedule A?
This is a common question that has lacked a clear answer for a very long time. Most practitioners have concluded that grants from foreign charities meeting certain requirements should qualify to be counted in full for public support test purposes, and not subject to the 2% limitation, However, there is some risk that the IRS could disagree with this position.
When Designing an RFP for Audit Services, Think Good First Impressions and Efficiency
Think of your request for proposal (RFP) for audit services as your initial introduction and handshake. Your goal is to make a good first impression to the prospective audit firm. You want to convey a message that is positive, thoughtful, and efficient. If you can demonstrate that your organization will be the smoothest audit on the planet, the organization will be more likely to attract high quality audit firms to submit a proposal and obtain lower fee estimates.
Q&A #62 – Are Board members allowed to pursue funding opportunities for other organizations?
This question raises difficult issues under the “corporate opportunity doctrine,” which is rooted in the fiduciary duty of loyalty. Under the corporate opportunity doctrine, a corporation’s Board members must avoid diverting to themselves opportunities which in fairness ought to belong to the corporation (such as leasing or purchase of property, funding opportunities, mission-based activities, or other business opportunities that could be advantageous the organization).
![Finance Committee Orientation Meetings are Worth the Effort [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1708352747919-NWSWQ3SEBDOAYT548Y9B/chairs-2181916_1920.jpg)
Finance Committee Orientation Meetings are Worth the Effort [SUBSCRIBERS-ONLY]
Is having regular finance committee orientation meetings value-added? The answer is a “Strong Yes.” If you are thoughtful with planning and execution of the finance committee orientation meeting, the answer will be an “Amazing Yes.” The return on time and effort here will pay many dividends.