Assessing  Management & Governance:  Nonprofit Operations &  Best Practices Presented by  Doug Sauer, CEO  New York Counci...
What We Will Be Covering <ul><li>The Nonprofit as a Corporation </li></ul><ul><li>Governance Structures & Responsibilities...
The Legal Corporation <ul><li>Corporation is created in NYS </li></ul><ul><ul><li>Either through Articles of Incorporation...
Fiscal Sponsorship… <ul><li>Is when a 501(c)3 allows its legal & tax-exempt status to be used by another group or organiza...
The Mission <ul><li>The tax-exempt purposes for which resources  are to be devoted </li></ul><ul><ul><li>Defines scope of ...
The IRS Form 990 Series <ul><li>Promotes Disclosure & Accountability </li></ul><ul><li>Used by “watchdog” organizations & ...
What Form to File 2010 Tax Year & Later   (Filed in 2011 & Later) Form to File Instructions Gross receipts normally ≤ $50,...
IRS Form 990  (con’t) <ul><li>State mission? </li></ul><ul><ul><li>Has it changed, any new activities, are these activitie...
IRS Form 990  (con’t) <ul><li>Disclosures on international activities (Patriot Act)? </li></ul><ul><li>Conflict of interes...
Charities Form 500 & NYS Auditing Requirements <ul><li>Annually Filed with NYS Attorney General </li></ul><ul><ul><li>Must...
Board Members & Officers are Ultimately Responsible For: <ul><li>Discharging the duties of their position in good faith an...
Board Members Are Fiduciaries <ul><li>A duty to act for someone else’s benefit </li></ul><ul><li>Has special responsibilit...
Major Policy & Monitoring Functions <ul><li>Board Management & Development </li></ul><ul><li>Personnel Oversight </li></ul...
Policy & Implementation Spheres Policy-making Implementation Operating  Policies © 2010 New York Council of Nonprofits, In...
Key Board Officers  <ul><li>Chair (President)  </li></ul><ul><li>Vice-Chair </li></ul><ul><li>Treasurer </li></ul><ul><li>...
NYS Requirements on Conflict of Interest <ul><li>Individual Officers & Board Members must disclose “material facts” & “pec...
Best Practice Standards Conflict of Interest <ul><li>Higher Standard Options: </li></ul><ul><ul><li>Define broadly: materi...
Best Practice Standards Conflict of Interest  (con’t) <ul><li>Do not allow any employees (including CEO/ED) to be a voting...
Best Practice Standards Conflict of Interest  (con’t) <ul><li>Limit or prohibit nepotism for board & staff </li></ul><ul><...
Best Practice Standards Conflict of Interest  (con’t) <ul><li>Bidding Policy </li></ul><ul><ul><li>For set dollar amount (...
The Not-for-Profit  as Employer <ul><li>The Board of Directors is the employer of record, as any other employer, and thus ...
The Board as the  Employer <ul><li>Is treated as any other employer would be in NYS </li></ul><ul><li>Must have personnel ...
Two Major Types of Worker Classification <ul><li>Employees </li></ul><ul><ul><li>At will </li></ul></ul><ul><ul><li>Contra...
Worker Classification <ul><li>Failure to appropriately determine who is & who is not an employee, or to clearly delineate ...
What is an Employee? <ul><li>The degree of CONTROL, SUPERVISION AND DIRECTION are touchstone determinants </li></ul>
Factors that Indicate “Control” <ul><li>Determining when, where & how services will be performed </li></ul><ul><li>Providi...
Special Rules for Performing Artists <ul><li>The Unemployment Insurance Division of the NYS Department of Labor has issued...
The Executive Director (or CEO) <ul><li>At-will or contract employee? </li></ul><ul><li>Exercises authority as designated ...
Best Practice Tip <ul><li>Define general & lasting parameters in bylaws </li></ul><ul><li>Have updated, board approved job...
Artistic Directors <ul><li>Typically: </li></ul><ul><ul><li>The most senior creative employees of an artistic institution ...
Open Discussion & Questions
Assessing  Management & Governance:  Nonprofit Operations &  Best Practices Presented by  Doug Sauer, CEO  New York Counci...
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  • ©2004 CCSNYS All Rights Reserved.
  • ©2004 CCSNYS All Rights Reserved.
  • ©2004 CCSNYS All Rights Reserved.
  • ©2004 CCSNYS All Rights Reserved.
  • ©2004 CCSNYS All Rights Reserved.
  • Nycon dec gov training

    1. 1. Assessing Management & Governance: Nonprofit Operations & Best Practices Presented by Doug Sauer, CEO New York Council of Nonprofits, Inc. New York City-Albany-Buffalo-Poughkeepsie-Rochester-Oneonta
    2. 2. What We Will Be Covering <ul><li>The Nonprofit as a Corporation </li></ul><ul><li>Governance Structures & Responsibilities </li></ul><ul><li>Staff Leadership & Management </li></ul>
    3. 3. The Legal Corporation <ul><li>Corporation is created in NYS </li></ul><ul><ul><li>Either through Articles of Incorporation (Department of State) or Charter (Department of Education) </li></ul></ul><ul><ul><li>Must have at least 3 board members </li></ul></ul><ul><ul><li>May be a membership corporation </li></ul></ul><ul><li>Then apply for IRS tax exemption via form 1023 </li></ul><ul><li>All DEC grantees must be 501(c)3’s </li></ul><ul><li>Two other major types are 501(c)4’s and 501(c)6’s </li></ul><ul><li>Nonprofits can have subsidiaries or “related” corporations </li></ul>
    4. 4. Fiscal Sponsorship… <ul><li>Is when a 501(c)3 allows its legal & tax-exempt status to be used by another group or organization </li></ul><ul><li>Key issues </li></ul><ul><ul><li>Activities must be related to the 501(c)3’s mission </li></ul></ul><ul><ul><li>The fiscal sponsor is responsible for proper use of funds and all required reporting </li></ul></ul><ul><ul><li>Written agreement between the parties should exist </li></ul></ul><ul><ul><li>Funders need to understand the relationship </li></ul></ul>
    5. 5. The Mission <ul><li>The tax-exempt purposes for which resources are to be devoted </li></ul><ul><ul><li>Defines scope of activities & customers </li></ul></ul><ul><ul><li>Exempt activities flow from mission </li></ul></ul><ul><ul><li>Unrelated Business Income Tax (UBIT) </li></ul></ul><ul><li>Official statement is in the Certificate of Incorporation or Charter, or as amended </li></ul><ul><ul><li>Check IRS application, IRS Form 990 & audit-be consistent </li></ul></ul>
    6. 6. The IRS Form 990 Series <ul><li>Promotes Disclosure & Accountability </li></ul><ul><li>Used by “watchdog” organizations & donors to determine how funding decisions are made </li></ul><ul><li>Compliance with best practices </li></ul><ul><li>Check it out on the web – www.guidestar.com </li></ul><ul><li>www.irs.gov </li></ul>
    7. 7. What Form to File 2010 Tax Year & Later (Filed in 2011 & Later) Form to File Instructions Gross receipts normally ≤ $50,000 Note: Organizations eligible to file the e-Postcard may choose to file a full return 990-N n/a Gross receipts < $200,000, and Total assets < $500,000 990-EZ or 990 Instructions Gross receipts ≥ $200,000, or Total assets ≥ $500,000 990 Instructions Private foundation 990-PF Instructions
    8. 8. IRS Form 990 (con’t) <ul><li>State mission? </li></ul><ul><ul><li>Has it changed, any new activities, are these activities related? </li></ul></ul><ul><li>Did the Board review audit? Review 990 before submission? % of funds used for management & general, and fundraising? </li></ul><ul><li>Whistleblower policy? </li></ul><ul><li>Record retention? </li></ul><ul><li>Gift acceptance? </li></ul><ul><li>Compensation policies for key employees & officers? </li></ul><ul><li>Paid board members? </li></ul>
    9. 9. IRS Form 990 (con’t) <ul><li>Disclosures on international activities (Patriot Act)? </li></ul><ul><li>Conflict of interest policy? </li></ul><ul><li>Business transactions with key employees or board members or their immediate families? </li></ul><ul><li>Business transactions among board members/key employees? </li></ul>
    10. 10. Charities Form 500 & NYS Auditing Requirements <ul><li>Annually Filed with NYS Attorney General </li></ul><ul><ul><li>Must file if over $25,000 in contributions whose total revenue </li></ul></ul><ul><ul><li>Must meet NYS Audit Requirements & submit: </li></ul></ul><ul><ul><ul><li>Independent Audit if revenues over $250K </li></ul></ul></ul><ul><ul><ul><li>CPA “Review” – if between $100K-$250K </li></ul></ul></ul><ul><ul><ul><li>Submit Financial Report certified by Board –under $100K (CPA not needed) </li></ul></ul></ul><ul><ul><li>If not filed, could be fined or Charities Registration number could be suspended </li></ul></ul><ul><ul><li>Result could be IMMEDIATE funding restrictions </li></ul></ul>
    11. 11. Board Members & Officers are Ultimately Responsible For: <ul><li>Discharging the duties of their position in good faith and with that degree of diligence, care, loyalty, & skill which ordinarily reasonable persons would exercise under similar circumstances in like positions </li></ul><ul><li>Assessment Note – The legal minimum for board members is 3 . Bylaws may state a higher number. </li></ul>
    12. 12. Board Members Are Fiduciaries <ul><li>A duty to act for someone else’s benefit </li></ul><ul><li>Has special responsibilities in connection with the administration, investment and distribution of assets, where those assets belong to someone else </li></ul><ul><li>Duties of Care, Obedience & Loyalty </li></ul>
    13. 13. Major Policy & Monitoring Functions <ul><li>Board Management & Development </li></ul><ul><li>Personnel Oversight </li></ul><ul><li>Finances/Fixed Assets Oversight </li></ul><ul><li>Resource Development </li></ul><ul><li>Stakeholder/Community Relations </li></ul><ul><li>Program Services: Quality Assurance, Evaluation & Continuous Improvement </li></ul><ul><li>Planning for the Future </li></ul>
    14. 14. Policy & Implementation Spheres Policy-making Implementation Operating Policies © 2010 New York Council of Nonprofits, Inc. All Rights Reserved. Board of Directors Area of Shared Responsibilities Executive Director/CEO Area of Shared Responsibilities Staff
    15. 15. Key Board Officers <ul><li>Chair (President) </li></ul><ul><li>Vice-Chair </li></ul><ul><li>Treasurer </li></ul><ul><li>Secretary </li></ul><ul><li>Executive (paid; usually ex-officio, non-voting) </li></ul><ul><li>Assessment Note: NYS law requires that there be someone serving as Chair, Treasurer & Secretary. The Chair cannot serve also as Secretary. Officers cannot resign their positions without qualified replacements. </li></ul><ul><li>r </li></ul>
    16. 16. NYS Requirements on Conflict of Interest <ul><li>Individual Officers & Board Members must disclose “material facts” & “pecuniary gain” in decision/actions and must abstain from voting </li></ul><ul><li>Payment & contracts between officers & directors are allowed so long as it is fair to the nonprofit & the officer or director does not breach his or her fiduciary duty by making a profit </li></ul><ul><li>Assessment Note – Payment to board members is a rare (and not best) practice & generally frowned upon by the IRS, funders & the public. </li></ul>
    17. 17. Best Practice Standards Conflict of Interest <ul><li>Higher Standard Options: </li></ul><ul><ul><li>Define broadly: material & other interest; actual & perceived </li></ul></ul><ul><ul><li>Have any & all interests that may compromise or be perceived as such declared at earliest moment </li></ul></ul><ul><ul><li>Prohibit any interested influence being exercise </li></ul></ul><ul><ul><ul><li>Prohibiting attendance at meeting, lobbying ED or other board members, etc. </li></ul></ul></ul>
    18. 18. Best Practice Standards Conflict of Interest (con’t) <ul><li>Do not allow any employees (including CEO/ED) to be a voting member of the board </li></ul><ul><li>Allow no self-dealing by board or employees (particularly key leadership) </li></ul><ul><li>Prohibit loans from the organization to staff </li></ul><ul><ul><li>Note: Loans to board members are prohibited under law </li></ul></ul><ul><li>Prohibit loans from board members & staff to organization </li></ul>
    19. 19. Best Practice Standards Conflict of Interest (con’t) <ul><li>Limit or prohibit nepotism for board & staff </li></ul><ul><ul><li>Hiring, supervision & contracting </li></ul></ul><ul><ul><li>Example: policy that prohibits an employee to be in the supervisory chain of a household/family member </li></ul></ul><ul><li>Maintain “independent” board composition (i.e. no household & family relationships among board members) </li></ul>
    20. 20. Best Practice Standards Conflict of Interest (con’t) <ul><li>Bidding Policy </li></ul><ul><ul><li>For set dollar amount (i.e. $5K) </li></ul></ul><ul><ul><li>For any transactions to be done with officers, board or employees </li></ul></ul><ul><li>Board approval of all business transactions between the nonprofit and the board & employees, including those that would normally be a decision of management </li></ul><ul><li>Restrictions on officers or board members applying for paid positions </li></ul><ul><ul><li>i.e. Must resign from board at application or expression of interest and cannot rejoin board for a period of time </li></ul></ul>
    21. 21. The Not-for-Profit as Employer <ul><li>The Board of Directors is the employer of record, as any other employer, and thus has the liability exposure </li></ul><ul><ul><li>CEO/ED may be delegated the responsibility to hire, enter into employment or contracting agreements, supervise, & terminate; but does so on behalf of the Board </li></ul></ul><ul><ul><li>Is not independent of the board </li></ul></ul>
    22. 22. The Board as the Employer <ul><li>Is treated as any other employer would be in NYS </li></ul><ul><li>Must have personnel policies </li></ul><ul><li>NYS requirements </li></ul><ul><ul><li>Working hours </li></ul></ul><ul><ul><li>Personal, sick & vacation policy </li></ul></ul><ul><ul><li>Holiday pay policy </li></ul></ul><ul><ul><li>Posted smoking policy </li></ul></ul><ul><li>Contractual requirements, i.e. drug-free workplace </li></ul>
    23. 23. Two Major Types of Worker Classification <ul><li>Employees </li></ul><ul><ul><li>At will </li></ul></ul><ul><ul><li>Contracted </li></ul></ul><ul><ul><ul><li>Exempt </li></ul></ul></ul><ul><ul><ul><li>Non-Exempt </li></ul></ul></ul><ul><li>Independent Contractors </li></ul>
    24. 24. Worker Classification <ul><li>Failure to appropriately determine who is & who is not an employee, or to clearly delineate the duties of contractors could have serious & costly consequences for the employer </li></ul><ul><li>Assessment Note: ED’s should rarely if ever </li></ul><ul><li>should be independent contractors. </li></ul>
    25. 25. What is an Employee? <ul><li>The degree of CONTROL, SUPERVISION AND DIRECTION are touchstone determinants </li></ul>
    26. 26. Factors that Indicate “Control” <ul><li>Determining when, where & how services will be performed </li></ul><ul><li>Providing facilities, equipment tools & supplies </li></ul><ul><li>Directly supervising the services </li></ul><ul><li>Stipulating the hours of work </li></ul><ul><li>Requiring exclusive services </li></ul><ul><li>Setting the rate of pay </li></ul><ul><ul><li>Providing fringe benefits </li></ul></ul>
    27. 27. Special Rules for Performing Artists <ul><li>The Unemployment Insurance Division of the NYS Department of Labor has issued more specific guidelines on whether a person defined as a “performance artist” is truly an employee or an independent contractor </li></ul>
    28. 28. The Executive Director (or CEO) <ul><li>At-will or contract employee? </li></ul><ul><li>Exercises authority as designated by the board & is accountable for overall organizational performance </li></ul><ul><li>Provides vision, professional support, guidance & advice to board </li></ul><ul><li>Advances & protects fiduciary obligations of organization & board </li></ul>
    29. 29. Best Practice Tip <ul><li>Define general & lasting parameters in bylaws </li></ul><ul><li>Have updated, board approved job description or clearly defined contract </li></ul><ul><li>Evaluate in writing annually </li></ul>
    30. 30. Artistic Directors <ul><li>Typically: </li></ul><ul><ul><li>The most senior creative employees of an artistic institution </li></ul></ul><ul><ul><li>Responsible for motivating staff to produce the highest quality of work while maintaining the organization's mission </li></ul></ul>
    31. 31. Open Discussion & Questions
    32. 32. Assessing Management & Governance: Nonprofit Operations & Best Practices Presented by Doug Sauer, CEO New York Council of Nonprofits, Inc. New York City-Albany-Buffalo-Poughkeepsie-Rochester-Oneonta
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