Joint ventures can provide many opportunities for not-for-profit organizations. First of all, linking up with a corporation can be a great branding tool. People put more trust into organizations that are associated with a “brand name,” and investors may be more willing to provide support. Corporations may have greater access to resources and can help the not-for-profit accomplish fundraising or program-related goals. Additionally, some alliances may even benefit from tax incentives.
Public companies are required to have an audit committee (due to the Sarbanes-Oxley Act of 2002), and while not required, many not-for-profit organizations have also started their own committees as well. In order for an audit committee to be successful, both the organization and committee members must develop and fully understand the committee’s role and responsibilities.
The redesign of Form 990 a few years back ushered in a wave of new reporting, most of which focused on transparency, governance and recordkeeping. One of the new schedules created from the redesign was Schedule L, Transactions with Interested Persons. The purpose of this schedule was to allow the IRS and the public to gain visibility into the dealings that organizations have with those close to the organization.
With football season in full swing, the best teams are the ones that work together. A team may have the best coach, but without a good offense to contribute to the mix, they will get nowhere. A team with a great defense, but poor special teams, will also lose in the long run. In order to be successful, a team must have participation and contributions from all areas within their organization. Similarly, the best not-for-profits cannot rely solely on one area of the organization to prepare, update and review the budget. Rather, everyone must pitch in.
Three key players in the success of a not-for-profit are non-accounting personnel.
Cash contributions are fundamental sources of revenue for your organization; however, do not underestimate the importance and value of receiving gifts-in-kind. Gifts-in-kind refer to all noncash gifts and, as with cash contributions, there are requirements for recording these types of gifts. Gifts-in-kind should be recognized if your organization has discretion in using or distributing them and if your organization is the recipient of the risks and rewards of those gifts (such as the risk of loss if they are lost, damaged or destroyed).
Not-for-profits are required to report expenses by the functional classifications of program services and supporting services on the financial statements because it is required by GAAP. Additionally, they are required to report expenses by the functional classifications of program services, management and general, and fundraising on Form 990 because it is required by the IRS.
Many not-for-profit organizations are founded by the will and impetus of a single – and singular – motivator. Dance companies, for example, are often formed to showcase and promote the unique talents of a particular choreographer. Other not-for-profit organizations, especially in the germination stage, are often conceived, built and run by a strong and determined leader.
Board members are a not-for-profit organization’s ambassadors to the constituencies it serves. But a lack of diversity — whether physical, societal or economic — can signal an underlying problem: a disconnect from the community. A not-for-profit can improve its funding and program effectiveness when it reflects the population it serves, as well as the community in which it operates. This article offers suggestions for improving diversity, while a sidebar shows there are ways to mix it up beyond just the board of directors.
The word “benchmark” may strike some as organizational lingo, but the practice of benchmarking often proves valuable for not-for-profit organizations. Not-for-profits that incorporate financial benchmarks into their operations are better at anticipating negative financial trends and may even see revenues climb, expenses drop and efficiencies improve.
Some of you may remember an amusement park called Riverview Park, which operated in Chicago from 1904 to 1967. Although it was before my time, I remember my parents telling me about the fun times they had at Riverview Park riding The Bobs wooden roller coaster or the Pair-O-Chutes. Although you may not get the same adrenaline rush that you would zipping down the tracks of a roller coaster or slowly rising above the horizon atop a ferris wheel, reading and understanding your organization’s financial statements should be no less “fun.”