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Aug 15

New overtime rules: Got compliance?

By Sponsor Insight

By Jeremy York, Human Resources field representative, Synergy PEO Services

Last year, the Department of Labor (DOL) announced proposed changes to the Fair Labor Standards Act (FLSA), the law that outlines overtime exemptions for workers.

These proposed changes will extend overtime protections to nearly five million workers by making many positions previously considered overtime exempt under the Act, nonexempt and eligible for overtime.

After 10 months of review, the final rule was published in May.

Overview

The final rule focuses on updating the salary and compensation levels needed for executive, administrative and professional workers in order to be exempt.

Specifically, the rule:

  • Changes the standard salary level from $455 per week or $23,660 annually to $913 per week or $47,476 annually; meaning that employees must make at minimum the standard salary level to be classified as exempt.
  • Sets the total annual compensation requirement for highly compensated employees (HCE) subject to the duties test to $134,004.
  • Establishes a mechanism to automatically update the salary and compensation levels every three years to align with cost of living etc.
  • Amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

Employers have until this Dec. 1 to comply with the final rule. This means that in order to be exempt from overtime, employees must make a minimum salary of $47,476 and satisfy the duties test outlined by the DOL for exemption from overtime (see table below). Employees who do not meet these criteria must be classified as nonexempt and paid overtime for any hours worked over 40 hours per week.

Basic requirements for claiming an exemption under the standard duties test

  Executive Administrative Professional
Salary Basis Test ·   Employee must be paid a salary, not hourly ·   Employee must be paid a salary, not hourly ·   Employee must be paid a salary, not hourly
Standard Salary Level Test ·   $913 per week ($47,476 per year for a full-year worker) ·   $913 per week ($47,476 per year for a full-year worker)

 

·   Special salary level for certain academic administrative personnel

 ·   $913 per week ($47,476 per year for a full-year worker)

 

·   Salary level test does not apply to doctors, lawyers or teachers
Standard Duties Test ·   The employee’s “primary duty” must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise and managing two fulltime employees,

 

·   Additional requirements provided in Section 29 CFR 541 Subpart B

 ·   The employee’s “primary duty” must include the exercise of discretion and independent judgment with respect to matters of significance.

 

·   Additional requirements provided in Section 29 CFR 541 Subpart

 ·   The employee’s “primary duty” must be to primarily perform work that either requires advanced knowledge in a field of science or learning or that requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

 

·   Additional requirements provided in Section 29 CFR 541 Subpart D

 

Special note for nonprofits

Nonprofit organizations have been identified as a sector that is most significantly impacted by these changes given their limited budgets and other financial factors.

The DOL recognized this and published a special overview and guidance for nonprofit organizations outlining how the FLSA applies to nonprofits:

  • Enterprise coverage: All employees of an organization will be covered by the FLSA and overtime regulations, if the entity has annual revenues of at least $500,000, measured by volume of sales made or business done (See the guidance document for more detail.).
  • Individual coverage: If the employer does not meet the standard for “enterprise coverage,” an individual employee will be covered by the FLSA if he or she engages in interstate commerce or in the production of goods and services for interstate commerce. This can include such regular activities like making out-of-state phone calls, receiving and sending mail or email, ordering goods from out-of-state suppliers (such as Amazon) and handling credit card transactions.

While some nonprofits may not be covered under the FLSA, it is likely that many employees of nonprofits are entitled to FLSA protections.

The DOL’s guidance document also outlines several options for nonprofits on how to address these changes. These options include:

  • Raise salaries: For workers whose salaries are near the new salary standard and meet the duties test, the organization can raise their salaries to meet the new standard and maintain the employees’ exempt status.
  • Pay overtime above a salary: Pay newly overtime-eligible employees a salary and pay overtime for hours in excess of 40 per week. The law does not require that newly overtime-eligible workers be converted to hourly pay status only from exempt to nonexempt.
  • Evaluate and realign employee workload: Limit overtime by ensuring workloads are distributed to minimize overtime and that staffing levels are appropriate for the workload.
  • Adjust employees’ base pay and pay overtime: Adjust the amount of an employee’s earnings to reallocate it between regular rate of pay and overtime compensation. This method works for employees who work a relatively small amount of predictable overtime. Example: Assume a fundraising supervisor at a nonprofit who satisfies the duties test for the executive exemption earns $37,000 per year ($711.54 per week). The supervisor regularly works 45 hours per week. The employer may choose to instead pay the employee an hourly rate of $15 and pay time and a half for the five overtime hours worked each week, keeping their annual compensation liability for this employee at $37,000 annually.

Compliance

To meet the Dec. 1 compliance deadline, organizations will need to craft a compliance strategy and review internal practices.

Currently, Synergy is working with its clients to:

  • Conduct FLSA audits to identify which positions are impacted by the final rule.
  • Develop actions plans for how to implement the new changes.
  • Identify methods to reduce overtime for those roles that were previously exempt from it.
  • Understand how these changes may impact company culture and employee morale.

Navigating through these changes can be challenging and even overwhelming. Therefore, it is recommended that you secure an HR partner that can assist in working through these changes. Utilize the right expertise to keep you compliant and to avoid legal action.

JeremyYork Jeremy York, SPHR, SHRM-SCP, is a Human Resources Field Representative for Synergy PEO Services. He provides strategic and generalist HR support to local nonprofit organization leaders and their staffs. York has over 15 years of human resources experience working as a consultant, director of human resources, and generalist, in the insurance, healthcare, nonprofit, PEO, and other industries.

Aug 08

The final rule for nonprofit organizations

By Sponsor Insight

By Mike Staton , co-founder and managing director, Alerding CPA Group

The U.S. Department of Labor (“DOL”) has issued the new overtime final regulations (“Final Rule”) which impact nonprofits as well as for profits.  The new rules will go into effect December 1, and will mean that most employees earning less than $47,476 will be entitled to overtime compensation regardless of their employment classification.  Neither the Federal Labor Standards Act (“FLSA”) nor the DOL’s regulations provide an exemption from overtime requirements for nonprofits.  However, there are special rules that apply to nonprofits which is where the confusion and details of compliance begin.

Here are some key points and how they apply to nonprofits:

  1. Effective Date:  December 1, 2016 with no phase in period allowed.
  2. Salary threshold:  The Final Rule raises the standard minimum level for salaried, exempt workers to $47,476 per full-time year from the previous threshold of $23,660.  White-collar employees must also meet the exemption requirements of the duties tests defined by the FLSA.
  3. Enterprise rules:  As a general matter, nonprofit organizations are NOT covered enterprises unless they meet the threshold test.  The FLSA and the Final Rule apply to enterprises with annual sales or business of at least $500,000.  For a nonprofit, enterprise coverage applies only to the activities performed for a business purpose (such as operating a gift shop).  It does not apply to the organization’s charitable activities that are not in substantial competition with other businesses.  Income from contributions, membership fees, many dues, and donations (cash or non-cash) used for charitable activities are not counted toward the $500,000 threshold.
  4. Individual rules:  There are also tests to be made at the individual level.  Organizations should review the FLSA guidelines on these rules.

Employers will need to pursue one of several options to comply with these changes.  The options include increasing exempt employees’ salaries to the new level, converting them to hourly employees and paying overtime, or one of many other options.

The DOL has published “Guidance for Non-Profit Organizations on Paying Overtime under the Fair Labor Standards Act” for further clarification. You may also contact your Alerding CPA Group professional at 317-569-4181 or visit our website:www.alerdingcpagroup.com.

mikestaton Michael A. Staton, CPA
Managing Director
Mike is a Certified Public Accountant and is Co-Founder and Managing Director of Alerding CPA Group. Mike has served closely-held businesses for over 30 years and was named the Accounting Advocate of the Year by the U.S. Small Business Administration in 2001.
See Michael Staton’s Full Bio ►

Jul 25

Don’t waste your professional development

By Sponsor Insight

By Stefanie Krievins, coach and founder, The Heart Projects |

We do-gooders are great at doing good, which usually also means being constantly active. What we’re not so great at is renewing our spirit and taking breaks to avoid compassion fatigue — that unique form of tension and stress that comes from helping those in distress.

Professional development, in particular leadership development, can help you address the toll that this difficult — yet fulfilling — work takes on your well-being.

Many nonprofit staff are quick to attend trainings on the development of their technical skills: fundraising, management, budgeting, marketing and outcomes development. While this is certainly important, you’ll be able to apply those learnings more quickly if you also address your leadership skills:

  • How to prioritize
  • Goal setting
  • Project and time management
  • Emotional intelligence
  • Ability to challenge the status quo
  • Inspiring and communicating with others

As you enter a new budget year, plan now to strategically use your professional and personal development benefits offered by the organization.

In the short-term, it can seem difficult to dedicate time to your own development because there are so many pressing issues. If you apply the information directly after the training or coaching, you’ll probably find that you’re more efficient, focused and energized. In the long-term, learning these important skills will support you to have more of an impact for the organization.

Here are some ways you and your organization will benefit from leadership development:

  • Understanding your strengths and how your job provides you with joy. It might seem odd to seek training or coaching when you’re happy in your job, but it will only support you in becoming a better leader faster.
  • Learning new skills. One of my favorite quotes is, “Leaders are learners.” In our important work, leaders are needed at every level and we need people equipped to take on new challenges in an educated way. The secret to every great leader is that they are constantly learning new skills and new levels of self-awareness.
  • Understanding why you feel stressed. Stress can feel overwhelming and all encompassing. Taking the time to understand specific stressors helps you isolate the problem and then figure out how to solve it. Being able to get rid of stress is just the first step. The second step is to identify the positive emotion you want to replace it with.
  • Respite. Those in human and social services especially deal with some the worst of humanity: abuse of kids and seniors, teens left to fend for themselves on the streets, drug abuse, untreated mental illness, etc. This can, and does, traumatize employees and staff at all levels. You deserve the opportunity to truly disconnect and renew your energy — and have it funded by your employer. You are carrying out the organization’s mission, so its budget needs to cover the emotional health of employees. This can be done via coaching, therapy, EAP services, paid retreat time or spiritual direction, a form of one-on-one discernment with a trained professional.

Leadership development comes in many forms and goes beyond the typical training/conference/workshop. Here are some creative suggestions for you to leverage your allocated professional development benefits:

  • Paid wellness/spiritual retreats (just for you or for a larger team)
  • One-on-one or group coaching
  • Job swapping with an individual from another organization
  • Finding a mentor through a formal mentor program
  • Joining a mastermind (it’s like having your own personal board of directors)
  • Paid sabbatical of a month or more, usually available after at least five years of employment
  • Attending a stress management or meditation/mindfulness workshop

If you have especially challenging goals for the upcoming year, don’t be afraid to ask for additional leadership development. Your organization will increase the likelihood of meeting its goals if it supports your growth. You also owe it to your organization to implement what you learn by practicing your new skills, and providing a report to your manager on how the leadership development impacted you.

By focusing on your own needs and development, you’ll strengthen your organization with better outcomes, more effective outputs and stronger teamwork. Personally, you’ll benefit because you’ll be able to take on more challenges and be in a better position for a promotion. Make your growth a priority this year.

stefanie Stefanie Krievins is the founder and coach for The Heart Projects, which delivers free resources at stefaniekrievins.com. She also offers personal leadership development programs and coaching for nonprofit staff, volunteers, social entrepreneurs and those who want to connect with work that matters. She has a master’s degree in nonprofit management from SPEA at Indiana University, completed credentialed coaching training from Erickson International, and has more than a decade of employment and volunteering in the charitable sector in Indiana and nationwide.

Jul 18

Three key fundraising opportunities for Indiana nonprofits

By Sponsor Insight

By Jen Pendleton, CFRE, vice president-Indiana, Aly Sterling Philanthropy

In my new role as vice president with Aly Sterling Philanthropy, I’ve been meeting with nonprofit leaders like you, all over Indiana.

While you and your fellow leaders represent a diverse group of organizations dedicated to a range of causes, I’ve discovered that, regardless of your organization’s size or type, you share many of the same challenges.

Can you relate to any of the following?

  • Is your nonprofit struggling to increase annual fund giving and also bring in major gifts?
  • Do you feel alone and unsupported within your organization when it comes to fundraising?
  • Do you struggle to engage your board members fully?

Now, I choose to be optimistic and refer to these challenges as opportunities – because that’s ultimately what they are! Every one of these issues is solvable with some planning and careful thought to address the issue at its root cause.

Consider the areas of OPPORTUNITY below and how they apply to your organization.

  1. Leadership

Many of you shared your struggle to find board and staff leaders who are great at what they do, willing to work hard and, most importantly, able to stick around longer than a year or two.

Consider these points:

  • Plan ahead for succession and dedicate time to strategically recruit and onboard your leadership. It’s one of the most important things you can do all year.
  • Look in your current donor and constituent pool and proactively recruit people who already love your organization and care about your mission.
  • Take time to get to know each board member individually. Meet with each of them (or at least call) once or twice a year to talk, catch up and see how they think things are going. You’ll be amazed what an impact it can have on you and your board member!
  • Make sure you and your fundraising staff have support from organizational staff and board by encouraging intentional collaboration.
  • Take time to celebrate your successes and say thank you! It makes everyone feel good and keeps staff and board energized and committed.

  1. Time and resources

Every organization says resources – people, money and time – are the biggest challenges to their mission. The “overhead myth” seems to be alive and well, and most of you are still trying to do more with less.

Consider these points:

  • Assess where you, your staff and board are spending your time. Is it on the most important things?
  • Determine what you can stop doing, what you should start doing and where you need to invest to accomplish your most strategic goals.
  • Ask your board for the resources needed to meet your mission. Show them a plan for reaching your goals and ask for their investment.

  1. Building a culture of philanthropy

In most organizations, only one or two people focus on stewardship and/or fundraising. At least one organization I spoke with doesn’t have any fundraising staff.

Why does this matter? Because best practices show the most successful organizations are those that create a “culture of philanthropy.” This means they involve everyone in every department at every level in raising money and stewarding donors. If you think your development director is your #1 fundraising tool, think again. That grumpy, uninformed person answering your phone or working the front desk can undo months of cultivation in one conversation.

Consider these points:

  • Assess how many people are focused on fundraising and stewardship in your organization.
  • Consider what would happen if you leveraged all staff and board to be evangelists, “thankers” and cultivators of your donors and mission.
  • Start small. Determine what your culture of philanthropy looks like and build a pilot culture with a few key people… then refine and launch to board and staff when you have some wins!
  • Don’t be afraid to try new things. To grow to the next level, change is required. Assess what you can stop doing and create the time to start doing more meaningful work that matters and helps bring more revenue and resources in the door!

It’s true that collaboration, resources and culture – mixed with planning and careful thought – are the keys to solving organizational challenges as well as the larger issues impacting our community and world. You’re immersed in the work of both, and I’d like to help.

Let’s get started! I’m happy to meet with you and your team to brainstorm soon. It’s how we do business – build relationships first – at no cost to your mission.

jen-pendleton Jen Pendleton, CFRE, is vice president of Aly Sterling Philanthropy, leading the firm’s work in Indiana. Before coming to ASP, Jen served as president and CEO of the Community Foundation of Boone County (Indiana), where she led a campaign to raise $1 million in matching funds from the Lilly Endowment for the county’s Community Impact Fund.

Jul 05

Don’t let outdated practices hamstring your nonprofit

By Sponsor Insight

By Teddie Linder, business manager, Netlink, Inc. |

Recently, Netlink assisted a for-profit property-management company in its acquisition of multiple apartment complexes in another state. The client planned the acquisition and worked with us to ensure a timely takeover regarding technology. In advance of the transition, the only variable not completed involved obtaining master settings, licensing and passwords from the previous IT management resource. This info is needed to make sense of what is in place, make changes, install new software, create new accounts and connect to the new management company’s network and IT resources.

Unfortunately, the property-management company’s existing IT provider wouldn’t address any needs in advance of the changeover.

The staff arrived to work on the first day under new management only to find their systems didn’t work properly. They were unable to conduct the routine daily business like moving tenants in and out, and handling maintenance requests. The manager in charge of the transition was upset, frustrated and angry; the transition took longer and was going to be more expensive.

Even after it was resolved, a single question remains: What happened?

Instead of handing off the administration rights, the IT staff simply wiped settings and licensing from the computers. All of the programs were removed. Netlink’s staff faced a long day of configuration, relicensing programs and resetting equipment in multiple offices, before the company’s staff was back online.

Did the previous company do anything wrong? Not really; they simply followed a system that was advantageous for them, but one that hamstrung the client. The end-result was that it made life difficult for the owners, executives and staff by creating an unneeded “hostage situation” for technology assets and tools: the servers, workstations, software and subscriptions that allow a business to operate.

This “standard practice” involves the IT company setting up accounts in its name, not under the client’s. It is an outdated approach that many times involves billing the client for additional services with a markup. The problem with this relationship is the client doesn’t “own” the setup, server, the subscription or the license. So when it is time for the client to make a change or move on, they have to start with brand new setup, sometime new subscriptions (increasingly used for software licensing or programs), and migrate company data to the new setup.

This practice creates a level of stress and a lack of mobility that is unnecessary.

A different model to consider is “client-owned, provider-managed.” Each account is established with the client as the owner of the account. Payment is made directly by the client company to the vendor of the service(s) and the IT provider is paid only for managing those services. This keeps the role of the client, the IT Management provider, and the services vendor clear and allows the client to change as the market or other forces require.

The bottom-line is business owners or executives should ALWAYS maintain access to their own information technology framework where possible. The client’s business should always have access to licensing, passwords, and configuration details that a reputable IT provider maintains on the company’s behalf, and can be repurposed when needed. Examples include:

  • E-mail hosting (Office 365/Google Apps/other)
  • Server & file access
  • Internet ISP connection (know who Internet service provider is, and have the account information accessible)
  • Domain network/registrar info
  • Website hosting info

Netlink, Inc. shifted to the client-owned, provider-managed model several years ago sensing the limitations and wanting to combat the perception of holding IT information hostage. It is a cleaner, clearer, and more customer-centric approach, different than reselling or recreating setups from scratch. Our clients own their configurations, which will travel with the them, regardless of whether Netlink manages the company’s IT or not.

The clarity of succession brings benefits to both the client and the IT provider. Both parties are clear on the IT provider’s role, as well as the cumulative benefit of maintaining configurations and documentation on the client-owned setup.

At Netlink, we believe strongly in the power of the client relationship — keeping the optimal customer experience as the guide for all that we do. Adding predictability and removing ambiguity benefits everyone. Like any good business relationship, simplicity, clarity and transparency are minimums and benefit everyone regardless.

teddie_linder Teddie Linder is the business manager for Netlink. A certified Green Belt in Six Sigma she focuses on process improvement that benefits the customer and the business. She can be reached at teddie@netlinkinc.net.

Jun 27

Executive education: Focus on leadership

By Sponsor Insight

By Sara Johnson, director of Executive Education, Indiana University School of Public and Environmental Affairs |

As another presidential election campaign races to its conclusion, the topics of public management and leadership are getting a lot of attention and scrutiny. Questions such as “Whom do you trust?” or “Who is the most qualified?” are in the news every day.

For those vying for the top leadership position in the United States, there are obvious differences in style, experience and philosophy. Clearly, there is no “one-size-fits-all” approach to effective leadership of government and other organizations that exist to serve the public.

Still there are common bonds, and perhaps “serve the public” is the key phrase here. If we assume those who seek leadership positions in organizations that “serve the public” are there to truly serve, would we not expect them to be “servant leaders?” Robert K. Greenleaf, who established the Robert K. Greenleaf Center for Servant Leadership, first coined the term in 1970.

According to Greenleaf, this philosophy and set of practices focuses on “enriching the lives of individuals, builds better organizations and ultimately creates a more just and caring world.” To create a more just and caring world, one must have a heart for serving others and exhibit effective leadership traits.

That’s where taking courses in Public Management and Nonprofit Management can create an advantage. Skills learned and applied in these programs at the Indiana University School of Public and Environmental Affairs prepare leaders for the unique practices and challenges in organizations that serve the public.

Executive Education courses at SPEA offer both graduate credit and non-credit programs to working professionals. Public Management and Nonprofit Management Certificates can be earned using a blended format of both in-person and online courses. Graduate credit earned in these certificates can then be applied toward a master’s degree in public affairs.

These Executive Education programs are specifically designed to develop leadership skills that will strengthen public and nonprofit organizations as they respond to their unique challenges, such as funding structures, breadth of stakeholders and potentially working with a large population of volunteer workers. The Executive Education program at Indiana University can also customize non-credit training for an organization’s employees, administrative team or board.

Besides offering solid course work, the programs are receiving national recognition. The most recent rankings from U.S. News & World Report rated the IU School of Public and Environmental Affairs first and fourth in the nation in nonprofit management (Bloomington and IUPUI) and third in public management based on ratings by educators at peer schools.

Faculty members are industry experts, many of whom have led nonprofit and public organizations prior to teaching, and include former mayors, economic and health policy experts and authors of books about nonprofit governance.

Why not build your leadership skills by working with some of the industry’s best?

For more information about SPEA Executive Education visit the website at Click Here call 317-274-3418 or email execeduc@iupui.edu.

 

sara-johnsonSara Johnson is the director of Executive Education and a clinical assistant professor at the School of Public and Environmental Affairs. Johnson has been a lecturer for SPEA, where she teaches executive leadership, as well as the Richard M. Fairbanks School of Public Health at IUPUI, where she taught both graduate and undergraduate students and was director of undergraduate programs.

Jun 20

Giving is up: What does that mean for fundraising?

By Sponsor Insight

By Una Osili, director of research, Indiana University Lilly Family School of Philanthropy at IUPUI |

Last year charitable giving from individuals, estates, foundations and corporations hit a record $373 billion, according to Giving USA 2016: The Annual Report on Philanthropy for the Year 2015.

The years 2014 and 2015 represent the highest and second-highest totals for giving in the past 10 years, adjusted for inflation. But total giving grew more slowly in 2015 — increasing by 4.0 percent adjusted for inflation — compared to the 6.1 percent increase we saw in 2014. The slower rate of growth in 2015 reflected changes in several of the economic factors that influence giving: while most were still positive, their growth was not as robust as in the preceding year.

Still, contributions from all four sources of giving and to all but one of the nine categories of nonprofits receiving those gifts (the exception was giving to foundations) went up in 2015. This suggests that while the giving climate was not quite as strong in 2015, the overall environment for giving remains favorable.

Individuals were responsible for the largest share of giving last year, providing 71 percent of the total, while foundations saw the largest year-over-year percentage growth among the sources of giving, increasing the amount they collectively gave by 6.5 percent.

The longest-running and most comprehensive report of its kind in America, Giving USA is published by Giving USA Foundation, a public-service initiative of The Giving Institute. It is researched and written by the Indiana University Lilly Family School of Philanthropy.

Here’s a closer look:

2015 Charitable Giving by source

  • Individual giving, $264.58 billion, increased 3.8 percent in current dollars over 2014.
  • Foundation giving, $58.46 billion, was 6.5 percent higher.
  • Charitable bequests, $31.76 billion, increased 2.1 percent.
  • Corporate giving, $18.45 billion, grew 3.9 percent.

Highlights of 2015 gifts to selected categories of nonprofits

Five charitable subsectors saw large increases in 2015:

  • Education: giving increased to $57.48 billion, growing 8.9 percent.
  • Public-Society Benefit: the $26.95 billion given in 2015 was an increase of 6.0 percent
  • Arts/Culture/Humanities: at $17.07 billion, growth in current dollars was 7.0 percent
  • International Affairs: $15.75 billion, a jump of 17.5 percent.
  • Environment/Animals: the $10.68 billion estimate for 2015 was up 6.2 percent

While these results are encouraging, though, it’s what nonprofit leaders and fundraisers do with that information that counts. Here are some points to ponder:

  • Put the majority of your effort where the majority of the giving for your type of organization is. The new Giving USA report estimates that 87 percent of giving comes from or is directed by individuals, their bequests and family foundations where family members play a role. Some nonprofits’ missions may be more conducive to corporate or foundation support, but it’s important to have the right mix of funding sources for your organization. Adjust your outreach as necessary.
  • Review historical trends to inform your planning. While, as they say, past performance does not predict future results, what informed assumptions can you make about growth in giving over the next few years after reviewing patterns and trends over time? What might those trends mean for your organization? Do you have a plan to address them? Be sure to look at the trends for your type of organization, as well as for giving overall.
  • Develop a more focused and compelling case for support. Incorporate data and takeaways from Giving USA and other reputable research into your nonprofit’s proposals and communications.
  • Increase your volunteer leaders’ understanding of philanthropy. Show them how your organization’s funding patterns and potential compare to the national picture. Give them additional insight into the latest developments in philanthropy, how those might affect your nonprofit, and what steps you are taking as a result. Sharing this type of information will provide assurance that recommendations and decisions are based on the most accurate data available.

Explore Giving USA products and resources, including free highlights of each annual report, and find key tools to share with your board and donors at our online store. Select the full report, available in both digital and paperback formats, a PowerPoint slide deck, data tables and more.

 

una Una Osili, Ph.D., is director of research for the Indiana University Lilly Family School of Philanthropy at IUPUI.

 

Jun 13

Beware: New overtime rules apply to most nonprofits

By Sponsor Insight

By Zachary S. Kester, JD, LLM, CFRM and Kylie Schreiber, Charitable Allies |

To their detriment, many nonprofits believe the new overtime rules going into effect on December 1, do not apply to them since they are not business “enterprises.”

But this overlooks the reality that “individual” employees may qualify for overtime because of their job duties. The majority of employees who make less than $47,476 in annual salary will be entitled to overtime.

Any individual employee who engages in interstate commerce in some shape or form is eligible for minimum wage and overtime pay standards, according to the Fair Labor Standards Act (FLSA) and the U.S. Department of Labor (DOL). Interstate commerce is a rather broad concept, and is explained further below.

To make matters worse, the DOL utilizes language in its recently published guidance [pdf] for nonprofits to suggest that they do not often investigate or take action regarding violations for “individual” employees. But in states like Indiana, employees can use the strict wage and hour laws against employers for nonpayment of wages, which include overtime pay. So organizations should think twice before becoming too complacent.

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May 23

Gen X giving: Effective fundraising strategies for Gen X donors

By Sponsor Insight

By Abigail L. Coleman, writer, JGA |

The Baby Boomer and Millennial generations are frequently top of mind in discussions and research into the generations and generational giving preferences, but what about the “in-betweens?” Given the buzz, particularly about Millennials, it may be easy to overlook a resource for significant current and future donor growth for your organization: Generation X.

Also known as Gen X, this group includes those born in the United States from 1964 to 1980. Gen Xers are sandwiched squarely between older Baby Boomers and younger Millennials and represented 20% of total giving in the U.S. in 2013.

Based on data compiled by Pew Research Center, notable characteristics of this generation include:

  • Diverse: 61% white (non-Hispanic)
  • Religious: only 21% are religiously unaffiliated
  • Moderately Educated: 46% had a high school diploma or less in 1995 (at age 25-32)
  • Patriotic: 64% say they would describe themselves as “a very patriotic person”
  • Insecure about Retirement: 44% are not confident about having enough money for retirement — this insecurity is greater than both that of Baby Boomers (40%) and Millennials (35%)
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May 16

Managing an endowment

By Sponsor Insight

By VonLehman staff |

Every nonprofit dreams of receiving a large endowment that will keep it financially worry-free in the future and allow it to fulfill its mission with ease.

But, in the real world, endowments also carry serious responsibilities, created by the Uniform Prudent Management of Institutional Funds Act (UPMIFA). When managing endowments, nonprofit leaders must keep the following realities in mind:

An investment policy drives fund management

Every endowment should have a comprehensive investment policy that drives the management of the fund. According to UPMIFA, investment decisions must be made in relation to the nonprofit’s overall resources and purposes. And the endowment investment policy should be different from the policy for other investments of the organization.

“Prudent” investment decisions must consider the entire portfolio and be made as part of an investment strategy with risk and return objectives reasonably suited to the fund and the organization. UPMIFA also permits “only investment costs that are appropriate and reasonable.” (UPMIFA applies only to “true” endowments funded by donors, not “quasi” endowments created by boards.)

The endowment’s objectives should guide its investments and management. For this reason, it’s important not to simply adopt a generic objective but to articulate an objective that reflects the organization’s own circumstances. For many nonprofits, the primary goal is to preserve and grow funds for the organization’s long-term stability while providing a predictable contribution to support current activities. As a living document, the investment policy can change over time as objectives or other factors change.

Asset allocation is key

The investment policy will include an optimal asset allocation. The nonprofit’s investment committee must analyze the risk and return of potential investments (including stocks, bonds and alternative investments such as hedge funds and private equity) to determine the best mix and to obtain the total desired return. To maintain flexibility for responding to changes in the investment environment, it’s best to establish ranges for each asset class instead of set percentages. The investment committee should review performance quarterly and adjust the allocations accordingly.

Your spending policy: A crucial component

The investment policy should include a spending policy for the endowment, setting a percentage that can be spent annually. The spending policy will impact the performance of the fund, as well as its ability to fulfill the donor’s intent.

UPMIFA sets standards for endowment fund spending. It provides that an organization can spend as much of a fund as it determines to be prudent for the “uses, benefits, purposes and duration” for which the fund is established.

UPMIFA’s seven criteria to guide annual spending decisions are: 1) duration and preservation of the endowment, 2) the purposes of the organization and the fund, 3) general economic conditions, 4) effects of inflation/deflation, 5) expected total return from income and appreciation, 6) the organization’s other resources, and 7) the organization’s investment policy.

Unlike its predecessor, the Uniform Management of Institutional Funds Act, UPMIFA allows nonprofits to adopt a “total return” strategy that bases the spending rate on the endowment’s total value (including appreciation) rather than on only income. To ensure reasonably consistent cash flows, many organizations using a total return spending policy apply “smoothing” mechanisms to minimize the effect of market volatility. An organization might, for example, use a three- or five-year rolling average calculation.

Benchmarks gauge performance

The investment policy should include benchmarks for evaluating the performance of investments and managers, too. Performance should be assessed over both full market cycles (seven to ten years) and the shorter time periods that compose them.

An investment committee can meet quarterly to review performance, consider recommendations for changes to the investment strategy and rebalance asset allocation as necessary.

GAAP requires disclosures

Whether or not it’s covered by UPMIFA, every endowment must make certain financial statement disclosures under Generally Accepted Accounting Principles (GAAP), which could mean additional record keeping for your organization. Among these are descriptions of the organization’s endowment spending and investment policies, and of the nature and types of permanent or temporary restrictions on the endowment net assets. You also must report:

  • The governing board’s interpretation of the law(s) underlying the organization’s net asset classification of donor-restricted funds,
  • The composition of the endowment by net asset class at the end of the period, in total and by type of endowment fund, with donor-restricted funds shown separately from board-designated endowment funds, and
  • The aggregate amount of the deficiencies for all donor-restricted endowment funds where the fair value of the assets at the reporting date is less than the level required by donor stipulations or law.

Finally, be sure to include a reconciliation of beginning and ending endowments, in total and by net asset class.

Is it worth it?

Nonprofits are under no obligation to accept endowed gifts, but if they do, then they must be willing to comply with the terms of the donor restrictions and perform the necessary administrative functions, both present and in the future. In order to offset administrative costs, the charity may want to consider requiring a minimum contribution in order to accept an endowed gift or charging an administration fee against the income of the endowment funds (proper disclosure required).

Not just a dream

One of the most important roles of your board of directors is managing your endowment funds. Guided by good stewardship, the endowment will contribute to your nonprofit’s financial health and stability — no longer a dream, but a reality.

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