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Patrick Ferraro

Recent Posts by Patrick Ferraro:

New Survey Looks at Tomorrow's Nonprofit Leaders

When the Baby Boomers begin to retire en masse from the nonprofit sector, will the next generation be ready to replace them? And more important, will they be willing? These crucial questions are addressed in a new survey, Ready to Lead, conducted by the Meyer Foundation in cooperation with CompassPoint, the Anne E. Casey Foundation, and Nearly 6,000 individuals took part in the survey, the majority of whom were employed within the nonprofit sector at the time, none of whom had ever served as an executive director.

Undertaken in September 2007, the survey is a follow-up to the 2006 report Daring to Lead, which revealed that three-quarters of current nonprofit executive directors planned to leave their positions within five years. The reasons given included general burnout and insufficient compensation for their efforts. This new survey suggests that the next generation of potential executive directors is well aware of this dissatisfaction and that they are watching it closely as they carefully choose the next steps on their career paths.

Although the results of the latest survey show an encouraging attitude among members of Generations X and Y toward the pursuit of a meaningful career in public service, they also reveal the numerous perceptions and stark realities that could drive potential leaders away from the nonprofit sector. The majority of the survey's participants had doubts about the financial viability of a nonprofit career, most notably worrying about their retirement years. More than two-thirds of the participants reported that they feel they are currently undercompensated.

Additionally, where about a third of those surveyed aspire to the position of executive director, the results show that many feel they are not being properly mentored to step up to leadership positions within their own organizations. This feeling supports—or perhaps feeds off of—the general perception that nonprofits tend to turn to outsiders for top positions rather than hiring from within as private businesses are prone to do. Another notable obstacle revealed is the participants' fear of being held responsible for an organization's fundraising efforts, more specifically the fear of being held responsible for failing to secure enough money.

As the workforce contracts with the departure of the Baby Boomers, competition for future leaders is expected to increase sharply. The nonprofit sector will have to battle with the government and private business sectors for the right to hire the next generation's best and brightest. So will nonprofits be able to compete despite these negative perceptions? Despite generally offering less money and fewer benefits?

The study concludes that the promise of direct involvement in social change continues to draw in potential leaders despite the sector's disadvantages, perceived or otherwise. The report strikes a strong cautionary note, however, as to the urgent need to take steps to make the sector a more attractive employer. The analysis outlines specific suggestions, including replacing dated power structures, paying employees reasonable salaries, and providing sufficient benefits. Current executive directors are urged to be better mentors and engage in serious succession planning.

The complete survey results and detailed analysis are available at both Meyer Foundation and CompassPoint.

Patrick Ferraro, June 2008
© 2008, Philanthropic Research, Inc. (GuideStar)

Patrick Ferraro is a freelance writer in Seoul, Korea, and a former editor of the Newsletter.

Keep Out of Politics: The IRS Political Activities Compliance Initiative

With the 2008 presidential campaign season officially upon us, some nonprofits and their employees could soon find themselves faced with gray areas regarding the types of political activities they may or may not be permitted to become involved with.

The issue is a serious one: engaging in prohibited political activity can result in excise taxes or even loss of tax-exempt status. In 1992, the Landmark Church in Binghamton, New York, took out newspaper ads opposing Bill Clinton's candidacy for president. Three years later, the IRS revoked the church's tax exemption. A federal judge and then a federal court of appeals upheld the IRS's decision.

On the surface, the rules are pretty simple. The Internal Revenue Code states that
501(c)(3) tax-exempt organizations may not "participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office." Within set limitations, however, these same organizations are permitted to advocate for or against specific issues or ballot initiatives.

To ease the burden of ambiguity, the IRS has announced that its Political Activities Compliance Initiative (PACI) is once again in effect. Education is one of the two main themes of this program, as the IRS seeks to ensure that charitable organizations have easy access to the information they need to make the proper decisions regarding political activities.

"We take very seriously our obligation to ensure that tax-exempt organizations have the information they need to make the right decisions about political campaign activities," said Steven T. Miller, commissioner of the Tax Exempt and Government Entities Division at the IRS. "The vast majority of organizations want to do the right thing, and, as in past years, we will continue our efforts to make sure they have the information they need."

Enforcement is the second theme of the program, with the IRS Exempt Organizations Division making it clear that it intends to impose these restrictions—as well as the punishments that stem from their transgression—both firmly and fairly.

In the interest of education, the IRS has:

IRS Updates, May 2008: Intermediate Sanctions, Instructions for Filing the New Form 990, and Mor

Final Regulations on Intermediate Sanctions

If your organization is still struggling to understand fully the definition and implications of excess benefit transactions, take note. The IRS has issued its final regulations on intermediate sanctions, the penalty imposed on nonprofits that are deemed to have overcompensated CEOs, board members, and other "disqualified" individuals specified in the regulations. Rather than enacting substantive changes to the proposed regulations set forth in 2005, the final document attempts to clarify complex issues with specific examples and to serve as a guide for potentially troubled organizations.

Among other points, it emphasizes that any reasonable attempts at enacting safeguards against excess benefit transactions will be treated as a favorable factor if transactions are later deemed to be excess benefit transactions. Self-identification of excess benefit transactions and the implementation of corrective measures before the IRS becomes involved are also factors that the IRS will take into account when deciding whether or not to revoke tax-exempt status because of excess benefit transactions.

Draft Instructions for the New Form 990

A draft of the instructions for completing the redesigned Form 990 has been released by the IRS and is now open for comments from the public. Enhanced with such features as a glossary of terms and a table for determining how and where to report various forms of compensation, the instructions also include a line-by-line breakdown that guides filers through each question of the form and its attached schedules.

In the interest of increasing clarity and reducing complexity, the IRS is now soliciting comments on all aspects of the draft instructions. The IRS has also included with the draft a list of items within the instructions that the service is especially interested in receiving feedback on. Comments will be accepted until June 1, after which time they will be posted on the IRS Web site.

Requesting a Form 990-T

The IRS has also recently released an announcement outlining the procedure required to request a copy of Form 990-T, the form 501(c)(3) organizations file to report unrelated business income. Forms that were filed after August 17, 2006, are available for public inspection upon request, as dictated by the Tax Technical Corrections Act of 2007. In order to request a Form 990-T, members of the public must fill out a Form 4506-A and mail or fax it to the IRS. More information >

E-Postcard FAQs Updated

Finally, for those small organizations now required to file a Form 990-N, also known as the e-Postcard, the IRS has posted an updated list of FAQs. These questions cover basic information, such as "Who must file the Form 990-N?" and "What information do I need to provide on the e-Postcard?" as well as more specific topics.

Patrick Ferraro
© 2008, Philanthropic Research, Inc. (GuideStar)

Patrick Ferraro is a freelance writer in Seoul, Korea, and a former editor of the Newsletter.

Everyone's a Winner on the GuideStar Exchange

The GuideStar Exchange Giveaway came to a close January 31, and on February 4, 10 organizations were randomly selected to share the $10,000 grand prize. Every organization that had been accepted as a member of the Exchange was automatically entered into the drawing. The Exchange is a new initiative at GuideStar, aimed at helping nonprofits share a greater scope of information on their goals and achievements with grantmakers and potential donors.

"I'd like to offer my congratulations to the Giveaway winners and my sincere thanks to everyone who filled out a GuideStar Exchange Form, thereby helping us create a valuable win-win situation within the nonprofit sector," said Bob Ottenhoff, GuideStar's president and CEO. "Participating organizations are rewarded with a richer report that can provide a more complete picture of their good works. Donors and funders benefit with easy access to more information on the nonprofits they support."

The following GuideStar Exchange members will each receive a check for $1,000:

Federal Agency Taps into the Power of the GuideStar Database

The General Services Administration (GSA) recently announced the addition of GuideStar products and services to its Financial and Business Solutions Schedule. As the agency that is responsible for facilitating the basic operations of other federal agencies, the GSA has recognized the GuideStar database as an effective means of providing federal employees with easy access to the information on nonprofit organizations that they need.

Part of the GSA's mandate is to procure a ready supply of the various goods and services that are required by the federal government. It does so by establishing pre-negotiated contracts with outside entities, including nonprofit organizations.

Federal grantmakers, contract procurers, regulators, and policy analysts all need timely and accurate nonprofit information. By accessing GuideStar products and services through the GSA Financial and Business Solutions Schedule, these employees will be able to make decisions with confidence and perform their duties with greater efficiency. And, of course, everyone benefits from a more efficient government.

The GSA Financial and Business Solutions Schedule offers federal decision makers the full range of GuideStar products and services, including GuideStar Premium, data sets, GuideStar Charity Check, the GuideStar Nonprofit Compensation Report, and much more. Click here for more information: GSA authorized price list.

Patrick Ferraro, February 2008
© 2008, GuideStar

Patrick Ferraro is a freelance writer in Seoul, Korea, and a former editor of the Newsletter.

Of the Columbus Foundation, PowerPhilanthropy, DonorEdge®, and GuideStar

The Columbus Foundation, one of the nation's largest community foundations, has launched PowerPhilanthropy, an on-line resource designed to connect people with high-quality information about local nonprofit organizations.

Based on the DonorEdge® community leadership process developed by the Greater Kansas City Community Foundation, PowerPhilanthropy features detailed profiles of more than 300 organizations from the Central Ohio region.

PowerPhilanthropy is available for use by the general public, with expanded information offered to the foundation's donors. Users can create personal accounts that facilitate secure and easy on-line giving.

What is GuideStar's connection to PowerPhilanthropy? GuideStar has partnered with the community foundations of the DonorEdge Learning Community in the interest of creating more grassroots, community-strengthening on-line resources. Currently, seven community foundations, including the Columbus Foundation, have adopted the DonorEdge process to serve their regions more effectively. Several other community foundations have also expressed interest in becoming part of the DonorEdge Learning Community.

GuideStar is working with DonorEdge to create a new generation of scalable, sustainable technology that can be replicated across the country. By creating regional knowledge banks that facilitate effective philanthropy, the DonorEdge-GuideStar alliance seeks to increase charitable giving, build public trust in the nonprofit sector, teach donors how to become smarter charitable investors, and help nonprofits successfully communicate the differences they are making in their communities.

IRS Issues New Implementing Guidelines for FY 2008

Are you interested in what's going on at the IRS? Curious about what they have planned for the year ahead? If so, it might be worth your time to take a look at the Implementing Guidelines for fiscal year 2008, which were recently issued by the Exempt Organizations Division. This document serves the dual purpose of taking a look back at the division's achievements during the past year and outlining its plans and strategies for the year ahead.

According to the guidelines, projects anticipated for 2008 include: (1) the redesign of Form 990, based on comments the division received on the draft version released in June 2007, and (2) several programs designed to control donor abuses, such as the over-valuation of non-cash contributions.

The document also contains brief summaries of three new compliance initiatives: a National Research Program that will focus on employment taxes; an Exempt Organizations Research and Compliance Initiative that will focus on colleges and universities; and a Voluntary Compliance Program that will assist non-compliant organizations in filing their required forms and avoiding penalties. (For more information on the Voluntary Compliance Program, see last July's "IRS Update.")

The division also plans on improving customer service by expanding on-line offerings for nonprofits. Projects include an electronic tracking system, a Web-based tool for guiding new organizations through the application process, and an expansion of on-line training programs.

If you'd like further details on these planned initiatives—and more—you can download a copy of the Fiscal Year 2008 EO Implementing Guidelines.

Patrick Ferraro, January 2008
© 2008, Philanthropic Research, Inc. (GuideStar)

Patrick Ferraro is a freelance writer in Seoul, Korea, and a former editor of the Newsletter.

Unveiled: The IRS Introduces the Redesigned Form 990

Updated to Serve a Changing Sector

For the first time since 1979, the IRS has completed a significant overhaul of the reporting form tax-exempt organizations are required to file each year. The redesigned Form 990 was officially released on December 20, 2007, approximately six months after the IRS introduced a draft version of the form and solicited comments from the public. Returns filed for the tax year 2007 will still use the current form, with the new form coming into use beginning with returns filed for tax year 2008.

The general purpose of the redesign was to update the Form 990 to reflect the many significant changes that have occurred in the nonprofit sector over the past 28 years, specifically addressing the increased demand for transparency and accountability.

After releasing the Form 990 discussion draft in June 2007, the IRS held a 90-day comment period, during which more than 3,000 pages of suggestions from the public were received in letters and e-mails. These comments were the basis of many of the modifications that were incorporated into the final version of the form.

Although there were some major changes, the final version retains the same basic format as the draft. There is an 11-section core form supplemented with 16 schedules lettered A through O, designed to replace the attachments that are currently used. The entire core form must be completed by all filers, but organizations are not necessarily required to fill out every schedule. The final version of the form features a checklist that will allow preparers to determine quickly which schedules are applicable to their organizations.

Other changes from the current Form 990 include a summary page designed to provide a financial "snapshot" of the organization and a section that requests information concerning the organization's board and governance policies.

Transition Relief for Smaller Organizations

In the interest of making the changeover easier for small organizations, the redesigned Form 990 will be phased in over a three-year transition period. The new form will be put into use beginning with tax year 2008 returns filed in 2009, but at the same time the threshold of eligibility for filing a 990-EZ will be adjusted to include more organizations. The Form 990-EZ itself will remain unchanged, although certain schedules from the new Form 990 will replace attachments that are currently used.

Starting with tax year 2008, the financial threshold for 990-EZ filing will be changed to gross receipts of less than $1 million and assets of less than $2.5 million. Over the next two years, however, this threshold will be gradually tightened, requiring more organizations to file the new Form 990. For tax year 2009, it will be adjusted to gross receipts of less than $500,000 and assets of less than $1.25 million, and in 2010 it will be set at gross receipts of less than $200,000 and assets of less than $500,000. Also effective for tax year 2010 will be a change in the threshold for 990-N (e-Postcard) filers, adjusting it from $25,000 to $50,000 in gross receipts.

There will also be a phased-in transition period for Schedules H and K, which were designed for hospitals and reporting on tax-exempt bonds. For tax year 2008, only some basic identifying questions will be mandatory, with the rest of the requested information considered optional. Beginning in tax year 2009, however, all of the information requested on these schedules will be mandatory for the organizations that are required to file them.

Responding to Comments from the Public

The final version of the new Form 990 features several major differences from the discussion draft. Notable changes include the decision to continue to allow group return filings and the addition of Schedule O, which provides organizations with space to include further explanations and relevant supplemental information.

Security concerns were also addressed. Organizations will no longer be asked to provide the private addresses of employees, officers, and board members. Furthermore, in the interest of protecting individuals in volatile areas of the world, Schedule F no longer requires organizations to list the countries in which they conduct activities—instead they are requested to provide a general region.

GuideStar took part in the public comment process on the discussion draft, offering an eight-page letter outlining our suggestions and concerns. Like many others in the sector, we were particularly concerned with the ratios and percentages that were featured on the summary page of the draft form. In the interest of providing a more complete and relevant picture of the filing organization, we suggested requesting preparers to supply two years of basic financial information that could be compared at a glance. This change was implemented into the final version of the form.

Other suggestions made by GuideStar (and undoubtedly others) that were incorporated into the final version of the Form 990 were: the removal of the request for the Social Security Number of the form's preparer in the Signature Block; moving the statement of program accomplishments to a more prominent position at the front of the form; and raising the thresholds for 990-N and 990-EZ filing.

"My colleagues and I applaud the IRS for listening to the diverse needs of the sector and for fashioning a responsible new Form 990," stated Bob Ottenhoff, GuideStar's president and CEO. "The revised return clearly reflects the service's consideration of the comments it received about the draft version of the revised form. My colleagues and I believe that these changes and the gradual introduction of the new form will increase the accuracy of the returns and mitigate the costs of the transition to the new form."

Learn More

The IRS plans on releasing draft instructions for the revised Form 990 sometime in the first quarter of 2008. In the meantime, GuideStar representatives will be speaking at conferences around the country on the changes to the Form 990 and what they mean to nonprofits.

Patrick Ferraro, January 2008
© 2008, Philanthropic Research, Inc. (GuideStar)

Patrick Ferraro is a freelance writer in Seoul, Korea, and a former editor of the Newsletter.

Get Your Organization Listed on the New GuideStar Exchange

Is it better to give or to receive? How about both? Members of the GuideStar Exchange give the public more information about their organization's mission and activities. In return, they receive the ability to customize upgraded GuideStar report pages.
Today's donors want more than your assurances that you're good people doing good work. They want to know how you define your mission. They want details about your programs and how those activities support your mission. They want to know how you use their contributions. And they're looking for measurable results.

The GuideStar Exchange is a new initiative designed to connect nonprofits with current and potential supporters. By leveraging GuideStar's vast on-line audience of grantmakers and individual donors, your organization can reach engaged donors and share a wealth of up-to-date information with them.

"Individual donors and professional grantmakers come to GuideStar every day to find information about nonprofits they are interested in," said Bob Ottenhoff, GuideStar's president and CEO. "These donors are empowered and engaged in their philanthropy. The most successful nonprofit leader is proactive in sharing information. A listing on the GuideStar Exchange extends your marketing reach by meeting these donors where they are and giving them what they have come to expect—accurate and timely information about your mission, your programs, and your funding needs."

There is no cost to have your organization listed on the Exchange. Any nonprofit that has an official IRS letter of determination and conducts an annual audit is invited to apply for membership. If your organization is accepted, you'll have the opportunity to create customized report pages that feature richer information and greater visual appeal. If you act before January 31, 2008, you will also receive a free one-year subscription to GuideStar Premium (a $1,000 value).

As a member of the GuideStar Exchange, you'll be able to upload your organization's logo to your GuideStar report pages, along with photos, video, and recent news items. You'll also have the option to post direct links to your Web site and your most recent annual reports as well as a list of three "wishes"—timely appeals for the specific donations your organization needs.

GuideStar is also offering a special $10,000 Sweepstakes Giveaway as an added bonus to early adopters. Ten organizations that have been accepted as members of the Exchange will be randomly selected and awarded $1,000 each. Keep your eye on the GuideStar Web site for the official contest rules.

The GuideStar Exchange will launch on December 15. Be sure to come back and get listed on the Exchange, then use your enhanced report pages to give grantmakers and individual supporters the information they need to connect with your organization.

Patrick Ferraro, December 2007
© 2007, Philanthropic Research, Inc. (GuideStar)

Patrick Ferraro is a freelance writer in Seattle and a former editor of the Newsletter.

Signs of Stability: Results of the 2007 GuideStar Nonprofit Economic Survey

For the past six years, GuideStar has been asking nonprofit representatives to compare their organizations' current situations—in terms of services provided and donations received—to the previous year. Certain trends have become evident in the past few years: a majority of organizations reporting that their contributions had increased or remained the same and a majority reporting an increase in the demand for their services.

Both of these trends continued in 2007, pointing to a stability in the steadily expanding nonprofit sector, despite the uncertainty of the current economic climate. A general feeling of optimism about the coming months was also in evidence, as a majority of organizations that rely on end-of-year contributions indicated that they were anticipating an increase in gifts during the 2007 giving season.

"We are pleased that support for nonprofit organizations has increased this year," stated Bob Ottenhoff, GuideStar's president and CEO. "We are also glad that, despite fluctuations in the economy, so many in the sector are optimistic about end-of-year giving. As demand for nonprofits' services grows, however, it is more important than ever that Americans support the vital programs offered by the nation's charitable organizations."

Contribution Levels

When survey participants were asked about contributions received over the first nine months of 2007 as compared to the same period last year, the results were in line with the past three years.

Change in Contributions

GuideStar Survey Contributions Decreased Contributions Stayed about the Same Contributions Increased Don't Know
October 2007 19% 25% 52% 4%
October 2006 19% 27% 50% 4%
October 2005 22% 26% 49% 3%
October 2004 23% 24% 50% 3%
October 2003 35% 22% 39% 4%
November 2002 48% 22% 28% 3%

Representatives of organizations that receive the majority of their contributions during the last three months of the year were also asked how they anticipated 2007's year-end giving to compare to the same period in 2006. The results display a positive attitude toward expectations for the upcoming giving season, with 28 percent of respondents anticipating contributions would remain about the same and 60 percent anticipating that they would exceed the 2006 levels.

Demand for Services

As has been the case for the past four years, a majority of survey respondents reported an increase in the demand for the services their organizations provide over the first nine months of the year.

Change in Demand

GuideStar Survey Demand Decreased Demand Stayed about the Same Demand Increased Don't Know
October 2007 5% 25% 67% 3%
October 2006 4% 23% 72% 2%
October 2005 5% 24% 70% 2%
October 2004 5% 23% 71% 2%
October 2003 6% 22% 70% 2%

For the third straight year, the greatest percentage of organizations reporting an increase in the demand for their services identified their mission as pertaining to Food/Agriculture/Nutrition. The categories with the smallest percentage of organizations reporting an increase in demand for services included Arts/Culture/Humanities, Medical Research, and Science and Technology Research Institutes.

Grantmaking Organizations

Nearly 20 percent of the participants in the survey indicated that the organizations they represent were either a private foundation or a grantmaking public charity. More than half of these organizations reported an increase in the dollar amounts they had awarded in the first nine months of 2007, with only 12 percent reporting a decrease.

Change in Amounts Awarded

GuideStar Survey Amounts Awarded Decreased Amounts Awarded Stayed about the Same Amounts Awarded Increased Don't Know
October 2007 12% 33% 52% 3%
October 2006 14% 32% 52% 3%
October 2005 13% 38% 47% 2%
October 2004 19% 33% 45% 2%
October 2003 32% 35% 32% 2%
November 2002 40% 28% 18% 15%

Representatives of these organizations were also asked to compare the number of grant applications they received during the first nine months of 2007 to the same period in 2006. Eighty-nine percent reported that this number had either increased or remained the same.

Differences by Location and Organization Size

When the survey results were broken down regionally, there was little difference of any statistical significance from the national results, both in contributions and demand for services. Representatives of larger organizations with annual expenditures of $5 million or more were the least likely to report a decrease in contributions as well as the most likely to report an increase. Organization size, however, didn't appear to affect demand for services.

See the complete survey results, including regional and mission-based breakdowns

About the Survey

In October 2007, GuideStar invited newsletter subscribers who had identified themselves as representatives of either a public charity or a private foundation to participate in its annual survey on nonprofits and the economy. Responses were received by 4,173 individuals representing at least 3,587 nonprofit organizations of varying sizes and missions located in all 50 states as well as the District of Columbia.

Patrick Ferraro, December 2007
© 2007, Philanthropic Research, Inc. (GuideStar)

Patrick Ferraro is a freelance writer in Seattle and a former editor of the Newsletter.