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The power of compounded interest never ceases to amaze me.  Invest a dollar today and in 10 years, it could grow to be much more than that.  Who knows how much I would have accumulated by now had I started investing the money earned from my first job as a teenager.  Fortunately, I am wiser now. My personal “financial policies,” direct my spending, saving, and investment activities and keep me from spending all of my money on things which I’ll regret later.

Small and large nonprofit organizations can benefit from having a deliberate strategy for their own spending and investing. No one can predict what the financial markets will do, but we can keep an eye on our investments and make sure we have policies that guide those investments. Even organizations that need all of their cash for operating, should have written policies that specifically state that assets are to be kept liquid.  Nonprofits with sizeable assets, say over $200,000, will want to ensure that the board provides clear directives to the person managing those assets. Written investment polices can help avoid making haphazard decisions that are not in the best interest of the organization, like investing all of your assets in the stock market or buying a parking lot because it seems like a good idea.

But don’t expect to simply adapt any old policies you find off of the internet.  The Standards for Excellence® code specifically states, “Organizations should have written financial policies adequate for the size and complexity of their organization governing investment of the organization’s assets…”  Your organization’s investment policy should derive from an assessment of the economy and the organization’s current financial situation, taking into consideration your plans for spending down the endowment and the risk you are willing to assume.

Did you know?  The Standards for Excellence® program’s educational resource packet, “Finance Policies” discusses the components of an investment policy and includes model investment policies that you can use as a starting point for creating your own policy. The packet is free and available to Standards for Excellence Institute® members.  It is available through the members only section of our website.  Hard copies are also available upon request.

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Earlier this month, we suggested that the challenging economic climate may provide the impetus for you to hire a fundraising consultant to handle a new development approach or project.  Perhaps you are trying to raise the resources to match a grant. Or, perhaps you are launching your first direct mail campaign.  At any rate, if you choose to engage a fundraising consultant to assist or lead the effort, during the pre-engagement phase, you should inquire not only if the individual is properly registered with applicable registration authorities, but you should also be sure that the individual does not expect to receive his/her compensation as a commission or percentage of the amount of funds raised.  In fact, the latter applies equally to consultants or staff fundraisers.

As the Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector® states, “Fundraising personnel, including both employees and independent consultants, should not be compensated based on a percentage of the amount raised or other commission formula.”

There are a host of reasons to avoid this type of payment.  For instance, percentage-based compensation is considered unprofessional or amateur; may place pressure on donors for immediate needs; may be viewed as privately benefiting fundraisers rather than serving the public purposes of the nonprofit; and may short-change the organization or the consultant—just to name a few.

Did you know?  The Standards for Excellence® program’s educational resource packet, “Employment of Fundraising Personnel,” includes a detailed discussion on this subject. The packet is free and available to Standards for Excellence Institute® members.  It is available through the members only section of our website.  Hard copies are also available upon request.

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In this current economic climate, many nonprofits find themselves endeavoring to raise funds in new and innovative ways.  Some organizations may find themselves engaging fundraising consultants to assist with special fund drives or emergency campaigns.  Others will consider selecting a new consultant to help the organization develop top notch grant proposals for foundations or public sector sources that they have never approached in the past. 

As the Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector® states, “When using the services of a paid professional fundraising consultant, organizations should only use the services of professional solicitors and fundraising counsel who are properly registered with applicable regulatory authorities.”

You will need to pay careful attention to the definitions of professional solicitors and fundraising consultants in your state.  For instance, it may be that the individual whom you hire to help with your annual campaign must be properly registered with your state, but your grant writer is exempted from those requirements.  In some cases, special disclosure requirements and reporting may also apply.  At any rate, it is important for you to learn as much about individuals who you plan to engage as fundraising consultants at the front end, prior to the start of the engagement, and this includes inquiring as to whether the individual you are considering is indeed properly registered in your jurisdiction.  You may even wish to request a copy of their current registration certificate or letter.

Did you know?  The Standards for Excellence® program’s educational resource packet, “Employment of Fundraising Personnel,” includes a detailed discussion on this subject. The packet is free and available to Standards for Excellence Institute® members.  It is available through the members only section of our website.  Hard copies are also available upon request.

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Heightened media scrutiny of nonprofits engaging in public affairs during the last presidential campaign served as a constant reminder that any implication of favoritism or preference toward political candidates can result in the loss of a charity’s tax-exempt status. Although the presidential campaign is over, nonprofits must continue to make a conscious effort to avoid participating in partisan political activities. State and local elections are in our midst and nonprofits should do whatever they can to ensure that their board members, employees, and volunteers are aware that the same rules apply when it comes to smaller, less publicized elections. Adding a clause to your personnel, volunteer, and board policies that communicate these rules is one step toward avoiding partisan activities in your organization.

Did you know?  Our educational resource packet, “Public Policy Advocacy: Promoting the Public Participation” includes a discussion on remaining nonpartisan in community activities as well as concrete examples of partisan situations. The packet is free and available to Standards for Excellence Institute® members.  It is available through the members only section of our website.  Hard copies are also available upon request. Log in to access this educational resource packet. Not a member? Join now!

This all too common phrase is often spewed from the mouths of siblings.  A big sister is allowed to go to bed a little later than her younger brother. A little brother is able to stay home from school sick while the big sister has to face a possible pop quiz in math class. A child’s perception of an unfair act by a parent might cause a small tantrum that lasts for a few minutes or start an all out war that lasts for what seems like forever. Alas, the quest for fair treatment does not stop when we become adults.  We, too, would like to be treated fairly in our daily lives and especially in the workplace.  Clearly written personnel policies are important for nonprofits now more than ever.  Given the current economic climate and with layoffs and bailouts in the daily news, fairness is now a hot topic.  Even for an organization with only a couple of employees, there is real danger in foregoing formal personnel policies in favor of lax workplace practices.  Clear policies allow us to manage personnel with uniformity, fairness, and help with making tough decisions that can significantly impact a company’s culture and morale.  Take a moment this week to review your personnel policies to ensure that they address at a minimum, the topics recommended by the Standards for Excellence® code. The code states, “In addition to covering basic elements of the employment relationship (e.g. working conditions, employee benefits, vacation and sick leave), the policies should address employee evaluation, supervision, hiring and firing, grievance procedures, employee growth and development, confidentiality of employee, client and organization records and information.”

Did you know?  The Standards for Excellence® program’s educational resource packet, “Personnel Policies,” includes a discussion on personnel policies and includes model personnel policies. The packet is free and available to Standards for Excellence Institute® members.  It is available through the members only section of our website.  Hard copies are also available upon request. Log in to access this educational resource packet. Not a member? Join now!

In a report released in February 2008, Ellison Research found that the public still has great concern about nonprofits’ program, administration and fundraising breakdowns.  62% of the public polled stated that they think nonprofits spend more than a reasonable amount on administration and fundraising.  Because low overhead continues to be equated with efficient, effective organizations, nonprofits are pressured to demonstrate that they spend a high percentage of funding on its programs.  However, these percentages do not tell the entire story.  They do not necessarily convey meaning about the quality of a nonprofit’s programmatic and fundraising efforts. The Standards for Excellence® code encourages nonprofit managers to consistently review their fundraising efforts to ensure that their fundraising programs have the right mix of activities that are worth the time and effort put into conducting them.

The Standards for Excellence® code states that nonprofits should specifically review the efficiency of its fundraising program over the course of time and across the organization’s entire fundraising program.  Over the course of five years, an organization should strive to maintain a fundraising revenue to expense ratio of at least three dollars earned to every one dollar spent.  If an organization fails to meet the ratio, the staff and board should examine the fundraising activities to account for extenuating circumstances, and reevaluate certain activities to determine what is worth the effort and what efforts should be discontinued.

Did you know?  The Standards for Excellence® program’s educational resource packet, “Fundraising Costs,” includes a formula for calculating your fundraising revenues to expense ratios using the Form 990.  The packet is free and available to Standards for Excellence Institute® members.  It is available through the members only section of our website.  Hard copies are also available upon request. Log in to access this educational resource packet. Not a member? Join now!

Springtime at my house means lots of outdoor gardening projects.  One that I like to do best is mulching the flower beds.  In addition to looking neat and tidy, the mulch helps my flower beds retain a bit of water, and stops the growth of some of the weeds.  In my garden (maybe yours, too), the mulch never stops the growth of all weeds.  There are always at least some very hardy weeds that get through even the best mulched plots!  And if I don’t pull it at first sight, the unwanted weeds will cast a shadow over my beautiful flowers.  In some small way, the effort of placing mulch in the flower beds is the same as covering up or ignoring financial improprieites in your organization. If you fail to have a good whistleblower policy, you are setting your organization up for a situation where concerns about improprieties only have one avenue to see the light of day — the public or the media.

Nonprofits should take care to have strong whistleblower policies in place.  As the Standards for Excellence® code states, “Organizations should provide employees, board members and volunteers a confidential means to report suspected financial impropriety or misuse of organizational resources and should have in place a policy prohibiting retaliation against persons reporting improprieties.”  The IRS Form 990 includes a question on whistleblower policies, and of course, the Sarbanes-Oxley Act requires that nonprofits have a whistleblower policy in place.  In short, organizations should take care to have the type of organizational culture that encourages bringing to light and stopping situations where there might be improprieties.  If you fail to have a good whistleblower policy, you are setting your organization up for a situation where concerns about improprieties are squelched, where doubt and distrust fester among staff and board members, and then, the difficult problems may come out in more damaging ways.  Wouldn’t it be better to have straightforward and easy to navigate channels for reporting and stopping improprieties when they are minor problems than to wait until the problems are so difficult that they become public relations nightmares — like those big hardy weeds that force themselves up through my piles of mulch?

Did you know?  The Standards for Excellence® Educational Resource Packet, “Reporting Financial Improprieties,” includes a discussion of whistleblower policies and a sample as well. The packet is free and available to Standards for Excellence Institute® members.  It is available through the members only section of our website.  Hard copies are also available upon request.

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No sooner than spring arrives do we begin planning our summer barbeques, vacations, and road-trips. Having survived the winter, that ribbon of highway leading to the sandy beach never looked so good. Back at the office, you might also be making plans to capitalize on your expanding database and donor lists having captured more potential donors than ever during last year’s annual appeal. As it has become easier to reach potential donors online who reside in every state and country, how tempting it is to begin sending these new potentials personal solicitations and inviting them to your special events. I warn you, however, to tread with caution.

Many states regulate charitable solicitations and require nonprofits who are soliciting in their states to register with the state office that regulates charities. Under some state laws, solicitations must also include a special disclosure statement notifying the public about the availability of current financial statements for the nonprofit or about the fact that registration does not imply an endorsement of the state agency for the nonprofits. Registration fees vary and penalties for not following the solicitation laws could be hefty. It is important to look at the solicitation laws in each state you intend to conduct solicitations just to be sure that you are following the letter of the laws. Some states accept the Unified Registration Statement, while others do not.

Did you know?  The Standards for Excellence® program’s publication, “Disclose It: A Charitable Nonprofit’s Guide to Public Disclosure Requirements,” includes a detailed discussion on multi-state solicitation regulations and information about how to remain in compliance with them. This document is free and available to Standards for Excellence Institute® members through the members only section of our website.  Disclose It is also provided as an attachment in the Fundraising Practices and Openness Standards for Excellence® educational resource packets.  Hard copies are also available upon request.

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Thinking back to the second grade, I recall the day I met my ultimate goal –  to achieve perfect attendance.  My name was plastered on the school’s front bulletin board with many others that had managed to pull themselves out of bed each morning, sometimes going to lengths to persuade parents that they were well enough to go to school. Perfect attendance was a symbol of achievement for many of us. But it was not an indicator of how much we had learned. The grades from the pop quizzes and scores on standardized tests ultimately revealed how much we had learned and indicated whether or not we should progress to the next grade. Checking students’ attendance was simply one of the school’s mechanisms for monitoring students.

Monitoring is an essential, ongoing process involving collecting information related to your organization, including program activities (such as how many times you provided a service) and relevant community statistics (such as how the rate of smoking has changed among teens in your county). However, nonprofits must always strive to evaluate our programs for effectiveness by measuring the benefits or changes in individuals or populations during or after participating in our programs.  In other words, what impact is your program making and how close are you to achieving your mission?  These can be more difficult questions to answer.  But the Standards for Excellence® Code emphasizes comprehensive evaluation as an important tool for being accountable to the public. 

Did you know?  The Standards for Excellence® Educational Resource Packet, “Program Evaluation,” includes a discussion on program evaluation and explains various approaches to outcomes measurement and data collection techniques. The packet is free and available to Standards for Excellence Institute® members.  It is available through the members only section of our website.  Hard copies are also available upon request.

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If someone called your agency today and requested the organization’s Form 990s for the past three years, would someone be able to help them right away?  What would happen if someone walked through the door and asked to see a copy of the organization’s determination letter or 1023 or 1024 form (the original application for tax exempt status)? Would they be helped or would they be turned away by someone who had no idea what the person was talking about?  Nonprofit organizations are legally required to make these three documents available for public inspection upon request to anyone who requests them in person and available by mail within 30 days if requested by other means.  Failure to do this could result in fines imposed by the Internal Revenue Service.  According to the Standards for Excellence® code, “Nonprofits should have at least one staff member who is responsible for assuring that the organization is complying with both the letter and the spirit of federal and state laws that require disclosure of information to members of the public.” Following the simple guidance found in the Code, could save your organization unnecessary penalties and preserve the culture of openness in your nonprofit.

Did you know?  The Standards for Excellence® Educational Resource Packet, “Openness,” includes a detailed discussion on federal regulations that apply to any nonprofit. The packet is free and available to Standards for Excellence Institute® members.  It is available through the members only section of our website.  Hard copies are also available upon request.

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