Hi,
If you run a nonprofit, the things that quietly decide whether you thrive or slowly slide are almost never the things your board spends its meetings on.
Here are the five most unmanaged things that worth a look before your next board meeting so none of them become a problem:
The public support test
- A public charity has to keep drawing enough of its support from the general public.
- If one large grant or major donor tips the ratio, the IRS can quietly reclassify you as a private foundation – stricter rules, more restrictions, and an excise tax on investment income.
- It builds over a multi-year window, and almost no board tracks it until it has already happened.
The policies your 990 publicly grades you on
- The form asks, in public, whether you have a conflict-of-interest policy, a whistleblower policy, a document-retention policy, and a real process for setting executive pay.
- A row of “no” answers is visible to every funder and watchdog who looks you up. They cost nothing to adopt and quietly raise your credibility.
Operating reserves – Most boards have never set a written reserve target.
- A common benchmark is three to six months of operating expenses, and it is just as important to know the difference between board-designated reserves and truly unrestricted cash.
- One delayed grant or one bad quarter is exactly where organizations without a reserve get into real trouble.
The overhead conversation
- How you split costs across program, admin, and fundraising becomes your public profile on Candid and Charity Navigator, and it shapes what donors think of you. Underreport real admin costs to look lean and you starve your own operations; report honestly and tell the story well, and you build trust instead of losing it.
UBIT and worker classification – The two most common surprise tax bills in the sector.
- Revenue from activities unrelated to your mission can be taxable, and leaning heavily on contractors who should be employees creates payroll-tax and penalty exposure.
- Both are easy to avoid with a heads-up before the fact, and expensive to fix after.
None of these show up in a routine filing. They are the things a good advisor raises with you during the year, while you can still do something about them.
That is the part most firms skip. We work with boards on exactly these questions – reserves, governance policies, your public support position, and how your numbers read to funders – not just the return at the end.
Reply to this email by Friday and we will set up a free 15-minute call with one of our senior nonprofit specialists to walk through which of these five your organization has covered, and which need attention. It is a governance and financial-health conversation, not a sales pitch.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com