May 7, 2008
Keeping Our Eye on the Ball
Just days ago the Commissioner of the Tax Exempt and Government Entities Division of the IRS, Steve Miller, told exempt organization lawyers gathered in Washington that the IRS will be “more aggressive” in monitoring the “efficiency and effectiveness” of charitable organizations. And this week, grantmakers from all over the country are convening for the annual Council on Foundations Leadership Summit. As regulators are considering what abuses to investigate, and grantmakers are considering how the global economy is creating challenges and opportunities, the Center is keeping an eye on the emerging issues that impact the nonprofit sector’s response to risk. We’ve been asking ourselves:
- How will developments at the national level, such as the new IRS Form 990, impact the role of boards and staff to recognize, manage and report financial and program risks?
- What are the latest technological tools and trends, such as social networking and blogging, that will assist or hinder organizations as they seek to select the best possible staff for their programs?
- What nationwide challenges, such the transition of nonprofit leaders and an economic slowdown, are likely to stress the sector, and how can nonprofits strengthen themselves now for future sustainability?
In response to all these questions we also ask, ‘What resources can the Center offer to help?’ One significant resource is the upcoming 2008 Risk Management and Finance Summit for Nonprofits, September 7-9th in Minneapolis, MN, which will be the opportunity for you engage with your peers and nationally recognized experts as we tackle these tough issues.
Special Features at This Year’s Summit Include:
- An opening plenary session, “The Art of Leadership” by Erik Wahl, that is not to be missed! Erik will share his unique approach to empowering leaders and “leveraging chaos to create opportunities.”
- Cutting edge information about the latest trends and technology to assist in background checking for paid and volunteer staff.
- Workshops on advanced financial risk management and fraud prevention.
- Back by popular demand: “Forum for Insurance Agents and Brokers.”
- An opportunity to brush up on the basics at the “Insurance Boot Camp and Coverage Clinic.”
- New! A workshop track just for grant-making organizations.
- Workshops on governance policies and how the new IRS Form 990 can move your board towards sound risk management.
- And as always, the Summit will offer challenging topics, including: Managing the Risks of Burn-out, Nonprofit Life Cycles, Risks and Rewards of International Programs, Crisis Communication, and Establishing a Meaningful Ethics Program at Your Nonprofit.
We know that the Summit will help you keep your eye on the ball and we hope you’ll join us! For online registration and a closer look at the schedule of keynote programs and educational sessions, Click Here Register early and save!
Resources From the Center:
The Center recently was asked for advice on a fundraising collaboration between two organizations. One partner is a 501(c)(3) public charity and the other is not. The charity was concerned about whether it could engage in a joint fundraiser with a non-charity and the other entity was specifically interested in allowing donors to take a tax deduction for their contributions.
As often happens when we receive a request for assistance by phone or email, the Center was able to point the partners to two of its publications, No Strings Attached: Untangling the Risks of Fundraising and Collaboration and Managing Special Event Risks, as well as an article on collaborations from the Center’s Online Resource Library. The Center’s staff also cautioned the partners about several significant legal issues:
- When fundraising activities are conducted between partners, how the donated funds will be used must be described accurately in any solicitation otherwise the charity(ies) could be engaged in fraudulent or misleading solicitation practices; If a non 501(c)(3) is going to share in the revenues, that should be clearly disclosed to potential donors.
- The State where the charity(ies) has/have registered for charitable solicitation purposes may consider any revenue sharing arrangement to trigger an obligation to (i) have a written contract between the parties and (ii) register the fundraising event as a "commercial co-venture."
- In general, if one of the partners is a for-profit that will financially profit from the event, the charity needs to be assured that the event will not result in what the IRS considers to be "private benefit” which would put the charity at risk for penalties from the IRS for activities that are prohibited under IRS Code Section 501(c)(3).
Collaborations present upside—and downside risks. No collaboration whose downside risks could spell disaster for the mission of a nonprofit should be entered without a thorough risk assessment. Some of the questions that should be asked include:
- Do the partner(s) share the values of our organization?
- What are the upside benefits for us? For our partner? What motivates the parties to collaborate? Which organization is the principal beneficiary of the partnership?
- Are there any conflicts of interest raised by the collaboration?
- Is there an exit strategy if the partnership goes sour?
- What obligations will we be left responsible for if our partner(s) bail out?
- Whose insurance will cover harm that results from the collaboration (e.g. consider bodily injury and property damage)?
- What is the timeline and procedure for sharing financial records at the conclusion of the event?
- How will expenses be shared? Profits?
- What lessons has the nonprofit learned in past collaborations that can and should be applied to the planning process for this collaboration?
Many of the answers to these questions should wind up in a written agreement between the collaborating partners.
If you have any questions about collaborations or fundraising risks, give us a call or send us an email. Looking ahead, plan to join us for two Webinars this fall that will address Managing Fundraising Risks on November 7, 2008, and Managing Special Event Risks on December 3, 2008.
Next Month’s Webinar! Whistleblower Policies and Retaliation Claims
Need Assistance Developing a Whistleblower Policy for Your Nonprofit?
Does your nonprofit have a whistleblower protection policy? Are you aware that lawsuits alleging retaliatory actions by employers are one of most common claims brought by employees? Staff at the Nonprofit Risk Management Center are available to assist you with policy development through the Center’s affordable consulting services. You can also brush up on the basics by joining us for next month’s Webinar, June 4th, 2-3 pm EST, Whistleblower and Retaliation Claims: Policies That Protect Your Nonprofit.
Your Questions Answered by the Center’s Staff
If you have a question, just go to our web site, click on the ADVICE tab and select “Technical Assistance.” A simple form allows you to submit your question to our staff experts. We’ll respond within 48 hours and you can look for your question in a future eNews!
Q. What specific policies are advised regarding personal relationships between supervisors and employees and between employees who are not in a supervisor/employee situation?
A. Personal relationships between employees/volunteers raise at least three issues that many organizations address through personnel policies, including: (1) anti-nepotism policies, (2) prohibitions against sexual harassment/hostile environment, and (3) managing conflicts of interest. The conventional wisdom is that employees or volunteers with an other-than-professional relationship should not supervise one another or be in a position to control the work environment or compensation and fringe benefits of the other. Personal and family relationships can impact your objective professional judgment; conflicts need to be disclosed and even close personal relationships can deteriorate into uncomfortable ones. Accordingly, many nonprofits elect to limit the interaction between employees and volunteers who share more than a professional relationship in order to reduce the risk of collateral damage when a relationship sours or due to the appearance that personal interests trump professional ones.
Need further assistance? The Center offers policy development consulting services at affordable rates. Call us! 202-785-3891.