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Nonprofit Advisor For the Nonprofit Executive and Board of Directors Member

Spring 2011

Survival Strategies Although the U.S. economy is showing signs of improvement, the recovery is far from robust. From a nonprofit standpoint, 2011 is shaping up to be another challenging year.

Conduct thorough due diligence, including a financial review. Do not skip this step, even if you’re very familiar with the other organization(s).

collaboration should allow organizations to

There is some good news: Individual donations are increasing. However, founda-

streamline operations and reduce expenses,

tion grants and corporate giving are not.*

it is not a given. In fact, a merger might

Create a procedural “blueprint” to forecast how each step of the merger will be handled. Include cost estimates.

Carefully plan communications — both

The billions of dollars of federal stimulus

involve a significant investment of money

money being channeled to nonprofits will

— and time. Any benefit to the bottom line

internal and external — to help ensure

soon end. And state and local governments,

should be viewed as a long-term goal, not a

that your message is delivered in a

many of which are struggling to cover severe

short-term expectation.

positive, straightforward manner. ■

budget deficits, are an unlikely source of additional financial support. Meanwhile,

and get them involved in the transition.

“ . . . mergers, collaborations,

demand, particularly in the social services

and innovative partnerships

sector, continues to increase.

are being considered as

These are serious challenges and many

possible survival strategies.”

and innovative partnerships are being

staff, executives, board members, and

organization: staff members, executives,

Having two or more “like-missioned”

board members, and donors. The sense of per-

organizations join forces can provide many

ceived loss, especially the loss of institutional

potential benefits. Ideally, the new entity

identity, can be very powerful and should

will be stronger than the sum of its parts,

be addressed carefully and thoughtfully.

allowing it to widen its charitable impact,

Here’s a very general checklist for organi-

to develop new programs. When organizations band together, each may bring different funding sources to the

contractual obligations and liability exposure, that may result.

* “Nonprofits Strategize to Help Them Cope with a Perilous 2011,” The Chronicle of Philanthropy, January 9, 2011

Keep the organization’s mission as

ceeding than a corporate-like merger driven by cost savings.

saving money through a merger? While a

(301) 652-9100 ■

In This Issue

■ Talking Points To Boost Partici-

generally has a better chance of suc-

What about the obvious benefit of

(410) 783-4900

Identify legal issues, such as potential

■ Survival Strategies

zations with similar or compatible goals

Possible Barriers

your tax status and funding sources. ■

of collaboration or alliance. your top priority. An alliance of organi-

important in today’s economy.

Determine how an alliance might affect

zations that may be considering some type ■

union. Funding diversification is particularly

Philip Cornblatt, CPA

Strategize branding and marketing efforts.

An Action Plan

expand its reach, and pursue opportunities

Anne E. Schrantz, CPA

resistance from the people closest to the

Some Advantages

Hold “coming together” events for the donors of the merging organizations.

Charitable groups that are considering a merger should also be prepared to encounter

considered as possible survival strategies.

Build support among your top donors and solicit their involvement as well.

organizations are struggling. In this climate, it’s no surprise that mergers, collaborations,

Enlist the support of board members

Anne.Schrantz@reznickgroup.com

Philip.Cornblatt@reznickgroup.com

pation in Your Retirement Plan

1 2

■ More Nonprofits Eligible for

e-Postcard

2

■ A Fresh Look at Fundraising

3

■ Recent Developments

4

Copyright © 2011


Nonprofit Advisor

2

Talking Points To Boost Participation inYour Retirement Plan A retirement savings plan is a valuable benefit — but only if employees take advantage of it. If participation in your organization’s plan has been lagging — or contribution levels are low — stepping up your communication efforts may help.

employees put this 2% “raise” to good use by increasing their plan contributions. Saver’s Tax Credit Let employees know about the saver’s tax credit — a federal income-tax credit that

accounts. Although taxes generally are due

can effectively lower the cost of contributing

encouragement. Here are some points to

Your employees may just need some

when funds are distributed from the plan,

for employees who meet certain income

stress.

rolling a distribution over to another plan or

criteria. The credit is available for up to

individual retirement account (IRA) can keep

$2,000 of contributions.

Tax Deferral Remind employees that making pretax contributions to the plan means they’ll owe

the tax deferral going longer.

* The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

Special Opportunity To Save More

less current federal income tax on their

The 2010 Tax Relief Act* has reduced the

earnings. Taxes are also deferred on invest-

Social Security payroll tax rate for employees

ment earnings generated in their retirement

from 6.2% to 4.2% for 2011. Suggest that

Saver’s Tax Credit 2011 Income Ranges 50% Credit

20% Credit

10% Credit

Married Couples Filing Jointly Earning

Up to $34,000

$34,001 - $36,500

$36,501 - $56,500

Head of Household Earning

Up to $25,500

$25,501 - $27,375

$27,376 - $42,375

Single & Married Filing Separately Earning

Up to $17,000

$17,001 - $18,250

$18,251 - $28,250

The maximum credit is $1,000 (50% × $2,000 of contributions) for an individual, $2,000 (50% × $4,000 of contributions) for a married couple. Earnings are adjusted gross income (AGI). To qualify, an individual also must be age 18 or older before the end of the year and can’t be a full-time student or claimed as a dependent on someone else’s return.

More Nonprofits Eligible for e-Postcard Gathering the information required for Form 990, the annual return that most tax-exempt organizations file with the IRS, typically takes a significant amount of time and effort. Small organizations, however, may file the much simpler electronic Form 990-N

are eligible to file the e-Postcard if their average annual gross receipts are: ■

$60,000 or less for the first two tax years. This applies if the organization has been in existence for more than one year but less than three.

If an organization has been in existence for one year or less, it may file the e-Postcard

$50,000 or less for the last three tax

if gross receipts, including amounts that

requirements will allow more organizations

years, including the tax year for which

are pledged by donors, total no more than

to utilize the e-Postcard.

the return is filed. This applies if the

$75,000.

(e-Postcard). A recent change in IRS filing

Effective for tax years beginning on or after January 1, 2010, most organizations

organization has been in existence for at least three years.


3

A Fresh Look at Fundraising To say that the Internet has changed our lives is an understatement. Twenty years ago, the Internet was a big deal. Now it’s a normal part of everyday life. These days, the big changes are the innovations ushered in by Web 2.0. Web 2.0 introduced interactivity. And

likely that more of your donors will turn to

that turned the Internet from a static vault

social media channels for information and

of information into a full 24/7 communication

to make donations.

platform. Social media, such as Facebook, Twitter, YouTube, and LinkedIn, are game

presence is time consuming. And it is. Developing a robust social media presence requires time and effort. The reward, however, is the ability to immediately reach out to, converse with, and respond to your community. Getting Started Since social media is rapidly becoming a way of life, making the transition from the

Spreading the Word There are some impressive advantages

old communication channels to social media

to using social media. The cost of entry is

may be inevitable. If your organization is on

low in terms of actual dollars (although not

the social media sidelines, and many are,

necessarily in terms of time). You can build

you may want to do some research. If you’re

a community of supporters and, in turn,

not sure where to start, ask a tech savvy

empower them to reach out on your behalf.

volunteer or staff member to help. When

The biggest advantage of all, however, is the

you’re ready, draw up a simple plan for using

campaign is to share your mission and your

ability to establish a connection and com-

social media. Set measurable goals, such

story in the most effective way possible. In

municate directly with your community.

as boosting visibility, increasing website

changers. Given these new ways of communicating, what are the challenges for nonprofit organizations as they reach out to connect with current and potential donors? Fundraising in Transition One of the key goals of a fundraising

the past, direct mail was generally the best

Nonprofits of all sizes have been quick to

communication option for fundraising cam-

embrace the various social media channels.

paigns. But that may no longer be the case.

According to figures from The Chronicle of

With new communication channels opening up, there may not be a single most effective way to reach out any more. A

Philanthropy’s latest annual survey of online fundraising, the top five social media tools

traffic, and building community. You can always add online fundraising later. Make It a Policy It’s likely that you have volunteers and staff members who are active social media

organizations use are:

recent study shows how donors from differ-

Facebook: 58%

users. It’s very important, on many levels,

ent generations ranked the importance of

Twitter: 42%

that they consider the repercussions of their

various information channels. (See table.)

YouTube: 36%

online actions. More and more, organizations

Blogs: 18%

and businesses are adopting formal social

mail is still an effective way to reach donors,

Text messages: 15%

media policies to provide clear usage guide-

repeating this study in a few years could

Not all organizations are convinced that

While the numbers indicate that direct

lines and avoid liability exposure. Even

yield very different results. As the population

using social media is worthwhile. One major

organizations that don’t currently use social

ages and technology advances, it is very

complaint is that maintaining an effective

media need a policy.

The general information in this publi-

Preferred Information Channel

Generation

Mail

Matures (born 1945 or earlier)

49%

24%

Boomers (born 1946–1964)

36%

Gen X (born 1965–1980) Gen Y (born 1981–1991)

cation is not intended to be nor should

Facebook, other social

E-mail/ e-newsletters Website

it be treated as tax, legal, or accounting

media

Twitter

14%

2%

0%

28%

22%

5%

1%

38%

34%

34%

16%

5%

26%

29%

36%

17%

7%

advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the

Source: The Next Generation of American Giving, March 2010, commissioned by Convio

purpose of avoiding tax penalties.


Nonprofit Advisor

4

Recent Developments Executive Compensation Resource

specify that it should include a review of com-

implementation issues, recent developments

Transparency and accountability have

parability data, i.e., “looking to compensation

related to health care, and access to data,

been — and still are — big issues in the

levels paid by similarly situated organizations

studies, and developments.

nonprofit world. Form 990 was redesigned

for functionally comparable positions.”

The website’s Implementation Timeline,

GuideStar, an organization that gathers

featuring a year-by-year list of provisions, is a

insight into how nonprofit organizations are

and publicizes data about nonprofits, now

particularly useful resource. In addition to offer-

run. Executive compensation issues receive

offers a compensation resource that allows

ing a comprehensive overview, viewers can

particular scrutiny.

organizations, consultants, and regulators

“drill down” for more information and addi-

to easily and effectively analyze executive

tional links by clicking on each provision.

specifically to provide the IRS with better

The IRS has published guidelines for “best practices” to help organizations meet the

compensation.

new reporting requirements. In addressing

Health Care Reform Timeline

How May We Help You? Reznick Group offers a broad

compensation, the guidelines say that “a

Last year’s extensive health reform

charity may not pay more than reasonable

legislation is still a hot topic. So hot that

range of audit, tax information,

compensation for services rendered” to

the Henry J. Kaiser Family Foundation has

return preparation, and executive

officers, directors, trustees, key employees,

launched a website to provide an information

board advisory services to non-

and others in a position to exercise “substan-

gateway — http://healthreform.kff.org — for

profit organizations. If we can be

tial influence over the affairs of the charity.”

individuals and organizations interested in

of service to you, please call.

Although the IRS does not directly spell out

learning more about the Patient Protection

Anne E. Schrantz, CPA

a process that organizations should use to

and Affordable Care Act. It provides expla-

Philip Cornblatt, CPA

determine compensation, the guidelines

nations of the law, in-depth analysis of

(301) 652-9100

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Nonprofit Advisor: Spring 2011 Issue