“Success seems to be connected with action.  Successful people keep moving.  They make mistakes, but they don’t quit.”  Conrad Hilton, Hotel Executive
Qualities leaders possess that enable them to make things happen:
1. They know what they want
2. They push themselves to act
3. They take more risks
4. They make more mistakes - and don’t let it bother them
How to improve YOUR initiative?
1. Change your mindset – “If you lack initiative realize the problem comes from inside yourself, not others.  Find the source of your hesitation and address it.”
2. Don’t wait for opportunity to knock – be proactive
3. Take the next step – do something about it!
Above information derived from John C. Maxwell’s “The 21 Indispensable Qualities of a Leader”, Chapter 10.

Raffles are a great way to earn revenues in combination with special events. Donors will generally provide the raffle items as a donation to your organization, which allows your organization to raise funds without incurring substantial related costs. Along with this relatively easy revenue generator come some strict guidelines due to restrictions contained in the gambling/gaming laws of Texas and IRS requirements on the form 990. To be allowed to hold a raffle you must be performing the raffle in order to use the proceeds for a charitable purpose.

What is a raffle? According to www.dictionary.com, a raffle is a form of lottery in which a number of persons buy one or more chances to win a prize.

According to Texas state statutes, Chapter 2002 of the Occupations Code sets the rules for charitable raffles. Some of the notable provisions of the law include:

• No more than two raffles can be conducted per year.
• The two raffles cannot be conducted simultaneously.
• Organization must set a specific date to award the prize.
• Mass communication (via newspaper, radio or television) is not allowed.
• Individuals may not be compensated for conducting/promoting the raffle.
• The tickets must be sold by the organization and its representatives.
• The prize cannot be cash.
• The organization must have possession of the prize in your possession at the time of ticket offering.
• A $50,000 maximum prize value.

Due to these requirements, Organizations must act wisely when scheduling these events. The tickets must also have the following specific information on their face:

• Name and address of the organization
• Ticket price
• Description of prize(s)
• Date the prize will be awarded

How does gaming affect the redesigned Form 990? If you collect more than $15,000 from the gaming event, the information must be disclosed in Schedule G. Need help in determine what is a “game”? Call me.

According to Barry Gaberman, Board Chair of BoardSource, getting out of bed, turning on the television, reading the newspaper, going to the local coffee shop…all forms of communication tell us that our economy is in turmoil. Tax-exempt organizations look to their senior leadership to provide vision during recessionary times.

According to Gaberman, the following represent board recommendations, addressing the crisis:

1. Don’t panic – remain calm and collected.
2. Strategize – examine and re-examine the organization’s goals and objectives
3. Open your eyes – evaluate financial assets/resources
4. Be creative and plan an alternative (a contingency budget; potential merger or acquisition if needed)
5. Work closely, communicating frequently with CEO or ED
6. Ask for more (from management and from the community)
7. Go on a diet (reduce expenses – especially administrative discretionary expenses)
8. Meet the test; be constructive partners with management holding the organization accountable
9. Evaluate compensation and effects of negative publicity
10. Guard the organization’s mission. Don’t forget the why.

According to Goldman, “no one has a crystal ball. The economy may only dip, then recover quickly, or we may be headed into a prolonged recession. While we all hope for the former, boards that prepare for the worst – strategically, financially, and operationally – will be in the best position to fulfill their mission now and when recovery does occur.”

Can your organization whether this crisis? Post comments on other solutions or thoughts.

For further information, see BoardSource’s November/December 2008 Magazine, or www.boardsource.org.

Peggy M. Jackson, DPA, CPCU and Toni E. Fogarty, Ph.D., MPH, have written a wonderful book for nonprofits. It is called Sarbanes-Oxley for Nonprofits. Now I know that most people involved in nonprofits are “people dedicated.” Most do not spend their time reading accounting rules. This book shows why it is important for the nonprofit’s management and board members to have a basic understanding of financial statements and how to analyze them. This information shows a picture of the financial health of the nonprofit. The healthier the exempt organization, the more people that can be helped. Isn’t that something we all want?

In my next few articles I will give some very basic information about the four financial statements and some financial ratios to help evaluate them. Don’t worry. This will be simple and valuable information. Who knows? You might even find it interesting and fun. Be careful. You might be an accountant in the making.

Having that “bad apple” in your workplace can be very distracting if not destructive.  So in response, candidates are run through an exhaustive process of evaluation.  This process may not be the most productive method for measuring an employee’s emotional intelligence. If you want to pick good apples without hoping they fall from the tree, consider the following:

• Is the candidate self-aware and self regulated- you cannot have a loose cannon who does not understand how to control anger or anxiety.
• Is the candidate able to read others and see others’ reactions to their behavior- this can be defined as a social “radar”.
• Can the candidate learn from mistakes made- this is the best way to judge how a person responds to adversity.

Here is a short list of effective questions to detect the prospect’s emotional intelligence:

• Tell me about a conflict you had with a peer or supervisor, and how it started and became resolved?
• Tell me about a time you said or did something that had a negative impact on a peer, supervisor, or customer. How did you know the impact was negative?
• Tell me about a situation when you discovered that you were on the wrong track.  How did you recognize this, what did you do, and what did you learn?

If this approach interests you, see Adele Lynn’s book The EQ Interview: Finding Employees with High Emotional Intelligence.

Sarbanes-Oxley laws showed public companies how serious the government takes the clarity of financial statements. The new 990 IRS form is also an indication of the government’s intention of keeping an eye on nonprofits. A nonprofit should stick to its mission, produce financial statements that give a clear picture of its financial position, and maintain internal controls so that both of these objectives are met.

In today’s regulatory environment, a nonprofit’s audit committee function is vital. It should be comprised of dedicated board members and can also include independent external parties. There should be no member of management on the audit committee. All of the audit committee members should have a basic understanding of financial statements. It is imperative that at least one of the members be an expert at reading and preparing financial statements and be knowledgeable about GAAP (generally accepted accounting principles).

This financial literacy allows the committee to evaluate the preparation of the NPO’s financials, the effectiveness of internal auditors and internal controls, as well as being able to converse openly with the external auditors.The nonprofit benefits when the committee functions correctly.

Al Weber, CPA and partner of McGladrey and Pullen has written an Audit Committee Guide for Not-for-Profit Organizations that you might find helpful.www.nam.org/~/media/Files/s_nam/docs/233000/232980.pdf.ashx

Nonprofits typically use their cash. Large amounts may be kept in checking and savings accounts instead of being invested because it is not meant to hang around a long time. It is meant to be used for the mission of the nonprofit.  If your nonprofit keeps large amounts of cash in the bank, be wise about protecting it. Keep your money in an FDIC insured bank. To find out if your bank is FDIC insured, you can call this number obtained from the FDIC’s website:  1-877-275-3342. You may also use “bank find” at www.fdic.gov/deposit .

The rules have changed recently so it might be a good time to recheck them. FDIC insurance covers checking, NOW, savings, and money market accounts as well as CD’s. Currently the amount insured is $250,000 per depositor per bank. This means that it might be a wise decision to have a maximum limit of $250, 000 in total per bank your nonprofit uses. The FDIC will sum all the insured accounts per bank, so just opening new accounts in the same bank or in a different branch of the same bank isn’t a safeguard.

For more information see: www.fdic.gov/deposit/Deposits/insured/faq.html

The major differences are in the reporting requirements. While public charities file the 990 Form (newly redesigned for 2008), private foundations file a 990-PF. The 990 tracks activities and attempts to show how the organization is accomplishing its exempt purpose. The 990-PF, while also tracking that information, is very focused on two things:

• Type of investments being made
• Distributions being made

Because they do not have the public support base, private foundations rely on either a minimal number of significant contributors or returns from investments for their income base. Most are considered to be “grant-making” organizations as they do not have any operations. The potential for abuse lies in the ability to direct the types of investments and/or distribute income either back to the contributors, who are usually board members or the original founders, or to non-exempt purposes that can benefit the contributors.

Extra reporting requirements include a detailed list of every investment owned by the organization. Every stock, every mutual fund, every partnership, S-corp, and LLC interest- ooh, did I say LLC? Yep. Certain transactions with flow through entities are considered “Listed Transactions”- assumed to be tax avoidance strategies- and others are being heavily scrutinized. In addition, they are not permitted to hold more than 20% interest in an unrelated business enterprise.

The other difference lies in the distributions. Besides keeping a keen eye out for anything that might possibly benefit a board member or significant contributor, it is imperative the organization make minimum charitable distributions roughly equal to 5% of the fair market value of investments. All distributions made must be detailed on the return with full name and address.

Do you need help in determining “what” should be reported “where” on your 990-PF? Contact us.