Shifting focus

There comes a time when everything that can be said on a subject has been said, at least in the absence of new data.

That's kind of where this blog is at now. When you start repeating yourself, it's time to move on.

The purpose of the blog was, and is, to assist new or struggling organizations in achieving greater success. In many cases, my mail tells me that mission has been accomplished.

I am aware that every day brings new people into the marketplace, whether it is in the nonprofit or for-profit sectors. If this blog was monetized, then prospecting for new fledgling businesses to advise would be useful, to me if not to you.

That was never my intention. The primary reason the blog exists is to provide free information and hopefully to prevent the readers from making expensive newbie mistakes.

Lately however, most of my mail has been from people looking to game the system.  The only mission most of them have is to scam the public and incidentally, figure out how to get rich doing it.

Those are not the people that any legitimate grant writer or consultant wants to help.

In the future, the blog will probably focus on RFP notices, trends and legislative issues that impact nonprofits and small businesses. In some cases it might stray into political climate changes affecting those groups.

Readers that specifically request "Climbing the Ladder  to Nonprofit Success" can still receive a PDF copy by emailing me at rightwords@ida.net, and of course I am still available at that email for grant writing, business plans and funding research services for qualified entities.

To those following the blog, if you have specific, germane questions about the process of running a successful nonprofit or small business, feel free to ask questions using the comment section. I'm always available for consulting services as well.

It's been a great ride. To all of you struggling to make the world a better place, my hat's off to you. 

When the 1023EZ may not work for you

Ever since the IRS released the new short form application for filing for charitable status, my inbox has overflowed with requests to help people file it.

The first thing I have to say to all of you is:

READ THE INSTRUCTIONS FIRST.

There are some specific areas that may require you to file the long form application instead, and there are some implied drawbacks.

The two areas that sentence applies to are organizations already incorporated as LLCs and organizations that envision grants as a primary income stream.

Part II of the instructions specifically prohibits LLCs from filing using a 1023EZ, although they can apply using the long form. Sole proprietorships, partnerships and "loosely affiliated groups of individuals" are excluded as well.

Of perhaps greater importance to most of the people contacting me is the $50,000 annual revenue restriction for the first three years

For organizations hoping to access grant funding, the 1023EZ simply doesn't indicate or require enough basic verified data that is available in the public domain to satisfy the background checks required by most grantors or institutional funding sources. (The EZ does not require any sort of verification of your claim that you will not exceed the 50K threshold, such as the financial projection worksheet in the standard 1023.)  Just remember that when you file, you are "attesting", i.e. making a legally binding statement that you are not going to exceed the revenue cap.

While it is probably true that nearly all new organizations will not exceed the revenue cap in their first three years, and thus are only required to file the 990-N (postcard) report, that document is not accepted by grantors, again because it doesn't require or report enough data to make a determination about your effectiveness or financial integrity.

If you exceed the cap and have filed a long form 1023, no  harm, no foul. If you have applied and been approved using the EZ, the IRS might have a problem, or more accurately, you might have a problem with them.

There are also certain mission categories that require more information to be submitted to the IRS than is contained in the short form application. These include, but are not limited to, charitable risk pools, credit or financial education or assistance, schools, colleges and universities, organizations with donor advised funds and churches or church associations.

Having said that, some organizations are quite well-qualified to use the short form. One that comes to mind is a group that wanted to provide cross-translated children's books to ESL students, i.e. have the child's native language story books contain the English translation displayed under the native language text, and make those books available as videos or PowerPoint presentations to any bona fide community organization, library or educational institution that needed them. The translations were all being done by qualified volunteers, so their initial capital needs were quite low.

Of course after the three year qualifying period, should your organization suddenly come into significant funding, you can file the long form 990 and provide the appropriate reporting to satisfy the IRS as well as donors.

I do provide an initial feasibility study that can help you decide if your organization should file the EZ, as well as a review of your prospects for survival through those first critical three years.  For more information visit http://www.cloudlancerwriting.com and click on the consulting link.

How to start a successful nonprofit

Thinking of starting a nonprofit?  Good for you!  Successful nonprofits provide goods and services that may be simply unavailable to various target populations in the world of macro solution strategies.

The key word is successful. People don't intentionally start nonprofit organizations intending to fail. Still, many do fail, or they fail to grow enough to actually achieve their mission. Here are some strategies to make sure that your nonprofit is not one of them.

1. Have a plan. Failure to plan is the number one reason all new business ventures fail, and the nonprofit skeleton or framework is the same as it is for any other business. Start with a strategic plan and be honest when you assemble the facts and financial data for the plan. This is the time to exchange the rose-colored glasses for a microscope. Don't gloss over any problems or threats to success. Everything else will depend on how well you do this one step. If you don't know how to gather the data, or don't know what data to include, spend the time and/or money to find someone who does. A strategic plan is more than a template. It is up to you to make it a useful document. Step one of the plan should be step two in this article.

2. Assemble an effective board. The board is responsible for governance and guidance. It is not and should not be the staff that does the day-to-day tasks after the initial formation of the nonprofit. An effective board should be passionate about mission delivery but it should also include people who have some expertise in the nuts and bolts processes of running a nonprofit or business.

3. Formulate a way to meet your financial needs via a funding plan. Know from the beginning that even after you receive your 501(c)(3) determination letter, grant funding is going to be an unlikely source of funding for the first two or three years. You can't help anyone if you can't pay the bills.

4. Hire a qualified executive director/CEO. This should be the only employee that the board directly hires or engages. This person is the general contractor, if you will, for the organization. The ED is both the public face of the organization and the person responsible for the operational success of the mission. Typically, many founders try to be both a board member and the ED. While that may be viable for a few months, it is a conflict of interest emotionally, and it generally results in neither job being done well. Even if the ED is initially a volunteer, have clear performance expectations and communicate them well. 

5. Market your mission. No one is going to support you if they don't know about you. Hold an open house or an event to involve your community in your goals.

6. Do frequent assessments. Your strategic plan should have outlined the steps for success. Where are you in terms of achieving those steps?

   

7. Don't ignore negative trends. It is very tempting to focus only on the good things. Seemingly minor issues can quickly grow into major ones that can destroy your organization. If a problem seems to be present at every board meeting, it is probably is a major issue. No problem should be present for more than two meetings without raising concern. Be proactive in addressing  the issue and expect results, not excuses.

8. Be involved without resorting to daily micro-managing. That might seem to be in direct opposition to number seven, but it really isn't. If you created an effective strategic plan you should have developed job descriptions and goals for your staff that will support the mission. If you review those goals often you will know if something is wrong. Until then, try to let the people you have engaged do their job

.

Following these steps will put your nonprofit on the road to success.  If you have questions, feel free to email me at granthelp@ida.net.  

The IRS and politics - Why your nonprofit should care

Unless you live on a distant planet, you have probably heard about the Internal Revenue Service's improper targeting of nonprofit applications that implied a conservative political leaning as the core mission.

Without repeating too many of the hackneyed phrases, there is certainly truth in the phrase "The power to tax is the power to destroy" originally attributed to Daniel Webster. This could be revised to read "The power to selectively pick political winners and losers is the power to destroy democracy".

It does not matter what side of the political fence you are on, this selective process of holding 501(c)(x) applications in limbo and requiring a depth and breadth of disclosure not allowed by the law to create interminable delays should scare you.

By selectively holding up the ability of nonprofits to disseminate information and fundraise for a particular political viewpoint, the IRS may have had an effect on at least two elections, in 2010 and 2012. There was constant speculation and commentary on why the Republican party seemed to have a much less effective grassroots fundraising strategy than that of the Democrats. Well, if there are fewer organizations available to influence public thinking and fundraise for that political viewpoint, it could certainly have contributed to that perceived shortcoming.

As a grant writer and nonprofit consultant, I am familiar with the regulatory framework in which the IRS Office of Exempt Organizations is supposed to operate within.  I was even marginally involved in the process, since I reviewed a nonprofit 1023 that had been held up for fourteen  months.  I remember thinking that the requests for information seemed out of place, but ultimately, I felt that the way they were stating their mission and even their name was not really representative of their actual goal.  I had them reapply using different verbiage and the application sailed right through (no, this wasn't the nonprofit that has been on the news). At the time I just chalked it up to getting the presentation language of their mission, which was not political in any way, in line with the actual goal, and forgot about it. Looking back, I certainly wonder if something else was in play there.

There is no other agency in the government that is more viscerally feared than the tax collector. The potential power of that agency to intrude into your private life is virtually limitless. They can and do compel you to reveal things that you hold private and sacred. With great power comes great responsibility to balance and keep separate the necessary goal of fairly enforcing taxation and the collecting of taxes from the political process. It would seem that the IRS totally abrogated that responsibility on some or even all levels. 

If the party in power can, by either overt or covert means, stifle dissent and prevent discussion it can ultimately influence elections. That's a dictatorship, and it isn't what we are about. That's why you should care.