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Q&A #76 – Is Form 990, Schedule B donor information required with my organization’s state charitable solicitation registrations?
The answer should be no, for now. This past summer, the Supreme Court invalidated California’s requirement to include unredacted Form 990, Schedule B donor information as part of its charitable solicitation registration law in Americans for Prosperity Foundation v. Bonta, No. 19-251 (July 1, 2021). Prior to this decision, California was one of a handful of states that required this donor information, along with New York, New Jersey, and Hawaii. All except for Hawaii have since explicitly suspended this requirement in response to Bonta, and Hawaii has not yet clarified its position.
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Supercharge Your Nominations Committee [SUBSCRIBERS-ONLY]
The typical nonprofit organization nominations committee is active for only a short period of time with a single objective: to assemble a list of recommendations for nominees to replace open and expiring officer and director positions. We need to break out of this mode and supercharge our nominations committees by having them meet throughout the fiscal year and broaden and reprioritize their service objectives.
Q&A #75 – Are there advantages to 501(c)(4) status compared to 501(c)(6) status?
Both 501(c)(4) and 501(c)(6) organizations are permitted to engage in unlimited amounts of lobbying so long as the lobbying is consistent with the organization’s tax-exempt purposes. The main advantage of 501(c)(4) status as compared to 501(c)(6) status is that there is more flexibility with regard to the organization’s governance structure. However, there are some downsides that should also be considered.
Reporting the Total Number of Volunteers on the Form 990
Nonprofits have only a few touchpoints where a lasting impression can be made in the blink of an eye. These opportunities must be given careful thought so they can be optimized and leveraged before they disappear. The total number of volunteers reported on Page 1, Line 6 of the Form 990 is one of those key touchpoints that most organizations take for granted.
Q&A #74 – How does simple majority voting differ from other types of Board voting?
A “simple majority” generally means more than half of the votes cast, but can also refer to approval by more than half of the Directors present at the meeting (a subtle but meaningful distinction). This is the most common type of Board voting, and many nonprofit organizations use simple majority voting as the default for most Board decisions in their Bylaws. A key distinguishing feature of simple majority voting is that it only counts votes cast or Directors present, in contrast with decisions that require approval of a majority or more of the entire Board of Directors (regardless of whether some Board members abstain or are absent), sometimes called “absolute majority” voting.
Key Takeaways from the 2021 ASAE Annual Meeting
My expectations and experiences from the virtual 2021 ASAE Annual Meeting were different from last year because I thought for sure we would be meeting in-person this year, which, of course, turned out not to be the case. This simple statement was confirmation that the world around us has changed for the long term. Three observations hit home that made a deep impression related to nonprofit organization management practices: listen with purpose, stop using outdated contract templates, and take a fresh look at policies.
Q&A #73 – What provisions should be included in an MOU for a joint program?
The first step is to decide whether a Memorandum of Understanding (MOU) or formal contract (agreement) is most appropriate for your situation. An MOU is a good choice if the parties are still in the exploratory phase of the relationship, since MOUs should be used as non-binding documents that lay out the framework for a more formal agreement that the parties intend to sign later. The terms of an MOU vary widely depending on the relationship and project, but there are some provisions that are typically found in an MOU of this type.
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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.
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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.
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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.