Nonprofit 411: Demystifying Mergers

Nonprofit 411 H&B-minBy Eleanor Evans, Counsel at Hemenway & Barnes

In these uncertain times, many nonprofits are exploring mergers as a possible sustainability strategy.

What’s a “merger”? Generally speaking, a merger is the combination of one nonprofit’s programs, assets or entire organization with another’s by one of various methods, such as a formal merger, a parent-subsidiary relationship or a program transfer.

What can we achieve by merging? The ultimate goal should be to further your organization’s mission. This could mean expanding the number of people it serves, delivering new types of services or serving existing constituents more effectively and efficiently.

When should we begin thinking about a merger? Now, when your organization has strengths it can bring to the table – and before it finds itself in crisis. A particularly good time to initiate merger conversations is when the executive director is planning to depart or has just left.

What should we look for in a merger partner? An organization with a similar mission, compatible culture, contiguous service area or a menu of services or client base that complements your nonprofit’s will often make an attractive partner. Each partner should bring assets – resources, relationships, experience or skills – to the merger.

How do we find a merger partner? Start by reaching out to organizations with which your nonprofit, its executive director or board members have existing relationships. In some cases, it may be helpful to hire a consultant to help identify potential partners and facilitate conversations with them.

What lessons have other nonprofits learned from their experience with mergers?

  • Ensure that the merger furthers each partner’s mission. It’s important for each partner to identify how the merger will help it reach its strategic, mission-related goals. Each partner should initially assess its strengths and weaknesses, clarify what it hopes to achieve by merging and determine whether merging makes more sense than other alternatives. Both partners should examine the decision to merge from the perspective of those they currently serve and hope to serve in the future.
  • Articulate a shared vision. The partners should identify and agree on the results they hope to achieve and the impact merging will have on those they serve. This vision can be employed to get buy-in from stakeholders, rally board and staff members when obstacles arise, communicate with the public about the merger, and measure the merger’s success.
  • Identify merger champions who are passionate about and can help convince others of the benefits of merging and who will see the merger through to completion. Lining up advocates from each organization’s board early on is key to getting the boards to buy in and to fulfill their oversight role.
  • Conduct thorough due diligence. Each partner should conduct a thorough investigation of the other’s operations, assets and liabilities to identify issues that could affect how the merger is structured, require negotiation or derail the merger altogether. Experienced legal and financial professionals can be invaluable in this process.
  • Communicate with funders to ensure continued post-merger support.
  • Prioritize organizational culture. Assess each organization’s culture and identify and address areas where culture conflicts could impede effective integration. Take proactive steps to build a new organizational culture within the merged entity.

A merger is a fundamental organizational change that should not be undertaken lightly. Ultimately, its success will depend on the time and effort invested to identify and build trust with a compatible partner.

How Nonprofit Leadership Can Foster a More Inclusive Workplace Following the Election

By YW Boston


With the election this month, it is expected that nonprofit employees’ attentions have been on the results and its effect on areas related to their mission. Nonprofit leaders may be wondering, “Should we be discussing the results within the workplace? If so, how?”

During a recent YW Boston DEI Community of Practice meeting, the team of DEI professionals shared their questions, concerns, and strategies for supporting inclusive workplaces during a contentious election season. Here is a summary of this discussion along with additional resources.

Fostering an inclusive workplace demands a commitment to digging deeper, creating an environment conducive to open and honest communication and to the challenging issues or conversations it can surface. To do so effectively, a senior leader must build knowledge and understanding of implicit bias and how it functions, particularly in regards to race; explore methods to interrupt this bias through building awareness and new habits; and apply this learning through small group activities.

Here are a few questions to consider following the election:

  • How explicitly do we address this?
  • Do we issue an internal statement? An external statement?
  • How might the election results impact our employees?
    • For example, if protests erupt after the election, how might that impact employee’s commutes? Their ability to focus on work?
    • What would it look like to try to mitigate these issues?

As leaders in your organization, you have formal authority. It is important to keep in mind that what and how you communicate sets the tone for others. Communication can feel perilous at times when it is unclear what to say, but hesitance to start critical conversations has its own pitfalls; employees and stakeholders do and will remember a lack of communication too. Effective communications will tie the messaging to organizational values, focus on the effect rather than the result of the election, name the concerns people may have, and address them.

Following the election, leaders can remember to:

  • This election season, alongside COVID-19, has brought deep disruption and uncertainty.
  • Acknowledge that employees may be feeling uncertain or finding it difficult to focus.
  • Recommit to core values of DEI, trust, respect, and shared focus of the work.
  • Consider conversations that employees can opt-in to.

There are many forums that can foster community and provide space for staff voices. Digital message boards, technology, messaging applications such as Slack, virtual employee resource groups, affinity group spaces, structured meetings, opt-in spaces, or facilitated conversations and town halls are all options that offer the opportunity to connect. With the proper framing, norms, and community agreements, you can help curate a space that continues to build community and understanding.

A town hall with the CEO or other senior leaders provides an opportunity for open dialogue across a whole organization, and for leadership to centralize messaging. If planning a town hall, the following considerations should be made in an effort to effectively hold space:

  • Be clear in the purpose
  • Protect time, town halls require a lot of preparation
  • Understand what questions are likely to be asked beforehand
  • An honest assessment of whether the leader has the skills and emotional intelligence to do it.


About YW Boston

As the first YWCA in the nation, YW Boston has been at the forefront of advancing equity for over 150 years. Through our DE&I services—InclusionBoston and LeadBoston—as well as our advocacy work and youth programming, we help individuals and organizations change policies, practices, attitudes, and behaviors with a goal of creating more inclusive environments where women, people of color, and especially women of color can succeed.

As part of that work, we are helping organizations prioritize Diversity, Equity & Inclusion and become socially connected while staying physically distant. During this time, YW Boston is providing organizations with digital workshops and resources to help them better understand the challenges faced by their employees. For more information, please contact Sheera Bornstein at

How Can Nonprofits Ensure More Successful Diversity, Equity, and Inclusion Initiatives?

By YW Boston


As more nonprofits make organizational commitments in response to demands for greater diversity, equity, and inclusion (DEI), YW Boston has compiled a list of things to consider when ensuring a more successful implementation of these DEI strategies.

  1. Consider a dedicated DEI role within your organization

There is a lot of work to be done to improve diversity, equity, and inclusion within organizations. And so, one way for organizations to set themselves up for success is to have an internal role that is solely dedicated to DEI. This does not necessarily have to involve a new external hire. The important thing to remember is to build sufficient capacity, don’t just add additional DEI responsibilities to an existing employee’s job description. Be intentional and consider what a new DEI role could look like within your organization, and how it could either be filled by shifting someone’s role internally or hiring specifically for this role.

  1. Provide robust support to your DEI staff

That said, it’s important to set your organization’s DEI role up for success. If your organization already has a dedicated DEI staff member, this might mean growing your DEI team or finding additional ways to support them. One important aspect when it comes to supporting DEI staff is to have a deep understanding of what your organization’s needs are and what you would like your DEI staff to help you achieve. Clarity about your organizational goals will help DEI staff develop more effective assessments and workplans.

  1. Avoid creating silos between your DEI initiatives and the rest of your organization

The work of DEI professionals is to evolve the organization’s culture to a place where DE&I is centered in every initiative and department. To do this, you must ensure DEI staff have access to other departments and projects. Every department might have different perspectives on what DEI means to them, or even different readiness when it comes to embracing the work. By limiting your DEI staff’s reach, your organization risks limiting the amount of success your DEI initiatives can achieve.

  1. Encourage organization-wide participation

Having dedicated DEI staff within your nonprofit is just one part of organizational DEI strategy. An important part of fostering greater organization-wide acceptance and engagement is to encourage and model participation. This could mean sending internal DEI updates, encouraging staff to ask questions about new initiatives, building relationships between all-staff and DEI staff, or implementing processes for giving feedback about DEI efforts.

If you would like to access more resources about diversity, equity, and inclusion at work, refer to our Racial Justice and Diversity, Equity, and Inclusion Resources.


About YW Boston

As the first YWCA in the nation, YW Boston has been at the forefront of advancing equity for over 150 years. Through our DE&I services—InclusionBoston and LeadBoston—as well as our advocacy work and youth programming, we help individuals and organizations change policies, practices, attitudes, and behaviors with a goal of creating more inclusive environments where women, people of color, and especially women of color can succeed.

As part of that work, we are helping organizations prioritize Diversity, Equity & Inclusion and become socially connected while staying physically distant. During this time, YW Boston is providing organizations with digital workshops and resources to help them better understand the challenges faced by their employees. For more information, please contact Sheera Bornstein at

Nonprofit 411: Top Five Things Every Nonprofit Leader Should Know About Finance

Nonprofit 411 Night Heron-min

By Ellen Sturgis, Principal of Night Heron Consulting

People don’t get involved in nonprofits because they love finance! It’s about the mission right? But Executive Directors and Board members still hold fiduciary responsibility to ensure that resources are managed, protected, and used well. Here is my list of the questions you should ask about five key financial reports.

  1. Balance Sheet: The easiest number to understand is the cash balances, right? But what’s the right amount for your organization? A simple test: Divide your annual expense budget by 12. Divide your cash balances by that number. The result is the value of the months’ cash on hand. Is it under 6 months? That may be a concern. Look back to last year to observe cash fluctuations. This is your short term insurance against unforeseen events.
  2. Operating (P&L) Statement: Income. Understand where your revenues come from. Compared to last year, are you seeing a similar pattern of, for example, 50% donations and 50% grants? How likely are you to get the same grants every year? If there is a concentration in one area, how reliable is that year to year? I worked with one organization that depended on their annual Gala for over 70% of their annual revenue. Not good, especially when a pandemic forces the event’s cancellation.
  3. Operating (P&L) Statement: Expenses. As a leader of the organization, get comfortable with the general mix of expenses. Most nonprofits reflect a people-heavy budget: 70% in personnel and related costs isn’t terribly unusual—so don’t freak out. If you’re used to a commercial business, it may look odd, but it’s okay.
  4. Cash Flow: For many nonprofits that don’t have a cash reserve, this is the most critical report, and you may not even get one. Based on the income mix, are there certain months that are flush with cash (often December with year end appeals, for example)? Are there tight months (often summer) where expenses continue but revenue does not? Ask to see a monthly summary, from the previous year or two. Is that cash balance calculated above enough to get you through tight months?
  5. Budget: Most nonprofits have and vote on an annual budget. But remember, this is your roadmap to meeting your mission: no resources = no growth. If your organization wants to start a new program, is now the time if you’ve had losses in the last two years? Are new funding sources available? Will you have the cash or need a line of credit? These are the questions to consider, not just “do we break even”.

A PS about your annual audit—this isn’t just a requirement, it’s a terrific opportunity to get an independent assessment of your financial operations. Whether a review or full audit, two key suggestions: make sure the Board meets with the auditors without staff present, for a frank conversation. And I suggest changing audit firms at least every five years, especially if your staff stays the same.

A final word about all this in the time of COVID. When it comes to finance, the key concern should be the separation of duties. Talk to your auditors for suggestions. If only one person is opening and depositing donations, are you finding other ways to protect your organization’s gifts? Scanning and recording all documentation is critical. This protects everyone involved.

Nonprofit 411: How Third-Party Ownership Helps Nonprofits Benefit from Solar

Nonprofit 411 PowerOptions-minBy Walter Gray, Solar Program Manager at PowerOptions, a nonprofit energy organization in Massachusetts

Taking advantage of the financial benefits from purchasing and installing solar PV projects is relatively straightforward for homeowners and for-profit businesses – there’s an upfront capital cost of the project which pays off over time via three primary revenue sources: free electricity, state-level incentives, and federal-level tax benefits.

For a nonprofit, the federal tax benefits are wholly or mostly inapplicable because nonprofits have little or no federal income tax liability with which to monetize the tax benefits. And these benefits are significant.

For nonprofits to take advantage of these federal tax benefits and extract the most value out of a solar installation, the “third-party ownership” model has emerged as a popular method for nonprofit solar financing. There are a variety of business models around the third-party ownership concept, but the most common is the “Power Purchase Agreement” or “PPA”.

What is a Power Purchase Agreement?
Under a standard PPA, a solar developer will design, engineer, finance, construct, operate, and own the system for the term of the contract – typically 20 years. The host pays zero up-front cost, and agrees to buy the electrical output of the system for the term of the contract at a cost per kWh that is lower than the cost of buying grid-delivered electricity. This arrangement provides immediate savings to the host nonprofit, as well as a long-term hedge against the volatility of the energy markets.

What about the tax benefits?
The tax benefits accrue to the system owner – under the PPA this would be either the developer or an outside financier who transacts directly with the developer. Ownership of the system is like a home mortgage – the system may be sold to different owners over its lifetime, but the developer usually remains as the “servicer” throughout the term. As a for-profit entity, the system owner can efficiently monetize the tax benefits which provide a large part of the system payback, allowing them to charge a lower per-kWh rate to the host for the electrical output.

What does this look like in practice?
From the customer’s viewpoint, the tax monetization strategy takes place behind the scenes. The customer can shop for PPA proposals which will offer some high-level system specifications along with a per-kWh price for the electricity. The obligation to buy the output is the main commitment for the customer – the developer does all the planning and work including permitting and interfacing with the local utility, and delivers a turn-key project. The host has no operations or maintenance responsibilities aside from some typically benign obligations around not disconnecting or damaging the system.

Getting Started
We would start, as would any other developer, by asking for some information about your site (e.g. rooftop, parking lot) and requesting a copy of a recent electric bill. With this information, providers will be able to provide you with a free, no-obligation proposal to see whether it’s something you’d like to explore further.

As we always say at PowerOptions – a price is only as good as the contract terms behind it, so we encourage interested organizations to request template PPA contracts in order to evaluate different solar offerings.

It’s important to remember that solar incentives – both state and federal, decline over time so if you’re considering solar we encourage you to start the process as soon as possible.

Talking About Racism at Work: How Nonprofits Can Foster More Inclusive and Supportive Workplaces

By YW Boston


Talking About Racism at Work: How Nonprofits Can Foster More Inclusive and Supportive Workplaces

Whether or not your organization has made a public commitment condemning racism and committing to greater racial equity, as a nonprofit leader you may be wondering, “Should my team be engaged in more conversations about race and racism?” And if so, “How do I make those conversations productive?” We recognize that racism and other oppressive systems are institutionalized, and that this makes racism within organizations difficult to dismantle. Racial equity is not achieved by engaging in short-term actions and requires long-term commitment and hard work. Even within nonprofit organizations, modern-day standards of “professionalism” may encourage employees not to talk about racism and can make it hard to identify next steps. For nonprofits limited by capacity, resources, and the inexperience of looking internally to engage in anti-racism work, conversations about racism and seem daunting and could lead to greater harm for Black staff and employees of color.

As YW Boston continues to partner with organizations looking to create lasting change and improve their workplace cultures, we have gathered some considerations that can help those hoping to talk about racism for the very first time:

Before engaging in org-wide conversations, consider who you are reaching out to and why

Many interventions start with internal conversation amongst the organization’s executive team, followed by the identification of strengths and growth areas that then lead to action planning. This approach seems practical—identify a problem, assess the problem, identify a solution, implement the solution. When thinking about organizational change through a racial equity lens, additional considerations and more careful planning are necessary in order to prevent exacerbation or perpetuation of the challenges you are trying to address.

Instead, utilize a different framing when your organization is in these early stages of the conversation. It is important to assess your organization’s intentions, current impact, and intended future impact. 

  • Intentions: Ask yourselves, “why does my organization want to address racism and engage in DEI work?” Are you responding to external pressure from your stakeholders, funders, or constituents? Are you responding to internal employee feedback? Are you reacting to a national crisis? Are you hoping to improve and evolve organizational values?
  • Impact: There is a difference between our intentions, aspirations, and how we want to be perceived vs. the impact of our action/inaction and the harm we may be causing or allowing to continue. Racism is not just an ideology or prejudice, it is currently and has been historically embedded into institutions and systems that impact our workplace and employees, such as housing, education, healthcare, technology, and more. For that reason, it is not just unlikely, but impossible that racism does not play a part in our society, including our workplaces. It’s important that we don’t assume our nonprofit organizations are exempt from racism, otherwise, we can miss its impact on employees, stakeholders, and the organization’s bottom line.
  • Intended impact: As you learn more, your intended impact may also evolve. What is the change you wish to achieve? What does “success” look like and for whom? Who will be involved and be held accountable for this work? What outcomes do you wish to achieve? All of these questions will inform your action planning and decision making. It is important to consider here the relationship between intentions and impact. For example, you may intend to improve organizational culture by launching new DEI initiatives but end up overtaxing employees of color by asking them to lead or contribute to this work when it is not part of their job description. In other cases, conversations about racism may cause more harm if your facilitators do not have sufficient experience leading conversations through stress and trauma.

If you would like to access more resources about anti-racism and diversity, equity, and inclusion at work, refer to our Racial Justice and Diversity, Equity, and Inclusion Resources.


About YW Boston

As the first YWCA in the nation, YW Boston has been at the forefront of advancing equity for over 150 years. Through our DE&I services—InclusionBoston and LeadBoston—as well as our advocacy work and youth programming, we help individuals and organizations change policies, practices, attitudes, and behaviors with a goal of creating more inclusive environments where women, people of color, and especially women of color can succeed.

As part of that work, we are helping organizations prioritize Diversity, Equity & Inclusion and become socially connected while staying physically distant. During this time, YW Boston is providing organizations with digital workshops and resources to help them better understand the challenges faced by their employees. For more information, please contact Sheera Bornstein at

Nonprofit 411: Using Board and Staff Surveys to Drive Continuous Improvement

By Davis Harris, Interim Executive SolutionsNonprofit 411 IES - September SN Copy-min

Representing all voices, and hearing from all voices, are not the same thing. Nonprofits have become acutely aware of the need to bring diversity to the staff and to the board, but that does not necessarily mean they are hearing diverse perspectives. Organizations function best when all perspectives are considered but there is often too little time or opportunity in board meetings, staff meetings or even 1-1 conversations to explore differences based on background, lived experiences, or vision for the future. Not only can well-crafted board and staff surveys allow voices to be heard, but they can also highlight common areas of concern and opportunity that can lead to meaningful change.

One recent board survey surfaced the issue that a board was expecting its long-time ED to retire in the near future and many of the board members were expecting a particular director to succeed him. When the results were shared, the board was informed that the director had other plans in mind which prompted the need to develop a new succession plan. In another example, a staff survey surfaced concerns that staff were unsure about the finances of the organization and also felt they did not have all the information they needed to do their jobs. This indicated the need for more open and frequent communications between leadership and the staff.

What gets measured gets done, and a survey every couple of years is a great way to measure progress at both the staff and board level and highlight the priority areas on which to focus. Surveys can help assess whether the work being done is building an organization with a clear vision and if it has the personnel, processes, knowledge, resources, commitment and collaboration required to achieve that vision sustainably.

Staff surveys might include such issues as how decisions are made and how effective they are, the clarity of roles and responsibilities, adequate access to information, training and feedback, perceptions of fairness, equity, diversity and inclusion as well as leadership and culture.

Board surveys often cover two topics areas:

  • How the board oversees and supports the organization: Mission, vision and strategic planning; CEO selection and evaluation; Ensuring adequate financial resources; Overseeing and monitoring financial performance and operating policies; Providing expertise as needed; and Building the reputation of the organization.
  • The board’s own governance: size, structure and committees, composition, leadership, processes (such as meetings), recruitment, orientation and fund-raising.

There are many sources for such surveys, some of which can be taken online and will tabulate the results for a small fee. The value of using an off-the-shelf survey is that it is easier to measure quantifiable progress from survey to survey. That said, it is most often the comments that provide the insights, and it may be better to design a survey around issues that seem particularly prescient and then implement the survey in a tool like Survey Monkey. To ensure the most responses, set short deadlines, send frequent reminders, and have a single person (who commits to individual confidentiality) responsible for collecting and collating results.

Finally, share the aggregated information no matter what it says, and be prepared to act on the results. Failure to do so will reverse the value of soliciting and hearing all voices and perspectives.

How understanding history can help nonprofits address persisting inequities

By YW Boston


As nonprofits, we dedicate ourselves to a mission larger than ourselves, our immediate geography, and our moment in time. In order to meet our organization’s goals, internally and externally, it is necessary for us to gain an understanding of how inequitable systems have created and perpetuated violence in our communities. Inequitable systems that have propagated violence against people of color, and Black people in particular, continue to influence all realms of American life, including education, healthcare, housing, and beyond. By naming inequities as violence, we can better commit to creating truly nonviolent organizations.

YW Boston recently facilitated the workshop titled “Understanding Inequitable Systems as Violence” and in it we provide historical context to help foster a better understanding of U.S. history and how inequitable systems came to be. We also provide strategies and pathways for organizations looking to make a positive change:

What is collective violence and how does it manifest itself in the world around us?

Violence is defined by the World Health Organization as “The intentional use of physical force or power, threatened or actual, against oneself, another person, or against a group or community, that either results in or has a high likelihood of resulting in injury, death, psychological harm, maldevelopment or deprivation.” Collective violence specifically refers to violence enacted upon members of a group against another group or set of individuals.

Collective violence can be broken down into three categories; social, economic, and political. While social violence can be seen in mass incarceration rates and funding for both school districts and housing, political violence can be seen in redistricting, voter ID laws, and disenfranchisement. Economic violence can be best understood when looking at the most recent financial crisis where predatory lending, subprime mortgages, and unemployment was disproportionately affecting people of color. It is important for nonprofits to consider how these inequities manifest themselves today and the ways in which they interact with our work.

What can nonprofits do to take action?

We often hear how important it is to “take action” but it can be difficult to know exactly what to do. Non-violence is not just about which actions to avoid, but also about what we are going to do about the violence and injustice present in our society.

For an organization to become more diverse and equitable, and to create an inclusive culture, change has to encompass all areas within the organization. For organizations to create lasting change, we suggest a focus on the following seven pillars:

  • Buy-in from leadership
  • Regular working groups with various perspectives
  • Diversity within decision-making structures
  • Shifting toward unbiased hiring, retention, and promotion systems
  • Examining all practices and systems within the organization for inequities
  • Defining and finding intention around the culture of the organization
  • Allocating resources to support the change you are trying to achieve

Learn more about the history of systemic racism and about strategies for organizational change by accessing a recording of YW Boston’s workshop.

Photo credit: Sushil Nash


About YW Boston

As the first YWCA in the nation, YW Boston has been at the forefront of advancing equity for over 150 years. Through our DE&I services—InclusionBoston and LeadBoston—as well as our advocacy work and youth programming, we help individuals and organizations change policies, practices, attitudes, and behaviors with a goal of creating more inclusive environments where women, people of color, and especially women of color can succeed.

As part of that work, we are helping organizations prioritize Diversity, Equity & Inclusion and become socially connected while staying physically distant. During this time, YW Boston is providing organizations with digital workshops and resources to help them better understand the challenges faced by their employees. For more information, please contact Sheera Bornstein at

Nonprofit 411: Final Massachusetts Paid Family and Medical Leave Regulations Released

By Jessica Sullivan, Insource Services, Inc.Nonprofit 411 Insource - August SN-min

Several months ago, most employers began preparing for Massachusetts quickly approaching Paid Family and Medical Leave (PFML). Recently, the DFML released the final regulations. The changes were not substantive but provided clarification, as listed below. Click here for the full redline version of the regulations.

A refresher: PFML, a state-offered benefit for qualified MA employees, provides up to 26 weeks of job-protected, paid leave for medical and/or family reasons. The cost is shared between the employer and employee or employers may opt to cover the entire cost. A quick summary of the provisions is included below. Note that many of these were modified in the recently released final regulations.

  • Job protection extends to employees who choose to use a richer employer sponsored paid leave policy (sick bank, temporary disability, company leave policy) rather than filing for benefits under PFML. The employer is responsible for notifying the state/private plan and the employee also receives PFML job protection. Employers paying the PFML state tax are also eligible for reimbursement in the amount equal to what the state would pay for the same leave.
  • Treatment can include telehealth visits with a health care professional.
  • Leave can be taken in increments of 15 minutes but will not be payable until either 8 hours has accumulated or 30 days have passed from date of first use.
  • Employers with a private plan can require proof of wages from a newly hired employee (or current employee who has not worked the requisite quarters) to determine eligibility.
  • When employers transfer to or from the state tax to a private plan or between private plans, claims in process will remain with the plan through which the claim was originally approved.
  • Employees eligible for coverage while employed should apply for benefits with the former employer if covered under a private plan and if not more than 26 weeks has passed since employment ended.
  • Leave for substance abuse applies only to treatment through a licensed program. A family member of an individual in treatment may also be eligible for PFML leave.
    • If employers with an established policy regarding substance abuse in the workplace that is communicated to all employees and have proof of a violation of this policy, the employer can terminate the employee while on leave or within the 6 months after returning.

An employer providing a company paid leave benefit for a reason that would otherwise qualify under PFML is eligible to be reimbursed for the amount the state would have paid the employee for the same leave. This is applicable to employers who pay the PFML tax. What should you be doing now?

At this time, most employers are considering the practical application of PFML: how existing leave policies will intersect with PFML and what changes, if any, should be made to unify benefits and leaves. And, we are all waiting for the DFML to release their protocols for applying, turn around time for payment and the process they will use to work with employers. For now, here are a few reminders:

  • Display the poster: PFML Mandatory Workplace Poster and add Mandatory Employee Written Notices to new hire information (they must be shared within 30 days of hire).
  • Review or consider instituting a workplace substance abuse policy.
  • If you plan to require a fitness for duty from employees returning from leave, it’s a good time to start reviewing and updating your job descriptions. Employers need to provide a list of essential functions within 10 days of an approved leave to qualify the employer to ask for a fitness for duty at the end of a leave.
  • Review and begin to update employee handbooks to coordinate the benefits and requirements across your leave policies.

If you would like to review your leave policies with us or need further assistance, we would be happy to help at Insource Services.


Nonprofit 411: Tips on Alleviating Employees’ COVID-Related Hardships

Nonprofit 411 JohnsonOConnor-min (1)
By Joseph M. Giso, CPA MST


The Internal Revenue Service declared the COVID-19 outbreak to be a “qualified disaster,” thereby generating more favorable tax benefits for both employers and employees.



The declaration of a “qualified disaster” excludes from a taxpayer’s gross income certain payments to reimburse or pay for expenses related to a qualified disaster (i.e., “qualified disaster relief payments,” or QDRPs). In an employee-employer relationship, compensation is usually considered taxable for the employee and a deductible business expense for the employer.



All existing charitable organizations can operate an employee assistance program (EAP) provided they abide by certain provisions and documentation, as described below.


Charitable Class

The IRS defines a “charitable class” as “the group of individuals that may properly receive assistance from a tax-exempt charitable organization. A charitable class must be large enough or sufficiently indefinite that the community as a whole, rather than a preselected group of people, benefits when a charity provides assistance.”


The IRS adds, “If the group of eligible beneficiaries is limited to a smaller group, such as the employees of a particular employer, the group of persons eligible for assistance must be indefinite. … The proposed relief program must be open-ended and include employees affected by the current disaster and those who may be affected by a future disaster [emphasis added].”


Needy or Distressed Test

Eligible beneficiaries must be selected based on an objective determination of need, and the charitable organization must maintain adequate records demonstrating the recipients’ need for the disaster assistance provided.



As the IRS explains, the documentation should detail:

  • The nature of the assistance provided
  • The costs of providing the assistance
  • Why the aid was given
  • Members of the selection committee approving the assistance
  • Objective criteria for disbursing assistance
  • How the recipients were selected
  • Each recipient’s name and address
  • The amount disbursed to each recipient
  • Any relationship between a recipient and officers, directors or key employees of, or substantial contributors to, the charitable organization

Selection Process

An independent selection committee must choose the recipients, or adequate substitute procedures must be in place to ensure that any benefit to the employer is incidental. The selection committee is considered independent if a majority of its members are not in a position to exercise substantial influence over employer affairs.



Certain community foundations and other public charities maintain separate funds or accounts to receive contributions from individual donors. These donors then receive advisory privileges over investment or distribution of the donated funds. These organizations are known as donor advised funds (DAFs).


A donor advised fund or account established by an employer to assist in “qualified disasters” can make grants to employees and their family members based on the criteria established for public charities and under the following circumstances:

  • The fund serves the single identified purpose of providing relief from one or more qualified disasters.
  • No payment is made from the fund to or for the benefit of any director, officer or trustee of the sponsoring community foundation or public charity or any members of the fund’s selection committee.



An employee assistance fund (EAF) can be established as a public charity.  An EAF charity is an independent public charity with an exempt mission or purpose to provide emergency, need-based financial assistance to an employer’s workforce. It can maintain its public support requirement under the Internal Revenue Code because it receives donations from a variety of companies and their employees who sign up for their services. Unlike a DAF, an EAF charity can provide assistance to eligible individuals in response to any type of disaster or emergency employee hardship.


Using an EAF charity partner provides several benefits to the organization, including:

  • Allows the organization to offer a comprehensive program covering a wide range of financial hardship situations to the company and the employee.
  • Eliminates the administrative burden required to implement and manage an EAF.
  • Allows an objective third party to review applications and approve grants, providing anonymity to the applicant and protecting employees’ private information. This minimizes risk to both employees and the organization.



QDRPs are a very complicated area of tax law. But with the right vehicle and program, an organization can provide much needed relief to employees in times of hardship.

Joseph Giso CPA, MST


Joe has more than 30 years of experience working with nonprofit organizations in the human services, healthcare, education, and cultural sectors. Joe provides tax consulting services that are dedicated to improving the accountability and efficiency of tax-exempt organizations, including counseling on compliance with federal, state, and local agencies. Additionally, he has expertise in the area of organizational tax and reporting compliance. Joe is a member of the AICPA & MSCPA.