0
 Focus

on basics in four areas:

› Nonprofit Governance
› Nonprofit Compliance
› Nonprofit Accountability
› Threats to N...
Governance


Articles of Incorporation

› Most Important Governing Document



Bylaws

› Should be readily available
› Should be re...
Board of Directors
› Minimum = 3 / Preferred = 5
Officers

–
President
Vice President
Secretary
Treasurer

Function...
Board Meetings don’t have to be

TORTURE!

Have an Agenda
 Be Prepared
 Know your Audience
 Keep it Short!
 Keep track...
1.

Keeps the meeting focused and moving
Include routine and special items
Consent Agendas save time
Have handouts for rep...
4.

Keep it SHORT!

1 hour or less (use “Time Checks”)
Agenda helps manage time
Robert’s Rules NOT required
If you can’t e...
3 “traditional” – 2 “extra”

Duty of Care (Due Diligence )
 Duty of Obedience
 Duty of Loyalty
 Duty to the “Mission”
...
1.

Duty of Care - Due Diligence

Board Members are required to be INFORMED
Must know - financial, government status, proj...
4.

Duty to the Mission

› KNOW - BELIEVE - SUPPORT the Mission
 Should be able to recite the Mission - anytime, anywhere...
Compliance
 State
 Federal

 Lobbying

(IRS Restrictions)
 Employment
 UBIT
Annual Business Entity Report

• Indiana Secretary of State
Entity Annual Report (E-1)
• Indiana State Board of Accounts
•...
IRS – 990 Form
<$50,000 – 990 N
• Change in threshold
beginning 2010
• On-line ONLY
• Due 5 + 15 after end of
fiscal year
...
CANNOT DO
• Endorse political
candidate
• Spend more than 5%
of annual budget on
lobbying activities
• Directly lobby
legi...
Employment
taxes and reports
must be timely
filed!

Federal -- 941 –
Employer’s
Quarterly Federal
Tax Return

State -- WH-...
UBIT – Unrelated
Business Income
Tax

• (A) Trade or business
• (B) regularly carried on
• (C) not “substantially related”...
Accountability
Board reports to
The Buck Stops
with the Board

• Donors
• Government
• Sponsors
• Grantors

Are you Good
Stewards of the
...


Policies for –
 Handling Money

 Recording Money
 Reporting Money

Handout – Nonprofit Financial Control Policy
Financial Procedures Manual
Restrictions documented and honored
• Donor restrictions
• Grant requirements
• Commingling Fu...
Regularly provide information to the Public

Required disclosures
• Tax returns
• Organizational Documents
• Articles of I...
Watch the Rules regarding charitable donations!

• What can be considered a donation?
• What paperwork is required?
• Dona...
Risk
Management
Do you NEED Insurance?
 What are your risks?


› Events

› Location/Premises
› Goods and Services


Insurance is recomm...
Don’t Leave
Home Without
It!

Most places
require it

“Slip and Fall”
insurance for
basic activities

Facility rental

Per...
Directors & Officers Insurance Protects
the Board and Key Staff
D&O
Insurance
covers

Breach of Duty

Wrongful acts of
the...


Best Practices to Prevent
Financial Crisis
› Identify Risk
› Ranks Risk
› Identify Policies to manage risk
› Implement ...
People

• Board members, volunteers,
employees, clients, donors, the
public.

Property

• Buildings, facilities, equipment...
Financial Oversight is the review of both finances and financial
practices
Ensures safe, ethical financial procedures
Prot...
Have and use financial control
policies

Know who handles the
money

Remove temptation
Review financial information
• ALSO...


General Tips for Healthy Nonprofits
› Pay attention to finances as well as mission
› Recruit Board members based on nee...
 Step

1 – Review the Organization

› How well do you meet your budget

(typical year)?
› What shortfall do you anticipat...
 Step

2 – Make a Plan

› Risk Management Plan
› What can you reduce and maintain

current levels of service?
› What can ...
 Step

3 – Creative Options
› New Fund Raising Opportunities
 Social media, networking, microfundraising

› Collaboratio...
 Step

4 – Acute Crisis Management

› Reduction in programs

 Prioritize – what MUST you retain?
 Reduce scope/ Increas...
Nonprofit Corporations
have the Public Trust
Ethical

conduct of Board and Staff is
essential!
› No conflict of interest ...
Ethics and Conduct – What NOT to do


Improper donor
acknowledgements
 Donations of time are not tax-

deductible




...
› Governance
› Compliance

› Accountability
› Risk Management


IRS.gov – Exempt Organizations
 Publication 557 – Tax Exempt Status Info

 Online – Exempt Org Select Check





...
Thank you for your
kind attention
Any questions?
Nonprofit governance basics 2014
Nonprofit governance basics 2014
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Nonprofit governance basics 2014

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Transcript of "Nonprofit governance basics 2014"

  1. 1.  Focus on basics in four areas: › Nonprofit Governance › Nonprofit Compliance › Nonprofit Accountability › Threats to Nonprofit Success
  2. 2. Governance
  3. 3.  Articles of Incorporation › Most Important Governing Document  Bylaws › Should be readily available › Should be reviewed and updated every 5 years › Should “work with” the Board  Conflict of Interest Policy › Sign every year › For new and returning board members Handout: Conflict of Interest Policy
  4. 4. Board of Directors › Minimum = 3 / Preferred = 5 Officers – President Vice President Secretary Treasurer Functional Committees
  5. 5. Board Meetings don’t have to be TORTURE! Have an Agenda  Be Prepared  Know your Audience  Keep it Short!  Keep track of what happens  Handout: Sample Agenda
  6. 6. 1. Keeps the meeting focused and moving Include routine and special items Consent Agendas save time Have handouts for reports and financial › › › › 2. Be Prepared Read your Board Packet - Know the issues Do your homework from previous meetings › › 3. › Have a (written) Agenda Know your Audience What does YOUR Board expect from meetings?  “Show and Tell” versus “Just the Highlights”  Level of detail expected in reports Board Meetings should be RELEVANT to the time, place, issues facing the board ›
  7. 7. 4. Keep it SHORT! 1 hour or less (use “Time Checks”) Agenda helps manage time Robert’s Rules NOT required If you can’t end on time – › › › ›  Ask the Board to help prioritize remaining agenda items  Save some items for another meeting  Consider a special meeting to handle special matters 5. Keep Track of What Happens at Meetings Have someone take notes and prepare minutes Keep track of who is assigned to which tasks Document who makes motions and note “nay” voters Record action taken on Board matters (HINT: sometimes the government will ask for copies of minutes) › › › › ›
  8. 8. 3 “traditional” – 2 “extra” Duty of Care (Due Diligence )  Duty of Obedience  Duty of Loyalty  Duty to the “Mission”  Duty to the well-being of the organization  Handout: 8 Questions Asked by Nonprofit Boards
  9. 9. 1. Duty of Care - Due Diligence Board Members are required to be INFORMED Must know - financial, government status, projects and operations › No excuse for ignorance › Includes a duty to train successors about their duties! › › 2. Duty of Obedience Do what you are required to by the order of the Board, the policies of the organization or the law › 3. Duty of Loyalty Support the Board - even when you don’t agree with it’s actions (or politely resign) › Don’t talk about Board matters outside the Board room › Always act in the organization’s best interest ›
  10. 10. 4. Duty to the Mission › KNOW - BELIEVE - SUPPORT the Mission  Should be able to recite the Mission - anytime, anywhere  (otherwise, why are you on the Board?) 5. Duty to the Well-Being of the organization › It is the responsibility of the Board of Directors to ensure the financial and philosophical well-being of the organization › The Board of Directors MUST:  Manage the organization through financial hardship  Ensure that programs and activities thrive  Ensure the longevity of the organization
  11. 11. Compliance
  12. 12.  State  Federal  Lobbying (IRS Restrictions)  Employment  UBIT
  13. 13. Annual Business Entity Report • Indiana Secretary of State Entity Annual Report (E-1) • Indiana State Board of Accounts • Financial Reporting for Government Funds NP-20 • Indiana Department of Revenue
  14. 14. IRS – 990 Form <$50,000 – 990 N • Change in threshold beginning 2010 • On-line ONLY • Due 5 + 15 after end of fiscal year • NO extensions of time! >$50,000 – 990 EZ/990 • Due 5 + 15 • 6 month automatic extension • For most nonprofits – 990 EZ • Minimal property or real estate • Normal gross receipts < $200,000 • Total Assets < $500,000 Failure to file – automatic revocation of §501(c)(3) status
  15. 15. CANNOT DO • Endorse political candidate • Spend more than 5% of annual budget on lobbying activities • Directly lobby legislators CAN DO • Hold Candidate forum • Educate the public on the issues important to the nonprofit • Encourage likeminded supporters to contact their legislators
  16. 16. Employment taxes and reports must be timely filed! Federal -- 941 – Employer’s Quarterly Federal Tax Return State -- WH-1 – Employer’s State Tax Return January 1 – ONLINE requirement for many organizations Federal – EFTPS (electronic federal tax payment system) State – IN-Tax Employer conduct “Exempt” versus “non exempt” employees Wages and Hours laws Fair Hiring and Nondiscrimination Does not apply to all employers APPLIES FOR GOVERNMENT FUNDING!
  17. 17. UBIT – Unrelated Business Income Tax • (A) Trade or business • (B) regularly carried on • (C) not “substantially related” to exempt purpose Examples: • Apartment rental income • Store or shop unrelated to mission (coffee shop) If UBIT constitutes “substantial portion” of income, nonprofit can lose exempt status!
  18. 18. Accountability
  19. 19. Board reports to The Buck Stops with the Board • Donors • Government • Sponsors • Grantors Are you Good Stewards of the resources the public entrusts in your care?
  20. 20.  Policies for –  Handling Money  Recording Money  Reporting Money Handout – Nonprofit Financial Control Policy
  21. 21. Financial Procedures Manual Restrictions documented and honored • Donor restrictions • Grant requirements • Commingling Funds Training program for Staff and Board Document Retention/Destruction Policy
  22. 22. Regularly provide information to the Public Required disclosures • Tax returns • Organizational Documents • Articles of Incorporation • Bylaws • Funds used for lobbying • Application for Exempt Status Recommended disclosures • Annual report • Basic Financial Statement • Report of Activities • Mission/Vision
  23. 23. Watch the Rules regarding charitable donations! • What can be considered a donation? • What paperwork is required? • Donations of goods or funds > $250 require written acknowledgement • How to handle In-Kind Donations • Magic language: “No goods or services were provide in exchange for this donation” NOTE – donations of TIME and EXPERTISE are NOT deductible! Handout: Top 10 Rules for Charitable Donations Handout: In Kind Donation Form + Instructions
  24. 24. Risk Management
  25. 25. Do you NEED Insurance?  What are your risks?  › Events › Location/Premises › Goods and Services  Insurance is recommended to protect the nonprofit in the event of a claim for harm to person or property.
  26. 26. Don’t Leave Home Without It! Most places require it “Slip and Fall” insurance for basic activities Facility rental Personal Injury Working with other organizations Property Damage NOTE – Usually DOES NOT COVER MEMBERS
  27. 27. Directors & Officers Insurance Protects the Board and Key Staff D&O Insurance covers Breach of Duty Wrongful acts of the board What D&O Does Provides legal defense Pays claims What D&O Doesn’t Normal liability claims Criminal acts Mismanagement
  28. 28.  Best Practices to Prevent Financial Crisis › Identify Risk › Ranks Risk › Identify Policies to manage risk › Implement protections › Implement procedures in event of crisis
  29. 29. People • Board members, volunteers, employees, clients, donors, the public. Property • Buildings, facilities, equipment, materials, copyrights, trademarks Income Goodwill • sales, grants, contributions, sponsors, fund raising • reputation, stature in community, ability to raise funds and appeal to prospective volunteers Handout – Risk Management Policy
  30. 30. Financial Oversight is the review of both finances and financial practices Ensures safe, ethical financial procedures Protects Nonprofits and the Directors/Staff Provides integrity and transparency to the public Catches financial difficulties before they become financial impossibilities Handout – 10 Tips for Keeping an Eye on Finances
  31. 31. Have and use financial control policies Know who handles the money Remove temptation Review financial information • ALSO - have independent review of finances Be aware that it can happen to your nonprofit! Handout: Sample Board Anti-Fraud Policy
  32. 32.  General Tips for Healthy Nonprofits › Pay attention to finances as well as mission › Recruit Board members based on need › Embrace in-kind donations – but have a plan › Make smart decisions about facilities › Growth is not always good – watch “mission creep” and inadequate capacity Handout – How Small Nonprofits Can Improve
  33. 33.  Step 1 – Review the Organization › How well do you meet your budget (typical year)? › What shortfall do you anticipate? › How long can you survive at reduced budget levels? › How are you affected by each funding source?
  34. 34.  Step 2 – Make a Plan › Risk Management Plan › What can you reduce and maintain current levels of service? › What can you reduce and maintain minimum service? › Where can you increase funding  Lapsed donors, new donors, alternate funding sources
  35. 35.  Step 3 – Creative Options › New Fund Raising Opportunities  Social media, networking, microfundraising › Collaborations with similar or complementary nonprofits › Spin-off/Re-Master current activities
  36. 36.  Step 4 – Acute Crisis Management › Reduction in programs  Prioritize – what MUST you retain?  Reduce scope/ Increase fees › Reduction in Staff  Reduction in Staff ≠ previous service levels  Reduction in Staff = do it right › What is your “limit”?  Minimum financial - resource - program - mission Handout: PR in times of Crisis – Preserving public image
  37. 37. Nonprofit Corporations have the Public Trust Ethical conduct of Board and Staff is essential! › No conflict of interest -- No self-dealing -- Volunteer Board  (but you can have paid staff that report to the Board) Three areas Nonprofits Fail Ethics Issues › Failure to watch the money › Failure to watch the staff (and each other) › Failure to watch conflicts of interest
  38. 38. Ethics and Conduct – What NOT to do  Improper donor acknowledgements  Donations of time are not tax- deductible   Donor “influence-buying” Improper arrangements with donors  Failing to include both spouses in joint gift paperwork   Staff/ED/Board/Volunteer accepting gifts from donors Personal Benefit from Nonprofit Work
  39. 39. › Governance › Compliance › Accountability › Risk Management
  40. 40.  IRS.gov – Exempt Organizations  Publication 557 – Tax Exempt Status Info  Online – Exempt Org Select Check      Indiana Secretary of State Indiana Department of Revenue Guidestar.org Charity Navigator Blue Avocado
  41. 41. Thank you for your kind attention Any questions?
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