The GuideStar Blog retired September 9, 2019. We invite you to visit its replacement, the Candid Blog. You’re also welcome to browse or search the GuideStar Blog archives. Onward!

GuideStar Blog

New Year, New Congress, New President: What’s It All Mean for Nonprofits?

By awarding control of Congress and the White House to one party, voters acted to repeal federal government gridlock. A surge of activity has already started and will accelerate once the new president is sworn in later this week. Significant executive and legislative changes are a near certainty. Some changes will affect nonprofits and foundations directly. Other changes—whether viewed as gentle ripples or violent tsunamis—will be felt when the federal changes hit the state and local levels for implementation.

Influencing Public as Well as Philanthropic Efforts

As members of the independent sector, we continuously strive to increase our impact in the focus areas of our missions.  We think creatively, plan scrupulously, collaborate where possible, and work hard at maximizing resources we can bring to move the needle.  Many thousands of volunteer and paid staff hours are spent in these efforts.  And, make no mistake, we definitely do move the needle and often have demonstrable impact.  But could we have more impact with similar levels of effort if we focused them differently?

Interview with Muhammad Yunus

Nonprofit Financial Statements: Change is Coming

This March, the Financial Accounting Standards Board (FASB) – the organization that establishes financial accounting and reporting standards – will release a first draft of the new financial reporting changes for non-profit organizations. The good news: everyone in the non-profit space can have a voice in accepting or rejecting the changes. It is highly recommended that all non-profits and financial statement users share their opinion with FASB – good, bad, or otherwise – since it will impact reporting requirements.


Image source: Juvenile Justice Blog

Q&A: What are the advantages and disadvantages of selecting the IRS 501(h) lobbying election?

Generally, the IRS limits lobbying by a public charity to what is called an “insubstantial” amount of its overall activity. Because the meaning of that word is obviously open to interpretation (and disagreement), over the past 40 years, Congress has attempted to clarify what is or is not considered excessive lobbying.

Tax Exemption at a Crossroads?

In the wake of the IRS issues with determining the tax-exempt status of organizations that had applied for 501(c)(4) status, there seems to be more and more discussion about the purpose of tax exemption in the first place, and what sorts of activities should be supported by tax-exemption and other tax breaks. Senate Finance Committee Finance Chairman Max Baucus (D-Mont.) and ranking Republican member Sen. Orrin Hatch (Utah) have proposed starting with a blank slate and forcing other Senators to make anew the case for any tax breaks that they favor.

Update on the Overhead Myth Campaign

In mid-June, our CEO, Jacob Harold partnered with Charity Navigator and the BBB Wise Giving Alliance to pen an open letter to the donors of America denouncing the "overhead ratio" as a valid indicator of nonprofit performance. The letter and accompanying campaign marked the first time in history that the leaders of the country's three leading sources of information on nonprofits had spoken clearly with one voice: overhead is necessary to nonprofit success.

So far, more than 2,300 people have signed the pledge to end the Overhead Myth. The comments we've received have only affirmed our conviction. For example:

I am a professional that works exclusively with nonprofits, and I absolutely agree that the emphasis on overhead leads to a lack of investment in the business of being a nonprofit that seriously jeopardizes long-term performance and fulfillment of the charity's mission.

—Christa Divis, CPA, MBA

It's about time. The story you shared is being played out again and again by hundreds of nonprofits setting themselves up for failure. Like any industry aiming for long-term sustainable success, International Development needs systems, tools, HR, and general infrastructure, all of which require appropriate investments.

—Paula MacKinnon

Thanks for your leadership in making it clear that overhead ratios are not a way to assess the effectiveness of nonprofits. The field has unfortunately allowed overhead to become a proxy for understanding how well a nonprofit is managed. As we move away from using overhead numbers, let's focus even more rigorously to understand what factors truly matter for nonprofit effectiveness—and how funders can help!

—Mario Morino

Of course, some people have also raised concerns—especially around fundraising expenses. The detractors have a point: an established charity that devotes most of its expenses to fundraising should be carefully scrutinized. We addressed this question in more detail on our blog.

Ultimately, the overhead ratio doesn't get at what really matters when you're evaluating a charity: how well it accomplishes it mission. Impact is what really matters. We at GuideStar are working hard to bring you more and better information about nonprofit impact and success. Between the GuideStar Exchange, Great Nonprofits stakeholder reviews, and Philanthropedia expert recommendations, we are giving you the tools to make better philanthropic choices.

It's not too late to take part in the campaign. Please visit to sign the pledge and spread the word.

Kjerstin Erickson
© 2013, GuideStar USA, Inc.

Kjerstin Erickson is a special projects fellow at GuideStar who is about to leave us for the adventures of graduate school. We send her off with our thanks and best wishes for continued success.

IRS Updates, July 2013: Optional Expedited Application Process for Certain 501(c)(4) Exemption Applications, Nationwide Tax Forums, and More

It may be the dog days of summer, but IRS Exempt Organizations has been busy, busy, busy.

IRS to All Nonprofits: Pay Your Taxes and Document Your Pay!

Earlier this spring, IRS Exempt Organizations issued the long-awaited final report on colleges and universities. Although the report focuses on higher education, all nonprofits should take a look at it, because the IRS states that it has identified "some significant issues ... that may well be present elsewhere across the tax-exempt sector," including unrelated-business ventures and "the importance of using appropriate comparability data when setting compensation."