Preparing for Leadership Succession Planning

465By: Beth Bird

According to a number of surveys, we can expect to see a significant increase in the turnover of long-time nonprofit leaders in the near future. In fact, this wave of leadership retirements is already impacting the nonprofit environment. The effect on the nonprofit communities will be significant, and organizations that are well-prepared will be able to make the most of the transitions. However, many boards have not prepared a succession plan and will find themselves scrambling to replace key leadership positions. A thoughtfully prepared plan will lay the groundwork for a successful and smooth transition.

The National Council of Nonprofits has prepared a list of ten planning tips for leadership transition at https://www.councilofnonprofits.org/tools-resources/succession-planning-nonprofits.

When is a good time to start thinking about leadership transition? Now.

 

Does Your Organization Have the Right Year-End?

By: Deb Nelson1696

Have you found yourself asking why your organization operates on its current year-end? Whether it is a calendar year or fiscal year, organizations may benefit from examining whether the current year-end is still appropriate. Considerations may include:

Revenue Timing

If a large portion of your revenue is coming in right before year-end, it may make budgeting and year-end responsibilities more difficult. Changing the year-end to align with the organization’s operations may provide more flexibility and easier comparison to budget. For example, December 31 is right around the corner and many organizations receive substantial contributions in the last quarter of the year. It may make sense for those organizations to consider a June 30 or September 30 year-end.

Grant Cycles

If your organization is making or receiving grants on a specified schedule, this timing should be part of the conversation. If you receive significant grant revenue that has fiscal year-end timing and you operate on a calendar year-end, consider if there is benefit to align with the grant cycle to aid in the budget and reporting process.

Users of Your Financial Information

Do you have third parties requesting your audit and tax return by a specific date during the year? Consider whether a change in year-end would make it easier to meet those timing restrictions. Early communication with third party users is beneficial to gain a full understanding of potential implications that may arise with a change. Financial institutions, grantors, and regulators are some of the parties to reach out to. You should also contact your accounting firm to discuss timing and availability for fieldwork.

Audit Reports and Tax Filings

A change in year-end has an impact on the presentation of your financial information, from both an audit and tax standpoint. An organization needs to consider whether they would complete two separate audits to address the change: one for the 12-month period and one for the short-period, or whether they would have one audit spanning a 12+ month period, for example 18 months. In addition, you also must consider the impact on presenting comparative information.  Regardless of what the organization chooses to do from an audit standpoint, a tax return cannot be filed for a period longer than 12 months.  Therefore, a short period return will need to be filed and financial information will be needed even if a longer time frame is used for audit purposes.  State solicitation requirements may also impact the decision for the audit report.  State solicitation reports may require the attachment of audited financial statements which may require an organization to obtain two separate audits due to timing requirements. As discussed above, third party users may also require two separate audits because of timing.

Changing your year end is a relatively easy process.  The year end will need to be approved by your board and likely will require an amendment to your organization’s bylaws (or Articles of Incorporation).  If your organization has not changed its year-end in the last ten years, there is no special form to request the change from the IRS. Instead, organizations need to file a short period tax return and indicate “Change of Accounting Period” on the top of page one. If there has been a change in the last ten years, the organization must file Form 1128 – Application To Adopt, Change, or Retain a Tax Year, with the short period tax filing. If your organization files Form 990-N, you must report the change on Form 990, Form 990-EZ, Form 1128, or by sending a letter to the IRS.

Nonprofit Board Fundraising Duties

Contributed by: Kyle Fritch, Eide Bailly Tax ManagerKyleFritch

Boards have several responsibilities and duties to help fulfill their organization’s vision and mission. They oversee management and finances, set strategic direction, and ensure compliance with legal and tax requirements, to name a few. However, one of the board’s primary responsibilities is to help secure adequate resources to use in accomplishing the business mission. When it comes to the board’s role in fundraising, there is no single right answer. Nevertheless, nonprofit board members should consider focusing on four fundraising responsibilities:

1. Take a Leadership Role in Fundraising – Board members must take a leadership role in fundraising since they essentially own the organization and are responsible for the well-being of the organization and its successes. In addition, supporters and potential supporters see board members as the people most committed to the organization. If the board will not take a lead role in raising funds, why should anyone else support the organization’s cause? One way to accomplish the leadership role is to be actively involved in the development of the organization’s fundraising plan. A well-thought-out fundraising plan (developed in partnership with the board) identifies the board’s role, the amount each board member is expected to give and/or raise, and provides guidance for the range of ways in which they can support the fundraising efforts. Identifying the fundraising tool that best suits each member for bringing resources and people to the organization will only strengthen the organization’s overall success.

2. Leverage Connections – One of the most significant reasons a person makes a contribution to a nonprofit organization is because the right person asks. Although prospective donors must be interested in the organization, it is the people involved, especially those who ask for the gift, that makes people want to contribute. Therefore, board members should look for opportunities to introduce others to their organization and its mission. Making these introductions is valuable to the fundraising effort and provides opportunities to bring attention to the organization’s good work in the community.

3. Give-Or-Get Policy – What is a give-or-get policy? The name speaks for itself. Your board members agree to either donate a certain amount of money every year, or they agree to raise the equivalent from others. The level of monetary commitment is up to the board members. An important reason to implement this type of policy is that major donors, grant-makers, and individuals want to see the level of commitment from boards of the organizations they support or are thinking of supporting. Implementing and complying with such a policy is an effective way to demonstrate the board’s commitment to the success of the organization. Careful planning should be performed before implementing such a policy to insure it will succeed and not drive board members away. Every board is unique and may have different circumstance to consider. Some board members may lack personal wealth or community influence and others may have no experience fundraising. Taking the time to establish rules and procedures that fit an organization’s particular situation will aid in the policy’s success and in gaining compliance from its participants.

4. Oversee Your Organization’s Fundraising Efforts – As a board member you have the fiduciary duty to maintain financial accountability of your organization. Rather than taking a passive role in the fundraising efforts, board members should monitor the organization’s progress towards its fundraising goals. At times, staff members can become inundated with the day to day operations and may not realize a particular activity is under-producing or lacks the funds to be successful. By exercising oversight at a higher level the board is in a position to evaluate funding priorities and make recommended corrections.

Ultimately, the missions of nonprofits are important, but without funds, the organization cannot effectively function. By taking a leadership role, leveraging connections, and overseeing the organization’s fundraising efforts, board members can meet their fiduciary duties and secure the funding needed to fulfill their organization’s mission.

 

One funding opportunity, for 501(c)(3) organizations located in AZ, CO, MN, and UT: http://www.eidebailly.com/industries/nonprofit/resourcefullness-award-home

 Apply for the Eide Bailly Resourcefullness Award by Wednesday, August 12th.