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October 2019

Role of technology in advancing nonprofits and careers

By Sponsor Insight

The Women’s Philanthropy Institute is diving into the topic of technology at its sixth national symposium from March 31-April 1, 2020 in Chicago. Learn more.

By Abby Rolland, communications project manager, Lilly Family School of Philanthropy

Technology plays an important role in the nonprofit sector. Archives in libraries are being digitized and readily accessible for online use. Social media allows individuals to witness the human face of disasters unfolding in real time. Online giving, text-to-give, and crowdfunding options help donors in any situation feel that they are giving immediately.

Technology can also help nonprofits raise both awareness and funds.  

Indiana University Lilly Family School of Philanthropy at IUPUI alumna Smita Vadakekalam has worked for technology strategy consulting firm Heller Consulting for over a decade since she graduated in 2001. She has a wealth of knowledge about technology, change management, and how the nonprofit sector has adapted to increasingly rapid growth in technology use.

For Vadakekalam knowing and understanding how to use technology is critical.

“We’re in a digital age where every role, whatever industry you work in, touches technology. By planning for it and using it strategically, technology has great potential. It can be fully utilized and enhanced to further an organization’s goals to make a powerful, important impact. In most cases, technology is the underlying infrastructure which nonprofits rely on to run their organizations,” Vadakekalam explains.

Rapid technology changes have also impacted nonprofits’ decision-making processes. Vadakekalam says that decisions made about technology changes used to occur in siloes, with individual departments using their own budgets and thinking of technology in a very narrow sense. Now, many individuals call her and her firm for C-suite level projects.

“Individuals want to make strategic decisions about their nonprofit, and they want to achieve growth at the organization,” Vadakekalam says. “They recognize that technology plays a large role in meeting their strategic plan.”

In other words, she says, they’re looking at it from a holistic perspective, and understand the important investment they’re implementing.

However, Vadakekalam cautions that nonprofits need to carefully prepare a strategic plan for whatever technology system they decide to use before they invest in it.

“There are so many choices one has when it comes to technological tools. You have to be strategic about the tool you’re choosing and why. You can waste time and money looking at these “shiny new objects” that don’t do what you think they do, so it’s vital to conduct a thorough planning process: be knowledgeable about your strategy and what product best fits that.

“That’s often where our company assists. We help curate the choices, and assist organizations in articulating their short-term and long-term goals. Then, we help find the best system that fits.”

To learn more though about technology and how it fits into an organization’s mission and goals, Vadakekalam encourages nonprofit practitioners to participate in opportunities, such as internships or classes, that focus on learning more about technology.

“Be curious, be open to learning, and be a problem solver. You can learn a lot about the sector and technology systems through free resources, trainings, and tutorials at your job.

“Also, elevate your soft skills. Be a good communicator, understand how people consume and process information, and figure out how you’re going to help teach them how to use these pieces of technology.

“You may need to make the case to some people in your organization as to why these tools are important to have. Be able to match that reasoning with the larger vision of the organization, and communicate that effectively.”

Vadakekalam emphasizes that technology has become a part of our everyday lives, and nonprofits must adapt and include it in their future plans.

Nonprofits that strategically plan and implement technology in a holistic way can utilize it to further their mission and support the greater good. Understanding how to effectively utilize technology as a tool is a huge benefit for any nonprofit,” she explains.

How can you build a career in tech in the nonprofit sector? Vadakekalam shares some of her tips. 

Having hands-on experience is vital.

Knowing how to run your organization’s Customer Relationship Manager (CRM) system is important. If you work for a smaller organization, you can gain experience by being the administrator of the system. Then, continue to think creatively about ways that you can enhance the tool to further the goals of your department or organization.

Play a role on the decision-making committee for a technology transformation project.

Technology is rapidly changing, so there’s typically some kind of transformation project at your organization related to it. Being a part of this committee and helping select and implement the system will help you become more familiar with technology and the good it can do for your nonprofit.

It’s incredibly important to have a high-level of understanding about the processes within your organization and know the strategic tools you have at your disposal.

Look into free training and resources available either inside or outside the organization.

Technology systems have user groups that share how the system is used at different organizations.

Websites like Coursera, EDX, and Udemy offer free resources, and other organizations also offer complimentary materials, while NTEN and Tech Soup offer networking groups that work with technology in the nonprofit sector.

If you can’t find what you’re looking for within those free resources, consider checking out other resources.

The Fund Raising School offers the course “Digital Fundraising” to help you learn how to connect to your donors online. Consulting firms also provide free resources, including blogs, guides, and webinars on its website that include knowledge and experience built from over 20 years of working in the nonprofit and technology space.

Abby Rolland serves as the communications project manager at the Lilly Family School of Philanthropy, and is also working towards a master’s degree in philanthropic studies. She holds a bachelor’s degree in history from Gettysburg College.

A look at Indiana’s Women’s Funds

By Feature

WAYNE COUNTY FOUNDATION, Richmond

FUND NAME: Women’s Fund

TYPE: Special interest

SOURCE OF FUNDS: Individual donors; major event (annual luncheon featuring silent auction with 100 donated works of art); luncheon underwriters

WHEN ESTABLISHED: 2001

GRANTS: First given in 2006, total to date, $258,000

HOW MANY MEMBERS: 200 attend annual luncheon

GOVERANCE: No formal structure; luncheon committee determines luncheon theme and grant recipients

RESEARCH: Informal

PROUDEST OF: “When we started, we had no idea it would grow to be what it is. We just thought that there was a need.  We had seen women’s foundations in different places, and we wanted this. We’re a small community of 35,000, our county’s about 50,000. We wanted it to make a difference in our community. I’m proudest of women who have been changed.” — Mary Jo Clark, co-founder Women’s Fund

FUND NAME: Women Helping Other Women

TYPE: Giving circle

SOURCE OF FUNDS: Annual membership dues of $500; individual donors; endowment

WHEN ESTABLISHED: 2008, added endowment in 2011; has just over $15,000 in assets

GRANTS: To date, nearly $72,000

HOW MANY MEMBERS: 22                   

GOVERNANCE: Group consensus; Wayne County Foundation staff person executes

RESEARCH: Informal, shared by foundation staff

FUND NAME: Girls That Just Want to Give

TYPE: Giving circle

SOURCE OF FUNDS: Annual membership dues of $300

WHEN ESTABLISHED: 2014

GRANTS: To date, $21,450

HOW MANY MEMBERS: 15                            

RESEARCH: Informal, shared by foundation staff

FUND NAME: Women with a Purpose

TYPE: Special interest

SOURCE OF FUNDS: Endowment; annual women’s conference; option to donate individually

WHEN ESTABLISHED: 2007

GRANTS: First $400 given last year; endowment of $12,800 started in year five of conference

HOW MANY MEMBERS: 103 conference attendees in 2019    

RESEARCH: Informal, shared by foundation staff

GOVERNANCE: Workshop at the conference with attendees becoming the grants committee; aim is help attendees understand the grant selection process and the difficulty of saying “no.”

RESEARCH: Informal, shared by foundation staff

PROUDEST OF: Growth from the women’s conference. “When I came here, I realized that we still have the good old boys’ network too much.  We were talking to the men when we were talking about charitable giving but weren’t including women in those conversations. I started trying to make a difference in how we approached that, and trying to get the women involved more. I set up the women’s conference, a one-day conference. It’s a day of networking, and learning and honing skills and being together with other women from the community.” —Rachel Hughes, Wayne County Foundation development officer

COMMUNITY FOUNDATION OF CENTRAL INDIANA, Indianapolis

FUND NAME: Women’s Fund

TYPE: Special interest

SOURCE OF FUNDS: Donations to endowment and operating fund

WHEN ESTABLISHED: 1996, now has a $16 million endowment

GRANTS: To date, $7 million

GOVERNANCE: Advisory board with officers; grants committee of about 20

RESEARCH: No original research, but uses research that’s compiled by others; will occasionally fund research, particularly through the Indiana Institute for Working Families to help inform the work the fund does with economic mobility

PROUDEST OF: “We’re really proud of the work we have done with Grameen to establish a branch of Grameen Indianapolis to help women who are living in poverty become small-business owners and to become economically independent and really change the trajectory of their lives. We’ve made a very bold investment with Grameen. We gave them a half million dollars along with the Indianapolis Foundation and some other funds, and we gave them their first money in 2011. Over 5,000 women have been served, $37 million dollars of loans have been deferred and 5,359 jobs have been created with a 99 percent repayment rate. That’s 5,300 people whose lives have been changed immeasurably because they had a small loan. The average loan size is $3,200.”.”Jennifer Pope Baker, Women’s Fund executive director

COMMUNITY  FOUNDATION OF SOUTHERN INDIANA, New Albany

FUND NAME: Women’s Foundation of Southern Indiana

TYPE: Giving circle

SOURCE OF FUNDS: Membership fees; individual donations; endowment

WHEN ESTABLISHED: 2005; became a giving circle in 2017

GRANTS: 2017, $50,000; 2018, $100,000; 2019, $106,000

HOW MANY MEMBERS: 139                                              

GOVERNANCE: Advisory board with 23 this year

RESEARCH: Commissioned a research project by Indiana University Southeast on the actual needs of women in the community. Reinforced that there was a need for affordable housing, day care, health care and good transportation.

PROUDEST OF: “Being a person who’s been involved in philanthropy and many different fundraising efforts, working with a group of women that are singularly focused on helping other women in the community has just been really an amazing experience. I just think when women get together with a real purpose, amazing things happen.” — Lori Lewis, Women’s Foundation of Southern Indiana president

MADISON COUNTY COMMUNITY FOUNDATION, Anderson

FUND NAME: Women in Philanthropy

TYPE: Special interest

SOURCE OF FUNDS: Century Club; annual luncheon event; endowment of over $100,000

WHEN ESTABLISHED: 2005

GRANTS: Still actively growing endowment

HOW MANY MEMBERS: 200                      

GOVERNANCE: Committee that meets monthly to plan luncheon

RESEARCH: Informal

PROUDEST OF: “That it started from scratch, it started from nothing and look where we are. In the last couple of years, we had a drive to increase our endowment to $100,000 and we reached that in no time flat, so we just said, ‘Hey, you did so well on that, let’s go for another $100,000 in the endowment, and we’ll be able to start giving away some significant money.’” Sally DeVoe, Madison County Community Foundation executive director and founder of Women in Philanthropy

Trend in philanthropy: Women helping women

By Feature

By Lynn Sygiel, editor, Charitable Advisors

The need was out there. It was just flying a bit under the radar until a women’s group took it upon itself to recognize it and do something to fill it.

Like many parts of Indiana, Wayne County, in the eastern part of the state along the Ohio border, had a growing Hispanic population. That also meant a growing set of language challenges for Hispanic women and their families when it came to medical care, specifically in the maternity ward.

At a time when communication is vital, especially during impending deliveries, doctors had trouble getting their messages across and their instructions understood. A stopgap solution was to have Earlham College students serve as translators. But babies don’t always arrive on a timetable, and students weren’t always available.

Enter the Wayne County Foundation’s Women’s Fund.

The women’s solution was to provide a grant to train medical translators for the maternity ward.

“We sent two women (to be trained as medical) translators, and today one of them is working fulltime at the Wayne County Health Center after receiving more training. At that point, the doctors were all men and (change) was slow with the hospital. They were surprised that we identified that need,” said Mary Jo Clark, one of the co-founders of the Women’s Fund. “We have been able over the years to identify a lot of needs in the community.”  

The fund’s first grants were given in 2006, and since then, the group has given out over $258,000. The Women’s Fund is one of four funds targeted to women and girls at the Wayne County Foundation.

And this isn’t the only Indiana community where women provide funds to make their communities better places for women and girls. There are seven community foundations that host women’s funds, according to Elizabeth Gillespie, a doctoral candidate in the School of Public Administration at the University of Nebraska-Omaha, who has just completed a study in partnership with the Women’s Philanthropy Institute based at the Lilly Family School of Philanthropy.

While women’s funds started in the 1970s, it wasn’t until 1991 that the National Network of Women as Philanthropists was established. It would later become the Women’s Philanthropy Institute (WPI), and a free-standing nonprofit. WPI moved to the Lilly School of Philanthropy in 2004 and expanded its mission to include research and education. Its signature series, Women Give, is an annual publication.

The report, Women’s Foundations and Funds: A Landscape Study, was released in May. A companion publication, based on the second phase of in-depth interviews with fund leaders will be released in December.

Gillespie found patterns studying more than 200 women’s foundations and funds to demonstrate the positive change for the broader community from an investment in women and girls. Five funds from Indiana were included in Gillespie’s report. Of these, four – the Women’s Fund of Central Indiana (Indianapolis); Southern Indiana Women’s Fund (New Albany); Women’s Fund of Wayne County (Richmond); and Women in Philanthropy of Madison County (Anderson) – were interviewed for this story.

They vary in size and activities, but all support nonprofits in their local communities, reflecting the idea, according to the report, that women’s foundations and funds “connect the well-being and success of women to the well-being and success of their communities.” All talked about the collective impact beyond grantmaking their efforts are having, and most rely entirely on volunteers for events and committee work.

The first in Indiana, the Women’s Fund of Central Indiana, was launched in 1996. At the time, a feasibility study led a group to action, and Julie Cagle, the consultant who led the study, became part of the inaugural staff. Jennifer Pope Baker, its executive director since 1998, said the impetus came from the grassroots level, not from the foundation where it is housed.

According to Pope Baker, a group primarily of women wondered why the needs of women and girls were not receiving the same attention as boys and families. They wanted to learn why that was the case and what could be done about it.

“The why really was that women typically have silent problems that are easy to ignore — teen pregnancy, domestic violence, hidden addictions and those sorts of things. They weren’t violent problems that were tearing at the fabric of our society,” said Pope Baker.

“The idea was let’s change the thinking around the needs and issues of women and girls and the thinking around philanthropy to benefit women and girls. Let’s be bolder in all those things and not place blame. Let’s just accept responsibility for creating change,” Pope Baker said.

And accept the challenge, they did.

The next step was to seek a home. Serendipitously, Ken Gladish, the then-Indianapolis Foundation president, thought that joining forces could be mutually beneficial. He recognized that the foundation lacked diversity, and believed a partnership could give the Women’s Fund instant credibility and provide the foundation gender diversity. He sweetened the pot with a $1 million match to launch fundraising and the group accepted his offer and the women’s group became a special fund of the Indianapolis Foundation.

Shortly after, the foundation merged with the Hamilton County Community Foundation to create the Central Indiana Community Foundation (CICF).

Other funds in Indiana started in similar ways with a woman or group of women identifying the need to focus on women and girls and a desire to make a difference with their donations.

For example, Richmond, which has had a women’s fund since 2001, last year awarded a grant to two high school seniors. For four years, the girls had enrolled in what traditionally was considered the boys’ domain – an auto mechanics class. Both had landed jobs in the profession after graduation. Recognizing that a lack of strength put them at a disadvantage, the girls requested money to purchase a car lift. At the fund’s annual luncheon, the girls were awarded the funds, and in addition, received a classroom plaque to acknowledge for future generations their barrier-breaking efforts. In response, the awardees arranged a meeting with underclassmates sanctioned by the school’s administrators to interest more females in the coursework.

Each of Indiana’s women’s funds has developed its own grant-giving approach to fit the needs of its community. Several have taken a giving-circle approach, raising money through dues memberships and then distributing the funds in the calendar year.

New Albany began its efforts in 2005 with an endowment, but after careful study in 2017, made the shift to a giving circle. Two of the four funds at the Wayne County Foundation are giving circles. The others – Indianapolis, Anderson and two in Wayne County – are set up as special interest funds of the community foundation.

New Albany’s initial effort was a biannual dinner. President Lori Lewis said it was a successful dinner, but the growth was slow. 

“We know that the founding women wanted to involve women in philanthropy, and they wanted to make a difference in the community. And around 2005, the only way they saw to do that was to get an endowment going. We saw the giving circle as a way to involve more women and to be able to make a bigger impact in the community quickly. There’s ownership in being a member. I think it just makes them more aware of what’s going on in the community, more aware of us trying to change the community,” she said. Cincinnati, which has a giving circle, mentored the group.

Earlier this month, at its annual dinner, the women awarded its third grant — $106,000. Each year the number of women has grown, enlarging the distribution. Lewis said the change has also caused grantees to dream big. Its first awardee, St. Elizabeth Catholic Charities, put in a commercial teaching kitchen for women to teach culinary arts skills, and as a result, find good paying jobs. Last year it funded self-esteem camps for girls in Floyd, Clark and Harrison counties. The group has also committed to fund the original endowment to respect the fund’s originators.

Initially, the Women’s Fund of Central Indiana had a cadre of women investigate different models of women’s funds to determine its best course of action. Their recommendation was to create an endowment of at least $4 million before making any grants to ensure it would be a growing fund. Today, the endowment is about $16 million.

Over time, it has awarded not only program funds, but also general operating, believing that a nonprofit cannot provide quality programming without operating dollars. Recently, it changed the language for its grant initiatives to caregiving, violence against women and economic mobility. It has also provided significant support for several initiatives, including a commitment of $10 million to Bellfound Farm.

“Our First Next Initiative helping to incubate and launch Bellfound Farm, a residential urban farm designed to help young women coming out of the criminal justice system with re-entry and a lifetime of economic security coupled with extraordinary mental health support, will be extraordinarily significant,” said Pope Baker.

“The work that we’re doing with our next initiative to help women and girls who are 18 to 24 years old who are underappreciated and fall through the cracks to really engage in a thoughtful path to economic security is incredible.”

For all, community foundations have been the incubators. In fact, Sally DeVoe, the executive director of the Madison County Community Foundation in Anderson, started the effort in 2005 with the first task of raising visibility.

“We started the endowment, but we never made an issue out of the endowment until much later. We looked at it and said, ‘The money doesn’t need to be paramount. What needs to be paramount is that women understand they need to give the money and why they need to give the money,’” said DeVoe. The group is actively growing its endowment through its Century Club and its annual luncheon.

“We’re raising $10,000 a year, and certainly more than that. But we’ve just set that as a doable goal in a community like Anderson in Madison County where we haven’t been on the best side of the economic fence for a while. We’re coming back and stronger than ever, so we’re beginning to address some things and able to address them financially and, you know, emphatically,” she said. The group’s annual luncheon draws close to 200 women.

All the funds see the need to democratize philanthropy and create buy-in from the women in their communities. They have all found innovative ways to cultivate philanthropy. From silent art auctions to annual luncheons to a conference, all with the goal of raising the profile of women.

In the beginning, Pope Baker said women were not as good at asking for the funding they deserve, but she has seen a big difference and credits the women’s fund for being part of that difference.

DeVoe agrees.

“Women are not good at giving money to themselves, treating themselves well or donating to other women. What they want to zero in on is children, families and caregiving without looking at the fact that there are an awful lot of women in need,” she said. “I think a different look at women’s roles has been the thing that I’ve seen change the most.”

Wayne County Foundation’s development officer Rachel Hughes recognizes that more women are giving after the establishment of the different funds. 

“I feel good about the fact that we have empowered them to give philanthropically, and that doesn’t have to be to the foundation. We are helping them to gain their voices to be heard philanthropically in our community, whether that’s supporting strictly women’s organizations and programs or anything that they care passionately about.”

From day one, the Women’s Fund of Central Indiana has planned for the future with philanthropy education.

“I believe that you do not turn 50 or 60 years old and start writing big checks to organizations to whom you don’t have a connection. So we have been cultivating and developing relationships since the day we opened up our doors to engage people so they will want to support our work in a way that’s meaningful for them and the right time. We are always excited when more people want to join us in making positive change, join us in helping women and girls have all the tools they need to be economically successful. When a woman’s successful, a family is successful, and when a family is successful our community is as well,” said Pope Baker.

Reviewing your organization’s board governance model

By Sponsor Insight

By Annmarie Novotney, senior audit manager, Blue & Co.

A strong board of directors will oversee implementation of strategic objectives for the organization, but also has ultimate responsibility and liability. Building a strong board is challenging, yet crucial to setting the right tone for success of your organization.

Have you assessed your organization’s overall governance model recently? Generally, it’s best practice to review governance policies regularly but at least every three to five years. For newer organizations, this time period may be shorter as circumstances and strategic positioning may change more frequently.

As you review your organization’s governance model, consider the following:

Board size: The IRS generally requires a minimum of three board members but does not have requirements on term limits. Many organizations have at least five members, with an average throughout our client base of 15. As you consider what board size is right for you, also consider if term limits are appropriate. If your review determines changes to board structure need to be made, be sure to amend your organization’s bylaws (for maximum board members and term limits).

Type of board: You may also consider whether your board is a working board or a governing board. Working boards have members that are heavily involved in the implementation of the mission, and often perform duties that paid staff would perform. Governing boards have a big-picture focus and work to delegate tasks to staff in an effort to govern the strategic mission, not implement it directly.

Skillsets needed: A diverse and skilled board of directors can serve its organization more effectively. In all areas, ensure that you are focused on nonprofit (NFP) expertise. Attorneys and accounting professionals are especially important in this regard as nonprofits are unique in many ways. Some examples of areas include:

  • Financial – This expert would be able to provide guidance on the creation of a budget, financial statements, and accounting policies and procedures, and insurance considerations.
  • Legal – As there are many requirements for a nonprofit organization, a legal expert can ensure the board stays up to date on all compliance requirements and provides guidance on any legal matters that may arise.
  • Marketing – Ensuring your organization is well-known throughout the community can provide significant growth opportunities for recognition and future funding. An expert in marketing can help accomplish this.
  • Technology – A technology expert can ensure the organization is doing its best to protect its assets and information from cybersecurity threats. Cybersecurity threats continue to plague NFP organizations of all sizes, so having an expert here could keep the organization up-to-date on security options and policy ideas.
  • Fundraising – An expert in fundraising is a must for any NFP board. This person should not only have connections in the community, but also know how and be willing to ask for donations in an effective manner.
  • Program/Industry– Having a board member familiar with your programs, or with industry knowledge that could assist in growing or expanding current programs, can be an asset to review plans for future programming within your organization. He or she can review and identify red flags in planning, as well as provide realistic expectations on how quickly a program can be started or expanded.

Board committees: Board committees are also an important part of a Board of Directors. The size and responsibilities of committees vary greatly between organizations based on their needs. For some committees, it may be best to have a committee chair, responsible for communicating decisions to the board and ensuring the committee remains focused on its goal. The following are suggested committees, but should be tailored to your current needs and long-term goals:

  • Executive – This group acts on behalf of the entire board as the steering committee and prioritizes agendas. They also manage urgent matters between meetings.
  • Finance – These individuals take on an expanded role of the financial expert mentioned above. Preparing or assisting with the budgeting process, reviewing internal financial statements, and presenting these items to the Board would be included in the responsibilities of the finance committee. This committee can also provide insight on whether goals are achievable based on the financial performance of the organization.
  • Audit – If an audit becomes necessary for the organization, having an audit committee can ensure it is clear who is responsible for staying current on financial requirements, chooses the audit firm, ensures there is no conflict of interest and has a clear understanding of the audit results.
  • Fundraising/program – This committee is focused on driving and monitoring the organization’s fundraising performance and can also track the effectiveness of specific programs to determine if any changes need to be made.
  • Governance/nominating – This group determines the requirements and qualifications of board members, nominates them, and ensures they receive proper training. This committee also drives board expectations and performs regular self-assessments of the board.

Annmarie Novotney is an audit senior manager in Blue & Co.’s Carmel, Indiana office. She’s been with the firm for over nine years and works exclusively with nonprofits, specializing in assurance and consulting services.

If you are considering a review of your governance policies, or if you have questions or need guidance on how to incorporate these suggestions, please contact Annmarie Novotney (anovotney@blueandco.com) or your local Blue & Co. advisor.

Federal tax law raises concerns for nonprofits

By Sponsor Insight

By Ryan Olson, senior accountant and CPA, VonLehman

Passage of the federal income tax law in late December 2017 brought into reality a variety of concerns that nonprofits raised as the bill worked its way through Congress. In addition to the increased standard deduction that’s expected to depress charitable giving, the final Tax Cuts and Jobs Act (TCJA) includes several other provisions that prompted objections from charities.

Calculating UBTI

The corporate tax rate under the TCJA is a flat 21%. This change will benefit some nonprofits paying unrelated business income tax, because the tax is imposed at the corporate rate.  Those nonprofits with unrelated business-taxable income of $50,000 or less have an increased tax rate. It has increased from 15% to 21%.  Those nonprofits with unrelated business-taxable income of $50,000 or more have a decreased tax rate from anywhere from 25-35% to 21%.

Under the TCJA, nonprofits must calculate their unrelated business taxable income (UBTI) separately for each unrelated business. As a result, they can’t use a loss from one unrelated business to offset income from another unrelated business for the same tax year. But they can use one year’s losses on an unrelated business to reduce their taxes for that business in a different year (subject to certain restrictions).

In addition, the law includes certain fringe benefits in UBTI. Nonprofits now must include certain expenses in UBTI incurred to provide employees with qualified transportation fringe benefits (for example, transit passes), a parking facility used in connection with qualified parking fringe benefits and any on-site athletic facility.

And under the TCJA, reimbursements to employees for moving expenses or any activity considered to be entertainment can’t be excluded from that employee’s taxable compensation.

Excise tax on excess compensation

The TCJA creates a 21% excise tax on nonprofit executives’ compensation (including most benefits and any payments from related organizations) in excess of $1 million considered paid to a covered employee plus certain large payments made to that employee when he or she leaves the organization (known as “excess parachute payments”). “Covered employees” refers to current or former employees who are among the five highest paid employees for the taxable year or who were covered employees in 2017 or later. Once considered a covered employee, an individual is always a covered employee.

A payment generally is considered an excess parachute payment if:

  • It’s contingent on the employee’s departure, and
  • The total present value of all such payments to the employee equals or exceeds three times his or her average annual compensation for the preceding five years.
  • The excise tax applies to the amount of the parachute payment, less the average annual compensation.

Reduced charitable-giving incentives

The near doubling of the standard deduction was expected to reduce the number of taxpayers who itemize their deductions and, therefore, the number who can deduct their charitable contributions. In fact, Charitable giving by U.S. individuals fell 1.1% to $292 billion in 2018, according to Giving USA.

The TCJA includes further disincentives to giving. The law could hurt major contributions because it increases the estate tax exemption to $10 million, annually indexed for inflation, through 2025. Some wealthy individuals make major gifts to reduce their taxable estates, and the larger exemption means they won’t need to shrink their estates as much to avoid the tax. The TCJA also repeals the deduction for donations made in exchange for the right to buy tickets to college athletic events.

While the TCJA raises the limit on cash donation deductions from 50% of adjusted gross income (AGI) to 60%, that change isn’t predicted to have much of an impact. Cash donations of even 50% of AGI are already uncommon.

Certain tax-exempt bond interest repealed

Tax-exempt bonds usually pay lower interest rates than other bonds. The tax-exempt nature of the interest makes such bonds attractive to investors despite the lower rates.

A bond that is issued to pay principal, interest or the redemption price on an earlier bond issue is called an “advance repayment bond.” The TCJA repeals the tax-exempt treatment for interest paid on advance repayment bonds that are issued to repay bonds with more than 90 days remaining before the redemption date.

For example, if you issue tax-exempt bonds at 5% interest but subsequently learn you can refinance the bonds at 4% interest, the interest payments on the 4% advance repayment bonds won’t be tax-exempt for investors. You’ll probably need to pay more interest to cover the investors’ increased tax liability.

Next steps

Although the final guidance and procedures have yet to be issued by the IRS, the TCJA may have some negative repercussions for your organization going forward. Consult with your CPA now to determine the best steps to minimize any potential damage to your bottom line — and your ability to accomplish your mission.

What didn’t make it into the Act

Some of the provisions that caused concern among nonprofits didn’t make it into the final tax act. They include:

  • Johnson Amendment repeal. The House of Representatives’ version of the TCJA would have repealed a prohibition against nonprofits engaging in political campaign activity. Many nonprofit leaders had mobilized in opposition to this repeal.
  • Private activity bond tax-exempt treatment termination. The House bill would have eliminated the tax-exempt treatment of interest on the private activity bonds some organizations use to finance capital projects.
  • Expanded donor-advised fund reporting. Under the House bill, sponsors of donor-advised funds (DAFs) would have been required to report additional information on their Forms 990, including the average amount of grants made from DAFs during the taxable year.

Excise tax rate on private foundation net investment income. The TCJA left out a House provision establishing a streamlined rate of 1.4%, sticking instead with the two current rates of 1% and 2%.


Ryan Olson is a senior accountant working out of VonLehman CPA & Advisory Firm’s Indianapolis office. Olson specializes in tax and works with a wealth of nonprofits.

In fundraising, ethics should cause red flags to wave

By Feature

By Lynn Sygiel, editor, Charitable Advisors

The fallout was immediate and severe. Since New Yorker reporter Ronan Farrow broke a story in early September about the donor relationship of the Massachusetts Institute of Technology Media Lab and disgraced financier Jeffrey Epstein, the prestigious school has been on the defensive. Ultimately, the Media Lab’s attempts to conceal the extent of its contact with Epstein, both publicly and within the university, were exposed, resulting in its longtime director resigning and a deeper investigation by the university.

But after the headlines, what lessons are there for nonprofits? Just as the MIT scandal raised questions about that institution’s ethics, it can be a teachable moment for nonprofits, encouraging them to scrutinize fundraising efforts and practices and to evaluate their own organizational ethics.

Jim Langley has worked in higher education since the 1980s, and until 2010, was Georgetown University’s vice president of advancement. Since leaving the world of higher education, he founded Langley Innovations, a consulting company that advises clients on an optimal philanthropic path. Recently, he spoke with Charitable Advisors to share thoughts on ethics and to suggest ways for nonprofits, large and small, to shore up their fundraising practices. In short, Langley believes that integrity is everything, and when it is maintained, it is the most powerful personal and professional brand.

“Ethics are something that will protect you over time or add value to your career, will add value to your employability and be prized by an institution,” Langley said.

For him, if all things are equal, it’s also one way for a nonprofit to differentiate and find a trusted partner, and thinks that each organization needs to reinforce its ethics and raise awareness of ethical lapses or situations that start to create potential ethical compromises.

“The consumer then has the assurance that they’re dealing with somebody who will safeguard their time, their talent, their treasures, their sensitivities and their trust. I believe that, and this was triggered by the Epstein case, how profoundly stupid it is to behave in a short-term expedient way with the hopes that you never get caught. You put yourself on thin ice and the consequences are potentially enormous,” Langley said.

And while organizations like the Association of Fundraising Professionals published principles and adopted enforcement procedures in 2015, there haven’t been consequences for those in violation. Langley thinks there is need for an accrediting body that will censor flagrant violations and raise accrediting questions about those “that are wobbly and affirm those doing an exceptional job.”

“There are several organizations that have codes of ethics for fundraising, but then remain silent when those ethics are violated or trounced on. So, you kind of wonder, what’s the point of a code without teeth?” asked Langley.

“I think the standards are pretty clear. ‘Thou shalt not take from pedophiles’ doesn’t need a lot of nuance, but who speaks up? There’s a lot of tsk-tsking behind the scenes, but who speaks up and says, ‘The MIT Media lab should be censored in a public way so that everybody knows if you think of doing something like that again, there may be consequences greater than the dollars you’ll secure.’”

Langley said a public calling out will put organizations on notice and they might lose money as a result of their behavior if they are seen as being on a slippery ethical slope if not in a complete violation of something that so unimpeachably clear and important.

One contributing factor is the fundraising landscape and a contraction in philanthropic participation. Giving by individuals decreased as a percentage of total giving in 2018 to 68% (down from 70% in 2017), despite achieving its third-highest total dollar amount on record, adjusted for inflation. While there are fewer people giving, it’s masked by people giving larger gifts.

“If the volume of giving contracts, then the importance of big giving in terms of safeguarding the institution or advancing the institution’s mission becomes ever more important,” Langley said.

Couple that with what Langley sees as utterly false expectations surrounding fundraising.

“The top seems to inspire delusional thinking, and then that gets passed on in the form of goals imposed on development staff. ‘Thou shalt go out and get all of this money’ that we think is out there without any concrete evidence that it is. You put pressure on the fundraisers, the board puts pressure on the CEO, and it becomes what I learned as a boy in Catholic education is the occasion for sin.

“The circumstances create more wobble, more unethical behavior. You put pressure on people and they want to elevate the pressure, so I’d say all of those factors are now coming to play in a greater form than ever before. And so as philanthropy becomes less democratic, then the aristocratic few, at least some of them will then say, ‘Oh, then what leverage do I have?’”

One way to combat that is to learn the difference between high and unrealistic standards and that there are analytics that help determine what is reasonable within certain timeframes.

“In other words, a $1 million gift is generally 21 to 24 months in the making, not three months,” Langley said.

“I’d add one more point, and that is that when you don’t have a strong case for support, when you cannot point to where money will make a difference, when you think the only way to raise money is through ingratiating yourself with the rich, then you’re inclined to make these mistakes. If you’re more of a performance-driven organization, you’ll have far more confidence in the fact that as long as you are able to define differences to be made and as long as you prove that investment in (your organization) yields a significant sustainable societal return, you’re not going to be so quick to compromise yourself,” said Langley.

Langley offers these take-away lessons for nonprofits:

1.Include ethics as part of the staff onboarding process.

      “An organization has to have an orientation process that emphasizes the importance of character in both personal career development and in protecting the credibility of the institution.”

2. Develop an accountability policy.

“Spell out the larger the gift, the more comes with it. A large gift sort of out of the clear blue, we might want to go ‘Does this person have an ulterior motive? Is he or she trying to redeem or cover their own wont of character by aligning with us and appearing to be charitable? You have to have something like that in place. It’s all too easy to get around via big gifts and want them so badly that you suspend credulity and then you pay for it later.”

3. Determine who will administer the accountability policy.

“Have a devil’s advocate. Someone outside the advancement operation, maybe in the legal staff, maybe somewhere else, but outside. It needs to be someone who could say ‘While I have no personal interest in receipt of this gift, I want to protect institutional credibility.’

“In my ideal world, I want nonprofits to have an office of accountability — someone reporting directly to the president — and I want them to start projecting the philosophy that ‘We are accountable to a code of ethics, we are accountable to keep our promises to donors. It’s not just thanking donors. It is too many unkept promises, too much glib transactional fundraising and not enough conscience commitment in delivering on commitments, not enough taking the convictions of donors as seriously as we should have.’”

4. Hire the right development people.

“There are two schools of thought, which I’ve characterized as the hunters and the growers. If you’re hunting, you don’t really worry, because you just drag home the carcass, but if you’re growing, you say, ‘Well wait a second, I need to think about the implications of this over time.’ Too many organizations hired fundraisers for the wrong reasons. They thought it was all about asking and not about a process of relationship building. So, they hired people who they thought were presentable, persuasive and had the courage to ask. But over time, sheer experience started to prove that donors actually liked the curious frontline gift officer much better than the aggressively persuasive one.”

5. Develop board fundraising training modules.

“We need board onboarding. A board must orient itself. It’s something that everybody thinks they know, and they don’t know at all. So there has to be some schooling, and then second, there has to be the raising of questions and the monitoring of areas that might be predictives of ethical problems. Boards are often the guiltiest in terms of putting pressure on the CEO to produce magical fundraising results. I spend a lot of my time trying to orient boards to reality and say, ‘Yes, clamor for high achievement, but don’t throw out arbitrary metrics or suggest something is possible without having it grounded in sound analytics and a solid understanding of philanthropic behavior.’”

6. Help boards ask the right questions.

“What should really be happening between a CEO and a board is each asking the other intelligent probing strategic questions. So, for instance, ‘What are we doing to retain the loyal support that we have?’ That will open up a lens to how accountable an institution is. ‘How affective are we at retaining our gift officers?’ If they’re turning over a lot is that an indication of discomfort or unrealism.”

7. Listen to the testimony of frontline gift officers.

 “Listen to complaints coming in from external constituents and log those complaints because those can be early warning signs. Don’t get into a cocoon or to an echo chamber. Be very open to evidence that disrupts your thinking or shakes up your complacency and treat it very seriously. Understand that by definition the conscientious person is in the minority, so don’t dismiss internal discontent as the few soreheads. The minority are always the ones who make the majority of difference, who always preserve the integrity of the institution.”

8. Have a written gift policy with steps spelled out before formal acceptance.

“This should include reviewing the conditions of the gift and scrubbing the ethical character of the donor. The organization should say, ‘Make sure we don’t compromise ourselves unwittingly or wittingly in such a way where we’ll lose credibility and that will diminish our ability to do other great things going forward.’”

9. Pay attention to anonymity.

“It’s a flag that we should pay more attention to. If there’s not a longstanding relationship with an institution and someone starts to give, ask, ‘What is that about?’ Is it in fact some sort of laundering situation in which (the donor) is laundering that money to redeem (his/her) reputation or to create some standing that (he/she) wouldn’t have otherwise. But you have to juxtapose that with remarkably modest loyalties. People give to institutions for years out of spiritual motivation and nothing for themselves, and any kind of review of that ground would quickly reveal which was which.”