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![Nonprofits Should Stress Test Funding on a Regular Basis [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1709039967092-YB0T6IZRJG0SL2GJJBHW/bridge-4562163_1920.jpg)
Nonprofits Should Stress Test Funding on a Regular Basis [SUBSCRIBERS-ONLY]
Stress testing a nonprofit organization’s funding seems like a frightening proposition, conjuring images of doom and gloom. This is not the case at all. Regular stress testing of funding will enhance strategic planning, raise awareness of changing conditions, and stimulate an earlier call to action. All funding sources, both strong and weak, will benefit from these regular efforts.
Q&A #72 – What is required to meet the 10% facts and circumstances public support test?
It is common for 501(c)(3) public charities to rely on the 10% facts and circumstances test as an alternative to maintaining 33 1/3% public support that is generally required under Internal Revenue Code sections 509(a)(1) and 170(b)(1)(A)(vi). However, there are certain requirements that must be satisfied, and the Form 990, Schedule A requires organizations to explain how they meet these requirements.
Q&A #71 – What’s the difference between Model A and Model C fiscal sponsorship?
There are many different models of fiscal sponsorship. Model A and Model C are the most common. In Model A, the charitable project is carried out directly by the fiscal sponsor and the people who operate the project are employees or volunteers of the fiscal sponsor. The closely related Model B is very similar, except the people who operate the project are independent contractors of the fiscal sponsor rather than employees. In contrast, in Model C the fiscal sponsor has a more limited management role that is generally limited to receiving and disbursing grants in furtherance of the charitable project.
![Enterprise Resource Planning Should be About Mission, Not Just Systems [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1709991005676-UP6TOM3ZO6RDLPOK538Q/chris-liverani-dBI_My696Rk-unsplash.jpg)
Enterprise Resource Planning Should be About Mission, Not Just Systems [SUBSCRIBERS-ONLY]
Enterprise Resource Planning (ERP) is a hot topic in the field of nonprofit operations. Business systems need to run at maximum efficiency. We also need robust system integration to help nonprofit organizations to adapt to rapidly changing economic conditions (funding) and demand for services (programs and activities). However, ERP focus is too often centered on business systems by themselves when attention should be focused on mission and purpose.
Q&A #70 – How Can I Explain the Bottom-Line Budget Impact of Multi-Year Grants?
The answer is to take a two-pronged approach. First, prepare financial schedules that show the anticipated annual usage of the multi-year grant for the life of the grant. Second, using this information, be thoughtful and assertive with your messaging to your Board. Communicating in a multi-year format will help to move attention away from the impact of a multi-year grant on any single-year budget.
![Using Insurance Brokers as Trusted Business Advisors [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1709991714521-ZZ0NEYYWWOL4FQPQQ1ZD/mario-gogh-Yz9rpx3kiE8-unsplash.jpg)
Using Insurance Brokers as Trusted Business Advisors [SUBSCRIBERS-ONLY]
Insurance brokers have unique perspectives to share and should be included on your nonprofit organization’s team of trusted business advisors (“TBAs”). Insurance brokers are an organization’s first point of contact in the selection and purchase of insurance policies, and serve as an intermediary to the insurance carriers when questions, claims, and other risk management considerations arise. This experience makes your insurance broker an important resource in many aspects of risk management.
Q&A #69 – Can a grant from a previous grantor be treated as an unusual grant?
Large grants are usually a reason to celebrate, but some grants are so large that they pose significant problems for an organization’s public support tests. The ability to exclude “unusual grants” from the public support test can be extremely helpful in these situations. The fact that a grantor or funder has made contributions in the past is a significant factor weighing against unusual grant treatment, but this by itself is not necessarily disqualifying.
Creating a Culture of Projections: Actively Engaging Staff in the Financial Planning Process
Creating a culture of interactive, financial projection-based planning must be a primary practice within a nonprofit organization. To effectively achieve this goal, organizations need more than standard historical trend analysis derived from monthly financial statements and financial dashboards. These reports are necessary and important but should be considered as the starting point. Staff and management must be actively engaged in the planning process to create a “culture of projections” in which interactive questioning, rolling forecasts, and forward thinking can thrive.
![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.