Irs 501C6 Tax Forms
Irs 501C6 Tax Forms document sample
Shared by: fpx13294
Accountability in Nonprofit Organizations (NGOs) Kevin P. Kearns Graduate School of Public and International Affairs University of Pittsburgh March 10, 2009 Research Questions • What does it mean to be “accountable” and what types of accountability requirements face nonprofits? • How does the diversity of the U.S. nonprofit sector affect discourse on accountability? • Can the quality of the public discourse on nonprofit accountability be improved by using “life cycle” analysis as a framework for accountability? Recent Trends and Controversies • Growth of nonprofit sector in the U.S. - no longer invisible – 1.5 million organizations – 8% of GDP • Nonprofit scandals: United Way, Foundation for New Era Philanthropy, American Red Cross, Universities • Some regulatory initiatives: IRS Reporting Requirements (new 990 Forms), Watchdog agencies, Senate Hearings, Recommendations from Independent Sector Context of Scandals • Organizational complexity: more difficult for volunteer governing boards to understand details of the organization • Court of popular opinion: Media scrutiny and “talk show” politics. • Competition for competent leaders: High pay and benefits for nonprofit executives become an issue • Increased entrepreneurial activities: Unfair competition and loss of charitable values Impacts • Loss of community confidence • Erosion of donor support • Low morale among staff and volunteers • Distraction from mission - damage control consumes the agency A Narrow Definition of Accountability The extent to which one must answer to a higher authority - legal or organizational - for one’s actions” 2) “An obligation for keeping accurate records” (Shafritz, 1986). Essential Components of an Accountability System • There must be a rule, law, regulation, internally sanctioned procedure or organizational policy that is accepted by all stakeholders as a valid and legitimate standard of performance. • There must be some type of overseeing authority that is recognized by all stakeholders as legitimate and qualified to judge compliance or performance. • The oversight body must have sufficient internal capacity, including resources and management expertise, to effectively and fairly monitor compliance. • All stakeholders must embrace the same or substantially similar measurement systems as well as reporting procedures. • There should be appropriate sanctions for non-compliance and rewards for compliance. • Ideally, there should be a feedback loop that gives organizations the opportunity to learn from their mistakes and to improve their future performance. Compliance: The “Easy” Part of Accountability • Accountability for Legal Requirements – Incorporation – Governance (Duties of Care, Loyalty, Obedience) – Commercialization, non-distribution constraint • Accountability for Financial Probity – Financial Accounting (external oversight) – Managerial Accounting (internal oversight) – Financial Policy Statements Performance: The “Difficult” Part of Accountability • Accountability for Performance – Mission adherence, mission accomplishment – Program performance – Performance relative to industry standards – Performance relative to “best practices” • A Broader Definition of Accountability: – “Accountability involves the means by which [nonprofit] agencies and their workers manage the diverse expectations generated within and outside the organization.” (Romzek and Dubnick, 1986) Why the Broader Definition of Accountability is Superior to the Narrow Definition • Captures “compliance” expectations but goes further • Implies that diverse stakeholders also have expectations (donors, employees, volunteers, partner agencies, media, etc…) • Implies that accountability is a dynamic (changing) construct, not static • Notes that employees can “manage” (influence) expectations by their actions or inactions • Makes accountability a strategic (versus tactical) issue for NGOs Discussions about accountability typically emanate from three fundamental questions • Accountability for what? • Accountability to whom? • Accountability through what mechanisms? • These three questions are complicated by the fact that many people don’t know WHAT constitutes the “nonprofit sector” What’s In a Name? • Nonprofit Sector • Voluntary Sector • Charitable Sector • Third Sector • All are accurate, but only partially so Diversity of the Nonprofit Sector • 26 categories of tax exempt organizations in section 501 of Internal Revenue Code • Wide diversity of Missions (National Taxonomy of Exempt Organizations) • Nearly 400 discrete categories of nonprofit organizations in America! A Simple Classification of Nonprofits • Public-serving Nonprofits • Member-serving (501c3) Nonprofits – Human services – Advocacy organizations – Health (501c4) – Education – Social clubs (501c7) – Animal protection – Business leagues (501c6) – Crime prevention – Labor unions (501c14) – Community development – Mutual insurance – Food and nutrition companies (501c15) – Housing – Etc … – Etc … The Nonprofit Sector is Big and Growing • In 2006 the nonprofit sector contributed $666.1 billion to the U.S. economy and received $1 trillion in total revenue, an increase of 5.7% over 2005. • The U.S. nonprofit sector consists of roughly 1.4 million organizations, up from 1.1 million in 1998. • The private nonprofit sector accounts for 5% of the gross domestic product in the U.S., 8.1 % of the country’s wages, and 9.7% of the jobs. • Total nonprofit employment jumped over 16% between 1998 and 2006. The Nonprofit Sector is Astonishing in its Asymmetry • Over 70% of nonprofit organizations in the U.S. spend less than $500,000 per year. • Only 30% of the organizations in the sector, primarily hospitals and universities, account for 97% of all nonprofit expenditures. • Healthcare and education organizations account for over 36% of all nonprofit assets and nearly 63% of all nonprofit employees. Dangers of “One Size” Approach to Accountability • Example: Better Business Bureau Wise Giving Alliance • Organizational size has impact on organizational capacity • Mission is related to expectations • Unintended negative consequences of simplistic measures What “Expectations” Should be Managed and How? • Throughout history, NGOs have been influenced by competing forces (“impulses” – Salamon, 2009) that affect: – Roles and objectives of NGOs – The strategy and style of operation of NGOs – The principle reference groups (stakeholders) – The funding and resource base Organizational Life Cycle of Nonprofits • Birth and Start-up Stage: In this stage the founder(s) of the organization sense that there is an unmet need for a good or service, and they develop a vision for an organization to meet that need. Typically, they must enlist the support of others to support the vision. • Growth and Development Stage: Typically at this stage of development we see the organization evolving toward more formal management and governance structures to handle the increased demand and the higher community expectations that accompany growth. • Maturity Stage: At this stage in the life cycle, the organization has become well-established in its particular field of service. Typically mature organizations have a relatively sophisticated management infrastructure and governance systems. Often mature organizations have a strong culture, and sophisticated internal compliance systems to ensure that the culture tolerates no deviation from an ethical code of conduct. • Decline (and Renewal) Stage: During this challenging stage in the life cycle, the leaders of the organization may need to confront the fact that demand for the organization’s products or services is falling, either because of poor performance or simply because of changing community needs and market forces. The challenge is to respond to this by deciding if the organization can renew itself or if it should responsibly divest itself and downsize or terminate operations. Birth and Start-up Growth and Maturity Decline and Renewal Development Accountability for Legal compliance in Compliance plus Compliance plus Compliance plus responsible what? organizational responsible growth responsiveness to divestment management (corporate) design management; changing community and operational demonstrated progress needs and demands; compliance with the on mission Significant progress prospectus and accomplishment toward mission business plan accomplishment; corporate social responsibility; industry- wide best practices Accountability to Initial investors; An increasing large and Multiple and increasingly Clients; funders; contractors; whom? volunteers; board diverse group of clients, diverse stakeholders in creditors; regulators; members; founding funders, regulators, the community and employees; volunteers employees; clients volunteers, and potentially in the industry employees. Accreditation agencies. The media. Partner organizations. Vendors. Mechanisms of Articles of Strategic plan; more Strategic plan; Valuation of organizational enforcement incorporation; sophisticated internal sophisticated internal assets for dissolution or business plan; accountability controls compliance mechanisms; distribution to other comparable marketing materials; including financial self-designed standards of organizations logic model; initial audits; contract performance that meet or internal financial and management exceed industry operational controls mechanisms; and standards; performance quality control; crisis management management plan; risk management plan Accountability Matrix Kearns, 1996 Explicit Implicit Standard of Standard of Performance Performance Tactical Legal Negotiated Response from Accountability Accountability the Agency (compliance) (responsive) Strategic Anticipatory Discretionary Response from Accountability Accountability the Agency (advocacy) (judgement) Four Impulses Shaping the Future of NGOs Lester M. Salamon, 2009 The Johns Hopkins Center for Civil Society Studies Voluntarism Professionalism Nonprofit America Civic Commercialism Activism Each “Impulse” Has A Unique and Significant Impact on Accountability The Voluntarism Impulse Accountable To Whom? Accountable for What? • Accountable to “value driven” • Accountable for providing “outlet” for stakeholders who bring passion and expression of values (including conviction to the mission spiritual values) in the civic space • Accountable to volunteers who provide • Accountable for “value-based” significant human capital explanations of and solutions to social • Accountable to donors and members problems and issues (e.g., Jubilee who voluntarily support the 2000, Alcoholics Anonymous) organization and who embrace the • Accountable for transforming lives of values of the organization individuals via application of value- • Accountable to clients who embrace based interventions and treatments value driven service model • Accountable for maintaining tradition • Success or failure usually illustrated with personal stories or anecdotes, not aggregate empirical data The Professionalism Impulse Accountable to Whom? Accountable for What? • Accountable to professional • Accountable for mission staff who bring skills and accomplishment via theory- professional standards of based (versus value-based) performance to the mission logic model • Accountable to professional • Accountable for demonstrating associations results and outcomes that can • Accountable to informed be empirically verified and clients who expect tested professional treatment • Accountable for continuous • Accountable to funders and learning and improvement donors who understand the • Accountable for meeting “logic model” of the professional (“guild”) standards organization of performance and quality • Accountable for “best practices” The Commercialism Impulse Accountable to Whom? Accountable for What? • Accountable to “the market” • Accountable for market based (need and demand) measures of performance such • Accountable to partners, as market share, Social Return venture philanthropists, on Investment, Cost-Benefit “investor” philanthropists, Ratios, Various Financial social entrepreneurs Ratios of sustainability • Accountable to clients who • Accountable for exploiting expect to be treated like “comparative advantages” to “customers” capture niche markets • Accountable for catalyzing entrepreneurial culture via franchising, replication, and other growth strategies The Civic Activism Impulse Accountable to Whom? Accountable for What? • Accountable to • Accountable for changing supporters who view the allocation of valued NGOs as vehicles for goods in society or the social change rules by which those • Accountable to coalitions goods are allocated and partner organizations • Accountable for future • Accountable to outcomes that can’t be beneficiaries, including accurately measured in future generations the present time frame The Most Significant Challenges of Accountability Arise from Tensions Between the Impulses • Voluntarism vs. Professionalism • Voluntarism vs. Commercialism • Professionalism vs. Commercialism Thank You! Questions / Discussion?