Tag Archives: governance

Nonprofit Radio for August 15, 2022: Board Members Are People Too


Judy Levine: Board Members Are People Too

One size fits all rules may not make sense for your board, especially if you’re embracing diversity and equity in board membership. Our guest, Judy Levine, is a longtime board coach, trainer and consultant, and she leads Cause Effective.


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[00:01:23.53] spk_0:
Hello and welcome to Tony-Martignetti non profit radio big non profit ideas for the other 95%. I’m your aptly named host of your favorite abdominal podcast and oh I’m glad you’re with me, I’d be forced to endure the pain of pseudo calista toma if I had to hear that you missed this week’s show board members are people to one size fits all rules may not make sense for your board, especially if you’re embracing diversity and equity in board membership. Our guest judy Levine is a longtime board coach, trainer and consultant and she leads cause effective Antonis take two endowment excitement. We’re sponsored by turn to communications pr and content for nonprofits. Your story is their mission turn hyphen two dot c o. And by fourth dimension technologies i Tion for in a box. The affordable tech solution for nonprofits. tony-dot-M.A.-slash-Pursuant D just like three D but they go one dimension deeper here is board members are people too.

[00:01:29.04] spk_1:
It’s a pleasure

[00:02:05.22] spk_0:
to welcome to non profit radio judy Levin She has been executive director of cause effective since 2006 and she has over 30 years experience as a nonprofit management advisor At cause effective since 1993. And as an independent consultant. She has trained and consulted with well over 1000 nonprofits on issues in fund diversification, donor engagement and board and organizational development. Cause effective is at cause effective and at cause effective dot org judy Welcome to nonprofit

[00:02:06.47] spk_1:

[00:02:09.02] spk_0:
pleasure to have you, I’ve had your colleagues through the years Greg Cohen and Susan comfort who I know Susan is completely retired now and Greg is mostly retired now, but now we’re uh they’ve been sort of stepping stones to the top now. We have the executive director.

[00:02:27.11] spk_1:

[00:02:28.12] spk_0:

[00:02:30.21] spk_1:

[00:02:37.36] spk_0:
good. Okay. Um my my apologies. Susan comfort is someone else. Susan, Gabriel is who used to be

[00:02:43.00] spk_1:

[00:02:43.99] spk_0:
at cost

[00:02:45.01] spk_1:

[00:03:06.63] spk_0:
Gabriel and and Greg Cohen. So um you’re concerned about equity on boards. Uh, but at the same time, you know, we’re trying to maintain standards but we want we want a diverse board standards don’t always apply to all the all the different cultures. We’re inviting in, help me set this up.

[00:04:46.22] spk_1:
Well there’s always a fear of the difference, the different and uh there’s also a fear of um acting inappropriately around the different and those two fears um sometimes stop a board from real honest, um an accurate reflection on what’s at the table and what’s the most appropriate way to support the organization’s mission. Um And especially, you know, ever since the racial reckoning of 2020 and the understanding on nonprofits parts that they needed to reckon with their own D. E. I. B. Diversity, equity, inclusion and belonging. Um my sense is that that that happened that that reckoning has happened on a staff level at a different different pace than it’s happened on the board level and some of that has to do with fundraising and people’s fear that if they rock the boat, they will not have the fundraising return that they have now. Um, And I’m here to say two things. One is that there is plenty of, uh, salaried capacity in this country for people of color, although not as much, not as much wealth accumulation, certainly generational wealth accumulation. And that’s a very real factor. Um, so to think that you need to diversify your board that you need to reach into the client base, which may be true, but is not the only way to diversify your board from the, uh, the group. It has always been

[00:05:05.08] spk_0:
okay. That’s, that’s number

[00:05:39.72] spk_1:
one. The other is that, Yes, you may have to rethink the one size fits all package and that’s been a mantra in our boards is that everybody has to hold the same standard and we know that everybody is the stain standard and we don’t want double standards or triple standards. Um, I’m here to really help people rethink the idea of universal standards versus standards. That makes sense for where that person is coming from and what they can, what they can actually bring to the table if they do their best.

[00:06:17.02] spk_0:
Okay, let’s take the first of those because there’s, there’s an, there’s an assumption there that people of color are not gonna be able to meet our fundraising expectation. So we’re gonna have to, we’re gonna have to reduce our board giving to invite folks of color in. But that, that, that’s just unfair and unfair and racist you’re not, if you’re not finding these folks, then you’re not looking hard enough for people who do have the means, uh, to, to meet your, to meet your, your board expectation, your, your board fundraising expectations

[00:07:26.98] spk_1:
and, or you’re not looking, um, with the right messengers and, or you’re not understanding why your cause is going to be of deep personal interest just to a person of color. Um, all of those factors have to be there. Um, you can’t, you don’t ask anybody on the board, You don’t ask somebody on the board of an animal shelter. If they have no connection to animals, they don’t care about animals, you gotta look. Uh, so in the same way you have to understand, let’s put it this way. There are, there are legacy charities, um, the Urban League, um, you know, very, that, that there are huge fundraising machines that are people of color lead. Um, there’s a sense of the ownership that this is ours. Yeah, may not be in your board as currently constituted. That needs to be opened up.

[00:07:32.26] spk_0:
Yeah, that’s a, that’s a holding onto that’s holding onto power and structures and not allowing someone who looks different comes from a different background into our, our playground

[00:08:34.14] spk_1:
well, and it’s more than not allowing. It’s actually, um, it’s more than just a not doing, it’s something that you have to actually do do, um, is to understand, um, how who makes decisions. Is there an in group and out group? Is there a biding one’s time uh ethos um which doesn’t work well when you invite people of color on and then they have to buy their time and they’re the only ones that are biding their time. And yes, it might be historical that everybody else bathe their time years back, but people gonna lose, lose, you know, they lose patience. So it means that you have to do much more rapid um leadership development, onboarding and power sharing. Then your board may be used to.

[00:08:43.52] spk_0:
All right. I don’t want to derail what what what we were intending to talk about, but I just

[00:08:46.12] spk_1:
I think it’s,

[00:08:47.72] spk_0:
I mean, I think it’s important to point out the implicit bias that goes along with this, assuming that you’re gonna have to lower your standards basically. Just assuming you got to lower your standards if you have people of color in. I

[00:09:00.60] spk_1:
think it’s all of

[00:09:02.51] spk_0:
gross and erroneous.

[00:09:06.87] spk_1:
And board members, all board members need to be owners, not

[00:09:12.44] spk_0:
guests. Right. And yes, and not treated like guests. Alright. Alright. So one of the things you said is that um one size fits all

[00:09:21.36] spk_1:

[00:09:36.76] spk_0:
not, is not gonna be the right model necessarily. So what what’s what’s an alternative? So if we’ve got a, we’ve got a $15,000 annual give get bored requirement uh and and two thirds of it has to be from your personal, your your personal assets. So $10,000 from you and if you want to either give or get the other 5000, you have an option there, but you have to give at least $10,000 a

[00:11:27.90] spk_1:
year. One of the things that I talked about that took me, you know, frankly, you know, a while to understand is the role of generational wealth transfer in people’s capacity to have disposable income. So that um, you know, uh, often times white people come from there. They’re not coming from money money, but they’re coming from a position of um comfort. Um, and so they’re not necessarily carrying family members. They’re not, they’re not pulling their family out of poverty along with them. Oftentimes, certainly black people who are in a may make the same salary, but they are carrying people in their family. And so you can’t say, oh, this person makes X salary and that person makes X salary, therefore they have the same capacity. You only find this out by talking to and listening to someone and I universal give assumes universal capacity. And yes, we said, okay, this gives the floor and everybody should go over the floor. We all know that people rise to the floor. So the question is, is there a way to help this person get and to change that relationship and or is there what are we, what are what we are after on the board? Someone who is using their connections for the, to the extent for the organization’s behalf And what comes in is relative to those connections and that capacity,

[00:12:58.91] spk_0:
it’s time for a break. Turn to communications media relationships, you know, how important relationships are in all aspects of your work and, and personal side to the past couple weeks, I’ve been talking about fundraising, but relationships are everywhere that applies to the media as well. You want to get heard in the media, you want to be that thought leader that you know yet you are that that you know, that other folks ought to know you as it’s gonna happen through media relationships so that when you are calling the journalists are so much more responsive to picking up the phone that supplies to journalists, podcasters, bloggers, conference leaders, wherever you need to be known. Right turn to can help you build those relationships so that you get heard in the media outlets. When you need to be, they’ll help you with the relationships they know what to do. Turn to communications, your story is their mission turn hyphen two dot c o. Now, back to board members are people too. Alright. So we need to, we need to get to know our board members. Uh, and you know, I understand your point. You know, some folks may very well be supporting helping other family members, not necessarily out of poverty, but I mean could be, but not necessarily out of poverty, but they’re they’re they’re helping other family members that aren’t doing as well as they

[00:13:16.31] spk_1:
are. And

[00:13:39.08] spk_0:
a lot of that can a lot of that can very well come from the lack of inter generational wealth through the generations at that. Uh, folks of color got screwed out of, essentially. Um Alright, so, alright, and I still want to go back to the fact that, you know that I don’t want to operate under the assumption that you have to lower standards just to invite folks of color fundraising fundraising standards. I don’t want to I don’t want to operate on the assumption that you have to lower standards.

[00:14:00.20] spk_1:

[00:14:00.94] spk_0:
trying to defeat that assumption.

[00:14:02.80] spk_1:

[00:14:26.69] spk_0:
Okay. Um All right. So what about the uh, what about the pushback? Well, before we get to the pushback that you might hear from your white board members about we’ve been doing this for so long and it’s been fine for us. So why can’t it be okay for them before we get to that? What might what might some of this look like? What what kinds of what kinds of uh activities can can folks do if they if they can’t make the not able to meet the requirements. Are you, are you suggesting rewriting? Do we rewrite the

[00:14:37.01] spk_1:

[00:14:37.21] spk_0:
expectations for all board members

[00:14:39.05] spk_1:
or suggesting using that as a starting point? Not an ending

[00:14:42.32] spk_0:

[00:15:08.52] spk_1:
That’s a starting point with each board member, um, about their, how it relates to them, to their assets, to their relationships to their circumstances. Um, and where, which areas they can go above and beyond in and which areas they need to pull back from and everybody’s gonna have a different answer to that, those equations. The fact is that they are, you know, I’ve been on board with very mixed income levels and the people who had the higher incomes understood that in order to have a board with mixed demographics, they had to do more weight bullying in the fun

[00:15:23.13] spk_0:

[00:15:29.39] spk_1:
that, that was part of the value system was that it was not, if they wanted everybody equal, they would have everybody just like them. If the value system was to have different voices at the table, then the value system had to be that some people did more direct fundraising and direct giving and some people did more outreach and some people did more political converse, you know, conversations, etcetera.

[00:15:48.53] spk_0:

[00:15:50.64] spk_1:

[00:15:50.79] spk_0:
want to make sure we want to be having these conversations with uh, these individual conversations with potential board members right before we’re in the recruitment process, before we invite someone to be on a board or before we accept someone to be on the board, we want to be investigating these things

[00:16:10.94] spk_1:

[00:16:12.03] spk_0:
that they know what to expect, so that they know what the expectations are and we know what we can

[00:16:47.56] spk_1:
expect. I, I, you know, having done a lot of board recruitment with nonprofits through the years, I would say two things, I think you have a before as your recruiting, you say, here’s the kinds of things that board members are expected to do. Um, and um, you know, how do these rest with you? Um, and you’ll find out some of them are scary. Some of them are, you know, oh, I couldn’t do that. Some of them are like, oh, this, I could definitely do that. I don’t know that. I would pin someone down to an exact um, prescription. You’re trying to get their temperature,

[00:16:49.39] spk_0:
but you

[00:17:17.83] spk_1:
know, it’s a courtship process. And so people go above and beyond what they thought they could do when they’re really excited by the mission and they’re given the tools they didn’t know they needed. So uh, in the courtship process, I would put this menu out and say, you know, how does this look to you, How could you see yourself in this? Um, but I wouldn’t take that as the last word because board service should be, people should be going into places that are not comfortable for them.

[00:17:21.63] spk_0:

[00:17:43.27] spk_1:
that’s partly the role of the board chair is to, is to live that by example is not just to be good at what they do, but to live by example. I tried this and this was, you know, I thought I was gonna throw up, but actually I didn’t throw up. I did really well at it. And then I tried that and I did throw up. So I, you know, somebody else will do that one from now on. Um, and so I want to be honest with people, but I don’t want to pin them down to something that are not being ready ready to be pinned to.

[00:17:51.29] spk_0:
But you make a good point about board bird service being a challenge. You do want, you do want folks, you’re you’re you’re leveraging the fact that they love your mission, your work, your values. They stand beside you with that in those ways. Um, You want them to to be challenged. You want board service to be meaningful? Yes.

[00:18:19.09] spk_1:
And you you want them to learn something from it because that’s part of what they get out of. It is not just a happy club, but that they’re gaining a different kind of sense of themselves of what they’re capable of,

[00:18:24.49] spk_0:
interesting, different sense of themselves, what they’re capable of. Yes, challenge. That’s the challenge. That’s the challenge. Go beyond comfort zone. Try this and see whether you throw up or

[00:18:35.40] spk_1:
not. Right? Kind of. But I mean, you need to try it with a lot of support and with the tools,

[00:18:42.18] spk_0:

[00:18:42.95] spk_1:
throw somebody into the lion’s den.

[00:18:46.17] spk_0:
All right. What about the uh the pushback from white board members that, you know, we’ve we’ve been. This has always worked well for us. We’ve always had this very rigid uh uniform, giving everybody’s given the same through these years? What why why do we have to now? What’s the advantage? Why, why should we change now?

[00:19:09.91] spk_1:
Okay, so I need to be polite here. Um, you

[00:19:13.62] spk_0:
can be firm, you can be firm and realistic, you have to be

[00:19:16.04] spk_1:
polite counseling of white folks and I think it’s part of our job as white folks to help other white folks to a different place.

[00:19:22.57] spk_0:
Alright, so don’t be, don’t be soft on nonprofit radio listeners. I’ll admonish you don’t do

[00:20:31.72] spk_1:
That. Um, it’s 2022. We know stuff now is white folks that we didn’t, that we were able to be blind to for hundreds of years. Yes, and we don’t anymore. So there’s a moral obligation to act differently. Our non profit is is here for the public good. And it it we believe that to do that, we need to reflect the full spectrum of voices that is that public and or should be concerned with our mission. That means that we need to have a table that is really welcoming to all those voices that they’re not just here, but they’re actually, we’re gonna share the ownership of this mission. And that does mean that we need to pull apart the stuff that we’re comfortable with and that’s unspoken because it’s gonna be a mystery to somebody who doesn’t come from our background and it was already part of this

[00:20:40.51] spk_0:
and what’s the advantage to the organization, Let’s make it explicit, uh, to doing this?

[00:21:26.65] spk_1:
We are living our values in our governance and if we’re not that’s pretty um compromised. Um so one is congruence without organizational values and what we’re here to try and carry out. Um the second is sort of more robust conversation and decision making because there are different points of view at the table because it’s not people with it’s not an entire crew with the same assumptions and frankly you’ll have more interesting conversations. That will be a more interesting club to be part of. That’s not why to do it. But it’s a side product.

[00:22:41.83] spk_0:
It’s time for a break, fourth dimension technologies. They’ve got the free offer going. It’s exclusively for non profit radio listeners. It’s complimentary. That’s why it’s free 24 7 monitoring of your I. T. Assets And they will do this for three months. They’ll look over your servers, your network and your cloud performance, they’ll monitor your backup performance all 24/7. If there are any issues they will let you know right away. Plus at the end you get a comprehensive report And they’re also going to include a few surprise offers as well. They’re gonna take good care of you. It’s all complimentary, it’s for three months. It’s for the 1st 10 listeners. It’s on the listener landing page Just like three D. But they go one dimension deeper grab the offer, let’s return to board members are people too. All right so that sort of answers uh dumbing down.

[00:22:44.15] spk_1:

[00:22:50.48] spk_0:
know, we’re not we’re not we’re broadening broadening and there are advantages. What would you say to folks that are the advantages to them personally learning, learning, learning about, learning from folks with different backgrounds.

[00:23:47.71] spk_1:
There is an incredible gift to be had to be able to listen. I’ll say this personally as a white person working in a diverse environment. Um, it is humbling and awe inspiring to be in a place where you can really hear from people who didn’t, who are just like you and have them change your mind and open your mind. That’s what you gain by being in a diverse environment. And not only will you make better decisions for your nonprofit, but you will learn more and be a kinder person who in and of itself understands the way you interact with the rest of the world in a different way

[00:24:35.83] spk_0:
folks. If you want to see a diverse team, then uh, pause the podcast and go to cause effective dot org. Go to their team, this team or staff page and look at the look at the pictures of the staff at cause effective dot org and then of course, come right back and press play again. Don’t don’t don’t don’t start browsing, you know, don’t go to amazon dot com to just look at cause effective dot org and you’ll see, uh, an enormously diverse team there? Um, All right. So, you know, that

[00:24:37.08] spk_1:

[00:24:38.22] spk_0:
anything more you want to say about why this is worth it for the organization or for the people.

[00:25:32.29] spk_1:
Um, we live in a diverse world. I mean, you know, no matter where you are, um, we, we live in a world in a country certainly and in a world with lots of different kinds of people from lots of different kinds of backgrounds and doing a lot of different things to the table and that are really interesting to interact with. Um what better way to interact with them than in the support of a cause you love. So there’s, you know, you’re all putting your, you know, shoulder to the wheel together. Um, it it gives you your life spice to be doing this in a way that’s not homogeneous and your organization itself will be stronger.

[00:25:47.52] spk_0:
Yeah. In the ways you just, you talked about a few minutes ago. Yeah. You have some ideas about how to do this. Uh, it’s sort of efficiently shave, shave some some time off.

[00:25:53.59] spk_1:
Well, one of the things that, you

[00:25:55.75] spk_0:
know, we

[00:26:58.51] spk_1:
all know that executive directors well run boards, executive directors are behind them at kind of every step of the way. Um, but in boards that really take off, there’s board to board conversation that the executive director kind of monitors, but it’s not board of every conversation. And so, and when that happens, it’s because there are, there’s not just a board cheerleader, but there are many leaders. So there are leaders of governance where there might be a leader of on boarding or there might be a leader of uh you know, there’s different ways to chunk it up so that there’s leadership which leadership leads to ownership. Um and so part of your job as the board liaison, whether is to understand what that web of relationships could is and could be and then to do in essence what we call, you know, HR staff development, but with board members, so you’re asking them to take on certain things and then your job is being a coach, not being a doer.

[00:27:04.42] spk_0:
We’re talking about the ceo executive director now.

[00:27:09.62] spk_1:
Yes, yeah and and development director also

[00:27:12.35] spk_0:
Development and and working closely with the board chair. I mean, it’s gonna help enormously to have a culturally sensitive board

[00:28:29.33] spk_1:
chair. Um I send board members, especially white board members to trainings and not just what is D. I. But to reel immersive, you know, one or two day trainings about the how this culture rests has rested on um racial injustice. Um I say if you’re gonna be part of this organization, you need to have this basic understanding. Um and we need you to do this two day training and here’s, you know, how to pay for it. Um because there’s a basic understanding of that that really shifts in those kinds of very immersive trainings. I’m not talking about a two hour what HR does at a large corporation. Um And you know, we just said these are our values and you have to really get it if you’re gonna be part of this team, I would certainly do that with board leadership, that this is a journey and this is part of the and we want the board to be part of this journey, and we need the board leadership to start it out. And if the board chair won’t do that, you do a succession plan, it’s not like you kick them out right away, but ultimately, your board’s not gonna progress until you have somebody at the head of it for whom this is the air they breathe.

[00:28:42.34] spk_0:

[00:29:10.30] spk_1:
Now, you can have a chair and a president, you can have an honorary chair and an honor. You know, there are all kinds of ways to move people to the side that don’t, you know, kick them off this planet. But ultimately, you need to have someone who does, who breathes this stuff and who you don’t have to explain why this matters. And then it’s deeper than going to a training to understand what that implicit bias exists,

[00:29:19.69] spk_0:
Right? one of those two hour trainings, okay, say a little more about joyful board service, what we, what we can aspire to.

[00:29:41.65] spk_1:
I, you know, I get this so often were board members, the board that we’re working on, their their niggling, They’re going after, you know, do I have, you know, is it 2000 or 3000? What do I have to do? That’s the question as to what as, you know, it’s like I’d like to get away with as little as I can. Um and and it’s an imposition on me

[00:29:49.85] spk_0:

[00:30:47.66] spk_1:
opposed to I will do everything. I can, I may not be successful at everything, but I’m gonna give it a shot because this mission matters so much, and if I can help it, God willing, I’m going to and there’s when people are at the table with that attitude, there can be a joy at both delivering yourself and seeing other people deliver and celebrating that. Um and you can build that in, you can build in celebrations. You can build in, you know, balloons for somebody when they hit a certain mark. Um you have to build in, not just um the actual dollars, but you can build in, they made thank you calls and they never talked to anybody before. You know, there’s all kinds of ways to build in a sense that I can do be part of the fundraising process, which then builds more courage for the next step. But it doesn’t happen unless you think about it,

[00:30:53.61] spk_0:
celebrating small successes. That’s that’s a terrific idea.

[00:30:59.73] spk_1:
Yeah. And you want to build in this this sense for every board member so that they are looking for ways to celebrate each other.

[00:31:06.28] spk_0:

[00:31:10.79] spk_1:
So it doesn’t just come from you the the ceo it doesn’t just come from the board chair, but that they’re trying to help each other up that ladder.

[00:33:20.95] spk_0:
It’s time for Tony’s take two. I’ll be on a panel called endowment excitement, fundraising and management. I’m fundraising. Uh, two smart women are the management and that’s, that’s the key about about panels. You want to be the sole person on your topic that way you’re at no risk. You can’t ever be called out for something stupid that you say because, uh, other people, the other panelists don’t know. Right? So, I mean, I don’t know endowment management. I mean, I know a little bit about spending rates and uh, three year moving average, you know, etcetera. Prudent investor rule. But, but I know very little compared to them about endowment management. And they probably know even little less about planned giving than I know about endowment management. So, everybody stays in their lane. You don’t have to worry that if you’re ever invited to be on a panel, be the sole expert in your area. All right. So, um, uh, that was a bit of a digression. But so the panel is endowment excitement, fundraising and management. It’s on august 25th at noon Eastern time, graciously hosted by N X unite. So I’m grateful to them. Thank you to register, you go to n X unite dot com. It’s like november X ray unite dot com and click on webinars and panels, there’s your registration. That is tony stick to, we’ve got boo koo, but loads more time for board members are people too with judy Levine you like to see board members socializing outside? I mean I, I can presume your answer, but I want you to say socializing outside outside the form of the board meetings.

[00:33:48.16] spk_1:
I do, but I also am realistic. Um, I don’t think it’s necessary for them to be personal friends. In fact, I’ve been on board with people who are personal friends and it’s tough because then they kind of talk about things outside and they’re like becomes factions and you certainly don’t want relatives on the same board that I’ll tell you right now. Um, not just married, but brother and sister were playing the, you know, the childhoods, you

[00:33:55.48] spk_0:
know, I can see in your face and it sounds like you’ve been there.

[00:33:58.97] spk_1:
Yes. Um,

[00:34:00.97] spk_0:

[00:34:01.69] spk_1:
don’t know. I think that people have to like each other.

[00:34:04.74] spk_0:

[00:34:05.77] spk_1:
And I think you need to have some social places, you know, it’s been hard, don’t,

[00:34:09.85] spk_0:
they need to get to know each other outside the

[00:34:15.36] spk_1:
board. Um, but that’s different than, um, but

[00:34:16.70] spk_0:
outside their board service. I mean, maybe not, maybe not necessarily

[00:34:23.34] spk_1:
to me that’s part of their board service. Um, that part of the board service is understand, you know, it’s team building

[00:34:28.51] spk_0:
and the organization can facilitate that. Right? I mean can we have, can we host drinks or dinner after a meeting.

[00:35:52.47] spk_1:
Yeah. Um, it’s, that’s one of the things that’s been much harder in zoom. Um, my board, you know, cost effective itself as a nonprofit and they had a board dinner once a year, but they sat at my house and one year I had the flu and they had at my house anyway. I just went to bed and they stayed up till like midnight and cleaned up after themselves and left, um, that we this, so we have a game night now once, once a year on zoom because it’s once a year, everybody comes and they do all kinds of like 32 truths and a lie and all kinds of stuff, but it’s not quite the same. Um, we did have an outdoor picnic this summer and about half the board came. Um, it’s hard, you know, that’s the hard thing is now getting people out of their shell because we’re all used to now doing everything by zoom or going to work and coming home and you know, scurrying home. What zoom has that? I haven’t quite figured out is that time before meetings. That time in the middle of meetings. You know, those are the times of the after meetings, Those kinds of times when people would talk to each other about their kids, building that in. Um, what we’ve done, some of it is in the, you have to do it in the middle of the meeting because people run out at the end of the meeting and they won’t come early, no matter. They say two board members will come

[00:36:00.09] spk_0:

[00:36:36.70] spk_1:
But if you break into smaller groups in the middle of the meeting, even if it’s only diets or triads and give them something to discuss. Um, you know, one of my provocative questions is how does your birth order affect um, the way you take on leadership, which gets into all kinds of personal background, it assumes strength and it gets people talking to each other. So having a section like that in the middle of each board meeting can help people to start to bond and then obviously changing, you know, changing the groups

[00:36:40.26] spk_0:

[00:36:49.81] spk_1:
making that group a hint. Make those small groupings deliberate. Don’t just leave it to the zoom universe to deliver. You

[00:37:15.11] spk_0:
can either make them random or you can assign people to be with other with other people. And the assigning is is much better. Yeah, I’ve done that in some of my trainings. Um, alright, what else, what else you want to touch on around this, this equity and equity and boards and, and inviting folks in and joyful board

[00:39:14.65] spk_1:
service self interest, which I think it has to do with understanding the, the meaning of your cause to people who are not directly affected by it. So, you know, when we’re teaching fundraising will say, um, okay, you don’t fundraise just for the people who have direct interest to your cause because that’s your clients and if you could raise your money from them, that would be earned income and you wouldn’t be a nonprofit, but you can’t raise money from people who have no connection to your cause because it doesn’t make sense to them. Why are they gonna lie on it? And that’s the same thing with board members. You can’t ask board members to fundraise if you don’t feel connection to cause and or to audiences that don’t feel connection, but you have to find the enlightened self interest, which is myself as a member of the city, this neighborhood, this grouping that I care about Children having a head start. That’s why you’ll often find like a mom’s group in Westchester suburb of new york that’s fairly wealthy. Most of it um, will take on fundraising for a program in the inner city because they understand the meaning of this work for Children, even though it’s not their Children. And the reason I’m bringing this up is because that’s where the ownership comes in the sense that it’s on to, it’s up to me to make a difference for this. And that this matters to me, even though it’s not my personal experience. And I think that’s group conversations conversation in the courtship process and then it’s group conversations at the board level to keep that fresh. And it has to be deliberate because it’s the board service devolved into finance monitoring.

[00:39:20.93] spk_0:
Oh yeah, if it’s right. If it’s allowed to

[00:39:24.91] spk_1:
discussions about why the mission matters

[00:39:28.50] spk_0:

[00:40:02.43] spk_1:
does the mission matter beyond just the direct recipients are very inspiring and they give your board members personal uh you know, nurturing and the tools to go out to their context with different kinds of language. And you will often find, you know, I’m looking for areas in which different people can be experts, not just the people who have a lot of board experience or who are, you know, longtime experienced fundraisers, but that people with different points of view can have the position of being an expert.

[00:40:10.97] spk_0:

[00:40:12.96] spk_1:
And this is where you will find points of view that your classic cabal has not thought of

[00:40:26.45] spk_0:
conversations. Yes, I love how you pause and and think through and then make your next point. I’ve just been talking to you for 40 minutes, whatever. 35 minutes I’ve learned. All right, give her a couple of, give her a couple beats because she’s got she may very well have more to say. I love your the way you reflect. IIi don’t have that gift. I tend to be more more impulsive and I spew everything out in one shot.

[00:40:53.64] spk_1:
Well, that’s why you’re on the radio and I’m

[00:40:55.08] spk_0:

[00:42:16.41] spk_1:
normally um you know, I wanna having served on the board, not that many because I take it really seriously. Yeah. Um And then being a an executive director myself and um being a consultant support gives me humility about about the possibility of board service. Um And I feel like uh people who are only on staff have expectations uh and anger when board members don’t meet their expectations, whereas I’m trying to say it’s human nature to triage the kind of people who will agree to be on the board are often fully committed, I don’t wanna say overcommitted because you commit to what you commit to and it makes sense for them to do what they have to do and not more, because there’s always something else calling on their time, let alone, you know, the idea that they might want to play golf or read a book if you do that. If you understand it, that that’s rational, human behavior, then you don’t get as angry at people, you manage them,

[00:42:17.96] spk_0:
that everyone’s gonna triage that they’re gonna they’re gonna assess their

[00:42:21.34] spk_1:
priorities and

[00:42:22.84] spk_0:
they’re gonna they’re gonna act accordingly

[00:42:33.84] spk_1:
and it’s up to you to have a dialogue about that. It’s not that you you know, there’s something wrong with letting people slide or something, but it’s um it’s understanding and helping them understand how to fit in with all the different priorities of their life,

[00:42:40.74] spk_0:
right? And where does this mission fit in? And you’re among your priorities?

[00:43:11.76] spk_1:
You know, it’s why i um when when I when groups do uh board member um contracts or whatever they call them. Um I suggest that there actually be calendars in there so that you, somebody can say to you, I can’t do that in june because my twins are graduating high school, in which case we’re saying, you know what, we’re gonna take you off of that and we’re gonna take you off of May so that you can have a very because they’re not gonna do it anyway.

[00:43:14.85] spk_0:

[00:43:15.70] spk_1:
And then they just

[00:43:18.05] spk_0:

[00:43:22.19] spk_1:
they don’t respond to emails, so having respect for all the different polls rationally on board members time and life and energy and then helping them understand how to fit this in in a way that makes sense.

[00:43:51.30] spk_0:
Alright, let’s give you, I want to give you a chance to talk about cause effective because it is a non profit. It’s a it’s a consultancy for nonprofits, their advisors, consultants. What what uh what’s the breath of the work and how how do you work with with your client nonprofits?

[00:43:57.71] spk_1:
Well, you know, I’d say we are 40 this year, we are about to celebrate our 40th anniversary.

[00:44:02.85] spk_0:
Congratulations. For decades.

[00:47:33.85] spk_1:
Um And I’d say that the common theme throughout has been changing how organizations are resourced, um changing the balance of money and therefore power in the sector. Um and it’s both increasing it and increasing it so that it’s not just that the most well resourced nonprofits get more resources, but that it’s non profits that are located in disenfranchised communities and the people who work there and um uh and volunteer there are able to raise the money, they need to further those causes. Um and to govern themselves because to me, governance is integral. E apart, it’s more than just raising money, but if you don’t have a governance structure that works, you’re not gonna have a fundraising structure that works on the voluntary level. Um, and that’s where you get to organizations where the staff fund raises. But the board doesn’t have volunteers don’t. Um, so we have, we work, we do a lot of cohort work where we’re looking at development Directors of Color and help, um, working with them over a six month period of time, um, in a particular program that we have to help them really address, um, the barriers to their being successful and not only to talk about it, but to actually address it. Um, we, so we do a lot of individual coping with, with, with executive directors, who may be having come up through fundraising and, but, you know, you need to do it if they did. It is not part of the fundraising structure. The organization is only gonna get so far, um, and board members, a lot of board consulting, especially now with boards that, no, they need to diversify and don’t really like, they know they need the composition, but they don’t, they don’t necessarily know that they need to act differently to have different people in different seats. Um, we do everything from, you know, eight hour retreats on zoom, maybe six hours, uh, two year long coaching engagements to what we call deep transformation, which is a lot of times people come to us and say, well, my board won’t fundraise and we get in there, we start talking to board members and we find out there’s all kinds of reasons, it’s not just that they don’t know how to ask for money, but it’s that there’s not financial transparency, there’s not a real partnership between staff and board. Um, there’s not a peer to peer accountability on the board. Um, there’s a inner group of three board members who do everything and everybody else slides. Um, you know, there’s all kinds of reasons that we will help, we will actually go in and help address. We say that that’s a symptom, my board won’t fundraise and there are, you know, many, many causes of that and we will, we, one of the things we’re known for is that we will go and address the cause. We’re not just gonna do the tactics. Um, we also do a lot of fundraising consulting for groups that have had a lot of government support or a lot of foundation support and know they need to diversify and they don’t necessarily have, you know, a Lincoln center board, um, but it is very possible that people around the country or the world will care about what they do and we’ll back it up and want to make it happen if they, you know, for one thing they say is that our fundraising, the one thing that’s, that’s some limited time. There’s only 24 hours and maybe one second or maybe now two seconds in the day. And so you need to make choices that are smart with how you spend your fundraising time. Money is not the limiting factor, but time is and so will help groups really understand what are the likely avenues and how to structure the resources they have to reach those

[00:47:43.87] spk_0:
Days get longer. What’s one or 2 seconds

[00:47:51.27] spk_1:
actually they did make a ruling and there’s like they added a second or something. Oh,

[00:47:51.54] spk_0:
I didn’t hear about that. I’ve been squandering my two seconds a day. How long have we had this? How long have we had these longer

[00:47:57.57] spk_1:
days. Six

[00:47:59.88] spk_0:

[00:48:00.43] spk_1:
Yeah. I don’t know how many seconds that is. I can’t do the math that fast. No,

[00:48:20.41] spk_0:
But six months is 100 80 days. Times two seconds, 360 seconds. It’s a good six minutes I’ve, I’ve squandered. Alright. I’m gonna try to get it back right now by cutting you off. No. All right. Thank you for explaining. And thanks for a frank conversation. We don’t, you know, for our for nonprofit radio white listeners. We’re not, we’re not, we’re not going easy. You have to have you have to have honest conversations. So thank you.

[00:48:58.91] spk_1:
Yeah, I, I think this has been some of the, you know, I’ve been in this field for 30 years and this has been some of the most rewarding and deep work. Um it’s not surface, it really addresses, you know, I had to go back to everything I assumed from my childhood on and understand that there’s there are different realities and that um it’s not that I can go back and change it but I can change my behavior going forward so that I further a different kind of future.

[00:49:31.46] spk_0:
Mm She’s judy Levin, she’s the executive director of Cause effective. You should have already been at their website because you would have seen their diverse team when we uh when I suggested take a pause and then you came back but if you haven’t been there or if you don’t remember where it is, it’s at cause effective dot org. And they’re also at cause effective and judy Levin, thank you very much. Thanks for sharing.

[00:49:33.80] spk_1:
Thank you. It’s great to have this kind of conversation

[00:50:47.97] spk_0:
next week Back to our 22 NTC coverage, accounting for nonprofit leaders. If you missed any part of this week’s show, I Beseech you find it at Tony-Martignetti.com. We’re sponsored by turn to communications pr and content for nonprofits. Your story is their mission turn hyphen two dot c o and by fourth dimension technologies i tion for in a box, the affordable tech solution for nonprofits but they also got the special offer going on the free offer grab it. It’s all at the listener landing page, tony-dot-M.A.-slash-Pursuant but they go on to mention deeper. Our creative producer is Clam Meyerhoff shows, social media is by Susan Chavez. Marc Silverman is our web guy and this music is by scott Stein. Thank you for that. Affirmation scotty, You’re with me next week for nonprofit radio Big non profit ideas for the other 95% go out and be great.

Nonprofit Radio for March 4, 2011: Minimizing Money Management Mayhem

Big Nonprofit Ideas for the Other 95%

You can subscribe on iTunes and listen anytime, anyplace on the device of your choice.

Tony Martignetti Nonprofit Radio for March 4, 2011:

Kathy Boyle, President, Chapin Hill Advisors is this week’s guest.

We’ll talk about Minimizing Money Management Mayhem: What UPMIFA means for your CEO, CFO and board.

Kathy distills the requirements of UPMIFA for nonprofits in New York–and other states–where the Uniform Prudent Management of Institutional Funds Act has become law.

  • What is “prudent”?
  • What needs to be in your investment policy statement?

We’ll leave you with tips for compliance and action items.

Update: April 13, 2011 – The New York State Attorney General now has a guide to New York’s Prudent Management of Institutional Funds Act (NYPMIFA).  NY nonprofits will find this guide by the AG helpful.

Top Trends. Sound Advice. Lively Conversation.

You’re on the air and on target as I delve into the big issues facing your nonprofit—and your career.

If you have big dreams but an average budget, tune in to Tony Martignetti Nonprofit Radio.

I interview the best in the business on every topic from board relations, fundraising, social media and compliance, to technology, accounting, volunteer management, finance, marketing and beyond. Always with you in mind.

When and where: Talking Alternative Radio, Fridays, 1-2PM Eastern

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Here is the link to the podcast: 031: Minimizing Money Management Mayhem
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Welcome to the show on the aptly named host of tony martignetti non-profit radio big non-profit ideas for the other ninety five percent, one will give a little shout, teo larry bloom, who has the show right before this one, the divorce, our with larry bloom if you haven’t listened to the divorce our and if you have that situation in your own life or in a friend’s life for someone else’s life, who you know ah, larry does very heartfelt and sincere, almost cathartic radio. But today was more straightforward, he’s talking about ah change in laws in new york state around divorce and his practices in new york city and new jersey. That’s larry bloom, the divorce our who comes before me here on this show last week, it was we’re looking hr consultant karen bradunas helped the museum of chinese in america think and work strategically around their job. Opening for a curatorial director and second segment last week was fabulous. Facebook, our regular tech contributor scott koegler who’s, the editor of non-profit technology news revealed seven things you must do with your facebook page this week we’re minimizing money management mayhem what upmifa means for your ceo, cfo and board. Kathy boyle, president of shaping hill advisers, distills the requirements of the uniform, prudent management of institutional funds act in new york and just about every other state where upmifa has been approved. What is prudent management? We’re going to talk about what’s, prudent, what needs to be in your investment policy statement, and we’ll leave you with tips for compliance and action items around this important law on tony’s. Take two at thirty two minutes after the hour, we’re going to talk about the fact that mohr non-profits are going to be filing the irs long form long nine ninety this year because of changes in the requirements for who files that that’s at roughly halfway through on tony’s, take two, but for the hour, it is cathy boil, and we are minimizing money management mayhem. Starting after this break, you’re listening to the talking alternate network, get in. Nothing. Duitz is your marriage in trouble? Are you considering divorce? Hello, i’m lawrence bloom, a family law attorney in new york and new jersey. No one is happier than the day their divorce is final. My firm can help you. We take the nasty out of the divorce process and make people happy. Police call a set to one, two, nine six four three five zero two for a free consultation. That’s lawrence h bloom two, one two, nine, six, four, three five zero two. We make people happy. Falik are you suffering from aches and pains? Has traditional medicine let you down? Are you tired of taking toxic medications, then come to the double diamond wellness center and learn how our natural methods can help you to hell? Call us now at to one to seven to one eight, one eight three that’s to one to seven to one eight one eight three or find us on the web at www dot double diamond wellness dot com. We look forward to serving you. Hey, all you crazy listeners looking to boost your business? Why not advertise on talking alternative with very reasonable rates? Interested simply email at info at talking alternative dot com dahna welcome back to tony martignetti non-profit radio big non-profit ideas for the other ninety five percent. I’m joined in the studio now by kathy boyle. Kathy is the president of chapin hill advisors. She is a frequent contributor to bloomberg and fox tv, and her expertise is in non-profit investment practices. Kathy, welcome to the show. Great to be here, tony, why don’t you tell this a little about shaping hill advisors first? Well, shape until his investment advisory firm we basically covered three different areas, high net worth individuals, families and a natural extension of that is the foundations of families run and not for-profit organizations to which they contribute and we helped them with both their planning needs, consulting needs and managing their money, and we’re here to talk about upmifa, which is all on the non-profit side of your of your three problem practice the uniform, prudent management of institutional funds act recently passed in new york, it applies in about well, as of june of last year, it was in forty seven of the fifty states, right? I think it was i saw florida, mississippi in pennsylvania haven’t passed it, but new york most recently and that’s why we’re talking about it today, so but it does apply in forty seven of the fifty states generally, kath, what is upmifa? Well, basically it’s it’s an over lying law to cover the prudent, this strategies and the standards that you should be following if you’re running enough for-profit organization or foundation endowment, and it specifically is about endowment endowment management, right? Yes, absolutely, absolutely. And you know what people? What people don’t realize is that there have been so many not-for-profits organizations funded in the last several years, they’ve grown dramatically, it’s largely because we have the baby boomers, we outlawed them coming into wealth, whether they work for corporate companies and took a left and decided do their own thing, or they’re entrepreneurs and sold a business, they want to help the world, but they want to do it their way. So there’s a plethora of these organizations and has been very loosey goosey, they’re able to do sort of there under the radar, and a lot of them are doing things incorrectly, they’re not falling the rules, there really hasn’t been any bite there’s been these laws and these things have been out there for a while, but there hasn’t really been any big fines. What types of organizations does upmifa apply to? Well, naturally applies to a lot of endowments. So you may have a school endowment let’s say you went to cornell and they have an endowment to help pay for their future things. Keep the school fundez so the public charities five oh one c three public charities, absolute endowments, absolutely any money, any pool of money like that that’s covered under either chaillou trust or five twenty three is covered under this law. And what about private foundations? Private foundations also fall under this. You always have this prudent standard. This is not your money, it’s, not your piggy bank. Once you set it up and you get the tax deduction, which is where the private comes in now you have those rules to follow that way. And then if you have the foundation, the endowment, you have to make sure you’re following him as well, and the enforcement around this and we’re going obviously talk about a detail about the requirements, but enforcement, where do we typically see that in in all the states that have that have enacted upmifa well, you know, unfortunately really haven’t seen again, a lot of bite you haven’t seen a lot of them coming down hard on anybody. There’s been no big cases, there was a very big case with robin hood, which is a great foundation, and they had what we call self dealing with a lot of the board members were getting paid through the organization if they were on the board, you’re supposed tohave, you know, arm’s length agreement here on dh yet there was no fine, there was no penalty, you know? And so a lot of people feel like, oh, well, if they didn’t get slapped, then i’m okay, or some people don’t even realize they don’t even it’s not even bold up to the top, i can tell you i can meet with so many organization that don’t even know that they’re supposed to have a written spending policy that they’re supposed to have an investment policy statement. The size of the endowment doesn’t matter all right now it does so this could apply to ten or fifteen thousand dollar endowments as well as many, many multi million dollar endowment, right and that’s that’s again something else to people don’t realize that thinking, oh, this is new it’s small. I just started it a lot of times people think it’s an extension of themselves, they think it’s an extension of them, they’ve done like the filing and they think they’re done they’re non-profit is an extension of themselves exact, and they’re so wrapped up in it may be there work-life and personal life are intertwined, but the financial side can’t be right. Exactly. And also you have to have this distance. You have to follow the rules, it’s, just like when you set up a corporation, maybe nobody tells you that if you file a sub chapter s you have to now file it with the state in order to be recognised, otherwise you’ll fall back and be recognized as a c. So it’s these kinds of things, a lot people there’s no little manual that says, this is how you go one, two, three, four and you said that there hasn’t been a great deal of enforcement, but i think we would see enforcement if what i think when it does come, i mean, there aren’t forty seven states enacting this for nothing except i think, from the state attorney’s general, aren’t they generally the ones? Yes, the state attorney general is the one that would visit your offices and then perhaps put a fine out there, and i think the possibility can arise if a couple of ways i’m thinking of donors being unsatisfactory with the way they’re endowed fund has been managed, disgruntled, anybody donor-centric who worked their employees. Ah, former boardmember you really have a lot of risks just like when you’re running company, somebody fire somebody and you don’t take the right steps, they could sue you. So you have to remember this kind of thing is the same thing. You have to make sure that you’re watching out for all of your areas and also remember tony, all these states and local cities and towns are in deficit look at new york state, ten billion dollars, i’m sorry, but i think this is going to be easy money because they haven’t been find we’re looking for other ways you could only tax the consumer in the property holder so much and these guys have not been taxed. So in my opinion, i think going down the road, this is gonna be an easy place for states to raise revenue. You raise an excellent point to about disgruntled employees. Another one i think about is disgruntled heirs of donors who look at what they’re like, the legacy that their parents or maybe grand parents left. And they’re not satisfied with the management of it. With kathy boils she’s, president of shaping hill advisers, were talking about the uniform, prudent management of institutional funds act, and we’re going to take a break, stay with us. Talking alternative radio twenty four hours a day. Are you feeling overwhelmed in the current chaos of our changing times? A deeper understanding of authentic astrology can uncover solutions in every area of life. After all, metaphysics is just quantum physics politically expressed. I am montgomery taylor, and i offer lectures, seminars and private consultations. For more information, contact me at monte m o nt y at r l j media. Dot com are you stuck in your business or career trying to take your business to the next level, and it keeps hitting a wall? This is sam liebowitz, the conscious consultant. I will help you get to the root cause of your abundance issues and help move you forward in your life. Call me now and let’s. Create the future you dream of. Two, one, two, seven, two, one, eight, one, eight, three, that’s to one to seven to one, eight one eight three. The conscious consultant helping conscious people. Be better business people. Buy-in i really need to take better care of myself if only i had someone to help me with my lifestyle. I feel like giving up dahna is this you mind over matter, health and fitness can help. If you’re expecting an epiphany, chances are it’s not happening. Mind over matter, health and fitness could help you get back on track or start a new life and fitness. Join Joshua margolis, fitness expert at 2 one two, eight sixty five nine to nine xero, or visit w w w died mind over matter. N y c dot com upleaf you’re listening to the talking alternative network. Dahna welcome back to the show. I’m tony martignetti and i’m with kathy boil, the president of chapel hill advisors, which you will find at shaping hill advisor’s dot com doing that right is a cheap way also in shape and held outcome kapin hill, dotcom thank you, bond. We’re talking about the uniform prudent management of institutional funds act. It applies in forty seven of the fifty states. Kathy let’s on, before we get back to the questions, i’m sorry, i wantto remind people that we are live and can take your calls at eight seven, seven for eight xero for one, two, zero, eight, seven, seven for eight xero for one to zero if you have questions about upmifa cath let’s, go through the the overview detail overview of what the requirements of upmifa r and then we’ll look at each one individually and flush them out. All right, well, let’s, just talk about a couple of bullet points. One of the things that this new upmifa does is that it allows spending from what’s called an underwater endowment. So that means if a phoner dahna gave you a million dollars and the market went down and it’s now worth eight hundred thousand dollars before this, you wouldn’t be able to take any money out of that. So if you were relying on let’s, say four percent, so four percent of one million dollars is forty thousand dollars. So if that was going out to make grants or to help run your operating fund, then you can no longer use that money because it’s dropped eight hundred thousand. So now they allow this, but it must be permitted by the donor. So you have to go back to the person who gave you that million dollars and say, is it okay with you? Tony it’s down eight hundred thousand dollars would like to continue spend out of this. Are you okay with that? All right. And you referred to four percent for us? Just a little bit that’s. You’re referring to the spending rate just at a non-profit. What? Intel? Yes, for there. And that other? They’re spending endowment spending rate at a non-profit. What goes into determining what that spend rate should be year after year? Well, that’s, a good question. The board has teo address this. And now it’s required to be in writing. You need to have a spending policy. How much is pertinent? First of all, the market, what can the market bear? Are we looking for? Total return? So we’re gonna have fizer and collected dividend or bristol myers and collect our five percent and hope that we make two or three percent in in capital gains. So we have a seven percent return, and then we’ll pull five percent out of that. So depending on how much risk you want to take and what kind of allocation you have in your endowment’s investments, then you determine your spending policy. So i think we can easily achieve four percent without dipping into our principal that’s how you come up with your spending policy, okay? And now there are formulas that will look at the last three year average called moving average of what the endowment was earning each of those three years and and we’ll base the current year’s spending rate on the the average of those previous three years, i’ve seen more sophisticated formulas, right? There’s, lots of formulas, but the bottom line comes to are you going tobe? Invest this entire thing in bonds and just take the interest only or you’re going to invest it in a partial stock and bond portfolio and assume that you have a rolling rate of return, which is where the three year average would come in on you know, if rates go down and you’re completely in bonds now you’re at the risk of the interest rate environment, so you’re spending policy has to have a little flexibility for getting four percent your bonds today, you can’t keep it right a four percent, because what if next year you rolling into three percent bonds so your average is going down? So it’s really a calculation? You have to look at how sophisticated your board is, how what your formula is going to be on your investment policy on your investment allocation, and then go back and use a formula determined on the other side. So moving away from the financial factors that go into determining the spending rate from year to year, this is in part funding programs, so the other side of the balance is how much do we need to sustain our programs in addition to fund-raising revenue, maybe fees for services that we have with government government agreements or maybe fromthe service? Recipients themselves, whatever all the different sources of income are, we have to make sure that we can fund it years program, right? You have to really look at typically a family will get together and say, well, we want to help schools, you know, very typical concerns for families, our education, healthcare helping the underprivileged. So if you want to solve all three of those in your local community, how much do you need to give to the you know, police, you know, to do the junior league or the you know, the uniforms or help the school’s buy books for the kids? Whatever you’re doing, you got to figure out what the need is and do you have enough money to support that need and what happens? What if you want to support five things begin to have enough money to do two things? So what do you do? Do you increase your spending policy and give yourself a little more flexibility and say, well, temporarily, we’re willing to steal a little bit more, so we’ll take a five percent or six percent out, even though we might not be earning that. But again, this has to be written. You have to carefully think through this. Okay, so a written policy around investment and spending rate. What else is a major point of upmifa? Well, there’s. Another one they have to really keep in mind. It presumes that anything over seven percent is inappropriate. Okay, again, talking with spending rate, the spending race of spending rate over seven is assumed, presumed to be impertinent. Imprudent. Right now it can be rebutted. But do you want to go down that path so it’s? Better to adjust your spending limit to something under seven percent. So keep that in mind. Okay. Do you know if different states have set different thresholds for that imprudence determination? Do you know that’s? A good question. I don’t. Ok. But in new york, it’s seven percent in new york. It’s percent. I’m gonna assume that in the states it’s, it’s. All very close to that. I mean, it is a uniform act, eh? So i’m gonna assume that. Okay? What else? Highlights? One of the thing i think is important is you are here today. The market dropped quite a bit. No ate. A lot of organizations have not made all the money back. They’re trying to win the market’s been on a tear for eight months, so nine months, almost. But we’re in a period where we could experience more volatility. So well, you have to do is if you need to spend the underwater endowments, you’ve still that made it back. You need to actually go out and have written consent from the donors who gave you that money? Yes. Okay. And again, underwater you mentioned it being less the value is less than the original gift. Yes. Now suppose that gift is many years old. Wood wood under water then mean it’s lower than what it’s been in just the recent past. Or would you still look back, say, ten or twelve years to the original gift? That’s, another trick question really award. It depends on your spending policy again because they were spending policy allowed you to spend a certain amount of principle than you have principle erosion. And so you would want to look that at what you considered your average. If you assume that you are on ly taking income out now, you really need to go back to the original and have the original amount of rachel. Okay, so, that’s an interesting point. Ah, spending policy can allow dipping into the principal of the gift. We’re not spending nearly income. Well, but again, you have to have the written permission from the donor. Because, again, it’s underwater. Ideally, you want to leave the principal intact? It depends on whether this a perpetual and you want to keep this intact and be ableto have the income on lee. Ok, ok. Um, not you again, you know, flushing out to some of the some of the details you mentioned. This is assuming that this is a perpetual endowment. Why don’t you distinguish that from maybe other types of end down? Well, there’s, other kinds of endowments that go for certain number of years and they spend down. So the bill gates foundation is a big proponent of this that they’re going to go and just dump all this money into a cause and solve it in a certain period of time. And that’s an area of contention. A lot of people feel that well, the problems of aids and hepatitis and things like that will not just be solved just by dumping huge billions of dollars. But that’s how? The organisation is funded and that’s. How it’s a spend down policy. So it has a finite time it’s going to be done by twenty, twenty, or twenty, fifteen or whatever. The mandate is all right. So just making the point that all endowments are not perpetual and they’re not created equal, right? Okay, i’m with kathy boyle, she’s, the president of shaping hill advisers were talking about the uniforms. Prudent management of institutional funds act. What does the policy seo the sari? What does the law say about delegating the decision making around investment management? That’s another good point? You actually have to have a committee. You need to have somebody who’s making the decision. Whether is the board of directors, a subcommittee, the executive director with the help of an advisor consultant. But you have tohave it stated, and who is responsible for this? Who is that? There has to be an active committee of some sort to be one person, but somebody has speed in charge of this, all right? Right? And you said, i mean, in a small a small institution that could be the executive director, larger one could be the investment committee or finance committee of a very large board of trustees, right? And, you know, again, tony, this is an area so many people. Look, i understand i run a business there’s eight million things to do every single day you always run out of time. My joke is ten more hours, and i’ll be fine. I’ll catch up. So when you’re the executive director or it’s your foundation that you created, so you’re running it and you’re running. A business or whatever you’re doing with your family life, you know, there’s a million things to do you trying to grant your china fund-raising tryingto make sure that everything is running correctly, you’ve got employees to manage. Perhaps you’ve got eight million things to do every day, so i find that this falls to the bottom of the of the of the totem pole, as compliance often does. One part of my practice is charity registration compliance that non-profits b in compliance with state laws in all the states where there soliciting and there’s been some enforcement, but compared to the one point, two million public charities, a drop in the bucket in terms of enforcement. So again, like like a upmifa compliance issues seem to fall to the bottom until there’s a headline, right? And then, you know, there’s, a perp walk in the case of more likely be a perp walk in the case of financial impropriety. Right? Then there is charity registration, but until you have that, it just doesn’t get the board’s attention, right? Right, right. And, you know, again, there’s so many things that you need to be compliant with. So it’s very difficult. And a lot of times your boards are not compensated, they meet quarterly. They may care passionately about the cause of the organization, but they have limits on their own time as well. And so they’re not going to get into the nitty gritty generally. And so if somebody on the board is not going to get into the nitty gritty of falls back on the executive director’s or the founders plate toward the end, we leave people with some action items and some specific best efforts that they can make tio put themselves at least close to compliance. I know you have some good ideas around that it’s the uniform, prudent management of institutional funds act. What does the act say about prudence? What is prudent? Well, prudence really means quite a bit in this take, because people just think that if they put money into a cd, they’re fine, and i can tell you again how many organizations i run into where they’re in cash there in money market or they’re in cds and they say, well, at least it’s safe. Well, prudent also, you have responsibility to diversify, so you have to have a written policy investment. Policy statement of what is called ni ps and you have to take a lot of things into account, like the economic conditions. So if we think interest rates are going up from here, which that’s my view, you know, maybe short term, they’ll will continue go down, but longer term rates have to go up, so it would be imprudent of you to take your entire foundation and put it one hundred percent in twenty year government bonds. You’re not diversified your you’re open to investment risk, so you have responsibility to diversify, and that generally means among a different asset classes. Now you’re going to have a very small allocation and stock, but being one hundred percent cds is important because you’re not protecting your principle for a longer period of time for inflation. A rhodes, you’re spending patterns is quite a bit more than safe. Yes, i’m saying in six words what you elaborated in particularly, but it means a lot more than safe what else i know they’re a lot of elements, teo prudence beyond diversification what else write? Well, you have to actually this is fairly new. You have to take into account inflation or deflation in the past, we wouldn’t have worried about that, but that could be a real concern, especially given that we have oil at one hundred dollars barrel right now, so that could create quite a bit of inflation food, inflation, heat inflation which can effect again some of your causes. So if you’re granting money to a school or you’re trying to help her lower income area, they’re hyre costs caused inflation there, so you have to take inflation into account terms your own portfolio as well. Okay, let’s, let’s dive a little deeper. And because i want to understand this, you make sure that people who are not as investment savvy is ur understand that as well. What? What types of investments are inflation protective? Just just generally expect inflation be rising. What what types of assets would people be investing in? Well, generally, stocks are considered an inflation hedge because if the environment goes up cos remember stocks or just cos and if company conditions the thrive, the stock goes up theoretically so stocks give you inflation protection now, it’s over a longer time period because they can be very volatile. Another thing to consider is now you can buy all kinds of commodities you can buy them through exchange traded funds. Etfs is what we call them, so you can buy exposure to cotton and wheat and bread and oil so you can buy these exchange traded funds and there’s some professionally manage commodity funds so you can put a commodity. Gold is a great inflation hedge, but your investment policy statement needs to state that you do have the ability to look at hard assets and commodities very important can’t have the investment. And again, i would just met with someone. I asked him if his i p s had an allocation had the permitted ability to go into hard assets. He said no. When i got the statement, they had five percent allocation of hard assets. So again, you want to be in compliance with this couple of the things you want to look at. It is you want to look at the tax consequences of the investment, whether or not there is any unrelated business taxable income we call u b t i and you also want to look at the other resources of the organization. So let’s say the market takes another. Header, and it goes down thirty percent over the next year and a half, and you still have recovered from the last one. You’re now down to five hundred thousand dollars from your original million, which went down to seven hundred, back-up two, nine hundred. Now you’re down to five hundred, i can’t spend it the same rate. So what do you dio? Do you have other resources? Can you pull in other money? Is there short term money that he can use so you can leave your longer term money to grow back? This’s tony martignetti non-profit radio. We’re talking about the uniform, prudent management of institutional funds act. After this break, i’m going to have to give cathy a short stint in jargon jail for u b t i unrelated business, taxable income, but she’s going to flush it out and and she’ll get parole after this break. You’re listening to the talking alternative network. Oh, this is tony martignetti aptly named host of tony martignetti non-profit radio big non-profit ideas for the other ninety five percent technology fund-raising compliance social media, small and medium non-profits have needs in all these areas. My guests are expert in all these areas and mohr tony martignetti non-profit radio fridays, one to two eastern on talking alternative broadcasting do you want to enhance your company’s web presence with an eye catching and unique website design? Would you like to incorporate professional video marketing mobile marketing into your organization marketing campaign mission one on one media offers a unique marketing experience that will set you apart from your competitors, magnify your brand exposure and in cancer current marketing efforts. Their services include video production and editing, web design, graphic design photography, social media management and now introducing mobile marketing. Their motto is we do whatever it takes to make our clients happy contact them today. Admission one one media dot com hey, all you crazy listeners looking to boost your business, why not advertise on talking alternative with very reasonable rates? Interested simply email at info at talking alternative dot com metoo welcome back, it’s. Time for tony’s. Take two at thirty two minutes after the hour. Roughly i want to just make you aware that the thresholds the revenue thresholds for what non-profits have to file long irs form nine. Ninety, which is a pretty burdensome for me, have changed this year. The thresholds have come down. So that means that there are b’more organizations that are suffering. Should i say the non-profit of the the long form nine ninety filing this year? And i blogged about that? My bloc is that m p g a d v dot com. Just generally the thresholds in terms of financial gross receipts has came down in two thousand eleven. Last year it was half a million dollars in gross receipts, or total assets of one and a quarter million. This year, those limits air down to just two hundred thousand dollars in gross receipts, or total assets of half a million. And if you hit that threshold which more non-profits will because it’s lower you had then have to file the long form nine ninety and there are other forms to there’s the there’s always the the nine ninety postcard, which is quite simple and there’s a nine ninety easy and i lay out all those requirements for for which form you have to file on the on the in the post on my block, it mpg a dv dot com in the name of that post is more non-profits filing long irs form this year back with kathy boyle, we’re talking about the uniform prudent management of institutional funds act kathy’s, the president of shaping hill advisors, a frequent contributor as well to bloomberg and fox tv and she’s with us demonstrating her expertise in non-profit investment practices before the break, we were defining prudence. What does it say about boardmember tze on board members conduct around prudence? Well, boardmember sze have responsibility to act with prudence is what we call it, so i find what i see sometimes is, especially since we’re in new york city, we see a lot of organizations with a lot of wall street experience on aboard. What happens is all the guys have very strong opinions or women, and nobody does anything so that’s it’s not prudent if your money sitting in cash because you’re bored can’t come to an agreement, you’re not fulfilling the letter. Of the law, so considerable board requirements and oversight. We’re going to talk about overseeing investments shortly. I did promise before the break that i would give you a reprieve. Parole from jargon jail. So you unrelated business, taxable income there you’re talking basically about income that’s not related to the charitable mission, right? Right. And you want to be careful of that, you know, with kinds of investments that you make and how much is that income going, too? Hit your bottom line and how is it going to affect it? Do you really want to take a look at that? And sometimes that gets very technical? It does, and there are a lot of code sections related to unrelated business income. There are a lot of cases and private letter ruling from the irs and those cases that i’m referring to roll in tax court all trying to figure out, you know, what is unrelated business taxable income? Because what it means is that your tax exempt non-profit now ends up having to pay tax on the income that is unrelated to your charitable mission and that’s the last thing you want when you set this whole thing. Up to be tax free and be able to do something good for people. The other thing after member with board members, their personal financial liability, it’s called fiduciary responsibility. Okay, and people wave over this the first question get oh, well, we have dino. Dino is directors and officers insurance, and it protects the board against, you know, a mistake essentially. So if somebody makes a mistake or somebody under your watch makes a mistake so let’s, say the foundation. You did all the rules, you followed the prudent investor rule. You have an i p s but you got bernie madoff for a piece of your you did your due diligence. You pass it off to consultant, you still ended up in made off, and somebody wanted to sue you because of that that would tend to be protected as long as you took all the steps under the dino, so you would have some kind of protection. Personally. However, if you’ve not taken the rights steps and you haven’t followed the rules, you’re not protected. A new dino and that’s jeff, remember so you could be personally sued. Tony, personally, if you’re on a board and you’re not falling these rules. So that’s critical plus that’s just a thin reed toe. Hang on. We have insurance to cover ourselves if we’re not doing things right right way have insurance to cover it. But it’s kind of like leaving the water on in the in the in the washing machine for the washing. Machine’s not working, you know. Well, i have flood insurance. You know where i have water insurance. So i’ll fix the basement later. Why in god’s name would you want to do that? And shouldn’t we just be operating non-profits the right way? Yes, but the right way gets again. You know, i understand how it works, you know, i sit on several boards and the mission and the operating all takes precedence, and so you want to do good and you’ve got your gala coming up and you’re running around like a chicken without your head trying to get donors and get the gala attended to and raise some money and make sure it’s profitable and so and board members only me quarter to quarter, and they’re like chasing cats, trying to get them around the board and get them on a call together. And doctor thought that thought so. I understand it’s a challenge is always a challenge, but the’s things air critical and you really have to do him. The investment policy statement the i p s your calling the act is pretty explicit about what needs to be in an investment policy statement. First of all, the thing needs to be in writing, which we find a lot of non-profits haven’t even done right, right, exactly, exactly. And you want to state your objective? What are you trying to dio it could be is you can’t really be a one pager, but it can be very short, so you really have to go through the steps of creating it. There’s lots of things online, you can take things online or if you’re a bigger organization, might want hyre consultant help you write one if you do have ah finance committee and you’re bored, that would be a very good place to start as well, right, exactly. That’s an excellent place to start. And you want to have knowledgeable people on that, so okay, before we get to the high ps yes, knowledgeable people on your board finance committee does that necessarily. Mean, i i have a boardmember who works for bank of america. Right? So they must be knowledgeable, right? Right. And that’s ah, that’s. Another miss number. You know, it’s kind of lee analogy i use is when i have a recent widow and she plays bridge with a bunch of her girlfriends and somebody’s son works on wall street and she goes, oh, i’m going to go find out what harry thinks i should do with my money. Harry is a traitor. Maybe he trades derivatives. Maybe he trades one kind of stock. Is harry well equipped to tell gladys what to do with her entire portfolio? Know. And so you have two leaves. The same sort of analogy. When you’re choosing your board members or choosing your investment committee members, how much depth do they have? Do they really understand all the asset classes? Have they put portfolios together? Are they on lee looking up the tax id? A lot of people think bankers, cpas, they’re also related to money, often cps air on lee looking at the tax side of it, and they tend to be super conservative. So is that a good match? Is that one? Person and then you offset them with maybe an entrepreneur who manages their own portfolio. So you really have to think about in assam real card questions? The person who works for bank of america could very well be in marketing, communications or hr and you know, you’re making the point of reemphasized okay, so back to the investment policy statement this i p s what? What needs to be in there? Well, you need to have an overview of what, what your mission is, what you’re planning on doing. You have to have a purpose, you have to have a time frame, you have to have risked tolerance. So how much downside are you willing to sustain and during what period of time? And this is critical in this environment that we’re in? Starting in two thousand? In my opinion, we started what’s called a secular bear market and from two thousand two thousand to the s and p loss, forty nine percent of its value. So if you had thirty, forty or fifty percent air portfolio exposed during those three years, you continued to see it fall. If your investment policy statement didn’t give you the flexibility to have that much volatility. You may be out of compliance. So you want to make sure that if you using a fifty fifty portfolio or sixty, forty, whatever your mixes and stocks and bonds that you take them amount of volatility that the market has had over the last x number of years and be sure that that’s in there and this the secular bear market, what does that mean exactly? Well, secular is a very long trend. Their cycles and their secular trends. So secular trend and from nineteen sixty centering on the edge of george in jail. Sorry, nineteen eighty right in front of the jail and about to pull you out. Okay, i’m pulling. I’m pulling quick. Come out out of the gauge for nineteen sixty six to nineteen eighty two the dow jones returned one point four percent. That entire period of time is called a secular bear market from nineteen, eighty two to nine to two thousand ten toe eighteen years straight up, it averaged seventeen point four percent. That was a secular bull market. Now, within either one of those, you had crashes like in nineteen eighty seven, where the dow jones dropped precipitously. During the sixty six to eighty two period you had periods when you lost fifty percent your money and if you were smart enough or lucky enough to get in at that point could’ve made eighty percent of the next couple of years. We’ve just come off a period zoho period, it was one point, seven percent, one point for it right before and so in what, in my opinion, we started another secular bear and we’re only partway through. So we’ve just had two years from march of o nine we’re coming up on the anniversary here in the next couple of days where the market has gone up almost one hundred percent, depending on what index use snp went all the way down to six fifty it’s around thirteen twenty five give or take so it’s almost doubled exactly the rustle of the wilshire five thousand, which is the great big index five thousand stocks that’s already doubled now. Before that, we lost forty percent from the top of o seven down to march phone nine so a year and a half that was the cycles that was a cyclical baer followed by a cyclical bull. Basically, you’re about break even if you’ve been invest over ten years in the s and p, you have a small return. So when you go back to that example, you have to consider this. What if we are in the middle of a secular bear market and we have another bear cycle coming? Is your i p s set up to allow for that kind of downside volatility? Do you have all your money? Invest in the market, which we run into over and over again, and people say, well, i don’t want to make xero in my checking account. Well, it’s, imprudent to have all of your money invested the market you need tohave, sameer cashflow available. We’re going to take a break and when we return, of course, cathy boyle staying with us, talking about the uniform, prudent management of institutional funds, act, stay with us, talking alternative radio, twenty four hours a day. Oppcoll oppcoll are you stuck in your business or career trying to take your business to the next level, and it keeps hitting a wall? This is sam liebowitz, the conscious consultant. I will help you get to the root cause of your abundance issues and help move you forward in your life. Call me now and let’s. Create the future you dream of. Two, one, two, seven, two, one, eight, one, eight, three, that’s to one to seven to one, eight one eight three. The conscious consultant helping conscious people. Be better business people. Dahna i really need to take better care of myself. If only i had someone to help me with my lifestyle. I feel like giving up. Is this you mind over matter, health and fitness can help. If you’re expecting an epiphany, chances are it’s not happening. Mind over matter, health and fitness can help you get back on track or start a new life and fitness. Join Joshua margolis, fitness expert at 2 one two, eight sixty five nine to nine xero. Or visit w w w died mind over matter. N y c dot com duitz do you want to enhance your company’s web presence with an eye catching and unique website design? Would you like to incorporate professional video marketing mobile marketing into your organization’s marketing campaign? Mission one on one media offers a unique marketing experience that will set you apart from your competitors. Magnify your brand exposure and in cancer, current marketing efforts. Their services include video production and editing, web design, graphic design photography, social media management and now introducing mobile marketing. Their motto is. We do whatever it takes to make our clients happy. Contact them today. Admission one one media dot com. Talking dot com. Welcome back to the show. I’m tony martignetti we’re talking about upmifa the uniform, prudent management of institutional funds act with kathy boyle. Kathy, i just wantto emphasize one thing in the investment policy statement which we alluded to earlier, and that is the requirement of supervision and monitoring. What? What is it, what’s the act say about that? Well, basically, it means that you must have some way to supervised what’s happening with your money, so if you’re allocating it to bank of america or consultant, who then puts it out with various managers, somebody has to look at those statement somebody has to say, how are we doing? And remember, there needs to be a benchmark tony what i tell people when i place plain english to regular individual people, the index is people dow jones. We hear about all the times thirty stocks the s and p is a more appropriate benchmark for your equities and maybe a russell two thousand if you have a lot of small caps, so the benchmark is like the speed limit sign. If you’re driving on a little rural road up where i live in westchester county and you’re going thirty five miles an hour, you could be going ten miles over ten miles under, but unless you see a speed limit sign that says twenty five miles an hour you don’t know and so that’s what you need to do. And so, if your portfolio is sixty percent bonds and thirty percent stocks in ten percent cash, you need to have a benchmark each quarter that you look at, and it should be a blend of the bonds for sixty percent and index an index of either the snp or the russell or some index you’ll agree on and then money market so that you know how you’re doing and you know how your manager’s air doing? You also need to know i’ve seen a board where they had a value manager, and they won one missouri proud of herself for realizing that the value manager net of fi didn’t produce anything. And i looked and i said, well, do you know the russell value index actually produced eleven percent? So never mind that he didn’t make any money for you net of your fee, but he underperformed his sector by eleven percent, ten percent so that’s critical and again that goes back to who you choose to be on your your committee or on your board and how savvy they’re going to be very wealthy people often have advisers like me to do all this for them, and they may have someone underneath him. They’re not going to get into the nitty gritty again, so even very successful people often don’t even they don’t pay attention does not make them savvy about the market just because they have a lot of money invested or i shouldn’t just say about the market about that’s, general, exactly, and the native gritty again of what you need to do. So you know, the statements come out once a quarter. Well, how are they doing? What kind of return of we’ve gotten? Whether you can do this on an annual basis as well, quarter to quarter makes a little easier make angels if something’s going bad, and in the remaining time we have cathy, we want to leave people with some tips for getting into compliance, at least using best efforts to do that on a couple of action items for for different players in the non-profit so what do your ideas for? Getting into compliance now that the law is effective. Well, i think the first place to start is if you have an endowment, you have to have this written spending policy and that’s pretty easy to come up with. I mean, you can look back on history of the organization’s, been around for any length of time, look back to what you’ve done and craft something and make sure you’re in compliance therewith, the donor’s writing letters out to the donors having conversations if the foundation endowment is underwater, make sure you’ve written permission so that they’re too easy things to dio the bigger picture. All organizations need investment policy statement, and the way the attorneys have been guiding us is that if you make best efforts to at least you’ve taken the steps, so your i p s isn’t perfect. It’s not one that i would want to charge you for, but at least you have something in writing and you’ve made some effort to put it together. You’re less likely to get fined, penalised, tilly’s, short term that’s the way we’re looking at it now, they may give you some more time and come back and say, we want something better? Whatever, we don’t really know what’s going to happen because we haven’t really seen a whole lot of finds in this area, but the investment policy statements, the biggest place to start and getting something in place now you khun hyre consultant to do it, you can ask couple boardmember sze yu can put together investment committee and have them do it for you, but delegated if you’re really underwater and you’re running the organization, we’re running as fast you can. You feel like one of those little durables on that little cage then delegated out? Also, if you do have a financial advisor or even just if if you have just a banking relationship, those could be places to look for help. You might have the banking relationship, but they that bank may be able to help you with your gps or thie other documentation. Very often, many of us have things online. We have something it’s very simple that i wouldn’t charge people for, but we can we could easily give that out if we were retained as a consultant for something else. So, you know, very often that’s a good place to look if you also i served on several boards, so i could be very valuable to them in giving this kind of advice and interviewing the managers and interviewing the consultant. So if you have somebody on your board who is a financial adviser, we’re going to be we shouldn’t be managing the money if we sit on the board so we can play a very valued conflict of interest absolutely was wondering why she says that, but we can easily play that role on a professional basis. I’m delighted to do that. That’s what i do for a living it’s very easy for me to do for organization i care about, and you make a very good point about best effort if you can’t. And i’d say the same thing about charity registration, you’re not going to get into compliance in just a few months, but start making the effort so that if there’s a question, you can show something? Yes, exactly. We’re working on it exactly. Okay, so let’s assign some some action items, too different players in the non-profit i think the right place to start is with the board. What? So for the tips to get started what? Do you think the board should be doing first? Well, i think if you don’t have an i p s, then you need to pick a deadline critical, we’ve said the i p s probably six, three times to be exact, that investment policy statement and then these other things on the spending list the asset allocation and if the things that you’re going to in terms of investing your money, you also want to sign that to either if you’re going to let’s say you don’t have investing committee and you want to have one put a deadline in place, maybe it’s june, maybe it’s july don’t let it go on forever because i find again with not-for-profits since they moved very slowly, since the board meets once a quarter everybody’s busy and there’s always something that’s urgent things get tabled. Make sure that this is assigned a priority. Maybe it’s the sea for the first quarter becomes a beef. The second quarter becomes an a plus for third quarter, so it gets done. How about for the cfo or the executive director? If there, if there isn’t a cfo, well, unfortunately they’re the ultimate responsibility, you know, they’re running the organization. So if thie executive director is in charge and there isn’t really someone else to assign this to, then the e d needs to put this on her or his plate okay. And again create a deadline. And if there is development staff, what should? What should those fundraisers to be doing? Well, the development staff can play a very good role. They can reach out to the donors. They can put some of the spending paul seat about that of the underwater in the underwater. Those question exactly. And they can help make the spending policy because there they are. They’re raising the money they know what’s coming in or not coming in. They know how hard it is to raise money so they can go back to the spending policy and help develop that we have to leave it there. My guest has been cathy boyle, president of shaping hill advisers. She’s, a frequent contributor to bloomberg and fox tv. Kathy, thank you very much for joining me on the show. Great to be here, tony. Thank you. And now you put off your horse? Yes. You put off your horses for several hours today. To come to tokyo thank you. Gonna be riding out that ring at four. Thirty next week, we’re going sashadichter in the studio. Sasha is in charge of business development for accufund fund a very savvy, unusual non-profit that invests what they call patient capital in enterprises that combat poverty. Sasha is also a popular blogger and speaker. We’re going to hear how accufund funds work and his personal body of work i can help you or not profit and your career hope you’ll listen next week. You can keep up with what’s coming up? Sign up for our insider email alerts on the facebook page while you’re there, please click like like us. Be a fan of the page that’s at facebook, dot com and tony martignetti non-profit radio you can subscribe to this show on itunes. You don’t have to listen friday one to two we hope you do, but if you can’t itunes, go to non-profit radio dot net that will take you to our itunes page, where you can subscribe download. Listen any time, anywhere on the device of your choice that’s at non-profit radio dot net, the creative producer of tony martignetti non-profit radio is claire meyerhoff, our line producer and the owner of talking alternative broadcasting. His sam liebowitz. Our social media is by regina walton of organic social media, and our theme music was composed by booker t and the mgs were grateful to them for that. This is tony martignetti non-profit radio. I hope you’ll be with me next friday, one p, m eastern here on talking alternative broadcasting always found at talking alternative dot com. Durney i didn’t think that shooting good ending things. You’re listening to the talking, alternate network, waiting to get into anything. Thank you, cubine. Are you suffering from aches and pains? 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What Does Your Charity’s Conscience Say?

19th century charity board in the north aisle of St. Mary (copyright Richard Croft and licensed for reuse under this Creative Commons Licence)
National Public Radio reporting confirms what I have believed for years: IRS does not have sufficient resources devoted to policing the nation’s charities. That means the community must keep itself clean.

In NPR’s coverage, I’m focusing on the blog page where the story is posted. Not the four minute story, but the blog post and its shorter audio interview. A former director of the Service’s Tax Exempt/Government Entities team explains nonprofit examinations and audits aren’t a priority because considerably more money can be recovered from taxpayers and businesses.

That makes all of us in the nonprofit community responsible for operating properly. The buzzwords like accountability, transparency and compliance are well known, nearly cliché, and most of us recognize donors increasingly demand clean operations. That in itself should provide sufficient motivation.

Fear also motivates. If you don’t fear an IRS review because you’re resting on favorable odds, recognize that other interests within government are looking over your shoulder. From your state attorney general and secretary of state to the Federal Trade Commission and Congress, there are ample institutions helping to make sure you do the right thing.

Do you honestly not know what’s right? Do you fear the things you don’t know or understand? Your employees probably know the way. (That’s what I’ve seen for 13 years.) Are you listening to them? (In my 13 years, probably not.) If you prefer, there are thousands of consultants, in all stripes, to help your charity find its course.

Ultimately, it’s a matter of conscience–your charity’s conscience. What does it tell you about the right way to conduct business, to keep its reputation, donors, employees and board out of trouble?

That message is stronger than any IRS can put out.

Seven Highlights from the Fourth International Conference of Charity Regulators

Donation box

The International Conference of Charity Regulators met for three days in May of this year. Represented were Australia, Canada, New Zealand, Northern Ireland, Republic of Ireland, Scotland, and the U.S. hosts. The festivities were in Washington, D.C.

This seven-page summary has been circulating. I decided to pick out a few highlights for your consideration.

  • Canada used to have a rule that charities disburse 80% of their contributions, presumably annually. There is still a requirement to spend 3.5% of “investments.” Anyone able to tell us more about this? (page 2)
  • IRS can now make additional disclosures to states. That intrigues me. What have they been sharing with the states and what’s been added? (page 3)
  • Australia has no annual filing requirement. Nothing akin to IRS Form 990. You’ve got to be that smart to have country and continent status. (page 4)
  • “IRS believes that transparency, good governance and tax compliance go hand in hand.” That’s not a new statement. It is the rationale for the expansion of Form 990 two years ago. (page 4)
  • Processing of applications to IRS for tax-exempt status takes 112 days this year. Their way of discouraging formation of new charities? (page 5) (Aside from this conference, I had seen IRS talking about an online version of Form 1023, the application for tax-exempt status. I don’t know where that initiative stands.)
  • The Canadian Charities Directorate is the only office with a significant initiative to educate the public. Its counterparts are focused on training charities and their leaders. (page 5)
  • Internationally, regulators believe government oversight of charities will increase, particularly in transparency, compliance and use of resources. (page 7) Were you looking for a reason to retire early?

Nonprofit Compliance Problems & Solutions

Five Business Executives In a Conference Room Meeting

The Better Business Bureau Wise Giving Alliance released a list of top nonprofit compliance problems and failures under its 20 Standards for Charity Accountability. (Thanks to Grant Williams at The Chronicle of Philanthropy for his coverage of the BBB announcement.)

The most common problems fall under transparency, accountability and board inactivity. These are among the areas of focus for the IRS and states, as I explained in a post on the corporatization of nonprofits.

The solution is educating board members about what’s required and what their role is in compliance with federal and state standards. The Better Business Bureau will be satisfied. The UJA-Federation of New York has a program that teaches young people the responsibilities of board membership, and there’s at least one similar program in the Jewish community. I hope the students get on boards fast, so these 20- and 30-somethings can teach the 60- and 70-somethings some important lessons.

Attention board members: Compliance issues are critical and you are responsible!

Is there something you’d like to say to a board? Do you know of similar youth training programs?