NATIONAL STANDARDS FOR U.S. COMMUNITY FOUNDATIONS. What s the Field Talking About?

Transcription

1 NATIONAL STANDARDS FOR U.S. COMMUNITY FOUNDATIONS What s the Field Talking About?

2 National Standards Staff Hi, we are nerds and we are here to help. Lara Kalwinski, Esq. Executive Director, National Standards & Senior Counsel, Compliance and Policy Christina Gonzalez, Esq. National Standards Manager & Staff Counsel

3 AGENDA PART 1: Why Self-Regulation? PART 2: What are the National Standards? PART 3: Common Community Foundation Legal Issues and FAQs PART 4: The Process of Applying for National Standards Accreditation PART 5: Contact Us

4 PART 1 Why Are You Adding Work for Me and My Foundation? Making the Case for Self-Regulation

5 Why is Self-Regulation Important? EVIDENCE OF EXCELLENCE, ACCOUNTABILITY, & IMPACT Roadmap to establish legal, ethical, effective practices that withstand the scrutiny of donors, government and media.

6 Why is Self-Regulation Important? EVIDENCE OF EXCELLENCE, ACCOUNTABILITY, & IMPACT Consistent expectations among community foundation boards and practitioners, helping them focus and make effective use of time and talent.

7 Why is Self-Regulation Important? EVIDENCE OF EXCELLENCE, ACCOUNTABILITY, & IMPACT Framework for documenting, communicating and providing training and technical assistance to advance best practices.

8 Why is Self-Regulation Important? EVIDENCE OF EXCELLENCE, ACCOUNTABILITY, & IMPACT Legislators and regulators at the local, state, and federal level recognize National Standards as a way to evaluate community foundations

9 Aren t the Current Laws Enough? Understanding What Keeps Regulators (and Policymakers) Up at Night

10 Top Ten State Charities Issues 1. Absentee board and lack of board governance Directors and senior leadership failing to be sufficiently active and informed. 2. Not safeguarding assets You have a duty of care. Issues such as fraud and embezzlement are of top concern, as is the failure to adequately protect donor information (ties into another emerging topic of discussion cybersecurity). 3. Conflicts of interest Organizations must address actual conflicts, increasingly find themselves defending against the appearance of conflicts or impropriety. Would the media and your mom understand? 4. Executive Director with too much power Excerpts from remarks of James Joseph (Partner, Arnold & Porter LLP), Janet Kleinfelter (Deputy Attorney General, Office of Attorney General of Tennessee), and Verneta Walker (Vice President for Programs and Chief Governance Officer, BoardSource) at October 17, 2016 NAAG/NASCO meeting in Washington, D.C.

11 Top Ten State Charities Issues 5. Clear failure to follow mission of the nonprofit The board cannot be asleep at the wheel. It is imperative that board upholds the duty of obedience and avoid mission drift. 6. Membership issues and managing board conflicts If you do not resolve the conflict internally, regulators will. Importance of having whistleblower policies/procedures in place, and actually following them, was stressed. 7. Misusing your endowment or restricted assets/de facto application of cy pres The duty to prudently invest and duty to supervise all investments/advisors. You must follow restrictions on donations and keep good records (e.g., fund agreements). Cy pres ( as near as possible ) is a legal action, can be long and extensive. * An entire panel at NAAG/NASCO Conference on October 17, 2016 was dedicated to DAFs, endowments, and donor restrictions. Excerpts from remarks of James Joseph (Partner, Arnold & Porter LLP), Janet Kleinfelter (Deputy Attorney General, Office of Attorney General of Tennessee), and Verneta Walker (Vice President for Programs and Chief Governance Officer, BoardSource) at October 17, 2016 NAAG/NASCO meeting in Washington, D.C.

12 Top Ten State Charities Issues 8. Fundraising issues Professional fundraisers must be registered as appropriate; each state has certain rules on this, but there are some consistencies at the national level. 9. Lack of public accountability and transparency Failure to comply with federal and state reporting requirements and failure to keep adequate and timely records (e.g., saving PDF of electronic bank records) will lead to trouble. 10. Ignore the Attorney General s office Don t do it! Excerpts from remarks of James Joseph (Partner, Arnold & Porter LLP), Janet Kleinfelter (Deputy Attorney General, Office of Attorney General of Tennessee), and Verneta Walker (Vice President for Programs and Chief Governance Officer, BoardSource) at October 17, 2016 NAAG/NASCO meeting in Washington, D.C.

13 Top Federal Charities Issues Fake charities or illegitimate use of the 501(c)(3) rules by noncharities (think grantees) Revenue Procedures on tipping and unusual grants for purposes of the public support test need to be updated to reflect the new public support test, last updates were in the 1980s Determinations on what contributors can rely on for determining 501(c)(3) status, specifically can EO Select Check (replacement for Publication 788) Final regulations for supporting organizations will be available soon to conclude changes from the Pension Protection Act of COF Summary from the October 25 TEGE Council Gulf Coast Meeting, last accessed October 25, 2016http:// eo v7.pdf 2016, IRS Dirty Dozen List last accessed October 25, 2016

14 Top Federal Charities Issues Excise taxes related to donor advised funds Treasury is actively working on regulations and guidance to provide answers on permissible uses of donor advised funds and distributions from them. Reporting contributions in Schedule B and whether their needs to be changes. How partnerships are audited and checked for transactions with disqualified persons. Recognition that partnerships often include exempt organizations and affect them. 170 charitable contributions issues in review include appropriate of water rights, restrictions that prevent easement perpetuity, and qualified appraisals and appraisers. COF Summary from the October 25 TEGE Council Gulf Coast Meeting, last accessed October 25, 2016http:// eo v7.pdf 2016, IRS Dirty Dozen List last accessed October 25, 2016

15 Self-Regulation is Catching On

16 PART 2 What Are the National Standards?

17 WHAT ARE THE NATIONAL STANDARDS? The National Standards for U.S. Community Foundations is an accreditation program that promotes operational effectiveness to foster excellence in community philanthropy. WE DO THIS IN TWO WAYS: 1. We create standards for operationally and legally sound community foundations. 2. We lead community foundation staff and boards through the process of achieving operational excellence. With confidence in their operations, community foundations can innovate and take risks necessary to solve complex social problems.

18 WHO PARTICIPATES IN NATIONAL STANDARDS? 67% of all U.S. Community Foundations Meeting the definition of a public foundation with component funds 94% of the 25 Largest Community Foundations by Assets & Grantmaking 31% of Accredited CFs with $10 million in Assets or Less

19 #cofannual HOW WE ENCOURAGE PROMOTING ACCREDITATION

20 PART 3 Common Community Foundation Legal Issues and Frequently-Asked Questions

21 What Are Reviewers Thinking About What information or decisions does your board approve? What information or decisions do not get approved by the board? Do board and staff have the same understanding? For each policy, procedure or agreement, do you have evidence of when it was adopted or approved? Does your board have enough information to make informed decisions? Regulators ask where was the board Does use of variance power for endowment funds require any additional action under state law? What does UPMIFA or the like say in your state? Does your donor understand variance power? Does your board understand variance power? Does your Form 990 accurately reflect your activities? Please see Part V questions 8 a-b and 9 Do you know who is in charge of implementing your policies? Is that written down somewhere for board and staff? Do your bylaws go above and beyond what the law requires? If yes, then you must follow the additional restrictions in the bylaws. Did you have an organizational name change or a DBA? Do you have the government paperwork to prove it? Regardless of what is in your policies, what do your donors and grantees know? Is it enough? Conflicts of Interest must be done ANNUALLY, Confidentiality done once Is your template blank or does it have another entity s name on it? If you use the National Standards templates or others, it can be helpful to put in footer, adopted from BLANK

22 Top National Standards Questions: Funds Unrestricted Fund: Donors do not put restrictions on their gift and trust the foundation to select promising projects to receive grant funding through a competitive process based on community needs. Restricted Funds - Designated Fund: Designated funds name specific nonprofits that are beneficiaries of their grants and can ensure that support in the donor s name continues in perpetuity. - Field of Interest Fund: Community foundation or donor create a fund to support a broad area such as the arts, environment, health or more narrow interests as pre-k education. Fundholders may participate in the grantmaking process or utilize the foundation s expertise to identify potential grantees. A community (affiliate), corporation, or membership association may also create this type of fund with an advisory committee. - Nonprofit/Agency Fund: A nonprofit organization creates a fund to assist with the fiscal management, namely endowment management. An independent 501(c)3 community foundation affiliate may create this type of fund with an advisory committee and an MOU about the relationship. - Scholarship Fund: Donor can create a named fund with preferred selection criteria and minority input into the scholarship committee by donor, donor advisors, and related parties. Unrestricted or Restricted? I have strong feelings about this. Donor Advised Fund: Donor can create a fund for which the donor and his or her named successors make recommendations for grants subject to the approval of the foundation s board of directors. A memorial fund may be a type of donor advised fund.

23 Donor Advised Funds: Operational Rules IRC 4966 & 4967 No grants, loans, compensation, expense reimbursements, or similar payment to donor, donor adviser, or related party. No more than incidental benefit received by a donor/adviser or related party from a grantee. Gift acknowledgement must provide that CF has exclusive legal control over contributed assets. No excess business holdings IRC 4943(e) for more than five years. - 20% of the voting stock of an incorporated business - 20% of the profits interest of a partnership or joint venture or the beneficial interest of a trust or similar entity - Any interest in a sole proprietorship

24 Scholarship Funds Defined: Grant to assist individual pursuit of education, achievement of an objective, development of a skill Objective and non-discriminatory basis for charitable class (facts and circumstances test) No benefit to persons making selection If donor, donor appointee, or related person participates in Scholarship Committee: Donor may not control selection committee Donor s advice is provided only as a member of a committee Community foundation appoints selection committee Procedures are approved in advance by CF Board Procedures are objective and non-discriminatory Special Rules: Scholarships for corporate employees or dependents Following these steps avoids classification as a donor advised fund.

25 National Standards Resources National Standards Website: National Standards Info Page: National Standards E-brochure (USE IT!): Upgraded Communications Toolkit: Upgraded FAQs: es/affiliate_faq9_29_09.pdf and Upgraded Seals: NS00_sealguide_11Feb181.pdf Council on Foundations Community Foundations Webpages:

26 More Resources Connect with peers around the globe. Search an online library of resources and best practices. Seek and give candid advice in a private community of peers. Find members funding similar issues or performing similar roles in their foundation.

27 Philanthropy Exchange Continue the conversation at Log in with your and password for the Council's website.

28 PART 4 The Process of Applying for National Standards Accreditation

29 HOW DO COMMUNITY FOUNDATIONS PARTICIPATE? ELIGIBILITY To qualify for National Standards, your community foundation must be: Recognized by the IRS under Code sections 501(c)(3), 509(a)(1), and 170(b)(1)(a)(vi). This information tells us that your community foundation is organized and operated exclusively for charitable purposes and is a publicly supported charity. In good standing with federal and state regulators. Meet the National Standards definition of a community foundation as stated in National Standard 1.

30 HOW DO COMMUNITY FOUNDATIONS PARTICIPATE? ELIGIBILITY A community foundation is a tax-exempt, nonprofit, autonomous, nonsectarian philanthropic institution supported by the public with the long-term goals of: Building permanent, component funds established by many separate donors to carry out their charitable interests; Supporting the broad-based charitable interests and benefitting the residents of a defined geographic area, typically no larger than a state; and Serving in leadership roles on important community issues.

31 HOW DO COMMUNITY FOUNDATIONS PARTICIPATE? BEFORE APPLYING Keep in mind, preparing the materials and submitting your application for National Standards can take anywhere from a few weeks to a few months. Discuss the value of National Standards accreditation with your executive committee and board to make sure your community foundation has support as you undergo the process. Look through the accreditation requirements and make a list of items that will need board approval to assist you with building a timeline. It is a good idea to start with the legal section of this list.

32 HOW DO COMMUNITY FOUNDATIONS PARTICIPATE? BEFORE APPLYING Know your accreditation expiration date if your foundation is currently accredited. If you don t know your accreditation date, check our website at or us at submissions@cfstandards.org. For your first online submission, we suggest submitting between eight and twelve months before your accreditation expires. For your annual online renewal, you must submit at least 90 days before your accreditation expires.

33 HOW DO COMMUNITY FOUNDATIONS PARTICIPATE? APPLYING Visit our application website to start the online process. Application management software provided by WizeHive. Create an account using the Signup section. You can only have one account per community foundation. Fill out the application. You can save your draft as you go. If multiple staff members are logging into the application, make sure only one person is in the application at a time, or your work may not save. Once you have uploaded all of your documents, completed the application, and reviewed your work, you may submit. Keep in mind this process is rigorous and can take a few weeks to several months. You may print a copy of your application while you work on it or when it is final.

34 HOW DO COMMUNITY FOUNDATIONS PARTICIPATE? APPLYING After submitting your application, you will receive an confirmation providing payment instructions. Follow the instructions you receive for payment. Your first online submission costs $1,250. Annual renewal costs $1,000. Please make payment by sending a check payable to: Community Foundations National Standards Board 2121 Crystal Drive, Suite 700 Arlington, VA 22202

35 HOW DO COMMUNITY FOUNDATIONS PARTICIPATE? REVIEW PROCESS Once you submit your application and payment is received, peer and legal reviewers will go through your application. This process can take several months depending on volume. The National Standards Executive Director or National Standards Manager will compile reviewer comments and them to the community foundation used to set up the National Standards account. It is not unusual for your foundation to receive requests for supplemental materials. Review the comments and respond to the requests for supplemental materials. Provide your response within 30 days or after your next board meeting if your updated materials require board approval.

36 HOW DO COMMUNITY FOUNDATIONS PARTICIPATE? REVIEW PROCESS This process of responding to comments from reviewers can happen more than once. If supplemental materials are requested more than three times, the National Standards Executive Director will require a call with the community foundation to discuss outstanding issues before the fourth submission of materials. Once all National Standards are met, the community foundation receives an notification informing them they are accredited. The accreditation has a link to the National Standards licensing agreement that must be signed online. Once the licensing agreement has been signed and returned, the community foundation receives a confirmation including links to National Standards resources.

37 HOW DO COMMUNITY FOUNDATIONS PARTICIPATE? YOU RE ACCREDITED! The National Standards Seal and the Communications Toolkit make it easy for you to share your community foundation s achievement with your community. RENEWAL Now that your community foundation is accredited, all of your foundation's most important documents are available to you and saved in one online, easy-to-access location. Your annual renewal date is one year after you receive the notification of your accreditation.

38 HOW DO COMMUNITY FOUNDATIONS PARTICIPATE? YOU RE ACCREDITED! The National Standards Seal and the Communications Toolkit make it easy for you to share your community foundation s achievement with your community. RENEWAL Each year, you will review your original application and update any changes to your documents, policies, or responses to the application questions. Your renewal application is available to be updated throughout the year as your community foundation makes updates to its policies and procedures. Submit your annual renewal and payment no less than 90 days before your accreditation expires.

39 HOW ARE COMMUNITY FOUNDATIONS SUPPORTED IN THE PROCESS? SAMPLE DOCUMENTS The Council on Foundations legal team provides high quality, vetted sample policies and procedures specifically tailored to community foundations. HELPFUL HINTS Each sample document is accompanied by a cover sheet of helpful hints to help you think through what your policies and procedures should include and why. E-LEARNING For webinars or program updates, you can check out the National Standards home page, specifically the News and Events section. PROGRAM UPDATES Updated Website Updated Checklist Updated Online Application - Not Accessible February 13 March 30

40 Contact Us Lara Kalwinski: Christina Gonzalez:

41 EXTRAS

42 Peer Reviewer Tips For Review after the Presentation Please Share with CF Submission Lead

43 Peer Reviewer Tips Start early: Identify a point person and begin asking other key staff to familiarize themselves with Standards a year or more in advance of your expected submission date (and that date should be 6-8 months prior to the expiration of your current accreditation). You ll need time to review, create and compile the needed information and documents. No dumb questions: The CFNSB website is a valuable resource. The website contains many sample documents and helpful hints. Lara and other staff would rather help you in advance of your submission than engage in a long process of submissions and supplemental reviews. Use the knowledge and experience available to you. Samples: The sample policies provide on the website are an amazing resource. However, be aware that if it appears policies have ben adopted without careful editing, discussion, and board review to ensure applicability to your individual CF, it will raise questions in review. You can t go back to the future: Reviewers are required to find evidence that your board/cf has adopted the policy. This might require submission of minutes documenting approval of policy or in the case of a 990, either submitting a copy of an amended filing or a copy of the next year s 990.

44 Peer Reviewer Tips Read instructions carefully: For some standards, your CF is required to have a policy even if you don t currently conduct that activity (such as availability of 990T or excess business holdings in donor advised funds). Embrace sameness: Use a consistent format for fund agreements. Incorporate policies and terms and conditions by reference where possible, but submit every sample agreement in full with all applicable addendums, exhibits or appendices. Cross-check: Reviewers look at all the information submitted. If you state you don t offer scholarship funds and a reviewer notices the John Smith Scholarship Fund in your fund list, questions and requests for additional information will follow. Submit based on what is actually in place or what your organization would offer.

45 Peer Reviewer Tips Practical advice: Number pages within documents Highlight key elements, like the pertinent parts of board minutes or policies (and make sure the highlights translate to your scanned version) Keep copies (paper or electronic) of EXACTLY the same version of documents as those you submit For yes/no questions, keep an internal document referencing the policy or evidence upon which your answer was based. This will be a crucial resource if questions arise in the review, when it s time for reconfirmation, and for institutional history.

46 Peer Reviewer Tips Integrity: The process for submitting your information for Standards has been moved to the cloud, streamlined and improved. There are lots of yes and no questions, and if the answer is no your submission cannot go forward. Don t say yes based on aspiration only on reality. Excellence: Standards are a great learning tool for Board and staff. Compliance with National Standards represents a level of excellence your CF and Board should be proud of. Set that tone as you approach this process. Enjoy the process!

47 #cofannual HOW WE ENCOURAGE PROMOTING ACCREDITATION

48 HOW IS THE COUNCIL ENGAGED WITH NATIONAL STANDARDS? The Council supports community foundations through the National Standards program. The Council believes that Standards are a critically important element of our challenge to Congressional and State actions to constrain community foundations. The Council s legal team created over 40 template policies and pieces of guidance for the National Standards revisions. The Council s leadership underwrote the implementation of the National Standards online application.

49 HOW IS THE COUNCIL ENGAGED WITH NATIONAL STANDARDS? The Council s policy team educate policymakers on this peer-driven, self-regulatory accreditation program that reflects efforts to comply with legal requirements and advance best practices. The Council s policy team arranges opportunities for policymakers to receive briefing on National Standards. The Council s communications team helps place National Standards updates in Council publications.

50 HOW IS THE COUNCIL ENGAGED WITH NATIONAL STANDARDS? MANAGEMENT & LICENSING AGREEMENTS The CFNSB and the Council have a management agreement under which the Council will provide staffing, office space, back office and other services to the supporting organization. The Council will retain ownership of the trademarks associated with National Standards but will license the trademarks to the supporting organization for a fee. The CFNSB will administer the accreditation program but the Council will still maintain some education and marketing efforts related to National Standards. While there are separate areas of responsibility related to National Standards, the CFNSB and the Council have aimed for alignment on strategies and goals for the community foundation field. The Centennial Plan is the Council s current strategy for the community foundation field. The National Standards are an important component of the field-building and brand-building initiatives.

51 Contact Us Lara Kalwinski: Christina Gonzalez: