What is in a mission?

“What’s in a name? That which we call a rose by any other name would smell as sweet.”
Shakespeare, Romeo & Juliet

What’s in a mission? That which we describe the work of a nonprofit by any other would “do good” just the same, right? Shakespeare might agree, but those in the sector know that a nonprofit’s mission is unique to the organization and the cause that it is designed to serve.

This is why strategic planning should always include a hard look at an organization’s mission and how that mission fits with the long-term outcome the work should accomplish.

The Michigan Nonprofit Association (MNA) invested more than 18 months exploring our mission, our vision, and our unique role in the nonprofit sector so that we might better understand ourselves, our community, and our future. Our journey included taking on a new way of thinking built around David LaPiana’s model of “Real-Time Strategic Planning” that forces an organization to continually understand and examine its identity, strategy, and advantages.

At MNA, we are proud of the work that we have accomplished in understanding ourselves and our work and invite others to explore our new vision, mission, and values and ask that you help us understand how we can better serve nonprofits to achieve their missions.

Submitted by Kyle Caldwell, president and CEO, for the Michigan Nonprofit Association.

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2010 Compensation and Benefits Survey data can help avoid excise taxes

The IRS imposes intermediate sanctions primarily as a means to penalize nonprofits for excess benefit transactions. The most common type of excess benefit occurs in providing excessive compensation, fringe benefits, or other unearned benefits to directors or other disqualified persons. Sometimes the excess benefit arises through the sale of property for less than fair market value or a contract that confers excess benefit on the disqualified person. Disqualified persons are generally members of the board and officers of the organization but also include persons with significant influence over the organization, such as managers, large donors, or fundraisers providing significant services.

If the IRS finds a disqualified person has received an excess benefit, that person or entity is required to return the excess benefit to the organization. The organization must be returned to the state it was in, to the extent possible, before the excess benefit was given. In addition the individual or entity must pay an excise tax in the amount of 25% of the excess benefit to the IRS. If the return to the organization is not done in a timely manner, then the excise tax can increase to 200%, and the IRS may also levy a 10% tax on the organization manager who authorized the original transaction. The excise tax assessed against an organization manager is limited to $10,000 for any one excess benefit. With respect to any one excess benefit transaction, the maximum amount of the tax imposed cannot exceed $20,000.

Is your head spinning yet?

While these sanctions pose serious consequences for nonprofit organizations, compliance is fairly straightforward. Congress has created a procedure in which the board, or a committee given authority by the board, can create a rebuttable presumption that the transaction with a disqualified person is not excessive. Payments under a compensation arrangement or transfers of property between an applicable tax-exempt organization and a disqualified person are presumed reasonable at fair-market value if the following conditions are satisfied:

• The transaction is approved in advance by an authorized body of the organization composed of individuals who do not have a conflict of interest concerning the transaction. This means that the persons who will benefit should not participate in the decision making process.

• The authorized body must obtain and rely on comparable data to determine if the compensation or transaction is appropriate. (This is where studies like Michigan Nonprofit Association’s 2010 Compensation and Benefits Survey can be helpful.)

• The authorized body must adequately document the basis for their decision. The document should include:
o Terms of the transaction and date approved
o Members of the authorized body present and their votes
o Comparability data relied on by the authorized body and how it was obtained
o Any actions by a member of the authorized body who may have a conflict of interest
o Documentation of the basis of the determination before the next meeting of the authorized body or 60 days after the final action was taken, whichever is later; and approval of the records as reasonable, accurate, and complete within a reasonable time thereafter

These rules, along with transparency and accountability standards, dictate that a nonprofit must examine the marketplace and maintain clear records of processes used to determine compensation. In order to assist members in this effort, Michigan Nonprofit Association released the 2010 Compensation and Benefits Survey. Free for all members of the Association, this survey provides salary and benefit information for nearly 20 positions specific to Michigan’s nonprofit sector. The survey is intended to provide comparable data to be used to determine the appropriateness of compensation and to rebut charges that compensation is excessive or inappropriate. Nonprofit boards, authorized committees and executive level staff can use this data as a resource in their process of setting salaries, ensuring that their organization is competitive in the marketplace, and significantly reducing the risk of intermediate sanctions being imposed by the IRS.

Log on to MNA’s website today at www.MNAonline.org to download your free copy of the 2010 Compensation and Benefits Survey.

Marion Gorton

Brandon Seng

Submitted by Marion Gorton, Public Policy Specialist, and Brandon Seng, Director of Member Services, for the Michigan Nonprofit Association.

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Filling Your Storytelling Toolbox

Michigan’s nonprofit sector is one of the only growing areas in Michigan’s economy, with a 2.7% increase in employment (or 11,500 jobs) and 14.7% increase in wages all during this most recent recession. Do we celebrate this success or are we humbly reminded that this modest growth is dwarfed by the overwhelming increase in needs nonprofits have to address and the declines in public and private revenues?

The published reports in the New York Times illustrate why some might advocate to “keep our heads low.” New Jersey’s most recent budget includes provisions restricting the compensation of nonprofit CEOs based on the same formula as applied to for-profits receiving state contracts. At the national level, Boys and Girls Clubs of America received special attention by U.S. Senate members as their CEO was paid $510,774 in salary and bonuses plus retirement compensation for a total of nearly $1 million. While no one is raising concerns of fraud or misuse of the charity’s resources, some are calling the wage and benefits excessive and questioning why a leader of a charity should earn that level of compensation.

In another challenging twist, our sector is being squeezed between providing local services in partnership with government and receiving fair, timely and accurate reimbursement for those rendered services. The Government Accountability Office (GAO) issued a report clearly stating that federal grants often fail to provide nonprofits with the necessary resources to cover the full costs of delivering services. The National Council of Nonprofits released a report highlighting the challenges states are facing with delayed payments, cutting essential programs, and imposing new fees.

Finally, the very status of charitable nonprofits is being challenged. Several states across the country are examining the possible revenue gains realized if nonprofits were charged property taxes. Still others are testing PILOTs (Payment In Lieu Of Taxes). These are fees that charities are strongly urged to consider by local governments that presumably will help defray the costs of municipal services.

The landscape is complicated at best. What should we do in the face of an increasingly hostile climate to fulfill our missions while experiencing modest growth? Some might propose a “stay under the radar” and keep doing our work quietly method and hope we go unnoticed. But this denies our sector the opportunity to effectively tell our story. As a sector we need to fortify our storytelling toolbox to develop a greater understanding of what we do, why we do it and what impact we have in communities.

Here are some tools you can add to your toolbox:

1. Story Banks are available to you to share your story with MNA as well as our fellow nonprofits across the country. MNA’s story bank provides you easy to use prompts, to share the great work of your organization. The National Council of Nonprofits recently launched an effort seeking your stories on challenges working with government contracts and grants. These important resources help others understand the opportunities and challenges we face.

2. MNA 2010 Compensation and Benefits Survey (free to MNA members) that provides comparative data for your board to recommend your CEO’s salary. Much of the challenge in fending off criticism of CEO compensation is a lack of data especially more local comparisons. Click here to access the survey.

3. Engage policy makers to ensure they understand the consequences of their decisions as we work to resolve another challenging state budget process. MNA provides a host of advocacy tools including our Michigan Participation Project that gives you the resources you need to get your constituents registered to vote, find out where community town halls are taking place, and products to remind everyone to vote in November. We also provide you the “do’s and don’ts” during election season.

4. Running an effective nonprofit requires solid management practices, transparent finances, good volunteer management and much more. The Michigan Nonprofit Management Manual gives you all these resources and more. You can also check out our Staying Legal website that gives you all the state and federal regulations you need to maintain your organization’s charitable status.

These are just some of the tools we provide for Michigan’s nonprofits to be more effective and tell your story. MNA provides these resources to empower your organization to develop strong practices, provide greater value to your constituents, fend off the uninformed criticism of how nonprofits operate, inform and shape more supportive public policy, and lead in Michigan’s economic recovery. Above all, use these resources to help us build a strong and vibrant nonprofit sector!

Submitted by Kyle Caldwell, President and CEO of the Michigan Nonprofit Association.

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Don’t Lose Your Tax Exempt Status!


Time is Running Out!

As a nonprofit organization, you know the importance of your tax-exempt status. Be sure not to risk losing that status by submitting your annual return by May 15, 2010!

Whether your organization has a budget in the millions or in the thousands, you are required to submit an annual 990 form to the IRS. Please note – nonprofits with annual revenue of less than $25,000 are now also required to file. This requirement has changed in order to help our government better understand how many 501(c)3 organizations exist.

Beware – this is the first year (2010) the IRS will automatically revoke the tax-exempt status of organizations that have failed for three consecutive years to file the required Form 990 with the IRS. These forms must be filed by May 15th, otherwise your organization may have to submit its application for tax-exemption with the IRS all over again.

The Urban Institute’s National Center for Charitable Statistics has developed a simple tool to find out if you need to file. Here’s how in 3 easy steps:

(1) Go to this website

(2) Select the name of your state and then enter your nonprofit’s name. If there is an alert “FILE NOW” by your nonprofit’s name,

(3) File a 990 or your nonprofit’s tax-exempt status will be revoked on May 16th.

Filing by May 15th will prevent your organization from having to pay $750 and submit an application for tax-exemption with the IRS all over again!

Smaller organizations can fill out the IRS Form 990-N, known as the ePostcard (http://www.irs.gov/charities/article/0,,id=169250,00.html). The ePostcard is easy to complete, and only takes a few minutes to answer eight simple questions. Larger nonprofits simply need to file their tax returns.

For more information about filing annual returns, please visit http://www.irs.gov/pub/irs-tege/filingrequirementsfactsheet_012010.pdf

Submitted by Kari Sederburg, director of public policy for Michigan Nonprofit Association.

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Threatened loss of major nonprofit – what does it mean for nonprofit sector?

Michigan is not known for earthquakes. But the earth moved last week in Detroit when the nonprofit Detroit Medical Center (DMC) announced a deal with for-profit Vanguard. This possible deal to take over one of our region’s largest nonprofit employers shifted the ground.

On the surface, this proposed deal seems to be good for the Metro Detroit region. The large debt load of the DMC can be reduced. Plus, an infusion of cash can fund the needed upgrades the facility has been struggling for years to implement. But when the earth moves as violently as it is from this potential deal, those living in an area need to look beneath the surface to identify possible fissures. So what do we make of the threatened loss of a major nonprofit for our region?

Looking specifically at the DMC, some are concerned that the focus on charity care may not be the same under a for-profit regime. Fortunately, at this time Vanguard seems to be sensitive to DMC’s nonprofit origins as it tries to provide venues to preserve some of the intent of the many donors who have invested in this Detroit institution. Vanguard also has proposed maintaining the current management. However, in this time of increasing needs and diminishing resources, we know that charity care will likely increase, at least in the short term as we work to understand the impact of recent national legislation. Unfortunately, however, some studies have shown that there is little change in the amount of charity care delivered by nonprofit hospitals that have been acquired by for-profits.

As people who live in Michigan, we also need to look more broadly at how this earthquake of a deal will ripple through the ground beneath us but also the integrity of our social safety net. For example, we cannot overlook the invaluable role that DMC has played as one of our region’s – and indeed, one of our nation’s – largest teaching hospitals. The doctors trained here did not all stay in Detroit; many settled elsewhere in Michigan providing quality health care across our state. We need to ask ourselves what in this deal could undermine that vital educational role of this essential institution. The same research referred to earlier showed that of all the hospital transfers studied, the teaching institutions were the least likely to maintain their nonprofit missions of education.

Looking even more broadly at the social safety net nonprofits hold, for more than three decades, society has been calling more on nonprofits to fill a role previously served by government: caring for those in need. Governments, trying to save taxpayers billions of dollars, have turned to nonprofits to deliver services government used to deliver, but providing the same or better service with greater efficiency—doing more with less.

Unfortunately, governments seem to forget that they rely on nonprofits as silent partners in providing public services. As a just released national report reveals, state and local governments across the country have been slashing funds for programs they expect nonprofits to deliver, withholding payments from nonprofits for contracted services already delivered on behalf of government, and seeking revenue from nonprofits through new fees and taxes. These short-sighted actions hurt the community at large.

Equally unfortunate is that local, state and even federal units of government seem to be taking these actions without recognizing that nonprofits are major contributors to our state’s economy. The nonprofit sector is the state’s third largest employer. One of every ten workers in Michigan is hired by a nonprofit organization, and nonprofits generate an additional 161,000 jobs as a result of spending by the organizations. Undercutting nonprofits directly undercuts our economy.

So before we celebrate the proposed transfer of the DMC from one of our region’s most valuable charitable nonprofits into a for-profit entity, we all need to take a deep breath and thoughtfully examine the potential consequences. While this may remove the financial burden of the DMC in the short term, we cannot be certain that its larger philanthropic mission will endure.

We may look back in ten years to the earthquake that moved the ground in Detroit and across Michigan last week and see two things. First, that charity care is expanded or at least maintained in the region. Second, hopefully it wakes us as citizens and the policymakers we elect to the real threat: that we are in danger of losing something of great importance – not only DMC, but also the nonprofits upon which we all rely for Michigan’s quality of life.

Recent articles about the Detroit Medical Center and Vanguard announcement:
+DMC-Vanguard deal likely to receive close scrutiny (Crain’s Detroit Business)
+Vanguard Health plans to buy DMC (WDIV 4)
+ DMC and Vanguard Health Systems release rundown of the partnership (Detroit Free Press)
+ Vanguard, DMC announce sale (Detroit News)

Kyle CaldwellSubmitted by Kyle Caldwell, President and CEO for Michigan Nonprofit Association.

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Generational Differences

This fall we shared a blog introducing MNA’s office book club, which has been a great opportunity for staff to come together and discuss everything from trends in the nonprofit sector to work styles among colleagues. So far we’ve read Who Moved My Cheese by Spencer Johnson, Generations: The Challenge of Lifetime for Your Nonprofit by Peter Brinckerhoff, and Momentum: Igniting Social Change in the Connected Age by Allison Fine.

I wanted to share my thoughts on Generations since MNA has been focusing on diversity in the nonprofit sector. We’ve polled our members, examined our own board and staff and looked at a variety of issues including race, gender, geography, background and of course, age. Until recently I thought the last point, when you were born, was just a matter of time and relative maturity. That was until I read Generations. Among Peter’s many revelations is the blazing fact that we have to realize our generational categories, focus on the perspectives of the various generations, and have a game plan for both dealing with the growing number of Boomers retiring and the near equal number of Gen@’s coming into the leadership of our workforce.

For a “tween” generation like myself (someone born in 1964, just past the end of the Boomers and at the beginning of the GenX), I find myself to be a product of television and the personal computer. Yet, I still don’t really get full value of Facebook and Twitter, but yet still haven’t found a new technology that I wouldn’t want to own. In my work life, I am suppose to have the desire for informality (GenX), but the optimism and career focus of the Boomer Generation. As I am sure is the case with many others, I don’t fit in one nice category. On the other hand, the framework of Generations gives everyone a way of examining diversity in the workplace in a very different way.

Brinkerhoff’s “Six Big Actions” provide a work plan for organizations to use as they seek to not only diversify their talent pool, but also deal with the demographic forces we all will be faced with as we look to both retain and attract talent for our staff and boards. For my own organization, we’ve been wrestling with the challenge of internal work styles, communicating with our members, mentoring new leaders to the sector, and managing board diversity in recent years. I have been struggling with how to deal with the overall issue of talent in very crude terms (race, gender, age) and I should be looking much deeper—looking at generational issues, communication styles in a wired age, marketing to audiences in the ways they take in information, accommodating technology preferences (what Brinkerhoff calls, “Techspectations”).

Sample page - Technology and Generations

Sample page - Technology and Generations

Diversity is a sensitive and complicated issue. It’s made even more complicated by the generational issues identified by Brinckerhoff. Fortunately, Generations provides a framework to have the conversation that is non-threatening and far-reaching. I encourage every nonprofit leader to check it out, and check out the various assessment tools to see how you and your organization can engage the various generations at their levels. It will change your thinking.

Next up for the book club: Good to Great by Jim Collins and Uncharitable by Dan Pallotta.

Kyle CaldwellSubmitted by Kyle Caldwell, president and CEO for Michigan Nonprofit Association.

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Giving Wisely This Holiday Season

This time of year, mailboxes and inboxes are filled with requests for charitable donations all saying the same thing – that financial support is needed now more than ever. But in these tough economic times, how can Michigan families ensure that their dollars will do the most good?

To assist donors in making these critical decisions, Michigan Nonprofit Association, Council of Michigan Foundations (CMF), Michigan Association of United Ways (MAUW) and the Michigan Attorney General have developed a guide for Giving Wisely This Holiday Season.

The guide includes tips for choosing a charity, warning signs to watch for fraudulent groups, and tips for safely making a donation including online giving.

Read the Giving Wisely This Holiday Season guide, then let us know what you think. Is it helpful? How do you plan to give this holiday season? For our nonprofit leaders – how will you work with donors to help make the giving process a rewarding experience?

Submitted by Lisa Sommer, public relations manager for Michigan Nonprofit Association.

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