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Nonprofit Tweets of the Week – 1/30/15

Yalnız Adam

Sadly, terrorism in the Middle East (ISIS), Nigeria (Boko Haram), and on the silver screen (American Sniper) dominated the news the past week. But today, we celebrate Fred Korematsu Day. If you don’t know this civil rights hero and first Asian American to have a day named after him in the United States, check out his story on the Korematsu Institute website. Then, have a listen to Yusuf islam (Cat Stevens) Peace Train while perusing our curated nonprofit tweets of the week:

  • BoardSource: Just Released: New National Study on Nonprofit Board Practices #LeadingWithIntent http://rlm.ag/1Oscz6
  • Nonprofit Quarterly: The 2014 BoardSource Governance Index is out! Is your board out of step with the norm? http://hubs.ly/y0tdGF0
  • Independent Sector: MUST READ: See our statement on the President’s 2015 State of the Union Address. http://ow.ly/HIwbR #SOTU
  • Gene: The Challenges of New Nonprofits – http://bit.ly/1GIptpC | #fiscalsponsorship as incubator may mitigate http://bit.ly/1GIptFT
  • Ron Muriera: Great info! “Fiscal Sponsorship: Legal Primer” by @GTak on LinkedIn
  • Philanthropy: A victory for @carlmalamud: Court orders IRS to release computer-readable charity tax forms: http://ow.ly/IbuAV
  • Rick Cohen: Wall Street Finds Social Impact Bonds to Be Attractive Investment Options – could write #SIBs article every day NPQ
  • World Economic Forum: The key moments from Davos 2015 http://wef.ch/1yWg5rC
  • Gene: Will Unilever become the world’s largest publicly traded B corp? | The Guardian http://bit.ly/1LcejJq #socent
  • Stanford Social Innovation Review: Making progress on the #fourthsector agenda – read a recap of the #4thsectordc convening: http://ow.ly/HRb1h @HeatherGrady1 #socent
BOARDS / GOVERNANCE

7 Reasons to Review Your Bylaws Now

Review Word Shows Assessment Evaluating Evaluates And Reviews

The bylaws of a nonprofit corporation are the board’s internal rules and instruction manual for how the nonprofit is governed. It may be the nonprofit’s single most important document. Here are 7 reasons why you should review your bylaws for legal and internal compliance:

1. To ensure legal compliance with applicable state and federal laws.

The bylaws must be drafted with provisions consistent with applicable law. Directors who approve or observe bylaws that provide for unlawful actions or practices may be breaching their legal duties and creating exposure to the organization and themselves. Some common areas of noncompliance: voting on board actions by email; actions by written consent that fail to meet statutory requirements (e.g., California requires unanimous written consent); directors’ terms in excess of those permitted by state law; committees including persons who are not directors being authorized with powers of the board.

2. To ensure legal compliance of internal governance practices.

If the bylaws require certain actions to be taken and procedures to be followed, ignoring such requirements may be a breach of the directors’ legal duties and create exposure to the organization and the directors. Meetings should be held as required, notice should be given as required, elections should be held as required. A procedural defect (e.g., improper notice) could result in a dissenting director invalidating a board action (e.g., election of an officer).

3. To ensure the presence of sound governance practices.

Bylaws should contain provisions that routinize certain governance actions. For example, board elections at annual meetings rather than on the anniversary date of each and every director’s election will likely be far more manageable for most organizations with self-perpetuating boards. Requiring that regular board meetings be held at least quarterly will likely help the board better meet its oversight and planning responsibilities.

4. To remove the presence of unsound governance practices.

Some provisions in bylaws may be consistent with the law but make for terrible or overly burdensome policy. A typical example of such provision is the requirement that the organization observe Robert’s Rules. This requirement adds 600+ pages, updated regularly, that the board will be responsible for learning and following. Allowing a quorum to be established with less than a majority of directors then in office may be seen as encouraging directors to think of attending board meetings as optional and not critically important to meeting their duties.

5. To move certain provision to separate policy documents.

While it is appropriate to review an organization’s bylaws regularly (at least every 3-5 years or whenever there is a known change in the law that might affect the governance of the organization), certain provisions that need to be modified more often may belong in a separate policy document. Descriptions of committees and task forces generally are better suited in a separate board-approved document. Detailed descriptions of employees, including the chief executive officer, also belong in employee job descriptions rather than in the bylaws.

6. To educate the board about its responsibilities.

The bylaws may describe the directors’ legal duties and standard of care for observing those duties. They should cover the board’s ability to delegate management to officers, committees, and others, subject to the board’s oversight. The bylaws may also describe exactly whom directors may rely upon for risk mitigation purposes (hint: it’s not just anyone).

7. To guide the board in meeting its responsibilities.

The bylaws should describe how often the board holds regular meetings, how it may hold special meetings to address particularly important or urgent matters, and how it can take action by written consent. They should cover how directors are selected, their terms of office, and whether there are any term limits. They should emphasize the importance for directors to attend board meetings and otherwise live up to their duties (e.g., through the establishment of an appropriate quorum requirement and removal provisions, including for attendance).

Conclusion

Reviewing the organization’s bylaws is a basic part of every board’s legal duties. And well-drafted bylaws will signal a well-governed organization, which will be an important factor for internal and external stakeholders, including potential directors, employees, funders, major donors, and regulators.

TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 1/23/15

Winter view of Davos, famous Swiss skiing resort

The past week was marked by the President’s State of the Union address and the start of the World Economic Forum in Davos. Have a listen to the Beatles’ Getting Better while perusing our curated nonprofit tweets of the week:

  • NPR News: Missed any part of our #SOTU coverage? See our re-cap, including early analysis and transcript, here: http://n.pr/15sTo3O
  • Philanthropy: Why nonprofits are finding much to like in @BarackObama’s tax plan: http://ow.ly/HLH4j
  • Suzanne Perry: What’s Next for Nonprofits This Year http://shar.es/1bYrDO via @Philanthropy
  • Phil Buchanan: Lack of good journalism about the sector among reasons for continued ignorant sweeping generalizations about NPs. http://tinyurl.com/mcaevjq
  • Jeff Schuck: Good thoughtful piece on #nonprofit #overhead by @philCEP along with some commentary by yours truly. Worth 5 minutes: Effective Philanthropy
  • Philantopic: Capacity: The #Philanthropy Buzzword For 2015 That’s Missing http://onforb.es/1G9EArD @forbes
  • Gene: Great legal resources for nonprofits available at Venable
  • Gene: 7 Reasons to Review Your Nonprofit’s Bylaws Now http://linkd.in/1C7Ehte
  • Nonprofit Law News: IRS Issues Long-Awaited Final Regulations for Charitable Hospitals http://bit.ly/1CjkmaM | by @Polsinelli
  • Bill Gates: .@melindagates and I just released our Annual Letter—we’re making a big bet for the future: http://b-gat.es/15uzlSK
  • Oxfam International: Consumers won’t fall for greenwash. 2015 must be the year for #climate action http://oxf.am/Z5Ng #wef15
  • Law Cite Sleuth: Our Mini-Theme: Corporate Social Responsibility is Now Legal | Business Law Section http://shar.es/1bAue2
DONOR-ADVISED FUNDS

What Is A Donor Advised Fund?

wispering  business information
Donor advised funds are an increasingly popular mechanism for individuals with charitable objectives who want to make a deductible charitable contribution in one year but make charitable distributions (grants) over a period of years. They are often recommended to such individuals as a preferable alternative to starting a private foundation. In general, a donor advised fund (“DAF”) is an account hosted by a sponsoring 501(c)(3) organization, usually a community foundation or a nonprofit affiliate of a financial services company, that is funded by a donor’s contributions in the form of cash, stock, or other assets. While the donor relinquishes legal control over the donation at the time it’s made, the donor retains advisory privileges as to the distribution of the funds and is generally able to benefit from a tax deduction on the contribution in the year in which it is made. In practical terms, the advice is generally followed by the sponsoring organization so long as grants to the identified grantees would not violate applicable laws or be outside of the sponsoring organization’s exempt purpose or mission.

Definition

Under the Pension Protection Act of 2006, a DAF is defined as a fund or account:

(i) which is separately identified by reference to contributions of a donor or donors,

(ii) which is owned and controlled by a sponsoring organization, and

(iii) with respect to which a donor (or any person appointed or designated by such donor) has, or reasonably expects to have, advisory privileges with respect to the distribution or investment of amounts held in such fund or account

 IRC Section 4966(d)(2)(A).

All three-parts of the above definition must be met in order for the fund or account to be characterized as a DAF. While the IRS has yet to provide regulations interpreting these requirements, the IRS released a Donor-Advised Funds Guide Sheet Explanation in 2008 that is instructive in a determination of whether a certain fund meets the test:

  1. Separately Identified Fund: In order to be a distinct fund or account for the purposes of prong one, the fund or account must refer to contributions of a specific donor or donors. The Guide Sheet provides that a distinct fund or account of a sponsoring organization does not meet this prong of the definition unless the fund or account refers to contributions of a donor or donors, such as (1) by naming the fund after a donor, or (2) by treating a fund on the books of the sponsoring organization as attributable to funds contributed by a specific donor or donors. While we have no authoritative guidance on what would constitute specific donors in this context, we agree with attorney Greg Colvin’s analysis* based on the legislative history that the term refers to related donors (including any member of the donor’s or donor advisor’s family or a 35% controlled entity of the donor or member of the donor’s or donor advisor’s family). Accordingly, if a sponsoring organization has established a restricted fund or account that is funded exclusively by contributions from a single donor or a group of related donors, regardless of the name of the fund, this requirement may be met. If the restricted fund or account is funded by contributions from a group of unrelated donors (which is often a characteristic of a giving circle), this requirement may not be met. Note, however, that that the number of unrelated donors and the relative contribution amounts of the different donors may impact this analysis.
  2. Owned and Controlled by a Sponsoring Organization: To meet the second requirement, the sponsoring organization, which must be a public charity, generally must have legal ownership and control over the assets following the contribution, and the fund or account must not be owned or controlled by the donor or other such person.
  3. Donor Has Advisory Privileges: Lastly, the donor or donor advisor must have, or reasonably expect to have, advisory privileges over the distribution, which may be evidenced in a written document or through the conduct of the donor, donor advisor, and sponsoring organization. Advisory privileges refers to the right of a donor or donor advisor to provide “noncompulsory recommendations, suggestions, or consultative advice” with respect to how the fund is granted out, but should be understood to be distinct from a donor’s legal right to control the donation.

DAFs are subject to several private foundation-like rules that sponsoring organizations may not ordinarily be subject to as public charities. These rules will be addressed in a follow-up post. Additionally, though long overdue, the IRS is expected to issue regulations on DAFs sometime in the near future. Potential areas of uncertainty that could be addressed include whether the IRS will impose a mandatory payout of funds being held in a DAF, similar to the 5% payout requirement applicable to private foundations, and other such private foundation rules that could reasonably capture DAFs.

 

Further Reading:

IRS: Donor-Advised Funds

* Adler & Colvin: Is a Fiscal Sponsorship Maintained for a Project by a Public Charity also a “Donor Advised Fund?”

BOARDS / GOVERNANCE

2 Questions Nonprofit Board Members Should Consider on Martin Luther King Jr. Day and Beyond

Eraser changing the word Injustice for Justice

On this Martin Luther King Jr. Day, consider the following two questions:

  • Is social justice a core value of your organization and something you strive for in pursuit of advancing its mission?
  • Is your organization investing its resources consistent with its values in a meaningful way?

How to Be a Racial Justice Hero

Colorlines published a great article a few years back on Martin Luther King Jr. Day: How to Be a Racial Justice Hero, on MLK Day and All Year Long. In the article, the authors note that it’s a good time to reflect on how you can be part of some positive change in the year ahead and suggest asking one institution you routinely interact with one of the following questions:

  • Are the policies and practices, and their impacts, racially inclusive and fair?
  • Who are the stakeholders and how can they be engaged in making change?
  • What concrete equitable changes can you envision and propose?
  • How can you focus your collective power to influence the power-holders?
  • What purposeful action steps could lead to real change and when can you begin?

If you serve on the board of a nonprofit organization, these are great questions for you to consider and discuss with your fellow board members.

Core Values

If social justice isn’t an expressly stated core value of your organization or if your boards haven’t discussed the importance of formally identifying and communicating the organization’s core values, here are some iconic quotes to think about:

“The time is always right to do what is right.”

“Injustice anywhere is a threat to justice everywhere.”

“Our lives begin to end the day we become silent about things that matter.”

“The ultimate tragedy is not the oppression and cruelty by the bad people but the silence over that by the good people.”

“Human progress is neither automatic nor inevitable… Every step toward the goal of justice requires sacrifice, suffering, and struggle; the tireless exertions and passionate concern of dedicated individuals.”

These discussions may result in difficult days determining what actions are right for your organizations, but by engaging in them, you’ll take your organizations and the communities they serve closer to the promised land.

TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 1/16/15

Martin Luther King memorial in Washington.

Always inspired by the memorials in Washington DC, particularly around Martin Luther King, Jr. Day. Have a listen to Common and John Legend perform Glory while perusing our curated nonprofit tweets of the week:

  • California Wellness Foundation: 6 Trends to Watch in #2015 via @Philanthropy http://ow.ly/HbJWk #philanthropy #nonprofits #giving
  • Philanthropy: Opinion: The @WhiteHouse declares that nonprofits need overhead help http://ow.ly/HgZXC @NatlCouncilNPs
  • Robert Eggar: Shrinking IRS struggles to keep up with growing number of tax-exempt charities – http://goo.gl/alerts/suaW
  • Cecily Jackson Zapata: #IRS #nonprofit dark money rules will be so late they won’t impact 2016 election Pro Publica
  • Marc Lane: The Most Important Word for #Nonprofits: Merger http://huff.to/I4puj4 via @HuffPostDC @robertegger
  • CalNonprofits: Are there too many nonprofits in the US? Check out “Births & Deaths” in @npquarterly from @GuideStarUSA researcher: http://bit.ly/1u71KEy
  • Fast Company Exist: Now you can buy your Thin Mints online, as the Girl Scouts undertake a tech overhaul http://f-st.co/c37lldB [Ed. It’s notable to see that the online strategy looks to be designed as mission-related and not primarily for commercial purposes to avoid UBIT and related issues.]
  • Ellis Carter: Best of CharityLawyer 2014 – http://bit.ly/1DTYFO2
  • Sustainable Law Group: The Year in Social Enterprise – an Interview with Jim Schorr http://dlvr.it/85jty1
  • Acumen: To foster innovation, should government get out of the way? No, says @MazzucatoM, government should be a partner: Foreign Affairs 
SOCIAL ENTERPRISE

Nonprofit Radio: The Fourth Sector

Social Business

l’ll be discussing the “Fourth Sector” – the sector composed of for-benefit organizations – with host Tony Martignetti on Nonprofit Radio this Friday, January 16, at 1:30 pm ET / 10:30 am PT.

For-benefits are a diverse class of organizations that share two main characteristics: 1) they are primarily driven by social and/or environmental purposes, and 2) they earn a substantial portion of their income through business activities. They include sustainable businesses, social enterprises, municipal enterprises, community development corporations, social businesses, and a wide range of other models.

Nonprofits should recognize the importance of understanding and responding to this new “sector” and movement. More and more, individuals (particularly those of younger generations) are becoming sector agnostic in their actions to support social good. They don’t care if they are supporting nonprofits or for-profits so long as the organizations appear to be making a difference to society and/or the environment. Nonprofits must recognize this new form of competition for funds and for talent. And they must recognize the increasing potential for collaboration and alliances with these fourth sector organizations.

I’ll also be sharing some lessons learned from attending and participating in the Mapping the Fourth Sector gathering in Washington DC on January 15, 2015.

This invitation-only gathering will bring together a select group of leading practitioners, scholars, economic developers, government officials, impact investors, funders, and social entrepreneurs to explore the fourth sector and its potential for generating economic, social and environmental impacts. We will examine a range of questions from varying perspectives, with a view toward identifying points of consensus and divergence, and a bias toward collaborative action.

It looks to be a great conversation. I hope you’ll join us for the live broadcast or catch us later on iTunes.

 

nonprofit radio

TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 1/9/15

Freedom of Speech

The past week was marked by the horrendous shootings in Paris targeting journalists at a French satirical newspaper Charlie Hebdo and the public response “Je suis Charlie” from those standing in solidarity with the victims and those who willingly risk their security to promote freedom of expression and freedom of the press. Have a listen to Bruce Springsteen and Steven Van Zandt perform We Shall Overcome while perusing our curated nonprofit tweets of the week:

  • Nonprofit Quarterly: TRENDING: 11 Biggest Nonprofit Stories of 2014 and Their Implications for Our Future http://hubs.ly/y0qf8c0
  • Matthew Bishop: Ten predictions for philanthrocapitalism in 2015
  • LinkedInForGood: Better investment: #socent or #charity? Debate in NY Times. @SonalRShah @darrenwalker @NYWomensFdn @charitywater
  • Independent Sector: New year and a new way of thinking abt the role of the philanthropic sector and how we work toward a brighter future https://vimeo.com/112141925
  • Nayantara Mehta: New IRS Rules On “Dark Money” Likely Won’t Be Ready Before 2016 Election – Mint Press News
  • Ellis Carter: Is it time for a Legal Audit? http://bit.ly/1BiF8XQ #nonprofit
  • Nonprofit Quarterly: Look out for these ten ways to destroy your #nonprofit: http://hubs.ly/y0qv550 #10WaysToKill
  • Living Cities: Throwback to one of our best blogs: “5 Ways city govt & #Philanthropy can partner to disrupt #inequality” http://bit.ly/1yswUgw
  • Cecily Jackson Zapata: The problem with #venture #philanthropy in #pharma NY Times #nonrprofit
  • Richard LeBlanc: Eight CSR Trends to Watch Out For in 2015 [with various experts including @alicekorngold] https://lnkd.in/eJqD-hz
  • Erin Bradrick: Where do for-profit boards fall short? And how do these considerations apply to nonprofit boards? blog post to come! https://hbr.org/2015/01/where-boards-fall-short

 

BOARDS / GOVERNANCE

Nonprofit Board Meetings – Calendar of Agenda Items

Businessman writing agenda

As a supplement to our earlier post, What Issues Should a Nonprofit Board Consider Annually, we have created a calendar of priority agenda items for the board of directors of a hypothetical nonprofit organization, The Futureland Foundation. Generally, priority items should be discussed early in the agenda to best capture the board members’ focus. This calendar is not intended to be an exhaustive list of actions that a nonprofit board should or must take and may not be appropriate for all nonprofits, but rather, it is meant to be a useful tool from which organizations can build their own appropriate calendar of actions.

Assume that the board meets once every two months, the directors elect their successors, and the Futureland Foundation follows a calendar accounting year.

January

  • Executive Performance Review – Begin discussion of the executive’s performance, the method and timing of the executive’s performance review, and any change in the executive’s compensation. Authorize the executive committee to be responsible for completing and delivering the review.
  • Financial Review – Review and discuss the past year’s financial reports (pro forma) and how the organization’s financial performance informs the plans for the current year and beyond.
  • Generative Topic: “Decide what to decide” – Identify 5 questions the board should ask itself this year.

March

  • Review of Form 990 – Convene and authorize an ad hoc board committee to review the Form 990 (due May 15), and instruct board members on what they should know about the Form. Additional Information: What Board Members Should Know About Reviewing a Form 990.
  • Program Review – Review and discuss the organization’s major programs and how the organization’s programmatic performance informs the plans for the current year and beyond.
  • Generative Topic: Focus on the board’s performance and areas for improvement.

May (Annual Meeting)

  • Elections - Hold elections of directors and officers consistent with applicable provisions in the bylaws.
  • Legal ComplianceEvaluate past and potential issues regarding employment practices, internal policy compliance, required licenses and permits, nonprofit and 501(c)(3) compliance, facilities and real property, and intellectual property. Ensure all annual filings have been or will be completed and that the organization’s status with the relevant government authorities are all in good standing.
  • Generative Topic: Focus on the organization’s impact in advancing its mission.

July

  • Review Mission – Reflect on the organization’s mission and purpose statements and compare them against its activities, governing documents, and communications.
  • Board and Committees – Review the board’s composition; appoint and authorize committees, as necessary; delegate duties; discuss board training/development; determine adequacy of oversight and planning activities. Additional Information: Everything You Wanted to Know About Nonprofits & Committees
  • Generative Topic: Focus on the organization’s assets and opportunities.

September

  • Risk Management – Review internal policies, risk areas, and insurance coverage, and take appropriate follow-up action. Additional Information: Top Ten Legal Risks for Nonprofit Boards.
  • Fundraising/Networking/Communications – Review board’s role in fundraising and developing key contacts for the organization; review board and organizational communications policies.
  • Generative Topic: Focus on the organization’s challenges.

November

  • Budget – Review and approve the budget for the coming year.
  • Programmatic Plans – Review and amend, as necessary, the organization’s programmatic plans.
  • Generative Topic: Focus on the environment, competition, and opportunities for collaboration.