Armanino Nonprofit Blog

Armanino Nonprofit Blog

Welcome to the Nonprofit Blog hosted by the professionals at Armanino, CPAs & Consultants. This blog is set up to inform nonprofit organizations of trends, rule changes, best practices and free educational offerings that we have built to support nonprofit organizations. Our professionals bring you their insights from an accounting and organization perspective to help nonprofits reach their goals. We support our clients with advice, direction and best practices.

Monday, August 11, 2014

Should Your Nonprofit Cash in on Cryptocurrency?

A fascinating fad…or the next evolution of fundraising? Seems it’s what everyone is asking these days about the Bitcoins, Dogecoins and Peercoins of the cyber world. So, let’s take a look at how few early-adopting nonprofits have experienced some initial success in accepting these “cryptocurrencies” as donations.

Songs of Love, a national nonprofit that creates personalized, original songs for children and teens facing tough physical or emotional challenges, was one of the first nationally recognized 501(c)(3) charities to accept Peercoin donations. Donors simply send to the Peercoin wallet address provided on the organization’s website.

Another cryptocurrency, Dogecoin, has been used to raise money to fund everything from the Jamaican bobsled team’s trip to the Sochi Olympics to service dogs for children with disabilities.

Geekers Paradise?

Sure, it’s a brave new world when it comes to virtual currencies. But you don’t have to understand geek-speak to understand the basics.

The IRS refers to Bitcoin and similar cryptocurrencies as “convertible virtual currencies”, which means that they can be digitally traded between users and exchanged for legal tender or other virtual currencies. Cryptocurrencies don't exist in paper or coin form. They are downloaded from a virtual wallet, which is often housed on the owner's smartphone, to the charity's website, which is equipped to convert it to cash. Prompt exchange is often key due to the potential for volatility with virtual currency.

However, you can count on this: Somewhere, sometime, someone will contact your organization and want to make a donation using a cryptocurrency. If you have the ability to do so, you may just create a new platform and a new way to engage donors in the process. Of course, you’ll appeal to younger, tech-savvy donors. But the built-in PR buzz of this new technology may very well ripple across your entire base.

What the Tax Man Says

However, just because you can accept cryptocurrency donations doesn’t necessarily mean that you should. To be sure, a myriad of logistical and legal challenges can arise.

But figuring out the legalities of cryptocurrency donations got a bit easier after the IRS issued a March 2014 notice stating that cryptocurrencies should be treated as property (similar to the way stocks are treated for income tax purposes). Specifically:

  • Cryptocurrency received as payment (or donation) is includable as income for the recipient
  • The value of the cryptocurrency is determined to be the fair market value as of the date it was received

Consider Jumping In

Spare Key, a Minneapolis nonprofit that provides assistance to families with critically ill or injured children, began accepting Bitcoin donations at the beginning of 2014. In a blog post, Executive Director Erich Mische summed up his feelings on cryptocurrency’s future. “I am not smart enough to know where the cryptocurrency economy will end up in the weeks, months and years ahead. But I am old enough to know that I have been told too many times that things like cell phones, the Internet and reality shows would never catch on in my lifetime.”

If you’re considering crytocurrency, or have the same mindset as Mische, you’ll be glad to hear it’s actually pretty easy to jump into the world of cyber donations. Just go to Coinbase or BitPay to set up Bitcoin processing. Then, design a special Bitcoin donation page on your website. Sprinkle in a few “Bitcoin Accepted” logos and add some links on your donation pages to let people know they can donate.

Wednesday, July 2, 2014

Study suggests more female leadership needed in nonprofits

A recent Harris Poll of 644 women working in the nonprofit sector found 40% of those working at large nonprofits* felt that their organizations did not put as much effort into soliciting donations from affluent women as they did affluent men. The poll also found 58% of these women felt that their organizations would be more effective at raising money, and 59% said their organizations would be more effective at fulfilling their mission, if there were more women on the board of directors.

Debra Mesch, Director of the Women’s Philanthropy Institute at Indiana University, told the Chronicle of Philanthropy that the poll’s finding are consistent with research she’s conducted. Women “are not considered as major donors or perceived to be the decision makers,” she said. “We certainly see that, in many studies, there are financial gains for organizations when more women are on the board.”

Industry statistics indicate 82% of employees of nonprofit organizations are women while the majority of nonprofits are led by men, both as CEOs and as board members. Still, 57% of female employees aspire to top leadership positions. That sentiment is highest (72%) among workers aged 18-34. The number drops to 64% among those 35-44, to 48% among those 45-54 and 30% among those over 55.

The largest impediment to seeking a leadership role is the time commitment, cited by 55%, and stress, cited by 44%.

The survey was undertaken in conjunction with the George H. Heyman Jr. Center for Philanthropy and Fundraising at New York University. For more details, access this info-graphic or visit The Chronicle online now.

* The study, commissioned by The Chronicle of Philanthropy, defined large nonprofits as those with more than $25 million in assets.

Tuesday, June 24, 2014

An Affordable Care Act Update for Nonprofits

The Internal Revenue Service (IRS) has streamlined the reporting burden for employers under the Affordable Care Act (ACA)—but only if companies qualify and receive certification for 2014.

In its effort to determine which employers are offering qualified coverage and which face penalties for not playing, the IRS has outlined new reporting rules for employers with more than 50 full time employees (FTEs) or FTE equivalents.

IRS Section 6055 requires health insurers—including self-insured employers—to provide information on the type and period of coverage for every employee on the payroll during 2014. One copy goes to the IRS and another goes to the employee by Jan. 31, 2015 (or by March 31, if filed electronically).

IRS Section 6056 requires employers with more than 50 full-time employees to tell the IRS what health care coverage it offered to each employee and over what portion of the year that offer covered. That form is due Feb. 28, 2015, or March 31 if filed electronically.

Sec. 6056 also requires large employers to furnish related statements to employees that the employees can use to determine whether, for each month of the calendar year, they can claim a premium tax credit.

The goal of all this is to measure whether employers have complied with ACA’s requirement to offer “minimal essential” health care coverage at an affordable price that reaches a “minimal value” threshold for all employees and their families. Employers that don’t meet the test—and just one of their FTEs or equivalents received a premium tax break for buying insurance on the health exchange—will face significant tax penalties.

The new regulations are a significant improvement from earlier drafts. Gone are demands for some data that would have been costly to administer and have not helped the IRS determine penalties. The latest rules offer a combined form that allows employers to meet both Sec. 6056 and Sec. 6066 requirements (Form 1095-C). It’s a handy tool, especially for those employers who do not self-insure and do offer qualifying coverage to all of its FTEs.

The latest regulations also provide some short-term relief from penalties for employers who can show they have made good-faith efforts to comply with the ACA’s information reporting requirements in this first year.

To learn if your organization is eligible for transitional relief, review our latest webinar: Affordable Care Act: Tax Update for Nonprofits.

Like much of the ACA, the concrete hasn’t hardened yet and there could be additional changes before employers start filing in 2015. But these IRS regulations give employers a better measure of what’s expected as they weigh their employee benefit options.

If you’re unsure if your organization is required to take action to comply with ACA requirements, or if you’re still trying to minimize your FTE and FTE-equivalent headcount, contact Dan Jones (925-790-2644 or Dan.Jones@amllp.com) to learn more about how Armanino can help you minimize your “pay-or-play” tax risk.

Monday, May 12, 2014

Understanding recent OMB grant reform

After urging by grant recipients and two presidential directives, the Office of Management and Budget (OMB) has issued more than 100 pages of revised regulations governing administrative requirements, cost practices and audit procedures that take effect Dec. 26. And yes, it’s as big of a  deal as it sounds.

From an audit perspective, the shift in focus from a focus on procedures to a focus on program performance and measurable outcomes is one of the largest changes. There was also a $250,000 increase in the threshold that requires an audit—up from $500,000 to $750,000— and a decrease in the amount of sampling required by auditors.

From a consulting perspective, the OMB’s effort to streamline years of often confusing guidance into one uniform document was key, along with the changes that make accounting for indirect costs easier and less time consuming for grantees.

In addition, there are many technical changes that will require some additional training for accountants but, perhaps, the larger changes are in the new areas grantees will be expected to address:
  • A shift to electronic record keeping and the accompanying need for security are top of mind for OMB regulators.
  • A shift to an emphasis on program outcomes will push recipients into developing new non-accounting metrics.
  • A shift of submonitoring requirements from audit to the post award area with specific requirements stated for information in the award, ability to accept subrecipient indirect cost rates, and steps needed in monitoring.
It’s also important to note that some of the changes contained in preliminary OMB reform drafts didn’t make the official announcement—and the committee continues to meet.

Next Steps

Now is the time for nonprofits that receive federal grants to take a close look at their internal practices before December 26, when these changes will be included in their audits.
For an overview of the OMB reform changes and how they could impact your organization, listen to my recent webinar with Senior Consulting Manager, Karen Frost, titled Understanding OMB Reform for Grant Administration and Single Audits.

Monday, April 28, 2014

Program evaluation is worth the effort

For many nonprofits, the day-to-day struggle to keep the motor running has sapped the energy and enthusiasm for asking the most important question: How is my nonprofit doing?

Asking the stakeholders is time consuming. So is analyzing the data. Staff time is tight; so are the funds needed to buy software or outsource the process. Studying best practices can be helpful, but it can also be a frustrating reminder of the resources you lack. But without the knowledge, how do you know if your nonprofit needs to make changes? And what can you tell potential donors who ask about your effectiveness and efficiency? Here are some suggestions:

The Center for Effective Philanthropy offers a suite of tools, which give a 360-degree evaluation of a nonprofit. The tools measure perceptions of donors, staff, grantees and even declined applicants. Among the California nonprofits taking advantage of the donor perception tool, for example, are the Napa Valley Community Foundation, the San Francisco Foundation and the Orange County Community Foundation. There are 42 California nonprofits on the list of users for the Grantee Perception Tool.

The Foundation Center has also developed a valuable resource in its Tools and Resources for Assessing Social Impact (TRASI) database. There, nonprofits can access a number of tools that cover best practices and program evaluation.

Trade associations or your top advisors may also have information and resources to help you evaluate your program’s performance. For example, Armanino developed Rapid Performance Management, a benchmarking tool designed specifically to help our private school clients benchmark themselves against industry standards and their peers.

There’s no doubt evaluating your program takes work and resources, but in the long term, taking advantage of some of the tools and resources mentioned above will help you start improving your program’s performance and efficiency.

Friday, March 28, 2014

Nonprofits: Start small when it comes to big data

You’ve probably heard a current tech term that has been making the rounds: Big Data. For people in nonprofit leadership roles, it’s an important concept to explore and employ.

Big data is all about collecting and rapidly analyzing huge stockpiles of data to further your cause, whether it’s general support of your mission, fundraising or attracting volunteers. Vastly expanding troves of digital data, paired with newly available technology to sort through it, make this possible. For nonprofits, it boils down largely to this: How can data help my nonprofit support its mission and improve our operational efficiency?

Big data is already being used by some larger nonprofits, some of which attended the 2014 Conference for the Nonprofit Technology Network this past March.

One such nonprofit is the Ad Council, who helps nonprofits create multimedia communications on issues including preventive health, education and community. While still in the early stages of their big data strategy, they’ve begun changing the way they look at  their large amount of data to help answer internal questions such as “What are we supposed to do with this information?” They started by bringing in a “data scientist,” which had everyone talking about how the Ad Council should be looking at their own data. Then, they started small (picking just a handful of data sources to analyze), involved people from across the organization, and most importantly, ensured key executive team members approved of the time and resources needed to achieve their goals.

So what can midsize and smaller nonprofits learn from the Ad Council?
  1. Break Barriers: Tackling big data can enable your nonprofit to break down barrier between different groups—and previously separate data sets—by getting everyone together to brainstorm and share ideas about how you can use existing information to help your nonprofit achieve more. It’s a great way to reflect on what’s working and what isn’t, and to see how you can start operating more efficiently as a whole.
  2. Target Donors: Once you have a big data strategy in place, you can begin to compile profiles of your donors, potential donors and volunteers. By tracking past donations, you can tailor your efforts to get the best possible response from individual donors. As data collection becomes ever more detailed, comprehensive and personal, the opportunity to get a closer, more accurate picture of the people who can help your nonprofit expands.
At Armanino, we’ve helped numerous nonprofits organize and enhance their existing data, because you have to start digging into your data if you really want to understand how your nonprofit operates, and who your donors and volunteers really are.

Friday, March 21, 2014

Transparency guide for small-to-medium nonprofits

It’s been four years since the Foundation Center launched its Glasspockets initiative to encourage transparency in the nonprofit sector.

The roster of early adopters is impressive. Of the more than 55 foundations involved, 21 are based in California, including The William and Flora Hewlett Foundation ($7.7B), the David and Lucille Packard Foundation ($6.3B) and the Gordon and Betty Moore Foundation ($5.7B). In addition, a handful of community foundations have signed on including the Silicon Valley Community Foundation ($2.9B), the Marin Community Foundation ($1.3B) and the SF Foundation ($1.2B).

But there’s a challenge: to spread transparency principles and practices to the thousands of smaller foundations.

Early this year, Glasspockets introduced its new guide, Opening Up: Demystifying Funder Transparency, supported by a grant from the Carnegie Corporation of New York and produced in collaboration with Grant Craft.

The woman behind Glasspockets is Janet Camarena, the Director of the Foundation Center's San Francisco office. In a blog introducing the new guide, she wrote:
The guide’s research involved a survey of more than 700 philanthropy professionals and in-depth interviews with 25 grantmakers. From this knowledge base, a helpful roadmap emerged to help grantmakers through the hows and whys of transparency. And, indeed, one of the things I think many grantmakers will find most helpful is the step-by-step infographic that illustrates the various paths one can take to transparency, along with the following definition of foundation transparency.
The guide joins other Glasspockets offerings including the transparency template, which spells out best practices in 23 areas ranging from grantmaking processes to governance and staffing policies to investment strategies.

The Glasspockets website is also offering a series of three webinars for grantmakers explaining the philosophy, the benefits and the process of transparency. The webinars are presented in partnership with California Philanthropy and the James Irvine Foundation. Among the topics are harnessing big data and managing social media.

Overall, we think this thought-provoking undertaking is worth a look for organizations involved in the nonprofit sector. We know many nonprofit organizations often struggle to overcome their own data/financial transparency challenges—and this seems like a great initiative to help organizations get up to speed.

Wednesday, February 12, 2014

Nonprofit ‘diversions’ face scrutiny

Congress recently launched an investigation into nonprofit finances after a Washington Post investigation revealed widespread under-reporting of losses due to inappropriate diversions of assets.

According to the newspaper’s research, more than 1,000 nonprofits checked a box on page 6 of their Form 990 filing reporting they had discovered a “significant diversion” of assets. Included in this category would be losses attributed to theft, investment fraud, embezzlement and other unauthorized uses of funds. The Post’s inquiry covered the period from 2008, when the question was added to the Form 990, and 2012.

And roughly have of those nonprofits did not specify the full size of the loss, although the tax document’s instructions required that disclosure, the Post reported. Losses topping $1 million were not uncommon and at least two House committees will endeavor to learn the magnitude of the problem and suggest possible solutions.

The Post found more than 100 examples of California tax-exempt groups checking the box, some more than once. Bay Area nonprofits ranged from large organizations to smaller community groups.

Susan Aurelia Gitelson, author of Giving Is Not Just For The Very Rich: A How-to Guide for Giving and Philanthropy, told the Chronicle for Philanthropy the answers lie in nonprofits doing tougher scrutiny of their own operations.

In a posting to the Chronicle’s website, she suggests nonprofits ask themselves:
  • Do they have professional and volunteer watchdogs on their boards and inside their groups?
  • Have they kept the same leaders in place on the top and throughout their structure for many years without periodic checking of how they have been handling their responsibilities?
  • Are at least half of the board members independent and not too closely connected to the organizational staff?
  • Are two or more officers and lay leaders required to approve proposals and sign checks?

Friday, January 31, 2014

Focus on transparency and messaging

Prospective donors are constantly reminded to check what percentage of their donations goes to programs as opposed to administrative costs. And it’s good advice, up to a point.

Like so many things though, one size doesn’t fit all.

Across the wide span of the nonprofit community, the litmus test of a well-run organization seems to frequently default to an allocation of 75-80% to programs and 20-25% to administrative costs. That’s a shame, as it can be misleading.

As statistical averages, these may work well. But when they are taken out of context as rules, they do a disservice to both nonprofits and their donors.

Many well-run nonprofits couldn’t possibly pay their fixed costs with 25% of their donations, while there are others that could very well be viewed as wasteful operations and yet remain well under 25% administrative costs. In fact, certain nonprofits run at less than 10% administrative costs. That’s the nature of their business.

The moral of the story: Nonprofits need to focus on transparency and messaging more than one set measure when it comes to benchmarking.