Tuesday, March 22, 2011

April 20th Program Announced: Fund Development and Marketing Partnership

Leatherstocking AEA April 20th Program--Fund Development and Marketing Partnership: Increasing Your Nonprofit's Success

This program will feature a panel discussion defining the role of fund development and marketing in nonprofit operations, including defining success. The panel will further discuss the overlap and important partnership between these two areas.

Panelists include:
  • Paul J. Adamo, Vice President for College Advancement and Executive Director, College at Oneonta Foundation
  • Mike Stein, Vice President of Development, Bassett Healthcare Network
  • Tara Collins, Communications Director at Watershed Agricultural Council

Time: 8:30am - 11:00am
Cost: FREE
Foxcare Center's Education Room
1 Foxcare Drive, Route 7, Oneonta, NY 13820


Tuesday, March 15, 2011

Nonprofit Compensation: What is too much? …and who decides?

Are you tired of hearing, "That nonprofit pays its employees too much!" If every nonprofit board followed IRS guidance on setting the compensation of its key staff leaders, perhaps we wouldn’t hear that refrain as often. So board members, please do your part by embracing your role as defenders of the nonprofit sector’s right to pay its employees reasonably and fairly. Help us change the conversation from, "What compensation is excessive?" to "What compensation levels will help our organization build its capacity by hiring and retaining terrific staff?"

First, know the process for reviewing the annual compensation of the executive director. Second, be aware of the downside of NOT engaging in an annual compensation review. (Bad press, lack of donor confidence, and potentially IRS penalties….need we say more?)

Background: Under federal law, a charity may not pay more than "reasonable" compensation for services rendered. Although the Internal Revenue Code does not require charities to follow a particular process for determining the appropriate level of salary and benefits, it is clear that compensation for board members, officers, key employees (and others in a position to exercise substantial influence over the affairs of the nonprofit) should be determined by persons who are informed about what comparable nonprofits pay their employees, and who have no financial interest themselves in approving the compensation. (Source: IRS, Governance and Related Topics - 501(c)(3) Organizations 3-4 (2008)). These are the general guidelines offered by the IRS – but the IRS Form 990 offers specifics.
The IRS Form 990 asks nonprofits about the three-step process used to approve the compensation of the executive director/CEO (and certain other key employees): Did the process for determining compensation of the following persons include a (1) review and approval by independent persons, (2) comparability data, and (3) contemporaneous substantiation of the deliberation and decision?(See Section VI, Part B, line 15, of the Form 990.) Nonprofits that follow this three-step process are generally able to take advantage of what the IRS refers to as a "rebuttable presumption" that the compensation is reasonable, thereby protecting the nonprofit and the board members from sanctions that can be imposed by the IRS if it finds that the compensation was not reasonable.
Visit the National Council’s website for more information on how to measure comparability of compensation, and visit the IRS website for background on what can happen if a board fails to demonstrate it followed this 3-step rebuttable presumption process [hint: intermediate sanctions].

Demonstrating that your nonprofit has approved the compensation of the executive director/CEO in a thoughtful, deliberative process is a basic fiduciary responsibility of every nonprofit board. Here are some pointers:
  • The process of reviewing executive compensation should recur whenever there is an adjustment to the executive director/CEO’s compensation.
  • The "executive compensation review" should be conducted by persons who are "independent" (not paid by the nonprofit). Many nonprofits use a sub-committee, such as a "compensation committee" made up of board members and volunteers, or the executive committee, to conduct the initial review and then make a recommendation to the full board.
  • Having the full board approve the compensation of the executive director/CEO is consistent with being a transparent and accountable organization.
  • Documentation of what the board’s decision was based on (such as comparability data) and of the fact that the board carefully deliberated and approved the CEO’s compensation is critical. Minutes of the meeting should include enough details so that if the board’s decision is questioned, the process the board used to determine that compensation is "reasonable" will be clear.
  • "Compensation" means both salary and benefits, so if an executive director receives a salary but also other fringe benefits such as insurance, or a car or housing allowance, all those elements must be totaled together to determine the annual compensation.
There are many more resources on the National Council’s website, including a sample Policy for Review of Executive Compensation and a link to a virtual seminar on this topic presented at a symposium at Columbia Law School for state charity regulators by legal experts on executive compensation for tax-exempt organizations.

Read about additional governance policies that your nonprofit’s board should be aware of.

Thursday, March 3, 2011

Executive Service Corps to close local office

The Daily Star reported that the Executive Service Corps of Otsego-Delaware Inc. will close its office in Oneonta at the end of this month as its volunteers consider options for reorganizing.

Rich McCaffery, chairman of the board of directors, said the decision to suspend operations and close the office is a financial issue. With the pending merger of Wilber Corp. with Community Bank System Inc., ESC is losing significant revenue from the Mystery Shopping Project with Wilber National Bank, he said Wednesday.

ESC has a roster of about 75 volunteers who work with area companies and nonprofits providing advice about managing and developing their organizations.

ESC has an annual budget of $40,000, which pays for an office manager, a position that has been terminated, plus telephone, postage and other office costs, McCaffery said.

The ESC board met Monday, according to a letter to volunteers. About one-third of the volunteers responded to a survey about ESC and its future, and board member Joan Moyer has volunteered to coordinate efforts to reinvent the organization "to better fit the current economic climate and needs of both small business and nonprofits."

The local ESC was founded by Joann Rasmussen and Erna Morgan McReynolds.

Since its establishment in 1991, ESC has provided thousands of hours of consulting services to more than 500 small businesses and nonprofit agencies.

The local ESC office is located at 31 Maple St. in Oneonta.

McReynolds said the benefits of the program are twofold. Seasoned retirees offer insights from long experience, she said, and the work provides meaning to many retirees.

"The combination of retired or still-working volunteers to help nonprofits, small business and even municipalities worked well in this area as it had in more metropolitan areas," McReynolds said in an e-mail Wednesday. "In difficult economic times, the need is even greater."

Original Article by Denise Richardson for The Daily Star.