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Cannabis-related Contributions: Should you accept them?

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The growing and selling of marijuana is almost officially legal in San Luis Obispo County. In fact, the San Luis Obispo County Board of Supervisors is currently scheduled to adopt a permanent ordinance for cannabis land use regulations on October 3, 2017. In the next few months, marijuana promises to become very big business in our local economy – a potential challenge or an opportunity for many local nonprofits.

As the legal cannabis industry grows, is your nonprofit ready to accept or deny charitable contributions from cannabis-related businesses? If not, it may be time to have a board discussion on the topic. It may take several years before the legal regulations governing cannabis-related contributions – if there will be any – are fully defined. In the meantime, it would be wise to have a formal policy to guide your organization.

Here are a few points to consider: 

If the funds being donated were obtained from legal means, you may accept them. Never knowingly accept donations that come from revenues related to the sale of heroin or other illegal drugs or activities. Be sure to define a process for vetting donors before accepting gifts. The California Secretary of State’s website can be helpful in verifying legitimate businesses and personal references can be a resource for vetting individual donors you may not know.

And, speaking of legal parameters, there is some current confusion on this topic for nonprofits that receive federal funds. Most federal grant contracts stipulate that the recipient organization must not violate any federal laws and doing so will cause a forfeiture of the federal funds. However, while selling and using marijuana for recreational purposes currently remains a federal crime, there is no federal or state law prohibiting nonprofits from accepting gifts from cannabis businesses. As long as your nonprofit is not growing, selling, or distributing recreational marijuana, you will be in compliance with federal laws. (As always, be sure to carefully review and abide by all federal contract provisions as they may evolve and change.)

Because marijuana is being legalized in California, the debate to accept contributions from the cannabis industry is less a legal one and more an ethical one. It’s up to your board of directors to determine what are the ethical standards or expectations to which your organization will adhere. As an example, consider a tobacco business wants to make a donation to a cancer-related nonprofit. There are two schools of thought the nonprofit could employ:

  • The tobacco business is causing the problems we are trying to solve. Why shouldn’t it be held accountable and contribute to the solutions we are creating?
  • The tobacco business is causing the problems we are trying to solve. It is an enemy to our mission and we cannot be associated with it in any way without losing our credibility and integrity.

Both are points are fair and reasonable. Does the use or growing of marijuana negatively affect the work of your organization? Will accepting a contribution from a cannabis business cause you to lose the support of donors? Can you afford to lose those donors? Alternatively, if accepting a significant donation from a cannabis business will allow you to dramatically increase the number of clients you serve, do you have an ethical obligation to accept it in order to do more of your good work? Again, there is no single “right” answer that will serve all nonprofit organizations. It’s up to you to determine which answer best serves the men, women, children, plants, and/or animals who rely on your mission and programs.

Lastly, take steps to understand what is motivating a cannabis business to make a donation to your organization. Cannabis business are not recognized by the federal government. And, it is the IRS, a federal agency, which authorizes tax deductions for charitable contributions. Therefore, unlike other businesses, cannabis businesses will not be able to receive a charitable deduction for the gifts they make (at least until federal law changes). Is the cannabis business making a contribution in hopes of receiving brand exposure or awareness? If your nonprofit serves minors, promoting a cannabis business may present an ethical conflict. On the other hand, if the cannabis business is making a contribution in honor of an employee or friend who benefited from your program, no ethical conflict may exist.

If you decide to accept contributions from cannabis businesses, remember to:

Update and/or finalize your nonprofit’s gift acceptance policy accordingly. It’s hard to anticipate every unusual gift you may be offered, so be sure to outline conditions when legal counsel will be sought for guidance and to ensure legal compliance. Remember, Spokes has sample policies to help guide you.

Keep it in California. Only accept gifts from those recognized businesses that are incorporated and located in California. If a cannabis business located in Arizona (where selling recreational marijuana is illegal), or even Washington (where selling recreational marijuana is legal), wants to make a donation to your organization, be cautious and avoid the risk. Especially if you are exchanging any goods or services for the gift (e.g. tickets and advertising for an event sponsorship). Conducting business across state lines could place your nonprofit in the jurisdiction of the federal government and a tricky gray area.

Be consistent. Once you set your policy, stick to it and treat all donors the same. Borrowing from the example above, if you feel it is unethical to promote a cannabis business as a donor because your organization serves minors, you’ll need to hold the same standard for the many wineries and breweries that generously contribute to the nonprofit sector and also sell a product that is illegal for minors.

Follow your mission – doing so will always protect your organization. Various government agencies and the insurance industry are still grappling with how to define and protect the insurable interests relevant to cannabis businesses. To protect your nonprofit from a potential or emerging insurance risk, always use the donated funds received for clearly defined mission-related activities and expenses. Avoid accepting restricted gifts for new programs or activities requested by the cannabis business donor that are not closely aligned with your mission or current strategic priorities.

File IRS tax form 8300 when you receive more than $10,000 in cash from a single donor in a single donation or two “related” donations. For now, most cannabis businesses are unable to bank like other businesses and are forced to operate on a cash-only basis when paying for everything from rent to contributions. To protect your organization from unwittingly participating in illegal money-laundering activities, complete and file form 8300 within 15 days of receiving the funds. Ask a CPA for guidance, as necessary.

Continue your board’s discussion of the ethical concerns they may have regarding cannabis-related contributions (as well as all other types of contributions). Good leadership requires a willingness to make the best decision possible with the information that is currently available. As new information and understanding becomes available around the cannabis industry, new decisions may be necessary. Evolution is expected and responsible. Discuss, decide, and document your process.

We will continue to research issues related to cannabis-related contributions and look forward to updating you on new information and best practices we discover. If you have a related experience or story to share with us and the Spokes community, please contact us.

Ditching Technology (just this once) May Bring Your Nonprofit More Money

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It’s almost that time of year to start drafting your annual appeal. You may be debating about an all-email campaign or a written campaign. Turns out, a solicitation that is printed mail solicitation may be more successful. And, a phone call, may be even more so.
Yup. Technology may not be the solution for every potential donor you have. You may already know that Baby Boomers like to read their mail, but did you know that Millennials love to receive mail, too?
The Nonprofit Quarterly article, “The Case for Going Low Tech in Communications and Fundraising”, written by Sheela Nimishakavi offers some good advice:
Only use digital communication  AFTER you have already created a connection with a prospect or donor through other means (unless the prospect/donor has indicated a preference for receiving communications digitally).
Nimishakavi writes, “The golden rule of stakeholder engagement still applies – digital communication is good, phone is better, but in-person is the best.” Read her entire article here and consider making a few follow-up phone calls or visits after your solicitations are sent this year. Good luck!

The Secret to Successful Board Meetings?

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The Secret to Successful Board Meetings? Great Facilitation.

Think back to the last time someone invited you to sit on a nonprofit board. If you’re like most folks, the first thing that popped into your mind was something related to board meetings… how many board meetings do I have to attend, how long are they, will I be wasting my time…?

No one joins a board because they want to go to board meetings; folks join boards because they want to help make the organization’s mission a reality. But, here’s the catch:

Well-attended and well-facilitated board meetings are critical to the organization’s ability to achieve its goals.

So, now, think back to the last board meeting you attended. Did you leave the meeting feeling it achieved something valuable in pushing the organization towards its goals? Did you feel your time was well-spent? Did you walk out of the meeting with understanding and agreement on what actions were needed from your colleagues and you? Were you glad you attended and proud of your affiliation with the organization?

No? Not exactly? Do you relate to the cartoon above?

If so, there’s a good chance that your organization is making a few cardinal mistakes that sabotage the nearly 11 million meetings held in the US each day:

  1. Failing to design your meeting agenda for success – a task that begins at least a week before your meeting.
  2. Failing to properly prepare meeting participants by sharing your agenda and relevant information prior to the meeting.
  3. Failing to understand how groups make decisions. Not supporting the process required for the particular action/decision your group is considering.

An Easy New Way to Connect with Grantmakers…

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Spokes Members can now connect grant research and personal relationships through LinkedIn

The most successful grants are always the ones that come as the result of a personal connection with the granting organization. But, making a personal connection can be much more challenging than writing a compelling narrative. What’s a grantwriter to do?

Never fear! Foundation Directory Online has the perfect solution for you!

Foundation Directory Online just announced a partnership with LinkedIn that will allow you to quickly and easily identify personal connections between your board members and key staff members of granting organizations. Spokes Members can simply log onto Foundation Directory Online, select a foundation, view its profile, and look for the LinkedIn logo to see who in your network knows someone at the foundation.

In order to take full advantage of this new system, be sure to establish an organization profile on LinkedIn and connect each of your board members with it. That way, you’ll be able to immediately see any connections between your team and the grantmaker’s team.

Once you do find a connection, ask the connected board member to send an outreach letter to introduce your organization to the foundation. (This is a great strategy for reaching out to foundations that don’t accept uninvited grant applications, as well.) Find a sample outreach letter here.

Don’t know what Foundation Directory Online is? It’s THE premiere grants research database with more than 140,000 grant makers profiled, including many that don’t have websites and are challenging to find. Foundation Directory Online now also includes government grants, too! A one-year subscription to Foundation Directory Online costs $1,500, but Spokes members receive free access. Call our office to reserve one of our Foundation Directory Online computer terminals in San Luis Obispo and Santa Maria or see if you qualify for a remote pass and start securing new grants today!

The Right Way to Bring New CEO on Board

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Just hired a new CEO at your nonprofit? Now, the real Board work begins.

Spring is always a time of growth and re-birth in the natural world. It seems the same is true in our local nonprofit sector with many nonprofits transitioning from a retiring or exiting CEO to a new one, and many more preparing to hire the very first staff executive in their organization’s history.

 

Finding a new executive leader is always challenging for a nonprofit board. In fact, it may be the hardest task any nonprofit board must face. To start, the board faces the daunting task of managing the organization until a new leader can be found, which is then compounded by the additional stress and worrying of trying to find the “right” candidate. And the hard work doesn’t end there. The most critical period for a nonprofit’s success comes after the new CEO starts the job as the entire organization acclimates to its new leadership.

One third to one-half of new CEOs, whether they’re hired from outside or from within, fail within their first 18 months, according to some estimates. 

At Spokes, we’re constantly talking about how critical the role of a nonprofit board’s continuing support and guidance is in helping a new CEO be successful. The topic is really nothing new. What is new, however, is an article from Harvard Business Review, “After the Handshake“ by Dan Ciampa, which offers some fresh tips and insights.

  • Nonprofit boards must find and maintain an appropriate balance between being un-involed and over-involved. CEOs routinely report that they don’t get enough transition support from their directors. Boards cannot micromanage, but there is also a danger in being too remote.
  • Nonprofit boards must set clear expectations about how much communication they expect between board meetings or in which decisions or changes they want to play a larger role. Ciampa recommends that board members can start defining clear and appropriate expectations with the new CEO by asking the following questions:
  1. “What information do you need from the board to be able to do the best job you can?”
  2. “What behavior on the board’s part would best enable us to have a trusting relationship at board meetings, between them and in one-on-one conversations?”
  3. “From your experience during the search process and in your first meeting or two as CEO, what one thing about how the board operates would you change to make our relationship all it must be?”
  • Nonprofit boards must help a new CEO build his/her relationships with key organizational stakeholders – including each of the individual board members. Every new CEO will need some help navigating the new culture of your organization.
Ciampa explains that the CEO’s first 6 months or so is a time when nonprofit board members should expect to be meeting, talking and contributing more than they ordinarily do. Read his entire article here to learn more useful insights to help your board and new CEO successfully leap into a bright new future – together.

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