Take a step back for a moment and consider a long view of what could be the future for nonprofits. The revisions to the Form 990 have just been completed, but it seems the winds of change are blowing again with a forecast that could potentially bring a tsunami.
The Senate Finance Committee has oversight of charitable laws for the Senate while the Ways and Means Committee has a similar role in the House. Measures must ultimately be reconciled and approved by both Houses of Congress and then signed by the President before any laws are changed. So it’s a long process which is why, in part, no sweeping changes have been made in charity law in nearly forty years. But the climate is clearly different now as lawmakers see what has long been considered a lightly regulated “industry” in need of an overhaul.
Nearly five years ago the Senate Finance Committee set off alarm bells throughout the charity world with a “discussion draft” that envisioned new regulations that would have seriously imposed intrusive and costly requirements on charities, including most ECFA members. Finance Committee hearings were held, and an advisory Panel was convened by Independent Sector at Committee Chairman Senator Charles Grassley’s (R-IA) encouragement. The Panel, which included ECFA representation, issued a series of reports on suggested changes to the law and a long list of best practices that many charities have adopted voluntarily as a way of preempting the need for new legislation. Only minor changes were made to the law as a result of the initiative.
But the issue has not gone away. Some nonprofits continue to make the news by pushing the law or ignoring best practices regarding raising and spending money that is subsidized by the government in the form of tax deductions for contributors and property and income tax exemption for nonprofits. This keeps lawmakers stirred which leads to new proposals to change the law.
The latest edition of proposals, this time from a member of the House Ways and Means Committee, is perhaps more striking than any in memory. With Federal deficits mounting and budget battles increasing, Congress is looking for more revenue—and that was before the $700 billion bail-out was conceived! The charitable deduction is being viewed by some as a source of income and this is a concept which could get traction. One of the steps for Congress to raise more revenue would be to redefine a charity or a church, providing less tax-exemption shelters for organizations that now enjoy this benefit.
Some have suggested a greater incentive for gifts to help the poor and a lower or no deduction for gifts to arts or education. The faith based initiative could be revised to require all ministry recipients of federal funds to fall under EEOC hiring guidelines in order to qualify.
None of this is imminent, in fact it is probably a long shot, but come Spring 2009 we could begin to see if any of these ideas have traction in a new Congress or Administration. Realistically, the more likely early targets could be nonprofit hospitals—which some believe look and operate too similar to for profit hospitals—or colleges and universities, which are often mentioned because many continue to grow enormous endowments even as tuitions go through the roof.
In any of this, ECFA will give voice to its membership. We will continue to provide the latest information in these pages, on its website and in its regional seminars and other conference venues.
Meanwhile, pursue your mission with passion and excellence. Implement best practices intentionally. Trust the Lord to supply all your need now and in the future—come what may!
Saturday, October 18, 2008
Friday, August 29, 2008
Staying the Course in Changing Economic Times
What should a leader do in 2008 as change swirls and carefully prepared goals for the ministry seem threatened? Who could have predicted the disruptions that would be caused by $4.00 gas prices, shrinking home values, a stock market in decline, which impacts 403(b) and 401(k) retirement accounts, rising unemployment and the specter of inflation raising its ugly head after many years of not being a major factor.
As consumer confidence drops, how far behind can be donor withdrawal? I pray it will not be so. But now is the time to revisit mission strategies and prepare for operating in an environment we haven’t seen for quite awhile.
There is no scriptural promise that is conditioned on the economy. God’s Word never changes and it declares Christ is the same yesterday, today and forever. Christian leaders and donors who lived during the Great Depression probably understood that better than today’s generation.
All through history, whether in good times or bad, the Church of Jesus Christ has endured every hardship as God placed His hand on men and women who partnered together to meet the needs of their day and proclaim the “good news” of the Gospel.
Think of this: Today’s ministries have tools at their disposal that no previous generation has had. The ability to communicate quickly and efficiently, to analyze and plan and to put creative ideas into action has never been better. But they all must be carried out in the framework of time tested biblical principles.
A common tendency in addressing income shortfall is to simply increase fund-raising activity. It’s one thing to make donors aware of a need or situation—it is something else to engage in manipulative, guilt-trip or “gimmicky” tactics. God does not need that kind of help. The recent published book, Revolution in Generosity, edited by Dr. Wes Willmer (available from ECFA or your local Christian bookstore), underscores the promise that there is no shortage with God.
If you haven’t reviewed your operational costs lately, now is a good time. Strong income covers operating inefficiencies and mistakes while weak income exposes them.
For most churches and charities, many dollars spent have been donated. Be sure that certain costs such as travel and other visible spending don’t convey a poor image to your donors or the public. Revisit expansion plans; it is not unspiritual to delay or change direction when conditions indicate an unwise risk to the basic mission of the ministry.
Ask board members to join together in prayer with and support of the CEO and staff. Scripturally, there is protection in the wise counsel of many. Times of challenge are an opportunity for a team to pull together!
Today’s environment suggests a possible cycle that has occurred before—a tighter economy resulting in lower contributions at the very time that charitable needs increase. This is an election year with change in the air for 2009 and beyond regardless of who is elected to federal, state and local offices. New tax laws, tightened charity regulation and cultural changes could all impact your ministry. Plan now for various possibilities, including building partnerships, to reach your goals.
Most of all, acknowledge one more time that the ministry to which God has called you exists for His glory. Avoid turning your faith into presumption. At the same time, don’t be afraid to exercise your faith by stepping out of the box and taking prudent risks to accomplish some extraordinary things for God and His Kingdom. As has been said, “You cannot discover new oceans unless you have the courage to lose sight of the shore.”
As consumer confidence drops, how far behind can be donor withdrawal? I pray it will not be so. But now is the time to revisit mission strategies and prepare for operating in an environment we haven’t seen for quite awhile.
There is no scriptural promise that is conditioned on the economy. God’s Word never changes and it declares Christ is the same yesterday, today and forever. Christian leaders and donors who lived during the Great Depression probably understood that better than today’s generation.
All through history, whether in good times or bad, the Church of Jesus Christ has endured every hardship as God placed His hand on men and women who partnered together to meet the needs of their day and proclaim the “good news” of the Gospel.
Think of this: Today’s ministries have tools at their disposal that no previous generation has had. The ability to communicate quickly and efficiently, to analyze and plan and to put creative ideas into action has never been better. But they all must be carried out in the framework of time tested biblical principles.
A common tendency in addressing income shortfall is to simply increase fund-raising activity. It’s one thing to make donors aware of a need or situation—it is something else to engage in manipulative, guilt-trip or “gimmicky” tactics. God does not need that kind of help. The recent published book, Revolution in Generosity, edited by Dr. Wes Willmer (available from ECFA or your local Christian bookstore), underscores the promise that there is no shortage with God.
If you haven’t reviewed your operational costs lately, now is a good time. Strong income covers operating inefficiencies and mistakes while weak income exposes them.
For most churches and charities, many dollars spent have been donated. Be sure that certain costs such as travel and other visible spending don’t convey a poor image to your donors or the public. Revisit expansion plans; it is not unspiritual to delay or change direction when conditions indicate an unwise risk to the basic mission of the ministry.
Ask board members to join together in prayer with and support of the CEO and staff. Scripturally, there is protection in the wise counsel of many. Times of challenge are an opportunity for a team to pull together!
Today’s environment suggests a possible cycle that has occurred before—a tighter economy resulting in lower contributions at the very time that charitable needs increase. This is an election year with change in the air for 2009 and beyond regardless of who is elected to federal, state and local offices. New tax laws, tightened charity regulation and cultural changes could all impact your ministry. Plan now for various possibilities, including building partnerships, to reach your goals.
Most of all, acknowledge one more time that the ministry to which God has called you exists for His glory. Avoid turning your faith into presumption. At the same time, don’t be afraid to exercise your faith by stepping out of the box and taking prudent risks to accomplish some extraordinary things for God and His Kingdom. As has been said, “You cannot discover new oceans unless you have the courage to lose sight of the shore.”
Tuesday, June 24, 2008
Policies and More Policies
Churches and other nonprofit organizations are very familiar with policies. Policies provide sound guidance for day-to-day operations. And, the larger the organization, the more policies there seems to be.
Collections of policies grow up to be policy manuals. Policies come in human resource, accounting, facilities and other flavors. The greater the number of policies, the more likely one or more persons will be assigned the responsibilities of enforcing and interpreting the policies.
Policies notoriously collect dust. It is likely some of your organization’s policies are out-of-date and/or not being observed. This highlights the importance of an annual review of policies of all types (board and staff) to determine relevancy.
Organizational policies are fundamental for well-run organizations. ECFA’s best practices include many suggested policies. Our website includes many sample policies. We believe in policies.
For example, as part of a field review, ECFA often recommends a member adopt a conflict of interest policy to provide guidance in avoiding conflicts of interest. If a member has a significant investment portfolio, we will recommend the adoption of an investment policy.
ECFA has Standards which members are required to follow—and these seven Standards are simple, but not simplistic, as the nearly 100 pages of commentary on the Standards reveals. ECFA Standards and an organization’s policies are generally separate issues.
ECFA does not require member organizations to adopt certain policies—members have the flexibility to decide the policies which are appropriate for a particular organization. We are convinced that policies (board and organizational) do not come in a “one-size-fits-all” box!
In recent years, the IRS has shown an increasing interest in nonprofit polices. They have included policy-related questions on the Form 1023 Application for Recognition of Exemption and the Form 990 Return of Organization Exempt from Income Tax. Does the IRS require certain policies? Technically no, but practically—well, it’s a close call.
If an organization applying for tax-exempt status does not have certain key policies (as defined by the IRS), they will be pressed, at a minimum, to adopt the policies. And for organizations required to file Form 990 in 2009, there are a number of questions about specific policies (conflict of interest, whistleblower, document retention and destruction, compensation review and approval, evaluation of joint venture agreements, for example).
What is the importance of asking a few questions about policies? Well, it depends. It depends on how the answers will be used. In the instance of the responses to the new Form 990, the answers will be posted on the Internet for evaluation by the public and the media. It is likely we will see a “feeding frenzy” starting in 2009 based on the responses to some of these “policy” questions.
Many nonprofit policy experts will appear in the great Internet wonderland. They will offer their opinions on policy deficiencies of certain organizations and draw conclusions, going far beyond the presence or absence of policies. This will be our new world!
Even a group formed by the IRS, the Advisory Committee on Tax-Exempt and Government Entities (ACT), expressed concern about the IRS’s increasing interest in charities’ governance policies.
While agreeing that well-governed charities are more likely to comply with the tax laws and pursue charitable goals, ACT warned that if the IRS asks about specific governance practices, charities may feel pressured to adopt policies they otherwise would not consider. It also would place undue burdens on charities in terms of time, resources, forms, and the ability to recruit board members.
Good governance is more than policies. It is shared governance between a board and organizational leaders. It is about accountability. This new focus on policies provides an opportunity for leaders of churches and other nonprofit organizations to demonstrate the use of policies reflecting the culture of a particular organization—policies which will work within the confines of the entity.
Collections of policies grow up to be policy manuals. Policies come in human resource, accounting, facilities and other flavors. The greater the number of policies, the more likely one or more persons will be assigned the responsibilities of enforcing and interpreting the policies.
Policies notoriously collect dust. It is likely some of your organization’s policies are out-of-date and/or not being observed. This highlights the importance of an annual review of policies of all types (board and staff) to determine relevancy.
Organizational policies are fundamental for well-run organizations. ECFA’s best practices include many suggested policies. Our website includes many sample policies. We believe in policies.
For example, as part of a field review, ECFA often recommends a member adopt a conflict of interest policy to provide guidance in avoiding conflicts of interest. If a member has a significant investment portfolio, we will recommend the adoption of an investment policy.
ECFA has Standards which members are required to follow—and these seven Standards are simple, but not simplistic, as the nearly 100 pages of commentary on the Standards reveals. ECFA Standards and an organization’s policies are generally separate issues.
ECFA does not require member organizations to adopt certain policies—members have the flexibility to decide the policies which are appropriate for a particular organization. We are convinced that policies (board and organizational) do not come in a “one-size-fits-all” box!
In recent years, the IRS has shown an increasing interest in nonprofit polices. They have included policy-related questions on the Form 1023 Application for Recognition of Exemption and the Form 990 Return of Organization Exempt from Income Tax. Does the IRS require certain policies? Technically no, but practically—well, it’s a close call.
If an organization applying for tax-exempt status does not have certain key policies (as defined by the IRS), they will be pressed, at a minimum, to adopt the policies. And for organizations required to file Form 990 in 2009, there are a number of questions about specific policies (conflict of interest, whistleblower, document retention and destruction, compensation review and approval, evaluation of joint venture agreements, for example).
What is the importance of asking a few questions about policies? Well, it depends. It depends on how the answers will be used. In the instance of the responses to the new Form 990, the answers will be posted on the Internet for evaluation by the public and the media. It is likely we will see a “feeding frenzy” starting in 2009 based on the responses to some of these “policy” questions.
Many nonprofit policy experts will appear in the great Internet wonderland. They will offer their opinions on policy deficiencies of certain organizations and draw conclusions, going far beyond the presence or absence of policies. This will be our new world!
Even a group formed by the IRS, the Advisory Committee on Tax-Exempt and Government Entities (ACT), expressed concern about the IRS’s increasing interest in charities’ governance policies.
While agreeing that well-governed charities are more likely to comply with the tax laws and pursue charitable goals, ACT warned that if the IRS asks about specific governance practices, charities may feel pressured to adopt policies they otherwise would not consider. It also would place undue burdens on charities in terms of time, resources, forms, and the ability to recruit board members.
Good governance is more than policies. It is shared governance between a board and organizational leaders. It is about accountability. This new focus on policies provides an opportunity for leaders of churches and other nonprofit organizations to demonstrate the use of policies reflecting the culture of a particular organization—policies which will work within the confines of the entity.
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