Contrary to longstanding perceptions, regional trends and values have less of an impact on donor motivation than income and education, a new report from the Center on Philanthropy at Indiana University finds. Read the rest of this entry »

The following excerpt is provided, by permission, from Melanie Herman, Executive Director of the Nonprofit Risk Management Center, Leesburg, VA:

In Jeffrey Rosenthal’s fascinating book “Struck by Lightning: the Curious World of Probabilities, Rosenthal explores the science of probabilities. He compells his readers to remember that risk management is accompanied by “randomness”. Many aspects of our lives are governed by events not completely within our control and uncertainty is here to stay. Nonprofit leaders have two options regarding uncertainty: #1 – Let uncertainty get the better of us and our tax-exempt organizations or #2 – Learn to understand and perhaps appreciation randomness and act accordingly.

According to Rosenthal, “by thinking logically about the likelihood of various outcomes, we can better make decisions and understand our lives more deeply.”  So what does thinking logically have to do with governance and managing risk? Read the rest of this entry »

The IRS recognized the need for transition relief related to information included in Form 5500 by some 403(b) plans. It was noted that some of the filings would be rejected under ERISA because the filing would be incomplete due to the administrator’s inability to identify all participant contracts and accounts that should be included in plan assets. The filing would also be rejected if the audited financial statements contained an adverse, qualified or disclaimed opinion (other than disclaimers related to limited scope audit provisions in 29 C.F.R. 2520.103-8 or 103-12).

Administrators of 403(b) plans do not need to treat annuity contracts and custodial accounts as part of the employer’s plan assets for purposes of ERISA’s annual reporting requirements (further, the employer is not required to count the individual as a participant under the plan for Form 5500 reporting purposes) provided that:

1. The contract/account was issued to a current or former employee before 1/1/09
2. The employer ceased to have any obligation to make contributions and has ceased making contributions to the contract/account before 1/1/09
3. All of the rights and benefits under the contract/account are legally enforceable against the insurer or custodian by the individual owner without any involvement by the employer
4. The individual owner of the contract account is fully vested

The Department will not reject a Form 5500 on the basis of qualified, adverse or disclaimed opinion if the accountant expressly states that the sole reason for such an opinion was because such pre-2009 contracts/accounts were not covered by the audit or included in the plan’s financial statements.

The above information obtained from Field Assistance Bulletin 2009-02.

According to the Nonprofit Times, (11/2/09 article):

In this difficult economy, with cutbacks and retrenchments, it can be difficult for any nonprofit to survive, let alone flourish.

Despite the temptation to think in terms of mere survival as crisis management, Patrick M. Rooney, executive director of the Center on Philanthropy at Indiana University, argues that nonprofits should try to think positively, trying to act now rather than wait for good times that might be a long time coming.
Rooney offers several suggestions.

• Rather than simply look to shed every possible cost as a means of just staying afloat right now, organizations should evaluate costs strategically. It’s better to spend smart rather than just be as frugal as possible.
• It is important to look carefully at how a fundraising program is managed and evaluated. Difficult times might actually be a good time to reassess.
• Odd as it sounds, it might be better to spend more on certain aspects of an operation and infrastructure. For example, it is critical to continue to invest in fundraising as a long-term support issue.
• Adding or maintaining a business development specialist might be even more important in challenging times to grow existing sources of revenue and identify and develop new ones.

If budget cuts have to be made, it is important to evaluate what effect cuts will have on long-term goals and mission.

According to a survey conducted by Human Service Council (HSC) and Baruch College: School of Public Affairs in New York City, human services organizations in the New York City metropolitan area are being squeezed from both sides of service and funding. Human services organizations are seeing increases in demand for services and decreases in government funding, donations and endowments which all relate to the present state of the economy. For 84% of the organizations responding to the survey, public funding accounts for more than 40% of their operating budgets.

According to the organizations that responded to the survey, 60% are having difficulty managing cash flow, 30% have no lines of credit, and 67% have no endowment. Of the organizations that responded that had endowments, 73% saw decreases in their endowment. 53% of these organizations were forced to cut staff in order to cut costs. Some of these organizations have had to cut programs and those that have not are considering this option to cut costs.

While these statistics were gathered from organizations in the New York City metropoliation area, the current economic crisis is putting a great deal of strain on human service organizations around the country that rely a great deal on public funding.

The information above was summarized from the article “Governments Cutting Back on Social Service Spending” from NPT Weekly, a publication of The NonProfit Times. For more information, see www.nptimes.com. 

When completing the new Form 990, organizations are required to provide details about related organizations on Schedule R. An organization is a related organization to the filing organization if it stands in one or more of the following relationships to the filing organization:

1. Parent – an organization that controls the filing organization.
2. Subsidiary – an organization controlled by the filing organization.
3. Brother/Sister – an organization controlled by the same person or persons that control the filing organization.
4. Supporting/ Supported – an organization that is (or claims to be) at any time during the organization’s tax year, a supporting or supported organization within the meaning of section 509(a)(3) and 509(f)(3).

According to the IRS – the definition of control is:

1. Power to remove and replace a majority of a nonprofit organization’s directors or trustees,
   or
2. Management or board overlap where a majority of the controlled entity’s directors or trustees are trustees, directors, officers, employees, or agents of the controlling organization.

In the case of stock corporations, and other organizations with owners or persons having beneficial interests, whether such organization is taxable or tax-exempt, any of the following relationships represent control:

1. Ownership of more than 50% of the stock (by voting power or value) of a corporation.
2. Ownership of more than 50% of the profits or capital interest in a partnership.
3. Ownership of more than 50% of the profits or capital in a limited liability company (LLC ) treated as a partnership regardless of the designation under state law of the ownership interests as stock, membership shares or otherwise.
4. Being a managing partner or managing member in a partnership or LLC treated as a partnership which has three or fewer managing partners or managing members (regardless of which partner or member has the most actual control).
5. Being the sole member of a disregarded entity, (an entity wholly owned by the organization that is not a separate entity for Federal tax purposes).
6. Ownership of more than 50% of the beneficial interests in a trust.

What is considered indirect control? If the filing organization controls Entity A, which in turn controls Entity B, the filing organization will be treated as controlling Entity B also.

Sometimes it is difficult to determine “who” owns “what”. If you have questions, call us.

In December 2008, President Bush signed The Worker, Retiree, and Employer Recovery Act of 2008 into law. The law waived the required minimum distributions for 2009 from IRAs and employer sponsored defined contribution requirement plans because of the large drop in the stock market and declining retirement values.

Generally, a required minimum distributions is an annual amount that must be withdrawn from an IRA or an employer sponsored plan beginning with the year the account owner reaches 70 ½.

The IRS said that in many cases, because the law was signed so late in the year, and many individuals and plan sponsors were confused about how to comply with the new rules, IRA owners and plan participants received distributions they were not required to take or did not want.

Retirees who made a withdrawal from an IRA, 401(k) or other qualifying retirement plan have until 11/30/09, or within 60 days of the distribution, whichever is later) to put the money back in the plan tax-free.

Notice 2009-82 assures plan administrators that Read the rest of this entry »