Tuesday, July 29, 2008

Polysyllabic post, please read

So I spent part of my lunch cogitating on the revival of the commensurate test.

Gene Takagi's Nonprofit Law Blog covered it very well in a recent post, Re-Embracing the Commensurate Test. At the risk of over-simplifying a decision, the IRS examined the activities and governance of a nonprofit and found that they did not match its exempt purpose and took away their tax exemption. The Chronicle of Philanthropy also covered the issue in this article.

It is a complex decision but I recommend reading the actual IRS letter if you want to learn more.

I am such a nerd that even this seemingly arcane matter made me think of a suggestion: Next time you are reviewing your 990 ask the following questions of your auditor or whoever is responsible for your 990.

  • "How does this document prove that we deserve to be tax-exempt? Do our program descriptions and financial activity match our stated tax exempt purpose? Who benefited most from the way we spent our resources?"

Answering those questions is not as easy as it looks. Studying the new IRS Form 990 is a good place to start learning more. Most people may not know that the commensurate test has risen again. Those who do know about this will point out that the chances of it being applied to your organization are slim.

Every nonprofit has an annual opportunity to establish that its tax exemption is deserved. I would hope we all take it seriously. Maybe, if all 990s were complete and accurate, the commensurate test would fade away again. I would have to find a better reason to use the word commensurate.

Thursday, July 17, 2008

The Accountability Superhighway

When working with organizations on reviews I frequently encourage them to post their annual reports, IRS Form 990s, independent audits, and more on their web site. I have also been asking people if anyone has telephoned them lately to ask for an annual report. I find that very few donors do this.

I was very excited to read that a recent Nonprofit Times survey confirmed the increasing prevalence of the Internet as a means to research potential donations! I know this is not the biggest news to everyone but it holds enormous promise to charitable giving and building public trust. Having your annual report on-line can actually be less expensive. You can even do it in such a way that it can be easily printed for those without computer access. It is also easier to correct mistakes and to keep it current.

Take a look at our annual reporting standard as a simple guide to what information you should be sure to have on your web site in addition to important public documents. Let us know if you have any interesting ideas or questions about using your web site to build public trust.

Monday, July 14, 2008

In a nutshell

Transparency is not always easy but is always good in the short and long run.

Kate Barr, the Executive Director of the Nonprofit Assitance Fund, discussed the recent national ACORN scandal. Rather than just linking to the New York Times article about it, I suggest giving her blog a read. Compare ACORN's reaction to eight years of scandal versus a local response to a much shorter instant of fraud. Michael Wirth Davis of Goodwill/Easter Seals discussed his organization's decision to work with authorities and to be as transparent as possible at last year's annual forum.

Wednesday, July 9, 2008

Board Games

Sometimes it helps to have some simple guidance for your board recruiting.

In this post from the Nonprofiteer, "Board members are not hypothetical constructs", I found some nice advice. Many nonprofits are having a hard time finding board members. Sometimes this results in burnout of current members, difficulty achieving quorum, executive directors who are surprised that recruitment was not listed as a higher priority in their job description, etc.

In the linked blog the author suggests an approach that resembles the amassing of volunteer support for a capital campaign. I think that many nonprofits use an approach similar to this with some success. They ask what needs to be done, set up their criteria, and spend their time talking to actual people.

In short, the emphasis is on talking to people, not about them. What board recruiting tactics have helped your organization?

Tuesday, July 8, 2008

Public Trust check-up

How much do know you about general trust in the nonprofit sector?

In case you missed our Annual Forum speaker, Paul Light of NYU's Wagner School of Public Service, we have posted links to highlights and his remarks on our our web site. His research has shown that the level of trust in nonprofits "not risen significantly" in the years following September 11th, 2001. While nonprofits continue to be trusted more than the federal government and for-profit business, there are serious doubts about the ability of nonprofits to spend money wisely. His research and the Council's own local survey are a good opportunity to learn more.

The conversation about public trust was also covered by Dave Beal in his latest column in the Pioneer Press.

I am convinced that the nonprofit sector can turn these numbers around. There are a myriad of low cost ways to demonstrate that your organization is trustworthy.

For example, Does your website prominently post an annual report, accomplishments or outcomes, 990s, audits, or other public disclosure documents?

[Organization Self-Promotion Warning] How about an Accountability Wizard Review to publicly demonstrate a committment to accountability?