Nonprofit Management Salinas
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Transcript of Nonprofit Management Salinas
RUNNING YOUR NON‐RUNNING YOUR NONPROFIT LIKE A BUSINESS
By Hayashi & Wayland Accounting & Consulting, LLPRob Lee, CPA
Overview
Transparency
Accountability
Marketing and development efforts
Web‐based presence
Promoting your brand
Transparency
Would you invest in a business you could learn little, if anything about?
How open is your organization to public scrutiny? Finances Finances
Operational functions
Decision making process
Transparency – Actions You Can Take
Is your charity listed on the IRS list of tax‐exempt charities?
Have you updated your listing at GuideStar?
Is your charity rated at Charity Navigator?
Does your non‐profit have a Better Business Bureau accredited charity seal?
Do you post your Form 990 on your website? Do you post your Form 990 on your website?
Do you know what the Sarbanes‐Oxley Act is?
Do you know what the California Non‐profit Integrity Act is?
Is Your Charity Listed on the IRS List of Tax‐Exempt Charities?Exempt Charities?
The IRS maintains a list of registered non‐profits that are eligible to receive tax‐deductible charitable contributions If you are a registered non‐profit in good standing, make sure your name
appears on this list www.irs.gov keyword search Pub 78
http://www.irs.gov/app/pub‐78/
Have You Updated Your Listing at GuideStar?GuideStar?
GuideStar publishes your Form 990 through an information sharing arrangement with the IRS www.guidestar.org
Is Your Charity Rated at Charity Navigator?
This watchdog organization rates 501(c)(3) charities based on their financial efficiency and other factors including: The ratio of overhead expenses (particularly fundraising expenses) to a non‐
profit's overall budget Donors want most of a non‐profit's revenue to go toward its programs
Evaluating Charities Not Currently Rated by Charity Navigator A Donor’s Viewby Charity Navigator – A Donor s View
Is it legit?
Is it effective?
Is it committed to the rights of donors?
Is it financially healthy?
Evaluating Charities From a Donor’s View
Is it legit? One of the first steps donors take to review an organization is to determine if it
is a bona fide non‐profit: Organization registered in the U.S.
Donor’s contribution to the organization is tax deductible
All charities that file a Form 990 are registered with the IRS
Donors can be sure the organization has been granted non‐profit status at: Publication 78 on the IRS website, www.irs.gov
CA Registry of Charitable Trust’s website, http://oag.ca.gov/charities
Evaluating Charities From a Donor’s View (continued)(continued)
Is it effective? Donors may:
Contact the charity directly to assess its goals, accomplishments and challenges
Explore the organization’s website and learn about the programs they operate
A donor’s attempt to communicate with the charity can reveal a lot about the organization
Review of Form 990, Statement of Program Service Accomplishments
Evaluating Charities From a Donor’s View (continued)(continued)
Evaluating Charities From a Donor’s View (continued)(continued)
Evaluating Charities From a Donor’s View (continued)(continued)
Is it committed to the rights of donors? Donor's personal information
Donor privacy policy
Evaluating Charities From a Donor’s View (continued)(continued)
Is it financially healthy? Four elements of the Form 990 ‐ T.I.P.S
Types of support
Increasing over time
Program expenses
Salaries of note
Evaluating Charities From a Donor’s View (continued)(continued)
Types of support Where does the charity get its money from?
Take a look at Part 1, lines 8 through 12 of Form 990.
Review Form 990, Page 9, Part VIII
Multiple sources of revenue
Evaluating Charities From a Donor’s View (continued)(continued)
T f tTypes of support
T
Evaluating Charities From a Donor’s View (continued)(continued)
Evaluating Charities From a Donor’s View (continued)(continued)
Evaluating Charities From a Donor’s View (continued)(continued)
Evaluating Charities From a Donor’s View (continued)(continued)
Increasing over time Is the charity expanding or shrinking its programs?
Charities should be consistently growing both their revenue and their expenses
Comparing Total Revenue on the most recent Form 990 with the Total Revenue from older Forms 990
Compare Total Expenses, donors can evaluate whether the charity is expanding or shrinking its programs
Evaluating Charities From a Donor’s View (continued)(continued)
Increasing overtime
II
Evaluating Charities From a Donor’s View (continued)(continued)
Program expenses How much does the charity spend on its programs?
Charity Navigator shows that most charities spend at least 75% of their expenses on program services
Many donors review this percentage for a charity they are interested in supporting
Form 990, Part IX, Page 10: (Program Service Expenses/Total Expenses)
Evaluating Charities From a Donor’s View (continued)(continued)
P
Program expenses
Evaluating Charities From a Donor’s View (continued)(continued)
ProgramMgmtFundraising
= 80%= 7%= 13%Fundraising 13%
Evaluating Charities From a Donor’s View (continued)(continued)
Salaries of note Is the charity compensating its executives appropriately?
There are many opinions on what level of compensation is appropriate for the leader of a non‐profit Donors can see how any organization compensates their officers and key employees
by reviewing Form 990, Part VII
It is rare that an organization can perform without any paid leadership, in this case, donors may contact the charity directly and inquire further if they do not reportdonors may contact the charity directly and inquire further if they do not report executive salaries.
Evaluating Charities From a Donor’s View (continued)(continued)
Salaries of Note
S
Evaluating Charities From a Donor’s View (continued)(continued)
Does Your Non‐Profit Have a Better Business Accredited Charity Seal?Accredited Charity Seal?
Have you read the Better Business Bureau's Wise Giving Alliance Standards for Charity Accountability? www.bbb.org/us/charity
The Wise Giving Alliance at the Better Business Bureau provides a way for The Wise Giving Alliance at the Better Business Bureau provides a way for citizens to check up on non‐profit behavior just like they can do with businesses
BBB Standards for Charitable AccountabilityAccountability
Organizations that comply with these accountability standards have provided documentation that they meet basic standards: In how they govern their organization
In the ways they spend their money In the ways they spend their money
In the truthfulness of their representations
In their willingness to disclose basic information to the public
BBB Standards for Charitable Accountability (continued)Accountability (continued)
Governance and oversight The governing board has the ultimate oversight authority for any charitable
organization This section of the standards seeks to ensure that the volunteer board is
active, independent and free of self‐dealing To meet these standards, the organization shall have:
A board of directors that provides adequate oversight of the charity's operations and its staff
A board of directors with a minimum of five voting membersg A minimum of three evenly spaced meetings per year of the full governing body with
a majority in attendance, with face‐to‐face participation Not more than one or 10% (whichever is greater) directly or indirectly compensated
person(s) serving as voting member(s) of the board Compensated members shall not serve as the board's chair or treasurer
No transaction(s) in which any board or staff members have material conflicting interests with the charity resulting from any relationship or business affiliation
BBB Standards for Charitable Accountability (continued)Accountability (continued)
Measuring effectiveness An organization should regularly assess its effectiveness in achieving its
mission Have a board policy of assessing, no less than every two years, the organization's
performance and effectiveness and of determining future actions required to achieve its mission
Submit to the organization's governing body, for its approval, a written report that outlines the results of the aforementioned performance and effectiveness passessment and recommendations for future actions
BBB Standards for Charitable Accountability (continued)Accountability (continued)
Finances This section of the standards seeks to ensure that the charity spends its funds
honestly, prudently and in accordance with statements made in fundraising appeals.
To meet these standards, the charitable organization shall: Spend at least 65% of its total expenses on program activities Spend no more than 35% of related contributions on fundraising Avoid accumulating funds that could be used for current program activities Make available to all, on request, complete annual financial statements prepared in Make available to all, on request, complete annual financial statements prepared in
accordance with generally accepted accounting principles Include in the financial statements a breakdown of expenses (e.g., salaries, travel,
postage, etc.) that shows what portion of these expenses was allocated to program, fund raising, and administrative activities
l h h ' l d ll Accurately report the charity's expenses, including any joint cost allocations, in its financial statements
Have a board‐approved annual budget for its current fiscal year, outlining projected expenses for major program activities, fundraising, and administration
BBB Standards for Charitable Accountability (continued)Accountability (continued)
Fundraising and information materials A fund raising appeal is often the only contact a donor has with a charity and
may be the sole impetus for giving Have solicitations and informational materials, distributed by any means, that are
accurate, truthful and not misleading, both in whole and in part
Have an annual report available to all or on request
Include on any charity websites that solicit contributions, the same information that is recommended for annual reports as well as the mailing address of the charity andis recommended for annual reports, as well as the mailing address of the charity and electronic access to its most recent IRS Form 990
Address privacy concerns of donors
Clearly disclose how the charity benefits from the sale of products or services that state or imply that a charity will benefit from a consumer sale or transaction
Complaints brought to the BBB
Do You Post Your Form 990 on Your Website?Website?
Your IRS Form 990 tax return is a public document
In addition to your Form 990 the following should be made available on your website Contact information Contact information
List of board of directors
List of senior staff
Do You Know What the Sarbanes‐Oxley Act Is?Is?
The Sarbanes‐Oxley Act was passed in 2002 by Congress to remedy some of the accounting shortcomings of publicly‐traded companies It applies to publicly‐traded companies and requires them to adhere to
standards in governance that increase the role board members play in overseeing financial transactions and auditing procedures
Sarbanes‐Oxley and Non‐Profits
What does it have to do with my non‐profit? Although the new law applies to publicly‐traded corporations, it has served as
a wake‐up call to the non‐profit community as well
Responsible non‐profits have been using the Sarbanes‐Oxley as a standard for their own financial practices
Sarbanes‐Oxley and Non‐Profits (continued)(continued)
The aspects of Sarbanes‐Oxley that are most relevant to non‐profits are: The Act governs the Board of Director's Audit Committee
Audit committees are expected to have at least one "financial expert" or Audit committees are expected to have at least one financial expert or explain why not
Most non‐profits, even if they do not conduct outside audits, have one or more board committees that deal with financial issues
Independence of the members of the audit committee or other financial committees
Sarbanes‐Oxley governs the responsibilities of auditors
Sarbanes‐Oxley and Non‐Profits (continued)(continued)
The aspects of Sarbanes‐Oxley that are most relevant to non‐profits are (continued): The audit firm must also report to the audit committee "critical accounting
policies and practices"
Non‐profits also are encouraged to not mix auditing and non‐auditing services to prevent any conflict of interest
Chief executive and the chief financial officer of a publicly‐held company certify the company's financial statements
Non‐profits are encouraged to require their CFO to certify the organization's financial statements
The CEO of the non‐profit ultimately must be responsible
Sarbanes‐Oxley and Non‐Profits (continued)(continued)
Other provisions of Sarbanes‐Oxley regulate: Insider transactions and conflicts of interest
Disclosure or transparency to the public
Whistle‐blower protection Whistle blower protection
Document destruction
California Non‐profit Integrity Act of 2004
Oversight by the CA Attorney General’s Office – California Registry of Charitable Trusts
Registration
I d d t A dit f A l Fi i l St t t Independent Audit of Annual Financial Statements
Establish an Audit Committee
Executive Compensation Executive Compensation
Commercial Fundraisers
California Non‐Profit Integrity Act of 2004 (continued)(continued)
Oversight by the CA Attorney General’s Office – California Registry of Charitable Trusts The Attorney General regulates charities and the professional fundraisers who
solicit on their behalf I i d b i l l i i h i i h i h i bl Investigate and bring legal actions against charities that misuse charitable assets
Statutory registration program The Attorney General makes available various guides and publications The Attorney General makes available various guides and publications The Attorney General also offers guidance to help Californians make important
personal decisions on charitable giving http://oag.ca.gov/charitiesp // g g /
California Non‐Profit Integrity Act of 2004 (continued)(continued)
Registration 30 days to register and file rather than 6 months
Independent Audit of Annual Financial Statements G th h ld f $2 illi Gross revenue threshold of $2 million
Government grant exception
Establish an Audit Committee Gross revenue threshold of $2 million
Government grant exception
Appointed by governing boardpp y g g
Members of the Audit Committee
Audit Committee responsibilities
California Non‐Profit Integrity Act of 2004 (continued)(continued)
Executive Compensation Review and approval
Just and reasonable
Timing of compensation reviews Timing of compensation reviews
Compensation includes benefits
Commercial Fundraisers Must report to Attorney General’s Office
Contract in writing
Obligations
Fee arrangements
Accountability
It is not enough simply to be transparent Supporters want an accurate accounting of how their money is being spent
and what impact it is making
Touting "we make a difference" doesn't cut it these days Touting we make a difference doesn t cut it these days Today’s funders are not satisfied with simply knowing how many people your
organization served last year
The more measurable results and outcomes you can document the more The more measurable results and outcomes you can document, the more businesslike—and better—you look to large, serious donors
Marketing and Development Efforts
Can you name a successful for‐profit company that doesn't have a strong marketing or research development component? It is very difficult to grow programs and services if you're not actively out there
raising funds or promoting your organization
Web‐based Presence
You would be surprised to learn how many non‐profits still don't have a website An organization’s website is the first place many donors go to learn more
about an organization
If you already have a website, it is important that it: Accurately reflects your brand
Is easy to navigate Is easy to navigate
Is updated on a regular basis
Make sure to regularly communicate to current and prospective donors with a newsletter, preferably an e‐newsletter that is brief and compelling
Promoting Your Brand
How well are you communicating this information through a solid brand image and good brand messaging?
How easy is it for motivated funders to find you?
D f d k t tt t t l d t d Do funders you seek to attract truly understand: Who you are?
What you do?
How you do it?
And why they should care enough to support you?
References
How Business‐Like is Your Nonprofit? By Larry Checco 6 Actions You Can Take to Make Your Nonprofit More Transparent
By Joanne Fritz, About.com Guide Internal Revenue Service, www.IRS.gov GuideStar, www.guidestar.org Charity Navigator, www.Charity Navigator.org Better Business Bureau, www.bbb.org, g CA Registry of Charitable Trusts, http://oag.ca.gov/charities What Is the Sarbanes‐Oxley Act? And What Does It Have to Do
With My Nonprofit? By Joanne Fritz, About.com Guidey p y , Accountability‐central.com
Questions?