Nonprofit groups are assailing a proposed rule from the Internal Revenue Service, warning the regulations could dry up donations and leave them vulnerable to hacking.
The IRS is proposing new requirements for nonprofits to collect the Social Security numbers of their donors.
Currently, nonprofits send donors a form verifying their contributions, which they use for tax purposes. However, the IRS is proposing changes that would require these nonprofits to collect their donors’ SSNs to provide directly to the agency.
But this could put a bull’s-eye on nonprofits, critics say.
By Sherri Welch, senior reporter, Crain’s Detroit Business |
The U.S. Congress has approved a bill that would make three charitable tax incentives permanent, according to Washington, D.C.-based Independent Sector, which called the move “a monumental victory on Capital Hill” in an open letter to its members.
Independent Sector and the nonprofit sector as a whole have been advocating to make the charitable incentives a permanent part of the tax code for a decade. During that time, the incentives have repeatedly expired before, in some cases, being retroactively renewed, confounding and frustrating donors and advisers alike.
Part of the Protecting Americans from Tax Hikes Act of 2015, the charitable tax incentives set to become permanent include:
the IRA charitable rollover, which allows donors age 70½ and older to give to charities up to $100,000 tax-free annually from their IRAs
enhanced deductions for gifts of excess food inventories and conservation easement provisions under which private owners promise not to develop land in exchange for the deduction while still retaining ownership of the land.
The act also includes provisions to make the child tax credit and the earned income tax credit permanent, according to Independent Sector.
By William Foster, Gail Perreault, Alison Powell and Chris Addy, Bridgespan, for SSIR |
When Don Fisher stepped down as chief executive of the Gap in the late 1990s, he and his wife, Doris, decided that they wanted to tackle one of the most difficult social challenges in the United States: improving public education.
Through an expert advisor, they learned about the Knowledge Is Power Program (KIPP), which at the time consisted of just two charter middle schools — one in Houston and one in New York City. And after lengthy due diligence, the Fishers committed to giving $15 million over three years (roughly three times the organization’s annual revenue at the time) to bring KIPP’s results- oriented methods to many more communities and students.
By Jamie Levine Daniel, assistant professor of nonprofit management, SPEA IUPUI |
Nonprofits often engage in earned revenue activities to generate revenue to fund their mission-driven programs and services. These market-based income activities can take many forms — some directly related to the organization’s mission, some not.
For example to generate funds, an art museum can charge admission to an exhibit, which is directly related to mission or the organization can sell food in a café, which does not have a direct connection to mission. Both generate income, but each may not ultimately affect the organization’s program/service delivery in the same way.
Certain revenue activities may, indeed, ultimately support the organization’s mission. However, these other activities may draw organizational attention and resources away from the mission-related activities. The connection between the earned-revenue activity and the mission matters, and the following embeddedness framework offers a way to assess whether an earned revenue activity will have the desired effect for an organization.
The embeddedness framework looks at two aspects of an earned revenue activity to evaluate its connection to an organization’s mission. The first is organizational technology or the resources (human, physical, capital, etc.) used to delivery both the earned revenue activity and the organization’s core mission-related services. The second aspect is the target audience(s) for both the earned revenue activity and the mission-related service.
If the organizational technology and target market for both the earned revenue and core mission activity are the same, or an organization monetizing what it already does related to its mission, the earned revenue activity is considered to be fully connected or embedded within the organization.
Consider the art museum selling admission tickets. The core service and earned revenue activities are not differentiated. The organizational technology required is the same, and the target audience is the same.
On the other hand, that same museum’s café would be considered external (or unconnected) to the mission. The resources needed to run a café differ from those needed to mount an exhibit. A customer can eat in the café without entering into an exhibit hall, further differentiating the earned revenue activity from the core mission activities.
If the earned revenue activity and the mission activities share only one aspect in common – either the necessary inputs or the target audience — then the earned revenue activity is considered integrated. It is not fully connected or embedded, nor is it external to the core.
The museum taking a traveling exhibit to a nontraditional audience — an elementary school, or a civic festival — could be using existing resources/processes to target new audiences.
Using revenue and program consumption data from the Cultural Data Project from 2007-2010, my initial research shows that embeddedness matters. Both embedded and external activities are positively connected to program attendance, a signal of core mission activity. In embedded case of admission tickets, the organization makes money on what it already does. In the external case of the cafe, since the activities are separate or external and that activity that does not make money for the organization, it would be easy to shut it down, without detriment to core activities.
However, integrated revenue activity show mixed results. These types of activities show a negative relationship to both access and attendance. The negative effect is especially visible when looking at earned revenue activities that use the same organizational resources used by mission activities. This is noteworthy given conversations many nonprofits may have about maximizing resources.
My findings are that earned revenue can serve as an important element of organizational strategy and sustainability, but the nature of the activity is important. By considering the connections between the earned-revenue activity and the mission activity, organizations can use the embeddedness framework to determine the best use of resources that ultimately best serve program outcomes and client interests.
Jamie Levine Daniel is an assistant professor at the IU School of Public and Environmental Affairs at IUPUI. She has a Ph.D. in Public Policy and Management from Ohio State University and studies nonprofit management and nonprofit revenue trends.
The huge philanthropic pledge by Facebook CEO Mark Zuckerberg and his wife — totaling perhaps $45 billion — reflects the fast-paced emergence of a new Gilded Age of giving. The changes excite many in the charity world, but also raise questions about effectiveness, ethics and the impact on older charities that may not share in any windfall.
Foremost, there is applause for the new wave of philanthropists — led over the past five years by Bill Gates and Warren Buffett, and subsequently joined by Zuckerberg and scores of other billionaires in the United States and abroad.
The Giving Pledge, founded in 2010 by Gates and Buffet, now has 138 billionaire signatories from 15 countries who have pledged to give away more than half of their wealth. Many, including Zuckerberg, want to be personally engaged in the oversight and management of their pledged funds, and are finding nontraditional ways of leveraging them.
Amir Pasic, dean of Indiana University’s Lilly Family School of Philanthropy, drew parallels between these modern-day philanthropists and those from the earlier Gilded Age, roughly a century ago, when the Carnegie, Ford and Rockefeller families pioneered a new type of charitable foundation.
By LauraArrillaga-Andreessen for The New York Times |
Suppose you want to help people in struggling communities become better health care consumers. Or to try to prevent terrorist attacks using Big Data. Or to develop lab tests that cost a fraction of what most providers charge. Do you create a business or a nonprofit?
There is no right answer. Because for a new generation of innovators, notions of what is right are different. The important questions are: What is the problem? What solutions can I develop to address it? And, can I help more people by operating as a nonprofit, founding a company, or utilizing elements of both?
A profound change is sweeping across the entrepreneurial landscape. In the quest to improve lives or preserve the earth’s natural resources, today’s top minds are not only coming up with game-changing products and services. They are also reinventing systems and harnessing diverse tools — from cross-sector partnerships to capital markets — to meet their goals. Many of these innovative thinkers are young, coming of age in the aftermath of Sept. 11, amid the destruction of two protracted wars and the economic uncertainties ushered in by the Great Recession. They are digital experts, who, thanks to social media, smartphones and access to limitless information, have grown up with a sense of global community that transcends geographic boundaries. And they seem to have social consciousness embedded in their DNA.
This is my favorite time of year. Despite the darkness of the last few months, December is often about reflecting on the year that is drawing to a close and hopes for the new one coming.
And as is my tradition on this blog, I like to look ahead at the trends that may affect the nonprofit sector in the coming year. I have never claimed to be a clairvoyant, but I am an admitted optimist, so my predictions are less about telling the future and more about wishful thinking. This year, more than ever, I want to see opportunity amid the uncertainty and the challenges we face.
So here are five things I’m really hopeful about for the nonprofit sector as we head into 2016.
By Jim Simpson, CPA and director, Financial Technologies & Management |
In 2013, over 1.5 million tax-exempt organizations in the U.S. reported $1.74 trillion in total revenues and $1.63 trillion in total expenses, according to the National Center for Charitable Statistics. That means nonprofits are responsible for reporting and tracking all that financial information.
In September, Abila, a nonprofit software company, set out to understand this current financial landscape and interviewed 350 nonprofit finance professionals. Specifically, they wanted to:
learn about the day-to-day challenges facing nonprofit finance professionals
define emerging trends in fund accounting and technology
apply how trends and challenges differ based on the organization
Nonprofit boards and leaders should pay careful attention to the Nonprofit Finance study. The study reveals that the trends are for smaller, leaner finance teams and the importance for leaders to improve the finance department by implementing more efficient software products and processes.
Finance teams staff feels too many of their limited resources are spent on day-to-day activities, and not on more important strategic and planning activities. A typical finance team says they spend significantly more time than they would like in the following areas: helping other departments, month-end-closing, financial reporting, grant reporting, bookkeeping, accounts payable, accounts receivable and payroll processing. Their preference would be to spend more time with strategic and planning activities including strategic accounting, financial analysis, budget planning, and board engagement and development department activities.
Here are some key findings and study recommendations for how you, as a nonprofit finance professional, can overcome similar challenges.
Interruptions are common:It would help if other departments would schedule collaboration times and learn to self-manage their finance role to minimize interruptions to the finance department.
Nobody is above the basics:Nearly all financial/accounting professionals continue to be involved in the day-to-day activities of the organization. This is reflective of a trend towards smaller, leaner finance teams.
Funding is (obviously) key:Organizationally, finance/accounting professionals identify long-term sustainability and finding new funding sources as the biggest challenges.
Embracing the cloud:Larger organizations are moving to the cloud quicker, and see greater value and benefit to cloud-based software. Overall, most of the respondents see the cloud as beneficial, with security being the biggest area of concern.
Finance/accounting professionals want to focus more on strategy:By and large, respondents spent much of their time focused on either running reports or preparing for monthly presentations, and would like to spend more time on strategic and budget planning.
Jim Simpson, CPA and director of Financial Technologies & Management, is a financial leader and trainer, Software Advisor, CFO advisor, controller and forensic accountant to nonprofit organizations since 1999, serving over 350 nonprofit clients. He has worked as a CFO, controller and software advisor for over 25 years.
Contact Financial Technologies & Management to learn how our firm can improve your organization’s financial management operations and capacity. You can schedule an appointment directly from the website at WWW.FTMLLC.COM, or emailinfo@ftmllc.com; or phone at 317-819-0780.
By Erica E. Phillips, reporter, Wall Street Journal Logistics Report |
Each year, food donations coming in to Second Harvest Food Bank of Middle Tennessee surge from November through December to nearly double what the charity receives in the rest of the year.
It is a deluge of everything from canned soups, boxed cereal to crated vegetables and fruits, presenting an operation that depends largely on volunteers with a logistics challenge. To handle the rush, Second Harvest is relying on the sort of technology that retailers and other private companies use to manage the spike in activity that comes with the holidays.
The charity, part of the national network of 200 food banks that operate under Feeding America, uses logistics software made by Exact Macola to help manage the more than 30 million pounds of food it delivers from its warehouses each year. Exact Macola, a Dublin, Ohio-based company, sells business software to small and medium-size companies.
By John Bare, vice president, The Arthur M. Blank Family Foundation |
The third wave of innovation in urban ag is upon us, and it’s all about supply chain and distribution.
The first wave of innovation demonstrated the potential to grow fruits and vegetables in the middle of cities. Worldwide, now 800 million people are doing it.
The second wave of innovation revealed the sweeping demand among low-income families for fresh produce. The US Department of Agriculture (USDA) reports that SNAP spending “at roadside farm stands, farmers markets, and directly from local farmers” reached nearly US$19 million in 2014, “a nearly six-fold increase since 2008.”
The next challenge is finding efficient ways to aggregate and distribute fresh produce to small-area geographies and to neighborhoods that lack sufficient density to attract traditional suppliers. In a world where we have digitized nearly every transaction and substituted virtual for personal transactions, the innovative solutions here will have an old-school look. There will be trucks, refrigerated warehouses, and personnel washing, bagging, and delivering food.
