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Nonprofits Imperiled By Low Reserves: In Tight Times, Lack of Cushion Can Mean Failure

Jun 24, 2009; Washington Post | It’s good to have the Urban Institute study documenting the financial vulnerability of DC-based nonprofits—more than half had less than 3 months reserves in 2006, one-fourth had no operating reserves—but it’s no surprise to anyone who has looked at the information on how nonprofits are faring in the recession. Most of the reports have shown nonprofits drawing down on reserves, but many having no reserves to tap. However, foundations have reserves—called endowments—which they typically protect in good times and bad by limiting their payouts. The Post article quotes one foundation rep saying that the reason these groups have little or no reserves is that they are impelled to put their money into direct services and not bank money as reserves. Foundations might be reminded that it would be a good practice for foundation grantmakers to include money for operating reserves in their grants to grant recipients.  If anyone has ever put in the line in their budgets for foundations to include a percentage for reserves, only to have the foundation program officer cut it out, knows that the nonprofit sector often faces funders—foundations, individual donors, government agencies (though less so)—that often offer little support for nonprofit overhead (general operating) expenses much less investment in operating reserves. —Rick Cohen

Report of Recommendations, Advisory Committee on Tax Exempt and Government Entities (ACT) [PDF]
Jun 10, 2009; Georgetown University Law Center Continuing Legal Education | The latest report from this advisory committee to the Internal Revenue Service is important reading for anyone concerned with cross-border philanthropy, including recommendations for equivalency determinations, expenditure responsibility rules, and program related investments.Rick Cohen

Nonprofit Governance—The View from the IRS [PDF]
Jun 10, 2009; Inland Revenue Service | Here’s a quote from Sarah Hall Ingram, the new IRS commissioner of the tax exempt/governmental enterprises unit in a recent speech at Georgetown University: “You will notice that I have not listed as a goal the announcement of a set of universal and mandatory governance principles. At the same time, however, I hope you have noticed a clear theme in what I have had to say: I have no intention of walking away from governance. TE/GE will stay engaged in nonprofit governance and how it relates to the risk of noncompliance with the Internal Revenue Code. We will be measured but we will be present.”  What the IRS will and will not devote time and attention to is outlined in this very interesting talk, worth reading for text and subtext.Rick Cohen

Graduation Dreams
Jun 23, 2009; New York Times
| Nice to see that the New York Times editorial page editors agree with NPQ’s Cohen Report on the importance of supporting the DREAM Act for young immigrant kids trying to go to college or enter the military (cf. Why Nonprofits Should Care About the DREAM Act, Cohen Report, June 9, 2009). —Rick Cohen

New Cone Report Values America’s 100 Leading Nonprofit Brands
Jun 24, 2009; New York Times
| Would you believe that the brand of the YMCA of the U.S. is worth $6.4 billion?  It is, according to Cone and Intangible Business, the most valuable nonprofit brand in the nation.  The others on the top ten list are, in rank order, the Salvation Army, the United Way of America, the American Red Cross, Goodwill Industries International, Catholic Charities USA, Habitat for Humanity International, the American Cancer Society, the Arc of the U.S., and the Boys & Girls Clubs of America. Cone describes these organizations as some of the nation’s “most beloved and recognizable organizations.”  Interesting, however, is that some have also been the subject of significant criticism for accountability practices, notably the oft-criticized American Red Cross and the United Way of America, actually the latter mostly about some members of the United Way system that have fallen below practices that even the UWA itself finds unacceptable.  Both the ARC and the UW have played starring roles in Senate Finance Committee hearings on charitable accountability practices.  It is an interesting dichotomy, incredibly high brand value and simultaneously some less than positive press and political attention. —Rick Cohen

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