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.
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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
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Create a procedural “blueprint” to forecast how each step of the merger will be handled. Include cost estimates.
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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.”
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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.
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* “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 ■
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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
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your tax status and funding sources. ■
of collaboration or alliance. your top priority. An alliance of organi-
important in today’s economy.
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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.
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An Action Plan
expand its reach, and pursue opportunities
Anne E. Schrantz, CPA
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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.
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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
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■ More Nonprofits Eligible for
e-Postcard
2
■ A Fresh Look at Fundraising
3
■ Recent Developments
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Copyright © 2011
Nonprofit Advisor
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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
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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: ■
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$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.
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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-
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Facebook: 58%
users. It’s very important, on many levels,
ent generations ranked the importance of
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Twitter: 42%
that they consider the repercussions of their
various information channels. (See table.)
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YouTube: 36%
online actions. More and more, organizations
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Blogs: 18%
and businesses are adopting formal social
mail is still an effective way to reach donors,
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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
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
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it be treated as tax, legal, or accounting
media
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
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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
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