Howard Levy has done a great service to both the nonprofit community and to those who serve it. So few resources are available to provide instruction for those considering, and for those who participate in, board service for charitable organizations. Levy’s book, The Volunteer Treasurer’s Handbook, fulfills that need better than most.
In 138 concise, well-written pages, Levy covers 16 different subjects. As a long-time nonprofit practitioner, I am not aware of any other publication that provides so much information in so many different critical areas as this one.
Tax-exempt organizations, particularly charities, face a broad array of regulations and restrictions. Articles of incorporation must be filed and contain certain provisions in order to qualify for tax-exempt status. Bylaws that determine both the structure and the governance of a charitable organization must be prepared. Once those are in place, IRS Form 1023 or Form 1024 must be filed with the IRS to seek tax-exempt status.
Without the necessary funding, a charity cannot accomplish anything. The solicitation of those funds is regulated not only by the IRS, but by the laws of virtually every state. Many states have unique provisions, making the process difficult and expensive.
Once a charity commences operations, there is often a search for qualified board members. But what is a qualified board member? While The Volunteer Treasurer’s Handbook says it is about being a volunteer treasurer, it covers much more. Individuals who accept board service have a fiduciary duty to ensure the proper operation of the charitable organization, which not only includes management, but use of resources and the pursuit of its program service. There are very few resources on how to learn to be a good board member; this book is at the top of the list as a resource.
Each of its 16 chapters covers a different challenge facing board members. For example, Chapter 3, “Accounting and Financial Reporting,” introduces a summary of specialized accounting principles. Many potential board members would not know that charitable organizations that report to the public account on an accrual basis; this is significantly different than reporting on the cash basis.
As discussed in Chapter 4, a well-run charity operates on a budget that has been put together by management and presented to the board. The board needs to know enough about the internal workings of the organization and its outreach in order to review a proposed budget. Best practices require prior review of a budget and a resolution at a board meeting approving the same before its implementation. Budget review and approval is a major responsibility of a board member.
Likewise, the use of funds must be tracked and accounted for. Chapter 10 talks about the role and selection of outside accountants, which is critically important. Accounting mistakes can be expensive, and will impede the pursuit of excellence by the organization. From a legal standpoint, CPAs’ best contribution is to educate the board on best practices as they are encouraged by the IRS and the legal issues pertaining to fundraising and contracting.
As an attorney practitioner in the tax-exempt space, I was pleased to read Chapter 12, “Regulatory and Contractual Compliance.” Registration requirements for charities seeking public support are complex, time consuming, and expensive. In addition, as noted in the book, well-written contracts can prevent legal and publicity disasters.
Another area that is well covered is the troublesome topic of “donor restrictions.” Donors may restrict gifts in a number of ways. Readers are familiar with high-profile fights between estates or major contributors who made a conditional gift to an institution on condition that a building named for the donor or the donor’s family and other unusual restrictions. Likewise, there are special purpose gifts, as well as those made in the form of an endowment; each of these carries both an accounting and a legal significance. Chapter 13 of the book deals with these problematic issues in a succinct and direct manner.
One part of the regulations governing the operation of charitable organizations is a limitation on lobbying and business activities. The Volunteer Treasurer’s Handbook gives the reader enough information to understand the basic principles and recognize when issues might arise.
I was particularly pleased with those portions of the book that dealt with donor substantiation and the problems of non-cash items. Charities have an obligation to require certain provisions in certain circumstances in order for taxpayers to take a qualified deduction. The failure to properly handle any such transaction can create tax liability on both the donor and the donee.
Board service is a wonderful way to give back to the community. The criteria for volunteering for board service is, first, to be comfortable with the mission of the organization; second, to understand its culture, its management, its funding, and its resources.
Time, treasure, and talent are no longer enough. Board members must understand the culture they are entering and how to navigate within the boundaries of the law and best practices to be an asset to the organization.
I will use The Volunteer Treasurer’s Handbook and refer it to others who are considering board membership. For anyone what wants to have a better understanding of the restrictions, requirements, and challenges that charitable organizations face in today’s society, this book will help. I recommend it.