Blog - Spokes | Resources for Nonprofits

Executive Committee Membership

March 9, 2023 by Michael Simkins

Can someone be on the executive committee who is not a member of the board of directors?

It’s an interesting question. The short answer is, “Perhaps, but probably not.” As can so often be the case, it depends on the situation. Here are things to consider.

Look at your bylaws

A great place to start is to read your bylaws. What do they say about committees? Do they specify that there is an executive committee? Do they say who should be on it? Do they say what the executive committee is supposed to do?

For example, I recently was helping an organization whose bylaws said nothing about an executive committee, but they did include a provision that the board could establish committees by resolution, and that “all committees have the full authority of the board” (italics mine).

Board committees

The next thing to consider is the type of committee. There are two types—board committees and non-board committees. With a few exceptions, the board may delegate authority to board committees. According to California law, all members of board committees must be directors.

On the other hand, membership on non-board committees is not restricted to directors. These committees, also called advisory committees, can serve a variety of purposes. As that name implies, they can provide counsel to the board. The board might also assign various tasks and responsibilities to them. For instance, a non-board committee might develop fundraising plans or be responsible for volunteer training. Because non-board committees have no legal authority to act in place of the full board, anyone may be a member. Non-board committees are often used as a way to engage additional people in the work of the organization.

Returning to the example above, since the organization’s bylaws clearly state, “all committees have the full authority of the board,” any committee established in the organization would be a board committee. Only board committees can make decisions on behalf of the organization, and all members of board committees must be directors.

So, what’s the answer?

If the board has delegated authority to the executive committee, then all members of the executive committee must be directors. Certainly, others might be invited to attend executive committee meetings and/or provide input, but such people are not members of the committee and do not have a vote on motions or decisions. Theoretically, a non-director could be a member of the Executive Committee, but only if the Executive Committee was given no authority to act. In such circumstances, that executive committee would, in fact, be an advisory committee. And what would be the sense in that?

And don’t forget…

State law trumps your bylaws. If your bylaws include any language that suggests non-directors can be members of your board committees, it’s time to revise your bylaws.

References

Applied Wisdom

January 30, 2023 by Michael Simkins

Looking for ways to up your leadership game? On a special website, former Applied Materials CEO Jim Morgan shares leadership and management principles proven to be effective in nonprofit, philanthropic and business contexts. Jim is a well-known Silicon Valley high-tech executive and philanthropic leader.

Explore eight simple insights that have consistently delivered great results supporting the nonprofit sector in complex, real-world situations. On the site you can download Jim’s free booklet, watch videos, and sign up for a weekly reminder.

Visit Applied Wisdom for Nonprofits

Documentation for Your Donors

January 1, 2023 by Michael Simkins

It’s the new year and our donors will start to gather the necessary materials to prepare their income tax returns. It’s also a good time to be certain we have provided them with the appropriate documentation of their gifts. Here are two of the most important things to keep in mind.

Gifts of $250 or more

We need to provide donors with “contemporaneous written acknowledgement” of each gift of $250 or more, or separate gifts made on the same day that total $250 or more. Here, contemporaneous means that the donor has the documentation in hand by the time they file their annual return.

Your thank you letter to the donor can serve this purpose as long as it includes:

The date the gift was received (not pledged, but actually received)
Whether or not the donor received any goods or services in exchange for the donation and, if so, an estimate of their value.

For gifts you have already acknowledged with that information, you’ve met that requirement. But for those end-of-year, last minute gifts you receive, be sure to provide the necessary documentation promptly in January.

Quid pro quo contributions

When a donor does receive goods or services in exchange for a contribution to your organization, it is called a quid pro quo contribution. You must provide a written disclosure statement to donors if the contribution is greater than $75. Here’s an example. If for a donation of $100 the donor receives tickets to an event that would have cost $40, the deductible amount would be $60. However, because the total contribution exceeds $75, written disclosure is required. This can be done either when soliciting the gift or as part of your thank you once the gift is received. The written statement must:

Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the value of goods or services provided by the charity, and
Provide the donor with a good faith estimate of the value of the goods or services that the donor received.

For more specific information, visit the IRS at Substantiating Charitable Contributions.

Two Important New Employment Laws

December 17, 2022 by Michael Simkins

Pay Transparency

Among the new employment laws that go into effect January 1, 2023, two deserve special mention. One, referred to as “Pay Transparency,” applies to your nonprofit if you have 15 or more employees. Starting January 1, you’ll need to include pay range information in any job posting. In addition:

ALL employers must provide a pay scale to any current employee for their position upon request.
Employers must also maintain records of a job title and wage rate history for each employee during employment and for three years after separation from the company
All private employers with 100 or more employees must file pay data reports with the State’s Civil Rights Department, regardless of whether they are required to file a federal EEO-1 with the EEOC. (Note: nonprofits are considered “private employers.)

Retirement

The other change has to do with retirement programs. The CalSavers Retirement Savings Program is a state-run retirement program for employees who work for employers not offering a private-market retirement plan, such as a 401(k) plan. Previously, the law only applied to nonprofits with 5 or more employees. As of January 1, it applies even if you have only one employee.

Learn more

Spokes members can view the 60-minute video overview of these and other new HR-related laws for 2023. Sign into your account, click “access member benefits,” and go to the Video Library. You’ll find the recording in the Past Classes showcase. Not a member yet? Check out the member benefits.

Temporarily Suspending Operations

November 9, 2022 by Michael Simkins

Can a nonprofit hibernate?

One of our smaller nonprofit members recently asked me that question. The organization had formed to raise funds to build and operate a community pool but, as they put it, “hit a wall.” They aren’t ready to give up on their goal, but they need time to regroup and strategize.

The simple answer is perhaps, but there are many things to think about when addressing this issue. In legal terms, a hibernation for a nonprofit is called a “suspension of operations.”

According to Donald W. Kramer, an attorney with more than 45 years of experience dealing with nonprofits, “an organization can suspend its operations for a short period without losing its 501(c)(3) status.” The specific answer for any particular organization comes down to legal and factual issues, and each situation can be unique.

File your reports!

That said, there are some very important things to keep in mind. First and foremost, you still need to file your required reports with the state and federal government. For the IRS, that means your annual 990, whether it be the full 990, 990-EZ, or 990-N. If you should fail to do that three years running, your tax-exempt status will be automatically revoked, and you don’t want that! In California, that also means filing your annual 199 or 199N as well as your Statement of Information with the Secretary of State and annual registration with the Attorney General’s office.

Meet

Your board of directors needs to meet at least once a year. Since your board has said it does not want to dissolve, it should be meeting anyway to plan for the future and how you will resume active operation. Take minutes of these meetings and keep them on file.

Follow your bylaws

Be sure to re-read your bylaws. Going “into hibernation” does not mean you can forget about them. You still need to follow your bylaws. Do they say you will meet monthly? Do they say you elect officers every June? If your bylaws state you will do certain things at certain times, you still need to do those things—or, properly amend your bylaws to allow for your period of temporary inactivity.

Mind your money

Do you have money in the bank? Think carefully about how to manage it while your main activities are suspended. Do you have any ongoing expenses that you will face despite being in hibernation? Are some of the funds restricted and can only be used for the stated purpose for which they were given to you? Be prudent. Make a “hibernation budget.” Keep sufficient funds readily available for any ongoing expenses. Consider putting the rest in a short-term certificate of deposit. Also, be aware that should you end up deciding not to continue but to dissolve, that process involves expenses. It would not be a bad idea to set money aside for that, just in case.

Plan for the “Spring”

We are not talking Rip Van Winkle here. Rip snoozed for 20 years. Your model should be akin to grizzly bears. It’s an annual thing. According to the folks at Yellowstone National Park, “Male grizzlies come out of hibernation in mid to late March. Females with cubs emerge later, in April to early May.” Not only that, while they’re hibernating, bears do wake up and move around inside the den!

So, your organization is not just checking out completely or indefinitely. Get up and walk around the den. Set a goal for when you will resume active work. Figure out your path to full operations and start following it. If that seems like too much to do, then you may really want to consider dissolving rather than “hibernating.”