While most nonprofits will survive the ravages of the recession, the tanking economy has underscored the need for nonprofits to rethink their priorities and strategies, says the chief of the IRS’ nonprofit division.
“They need to understand that it isn’t business as usual,” says Lois Lerner, director of the IRS Exempt Organizations Division, referring to U.S. nonprofits. “Because they’ve done it this way for 10 to 15 years doesn’t mean it still works that way.”
Lerner was in Raleigh Oct. 19 and 20 to give a lunch address to about 450 people working in and around the nonprofit sector who attended a two day-long workshops sponsored by the Philanthropy Journal and the Institute for Nonprofits at N.C. State University.
The sessions in Raleigh were part of a series of eight partnerships between the IRS and academic institutions throughout the U.S. this year that aim to inform new generations of nonprofit leaders about how IRS compliance has changed and to educate them about the resources available through the IRS.
Nonprofits must leverage the resources available to them, says Lerner, including the information provided by the IRS through its website and newsletters.
And larger nonprofits should reach out to assist smaller organizations, she says.
“They need to reach down and pull up the smaller organizations and help them be successful in the complex world where there’s fewer dollars,” says Lerner.
Nonprofits of all sizes also should view their organizations through a business lens in order to operate in a sustainable way.
“We don’t like to think of these organizations as businesses,” she says of nonprofits. “But you have to have some business sense. If you want to survive, you have to think about the same things a small business does.”
And in this era of scarce resources and heightened scrutiny from the media, the public, lawmakers and regulators, she says, nonprofit boards need to step up their dedication to their organizations.
“All of the abuses we’ve seen in the newspaper, most of them could have been avoided with a board that was paying attention to their governance responsibilities,” says Lerner.
But ultimately, Lerner remains optimistic about the nonprofit sector, which she believes provides an enormous amount of good, “not only in the daily lives of individuals and communities, but on the entire economic well-being of our country.”
Most of the sector cooperates willingly with the IRS in its efforts to ensure nonprofits are complying with federal regulations, she says, while a handful are confused about how to comply and an even smaller number have “bad intentions.”
“The nonprofit sector wants to do the right thing, and if they know what to do they will do it,” she says. “The combination of greater transparency, governance and accountability are absolutely necessary.”
And with the new Form 990, and the oversight role of a handful of watchdog agencies, nonprofits have been doing a better job of “self-regulating,” which could prevent further regulation by lawmakers at the federal level.”
“What I’m seeing is a good move in the right direction,” says Lerner. “But it’s up to Congress to say whether more is necessary.”
But ultimately, Lerner believes regulators are only one audience nonprofits must answer to.
“The tax-exempt world doesn’t just need to worry about the IRS,” she says. “They need to worry about the court of public opinion. Their reputation is all they have. If they lose that, they’re done.”
Lerner also announced at the event that the IRS has extended the deadline for filing Forms 990 for nonprofits in the 10 North Carolina counties that experienced severe damage during recent storms.
In the wake of the Sept. 27 storms, President Obama declared the following counties federal disaster areas: Beaufort, Bertie, Brunswick, Craven, Hertford, Jones, Pender, Pitt, Onslow and Tyrrell.
Nonprofits in these counties now have until Nov. 26 to submit their filings. The new deadline includes small tax-exempt organizations that were planning to take advantage of the IRS’ one-time filing relief program.
Additional information is available on the IRS website.