Transparency: An Enduring Component of the Non-Profit World

by Robert I. Evans and Avrum D. Lapin

The Jewish and non-Jewish media have offered various opinions and news reports about non-profits and their financial behaviors. After reading “Raising The Bar”, a provocative editorial in New York’s Jewish Week recently and a highlighted posting on eJewish Philanthropy (February 8th) we feel compelled to further discuss the importance of financial transparency.

Today the “new normal” demands that the philanthropic world respond to contemporary measures that serve to protect donors and force non-profits to diligently follow rules that are sometimes difficult to swallow. And these rules impact all Jewish non-profits including (or especially) houses of worship.

One impending deadline is approaching that impacts non-profits and addresses financial transparency. At one time, filing the IRS 990 forms was not a matter of course but today the “new normal” that now characterizes the philanthropic world requires new measures to be taken. The deadline for filing is May so now is the time to gather information for complete responses to dozens of questions on the form.

While all congregations are legally exempt from filing the IRS 990’s, there has been a push to require all non-profit institutions to adhere to the same guidelines and to file important paperwork. Filling out the very detailed and intricate new IRS 990 form can be tedious. However, it can be critical to better functioning and organizational success going forward.

The recently updated 990 form now features a variety of new questions that, while making it much more time consuming, will ultimately help to ensure that non-profits are acting ethically. Much to our amazement, many organizations have simply disregarded certain questions that prove difficult to answer and have turned in incomplete forms. We strongly disapprove of this and counsel against it.

We did talk recently with prominent New York City non-profit attorney Andrew Grumet, at Edwards Angell Palmer & Dodge, who acknowledges that some non-profits have been slow to respond to the federal government’s mandates for full disclosure. “Quickly, though,” he said, non-profits of all types and sizes will find themselves in serious difficulties if they do not comply. The IRS 990 is only one form,” he continued. “There are so many others that are reflective of good housekeeping and proper financial oversight.”

If your non-profit finds itself unable to answer questions it is important to seek help from your financial or legal advisor or your CPA. We also recommend allotting extra time to complete this form as we’ve heard from many of our clients and friends that it is much more involved than expected.

While all this information may seem daunting for synagogues that may already feel they have enough work on their plate, we stress the critical importance of filing a 990 and having a financial review (or audit) completed by a qualified CPA. This process and sharing the fact that it is taking place with donors and stakeholders will help to ensure a greater level of transparency and potentially identify some real problem areas that may have gone unnoticed.

The lesson to be learned regardless of type of institution or size of budget: show your constituency that you are taking the necessary steps to become a financially more accountable and open organization. Skepticism in the community endures and friends and supporters need to know that you are going above and beyond to ensure that nothing falls through the cracks, especially charitable dollars. Be sure to post important documents like annual reports and 990’s to your website. These are public documents and therefore they should be made available. Demonstrate that your organization has nothing to hide; donors want to feel reassured.

Another important element noted in the Jewish Week editorial was the need for organizations to have and function within a set of standards or a code of ethics. While most organizations have these documents on file, they may go unchanged for years and constituents often know nothing of their existence. Make sure to update these detailed documents and make them available as well. Demonstrating to donors and others that you have well-defined organizational rules will help to put them at ease with the knowledge that the leadership is cognizant of and lives by certain values, principles and “best practices.”

Clearly, the Jewish community has received increased scrutiny regarding financial practices since the Madoff scandal and we feel that it is imperative that we not lose sight of the importance of transparency even as the economy appears to be improving. Take those extra steps to guarantee your organization, synagogue or other non-profit, be prepared to address financial needs appropriately!

Robert I. Evans, Managing Director, and Avrum D. Lapin, Director, are principals of The EHL Consulting Group, of suburban Philadelphia, and are frequent contributors to EHL Consulting works with dozens of nonprofits on fundraising, strategic planning, and non-profit business practices. Become a fan of The EHL Consulting Group on Facebook.