Recently I had the chance to speak with Jeff Stein the News and Program Director at News/Talk 1540 KXEL. We chatted about charitable donations to nonprofits in this age of COVID-19. Because there are so many financial challenges affecting both nonprofit organizations (and the beneficiary populations they serve) and current and prospective donors, this is a precarious, fragile time.
In preparation for the #GivingTuesdayNow global on Tuesday, give this interview a listen. It’s less than twenty minutes and will give you some solid insights into how to practice strategic charitable giving in a way that’s most useful to the nonprofit organizations you care most about during this trying time.
Employment policies are vital to the well-being of your favorite nonprofit. Such policies set workplace expectations, define work guidelines, reduce and eliminate confusion and misunderstanding, and provide steps necessary for any disciplinary action. Formalizing workplace rules makes certain that everyone—from independent contractors to management to staff to board members—are informed and on the same page.
COVID-19 has been particularly tough on the nonprofit sector and organizations providing essential social services. Employment policies in this environment are important, but I understand they could easily fall to the budgetary backburner. That’s why I want to make it clear, upfront, that I will work with each individual Iowa nonprofit organization to come to an agreement for a fee that fair, but also accessible and not a strain on the nonprofit. So, in short, the cost of drafting essential employment policies or other employment documents, like an employee handbook, is entirely flexible to fit each situation.
Benefits of Employment Policies
An official set of well-developed employment policies provides many benefits for your nonprofit. For nonprofit employers, policies capture the values you wish to instill in your workforce, outline the standards of behavior you expect, and provide a clear guide for rights and responsibilities. Instituting strong, fair, and unambiguous policies not only contributes to a happier workforce, but it can also improve employee retention. Further, employment law is vast, complicated, and can be tricky to navigate. Well-drafted employment policies, as described below, can also help you avoid legal issues and costly mistakes.
Employee handbooks are not required by law, but having one is in the best interest of your nonprofit and those who work for you— even if you have just one employee. A good employee handbook effectively communicates your nonprofit’s policies and procedures to employees and makes clear the rights and responsibilities of employees in your organization. Many disputes can be avoided by a clear, easy-to-read, and straightforward employee handbook.
An employment agreement sets the conditions, terms, and obligations between you as the employer and an employee. It’s considered a binding contract that should be administered in writing and signed by both the employee and an acting officer.
Employment agreements need to be individualized to suit each employment relationship. But important elements of employment agreements may include salary; benefits; work schedule; paid-time off (PTO) allotment; restriction on confidential information; non-compete and non-solicitation provisions; mandatory mediation and arbitration for all disputes; and making certain the employee is considered to be only “at-will,” that is, the employee can be fired at any time for any reason.
Formal Performance Review
Formal performance reviews are an assessment of an employee by a supervisor and employee (it’s a two-way, not a one-way discussion) that are based on jointly determined job goals and performance objectives. While often overlooked—and sometimes dreaded—performance reviews are of great value to nonprofit employers and their employees.
You should have in place a standardized form and consistent processes for conducting individual performance reviews of all employees. Evaluating the quality of an individual’s work, ability to meet goals, communication skills, adherence to your nonprofit’s mission, attendance, and dependability, among other criteria, is key to effective workforce management and to building trust with employees.
Employee Personal File
A personnel file is a hard copy folder or digital file that contains information related to every new employee, existing employees — full and part-time — and former employees. Knowing what needs to be stored in a secure personnel file — and what NOT to keep in it — will help your nonprofit in promotion and termination decisions; provide a means of tracking vacations, training, and achievements; and are necessary to comply with local, state, and federal regulations.
A personnel file should only contain items related to his or her job or employment status. These include (but are not limited to):
- Application and resume
- Signed acknowledgment page from employee handbook
- Pay information including timesheets, W-4s, and withholding forms
Just as important as having the right information in a personnel file, is to avoid placing the wrong documents in a personnel file. Some items that should NOT be in an employee’s personnel file include:
- Medical information and accommodation requests
- Whistleblower complaints
- Court orders, such as garnishment or restraining orders
Independent Contractor Agreement
Self-employed, freelancer, consultant. No matter what they call themselves, people who provide goods or services to your nonprofit, but are not your employees, are considered independent contractors. Independent contractors differ from employees in that IC’ers control their financial and work-related relationships and pay their own self-employment, Social Security, and Medicare taxes.
When you hire an independent contractor, you should have a written and signed contract that clearly outlines the scope of work, price, and payment, severability, deliverables, and clearly identifies the person as an independent contractor. Also, you can minimize and avoid legal liability by placing the right provisions in an independent contractor agreement.
Updating Employment Policies & Additional Policies Needed
If you already have some (or even all) of the above-listed employment policies in place, when were they last updated? Think about the many ways your organization has changed and grown since they were written, including new employees you hired and existing employees whose roles evolved. Changes to state and federal laws may have rendered some elements of your employment policies incomplete or out of compliance. It may be time to renew your commitment to a productive and happy workplace by revising employment policies.
What Other Policies Do You Need
Be aware this blog discusses only employment policies. To work toward optimal IRS compliance, you should adopt the nine major policies and procedures which appear on IRS Form 990. Also, you should have documents in place covering ethics; grantors and grantees; endowment management; and legal training for your board of directors.
To discuss further, please don’t hesitate to contact me via email (firstname.lastname@example.org) or on my cell phone (515-371-6077). I’d be happy to discuss employment law with you any time. I offer a one-hour free consultation, without any obligation whatsoever. Also, as I mentioned, I allow my nonprofit clients to essentially choose their own rate during this trying time of COVID-19, when more than ever before, our communities need the essential services that Iowa nonprofits provide.
Public charities and private foundations are both classified as 501(c)(3)s by the IRS. However, the different nonprofit operating structures come with different benefits, requirements, and challenges that can make navigating compliance difficult. I’ve written previously on aspects of private foundations including prohibited grants, payout requirements, and avoiding self-dealing. The best way to deal with many of the ins and outs of learning about private foundations is to deal with each individually; today let’s focus on jeopardizing investments.
Don’t Jeopardize the Foundation
Failing to exercise prudence and investing in ways that threaten the foundation’s ability to carry out its exempt purposes—called jeopardizing investment—and can result in a stiff penalty.
Many factors can contribute when determining whether or not an investment can be considered jeopardizing. At the least, a private foundation’s managers must exercise reasonable, ordinary business judgment and prudence in investing a foundation’s assets. Investments should also be made with the short and longterm financial needs of the entity in mind. This is part of baseline fiduciary duty board members must act with by closely overseeing the nonprofit’s finances.
In cases of jeopardizing investments, an excise tax of 10% is imposed on the foundation for the IRS-defined taxable period. Foundation managers can also be held personally liable and taxed up to a max of $10,000 (or 10% of the jeopardizing investment) if the “knowing, willfully, and without reasonable cause” participated in the making of the investment.
Furthermore, if the foundation does not take steps to remove an investment, an additional tax can be imposed on both the foundation and the responsible foundation managers.
High-Risk Activities: Proceed with Caution
While no category of investment is outright prohibited, a private foundation’s managers must pay close attention to high-risk activities, such as trading securities on margin, trading in commodities futures, and short selling, among others.
Get the Right Advice
All of this said, this is general advice and each charitable organization is unique. I highly recommend seeking out an attorney well-versed in nonprofit law to assist with multiple aspects of the charitable organization life cycle from the formation through employee hiring through board development.
Questions? Want to make sure your private foundation is taking the right steps to avoid adverse consequences like audits and taxes on top of everything else there is to keep track of? Don’t hesitate to contact me.