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GuideStar Blog

From the President's Office, September 2007

Dear Friend:

There are less than two weeks left to file your comments with the IRS about the proposed changes to the Form 990.

Here at GuideStar, we are putting the finishing touches on our own comments before submitting them next week. [Update, September 14, 2007: You can now read GuideStar's comments.] We applaud the IRS for undertaking the difficult task of revamping the 990 and commend the service for the countless hours of work it has put into revising the form. In a sense, this is a historic moment: it is the first time since 1979 that the 990 has been completely overhauled. In the intervening 28 years the sector has changed dramatically. It's much larger, more diverse, under more pressure from clients and supporters, and subject to greater scrutiny from the general public.

We believe the new Form 990 should result in nonprofit reporting that is complete, accurate, and filed in a timely manner. Unfortunately, the current draft would require more information from many organizations filing it, and GuideStar believes it will likely result in more information that is inaccurate and incomplete. The complexity of the new form is likely to result in organizations requesting more extensions to file it and is likely to increase compliance costs for many groups.

GuideStar's comments are based on our role as a provider of nonprofit data—only some of it from the 990—to a broad array of millions of users, including individuals, board members, media, and service providers, as well as highly sophisticated nonprofit experts. From our perspective, the data found in the 990 are often confusing and misleading. Plus, the 990 is only one way people learn about a nonprofit organization, since there is a growing marketplace of voluntary disclosures.

Rather than providing a line-by-line analysis, our comments focus on the larger picture and present four key points:

  1. Less Is More.
    Form 990 should be simplified, and the highest priority should be placed on collecting data that are useful, complete, accurate, and timely.

  2. Minimize the Burden on Filers.
    The costs of compliance with the proposed form need to be balanced against the utility and accuracy of the information gathered. The proposed form's increased complexity will also work against improving the timeliness of the returns. GuideStar's own auditors have told us the cost of preparation will soar 50 to 100 percent in the first year of the proposed new form, or nearly $5,000. Multiplied across the entire sector, we think this is an unreasonable burden to impose on the nonprofit sector.

  3. Help Decision Makers.
    As a public disclosure form, the Form 990 (and the Summary Page) must present an accurate picture of the finances and activities of a nonprofit; the current draft does not meet this objective. In fact, it creates an inaccurate picture by presenting financial ratios and compensation data out of context.

  4. Don't Rush. Changing the 990 will affect the sector for years to come. GuideStar urges the IRS to take the time to gather the data needed to create the most effective return possible.

    Utility, accuracy, and timeliness can only be achieved in consultation with the organizations that file the 990 and the diverse audiences that use it. Many have already shared their feedback on the proposed form. The service should take further advantage of nonprofits' and the public's sincere desire to help the IRS achieve its goals.

What do you think? What will the new 990 mean to your organization? I'd like to hear your comments and suggestions.


Bob Ottenhoff
President and CEO

Selecting Accounting Software

Whether you're looking to upgrade your current system or to install accounting software for the first time, the steps to a successful transition from what you're doing now to more productive—and fun—days at work are in essence the same: determine what results you'd like to see (commonly called the "needs assessment" phase), research the available software options, and then select the best one that's within your budget.

Performing the Needs Assessment, or Describing the Perfect World

The ultimate purpose of accounting software is to report information in all the ways you need to see it. Most organizations "make do" at some level with inadequate output; the accountant or bookkeeper spends time at the end of each month and year combing through the general ledger for details or exporting data to Excel in order to create reports that the software can't or won't format properly.

In this phase of software selection, you get to dream. Leave the limitations of your current software behind and consider the reports that would make life easy, that you'd like to be able to produce with a few clicks of a mouse.

First, list all of the people and agencies you report to. Consider program managers, the executive director and other management staff, the board, the finance committee, the accounting department, the IRS, grantors and other funders, and your CPA auditor.

Next, look at the reports you produce now and design a new and improved version for each of them. Include any reports you can't create at all, drafting the layout you'd like.

Here are some questions to help you:

  • How many aspects of your organization will you want to use to sort your accounting data? Common ones, in addition to "accounts," are "activity" (you may call this one "function" or "program"), level of restriction, and grant. Your organization might need others, such as location or department.
  • Is your system set up to produce detailed budget-to-actual reports for managers of grants or programs and summarized reports for the board?
  • Did your auditor make journal entries last year? If so, was he or she making corrections you can prevent with better system design?
During this first phase, it's good to consider the other data management systems in your organization that you may want accounting to integrate with, such as fundraising or client management, so you can evaluate accounting packages from companies that market multiple products.

Other questions that aren't related to reporting but need answers before you go to the next step are:

  • How many people will use the software? How many of them will need to use it simultaneously?
  • What security or internal control difficulties would you like to solve?
  • What capacity limitations might your current hardware cause, and can you afford to upgrade?
  • Do you need to track payments due from clients, customers, or members?
  • Will you outsource your payroll to a service bureau?

Researching the Options, or Exploring the Unknown

Over the past few years, the accounting software industry has seen the same consolidation we've become accustomed to in the digital world at large, yet the number of options for software that is designed for nonprofits—or that claims to be—has increased as developers have seen business opportunities in the growing nonprofit field. Solutions are both simpler to use and more sophisticated in their output, and the range of prices has broadened at both the high and low ends.

I recommend having a general idea of how much your organization can spend while going into the research phase with a flexible attitude. To help you avoid sticker shock, software that might work for a nonprofit with a $2 million budget can cost as little as $200 for one user or as much as $20,000 for several users. On top of the purchase price, there will be installation and training costs that you will pay both directly to a third party and indirectly in the form of staff time.

With that in mind, let's look at software. Here are a few names to start with (editor's note: inclusion in this list does not indicate endorsement by GuideStar):

Sage Software has acquired several well-known, formerly independent brands, and two of them—MIP and PeachTree—are popular nonprofit applications. MIP was designed specifically for nonprofits from its very beginning over 20 years ago. PeachTree was written for small business and has had a version for nonprofits for several years. PeachTree is a less expensive, more limited product; MIP is sophisticated, flexible, and much more expensive.

CYMA and Cougar Mountain are both on the less expensive side and were modified for nonprofits from business applications.

Blackbaud is best known for its fundraising application, Raiser's Edge, and has had an accounting package, Financial Edge, for quite a few years. It's the most expensive of the products mentioned in this article.

If you want to look beyond these programs, ask other organizations' accountants what software they use and how well it works for them. It can be especially helpful to gather information from nonprofits whose services are similar to yours, whether or not you know the people there personally.

Consider how each type of software will work with your current hardware and operating system. Will you have the money to upgrade computers as well as purchase and install the software?

Once you've identified several packages that seem to fit your budget, try them out.

  • Download a trial version, post some transactions, and closely evaluate the program's ease of use and the reports it can produce.
  • Find out how many certified consultants there are in your area. Contact one or two and ask about their rates, how far into the future they're scheduled, how long a successful installation will take, how often the company charges for upgrades, how their annual maintenance plan works, and whether there's a user group in your area. You're trying to get a sense of how available the consultant will be and how much the software will continue to cost after it's up and running.
  • Determine whether the software can produce the reports you've designed.
You may find nonprofits similar to yours successfully using software that's not meant specifically for nonprofits. In my experience, such applications can work because of two features: they offer a segmented account structure, allowing you to set up as many segments as you need in order to produce the reports in your ideal world, and they can produce statements of activity that combine parts of more than one fiscal year, which means that producing a report on expenditures under a grant that has a different year than the organization's is no more difficult than producing a fiscal year report.

You'd be wise to look for those two features in the software that calls itself "nonprofit" as well.

Selecting the One That's within Your Budget, or Enjoying the Reality Check

These days, accounting software has been tested in the marketplace for many years, so it's hard to go completely wrong in your choice. If your current budget places too heavy a limit on what you'd like to do, consider postponing the conversion until the next budgeting cycle and apply for grants specific to improving accounting and reporting.

The last word to accountants and bookkeepers: although this process should involve other managers in the organization, don't let anyone who knows less about accounting software than you do make the decision for you.

Nancy Church, CPA, Not-for-Profit Accounting Help
© 2007, Nancy Church

Nancy Church is the founder of Not-for-Profit Accounting Help, a resource for nonprofit bookkeepers and financial managers. She has been licensed as a CPA in Oregon since 1987 and has 20 years' experience working with nonprofits as a board member and finance committee member, independent auditor, part-time accountant, director of finance and administration, and consultant to educational, community, and environmental organizations.

If You Write It (with Emotion), They Will Give

Excerpt from How to Write Fundraising Materials That Raise More Money: The Art, the Science, the Secrets

Mostly, people give from the heart. The head is a bit player.

We assume just the opposite. In our post-industrial, technologically enhanced world, we worship reason. We believe that reason, our ability to work our way intellectually through problems, sets us apart as a species and yields huge benefits. And it does.

But reason has surprisingly little to do with decision making, neuroscientists now know. (Delicious irony there: science proves that emotion, not reason, controls most choices.)

Top Five Ways to Show Your Board That You Value Them

Reprinted from Benevon

Ask yourself this question in every interaction that you have with each board member: is this how I would treat a major donor whom I was cultivating to ask eventually for a large gift? Here are five ways to show your board members how much you value them:

  1. Honor their commitment to your mission. Even if you occasionally question their passion for your work, give them the benefit of the doubt. There are plenty of other nonprofit groups that would love to have them on their boards, so if they have chosen to serve on your board, it's pretty safe to assume that at least some part of your organization's mission appeals to them.

  2. Honor their time. Board members are volunteers—not paid staff. They weren't signing on for a job when they agreed to serve on your board. Be respectful of the other things they have going on in their lives. Don't bother them with the small stuff. Before asking them to make phone calls, fill tables, come to meetings, or sign letters, ask yourself: would I bother the biggest donor in town with this sort of thing?

  3. Honor their brains. These folks are smart—technically smart, people smart, and financially smart. In some cases they are just plain wise. Use their time to gather their input on the strategic issues that will help shape your future, not on the smaller tactical details. They will naturally offer to help you on the tactical pieces if they have helped to create or shape the larger strategy and direction. (And they will also be more likely to fund it!)

  4. Honor their contacts. Board members know that you know who they might know. Respect those relationships by asking board members to invite their friends and colleagues to events at or sponsored by your organization, rather than rushing in to ask their friends for money. Treat your board members as distinguished ambassadors, not as salespeople for your work.

  5. Honor their privacy. If this were the biggest donor in your community, perhaps you'd use a little more discretion. Leave messages with their secretaries—don't call them at home or e-mail their private address unless they've given you explicit permission to do so. Any information you have about their lives that could be regarded as private must remain confidential. Err on the side of discretion and courtesy. Be respectful.
Terry Axelrod, Benevon
© 2007, Benevon

Terry Axelrod is the founder and CEO of Benevon (formerly Raising More Money), a Seattle-based organization that has trained and coached more than 3,000 nonprofits to build sustainable funding from individual donors. For more information, go to

Transferable Skills Open New Talent Pools to Nonprofits

Many career counselors advise nonprofit job seekers—especially sector switchers and recent graduates—to identify and market their transferable skills. Do organizations really consider these candidates without feeling as if they are taking too great a risk? How open-minded are nonprofits when it comes to looking at candidates that offer skills and experiences gained in other sectors or environments?

In a sector of close to 2 million organizations, the answer is: it depends. Organizations that consider themselves entrepreneurial are generally open to hiring talent from other sectors or nontraditional backgrounds. For many organizations, candidates with transferable skills are welcomed in some job functions, such as operations, management, and finance, but not in others, such as fundraising and program management.

Cultivating a broadly skilled talent pool is key to developing the next generation of nonprofit talent. In the current climate of explosive organizational growth and the pending retirement of "baby boomer" leaders, there will be a huge need for new talent in every functional area in the very near future. These issues require us to start thinking creatively about what a qualified and skilled nonprofit professional looks like, and to be willing to embrace the potential impact of hiring people with transferable skills.

The Softer Side of Skills

In the nonprofit sector, soft skills play a big role in hiring decisions. For example, in a recent inquiry conducted by Commongood Careers, a group of 20 nonprofit hiring managers ranked cultural fit and personality traits above more traditional hiring considerations of experience, skills, and education.

Knowing the soft skills that are most important to your organization allows you to consider candidates based on their personal qualities and abilities, in addition to the positions they have held or where they have worked in the past. Although desired soft skills vary between organizations, we've found that there are some personal qualities that span many nonprofits, including:

  • Being entrepreneurial
  • Being a self-starter
  • Having a positive attitude
  • Being resourceful
  • Working collaboratively
  • Being creative, particularly in a resource-constrained environment
To evaluate the presence of these or other transferable soft skills in potential hires, follow two rules of thumb: stay open-minded and do your homework. Begin by thinking broadly about a candidate's past experience in work, school, and civic life. Research the companies listed on candidates' résumés to understand their past work environments; many desirable soft skills are developed when working in start-up, fast-growing, or highly creative work environments. When speaking with candidates, ask for specific examples of times they were called upon to use a certain soft skill. Demonstrated past success is the best predictor of strong performance in a new role or organization.

In addition to evaluating a candidate's transferable soft skills, probe on personal qualities that demonstrate a mission-fit with your organization. Not all candidates are going to come to you with extensive work or volunteer experience in your specific field, but that does not mean they do not possess the personal qualities required to connect with and embrace your organization's mission. Share as much information as you can—including brochures, videos, or other collateral—with strong candidates in order to give them a sense of the importance of your organization's mission. With openness and candor on your part, candidates will understand the importance of your organization's mission and will be able to demonstrate their personal connection to it.

Are Hard Skills Really Transferable?

It's common for nonprofit hiring managers to have a very specific picture of the hard skills required for a given role. A grant writer needs to have written grants before. Someone working in community affairs must have experience with the community being served. But how hard and fast are these rules? What candidates might you be missing out on by not considering candidates with demonstrated success from different work environments or roles?

We mentioned earlier that many nonprofits are open to hiring people who possess hard skills in operations, management, and finance. Whereas skills required for these functional areas easily cross sectors, there are other skills that can also be successfully transferred to nonprofit roles, such as:

  • Sales and Marketing–Skills learned and honed in the fields of sales and marketing can be easily transferred to the field of nonprofit development and fundraising, which is the area of most need within the sector. Even if a candidate doesn't have direct experience in development (e.g., fundraising, grant writing, event planning, corporate partnerships), don't overlook candidates with hard skills in building high-touch relationships, producing collateral, giving presentations, or "making an ask." People with sales experience, particularly those with a background in identifying prospects and cultivating relationships, can often make a smooth transition into the field of major gifts fundraising. Finally, be open to considering candidates who possess experience in volunteer event planning or other fundraising activities, are members of a nonprofit board, or are strongly networked in philanthropic and/or corporate circles.

  • Writing and Research–Individuals with experience in journalism, corporate communications, and other fields that require strong writing skills can often leverage their transferable skills into other types of development and fundraising roles. Additionally, recent graduates from master of public administration (MPA) or master of public health (MPH) programs typically possess the research and writing experience needed to break into development.

  • Consulting–Management consulting experience is sought after in the nonprofit sector because of the analytical, research, project management, and client management skills that people with this kind of experience bring. Consulting experience transfers extremely well to certain roles, such as portfolio manager at a social venture fund or other areas where a nonprofit organization provides professional services to other nonprofits. Corporate partnerships, community outreach, and board relations are other roles in which consulting experience can be valuable.

    One challenge of transitioning from a management consulting (or other corporate) background to a nonprofit role is the shift from working for an internal client to an external one. For example, some management consultants work in the trenches of customer research but do not interact with clients face-to-face. When considering these candidates, probe their knowledge of and experience in client-focused environments and be prepared to connect these hires with mentors or other internal staff to support their transition.

  • Information Technology (IT)–Thinking creatively about IT staff can yield great results for nonprofits. Coined by as "accidental techies," administrative or operational professionals who have been responsible for technology and systems management in past jobs can easily transfer these skills to a nonprofit environment. Similarly, technology professionals who have been specialists in a large department or corporation, but who are seeking more autonomy and ownership of their work, also transfer well to the nonprofit sector. In addition to technology skills, look for strong customer service skills and a friendly, patient demeanor.
Finally, many graduate degree programs—particularly master of business administration, MPH, and MPA—provide excellent training in hard skills that can be transferred into a range of nonprofit roles. For example, most MPH and MPA programs require coursework in grant writing and nonprofit finance.

When it comes down to it, a candidate's past success using a specific set of skills and competencies is the best indicator of how he or she will perform in a new role. Whether a hire is new to a job function or to the sector, remember that this person's ability to call upon his or her soft and hard skills in a new role is what most ensures success. By considering candidates with a variety of transferable skills, you will diversify your staff and increase the impact of your organization.

Commongood Careers
© 2007, Commongood Careers

Commongood Careers is dedicated to helping today's most effective social entrepreneurs hire the best talent. Founded by nonprofit professionals, Commongood Careers offers personalized, engaged services to job seekers and organizations throughout the hiring process as well as access to a wealth of knowledge about careers in the social sector.

Structuring Roles in the Hiring Process

An important aspect of any effective search strategy is the search structure, which refers to the people who will be involved in each hiring process and the roles that they will play. Developing an appropriate structure for each search will ensure that the hire is made in accordance with the needs, values, and capacity of your organization.

In developing the search structure, you will want to make sure that the following stages in the search process are appropriately designated:

  • Who will provide overall management of the process?
  • Who will be involved in scoping the role and writing the job description?
  • Who will post the position and distribute it to your organizational networks?
  • Who will design the tools to be used at each stage of the search?
  • Who will provide administrative support (i.e., scheduling candidate interviews, communicating with candidates)?
  • Who will provide an initial screen of candidates?
  • Who will be involved in interviewing candidates?
  • Who will complete reference checks on finalists?
  • Who will be involved in decision making?
  • Who will make the offer and negotiate with the final candidate?
Generally, the categories of people who may be involved in these various stages include board members and other external constituents, internal hiring managers, administrative support staff, and human resources representatives. Who is involved in each stage depends on the following criteria:

  • Level of Position: Generally, the more senior the position, the more senior the group involved in the hiring process should be. For a CEO or executive director search, for example, it will be appropriate to have a search committee structure involving board members and possibly other external constituents (more on search committee structure below). For an entry-level position, it is possible (though not advisable) to have only the position's direct supervisor involved in the hiring process.

  • Style and Values of the Organization: Is your organization extremely collaborative or are decisions made by one or just a few people? Does your organization value input from various team members or is it more autonomous? If your organization values collaboration, then input from staff in any hiring process is probably important to consider, regardless of the level of position.

  • Structure of the Organization: Does your organization have a human resources department? If so, what is its role in any hiring process? It may range from leading the entire hiring process to only being involved in a sign-off for the final candidate. Similarly, does your organization have support staff? Many of the stages in the hiring process can be handled by strong administrative staff.

  • Availability: Finally, consider the availability of each of the groups you are thinking about involving. Of course, in most nonprofit organizations, everyone is already doing much more than their job description, but if you know that there is no way that one director will be able to dedicate the time to interviewing candidates for a particular position in the coming months, then there is no sense in including that person in the search structure. You want to make sure that the search will be able to progress quickly at each stage, with no roadblocks. When an organization has administrative support staff available, senior leaders will be more highly leveraged in a hiring process.

Common Search Structures

So, what are some options available to you? The following are four commonly used search structures:

Search Committees

Search committees typically comprise five to eight individuals and include representatives from a variety of organizational stakeholders, such as senior management, the board of directors, funders, and organizational members, participants, or alumni. The committee is typically chaired by a board member or whoever will supervise the hire, if different. Depending on the nature of the hire, internal staff may not be involved. This is especially true for high-level searches for a CEO or executive director, or for any search where information is confidential.

With a search committee, there are typically different roles for different members. At the start of the search, significant work is put into collectively scoping the position, identifying candidates within personal networks, and defining the systems needed to support the search—such as feedback collection and decision-making tools. Typically, the committee participates as a group in search-related tasks such as interviewing. The committee will also have regular meetings to review top candidates, share feedback, decide on next steps at each stage of the process, and ultimately make a hire.

While the committee members manage the majority of the search directly, it is preferable if there is administrative support available for the logistical aspects of the search, such as posting job descriptions and scheduling interviews.

Single Hiring Manager

In some cases, particularly for nonprofits with small staffs, a single hiring manager will be responsible for the majority of the search-related responsibilities. Typically, this individual is the person who will ultimately supervise the hire. Others might be involved in providing administrative support, but the onus of screening, interviewing, and decision making lies with the hiring manager. To manage a search adequately, a single hiring manager should carve out approximately two hours per day for search-related tasks.

In addition to owning or overseeing the many search-related tasks, the hiring manager is also responsible for communicating with other staff about the status of the search. This communication will help to prepare the organization for the addition of a new staff member and will initiate the before the hire is even made.

Group Process

For most hiring processes, a group process will be most appropriate and effective. There are a variety of ways to structure a group hiring process. In some cases, an entire department manages the search; in others, representatives from different functional areas may each own an aspect of the search. For more senior hires, a representative of senior management or even the CEO or executive director should be a member of the hiring team.

Like search committees, group hiring teams require a great deal of up-front planning and preparation, especially when creating systems and tools to facilitate the hiring process. For example, the group must decide how often it will meet, how it will debrief after meeting candidates, and what tools are required for collecting and assessing candidate information.

Groups will divide and conquer tasks, such as posting and sourcing, but may choose to collaborate on other tasks. For example, the group may work together to scope the role and write the job description or to create interview questions and evaluation tools. Typically, each member of the group will be assigned different roles during the actual interviews. In general, the person who will supervise the hire will handle the tasks of extending and negotiating the offer with the chosen candidate.

HR/Hiring Manager Partnership

For organizations with a human resources department, an HR/hiring manager partnership can make for a highly organized and professional search. In these searches, HR can participate in a variety of ways, from providing purely administrative support to acting as a liaison between the hiring manager and the candidate to having decision-making input. An HR representative can also act as a neutral third party when it comes time to make an offer and negotiate salaries. Candidates often appreciate the ability to negotiate their offers with someone who will not be supervising them directly.

For Quick Reference

To help inform what type of structure works best for your organization, consider the benefits and challenges of each search structure outlined in the table below.

  Benefits Challenges
Search Committee
  • Effective for high-level positions reporting to the board of directors, e.g., CEO, ED
  • Candidates gain diverse perspective into the organization through meeting a variety of stakeholders
  • Communicates a high level of commitment to this hire and shows respect for the search
  • Requires significant time
  • Can be difficult to get to a shared vision for process and decision making
  • Process can get extended due to the need for consensus building
Single Hiring Manager
  • Single vision for the role simplifies the process
  • Works well when hiring manager has internal administrative support or is working with an outside search firm
  • Process moves quickly
  • Hiring can be too subjective, e.g., hiring manager can be looking to replicate self in new hire or find someone to compensate for personal weaknesses
  • Can be hard to "sell" candidates on the position and organization when they just have one point of contact
Group Process
  • Involvement of multiple staff members brings diverse perspectives on position and organization
  • Onboarding and team buy in are built into hiring process
  • Can take time to develop tools and processes and make hiring decision
  • Roles of different staff members need to be communicated clearly to candidates
  • Risk of alienating staff who are not involved
HR/Hiring Manager Partnership
  • HR expertise woven into the process
  • Supervisor relieved of negotiation aspects of the offer
  • Can be seen as more bureaucratic
  • HR process can be perceived as a "hurdle" to candidates

Commongood Careers, September 2007
© 2007, Commongood Careers

Commongood Careers is dedicated to helping today's most effective social entrepreneurs hire the best talent. Founded by nonprofit professionals, Commongood Careers offers personalized, engaged services to job seekers and organizations throughout the hiring process as well as access to a wealth of knowledge about careers in the social sector.