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I am pleased with the service and patience we have received. Thanks to your service, we have greater confidence in our financial position. Professional... helpful... cooperative... and accommodating to our church's needs are characteristics that describe our experience with Patrick and Raines. They add credibility, while simplifying our church's financial management. I eagerly recommend them. Thanks again for your help. It's getting better and better.

Dr. Randy T. Hodges, Senior Pastor
Hernando Church of the Nazarene

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Appealing to the next generation of supporters

Factors such as wealth level, education and even whether people volunteer, probably will tell you more about potential donors than their generation. But some broad generalizations about age can help not-for-profits target particular groups for support. The newest generation of adults belong to what’s being called Generation Z, and it’s possible to draw some conclusions about this otherwise diverse demographic.

Charitably inclined digital natives

Members of Generation Z typically are either in school or just beginning to launch careers. According to a study conducted by one market research firm, their contributions represent only about 2% of total giving. And their average donation tops out at $341 per year. Yet approximately 44% of Gen Zers have given to charity and they may be more driven to pursue social impact than earlier generations at their age. Many young people are hyperaware of what’s going on both in the world and their own communities.

As digital natives immersed in social media, Gen Zers make good peer-to-peer fundraisers. You might be able to harness the energy of this generation by sponsoring fun runs and similar events that require participants to solicit funds from friends and family members.

Many in this demographic volunteer or perform paid work for more politically oriented causes that they see affecting their own lives, such as gun control, climate change and racial inequality. Consider, for example, the teenagers and young adults who mobilized ongoing gun control campaigns in the wake of the Parkland shooting. Or the Black Lives Matter protests that have been largely led by young adults.

Content tailored to their interests

To reach Gen Z, forget Facebook and even Twitter. Teens and young adults favor platforms such as Snapchat, Instagram and TikTok, so you may need to develop different types of content for these more visual channels. The good news is that younger people tend to be more receptive to digital ads than their parents. But they expect outreach to be narrowly tailored to their interests, so be sure you rely on good data.

Members of Generation Z usually want to be more involved in charitable causes than earlier generations. They may not be satisfied with making one-time donations to nonprofits they barely know. To provide young adults with hands-on roles, create formal volunteer programs and consider setting up a junior board of directors.

Big dividends

Although most young adults aren’t in a position to make major donations now, you should regard this group as your nonprofit’s future. Cultivating their support and loyalty can pay big dividends down the road. For help in planning your nonprofit’s financial future, contact our talented team of accountants at Lynn@OnlineStewardship.com.

© 2020


Nonprofits: Carefully navigate the upcoming election

The 2020 presidential election is fast approaching and your not-for-profit has a stake in its outcome. But that doesn’t mean your organization is free to participate in campaign activities. In general, Section 501(c)(3)s risk losing their tax-exempt status if they participate in campaigning. However, there’s more nuance in the rules than you might suspect.

5 potential traps

Tax-exempt organizations can’t directly or indirectly act in federal, state or local campaigns either for or against a candidate or party. Here are several examples of activities that are generally off-limits:

1. Supporting a candidate or party for election. Your organization can’t get behind or oppose a declared candidate or third-party movement, engage in efforts to draft candidates, or perform advance exploratory work for a candidate or party.

2. Contributing to a campaign or endorsing a candidate. This includes direct financial support and indirect support, such as having your staff make calls on a candidate’s behalf.

3. Providing monetary support. Organizations are barred from donating funds to a candidate or party, and they can’t use another event to raise funds. Section 501(c)(3) not-for-profits are also barred from making loans to candidates or parties.

4. Offering support for support. You can’t ask for “support” from a candidate, political party or other political organization in exchange for your endorsement.

5. Distributing materials. Your nonprofit can’t distribute campaign materials or anything that tells recipient how to vote. This includes online communications.

5 acceptable activities

Of course, there are ways your nonprofit can participate in elections. For example, you can:

1. Sponsor a candidate appearance. If a candidate is invited for nonpolitical reasons — say, as a supporter of your charitable mission — make sure the appearance doesn’t turn into a campaign stop or fundraiser.

2. Hold a debate. If your nonprofit hosts a candidate forum, invite all the candidates, have an independent panel prepare the questions and provide every candidate with equal speaking opportunities. An impartial moderator should state that the views expressed within the debate don’t represent those of your organization.

3. Advocate a political issue. You can try to sway candidates to your way of thinking and encourage them to take a public stand. But you can’t endorse any of them.

4. Help build party platform planks. Your nonprofit can deliver testimony to a party’s platform committee, so long as you clarify that the testimony is strictly educational.

5. Launch a “get out the vote” drive. The drive must be designed solely to educate the public about voting and can’t promote or oppose a candidate or party.

Avoid penalties

Campaign-related offenses are punishable by revocation of tax-exempt status, but first-time offenders may be able to negotiate a less severe penalty. For example, you might agree to change procedures and stipulate that the violation won’t occur again. If your nonprofit spent funds on the banned activity, the IRS may impose excise taxes.

If you’re unsure about the acceptability of a proposed election-related activity, the Online Stewardship team can help.  Contact us at Lynn@onlinestewardship.com.

© 2020


Regaining your tax-exempt status if you failed to file Form 990s

There are many ways for a not-for-profit organization to lose its tax-exempt status — including participating in lobbying and campaign activities, receiving excessive unrelated business income and allowing board members to financially benefit from their positions. But the most common reason nonprofits lose their status is failure to file an annual Form 990 or 990-N for three consecutive years. If your organization has landed on the IRS’s revocation list for this reason, don’t panic. The process for reinstatement is relatively simple.

Getting good with the IRS

Assuming you lost your exempt status for failing to file, you can regain it with another filing. Contact us about submitting either Form 1023, “Application for Recognition of Exemption Under Section 501(c)(3)” or Form 1024, “Application for Recognition of Exemption Under Section 501(a),” based on your type of nonprofit.

Unless you apply for retroactive reinstatement, all of your organization’s activities between the revocation and the reinstatement date will be considered taxable. And all contributions made during that period won’t be deductible by donors. You may apply for retroactive reinstatement, effective the date of the automatic revocation, by filing the applicable form within 15 months or the later of the date of 1) the IRS revocation letter, or 2) the date the IRS posted your organization’s name on its website.

Providing reasonable cause

When you file the correct form, attach a detailed statement that provides reasonable cause for failing to file required returns in each of the three consecutive years. You should state the facts that led to each failure and the continual failure, discovery of the failures and steps taken to avoid or mitigate them.

You will also need to attach:

  • A statement that describes safeguards put in place and steps taken to avoid future failures.
  • Evidence to support all material aspects of those two statements.
  • Properly completed and executed paper tax returns for all taxable years during and after the three-year period your organization failed to file.
  • An original declaration dated and signed by an authorized person in your organization such as an officer or director. (See IRS Notice 2011-44 for the required wording.)

To expedite your application, write “AUTOMATICALLY REVOKED” at the top of the form and envelope and include the specified fee.

Serious repercussions

Losing your tax-exempt status can have serious repercussions. You’d likely owe corporate tax on any revenue as well as back taxes and penalties, and donors can no longer make tax-exempt gifts. So if your nonprofit’s status has been revoked, address the matter immediately. Contact us at Lynn@onlinestewardship.com for help.

© 2020


To survive the current crisis, your nonprofit needs multiple revenue sources

One of the strongest predictors of a not-for-profit’s long-term survival is multiple revenue streams. Many organizations with only one or two found that out the hard way when they failed during the 2008 recession. The same is likely to be true for nonprofits that do — or don’t — survive the current novel coronavirus (COVID-19) crisis.

Road map to diversification

Financially stable nonprofits have a good mix of revenue sources, with no one source accounting for more than 25% or 30% of the budget. If you aren’t there, take steps to achieve the proper mix:

Perform and present your initial evaluation. Your board should evaluate current revenue streams as well as future plans and associated expenses. You can help board members understand the benefits of diversification by presenting them with multiple scenarios where costs are compared to revenues with and without current revenue sources. Nudge reluctant directors to embrace greater diversification by showing them how eliminating a revenue stream could jeopardize your mission.

Determine additional revenue sources. Consider a wide range of potential sources, weighing the pros and cons of each, including implications for staffing and other resources, accounting processes, unrelated business income taxes and your organization’s exempt status. In addition, assess how well aligned potential sources are with your mission. For example, has that foundation grant you’re thinking about pursuing ever been awarded to another nonprofit serving your population? Does the company that has proposed a joint venture engage in practices that don’t jibe with your nonprofit’s values?

Develop strategies for each new source. You don’t want to put all your eggs in one basket, but you also don’t want to depend on too many “baskets,” because each new revenue stream will require its own strategy. Executing too many implementation plans can strain resources. Therefore, each plan should include initial and ongoing budgets, as well as any new systems, procedures and marketing campaigns that will be needed. It also should have a timeline.

Review and adjust as necessary. Take the time at the end of every month — don’t wait until year end — to closely review each revenue source. Is it living up to expectations? Is it costing more than expected or falling short of revenue projections?

Patience is crucial

The current pandemic environment has curtailed everything from major gifts to corporate giving, fundraising events to individual donations and foundation grants, so your nonprofit is likely hurting even if you have multiple revenue sources. But as society and the economy begin to recover, look for ways to make your organization more resilient. Diversification is an excellent way to do it. For help with necessary finance management and planning, contact us at Lynn@OnlineStewardship.com

© 2020


Is your nonprofit’s tap running dry?

The novel coronavirus (COVID-19) crisis has put enormous financial stress on many not-for-profits — whether they’re temporarily shut down or actively fighting the pandemic. If cash flow has dried up, your organization may need to do more than trim expenses. Here’s how to assess your financial condition and take appropriate action.

Put your board in charge

Ask your board of directors to lead your review and retrenchment efforts. In addition to having oversight experience and financial expertise, board members have a passion for your organization and will do whatever they can to assist. They may already have employer backing for your nonprofit, and those companies may be willing to step up their financial support. Or board members may be able to tap their social networks.

The first order of business should be to review programs relative to your nonprofit’s mission. If you identify one that isn’t critical to your mission and is a drain on cash balances and staff resources, consider cutting it. Terminating a non-mission-critical program frees up funds for other initiatives or administrative necessities. If you can redirect clients to similar programs offered by other organizations, such changes can be made without a break in service.

Your board may also be able to liberate cash from your investment portfolio. Your nonprofit may have investments or idle assets that aren’t generating operating income — for example, donated real estate, collections and other nonmarketable holdings. Divesting these possessions can raise critical operating funds.

Look to your endowment

Another potential source of operating funds is your organization’s permanently restricted endowment funds. Under the Uniform Prudent Management of Institutional Funds Act (UPMIFA), you may be able to spend what was once considered the untouchable original principal (or historical balance) of funds.

Access generally is available when the donor of the original gift is silent about restrictions or hasn’t specified that UPMIFA provisions don’t apply. In some cases, an original condition or restriction may no longer be practicable or possible to achieve. Your nonprofit should consult an attorney to learn whether this is an option.

If UPMIFA provisions don’t open up a source of funds, there’s another potential route — approach the original donor. Your organization can ask the donor to lift all or some of the spending restrictions so you may use a portion of the funds for operating costs.

We can help

These are only a few possible solutions for struggling nonprofits. If you know your nonprofit is in trouble, but don’t know how to start fixing it, contact us at Lynn@Onlinestewardship.com. Our skilled accounting team can work with your board to assess your situation and determine the best way to move forward. 

© 2020


Business charitable contribution rules have changed under the CARES Act, use it to your advantage!

In light of the novel coronavirus (COVID-19) pandemic, many small businesses are interested in donating to charity. In order to incentivize charitable giving, the Coronavirus Aid, Relief and Economic Security (CARES) Act made some liberalizations to the rules governing charitable deductions. By helping spread knowledge of these changes, it might make pulling in necessary donations for your non-profit easier. Here are two changes that affect businesses:

The limit on charitable deductions for corporations has increased. Before the CARES Act, the total charitable deduction that a corporation could generally claim for the year couldn’t exceed 10% of corporate taxable income (as determined with several modifications for these purposes). Contributions in excess of the 10% limit are carried forward and may be used during the next five years (subject to the 10%-of-taxable-income limitation each year).

What changed? Under the CARES Act, the limitation on charitable deductions for corporations (generally 10% of modified taxable income) doesn’t apply to qualifying contributions made in 2020. Instead, a corporation’s qualifying contributions, reduced by other contributions, can be as much as 25% of taxable income (modified). No connection between the contributions and COVID-19 activities is required.

The deduction limit on food inventory has increased. At a time when many people are unemployed, businesses may want to contribute food inventory to qualified charities. In general, a business is entitled to a charitable tax deduction for making a qualified contribution of “apparently wholesome food” to an organization that uses it for the care of the ill, the needy or infants.  

“Apparently wholesome food” is defined as food intended for human consumption that meets all quality and labeling standards imposed by federal, state, and local laws and regulations, even though it may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions.

Before the CARES Act, the aggregate amount of such food contributions that could be taken into account for the tax year generally couldn’t exceed 15% of the taxpayer’s aggregate net income for that tax year from all trades or businesses from which the contributions were made. This was computed without regard to the charitable deduction for food inventory contributions.

What changed? Under the CARES Act, for contributions of food inventory made in 2020, the deduction limitation increases from 15% to 25% of taxable income for C corporations. For other business taxpayers, it increases from 15% to 25% of the net aggregate income from all businesses from which the contributions were made.

CARES Act questions

Be aware that in addition to these changes affecting businesses, the CARES Act also made changes to the charitable deduction rules for individuals. If you have questions about any additional changes made to charitable contributions, contact us at Lynn@OnlineStewardship.com or (904)-396-5400. 

© 2020


Here’s how to handle gifts in kind and donated services

As unemployment and financial insecurity become widespread during the novel coronavirus (COVID-19) crisis, many not-for-profit donors find themselves unable to provide monetary support to favorite charities. Instead, your organization may receive offers of gifts in kind (GIK) or donated services. Although you likely welcome these gifts, you may be unsure about how to record and value them. Here’s a brief summary.

Gifts take many forms

GIKs generally are pieces of tangible property or property rights. They can take many forms, including: free or discounted use of facilities; free advertising; collections, such as artwork to display; and property, such as office furniture or medical supplies.

To record GIKs, determine whether the item can be used to carry out your mission or sold to fund operations. In other words, does it have a value to your nonprofit? If so, it should be recorded as a donation and a related receivable once it’s unconditionally pledged to your organization.

To value the gift, assess its fair value — or what your organization would pay to buy it from an unrelated third party. In many cases, it’s easy to assign a fair value to property. But when the gift is a collection or something that doesn’t otherwise have a readily determinable market value, its fair value is more difficult to assign. For smaller gifts, you may need to rely on a good faith estimate from the donor. But if the value is more than $5,000, the donor must obtain an independent appraisal for tax purposes.

Ask questions about donations

To determine the fair value of a donated service, ask whether it meets one of the following two criteria:

First, does the service create a nonfinancial asset (in other words, a tangible asset) or enhance a nonfinancial asset that already exists? Such services are capitalized at fair value on the date of the donation.

Second, does the service require specialized skills, is it provided by someone with those skills and would the service have been purchased if it hadn’t been donated? Such services are accounted for by recording contribution income for its fair value. You also must record it as a related expense, in the same amount, for the professional service provided.

There’s more

These are just the basics. For more information about handling GIKs and donated services, contact us at Lynn@onlinestewardship.com. Also ask us about tax breaks, government assistance and other COVID-19-related aid for nonprofits.

© 2020


Surviving the COVID-19 crisis: A nonprofit action plan

Although most not-for-profits have been hurt by the coronavirus (COVID-19) pandemic, your organization’s specific challenges probably depend on your mission, constituency and other factors. For example, social distancing rules have forced most arts organization to temporarily shut down and furlough employees. Many social services charities, on the other hand, have remained open and are struggling to meet surging demand for services.

What unites the nonprofit sector right now is financial insecurity. Without reserves and a resilient revenue model, you may be unable to continue operations. Here’s how your leadership needs to act to keep your organization afloat.

Take stock

First, determine your nonprofit’s cash position and how long you can continue operating if no new revenue comes in. If you’ve built an emergency reserve fund, you may be able to continue for six or more months. Unfortunately, most charities have much thinner cash cushions — perhaps only enough to cover a few weeks of bills.

Next assess (or reassess) future cash flows. Say, for example, that your mental health clinic uses a fee-for-services model, but your out-of-work clients can no longer afford the fees. Or perhaps your school raises 30% of its annual income with a gala that you’ve had to reschedule from April to October. You’re probably looking at some big shortfalls.

Be careful not to underestimate cash needs — particularly if demand for services has increased. Assume that funding sources that were already shaky will evaporate and that usually reliable donors won’t be able to come to your rescue due to competing demands and their own financial concerns.

Seek solutions

Now look for alternative sources of financial support. If you haven’t already, see if your nonprofit qualifies for a loan under the federal government’s new Paycheck Protection Program (PPP). Loans to nonprofits with less than 500 employees can be forgiven so long as you keep people on the payroll and adhere to other guidelines.

You can find helpful information about the Payroll Protection Program here: https://bit.ly/3aiVzbA

Community foundations are another key source of emergency funding. More than 250 community foundations in all 50 states have created COVID-19 relief funds. Built for speed and flexibility, these funds have already announced $64 million in grants to local nonprofits directly addressing the crisis. Many private foundations and government funders have also stepped up to the plate by removing grant restrictions. Get in touch with current grantmakers to see if they can help ease burdens and increase monetary support.

Now is also the time to touch base with restricted gift donors. Explain that by removing restrictions, they enable your nonprofit to deploy funds where they’re most needed now. Finally, let all donors know that federal tax rules have been relaxed for certain charitable contributions.

Unpredictable future

It’s impossible to predict how long and severe the COVID-19 crisis will be, so prepare your organization for a tough fight. Contact us at Lynn@onlinestewardship.com for help assessing your financial position and for advice about the new tax provisions.

© 2020

CARES Act offers new hope for cash-strapped nonprofits

On March 27, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. How is this massive $2 trillion recovery package poised to help your not-for-profit organization? It depends on your group’s size, financial condition and other factors. But most nonprofits affected by the coronavirus (COVID-19) outbreak are eligible for some relief under the CARES Act.

Paycheck Protection Program (PPP)

This $349 billion loan program (administered by the Small Business Administration) is intended to help U.S. employers, including nonprofits, keep workers on their payrolls. To potentially qualify, you must be a 501(c)(3) or 501(c)(19) organization with fewer than 500 full- or part-time employees. PPP loans can be as large as $10 million. But most organizations will receive smaller amounts — usually equal to 2.5 times their average monthly payroll costs.

If you receive a loan through the program, proceeds may be used only for paying certain expenses, including:

  • Payroll,
  • Health care benefits,
  • Mortgage interest,
  • Rent,
  • Utilities, and
  • Interest on debt incurred before February 15, 2020.

You can’t use these loans to pay your mortgage principal or to prepay mortgage interest.

Perhaps the most reassuring aspect of PPP loans is that they can be forgiven — so long as you follow the rules. To have your full loan amount forgiven (except for loan interest), you must retain employees and not reduce their regular salary or wages more than 25%. If you’ve already laid off staffers, rehiring them by June 30 may enable you to qualify for full loan forgiveness.

Industry Stabilization Fund (ISF)

Nonprofits with more than 500 employees, such as hospitals and educational institutions, may be eligible for ISF low-interest loans. When applying for one, you’ll be required to certify (among other things) that loan proceeds will be used to retain (or rehire) at least 90% of your workforce at full pay and benefits through at least September 30.

Unlike PPP loans, ISF loans won’t be forgiven. However, you aren’t required to pay principal or interest for at least the first six months after receiving an ISF loan. There’s a 2% interest-rate cap on these loans.

Immediate help

If you’d like to apply for financial assistance under the CARES Act, talk directly to your bank. And contact us at Lynn@onlinestewardship.com for help navigating the many provisions of recent legislation — including other lending programs, emergency grants and new payroll tax breaks.

© 2020


Improve Your Non-Profit’s Strategic Planning With A “Real-Time” Approach

Real-Time Strategic Planning (RTSP) offers not-for-profits a fluid approach to identifying, understanding and acting on challenges and opportunities to advance their missions. Is this process right for your organization? Let’s take a look.

What is it, exactly?

RTSP was first introduced by nonprofit consultant David La Piana as “a coordinated set of actions designed to create and sustain a competitive advantage in achieving a nonprofit’s mission.” A successful nonprofit plan requires three levels of strategy: organizational, programmatic and operational, using these building blocks of strategy formation:

1. Understand your identity. Ask the following: What is your organization’s mission and impact? What do you do (programs and services), where (geographic scope) and for whom (constituents, clients or customers)? And how do you pay for it?

2. Identify your competitive advantage. What strengths do you leverage to differentiate your organization from others and compete effectively for resources and clients? This step requires analyzing other organizations in the same geographic area that offer similar programs, to similar constituents, with similar funding sources.

3. Know how you’ll make decisions. Develop a “strategy screen” composed of the criteria you’ll use to choose courses of actions. A strategy screen might consider, for example, if an option advances your mission and enhances your competitive advantage. It also considers if you have the capacity to carry out and pay for the option.

4. Define the right strategic questions. Many questions naturally arise when presented with an opportunity, but they aren’t all strategic. Identify the strategic questions that must be answered now and sort operational questions (for example, “Will we be able to hire more employees to execute our plan?”) from strategic questions (“What are the implications for our mission?”).

What about “competitive advantage?”

One of the most important components of RTSP is competitive advantage. In general, competitive advantage is the ability to advance your mission by 1) using a unique asset — or strength — no competitor in your area possesses, or 2) having outstanding execution of programs or services. Your competitive advantage must be something clients and donors value, for example:

  • Accessible locations or specialized property that enhances program delivery,
  • A robust, diversified funding base,
  • Great name recognition and reputation, and
  • Powerful partnerships and a well-connected board of directors.

To make comparative judgments, of course, you need to identify and understand your competitors and their strengths. “Competitor” in this context isn’t necessarily a negative term. Your competitors often are organizations you collaborate with. Nonetheless, you’re also likely competing for donors, media coverage, board members, employees, volunteers or clients.

Continuing process

Nonprofits that implement RTSP have the tools to align their daily actions with their organization’s overall strategy and can work toward having a clear vision of their long-term direction. If you would like help making the concept a reality, contact us at Lynn@Onlinestewardship.com

© 2020


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