Spokes | Resources for Nonprofits

Find Us On Social Media:

New Rules for Covid-19-related Workers Compensation Claims

by

On May 6, 2020, Governor Gavin Newsom signed an executive order N-62-20 extending workers’ compensation benefits to employees who contract COVID-19 while working outside of their homes during California’s stay-at-home order. The order is retroactive to March 19, 2020 and extends through July 5, 2020.

For nonprofits and for-profit businesses alike, this executive order has caused considerable confusion around which Covid-19-related claims will and will not be covered by workers compensation insurance. How can an employer determine if an employee contracted Covid-19 from a customer or employee peer or a family member? If an employee tests positive, how can an employer know when the employee contracted the virus and if the transmission occurred while working outside of the home?

Workers Compensation issues are especially challenging for nonprofits organizations because a large portion of their employee workforce consists of volunteers who may or may not be covered by the organization’s workers compensation policy.

In this article, we’ll try to demystify how workers compensation works, explain how claims effect your organization, and offer resources to help you comply with this newest executive order while keeping your employees and volunteers safe.

What is Workers Compensation?

Workers’ compensation is legally required for any California business – for profit or nonprofit – that has at least one paid employee. Specifically, workers compensation insurance pays for occupational injury and illness that an employee suffers while functioning as an employee and is often a small organization’s single most expensive line of insurance coverage. How much a business pays for its workers compensation depends on its “experience rating”.

Experience rating is an evaluation method in which an organization’s workers compensation policy premium is adjusted up or down to reflect previous loss (or claims) experience. Essentially, the experience rating assumes that the number of claims made against your workers compensation policy is a predictor of future claims. In order for insurance companies to remain financially solvent, insurers must charge sufficient premiums to pay anticipated claims. Therefore, if your organization has a few workers compensation claims and, thus, a higher experience rating, your policy premiums will be increased in anticipation of more claims.

How does will a workers compensation claim affect my nonprofit?

The higher the payroll and the fewer dollars paid out for workers compensation’s claims, the lower the policy’s experience modification – and premiums –  will be. The lower the payroll and the greater dollars paid out for claims, the higher the policy’s experience modification – and premiums – will be.

Generally, workers’ compensation claims can have less of an effect on large organizations than they do on smaller organizations. The reason for this is that larger organizations have higher payrolls and pay proportionately less of that payroll in claims. Larger companies also tend to have a well-enforced safety programs and policies and designated employees who oversee safety and claims management.

Conversely, smaller nonprofits often have far fewer paid employees and much smaller payrolls while relying heavily on volunteers. Therefore, a single workers compensation claim can dramatically impact an organization’s experience modification. Reliance on volunteers adds an added risk as some workers compensation claims protect volunteers and some don’t. When a volunteer is hurt while working in service to the nonprofit and volunteers are not sufficiently covered in the workers compensation policies, lawsuits have been filed. (Example: a volunteer is helping to serve at an outdoor fundraising event and trips and breaks his/her leg.) What many nonprofits fail to understand is that insurers are legally allowed to sue any parties considered at-fault for a claim to recoup expenses – without the permission of the injured party. Meaning that, yes, your volunteers don’t want to sue your nonprofit, but the insurance company that is paying his/her medical bills can do it anyway if the insurance company considers your organization responsible for the accident.

Protecting your nonprofit, employees and volunteers.

  • If your board of directors hasn’t reviewed your organization’s workers compensation policy lately, agenda a review for your next board meeting.

Invite your insurance agent or broker to participate in this discussion. At the very least, designate someone to thoroughly review the policy with your agent or broker prior to the board meeting and prepare a report for board discussion. Does your policy cover volunteers, too? In which capacities? At events? While working in your offices only? While driving their own cars to pick up supplies for your programs? What about volunteers who are fulfilling office roles remotely?

  • Review and change relevant policies to minimize safety risks, as well as potential claims or lawsuits.

Remember to review all policies that protect both employees and volunteers. Will your workers compensation policy cover employees and volunteers who are suddenly working at home? Does your organization have a telecommuting policy in place that requires employees (and volunteers) to have a designate safe workspaces in their home with proper egress in case of fire and no tripping hazards? (Spokes has one to share!) Do you need to limit who is allowed to drive his/her personal vehicles in service to the organization? Do you have clear protocols outlined in your employee handbook about when and how to report an accident that may result in injury?

  • Make sure your organization is up-to-date with all federal, state and local guidelines for Covid-19 safety procedures – and carefully and consistently adhering to them! Here are a few websites with helpful resources and links.
  • When an Covid-19-related workers compensation claim is brought to your attention, use this helpful “Covid Presumption Flowchart” published by the Cal Chamber’s HR Watchdog program and the Law Offices of Mullen & Filippi to determine if the illness or injury falls within the guidelines of Executive Order N-62-20 and how to proceed.

The Covid-19 pandemic is forcing all business to carefully re-examine the way they work. It’s a challenging and sometimes painful process, however, it presents us all with an opportunity to ensure that we are doing our good work responsibly, efficiently and effectively.

As always, please contact Spokes if you have any questions or need additional guidance around the recommendations made in this article. We are also including a couple of helpful links to additional information that may be of interest to you:

Worker’s Compensation Coverage for Volunteers

COVID-19 Wokers’ Comp Claim Presumption Flowchart

Nonprofit Collaboration Models: One Size Doesn’t Fit All

by

This the second in a series of articles on building collaborations in the nonprofit community. See Article 1 here.

Managing your nonprofit in an era where there seems to be increased competition for charitable giving can be challenging, to say the least. For some nonprofits, working in a nonprofit collaboration model with other organizations may provide much-needed inspiration and support to unite their common business purposes and advance them to the next level. Whether the idea of working with another nonprofit starts with the board, staff members, stakeholders or donors, the options listed below provide some nonprofit collaboration models to possibly make that happen.

Some research studies have shown eight different models of nonprofit collaboration. This article describes the four of those methods. As you read through the pros and cons of each model, you may recognize a scenario that will fit your nonprofit strategy — the advantage being that nonprofit collaboration is not a one-size-fits-all concept, but can be uniquely tailored to the specific characteristics of organizations that want to work together.

Fully Integrated Merger

Emerging as the most widely-used option, this nonprofit collaboration model fully integrates the operations and missions of two or more organizations. One organization typically merges with another, allowing the corporate status and charitable exemption of one of the partners to remain intact. Or the partner nonprofits can agree to create a newly formed single organization as well.

This model works when there’s a true overlap in the missions of both organizations as well as similarities in programs and services. It’s an effective model to limit the duplication of services in the community. The benefits include increased efficiency in program delivery and greater access to resources. Challenges can include problems with bringing together two or more organizations with different histories and cultures along with the task of creating a new leadership and board structure.

Partially Integrated Merger

This model allows for a merger of two organizations while allowing each to retain their individual brand. The defining characteristics of each nonprofit are maintained, allowing the strategic advantages of both organizations to stay in place.

This nonprofit collaboration model works when a stronger or larger organization provides support to a less developed or smaller organization with the same or similar customer base and services. The smaller partner will see increased resources, stability and capacity, and in exchange they can help augment the amount and range of services that the larger partner currently offers. The biggest advantage of this model is that the community will see less competition and overlapping of services, but there’s a risk that the larger partner could overshadow the identity of the smaller organization and the merger could appear to be a takeover rather than a partnership.

Joint Program Office

A merger may not fit the needs of two organizations that have similar missions. However, if there’s an overlap in some programs or services, creating a joint program office model could combine one or more similar programs offered by each nonprofit. The goal would be to strengthen the efforts of that particular program for both organizations.

This model works when the organizations have programs and services that are similar but not exactly the same. It can result in a more efficient use of resources while allowing the collaborators to retain their independence. A challenge could be figuring out how to share program staff from each nonprofit and developing clear rules about program fundraising, strategic direction, and operating expenses.  

Joint Partnership with Affiliated Programing

In this model, nonprofit collaboration results when multiple nonprofits establish a partnership to share programs or delivery of services, allowing them to maximize their complementary strengths.

This model works when two or more organizations have a shared mission but don’t provide the same services. This can result in a more efficient use of community resources, less fragmentation of services, and the ability to provide more services to a broader group of clients. However, it can be quite a challenge to determine the degree of credit each partner can claim for the outcomes when reporting to their separate and shared stakeholders.

Wrap-Up

Did you find some new ideas in these four nonprofit collaboration models? What about a combination of models? Next time we’ll explore four additional models of collaboration for nonprofit organizations.

Additional resources:

Information in this article was taken from Models of Collaboration: Nonprofit Organizations Working Together. The Collaboration Prize.

Nonprofit Collaboration 2.0

Why and How do Nonprofits Work Together? 

Your Budget is Your Friend

by

If it’s time to create your budget for the upcoming year, congratulations. Your nonprofit budget is your best friend and the source of direction for all of your operations during the year. I know working on the budget may feel like torture, but it is one of the most important documents to support your nonprofit organization. It can actually be exciting to create.

Here are three reasons the annual budget is your best friend.

 

  1. Budgets provide a view of operations through numbers.

For some, numbers are scary, but budgets don’t need to be. Similar to your personal or home budget, your organization budget creates a guide to manage your finances each month. It lets you project how much income you need for operations during the year and identify the source of that income. For instance, you can list income sources as grants, donations, events, or other fundraising. Depending on your organization, you might project income generated from membership, services, or programs fees. After determining your projections for the year, allocate that income to various expenses needed to operate the nonprofit business. These expenses include salaries and benefits (don’t forget all mandatory employee benefits), rent, supplies, costs associated to operate your programs, services, and insurance and so on. Include as many expense categories as necessary to prevent underestimation of overall expenses. In general, it’s best to estimate income conservatively and estimate expenses generously.

 

  1. Budgets are a working document for financial controls.

Once you create your budget, you have to manage it. Each month the budget should be a part of your financial reports which include your Statement of Activities (Profit and Loss statement), Statement of Financial Position (Balance Sheet) and the Statement of Cash Flow. Compare the amounts you budgeted for each account shown on these statements to the actual monthly amounts to understand your current financial position. Hopefully you’ll meet or exceed your income projections while keeping the expenses in range or lower than projected. You might also get the opposite, that is, less income than projected or higher expenses, but you’ll be able to make adjustments to the budget to keep your operations on path. Your board treasurer and bookkeeper should be your helpers in these areas.

 

  1. Budgets guide the strategic operations of the organization.

Use your nonprofit budget to guide your strategic operations. Having determined the goals that will drive your mission for the year, you now have a projected dollar amount to support those goals. Use the budget and current financial statements to monitor your finances and determine if you can meet the goals or if you need to make adjustments. For example, you might have projected adding another employee position. If you find you’re meeting the projected income goals for the new employee, you can move ahead with that goal. However, if the income is not there (or not foreseeable), you might need to adjust the goal. (This doesn’t mean you can’t get the position filled in some manner. For example, you might seek a volunteer to get the help you need. Sometimes, that person might be the one to help you reach the financial projections for the year.) Another example of how your budget guides your strategic operations occurs when you analyze if you have enough income to manage your programs or services, or if you need to seek more private donations and grants. Your budget can even help you project if a fundraising event is feasible or if you should look for money in a different manner. Reviewing budget results each month lets you know how much you’re spending in each expense category and where you might have enough or need to cut back on expenses.

If you need help in the budgeting process with your best foot forward, here are the following resources:

For smaller nonprofits that are entirely volunteer-run, the Virginia Society of Certified Public Accountants offers this handy guide to help you address the budgeting challenges unique to your organization and resources. Budgeting for Small NPOs

For larger organizations, nonprofit consultant and author Joan Garry outlines an innovative strategy to creating a budget that is meaningful and realistic for all the stakeholders within your organization – board, fundraising staff/volunteers, and program staff/volunteers: https://www.joangarry.com/budgeting-for-nonprofits/

These tips are certainly not all of the uses for your annual budget, but you can see how important the budgeting process is. Like a good friend, treat it well, pay attention to it, and it will be your guide to successful operational planning.

Is it Legal to Have an Ex Officio Director on Your Board?

by

Do you have an Ex Officio Director on your board? Do you allow honorary directors on your board but don’t require (or allow) them to vote? If you answered “yes” to either of these questions, then you may be operating out of compliance with an important nuance found in California’s Nonprofit Corporations Code.

Fortunately, there are simple solutions to clear up these issues. Let’s explore the rules and steps to ensure that your organization is in compliance:

Non-voting board members cannot serve on California nonprofit boards.
Gene Takagi states, “any person entitled to attend board meetings without a vote is not a board member at all.” Non-voting board members can lead to confusion (do they count towards a quorum?) and can mislead other board members (do their opinions matter if they can’t vote?).

 To fix it: Move non-voting board members onto an Advisory Committee. Or, if you’d like to extend voting rights to these individuals, review your bylaws to make sure you have room for more board members and revisit the process of electing new board members. Your board can vote to bring them on as regular board of directors. If your bylaws state that non-voting board members are allowed, contact Spokes for a Bylaw Review to correct your bylaws today!

Ex Officio Directors automatically hold a position on your board because of a position that they hold outside of the board.
It’s rare to need Ex Officio Director positions in 501c3s. This position is more common in 501c6s, such as Chambers of Commerce, where the CEO /Executive Director often holds a position on the board. For further clarification, the NEO Law Group outlines many scenarios where this arrangement might make sense. However, if your organization labels non-voting board members as Ex Officio, you’ll want to correct this immediately.

 To fix it: Either (1) move non-voting members onto an Advisory Committee, or (2) invest them with the same voting rights and responsibilities of every other board of director serving your organization. To stay in compliance, ensure that your board policies, bylaws, and culture do not limit the actions of Ex Officio board members.

Honorary Director, Director Emeritus, and Advisory Director are misleading titles.
The term “director” is a legal definition that sets forth duties of care, loyalty, and obedience specifically for board members.

 To fix it: Identify new terms to honor these special advisors in your organization. To stay clear on the roles of your organizational volunteers, be certain not to use the word “director” for anyone who doesn’t serve on your board of directors.  

Advisory Boards are actually Advisory Committees.
Only one board can exist in your organization, and that is the board of directors.

 To fix it: Simply update your bylaws and policies so all advisory bodies are labeled as committees.

Staying in compliance with the Nonprofit Corporations Code is critical to your organization’s success. Your board of directors and advisory committees will function more efficiently once you clarify and adhere to these important regulations. If you have questions about board of directors versus advisory or honorary roles, reach out to Spokes for support at 805-547-2244 or [email protected].

Common Legal Pitfalls for Nonprofits (and How to Avoid Them)

by

Event season is rapidly approaching, and committee members are busy preparing and planning raffles, selling tickets, and collecting items for silent and live auctions. Unfortunately, many nonprofits overlook common legal pitfalls. Spokes wants to help you avoid this costly mistake. Read this article to learn about registering for raffles, incorporating disclosure statements, and being prepared to pay sales tax.

RAFFLES
Did you register your last nonprofit raffle with the State Attorney Generals’ office? If not, then you broke the law…and you’re not alone. Many nonprofits don’t realize that unregistered raffles can result in hefty fines. In 2017, CalNonprofits conducted a survey and found that 38% of the nonprofit respondents said they were “unfamiliar” with raffle requirements. Only 51% who held raffles filed the required annual reporting form.

The good news is that it’s easy to conduct a raffle legally. Before your next fundraiser, follow this raffle checklist to:
• Submit application CT-NRP-1, your IRS 501c3 determination letter, and a $20 check at least 60 days prior to the event.
• File the Nonprofit Raffle Report no later than October 1 the following registration year.
• Report earnings to the IRS.
• Invest 90% of all funds raised into mission-related projects.

Following raffle compliance guidelines can feel like a lot of extra work, and there is a movement to simplify the requirements. If you want to help, sign CalNonprofits’ petition to support Assembly Bill 2347 to decriminalize small raffles. This bill seeks to:
• Eliminate post-raffle reports for nonprofits that hold small raffles.
• Allow nonprofits to hold 50/50 cash raffles if a single raffle raises small amounts of money and all raffle activity is below a similarly small dollar threshold. (Currently, all 50/50 cash raffles are illegal except for charities affiliated with major league sports teams.)

DISCLOSURE STATEMENT
Every time a donor purchases a ticket for an event, the nonprofit is required to let them know how much of their payment is tax-deductible. For instance, imagine a nonprofit is charging $100 for a gala ticket.
$100.00 = Ticket
$45.00 = Food and entertainment costs
$55.00 = Tax-deductible amount

It is mandatory to disclose the tax-deductible amount. On fundraising solicitations and tickets, add the statement: “The tax-deductible portion of each ticket is $55.00 and considered a donation in support of [organization], EIN # ___-______”

SALES TAX
There is a common belief that “tax-exempt” means that nonprofits don’t pay sales tax. In reality, every time a nonprofit sells or purchases an item – something tangible that you can touch – it must charge or pay sales tax.

Think of it this way: when a donor “buys” a tangible item, the nonprofit is “selling” it to the donor. Therefore, the item transfer qualifies as a sale and is taxable. After the sale, the nonprofit must pay sales tax to the State Board of Equalization (BOE). The nonprofit may charge the donor sales tax or it may deduct the appropriate sales tax amount from the donors’ payment and pass it on to the BOE. Please note that there is extra tax consideration for selling food; for more clarification, read this article: When does a nonprofit organization operating in California need to pay sales tax? or contact the BOE.

We know all these rules and regulations are intimidating. We’re here to help! Spokes has resources and tips for staying in compliance with the law. We will gladly take your calls and emails if you have questions about registering for raffles, incorporating disclosure statements, being prepared to pay sales tax, or other regulations: call (805) 547-2244 or email [email protected] for support.

Guiding nonprofits to achieve their goals through support and expert resources.

How Can We Make A Difference Together?

Spokes welcomes local professionals who would like to share their expertise in support of the nonprofit sector.

Get Started Contributing

Recent Articles