pic by Bearman, 2007

The selection of candidates for elected offices seems to have created a new type of citizen calling themselves the Tea Party Voter.  They represent those tired of hearing the same promises and inaction by those elected.  While the voters look to make change in the government many nonprofits are looking to turnover their leadership.

It looks like government should take a better look at nonprofits for examples of how to lead and make change.

The ability to know when to hand over the reins of a nonprofit organization one created is not supposed to be easy.  It is a lot harder when it is not done in a planned manner.  The heart and soul of a nonprofit usually starts with its leadership.  There are a few nonprofits that were started by a community, a group of dedicated individuals or a cause, but in reality they survive with the leadership that represents the passion of why the nonprofit was formed.  The board of the nonprofit has an equally important role to play in the planning of succession.

Nonprofits should not think of succession planning as being unique to their sector.  All corporations, regardless of their corporation type, have to deal with succession planning eventually.

One of the key decisions to this planning is to groom the successor to assure they have the passion and the ability to bring the organization into the next century.  Unless the successor is from within the organization, the first year will be about the individual learning and living the mission of the organization through the eyes of the board, founding leaders and the community they serve. 

Another key decision is the transition between the old and new leadership.  I would suggest that first the day-to-day operations get passed to the new leader of the nonprofit.  Have the previous leader concentrate on courting the nonprofit’s supporters and assuring a role for them as the nonprofit enters into its next stage. 

The use of a merger as the succession plan is an exit strategy to use when the nonprofit is at a loss to replace its founding leader and does not have the heart or the ability to agree to a replacement. 

Planning and implementing change is necessary for the nonprofit to evolve and adjust to the market place.  While it may be hard emotionally to implement, inaction can lead to failure.  A severe recession is what it took to show which nonprofits were prepared to make decisions and which ones were not.  It also showed nonprofits where their true strengths and commitments were.  The advice is to make strategic planning an annual event.  A nonprofit will never know when its importance will be paramount to its survival. 

Strategic planning is something that many nonprofits talk about doing but never do.  Part of the problem is too many people doing the talking and no one strong enough to take the leadership.  This results in many actions related to government filings to not be completed.  Recently the IRS has stated that “Exempt Organizations:  Status Revoked for Not Filing Annual Return or Notice.”
 
Most tax-exempt organizations, other than churches, must file a yearly return or notice with the IRS.  If an organization does not file as required for three consecutive years, the law provides that it automatically loses its tax-exempt status.  Loss of exempt status means an organization must file income tax returns and pay income tax, and its contributors will not be able to deduct their donations.

What must be filed this year depends on the organization’s financial activity:

Financial activity filing requirement
 
Gross receipts normally?  $25,000
Note:  Organizations eligible to file the e-Postcard may choose to file a full return.  990-N (e-Postcard)
Gross receipts < $ 500,000 and
Total assets < $1.25 million 990-EZ or 990
Gross receipts?  $500,000, or
Total assets?  $1.25 million 990
Private foundation (regardless of financial activity) 990-PF

Additional information

So at a minimum check to make sure your IRS filings are in order and compliance with your state is in order.

The lack of filings has created tax liabilities and penalities for many nonprofits.  

pic from Spear

Nonprofits or a business at times are in a moment of excitement or caught up in the excitement of others or the reaction of others and make choices based on external influences.  A nonprofit should always wait a day before jumping into a decision that has not been vented internally with the pros and cons.  The organization may be excited today about a decision and everyone feels good but tomorrow will always come.  Tomorrow ultimately brings the reality of the decision to make everyone feel good as a having been the right or wrong choice for the strength of the organization. 

Nonprofits in the last two years have struggled between using cash reserves, furloughing people or laying people off.  I remind nonprofits that using cash means that the organization is deciding to reduce their ability to have a back up plan if things get worse.  While reducing staff hours or laying staff off is a hard emotional action, an organization’s viability has to be decided first.  It is better to be able to increase hours or hire people back or hire new employees than to go out of business.

In the moment of government cutting or donors reducing their giving there is the clamor that there are too many small nonprofits.  I promote the opposite should happen to really obtain the biggest impact of each dollar.  I think there are too many large nonprofits. 

Small for profit businesses are the strength of the US economy and the thousands of small nonprofits I place under the same umbrella.  The $100,000 plus salaries of larger nonprofits reduces the impact they have on the economy.  Each $100,000 can employ at least three individuals to provide much needed services and bring the money directly back into the economy. 

pic from Rock2292 

A nonprofit’s capital is its workers, cash and the in kind goods and services it receives. 

For those nonprofits who are just starting out a fiscal intermediary consulting firm may be the best option.  However, any organization should consider various degrees of the services.  The fiscal intermediary usually can provide five different lines of consulting services that will provide all the administrative services a nonprofit organization will need.  The product lines should be:  Working Capital Management, Employee Management, Treasury and Cash Management, Business Advisory Services and Regulatory Compliance Services.  Each product line’s success is to be judged by the efficiency and cost savings it produces for each nonprofit.

Working Capital Management (WCMS) should be comprised of eight main services:  payroll, accounts management, general accounting, bids, contracting, pricing, purchasing, and cost analysis.  The Employee Management System (EMS) should be packaged within the WCMS system as a list of employees that will interface against the payroll systems.  With the payroll system, simple employee considerations such as deductions, taxes and benefits should be offered. 

The Treasury and Cash Management (TCM) service line should be aimed at providing treasury management services in such areas as 90 days cash flow and cash reserves.  In addition, 403b plan management, endowment management and capital expenditure management services on behalf of the nonprofits should be considered. 

Business Advisory services are an advisory role to the nonprofit.  The ad-hoc services area are:  business development consulting, business plan consulting, capital structure consulting, M&A services and fundraising.

Regulatory Services for nonprofits are the handling of the organization’s interaction with governing bodies, government agencies and financial intermediaries that require administrative forms, records sent or financial records distributed to others.

The key to success of a nonprofit is to know when to bring consulting resources to bear to increase the likelihood of the outcome that the organization is seeking.  It is easy to incorporate but harder to run an organization.  Consulting provides the latitude to tap into the many different expertises needed but within the costs of hiring a full time employee. 

The advantages for a nonprofit’s status allow for the organization to use an incubator while the leadership completes the task of building the mission of the organization.

pic by grassroots international

Private sector philanthropic giving with a focus toward nonprofits who are grassroots is a means for knowing the donation will have local geographic reach.

The initial investment in the grassroots approach should be viewed like the planting of tree seedling.  The donor plants the seed of their idea.  The donor provides ongoing giving for a set number of years.  It should be the intent of the donor’s reasoning behind giving to be willing to be involved in the effort long enough to build strong roots for the grassroots nonprofit idea to have a foundation and the strength to grow branches.

The direction of the branches will be pruned in the direction of strengths.  The nonprofit should be open to being provided direction on prioritization and direction the donor wishes the support should grow.  The nonprofit should accept this direction especially if it falls within the mission of the organization.

Grassroots nonprofits have as a catalyst the strength of passion and volunteers.  The nonprofit with appropriate planning should be able to know strategically how their organization is to cover fixed costs, including staffing.  It should be the goal of the nonprofit to have each year an understanding of how they are going to have the funds to cover the approved budget for the year.  After five years it should be expected that the nonprofit knows how their financial support is being covered.  A nonprofit should include in its planning whether there is an opportunity to have members, user fees, a reserve or endowment to cover 75% of the expenses and fund-raise for the rest.  If there is a persistent 10-25% shortfall in spending it is usually attributed to providing raises each year to administrative staffing.  Is is with this in mind that outsourcing for nonprofits below three and a half million dollars that a donor should request the nonprofit do.

The use of the word “grassroots nonprofits” is to bring about a more powerful impact quickly to the cause at hand.  Nonprofits are created to address a cause.  The main weight for deciding a budget should be what the nonprofit can afford to do with its two main assets of cash and volunteers.

Throughout all of the nonprofit’s activities there has to be accountability.  A regulatory perspective of the nonprofits interaction with governing bodies, government agencies and financial intermediaries that require administrative forms, records sent or financial records distributed to others will fall to the designee or default to the Board officers.  The interaction requires time to contract with auditors for the annual audit of the nonprofit, and to ensure compliance with all respective laws, statutes and regulations.  The outsourcing of the service can provide an ad-hoc basis throughout the year when the Board and/or designated individual need the assistance.  A scheduling of the compliance work can be planned in order to be timely with the compliance.

Incorporating is the easy part for a nonprofit.  The hard part is annually keeping the donations from donors coming and expanding the donor base for giving.  
 

pic by magnusmangomango’s

Whether or not you agree with Greenpeace tactics, they are clear; raise the attention of their mission and they have created a solid funding base from individuals. It is fantastic that they are able to charge individuals to cover their expenses to volunteer on some of their missions. The result driven organization gives its supporters the opportunity to see, feel and hear the scope of their mission. The passion throughout the organization of belief to its mission and much of the funds are spent on direct service to that mission have really set the organization apart from other worldwide organizations. Most large worldwide organizations spend millions in overhead to coordinate their organization.

Many of the individuals who work for Greenpeace only ask for what is needed to survive to support the mission. In case your looking to support their efforts here is a link. http://www.greenpeace.org/usa/

I promote Greenpeace as a great case study of how to balance a mission and meet the needs of the support base wanting to be an active participant in its mission.

Space junk may just be the new initiative to clean up and change behavior that Greenpeace takes on.

pic by Neek #7

It is not so important to be the first nonprofit to create a service or an approach to be the most successful.  It is more important for a nonprofit to understand how the organization got to where it is today, identify where it wants to be and devise a plan to get there.  The plan should include an opportunity to learn, the means to identifying those components of the organization that are successful and those that need work.

Another aspect to an internal review of the organization is to review the transition plan for changing leadership.  A majority of the nonprofits will be going through the retirement of the current leadership.  The switching over to the next generation of leaders is better served by recruiting at least six months before the leadership change.  Institutional memory and community relations are difficult to maintain after a turnover in leadership.

pic by Sparrows Friend

pic by PLOtOnAnTiQuE

Scientific proof, a proof of concept and blind faith are three variables from which one can decide to operate. The reality of science provides a mix of emotions and reactions as discovery provides more about the inner workings of human kind development. 

Instinct as it relates to evolution does not mean anyone has to agree is always appropriate but one must agree in spirit it is there.  The same must be agreed upon as it relates to Creation.  Scientifically, such will likely never be confirmed, however the concept is not a bad place to place the unknown or to put ones faith towards. 

I would like to place one thought into the Creation concept.  The science is present showing the inner spirit of species to care about one another and to live in harmony. 

Society has created formally into law the means for it to be institutionalized and that is through organizations known as nonprofits and non governmental entities (NGO’s).  The role of nonprofits to be the base to the moral means of reaching the highest level of a caring society I foresee as a growing trend.

Further, I foresee the growing of more partnerships between for-profits and nonprofits to balance the return to society and the return to investors. 

Evolution of society continues and both theories are relative and not mutually exclusive.

Nonprofits should find those partners that they can evolve with and strengthen those bonds.  The strongest will survive. 

pic by tsudohnimh

Congress is famous for complaining and playing political games with important decisions. In the meantime, businesses spend millions to support foreign countries due to US reliance on foreign oil.

Nonprofits do not need to wait for Congress to begin to lower its energy costs.  Nonprofits should look to foundations and individuals to support the one time cost of installing alternative systems and end up saving in their operating costs.

In the states of California and Massachusetts there is the option to go solar and not have to buy the system.  Thereby, lowering the costs to a few thousand to have installed.

Another option for nonprofits is to think more about establishing cooperatives to lower their energy costs.  Bulk purchasing and implementing a plan energy conservation program as a group will save tens of thousands of dollars when done in conjunction with others.

In a sampling of providers in any particular zip code there seems to be a sufficient number of organizations in any geographic area to make this work.