Our Shared Sector: 3 Key Diversity and Inclusion Strategies for Nonprofits

By YW Boston

Our Shared Sector Nov 2019-min

The previous two editions of Our Shared Sector described the differences between each part of the “DE&I” Acronym–diversity, equity, and inclusion. The articles also covered several steps that nonprofits can take to weave these principles into their organizational cultures.

Your organization may now feel ready to embark on their diversity and inclusion journey towards a more equitable workplace. Or you may have already begun to implement changes. What happens when you stumble across roadblocks and find the need to re-assess? Here are three key strategies to address common pitfalls during your diversity and inclusion journey:

  1. The diversity within your staff may not be reflective of the diversity of your constituents.

One of the business arguments for DE&I raises a concern that understanding a breadth of markets is impossible without diversity of thought. After all, diversity boosts innovation within organizations. How then can companies measure whether they are building a representative workforce? DE&I experts suggest that leadership should compare demographic information to the makeup of employees within their organization. Reports show that although women made up 51% of the population in the United States in 2012, the number of women within executive teams only accounted for an average representation of 16%. Representation is even lower at the intersections of race and gender.

  1. A diverse pool of candidates may be hiding in plain sight.

When it comes to hiring, where can nonprofit organizations find diverse professionals that are representative of their constituents? We often hear recruiters and leadership executives justify their lack of diverse hiring by claiming they simply can’t find any diverse candidates. In some cases, going as far as claiming that diverse candidates do not exist or show interest in their industry. It’s important to remember that it’s not just about knowing where to look, but how. If you only look in those places that have already produced homogeneous candidates, you are unlikely to find much diversity. Instead, try sourcing through the networks of your diverse peers. Reach out to candidates and invite them to apply to a position within your organization. Furthermore, diversity may be hiding in plain sight, as some diverse folks may be “coding” to try and fit in.

  1. You may need to re-evaluate your metrics.

Let’s say your organization is trying to address racial or gender wage gaps. Research shows that women, particularly women of color, earn less than their male counterparts. Additionally, people of color, women, and in particular women of color are less likely to be considered for promotions or find placement in leadership positions. One way to address wage differences as early as possible is by paying close attention to how inequities manifest themselves during the hiring process. The Equal Pay Act— a law amending the Fair Labor Standards Act that was signed in 1963 and advocated by YW Boston— encourages candidates never to reveal their previous salary to future employers. This is important because candidates, particularly candidates with diverse intersecting identities, may have been underpaid at their previous position so bringing up past salaries during a negotiation or using them as a starting point may be detrimental to the candidate. After all, salary is often a better indicator of a company’s budget size, not of employee experience.

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.

Nonprofit 411: Get Off the Sidelines on Workers’ Compensation

Nonprofit 411 People's United-minBy Bruce Figueroa, SVP and Nonprofit Banking Lead, People’s United Bank

Nonprofits cannot sit back and assume their workers’ compensation policies will protect them from injury claims. To the contrary, active involvement and participation by senior executives in the workers’ comp management process is essential to ensuring the health of the organization and the mission.

Workers’ compensation coverage is one of the biggest expenses for nonprofits that deliver human services. In fact, for many of these organizations it ranks behind only physical infrastructure and salaries in terms of cost. Many organizations assume their sizable policy payments mean they have their exposure and risk under control. But when it comes to workplace injuries, there is much more to consider:

  • What are the best policies to prevent accidents and avoid claims?
  • Is there a plan in place to respond if-and-when someone gets injured on the job? Who is in charge?
  • Who is documenting the event and how? How will the organization investigate what happened?
  • What can an organization do for and about individuals who suffer multiple injuries or file multiple claims?

These questions are complicated by the fact that, given their limited resources, most small and mid-sized nonprofits do not have a dedicated risk manager on staff. Instead, the responsibility of risk management is usually taken on by a director or human resource manager who also wears many other operational hats.  Although these individuals might be highly committed and resourceful, they generally do not have extensive experience in managing crises or the ability to answer detailed questions in specialized areas like workers’ compensation. For example, does your organization know if volunteers are covered under your policy? Likewise, nonprofits often are unaware of the many options available to them and to their employees in terms of modified responsibilities and other means of facilitating injured employees’ return to work.

Because nonprofits without a dedicated risk manager often lack such a detailed level of knowledge, organizations could be vulnerable to claims, and less-than-fully prepared to manage crises when they do materialize.

There are standard workers’ compensation procedures and provisions that can protect both employees and organizations. To be effective, however, these elements must be in place before an injury or claim occurs. For this reason, advanced planning around established workers’ compensation “best practices” should be mandatory for all human service nonprofits. At a minimum, nonprofits should:

  1. Develop full knowledge of relevant workers’ compensation statutes, since workers’ compensation is a statutory benefit and can differ significantly from state to state;
  2. Understand legal defensibility, or how to use statutes to manage or defend a claim. In some cases, it might be best to deny a claim up front in order to engage a legal process;
  3. Implement procedures for accident investigation and claims management. To make this process consistent and effective, the organization must fully engage both supervisor and employee;
  4. Establish corrective action plans to prevent recurrence. In addition to making sure you don’t make the same mistake twice, this is a critical way to lower the organization’s experience modification rating (experience mod) and reduce loss costs;
  5. Hold periodic meetings with safety committee, management and your insurance company/broker;
  6. Create and implement a working strategy around the claims process. Review it periodically, and be willing to modify it when needed.

Given the scope of these requirements, it’s clear that nonprofits cannot afford to leave workers’ compensation claims up to human resources, the finance department or an insurance company. It’s time for directors, human resource managers and other executives to get off the sidelines and take on the responsibility of protecting the organization, its employees and its mission.

Bruce Figueroa is the Head of Nonprofit banking at People’s United Bank. The Nonprofit team meets the financial service needs of over 500 nonprofit institutions across the Northeast including credit commitments of over $1.3 Billion to support their missions. Contact Bruce at bruce.figueroa@peoples.com or visit our website at www.peoples.com/nonprofits.

Our Shared Sector: After Understanding the “DE&I” Acronym, How Can Nonprofits Start Their DE&I Journeys?

DEIForNonprofits (1)-min

The last edition of Our Shared Sector described the differences between each part of the “DE&I” Acronym–diversity, equity, and inclusion–and explained how the differences between each requires distinct approaches in improving them at an organization. This edition focuses on steps that nonprofits can take to weave the principles of diversity, equity into their organizational cultures.

Diversity

Increasing diversity within an organization most often means working with the Human Resources team, and any others in charge of hiring and promotion. It may mean creating or adjusting your hiring handbook or including language in job postings that indicate that people of color, women and non-binary individuals, those with disabilities, etc. are encouraged to apply.

Equity

By focusing on equity, an organization addresses all aspects of their work with an understanding that not all employees or potential employees have access to the same resources. Using an equity lens means asking questions such as: “Where are you posting the job description? Is the language accessible? Are you listing skills that allow other people to apply?” For example, you may recognize that while a job description states, “Master’s degree preferred,” not all prospective employees have had access to graduate education, so it is worth evaluating comparable skills sets for the job, such as experience working in the community.

Utilizing an equity lens means realizing that people of less privileged backgrounds often do not enter an organization with the same resources as their privileged counterparts. Therefore, it is equitable to provide them with additional support, such as providing them with professional development opportunities. Additionally, an equitable lens recognizes that leadership must ensure that white people and men are contributing to inclusion and are committed to change on an institutional level.

Inclusion

Inclusion works to create a welcoming work culture–one where individuals of all identities and racial and ethnic backgrounds feel that they are being supported and able to succeed. One strategy many workplaces employ is creating an Inclusion Committee. Committees such as these work with senior leadership and provide a space for individuals to brainstorm how to better support people of color and women in all levels.

What’s the next step?

Even after understanding the differences in Diversity, Equity, and Inclusion, actually putting a plan in place can feel daunting.

Keep these three pieces of advice in mind during your DE&I journey:

  1. It takes time. DE&I work is an ongoing process that will require both time in employees’ work schedules and a long-term plan that the organization commits to seeing through.
  2. This is not easy work. People are not used to discussing equity in the workplace, and it is going to be hard to get everyone on board. That is why leadership buy-in is so crucial–support from the top can provide needed guidance to the entire organization.
  3. There is no “right way” to do equity work. Each organization must come up with a plan to address their particular workplace dynamics and opportunities.

Consider reaching out to experts to ensure your organization makes the space and time to create meaningful cultural change.

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.

Nonprofit 411: Today’s Leadership Skills to Support Tomorrow’s Nonprofits

Nonprofit 411 WittKieffer-minBy John Fazekas, WittKieffer

Today’s nonprofits need leaders with more to offer than passion for the mission. They need executives who can build a brand, differentiate the organization from competitors and guide it to sustainability. Clarity on strategic priorities and proof of impact have risen to the top of organizations’ priority lists, with substantiated results expected of top nonprofit executives. In an effort to identify their next leader, organizations are prioritizing the following as essential skills and competencies:

Fundraising, Fundraising and More Fundraising: Many organizations require that their new leader demonstrate an ability to identify and tap new sources of revenue as part of a larger fundraising strategy. Whether donations, grants, corporate alliances or programmatic partnerships, CEO and executive director candidates must have an acute ability for accessing funding alternatives.

Partnering/Building Alliances: Nonprofits are looking for leaders with an entrepreneurial spirit who can identify partnerships with other entities in the community, and use these partnerships to do more for the population by offering complementary services.

Strategic Program Leadership/Performance Metrics: Wise spending, a pragmatic review of programs and using hard data to demonstrate actual impact and effectiveness of programs and services are all points of emphasis in the recruitment of new executives. Today’s leaders are expected to introduce innovations, design and implement comprehensive performance metrics, and be willing to cut ineffective and inefficient programs.

Social Media/Brand Building: Organizations want leaders who know how to build brands. There is no single media or social media tool that is a must-have, but today’s nonprofit leaders must know how to appeal to a new generation of supporters in a manner to which they will respond and share the organization’s story with others.

Subject Matter Knowledge: Organizations are looking for candidates who truly know the landscape and the key players (returning somewhat to earlier times in the nonprofit industry). This refers in particular to candidates who come from the for-profit sector with impressive resumes, but still must show familiarity with the organization and its environment.

Ability to Demonstrate Credibility, Quickly: Nonprofits look for new executives who will take time to learn the history and culture of an organization. Conversely, a new leader must quickly identify what can and should be done, and display calculated decisiveness. “Slash and burn” is by no means the right course, but changes made early in a new leader’s tenure will confirm the right hire was made.

About the Author

With 25 years of executive search experience, John Fazekas works with colleagues in WittKieffer’s Not-for-Profit and Healthcare practices to identify outstanding leaders for clients’ specific cultures and strategic needs. He has led and supported a range of engagements for CEOs/presidents, executive directors, COOs, CFOs and other key senior roles. Based in the firm’s Boston office, John’s clients include foundations and trusts, major civic and cultural organizations, hospitals, health systems, community health centers, disease-based associations and research institutes, and many other mission-driven organizations.

Nonprofit 411: 5 IT Risks Every Organization Should Be Aware Of

Nonprofit 411 BerryDunn-minby Chris Ellingwood, BerryDunn

Technology: we all love it and we all immerse ourselves in it from every fashion of our daily lives. These emerging IT security risks are not overly technical in nature and are things you likely have heard before. Reflecting on a strong economy and a changing business environment, knowing these risks will help empower nonprofits to consider the controls needed to enhance their controls while they implement new, high demand technology and software to allow their organizations to thrive and grow.

1. Third-party Risk Management – It’s Still Your Fault

Daily, we rely on our business partners and vendors to make the work we do happen. Third-party vendors are a potential weak link in the information security chain and may expose your organization to risk. At the end of the day, though a data breach may have been the fault of a third-party, you are still responsible for it. It is paramount that all organizations (no matter their size) have a comprehensive vendor management program in place to defend themselves against third-party risk.

2. Regulation and Privacy Laws – They are Coming

2018 saw the implementation of the European Union’s General Data Privacy Regulation (GDPR) which was the first major data privacy law pushed onto any organization who possesses, handles, or has access to any citizen of EU’s personal information. Enforcement has started and the Information Commissioner’s Office has begun fining some of the world’s most famous companies. All organizations must be aware of and understand current laws and proposed legislation. The good news is that there are a lot of resources out there and, in most cases, legislative requirements allow for grace periods to allow organizations to develop a complete understanding of proposed laws and implement needed controls.

3. Data Management – Time to Cut Through the Jungle

We all work with people who have thousands of emails in their inbox (that date back several years in some cases). Those users’ biggest fears may start to come to fruition – that their organizational approach of not deleting anything may come to an end with a simple email and data retention policy. Organizations should first complete a full data inventory and understand what types of data they maintain and handle, and where and how that data is stored. Next, organizations should develop a data retention policy that meets their needs. Utilizing backup storage media may be a solution that helps reduce the need to store and maintain a large amount of data on internal systems.

4. Doing the Basics Right – Sometimes the Simple Things Work

Across industries and organization size, the one common factor we see is that basic controls for IT security are not in place. Every organization, no matter their size, should work to ensure that they have controls in place. These include:

  • Established IT Security policies
  • Anti-virus/malware on all servers and workstations
  • System logging and monitoring
  • Employee security training

5. Employee Retention and Training

Organizations should be highly focused on employee retention and training to keep current employees up-to-speed on technology and security trends. A culture of security needs to be created and fostered from the top down. Making the effort to empower and train all employees is a powerful way to demonstrate your appreciation and support of the employees within your organization—and keep your data more secure in the process.

Ensuring that you have a stable and established IT security program in place by considering the above risks will help your organization adapt to technology changes and create more than just an IT security program, but a culture of security-minded employees. Our team of security and control experts can help your organization create and implement controls needed to consider emerging IT risks. You may contact me at cellingwood@berrydunn.com for more information.

Our Shared Sector: What Every Nonprofit Should Know About the Acronym “DE&I”

by YW Boston

Diversity, Equity, and Inclusion, or “DE&I” as it is commonly referred to, is a phrase that broadly outlines the efforts an organization takes to create a more welcoming environment for people of less-privileged identities. Diversity, Equity, and Inclusion can include any number of interventions and can feel daunting for nonprofits as it requires time, resources, and organizational buy-in. Once a nonprofit has identified that it wants to promote more diverse, inclusive, and equitable spaces, a good starting point is gaining clarity on what diversity, equity, and inclusion is and isn’t.

But Diversity, Equity, and Inclusion is referred to as “DE&I” so often that many individuals may not know what each letter refers to. One barrier nonprofits may face in getting started building a strategy is not knowing the difference between these three concepts and how to address each.

To get started, each part of the acronym is defined below.

What is diversity? What is equity? What is inclusion?

Independent Sector’s definitions of each of these terms are helpful to understanding their differences:

Diversity “includes all the ways in which people differ, encompassing the different characteristics that make one individual or group different from another,” including identity markers such as race, ethnicity, gender, differing abilities, sexual orientation, religion, and more. It also takes intersectional diversity into account, when people’s identity is made of a number of underrepresented identities.

Equity is “the fair treatment, access, opportunity, and advancement for all people, while at the same time striving to identify and eliminate barriers that have prevented the full participation of some groups. Improving equity involves increasing justice and fairness within the procedures and processes of institutions or systems, as well as in their distribution of resources.”

Inclusion is “the act of creating environments in which any individual or group can be and feel welcomed, respected, supported, and valued to fully participate. An inclusive and welcoming climate embraces differences and offers respect in words and actions for all people.” Inclusion goes beyond diversity, because once you have a diverse staff, organizations must focus on retention.

YW Boston often uses inclusion strategist Vernā Myers’ analogy: “Diversity is being invited to the party. Inclusion is being asked to dance.” Diversity is often thought of as being quantifiable by measuring who is represented in an institution. Inclusion is measured through qualifiable data, looking at attitudes and people’s perceptions of how welcoming an organization.

Why can it be unhelpful to boil it all down to “DE&I” acronym?

While goal setting is an important aspect of this work, diversity, equity, and inclusion each require different methods of intervention, different resources, and different tools for measurement.

When Diversity, Equity, and Inclusion are boiled down to the acronym DE&I, diversity often becomes the focus. Because racial, ethnic, and/or gender diversity can sometimes (but not always) be determined by visually scanning an organization, nonprofits may feel it is the easiest to measure and therefore tackle. Diversifying the workforce is important, but that doesn’t directly lead to those new hires feeling welcomed or supported in the organization.

To be able to move beyond diversity, YW Boston’s InclusionBoston team explains, an organization must work with “an understanding that the systems they are working in, especially when they think about institutions, are not equal and are not equitable. They need to recognize that they have to move beyond just having people in the room or at the table.” Organizations often assume that diversity equals inclusivity. While that is not necessarily the case, oftentimes if you are truly inclusive, diversity will follow along.

In addition, many people assume that DE&I work refers specifically to race and gender, but it can address any or all systemic issues of inequity. By looking deeper than the DE&I acronym, an organization can determine whether there is a particular systemic inequity it must address.

The next edition of Our Shared Sector will help nonprofits begin to address each part of the DE&I acronym within their organizations.

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.

Nonprofit 411: MA Paid Family and Medical Leave: What Do Nonprofits Need to Do For the October 1 Deadline?

Nonprofit 411 Insource-minby Saleha Walsh, Insource Services

Massachusetts provided us with a summer break in delaying the implementation of the payroll taxes that will fund the new state paid leave program. Now it’s time to prepare to meet the upcoming deadlines that require employers to notify their employees of program benefits and to begin employer contributions and employee deductions.

As a reminder, key provisions of this new program include:

  • Paid state-administered medical leave (up to 20 weeks) and family leave (up to 12 weeks, and more for covered service members) beginning in January of 2012. Leave is capped at 26 weeks per year.
  • All Massachusetts workers (as defined in the law – employees and in some cases 1099 contractors) who work for covered entities are eligible for paid leave, limited exceptions exist.
  • A payroll tax payable through MassTaxConnect beginning effective 10/1/19 and paid quarterly. The initial tax contribution rates is 0.75% of a worker’s wages (up to $132,900 of wages).
  • To be eligible for benefits, an employee must have received earnings from present or former Massachusetts employers that are (1) at least 30 times his/her weekly benefit amount, and (2) at least $4,700 over the past 12 months.
  • Former employees meeting this financial eligibility test are also eligible if the leave begins within twenty-six (26) weeks after employment termination.

To meet the October deadline, employers should:

  • Determine if they are a covered business entity. While all employers must participate in the program, a covered business entity is one in which more than fifty percent of a business’s workforce is comprised of self-employed individuals (1099-eligible). A covered business entity is required to include all of the covered employees and contractors in the program.
  • Determine the size of the workforce. Those organizations with fewer than 25 eligible workers must transmit the taxes deducted through payroll deduction on behalf of their employees, but are not required to contribute to the tax. Those organizations with 25 or more employees are required to contribute a portion of the tax for their employees.
  • Consider seeking state approval of a private plan offering identical benefits and protections.
  • Begin to plan for policy changes, if needed, to provide time off and job protection in accordance with the leave act.
  • Submit quarterly wage reports on their workforce including 1099 contractors beginning in January 2020 for the last quarter of 2019.
  • Begin employee payroll deductions effective 10/1/19 and transmit by January of 2020 for the 4th quarter of 2019. For those employers with 25 or more covered workers, the state guidelines require employers to pay 60% of the medical leave share of the tax and employees to pay the remaining 40% through payroll deduction (the medical contribution represents 0.62 of the 0.75 tax).  Employers are not required to contribute to the family leave tax.  (Employers with under 25 workers are not required to contribute at all but must collect and transmit employee deductions for both family and medical leave.)
  • Display the MA Medical and Family leave poster where other employment posters are displayed, in multiple languages in some cases.
  • Distribute workforce notices (by 10/1/19 and upon hire thereafter).

For more information or to obtain sample notices and templates, go to https://www.mass.gov/info-details/paid-family-medical-leave-for-employers-faq and/or contact Insource Services (www.insourceservices.com).

 

Our Shared Sector: Four Ways to Become a More Inclusive Nonprofit Leader

by YW Boston

YW Boston 1-min

Studies have found that nonprofit organizations are suffering from racial and gender leadership gaps. Research shows that people of color have similar qualifications as white respondents and are more likely to aspire to nonprofit leadership positions, yet people of color are severely underrepresented in leadership positions within the nonprofit sector. This has left many nonprofits wondering how they can develop more inclusive leadership in order to successfully support diversity and inclusion within their organization.

We know that improving diversity and inclusion within an organization requires a team effort. DE&I experts stress the importance of organizational buy-in. Leadership, in particular, should be open to changes within the organization. Executive leadership and management can sometimes pose as gatekeepers to organizational change. Therefore, it’s essential for influential leaders to assess the inclusivity of their leadership. Inclusive leaders can become change agents and are a key element of successful diversity, equity, and inclusion efforts. Fostering inclusive leadership means that your organization is committed to seeking diverse viewpoints, particularly when it comes to decision making.

But what exactly is an inclusive leader? How does one become an inclusive leader and how can individuals assess their own leadership skills?

1. Value and leverage all points of view in order to make better decisions

Groupthink can stifle innovation, decision making, and hurt a company’s bottom line. A leader’s ability to leverage diverse viewpoints can become one of their most critical skills. Through improved collaboration and strategic decision making, inclusive leaders can positively impact business performance, professional development, and employee engagement within their organizations. Not only do diverse teams perform better, but there is also a penalty for less diverse companies.

2. Build the courage to challenge assumptions and practice accountability

Inclusive leaders tolerate risk and are willing to be the first to speak up in favor of changes within an organization. It takes courage to challenge the status quo and hold the organization, others, and ourselves accountable. Courageous leaders should practice self-awareness and regulation in order to lean into discomfort and address their own biases and limitations.

3. Are committed to intentionally creating more inclusive spaces

When an organization is inclusive, all members feel valued, respected, and confident in speaking up and being heard. An inclusive space makes everyone feel like they belong. Improving inclusivity requires a long-term commitment and intentional effort. This means that inclusive leaders should adapt their practices and allocate resources towards improving diversity and inclusion. By aligning DE&I efforts to personal values and business priorities, inclusive leaders can ensure lasting impact.

4. Analyze root causes before taking action

A systems approach, such as the iceberg model, can allow leaders to be more effective and inclusive problem solvers. The iceberg model looks at the various elements within a system that can influence each other. During YW Boston’s LeadBoston program, we challenge participants to critically assess challenges in order to differentiate between symptoms and root cause. This approach provides both the knowledge and the tools that allow leaders to identify attitudes, beliefs, and behaviors that may be reinforcing barriers to diversity, equity, and inclusion.

 

YW Boston 2-min

Source

This article appeared originally on the YW Boston blog.

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.

 

Nonprofit 411: How to Prepare for Having Your 990 Prepared

Nonprofit 411 Jitasa-minBy Jeremy Cork, Jitasa

Whether you prepare your own Form 990 or outsource it, you can make the process less painful by following some simple steps and gathering certain information well-before prep begins. There are (2) variations of Form 990: Form 990 (12 pages) long form or Form 990-EZ (4 pages) short-form.  The gross receipts of your organization are usually what determines which Form 990 you are required to file.

If your fiscal year ends on December 31, your Form 990 is due by May 15.  You do have the option to file a 6-month extension giving you a new/final due date of November 15.  The month following your fiscal year end is usually very busy; preparing and filing employee W2s and contractor 1099’s, preparing various reports, etc. By the time you are finished with those tasks, you’re now a month closer (or more) to your Form 990 due date.  The Form 990 has as nearly as many additional schedules as there are letters in the alphabet.  Knowing ahead of time which schedules may be required can save time, effort and reduce stress.  To see a list of additional schedules and instructions, visit the IRS link here: https://www.irs.gov/forms-pubs/about-form-990-schedules.

Some of these steps can only be done after your fiscal year ends, however, by understanding each step and being proactive, your 990-filing experience can come and go with ease. This list is not all-inclusive as each organization is different, however, many steps are common for all organizations. So here they are!

Steps for making 990 Prep less complicated and less stressful:

  • BE PROACTIVE: discuss with your team ahead of time rather than just before the due date.
  • Financial Review or Audit: Review the audit requirements for your state.
  • IRS Extension: Consider ahead of time if you think you’ll need to file an extension.
  • Review Prior-year Form 990: This will provide insight into what will be required for the current year.
  • Close Books for Year-End:
    • Reconcile ALL bank/checking/savings/investment accounts, etc…
    • Record any journal entries necessary; accruals, AR, AP, prepaids, depreciation, etc…
    • Perform year-end Book Review: Review all activity for all accounts.
  • Gather Financial Information:
    • Financial Reports.
    • Copies of W2’s and 1099’s.
    • Review list of Form 990 Schedules – compare to prior-year Form 990.
  • Non-financial Information:
    • Organization details; Name, Address, Phone #, Board of Directors.
    • Review Parts IV – VII on the 990 to determine which other information may be required.
    • Who will review and sign your 990 internally before the deadline?
    • May need to consider additional as well.
    • Timing: Provide ample time for Board Review and any comments or changes before the filing deadline. A board review is not required but is strongly encouraged.

It may seem like it takes more time to gather information than to prepare the 990, but the extra time spent before prep will pay-off in the end.  Whether your file a Form 990 long form or Form 990-EZ short-form, prep time can be drastically reduced by following the steps outlined above.  Understanding that preparing and filing Form 990 is extremely important to your organization and should not be an after-thought. Your mission, and the cause it supports, is much too important not to consider the importance of your Form 990.

Nonprofit 411: How Does the New Transportation Benefits Tax Impact Nonprofits?

Nonprofit 411 HemBar-minBy Brad Bedingfield, Hemenway & Barnes LLP

To the dismay of charities across the country, costs incurred in providing certain commuting and parking benefits to employees now result in a tax payable by the charity (or other tax-exempt organization).  This odd tax (for expenses incurred after December 31, 2017) can be found in section 512(a)(7) of the Internal Revenue Code.  The tax is framed as a deemed “unrelated business income tax” (or “UBIT”), and the costs that trigger this tax are treated as deemed “unrelated business taxable income” (or “UBTI”).  Treatment of these costs as deemed UBTI affects how the taxes are calculated, and what options an organization may have for avoiding or minimizing the tax.

What costs are taxable? 

For purposes of determining the amount subject to tax, we must focus on costs to the employer, not benefits to the employee.  Costs to provide commuter rail or subway passes, and for certain kinds of bus or van transportation, generally count as deemed UBTI only up to $265 per month (in 2019), whether those costs are incurred directly or by way of pre-compensation reduction arrangements.  Commuter parking benefits provided by way of payments to third-party parking vendors generally work the same way, with a similar effective $265 per employee per month cap in many cases.

However, things get much more complicated when a tax-exempt employer owns and operates its own parking lot or garage.  Countable costs may include a range of things, including employee costs, maintenance, snow and leaf removal, cleanup, insurance, real estate taxes, and so forth (although depreciation on the parking facility does not count as a cost for this purpose).  Once the aggregate costs for parking are tallied, the employer has to find a reasonable way to allocate those costs to employee use.  IRS Notice 2018-99 provides one method of doing that, but each organization should consult with its tax advisors to determine a reasonable method for that organization.

Does Massachusetts impose UBIT?

Massachusetts imposes its own UBIT as well.  Because of the way the Massachusetts tax code references the federal UBIT provisions, it appears that this deemed UBTI for the cost of commuting and parking benefits will be subject to Massachusetts tax for employers in corporate form, but not for employers in trust form.  Like the federal government, Massachusetts requires quarterly estimated payments in advance, although the schedules for payment are not identical.  Other states may have a separate UBIT as well, which may or may not incorporate this new 512(a)(7) tax.

Can the tax be avoided or minimized?

One way to avoid or minimize the tax would be to stop providing commuting or parking benefits (perhaps instead increasing compensation), but that may not be practical.  An organization that has certain kinds of losses attributable to unrelated businesses may be able to use those losses to offset this deemed UBTI, although other changes in the rules have made that more difficult, especially with regard to new (post 2017) losses.  Charitable contributions may be an elegant way to avoid or limit this tax.  Charities in corporate form can generally deduct up to 10 percent of their UBTI for charitable contributions, and those in trust form can generally deduct up to 50 percent.  However, for certain very limited kinds of disaster relief, Congress (by special legislation) allows deductions of up to 100 percent of UBTI.  The organization will still have to file the federal Form 990-T to report the deemed UBTI and claim any deduction, but this can be a handy way to turn a tax into a mission-furthering grant.

Possible repeal of the tax?

Given its bipartisan unpopularity, this tax may be repealed at some point.  For now, however, nonprofits need to be tracking and paying taxes on costs to provide their employees with commuting and parking benefits.

For an in-depth review of the new transportation benefits tax on nonprofits, MNN members can watch my April 19th webinar, “New Transportation Benefits Tax on Nonprofits,” in MNN’s Webinar Archives.

Brad Bedingfield is Co-Chair of the Nonprofit Group at Hemenway & Barnes LLP. Brad assists private foundations and public charities with navigating complex tax regulations and procedures, including receipt and disposition of complex charitable gifts and participation in innovative forms of impactful philanthropy.