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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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Nonprofits and insurance: Getting it just right

Whether you’re starting up a not-for-profit organization or your nonprofit has existed for years, you may have questions about insurance. For starters: What kind do you need? How much? Are you required by your state or by grant makers to carry certain coverage?

Much depends on your organization’s size, scope and programming. But your goal should be to carry what’s required to meet any regulatory or funding mandates and to address legitimate risks. Although there are many types of insurance available to nonprofits, it’s unlikely you need all of them.

The essentials

One type of insurance you do need is a general liability policy for accidents and injuries suffered on your property by clients, volunteers, suppliers, visitors and anyone other than employees. Your state also likely mandates unemployment insurance as well as workers’ compensation coverage.

Property insurance that covers theft and damage to your buildings, furniture, fixtures, supplies and other physical assets is essential, too. When buying a property insurance policy, make sure it covers the replacement cost of assets, rather than their current market value (which is likely to be much lower).

Depending on your nonprofit’s operations and assets, you might want to consider such optional policies as automobile, product liability, fraud/employee dishonesty, business interruption, umbrella coverage, and directors and officers liability. Insurance also is available to cover risks associated with special events. Before purchasing a separate policy, however, check whether your nonprofit’s general liability insurance extends to special events.

Biggest threats

Because you’re likely to be working with a limited budget, prioritize the risks that pose the greatest threats. Then discuss with your financial and insurance advisors the kinds — and amounts — of coverage that will mitigate those risks.

Be careful you don’t assume insurance alone will address your nonprofit’s exposure. Your objective should be to never actually need insurance benefits. To that end, put in place internal controls and other risk-avoidance policies such as new employee orientations and ongoing training.

Don’t go overboard

Some organizations buy more insurance coverage than they need, which can be costly. So make sure you’ve thoroughly analyzed your nonprofit’s risks and buy only what’s necessary to protect people and assets. We can help you decide what insurance you need — and what you probably don’t. Contact us with questions or recommendations at Online Stewardship or our parent company, Patrick & Raines CPAs. You may reach out to Lynn by calling (904) 396-5400 or email her at or

© 2023

Why nonprofits need to track staffers’ time

Not-for-profit organizations are compelled by federal and state wage-and-hours laws to perform a certain amount of time tracking. Funders may also stipulate timekeeping practices. Fortunately, timekeeping software can make the job a lot easier for staffers and managers. Here’s how to ensure your nonprofit complies.

What’s required and what’s not

You generally are required to document hours worked by hourly employees. And even though salaried workers aren’t paid by the hour, you’ll need proof of their time worked if there’s ever a dispute over wages or their exempt status. Exempt employees generally include executive, administrative and professional workers who earn a salary, provided they meet the Fair Labor Standards Act criteria for these classifications.

In addition, your nonprofit should document incurred costs for funders that reimburse expenses or fund specific programs or activities. Timekeeping is also necessary to comply with the Affordable Care Act. Under the act, employees who work, on average, 30 or more hours per week are considered full-time. And employers with 50 or more full-time and full-time equivalent employees may be penalized if they don’t offer them adequate health care coverage.

If your organization follows Generally Accepted Accounting Principles (GAAP), you must allocate payroll expenses to specific programs and supporting services. Payroll allocation may be the basis for recording other expenses by program. The same holds true for costs deducted from unrelated business income.

Although you’re not required to track volunteer time, you may want to consider tracking it. Knowing the total number of hours volunteers contribute helps you show donors the true cost of programs and full scope of volunteer support. It also enables you to recognize and reward committed volunteers.

Best practices

For your timekeeping procedures to be effective, your organization should collect information as early as possible, verify its validity and let your software program do the rest. For example, you can require employees to record their own time daily (or use a time clock system that does it automatically). Consistency is important: Once you’ve established a policy, make sure everyone adheres to it.

Although tracking time for staffers who work exclusively in a single program usually is easy, timekeeping for multiple programs and supporting service areas can be more complicated. To simplify the task, capture employees’ time and allocate it as soon as you can. If daily tracking isn’t possible, consider capturing time data for a few representative periods during the year and applying those percentages broadly.

Decision-making help

Even if timekeeping weren’t required, it would be a good idea. Careful allocation of payroll and other expenses helps you understand the true cost of running programs. This, in turn, enables you to make decisions such as whether to continue specific initiatives and find new funding for programs. Contact us with questions or for timekeeping software recommendations at Online Stewardship or our parent company, Patrick & Raines CPAs.  You can reach out to Lynn by calling (904) 396-5400 or email her at or

© 2023

Your nonprofit probably won’t be audited by the IRS, but if it is …

Despite recent accusations that the IRS targets certain types of tax-exempt organizations for audit, not-for-profit audits generally are rare. That’s because most nonprofits owe no or very little tax. However, as the IRS receives funding as part of the Inflation Reduction Act, it’s expected to hire new agents for all divisions, including the Tax Exempt and Government Entities Division. So nonprofit compliance checks and audits potentially could become more common.

What should you do if your nonprofit hears from the IRS?

Initial letter and call

If your organization is chosen, most likely it will be subject to a correspondence (not an in-person) audit. An IRS agent will send you — and, if applicable, anyone with a power of attorney — contact letters via the U.S. Postal Service. The agent will then wait at least 10 business days before making phone contact.

The initial phone call will include discussion of the issue (or issues) being examined, for example, an incomplete Form 990 or a complaint the IRS received about your nonprofit. The agent will ask you to provide items listed on an Information Document Request (IDR), such as:

  • Filed Form 990s and other tax documents,
  • Payroll tax records,
  • Records of transactions with donors or business partners, and
  • Unrelated business income documents.

The phone discussion may lead the IRS auditor to modify the IDR before sending it to you. If the request seeks more than one item, the auditor will group the items on a single IDR.

Communicate and meet deadlines

Before the auditor sends the IDR, you and the auditor should agree on the deadline for your response. If you can’t agree on a date, the auditor will assign one.

The IDR also will identify the date that the auditor plans to review your responses for completeness. Deliver everything by the deadline. If the auditor determines your response is complete, you’ll be informed by phone. If, on the other hand, the auditor decides your response isn’t complete — or if you didn’t respond — you might be granted one or more extensions to comply.

If upon reviewing the IDR documents, the IRS decides you’re in compliance, the agent will contact you via phone and mail you a closing letter. Otherwise, the auditor will propose a tax adjustment, tax status change or even a revocation of tax-exempt status. If you agree to the proposal, you can typically close your case by fulfilling any requirements. Or you can request an appeal with the IRS or via the court system.

Get help if you need it

If your nonprofit is audited, comply with all requests on time and remain calm and professional when talking with IRS agents. If you need assistance communicating with the agency or assembling information and documentation, we can help. Contact us with your questions about best practices for avoiding an IRS audit thru Online Stewardship or our parent company, Patrick & Raines CPAs.. You can reach out to Lynn by calling (904) 396-5400 or email her at or

© 2023

Data analytics is more accessible than you might think

Data analytics is the science of collecting and analyzing sets of data to develop useful insights, connections and patterns that can lead to better informed decision making. It can be enormously useful for not-for-profits. For example, data-driven nonprofit Community Solutions partners with local charities to help them reduce, and even end, homelessness in their communities. Among the tools it uses are databases that account for individuals experiencing homelessness and their history, health and housing needs, as well as real-time data on available housing.

But what about nonprofits that don’t have the expertise to pursue tech-driven solutions? If this sounds like your organization, take heart: Using data analytics is easier than you might think. And deploying it successfully can save your nonprofit time and effort over the long term.

Number of advantages

The potential for data analytics is almost endless. It can produce such metrics as program efficacy, outcomes vs. efforts, and membership renewal that can reflect past and current performance and, in turn, predict and guide future performance. Data analytics can also help your organization validate trends, uncover root causes and improve transparency. For example, analysis of certain fundraising data makes it easier to target those individuals most likely to contribute to your nonprofit.

Data analytics typically facilitates fact-based discussions and planning, which is helpful when considering new initiatives or cost-cutting measures that stir political or emotional waters. The ability to predict outcomes can support sensitive programming decisions by considering data on a wide range of factors — such as at-risk populations, funding restrictions and grantmaker priorities.

Finding what you need

Data usually comes from two sources, internal and external. Internal data includes your organization’s databases of detailed information on donors, beneficiaries or members. External data can be obtained from government databases, social media and other organizations. Some basic analytics tools are free or available through non- and for-profit partnerships. But for more sophisticated and powerful functions, your organization may need to spend a little money.

Your informational needs should dictate your data analytics package. Thousands of potential performance metrics can be produced, but not all of them will be useful. So identify those metrics that matter most to stakeholders and that truly drive decisions. Also ensure that the technology solution you choose complies with any applicable privacy and security regulations, as well as your organization’s ethical standards.

Talk to experts

If you have in-house technology expertise or any board members familiar with data analytics, seek their input. Otherwise, talk to data experts for advice. Contact Online Stewardship or our parent company, Patrick & Raines CPAs for help when you have questions. You can reach out to Lynn by calling (904) 396-5400 or email her at or

© 2023

Is effective altruism all it’s cracked up to be?

The arrest last year of a high-profile cryptocurrency exchange founder for fraud not only hurt the crypto business, but also cast a shadow on “effective altruism.” This philosophy employs evidence and statistics to determine strategic ways to benefit others — and the alleged fraudster is a vocal proponent. He has claimed that he earned as much money as he could so he could give most of it to charity.

Is this a case of one bad apple spoiling what’s otherwise a sound approach to giving? After all, effective altruism is particularly popular among tech millionaires and billionaires. Or should your not-for-profit be wary of philanthropists who espouse it?

Power of high-impact giving

Effective altruism (also known as “strategic giving”) doesn’t focus on how effective a nonprofit is with its funds. Rather, it looks at how effective donors can be with their money and time. Instead of being guided by what makes them feel good, effective altruists use evidence-based data and reasoning to determine how to make the biggest impact.

Effective altruists generally consider a cause to be high impact if it’s large in scale, generally neglected by other philanthropists and is “highly solvable.” Because they strive to get the most bang for their bucks, some effective altruists focus on nonprofits that help people in the developing world. So, instead of donating to a U.S. school, an effective altruist interested in education might donate to an organization that provides nutrition to children in poor countries — because improving their diets also will improve their ability to learn.

What critics say

Skeptics question whether a focus on measurable outcomes results in a bias against social movements and arts organizations, whose results are harder to measure. Some organizations work to eliminate broader problems, such as income inequality or oppression, where progress isn’t easily quantified. An effective altruism approach may do little to tackle the societal issues behind a problem.

Critics also point out that an evidence-based approach ignores the role that emotional connection plays in charitable donations. When it comes to choosing which organizations to support, givers’ hearts frequently matter more than their heads. Concentrating on numbers and efficiency may actually discourage supporters.

Then there’s the issue of control. Some charities worry that effective altruists not only will dictate how nonprofits use their funds but also will treat philanthropy as a tool to achieve business, political and other non-charitable goals. Such problems are only exacerbated if effective altruists donate ill-gotten funds.

Exercise caution

Your nonprofit probably shouldn’t ignore the effective altruism movement, but exercise caution. Carefully evaluate any large offer of support, particularly if it means giving up control of how funds are spent or if you’re worried about the legitimacy of the donor. Instead, rely on financial and other experienced professionals for advice.

Contact Online Stewardship or our parent company, Patrick & Raines CPAs for help when you have questions. You can reach out to Lynn by calling (904) 396-5400 or email her at or

© 2023

Give your organization’s members a reason to renew

When inflation is high, it’s common for people to cut expenses by deciding not to renew subscriptions and memberships. For charities and associations that depend on membership fees, this trend can be distressing — if not catastrophic. If your not-for-profit’s membership rolls are declining due to nonrenewal, you need to address the problem immediately. Here are some ideas for keeping members in the fold.

Matching offerings to needs

To keep members, you may have to offer something they need. For example, offer education, networking opportunities, research, discounts or credentials. And the only sure way to get a handle on what your members need is to ask them.

Accomplish this through formal surveys, focus groups and online polls as well as by simply asking your members when you talk with them. How are your products or services meeting their needs? What do they need that you’re not providing? Needs aren’t static, and a lot has changed over the past few years. So check in with members regularly.

Communicating your value

Providing the right offerings is important. But you also must emphasize your organization’s value proposition. This is the unique experience that your members have when they interact with your nonprofit and its offerings.

Try making an emotional appeal that taps into the intangibles of being part of your group. Depending on your mission, you might tout the value of individuals banding together to create a powerful voice for change, the chance to help improve the conditions in your community or the ability to network with local or industry leaders.

Meeting members where they are

In general, members who are deeply involved will stick with your organization. Create as many avenues as you can for members to participate, for example, as board and committee members, event volunteers, or publication contributors.

Treat members as individuals whenever possible. Always address correspondence to them specifically (never to “member at large”) and consider offering them personalized content when they visit your website. Also make sure that it’s easy to renew membership through your website and that the renewal process enables multiyear memberships — possibly at a discounted rate.

If you don’t already, work your social media channels. Give members reasons to follow you by regularly posting updates, event photos and other engaging material. If your group is top of mind, members will find it harder to abandon you.

Acknowledging hardship

Finally, don’t avoid financial realities. Acknowledge that times are hard and you understand that members may face cash crunches. If possible, you might want to discount your membership fees temporarily to encourage renewals — and new memberships.

And if you feel your organization’s membership-dependent revenue model is no longer feasible, contact Online Stewardship or our parent company, Patrick & Raines CPAs for help when you have questions. You can reach out to Lynn by calling (904) 396-5400 or email her at or  We can help you explore other revenue-generation strategies. 

© 2023

Are your Accounting and Development departments like oil and water?

When Accounting and Development teams don’t work well together, the situation can lead to more than employee hostility and conflict. It can affect the not-for-profit’s financial statements and lead to the forfeiture of grant funds. To ensure the staffers in your Accounting and Development departments communicate fluidly, you may need to revise certain procedures and actively encourage collaboration.

Different recipes

The first step is to make sure staffers understand that Accounting and Development departments typically record their financial information differently. Development may use a cash basis of accounting, while Accounting typically records contributions, grants, donations and pledges in accordance with Generally Accepted Accounting Principles (GAAP). This means that the two departments produce numbers that vary, but nonetheless are both correct.

Let’s say a donor makes a payment in February 2023 on a pledge made in December 2022. Development enters the amount of the payment as a receipt in its donor database in February. But Accounting records the payment against the pledge receivable that was recorded as revenue when the pledge was made in December. Receipt of the check doesn’t result in any new revenue in February because Accounting recorded the revenue in December. Both departments’ records for February (and December) are accurate, but they disagree with each other.

Mixing effectively

To truly collaborate, Accounting and Development should reconcile schedules at least monthly. If, for example, Development fails to inform Accounting about grants on a timely basis, the latter won’t be aware of the grants’ financial reporting requirements and could forfeit funds for noncompliance. If Accounting doesn’t record grants or pledges in the proper financial period according to GAAP, your organization could run into significant issues during an audit — which could jeopardize funding.

Schedule meetings so that Accounting can educate Development about what information it needs, when it needs it and the consequences of not receiving that information. For its part, Development should provide Accounting with ample notice about prospective activity such as pending grant applications and proposed capital campaigns. Development should also present status reports on different types of giving — including gifts, grants and pledges. This is especially important for those items received in multiple payments because Accounting may need to discount them when recording them on financial statements.

New policies and procedures

If you’re encountering resistance from either department or if problems continue, contact us. We can help you initiate policies and procedures that promote the efficient communication of financial information and prevent negative repercussions.

Contact Online Stewardship or our parent company, Patrick & Raines CPAs for help when you have questions.  You can reach out to Lynn by calling (904) 396-5400 or email her at or

© 2023

A refresher on nonprofit endowment management

If your not-for-profit has an endowment, you probably know it’s a major responsibility. Endowment investments generally need to be managed by a financial expert, and your organization must adhere to certain regulations, particularly when it comes to spending. As a refresher — or primer for new employees or board members — here are the basics of endowment management.

Prudent decisions

First, it’s important to distinguish endowments from operating reserves. Endowments generally are designed to provide steady income to a nonprofit while its core investments grow untouched. That steady income can be a financial safeguard in times of crisis.

A significant portion of most nonprofit endowment assets are restricted funds. For funds that aren’t restricted, organizations generally must conform to provisions of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). Among other things, the UPMIFA allows nonprofits to include appreciation of invested funds as part of what is “spendable” in addition to realized gains, interest and dividends.

The act also provides guidance for “prudent” decisions, suggesting that spending more than 7% of an endowment in any one year generally isn’t fiscally responsible. And the UPMIFA makes it easier for nonprofits to identify new uses for older and smaller endowments that may be dedicated to obsolete or impractical purposes.

Spending income

Your spending policy will need to define how much of your endowment fund’s income can be spent on operations each year. Usually, this is defined as a percentage (between 4% and 7%) of a rolling average of endowment investments. A rolling average helps even out the ups and downs of market returns and prevents the endowment’s contribution to any one budget year from being significantly lower than contributions to other years.

However, this approach doesn’t address whether your endowment fund will be able to maintain a similar level of funding for future operations. Also, because investment returns usually don’t correspond to the inflation rates that affect your operating budget, your spending policy should be based on more than recent returns. To factor inflation into your spending policy, you might start with a relatively conservative, inflation-free investment rate of return. Then adjust it for inflation to arrive at a spending rate you can apply on a year-by-year basis.

Today’s difficult climate

The current high inflation, market volatility and recession worries make planning for your organization’s future challenging. If you aren’t sure whether your endowment’s spending policy has kept up with economic realities or developments within your organization, contact us for help.

Contact Online Stewardship or our parent company, Patrick & Raines CPAs for help when you have questions regarding your endowment accounts.  You can reach out to Lynn by calling (904) 396-5400 or email her at or

© 2023

Even perfectionists can learn to love delegation

Not-for-profit executives can be perfectionists — they often know exactly how they want something done and believe they’re the only ones capable of doing it right. Unfortunately, this attitude can alienate staffers and make it difficult to mentor successors and build effective teams. Then there’s the problem of time: There are only so many hours in the work day. To best serve your nonprofit and its constituents, you must practice the art of delegation.

What to hand off

It’s important for executives to devote their time to the projects that are the most valuable to their organization and that can best benefit from their talents. For example, public speaking engagements and meetings with major donors are probably best left to you and other upper-level executives. On the other hand, tasks that frequently reoccur, such as sending membership renewal notices, and jobs that require a specific skill in which you have minimal or no expertise, such as reconciling bank accounts, are probably delegation targets.

Before you delegate a task to an employee, consider the person’s main job responsibilities and experience and how those correlate with the project. At the same time, keep in mind that employees may welcome opportunities to test their wings in a new area or take on greater responsibility. Before assigning new tasks, check staffers’ schedules to confirm that they actually have time to do the job well.

How to be flexible

When handing off a task, be clear about goals, expectations, deadlines and details. Explain why you chose the individual and what the project means to the organization as a whole. Also let employees know if they have any latitude to bring their own methods and processes to the task. You may be tempted to micromanage a delegated task, but try to give staffers flexibility. After all, a fresh pair of eyes might see new and better ways to accomplish jobs.

On the other hand, delegation doesn’t mean dumping a project on someone and then washing your hands of it. Ultimately, you’re responsible for the task’s completion, even if you assign it to someone else. So stay involved by monitoring the employee’s progress and providing coaching and constructive feedback as necessary.

Getting it right

How do you know if you’re delegating correctly? Ideally, you should have time to focus on mission critical tasks that leverage your specific talents, and your staffers should be provided with growth and learning opportunities. If you’re new to delegating, it may take some time to get used to identifying projects to delegate and the staffers best capable of handling them. But once you get the hang of it, delegation can make the job of managing a nonprofit a little easier and much more fulfilling.

For more information about delegating, you can reach out to Online Stewardship or our parent company, Patrick & Raines, CPAs.  Get in touch by calling (904) 396-5400 or emailing or  


Put an advisory board to work on your nonprofit’s challenges

A community health center desperately needed to upgrade its computer network. Unfortunately, the not-for-profit had little IT expertise on staff or on its board of directors. That’s when it decided to form an advisory committee made up of people who could analyze the situation and help guide IT decision-making. This included a retired technology company executive, a cybersecurity specialist and a longtime volunteer who, in her paid job, managed technology purchasing for a hospital network.

This is only one example of an advisory board. These boards can function to guide specific projects or supplement existing expertise. At the same time, they can provide roles for major donors who may not be right for your regular board.

Asking questions

Does your nonprofit need an advisory board? Look at your general board members’ demographics and collective profile. Does your board lack representation from certain groups — particularly relative to the communities your organization serves? One thing advisory boards can do is offer opportunities to diversify leadership.

Also consider the skills current board members bring — or don’t bring — to the table. Do you have enough financial expertise on your board? Does the group have adequate fundraising or grant writing experience? What about public relations skills? An advisory board can help fill in critical knowledge gaps.

Adding advisory board members can also open the door to funding opportunities. If, for example, your nonprofit is considering expanding its geographic presence, it may make sense to find an advisory board member from outside your current area. That person might be connected with business leaders and be able to introduce board members to appropriate people in the community.

Selecting advisors

The advisory role is a great way to get people involved who can’t necessarily make the time commitment that a regular board position would require. It also might appeal to recently retired individuals or stay-at-home parents wanting to get involved with a nonprofit on a limited basis. And it can be an ideal way to “test out” potential board members. If a spot opens on your current board and some of your advisory board members are interested in making a bigger commitment, you’ll have a ready pool of informed individuals from which to choose.

Just make sure that advisory board recruits understand their role. They aren’t involved in your organization’s governance and can’t introduce motions or vote on them. But they can propose ideas, make recommendations and influence voting board members. Often, advisory board members organize campaigns and manage short-term projects.

When to disband

Advisory boards usually are disbanded after a project — such as the computer system upgrade for the fictitious advisory board mentioned previously — has been successfully completed. You may also want to consider eliminating an advisory board if it doesn’t seem to be meeting its objectives or requires more staff support than you can provide.

For more information on governance and financial issues, you can reach out to Online Stewardship or our parent company, Patrick & Raines. Get in touch by calling (904) 396-5400 or emailing or

© 2022

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