[PPT] - NONPROFIT GOVERNANCE POLICIES AND PROCEDURES REVISITED: TRENDS, PowerPoint Presentation

SLIDE 1

NONPROFIT GOVERNANCE POLICIES AND PROCEDURES REVISITED: TRENDS, DEVELOPMENTS, AND MORE

TEX A S S O C I ETY O F C P A S N O N P RO FI T O RG A N I Z A TI O N S C O N FEREN C E M A Y 1 9 , 2 0 1 5

Da vid M. Ro se nb e rg T ho mpso n & K nig ht L L P www.tkla w.c o m da vid.ro se nb e rg @ tkla w.c o m Da rre n B. Mo o re Bo urla nd, Wa ll & We nze l, P.C. www.b wwla w.c o m dmo o re @ b wwla w.c o m

SLIDE 2

FORM 990 AT A GLANCE

Co re F

rm

11 Pa rts

Pa rt 1 - Summa ry Pa rt I I – Sig na ture Blo c k Pa rt I I I

Pro g ra m Se rvic e Ac c o mplishme nts

Pa rt I V – Che c klist o f Re q uire d Sc he dule s Pa rt V – I RS F iling s a nd T a x Co mplia nc e

Par t VI – Gove r nanc e , Manage me nt and Disc losur e

Pa rt VI I – Co mpe nsa tio n Pa rt VI I I – Sta te me nt o f Re ve nue Pa rt I X – Sta te me nt o f F unc tio na l E xpe nse s Pa rt X – Ba la nc e She e t Pa rt XI – F ina nc ia l Sta te me nts a nd Re po rting

2

SLIDE 3

FORM 990 AT A GLANCE

Sc he dule A – Pub lic Cha rity

Sta tus

Sc he dule B – Co ntrib uto rs
Sc he dule C – Po litic a l a nd

L

b b ying Ac tivity
Sc he dule D – Supple me nta l

F ina nc ia l Sta te me nt De ta il

Sc he dule E

– Sc ho o ls

Sc he dule F

– F

re ig n Ac tivitie s
Sc he dule G – F

undr aising and Gaming

Sc he dule H – Ho spita ls
Sc he dule I

– Gra nts

Sc he dule J – Compe nsation
Sc he dule K

– T a x-E xe mpt Bo nds

Sc he dule L

– T r ansac tions with Inte r e ste d Pe r sons

Sc he dule M – No n-c a sh

Co ntrib utio ns

Sc he dule N – T

e rmina tio n o r Sig nific a nt Dispo sitio n o f Asse ts

Sc he dule O – Supple me nta l

I nfo rma tio n

Sc he dule R – Re la te d

Org a niza tio ns a nd Unre la te d Pa rtne rships

16 Sc he dule s

3

SLIDE 4

THE CURRENT VERSION OF FORM 990 ASKS ABOUT THREE POLICIES

Co nflic t o f I

nte re st Po lic y

Whistle b lo we r Po lic y
Do c ume nt Re te ntio n a nd De struc tio n

Po lic y

Se e Atta c hme nt 1 fo r re le va nt pa g e s o f F

rm 990-

Pa rt VI Se c tio n B c o ve rs po lic ie s (Pa g e 6 o f the Re turn) –

rg a niza tio n ma y a nswe r “Ye s” to the “do yo u

ha ve a po lic y” q ue stio ns o nly if the po lic y wa s in pla c e a s o f the e nd o f the filing ye a r.

4

SLIDE 5

CONFLICT OF INTEREST

Co mmo n wa y to vio la te the duty o f lo ya lty
I

nte re ste d tra nsa c tio ns

An o ffic e r o r dire c to r is “inte re ste d” unde r sta te la w if he :
ma ke s a pe rso na l pro fit fro m the tra nsa c tio n with the c o rpo ra tio n;
b uys o r se lls a sse ts o f the c o rpo ra tio n;
tra nsa c ts b usine ss in the o ffic e r’ s o r dire c to r’ s c a pa c ity with a

se c o nd c o rpo ra tio n o f whic h the o ffic e r o r dire c to r ha s a sig nific a nt fina nc ia l inte re st; o r

tra nsa c ts c o rpo ra te b usine ss in the o ffic e r’ s o r dire c to r’ s c a pa c ity

with a me mb e r o f his fa mily.

No t inhe re ntly une thic a l o r a vio la tio n o f la w
No te : L
a ns to dire c to rs a re a sta tuto ry vio la tio n

5

SLIDE 6

CONFLICT OF INTEREST

I

nte re ste d tra nsa c tio ns b e twe e n c o rpo ra te fiduc ia rie s a nd the ir c o rpo ra tio ns a re pre sume d to b e unfa ir o n the pa rt o f the o ffic e r o r dire c to r a nd fra udule nt

n

the c o rpo ra tio n, a nd a re thus g e ne ra lly vo ida b le .

Ge ne ral Dynamic s v. T

rre s,

915 S.W.2d 45, 49 (T e x. App.—E l Pa so 1995, writ de nie d).

Ho we ve r, T

e xa s la w pro vide s a limite d “sa fe ha rb o r” fo r inte re ste d tra nsa c tio ns if:

ma te ria l fa c ts a re disc lo se d; a nd
ma jo rity o f the disinte re ste d dire c to rs
a utho rize

the tra nsa c tio n in g o o d fa ith a nd e xe rc ise

f
rdina ry c a re .

6

SLIDE 7

CONFLICT OF INTEREST

T

he n, the tra nsa c tio n is no t vo id o r vo ida b le so le ly b e c a use o f the dire c to r’ s inte re st o r the dire c to r’ s pa rtic ipa tio n in the me e ting a t whic h the tra nsa c tio n is vo te d

n.

Se e T e xa s Busine ss Org a niza tio ns Co de (T BOC) § 22.230.

F

urthe r, the tra nsa c tio n will no t b e vo id o r vo ida b le if it is “fa ir” to the c o rpo ra tio n whe n it is a utho rize d, a ppro ve d o r ra tifie d b y the b o a rd. Se e T BOC § 22.230. T his is a ne b ulo us c o nc e pt a nd sho uld no t b e re lie d o n fo r pla nning .

7

SLIDE 8

DRAFTING POINTS ARISING FROM STATE LAW CONSIDERATIONS

Dra ft to e nc o ura g e c o mplia nc e with

sta tuto ry sa fe ha rb o rs (e .g ., T BOC § 22.230).

Co o rdina te po lic y with pro visio ns o f
rg a niza tio na l do c ume nts.
Dra ft with sta te la ws in mind (e .g ., T

BOC § 22.225 (pro hib iting lo a ns to dire c to rs)).

Se e Atta c hme nt 2 fo r sa mple c o nflic t o f inte re st po lic y

8

SLIDE 9

DRAFTING POINTS ARISING FROM FEDERAL TAX LAW CONSIDERATIONS

T

a ilo r the po lic y to the spe c ific type o f no npro fit e ntity in q ue stio n a s it is c la ssifie d unde r the I nte rna l Re ve nue Co de (the “Co de ”).

No t a ll Se c tio n 501(c )(3) c ha ritie s a re sub je c t to the sa me

rule s g o ve rning COI tra nsa c tio ns.

Dra ft to a c c o unt fo r the diffe re nc e b e twe e n priva te

fo unda tio ns a nd pub lic c ha ritie s.

Dra ft to a c c o unt fo r the uniq ue rule s g o ve rning suppo rting
rg a niza tio ns a nd do no r-a dvise d funds.
No t a ll ta x-e xe mpt no n-c haritie s a re sub je c t to the sa me

rule s g o ve rning COI tra nsa c tio ns.

Dra ft to a c c o unt fo r the a pplic a tio n o f the e xc e ss b e ne fit

tra nsa c tio ns e xc ise ta x (Co de Se c tio n 4958) to ta x-e xe mpt Se c tio n 501(c )(4) e ntitie s (e .g ., so c ia l we lfa re o rg a niza tio ns).

9

SLIDE 10

CONFLICT OF INTEREST POLICY

Wha t if the e ntire b o a rd is re la te d (i.e . a fa mily fo unda tio n)?
Do c ume nta tio n is ke y – b e sure to d o c ume nt the disc lo sure o f

the c o nflic t, c a re ful c o nside ra tio n o f the tra nsa c tio n, a nd the me tho do lo g y use d to d e te rmine tha t the tra nsa c tio n wo uld b e fa ir to the c o rpo ra tio n.

I

t ma y b e a dvisa b le (a ltho ug h o fte n no t pra c tic a l) to ha ve the b o a rd a ppo int a c o mmitte e

f disinte re ste d, b ut truste d

a dviso rs to ma ke re c o mme nda tio ns to the b o a rd with re spe c t to inte re ste d tra nsa c tio ns (suc h a s c o mpe nsa tio n fo r re la te d b o a rd me mb e rs, e tc .) a nd the n fo llo w tho se re c o mme nda tio ns.

T

he se c o mmitte e s c a nno t ha ve b o a rd de le g a te d po we rs unle ss a t le a st a ma jo rity o f the c o mmitte e me mb e rs c o nsist o f fo unda tio n b o a rd me mb e rs (thus d e fe a ting the purpo se o f “disinte re ste d”).

Se e Atta c hme nt 3 fo r sa mple c o nflic t o f inte re st po lic y fo r fa mily fo unda tio ns

10

SLIDE 11

IS THE COMPENSATION PAID TO DISQUALIFIED PERSONS REASONABLE?

T

he re sho uld b e a jo b de sc riptio n, e mplo yme nt c o ntra c t, e ng a g e me nt le tte r o r o the r a g re e me nt whic h fully de sc rib e s the dutie s, ho urs a nd re spo nsib ilitie s o f the disq ua lifie d pe rso n.

All type s o f c a sh a nd no n-c a sh c o mpe nsa tio n,

inc luding sa la ry, fe e s, b o nuse s, se ve ra nc e pa yme nts, fring e b e ne fits a nd de fe rre d c o mpe nsa tio n, must b e ta ke n into a c c o unt to de te rmine to ta l a nnua l c o mpe nsa tio n.

I

f c o mmissio n o r o the r type s o f re ve nue sha ring (inc e ntive pa y) is pa id, so me so rt o f e vide nc e tha t the ra te is in line with industry sta nda rds sho uld b e ma inta ine d a nd re c o rde d.

11

SLIDE 12

IS THE REASONABLENESS OF COMPENSATION PROPERLY DOCUMENTED?

Co mpa ra b le da ta , i.e . surve ys, o ffe rs the disq ua lifie d pe rso n

re c e ive d fro m o the rs, a va ila b ility o f o the rs fo r the jo b ,

pinio n o f c o nsulta nts.
T

he c o mpe nsa tio n sho uld b e a ppro ve d b y no n-disq ua lifie d pe rso ns (no n-c o nflic te d b o a rd me mb e rs), whe n po ssib le .

Writte n re c o rds o f me e ting minute s fo r the me e ting in whic h

the c o mpe nsa tio n a rra ng e me nt wa s a ppro ve d sho uld b e ke pt, a lo ng with no ta tio ns o f the c o mpa ra b ility da ta re lie d

n, the a tte nde e s, vo te s, a b ste ntio ns (c o nflic t) a nd a ny

re la te d disc ussio ns o r a c tio ns.

All c o mpe nsa tio n must b e re po rte d o n Pa rt VI

I I

f the

F

unda tio n’ s F
rm 990-PF

, inc luding ta xa b le a nd no n- ta xa b le fring e b e ne fits.

12

SLIDE 13

WHISTLEBLOWER POLICY

F
rm

990, Pa rt VI - L ine 13, Do e s the

rg a niza tio n ha ve

a writte n whistle b lo we r po lic y?

A whistle b lo we r po lic y:
e nc o ura g e s sta ff to c o me fo rwa rd with c re dib le

info rma tio n

n

a lle g e d ille g a l pra c tic e s

r

vio la tio ns o f a do pte d po lic ie s o f the o rg a niza tio n;

spe c ifie s pro te c tio n fro m re ta lia tio n; a nd
ide ntifie s sta ff, b o a rd me mb e rs, a nd/ o r o utside

pa rtie s to who m suc h info rma tio n c a n b e re po rte d.

13

SLIDE 14

WHISTLEBLOWER POLICY

Whistle b lo we r pro te c tio n pro visio ns o f SOX a pply to

no npro fit c o rpo ra tio ns

E

ve n if the c la ims a re witho ut me rit, the o rg a niza tio n ma y no t “disc ha rg e , de mo te , suspe nd, thre a te n, ha ra ss, o r in a ny o the r ma nne r disc rimina te a g a inst a n e mplo ye e in the te rms a nd c o nditio ns

f

e mplo yme nt” if the e mplo ye e re po rts suspe c te d fra ud

SOX ma ke s it a c rime to kno wing ly a nd inte ntio na lly

re ta lia te a g a inst suc h a n e mplo ye e

Crimina l sa nc tio ns inc lude , fo r individua ls, fine s up to

$250,000 a nd/ o r impriso nme nt o f up to 10 ye a rs, a nd fo r o rg a niza tio ns, fine s up to $500,000

Se e Atta c hme nt 5 fo r sa mple Whistle b lo we r Po lic y.

14

SLIDE 15

DOCUMENT RETENTION AND DESTRUCTION POLICY

Pa rt VI

, L ine 14 - Do e s the o rg a niza tio n ha ve a writte n do c ume nt re te ntio n a nd de struc tio n po lic y?

A do c ume nt re te ntio n a nd de struc tio n

po lic y ide ntifie s the re c o rd re te ntio n re spo nsib ilitie s o f sta ff, b o a rd me mb e rs, a nd

utside rs fo r ma inta ining a nd do c ume nting

the sto ra g e a nd de struc tio n o f the

rg a niza tio n’ s do c ume nts a nd re c o rds.

15

SLIDE 16

DOCUMENT RETENTION AND DESTRUCTION POLICY

A do c ume nt re te ntio n a nd de struc tio n po lic y
sho uld inc lude g uide line s fo r ha ndling e le c tro nic file s
sho uld c o ve r b a c kup pro c e dure s, a rc hiving o f do c ume nts,

a nd re g ula r c he c k-ups o f the re lia b ility o f the syste m.

T

he do c ume nt pre se rva tio n pro visio ns o f SOX a pply to no npro fit c o rpo ra tio ns. SOX pro vide s c rimina l pe na ltie s fo r a pe rso n who :

“kno wing ly a lte rs, de stro ys, mutila te s, c o nc e a ls, c o ve rs up,

fa lsifie s, o r ma ke s a fa lse e ntry in a ny re c o rd, do c ume nt, o r ta ng ib le o b je c t with the inte nt to impe de , o b struc t, o r influe nc e the inve stig a tio n o r pro pe r a dministra tio n o f a ny ma tte r within the jurisdic tio n o f a ny de pa rtme nt o r a g e nc y o f the Unite d Sta te s o r [a ny fe de ra l inve stig a tio n o r b a nkruptc y c a se ], o r in re la tio n to o r c o nte mpla tio n o f a ny suc h ma tte r o r c a se ….”

16

SLIDE 17

DOCUMENT RETENTION AND DESTRUCTION POLICY

T

his c rime c a rrie s a ma ximum se nte nc e o f 20 ye a rs. T he sta tute e xte nds c rimina l lia b ility to the de struc tio n o f do c ume nts re la ting to a ny fe de ra l inve stig a tio n – e ve n lo w le ve l e xe c utive

r a dministra tive

inq uirie s o r a ny b a nkruptc y c a se .

T

he sta tute a pplie s to “c o nte mpla te d” inve stig a tio ns, impo sing po te ntia l c rimina l lia b ility e ve n whe re c o rpo ra te

ffic e rs

ha ve no a c tua l no tic e

f

the inve stig a tio n.

SOX inc lude s a se pa ra te o ffe nse , a lso punisha b le b y up

to 20 ye a rs, fo r a ny pe rso n who a lte rs o r de stro ys do c ume nts o r re c o rds with the inte nt to impa ir the ir use fo r “o ffic ia l pro c e e ding s,” e ve n b e fo re a sub po e na ha s b e e n issue d.

Se e Atta c hme nt 6 fo r sa mple do c ume nt re te ntio n a nd de struc tio n po lic ie s.

17

SLIDE 18

DOCUMENT RETENTION POLICIES DRAFTING CONSIDERATIONS

I

nc lude a ll the diffe re nt type s o f re c o rds tha t sho uld b e inc lude d a s “do c ume nts.”

Be c le a r o n wha t do c ume nts ne e d to b e ke pt a nd fo r ho w

lo ng AND b e c le a r o n wha t do c ume nts ne e d to b e de stro ye d a nd whe n.

T

he re is no unifo rm la w o n re c o rds re te ntio n a nd de struc tio n. T he re a re re g ula tio ns in va rio us industrie s re g a rding c e rta in do c ume nta tio n (he a lthc a re , e tc .).

Co mmo n la w is we ll-e sta b lishe d tha t o nc e pe nding

c la ims/ litig a tio n e xists, do c ume nts re le va nt to the litig a tio n a re sub je c t to a “litig a tio n ho ld” a nd sho uld no t b e de stro ye d.

Po lic ie s sho uld inc lude whe re a nd in wha t me dium re c o rds

a re ma inta ine d.

18

SLIDE 19

SUMMARY- 990 POLICIES

Co nflic t o f

inte re st, whistle b lo we r a nd d o c ume nt re te ntio n a nd de struc tio n po lic ie s, while no t le g a lly re q uire d, a re prude nt ste ps fo r a ny c ha rita b le

rg a niza tio n with me a ning ful a sse ts a nd a c tivitie s.
Answe ring “no ” to

the F

rm 990 “do

yo u ha ve a ___________ po lic y” q ue stio ns is inhe re ntly le ss de sira b le tha n a nswe ring “Ye s”:

“I n the future , the I RSlike ly will take re spo nse s to partic ular Part VI que stio ns into ac c o unt whe n de te rmining whic h o rganizatio ns are mo st at risk o f no t c o mplying with the tax law.”

Ste phe n Cla rke , I RS ta x la w spe c ia list a nd Re vise d F

rm

990 pro je c t ma na g e r, Ma rc h 23, 2010.

Atta c hme nt 10 se ts fo rth sa mple re so lutio ns fo r a d o pting the se a nd o the r po lic ie s disc usse d he re in.

19

SLIDE 20

OTHER POLICIES

Po lic y o n Cha pte rs, Affilia te s, a nd Bra nc he s E xe c utive Co mpe nsa tio n Po lic y Gift Ac c e pta nc e Po lic y Po litic a l Ac tivity Po lic y Co de o f Co nduc t Jo int Ve nture Po lic y E xpe nse Re imb urse me nt Po lic y 990 to the Bo a rd Po lic y

20

SLIDE 21

GIFT ACCEPTANCE POLICY

T

he re is no t a q ue stio n o n the 990 o r 990-PF a sking a b o ut a g ift a c c e pta nc e po lic y, b ut it is g o o d pra c tic e to ha ve o ne . Se e Atta c hme nt 7 – Sa mple Gift Ac c e pta nc e Po lic y

Othe r g ift a c c e pta nc e po lic ie s a va ila b le o nline :
F
unda tio n Ce nte r:

http:/ / www.fo unda tio nc e nte r.o rg / g e tsta rte d/ fa q s/ html/ g ift a c c e pt.html (no t a c tua l po lic ie s, b ut a list o f re so urc e s whe re yo u c a n find o ne )

No npro fit Risk Ma na g e me nt Ce nte r:

http:/ / www.no npro fitrisk.o rg / to o ls/ ha llma rks/ to o ls/ 1g ift- a c c e pta nc e -po lic ie s.do c

Co mmunity F
unda tio n o f Gre a te r Birming ha m:

http:/ / b e stpra c tic e s.c o f.o rg / file s/ 44._Gre a te r_Birming ha m_ Gift_Ac c e pta nc e _Po lic ie s_2005.do c

21

SLIDE 22

WHY HAVE A GIFT ACCEPTANCE POLICY?

Pro te c t o rg a niza tio n fro m una ntic ipa te d lia b ilitie s
E

nha nc e re la tio nship b e twe e n o rg a niza tio n a nd (pro spe c tive ) do no rs

Unifo rm e xpe c ta tio ns
T

e rms g o ve rning re stric te d g ifts

E

nha nc e like liho o d tha t re stric te d g ifts will b e po te ntia lly de duc tib le

Pre se rve o rg a niza tio n’ s ta x e xe mptio n/ g o o d g o ve rna nc e
Re duc e risks o f e xc ise ta xe s
Dutie s o f c a re , lo ya lty
Sub sta ntia tio n
Se t sta nda rd te rms fo r re stric te d g ifts
I

nc o rpo ra te into fundra ising a ppe a ls a nd spe c ific a g re e me nts

Use o f do na tio ns if ha ve c ha ng e d c irc umsta nc e s

22

SLIDE 23

CONSIDERATIONS FOR A GIFT ACCEPTANCE POLICY

Do e s the g ift ha ve c o nditio ns tha t una c c e pta b ly tie up the use o f

the pro pe rty?

Will the type o f pro pe rty tie up o the r a sse ts o f the o rg a niza tio n,

suc h a s inc urring e xpe nse s fo r ho lding a nd/ o r ma inta ining the pro pe rty?

Will g ifts o f re a l e sta te will b e a c c e pte d, a nd if so , will the y b e

c o nditio ne d upo n a n inspe c tio n a nd e va lua tio n?

Will a c c e pta nc e o f the g ift hinde r o r pro mo te the missio n?
T

he o rg a niza tio n’ s dire c to rs a nd o ffic e rs must e xe rc ise prude nc e in inve sting a nd ma na g ing the o rg a niza tio n’ s a sse ts

I

t ma y o r ma y no t b e prude nt to a c c e pt pa rtic ula r g ifts

Do e s a c c e pta nc e c re a te ne g a tive pub lic ity fo r the o rg a niza tio n?
Ne e d

to we ig h e a c h g ift ve rsus the b e st inte re st

f

the

rg a niza tio n a s a who le .

23

SLIDE 24

ESSENTIAL ELEMENTS

T

ype s o f pro pe rty tha t will/ will no t b e a c c e pte d

Ab so lute pro hib itio n; who ha s disc re tio n a s to o the r g ifts

(a ppro va l pro c e ss)

T

ype s o f g ift ve hic le s

Whe the r to a c c e pt re stric te d g ifts, a nd if so , wha t

type s

Pro visio ns uniq ue to g ifts o f re a l e sta te , b usine ss

inte re sts, a nd o the r unusua l g ifts

T

ype o f a c kno wle dg me nts o f g ifts, a nd whe n to pro vide to do no rs

24

SLIDE 25

ESSENTIAL ELEMENTS

Ma y wa nt to inc lude pro visio ns re q uiring
rg a niza tio n to no tify pub lic o f the po lic y
E

spe c ia lly with b ro a d fundra ising

I

nside rs sho uld no t b e ne fit pe rso na lly fro m fe e s re la te d to g ifts re c e ive d a nd sho uld no t pa rtic ipa te in a ny a c tivity whic h c o uld b e de e me d a c o nflic t o f inte re st.

No finde r’ s fe e o r o the r priva te b e ne fit to a nyo ne

fo r g ift de ve lo pme nt.

25

SLIDE 26

ESSENTIAL ELEMENTS

Advise

a ll pro spe c tive do no rs to se e k the ir o wn le g a l/ ta x c o unse l in a ny a nd a ll a spe c ts o f the pro po se d g ift (a nd if ne c e ssa ry, the o rg a niza tio n sho uld a ssist the d o no r in se c uring inde pe nde nt c o unse l).

Do no rs o fte n wa nt to use the se rvic e s o f the o rg a niza tio n’ s

a tto rne y a nd a re willing to wa ive a ny c o nflic ts o f inte re st. T his sho uld b e do ne o nly a fte r c a re ful c o nsid e ra tio n a nd e xpla na tio n a nd do c ume nta tio n o f a ll po te ntia l risks to the do no r. A disc lo sure / wa ive r le tte r is impe ra tive .

Se e Atta c hme nt 7 fo r sa mple Gift Ac c e pta nc e Po lic y.

26

SLIDE 27

CONFIDENTIALITY POLICIES DRAFTING CONSIDERATIONS

De finitio n o f c o nfide ntia l info rma tio n sho uld b e

spe c ific a nd c le a r (a nd pra c tic a l)

I

nc lude c irc umsta nc e s unde r whic h disc lo sure o f wha t is g e ne ra lly c o nside re d c o nfide ntia l info rma tio n is a llo we d a nd the pe rso n(s) who c a n a ppro ve tha t disc lo sure

I

t is no t unusua l fo r a Co nfide ntia lity Po lic y to b e dra fte d in c o njunc tio n with a n E thic s Po lic y o r Co de

f E

thic s o f a no npro fit. T his c o mb ina tio n pro vide s the o ppo rtunity fo r the o rg a niza tio n’ s va lue s to b e sta te d a nd the n ha ve a Co nfide ntia lity Po lic y tha t re fle c ts ma ny o f tho se va lue s.

Se e Atta c hme nt 8 fo r sa mple c o nfide ntia lity po lic ie s.

27

SLIDE 28

WRITTEN POLICIES FOR LOCAL CHAPTERS, BRANCHES, OR AFFILIATES

Do e s the o rg a niza tio n ha ve lo c a l c ha pte rs,

b ra nc he s, o r a ffilia te s?

I

f “ye s,” do e s the o rg a niza tio n ha ve writte n po lic ie s a nd pro c e dure s g o ve rning the a c tivitie s o f suc h c ha pte rs, a ffilia te s, a nd b ra nc he s to e nsure the ir o pe ra tio ns a re c o nsiste nt with tho se

f

the pa re nt

rg a niza tio n? (E

xa mple s: re q uire d pro visio ns in c ha pte r’ s a rtic le s

f
rg a niza tio n
r

b yla ws, ma nua l pro vide d to c ha pte rs, a c o nstitutio n, o r simila r do c ume nt).

I

f “no ”, e xpla in in Sc he dule O.

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SLIDE 29

WRITTEN JOINT VENTURE POLICY

Did

the

rg a niza tio n inve st in, c o ntrib ute

a sse ts to , o r pa rtic ipa te in a jo int ve nture with a ta xa b le e ntity during the ye a r?

I

f “ye s,” ha s the

rg a niza tio n a do pte d

a writte n po lic y o r pro c e dure re q uiring the

rg a niza tio n to e va lua te its pa rtic ipa tio n in

jo int ve nture a rra ng e me nts unde r a pplic a b le fe de ra l ta x la w, a nd ta ke n ste ps to sa fe g ua rd the

rg a niza tio n’ s

e xe mpt sta tus with re spe c t to suc h a rra ng e me nts?

29

SLIDE 30

WRITTEN JOINT VENTURE POLICY

Wha t is the de finitio n o f “jo int ve nture ” fo r purpo se s o f

line 16?

Jo int ve nture
r simila r a rra ng e me nt me a ns a ny jo int
wne rship o r c o ntra c tua l a rra ng e me nt thro ug h whic h

the re is a n a g re e me nt to jo intly unde rta ke a spe c ific b usine ss e nte rprise , inve stme nt,

r

e xe mpt-purpo se a c tivity witho ut re g a rd to -

whe the r o rg a niza tio n c o ntro ls the ve nture ;
struc ture o f the ve nture ; o r
whe the r ve nture tre a te d a s pa rtne rship o r a sso c ia tio n.
Disre g a rd ve nture s if two c o nditio ns a re me t: (i) 95% o r

mo re

f ve nture ’ s inc o me

is pa ssive ; a nd (ii) prima ry purpo se o f o rg a niza tio n’ s pa rtic ipa tio n is the pro duc tio n

f inc o me o r a ppre c ia tio n o f pro pe rty.

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SLIDE 31

WRITTEN JOINT VENTURE POLICY

Sa fe g ua rd o rg a niza tio n’ s e xe mpt sta tus with

re spe c t to ve nture :

c o ntro l o ve r ve nture suffic ie nt to e nsure ve nture

furthe rs the e xe mpt purpo se o f o rg a niza tio n;

re q uire

ve nture to g ive prio rity to e xe mpt purpo se s o ve r ma ximizing pro fits;

re stric t a c tivitie s tha t wo uld

je o pa rdize e xe mpt sta tus; a nd

a ll c o ntra c ts e nte re d into with o rg a niza tio n b e a t

a rm’ s le ng th o r mo re fa vo ra b le .

31

SLIDE 32

INVESTMENT POLICY STATEMENT

Wha t is the purpo se / o b je c tive o f the inve stme nt

a c c o unt(s)?

Wha t type o f inve stme nt struc ture / a sse t a llo c a tio n

ma ke se nse b a se d o n o b je c tive s/ c o nstra ints/ risk to le ra nc e ?

Ho w will the c ha rity mo nito r pe rfo rma nc e ?
Wha t will b e the ro le s o f the Bo a rd? T

he I nve stme nt Co mmitte e ? T he o utside pro fe ssio na ls?

Wha t will b e the pro c e ss to re vie w the po lic y fo r

c o mplia nc e a nd ne c e ssa ry a djustme nt?

Se e Atta c hme nt 9 fo r sa mple inve stme nt po lic y sta te me nts.

32

SLIDE 33

INVESTMENT POLICIES DRAFTING CONSIDERATIONS

Do no t b e o ve rly spe c ific so a s to e ffe c tive ly

ha mstring the inve stme nt c o mmitte e a nd o utside inve stme nt a dviso rs.

By the sa me to ke n, the po lic y must e sta b lish c le a r

line s a nd ma nda te tha t inve stme nts must sta y within the se line s.

Be o b se rva nt o f a pplic a b le sta tute s, mo st

sig nific a ntly the T e xa s Unifo rm Prude nt Ma na g e me nt o f I nstitutio na l F unds Ac t, fo und a t Se c tio n 163 o f the T e xa s Pro pe rty Co de (“T UPMI F A”).

33

SLIDE 34

SETTING A SPENDING POLICY

Wha t a re the o b je c tive s to b e me t? (ra tio na le s fo r

e ndo wme nt)

Wha t a re the c ha rity’ s funding ne e ds?
Co nside r smo o thing b y inc luding use o f ro lling

a ve ra g e fo r c a lc ula ting va lue o f e ndo wme nt

34

SLIDE 35

DRAFTING TIPS COMMON TO ALL POLICIES

I

nvo lve the Bo a rd (the y’ re a do pting it!)

Use unde rsta nda b le la ng ua g e / de fine te rms
Co o rdina te te rms with pro visio ns o f

g o ve rning do c ume nts

Do n’ t try to b e No stra da mus
Do n’ t c re a te so me thing yo u wo n’ t fo llo w
Cre a te a syste m fo r a nnua l re vie w a nd

upda te a s ne c e ssa ry

35

SLIDE 36

WHY DO GOVERNANCE POLICIES MATTER?

Assist in c o mplying with sta te la w fiduc ia ry

dutie s

Assist in ma inta ining the o rg a niza tio n’ s

fe de ra l inc o me ta x e xe mptio n a nd in a vo iding fe de ra l e xc ise ta xe s

Assist in po sitio ning the e ntity fa vo ra b ly with

the I RS

Co ntrib ute to a c lima te o f e thic a l c o nduc t
Assist in se pa ra ting the whe a t fro m the c ha ff

in b o a rd se rvic e

36

SLIDE 37

T he info rma tio n se t fo rth in this o utline sho uld no t b e c o nside re d le g a l a dvic e , b e c a use e ve ry fa c t pa tte rn is uniq ue . T he info rma tio n se t fo rth he re in is so le ly fo r purpo se s o f disc ussio n a nd to g uide pra c titio ne rs in the ir thinking re g a rding the issue s a ddre sse d he re in. No n-la wye rs a re a dvise d to c o nsult a n a tto rne y b e fo re unde rta king a ny issue s a ddre sse d he re in.

37