I work for a nonprofit which is home to several named endowed funds. We are getting ready to send out annual statements for 2008. Unfortunately, all the funds suffered a loss. A lot has to do with the economic state we are in, but how do you think would be the best way to approach this to families who will see the loss and subsequently question it?
You are not alone, I know several organizations that have similar issues. I think you need to be as honest and straight forward as possible with your donors. Unless they have been under a rock they should be aware of the financial situation we are all in and what has happened to investments in just about everything. They may already be anticipating losses in their funds.
I would include as much information as you can in those statements. Were the losses your funds suffered less that what the market lost in general? That would be something to highlight Were steps taken to minimize losses when the managers realized the market was heading south? I would highlight any ‘good’ news as much as you can. It is the donor’s money and they have a right to ask questions, but if we are proactive in giving them information up front perhaps we can forestall some questions. But you will get some so you should be prepared in advance to answer them all as completely as possible. Saying “I don’t know” is bad, and lying to a donor or covering up bad news is even worse.
If mistakes were made in handling the endowed funds on your end, say perhaps the funds were invested a little more aggressively than they should have been, be up front and let them know that mistakes will not happen again. And maybe letting them know what your investment plan going forward would be helpful as well.
Questions and Answers from the latest New Form 990 training I did:
For calculating our total assets to determine which form we use, do we exclude property, plant and equipment?
Nope, you use total assets for figuring out which form, either the 990, 990 EZ or the 990 N, to fill out.
When filling out the functional expense section and calculating the advertising expenses, do we include money we spent to advertise open positions within the organization?
Not as I read the instructions. Here is what it says for line 12 in part IX:
Advertising expenses. Enter amounts paid for advertising. Include amounts for print and electronic media advertising. Also include Internet site link costs, signage costs, and advertising costs for the organization’s in-house fundraising campaigns. Do not include fees paid to independent contractors for conducting professional fundraising services or campaigns (these amounts must be reported on line 11e).
With the economic downturn and the decreased value of endowments and reserves, will more organizations be filling out Schedule N of the form 990?
Does your nonprofit have a donor-restricted endowment fund or a board-designated endowment fund? Are you hoping to get or create one? Effective for fiscal years ending after December 15, 2008, nonprofit organizations with donor-restricted and board-designated endowment funds are facing changes in financial statement reporting and disclosure requirements.
In August 2008 the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. FAS 117-1, “Endowments of Not-for-Profit Organizations: Net Asset Classifications of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), and Enhanced Disclosures for All Endowment Funds.”