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The IRS just released the draft instructions for Form 990. Here's ASAE & The Center's notice about it:

The IRS this afternoon released draft instructions for the redesigned Form 990 that tax-exempt organizations will file beginning with the 2008 tax year (returns filed in 2009). The draft instructions can be downloaded from the IRS website here: http://www.irs.gov/charities/article/0,,id=181091,00.html .

While the new Form 990 was finalized in late December 2007, the IRS is seeking comments on the 2008 Form 990 instructions to ensure they address the needs of filing organizations. Comments are due by June 1, 2008.

The IRS is requesting comments on all aspects of the draft instructions, including suggestions for further reducing the complexity of the form and the burden on filing organizations. At the beginning of the instructions for the core form and each schedule, the IRS has highlighted specific areas where comments might help. The agency indicated it's particularly interested in comments on the definitions in its glossary, and the instructions for significantly revised or new areas of the form such as compensation, governance, foreign activities, disregarded entities and joint ventures and hospitals. As it did with the Form 990 last summer, the IRS plans to post all comments on the instructions on its website (www.irs.gov).

According to the IRS, the draft instructions are intended to provide specific and clear guidance for completing the core form and each schedule. This approach has increased the length of the instructions, but the IRS believes the new content will make it easier for organizations to complete the form. The IRS has included a number of new tools to enhance compliance and promote more uniform reporting, including a comprehensive glossary of terms; a sequencing list to help organizations determine the order in which to complete sections of the form; and a compensation table to help organizations determine how and where to report compensation data.

ASAE is in the process of reviewing the draft instructions and welcomes feedback from the association community as we work toward submitting comprehensive comments prior to June 1.
For more information about the new Form 990, please contact ASAE's Public Policy Division at 202-626-2703 or email us at publicpolicy@asaenet.org.

Sixty-two percent of Americans believe the typical nonprofit spends more than is reasonable on overhead expenses (according to an Ellison Research survey of 1,007 U.S. adults). But a Meyer Foundation study of 6,000 “next-generation leaders”—staffers of all ages who have committed to the nonprofit sector and who are actively developing the skills needed to hold management positions—found significant concerns about salary and compensation.

When those future leaders consider spending the rest of their careers in the nonprofit field, the following percentages of respondents said that

• I will not make enough money to retire comfortably: 48%
• I will not make enough money to support a family: 37%
• I will not make enough money to pay off all debt in a reasonable time frame: 24%

These studies are both aimed at the philanthropic community, but I've seen similar concerns coming from professional society members too, especially when the industry the society represents falls upon hard times. What can we do to educate donors, members, and stakeholders so that they can understand the difference between investing in the future of a nonprofit or association and wasting money on unneeded overhead expenses? (With the caveat that we as staff should always be on the lookout to cut unnecessary overhead, like any business would?)

Notes:

• Model based on Boston Consulting Group’s “Growth-Share Matrix”
• To use the model, analysts plot a scatter graph using net annual margin (green) or subsidy (red) to scale diameter of each program, product or service
• Programs illustrated are for example only & do not represent actual margin or performance
• 1=Stars (High investment brand leaders-surplus capital); 2=Questionable (requires major investment-low results); 3=Cash Cows (Low investments-surplus capital); 4=Retire (limited investment-limited results-beware expensive/risky turnarounds)

Some of you share my long-term interest in annual evaluation of association programs, products and services (PPS). The reason for an annual evaluation is simple: evaluation looks at PPS performance and life-cycles, and provides the basis for rational decision-making about which PPS should continue and which should be retired.

Annual evaluation is also important because it is one method to release precious resources and capabilities to support innovation and consistent annual new PPS development. The old association adage is true for many of our associations, “If something new is to be added to the wagon, then something old must be removed.” The adage is true because it’s not often that our associations have on hand substantial unused capacity that can be devoted to new PPS development. And our ability to simply go out and increase our capacity to meet new opportunities is generally limited. There’s little venture capital available for non-profits.

Now, one could argue that innovation will let an association do more and better. But there is a finite limit as to how much one can and should try to stuff into a 5-pound bag, if you get my point. Many of us are past our organizational bag limit, and innovation just to add more to an overloaded bag is not the answer.

Thus, annual evaluation is important. But it’s hardly simple. The challenge is that associations generally provide PPS in two very different categories: 1) Mission-focused activities which are often subsidized in whole or part; 2) Business operations that provide the net margin necessary to subsidize the mission-focused activities. Both categories of activities support the organization’s overall mission and both categories reinforce and strengthen one another. And as many of us have learned the hard way, there is no mission without a margin. Evaluation of these two different categories of activities, however, can be challenging, since they are often so different. Targets and measures used to measure subsidized activities, for example, often are not the same targets and measures used for margin-producing activities.

Mark Golden and I had an interesting discussion of PPS evaluation of these two categories of activities in the “Driven by Mission Not Money” thread on the ASAE & the Center iCohere Measures of Success Strategy Lab web site, in which we both concluded that annual evaluation should be based on how the PPS is actually performing. Mark rightly commented, “It isn’t good enough to have good, mission related intentions, (evaluation should be based on) how well it (PPS) achieves mission related ends.” Said differently, evaluation of all activities should be based on results.

This has led me to develop the chart above for comment and trampling action. It uses some typical ASME programs and hypothesized data to illustrate how the approach might (or might not) work. Would such an evaluation process work in your organization? Could it be refined and made more useful? Inquiring minds want to know…I look forward to your comments.

There is one thing that people just absolutely need to give up. And that is thinking of how ideas or opportunities or issues will affect their budgets.

I'm not saying don't think about finances at all. Far from it. But as a senior member of staff, it is too common to think of budgets under your control first. "Will it make my department's bottom line better or worse?" I've seen people whose judgment I value a lot fall into this trap. If we are to truly move our organizations forward, this hard evidence of the silo mentality must be cast aside. When assessing anything — idea, problem, anything — use your mission first. A close second consideration is financial, but the only financial assessment that matters is the impact on the organization's overall bottom line.

Many times I've seen and heard of good ideas being beaten down, because the expense may come out of one side of the budget and any expected revenue comes out of another. When I've experienced these conversations, I've always thought they were so petty. But I've come to see them for what they really are: highly destructive to the health of the organization.

And CEOs—you're not off this hook. True, I'd hope that any CEO would look at the organization bottom line rather than how individual programs are affected. But if your senior people are going to overlook the affects on their budgets, your culture and practice must be that senior management is not held accountable for the financial performance of individual programs. Instead, senior management should be held accountable for the whole organization's bottom line. It seems to me that's the only way to have a healthy, functioning senior team.