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  • From the inception of our Beta version of the CEGA Website and its related Blog, we have stressed the importance of compliance with IRS regs for non-profit...
  • Tuesday, December 16, 2008Governance: Let's Get Specific When was the last time your NPO held a board retreat? Chances are, you went through a SWOT analysis...
  • What is More Ethical: Blogs or News Media? More and more of our non-profit organizations tell us they are getting their news and industry-specific information...

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Reboot? PILOT?

From the inception of our Beta version of the CEGA Website and its related Blog, we have stressed the importance of compliance with IRS regs for non-profit organizations (NPOs); aka charitable organizations, 501c3 organizations, and community organizations. Issues related to governance, ethics, and accountability are growing and the Board of Directors and Executive Directors of all NPOs should be taking these regulations seriously.

Take a look at what Boston Mayor Thomas Menino announced at a Greater Boston Chamber of Commerce breakfast on December 9, 2008:

http://www.boston.com/news/local/massachusetts/articles/2008/12/09/tax_hunt_targets_exempt_groups?mode=PF

The mayor has formed a task force to negotiate payments that would be made by non-profits to the city. It's called 'payment-in-lieu-of-taxes' (PILOT) and is nothing new. But, what is new is the decision to go after non-profits that have not traditionally even paid PILOT fees. The city's assessor says, "We want to ensure that each and every institiution is paying their fair share." In addition to the mayor's proposal, three other measures are under consideration by Boston City Council that would "extract more money from tax-exempt institutions."

Take a look at what Tom Friedman had to say in the New York Times (December 24, 2008): 

http://www.nytimes.com/2008/12/24/opinion/24friedman.html?ei=5070&emc=eta1

"We need a reboot. We need a rebuild. We need a buildup. We need a national makeover," said Friedman. "That is why the next few months are among the most important in U.S. history." As everyone who owns a PC knows, you must 'reboot' when your machine stops working, locks up, and there is nothing else left to try. From the comments made in his op-ed piece, Friedman suggests we look in the mirror, realize that bailouts are not the remedy, and accept that fact that we have all become like General Motors.

Wow! Bummer? We don't think so.

CEGA remains bullish on the importance of non-profits to the success of our communities and our nation. Upon our founding, our goal was to provide service to small and medium NPOs in order to help them jump out front on required IRS compliance issues and to tout their certification as a means to garner respect and support from stakeholders and donors.

The need is real. And the timing couldn't be better.

 

Governance: Let's Get Specific

Tuesday, December 16, 2008

Governance: Let's Get Specific

When was the last time your NPO held a board retreat? Chances are, you went through a SWOT analysis (strengths, weaknesses, opportunities, threats) or some derivation of it. While the practicality of the SWOT planning method is not the subject of this blog post, it does seem to provide a good starting point for evaluating issues related to governance (or any other issue for that matter) at the board and executive director level for an charitable organization.

It seems to me that we are too general with our planning discussions. And, that we rarely (if ever) take advantage of evaluating an outcome to learn from our mistakes and lost opportunities.

Example: "Okay," says the facilitator, "let's talk about our Weaknesses."

So the group starts talking about 'weaknesses' -- arguably, too much in the abstract: we don't have enough money; our membership is decreasing; fewer people are using our programs; etc.

We need to talk more about the specifics -- how long has it been since we conducted a capital or operational funding campaign?; oops, has it really been a year since our last monthly mailer went out to our members?; wow, time flies - our website is two years out-of-date?; and we really have not changed or updated our basic programming in over five years?

While specific questions about broad subjects can be uncomfortable, from a non-profit board governance perspective, such issues must be put on the table. The NPO needs to look internally, first and foremost, at its grants writing structure, its regulatory performance, and conduct a comprehensive evaluation of the internal systems (including programs and services). Informed with answers to these questions, the NPO can then look externally for assistance.

Obviously, some issues of non-profit regulatory compliance can be much more serious than others. What if the NPO missed the deadline on filing its IRS Form 990? This blog suggests that there is importance in looking at why that happened, who is responsible, and what steps will be taken to assure it does not happen again.

So, the suggestion is that issues of NPO governance should be discussed in greater operational detail than in the abstract. After all, the sucess of the non-profit organization and the fulfillment of its charitable mission to the community depend on it.

What is More Ethical: Blogs or News Media

What is More Ethical: Blogs or News Media?

More and more of our non-profit organizations tell us they are getting their news and industry-specific information online, via the Internet.

This specific title was one I was asked to write about, so I will give it my best shot.

Hometown newspapers continue a downward trend. Many have been sold to conglomerates and others have closed down completely.

The study of ethics and the media has long been an interest of this blogger. For a number of years, local newspaper writers have tended to start in small market towns and cities and then move up the career ladder by leaving town for a larger media market. This ongoing trend leaves non-profit organizations without solid media contacts that know about the charitable organization and can report on successes. Accordingly, an important issue for NPOs is the cultivation of positive relationships with media contacts.

Albeit anecdotally, it seems appropriate to draw distinctions between local media and national media -- and even newspapers vs. television stations (local radio news seems to have all but disappeared in small to medium markets). Traditionally, the television news has focused on what everyone has come to call 'sound bites' of information. To be fair, television news must cover a vast array of information in a very short period of time.

Executive directors of most non-profit organizations would be quick to notice that television news does not serve them too well. And, to the oft-uninitiated executive director, the sound bite may not come across as intended, inviting a phone call from members of the board of directors and the members of the charitable organization!

The limitations of the television news leaves the non-profit executive director with little choice but to focus on the local newspaper. However, efforts to get cooperation from the newspaper in getting information from the NPO to the community can be very frustrating. News releases are constantly being sent to newspapers and, as most people know, the majority of the news releases never make it into the newspaper. Most NPOs then conclude, rightly or wrongly, that the news media really doesn't care about their organizations.

Also, as previously mentioned, the majority of the remaining newspapers are in small to medium markets, where experience among the news writers tends to be less than the national newspapers with tenured and seasoned writers. And, let's face it, not many small-town newspaper writers will look to a non-profit to provide that "big story" that wins them the prize! (Unless, perhaps, it is a scandal of some sorts and they desire to become the next Woodward and Bernstein...)

So, is it really any wonder that the Internet has become an increasingly popular mechanism for NPOs to seek information and communicate their message? It's free, it provides full use of your First Amendment rights, no begging is required to get your story published, and it's popular! (There are still millions of Amercans who enjoy holding the newspaper every day.)

But, our question is about ethics.

While it is incumbent upon the writer of a blog -- in this case, let's consider it to be a non-profit organization that is writing the blog in conjunction with its web site -- to get the information correct and/or to share an opinion about an issue of interest to its readers. This is not necessarily the case among newspaper reporters. Arguably, if the NPO conducts itself in an un-ethical manner, its constituency will respond promptly and 'vote' with its contributions. Such does not seem to be the case among newspaper reporters, their deadlines, and the advertising-driven business plan.

Again, to be fair, newspaper reporters are typicaly handed daily assignments, about topics they generally know absolutely nothing about, and given a deadline for publication. The opposite is true for the blogger: it is not an assignment, the subject matter is almost always something that the blogger is very passionate and/or knowledgeable about, and there is no deadline. Over the years, personal experience has shown that the number of newspaper writers willing to seek information is dwindling rapidly; this is sad and does not bode well for the profession or the industry. One reporter actually told me once upon a time that the readers would not be able to understand the complex story, so the important issues were discarded in favor of a sensational twist. This is sad.

To the extent that 'ethics' in this case relates to accuracy, depth of knowledge, willingness to learn more about the subject, and personal responsibility and accountability (another key issue) for the blog of an NPO, it would be very interesting to hear the argument that would support the ethical superiority of the newspaper writer when it comes to these key factors.

Ostensibly, as the non-profit sector continues to wrestle with increasingly stringent oversight by the IRS and its funders, executive directors and board members will focus on ethics (and governance and accountability) in far more depth. Who will provide such oversight among the news media?

It seems to me that Bloggers need to take great care to write about issues that are of importance to their constituency. Everyone is on 'information overload' and running on and on (while clearly your right) is not likely to provide long-term benefits.

Feedback on this issue will be interesting.

Our organization is dedicated to assisting NPOs with issues of ethics, among other things, so a debate on this issue can also be instructive.

CEGA pointer: Fundraising Focus

A story in USA Today makes clear that times will be tough for non-profits, particularly the big ones who relied heavily on Freddie, Fannie, and Wall Street firms.See the article, "It's a hard time to be a charity" below:

http://www.usatoday.com/money/economy/services/2008-10-26-fundraising-crisis-donations-charities_N.htm

The article makes clear that non-profits, particularly the large ones, are in for tough times. Organizations like Freddie, Fannie, and other Wall Street companies will not be making contributions this year. As all charitable organizations know, many individuals and foundations wait until the end of the calendar year to assess requests and determine contributions.

CEGA was formed to serve. Our mission is to help small to medium non-profit organizations. This may be the most challenging time ever for non-profits to survive and thrive. Take a moment to read the article and ponder the challenges -- and, the opportunities.

We recommend that non-profits use this opportunity to separate themselves from the pack, become poised for excellence, and demonstrate a commitment to Fundraising Focus by working with us on Certification.

No doubt, the non-profit sector is in for some very difficult times as the economic challenges continue to unfold.

We are here to help.

CEGA Observation: It's the Economy! Great Time for Non-Profits?

The economic events of the last few weeks have certainly captured the attention of most Americans. What effect will the economic recession have on the fundraising and operations of the Non-Profit Sector?

Well, that depends.

At CEGA, we believe that our Mission is more timely than ever: non-profit organizations (NPOs) can derive economic benefit by excelling in areas of Governance, Ethics, and Accountability, particularly in times of economic uncertainty, cutbacks, and increased competition for contributions and grants.

Just this past week, we were made aware of a non-profit that saw an enthusiastic donor's $150,000 pledge become a reluctant $20,000 pledge. It's tough to argue with a donor! The man stated, "the value of my portfolio is dropping by the minute. I'm in my 70s and I just don't feel comfortable right now."

This prompted us to ponder the effect the economy will have on Major Donors and National Foundations. Likely, it will be substantial. Competition will be tougher than ever. But, the missions of so many NPOs are so important to the ongoing success of American that we, at CEGA, still hold to our belief that the Non-Profit Sector is going to be called upon to fix serious problems in ways that neither the Government Sector nor the Private Sector can adequately address.

Will some NPOs fail (i.e. 'go out of business') during these troubled economic times? Absolutely; some will not make it. That's the basis of our capitalistic system. Will some NPOs be 'rescued' like the banks? Perhaps. But, that will depend on the generosity of individual donors and individual circumstances; we would not predict that to be the norm.

So, how is your non-profit organization situated as we continue to move into these times of economic uncertainty? Take a look around you at the issues that are driving the national debate. For example: (a) if CEOs on Wall Street are being hammered for excessive compensation, how does your NPO executive compensation review compare with your peers? (b) if Boards are being criticized for lack of oversight for bank operations, how does your NPO compare? Are your policies up to date? Is your board active and informed? (c) if Accountability and Regulation are at center stage among private sector firms, how does your NPO demonstrate leadership far beyond the norm?

As with all things, the future belongs to the prepared. We urge your organization to take action now to be a leader in what promises to be an exciting new chapter in the greatest country in the world.

Please let us know how we can be of assistance.

Part 3: Income vs. Expenses - Are You Charitable?

In this post, we will continue our discussion about regulatory expectations and your ability to keep your organization in a proactive mode.

Although it may have been a long time ago, your non-profit organization received its IRS determination letter. Requisite in your role as a charitable organization -- serving the community well-being -- your fund-raising (income) must be directed toward your charitable mission (expenses).

The greater the percentage of income directly devoted to the specific mission of the charity is all the better. How do your administrative expenses and overhead compare with the funds directly supporting the activities of your mission? Have you taken a look at those numbers? Do you have a process by which you track those numbers?

As we have predicted, these types of internal reviews are going to be increasingly important as the IRS steps up its reviews of Form 990 filings.

If you need an internal audit process, CEGA can help you.

Excellence in the non-profit sector demands that charitable organizations demonstrate that they are indeed charitable.
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