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GuideStar Professional Solutions:

Non-Profit Tools and Intelligence to

Fuel Your Research, Analysis and Pre-grant Due Diligence

© 2010, GuideStar USA, Inc. All Rights Reserved. This information is copyrighted subject matter owned by GuideStar USA and is protected by United States and international copyright law.

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Scott Menzel

Manager, Product and Customer Experience

Pamela Jowdy

Senior Product Manager

Today’s Facilitators

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1. GuideStar Premium: Primer and Demonstration

Search and Refinement Tools

Research Tools

Analysis Tools

Perspective: Client Persona

2. GuideStar Charity Check: Primer and

Demonstration

How it works

What it delivers

Perspective: Client Persona

3. Common Participant Questions

4. Q&A

Today’s Objectives

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Key Metrics and MilestonesGuideStar 101

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Key ConsiderationsExempt Sector 101

•There is one exempt organization for every 169 Americans

•The sector employs about 9.4 million workers

•The sector represents over 7 percent of the total U.S workforce

•There are 175 new tax-exempt organizations recognized by the IRS every day

•Higher education, hospitals, and primary care facilities:

•represent 2 percent of the total number of public charities •hold more than half of all assets and represent well over half of all expenses

•Roughly half of all exempt organizations are staffed entirely by volunteers

•Roughly one third of all exempt organizations have fewer than 10 employees

Source: National Taxpayer Advocate 2009 Annual Report to Congresshttp://www.irs.gov/pub/irs-utl/1_09_tas_arc_vol_1_preface_toc_msp.pdf

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Key Terms and DefinitionsNon-Profit Vernacular 101

MSA: Metropolitan Statistical Area

Urbanized areas of high population density Based on counties and county-equivalents 369 Metropolitan Areas 582 Micropolitan Areas (core city 10K > 50K)

NTEE: National Taxonomy of Exempt Entities

Classification system used by the IRS Tag organizations into broad categories Three-tiered hierarchy IRS coding at third (tertiary) level http://nccs.urban.org/classification/NTEE.cfm

BMF: Business Master File

Private Inurement: excessive compensation or other unreasonable benefit granted to “insiders”

Intermediate Sanctions: penalties imposed by the IRS for excessive compensation levels or other private inurement violations (IRC Section 4958)

http://www2.guidestar.org/rxg/help/glossary.aspx

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Affiliation TypeNon-Profit Vernacular 101

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GuideStar PremiumTools for non-profit research and

analysis

Pamela Jowdy

Senior Product Manager

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Best Practices and ApplicationsWho Uses GuideStar Premium?

Non-Profit Development Directors

Non-Profit Fundraising Directors

Grant Writers

Foundation Grants Administrators and Donor Services Managers

Corporate Foundation Giving Program Managers

Healthcare: Prospect and Research Directors

Accountants, Auditors and Compliance Officers

Attorneys and Paralegals specializing in non-profit practice

Asset Managers and Financial Services professionals specializing in non-profit practice

Marketing Communications professionals

Management and technology consultants

GuideStar Premium

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Demonstration Areas of Focus

Search and Refinement Tools Did You Mean Related Keywords Search Refinement Sort Options Advanced Search Data Depth

Research Tools Non-profit search People search Affiliation Type Other Documents:

Letters of Determination Audited Financials Annual Reports

Knowledge Base Archive Articles, newsletters 16 Disciplines 10 year “long tail”

Analysis Tools Saved Organizations Saved Searches (People and Organizations) Organization Download Select and Compare Financial Charts

GuideStar Premium v3.0

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Survey. Interview. On-Site. Usability Lab. Repeat.

Product Development Methodology

960 conversations over 18 months Premium Users Other Product Adopters Prospects / Potentials

891 Survey Participants

45 In-depth Interviews

24 Usability Lab Participants

5 on-site visits, 4 focus groups

From concept phase (2008) through late Beta phase

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GuideStar Premium v3.0 Online Demonstration and Learning

Lab

Pamela Jowdy

Senior Product Manager

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Demonstration Recap

Search and Refinement Tools Did You Mean Related Keywords Search Refinement Sort Options Advanced Search Data Depth

Research Tools Non-profit search People search Affiliation Type Other Documents:

Letters of Determination Audited Financials Annual Reports

Knowledge Base Archive Articles, newsletters 16 Disciplines 10 year “long tail”

Analysis Tools Saved Organizations Saved Searches (People and Organizations) Organization Download Select and Compare Financial Charts

GuideStar Premium v3.0

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Perspective: Client PersonaTaylor: Senior Manager, Non-Profit Governance

Profile:

National public accounting practice Manages auditing and accounting team specializing in exempt organizations Writing and customizing RFPs for maximum relevancy Benchmarking: program evaluation and industry scans

GuideStar Premium Business Integration:

Qualitative and quantitative data helps to tailor RFP and fully articulate needs of client Assets, income, expenses (program, administrative and total) People data (number of employees) Areas served, subsection codes

Advanced search to establish peer groups for comparison Identify client areas for improvement and long term growth opportunities Objective lens Subsection, income, NTEE

Organization Download: on the fly list creation eliminates cumbersome copy and paste exercises

GuideStar Premium

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GuideStar Charity CheckPre-grant Due Diligence in the Pension Protection Act Era

Pamela Jowdy

Senior Product Manager

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Internal Revenue Code Grants Administration Milestones

1969 August 2006

Pension Protection Act

New requirements on grants to certain

supporting organizations [509(a)

(3)]

Definition of Type III supporting

organizations

Definition of Type III functionally integrated

supporting organizations

IRS Revenue Procedure 2009-32

Formalizes March 2007 FAQ

PrecendtialInstrument upon

which compliance and grantmaking teams can rely

Tax Reform Act

The legal framework for the regulation of private foundations and public charities

is established

December 2006

June 2009

Internal Revenue Code

Interim Guidance Regarding

Supporting Orgs and Donor-Advised

Funds

Grantor may rely on IRS BMF or Letter of

Determination for identifying supporting organization 509(a)

status

March 2007

IRS FAQ on Business Master File

Reliance

Allows grantors to use third party resources

to obtain required IRS BMF information about a potential grantee’s charity

classification under section 509(a)(1), (2)

or (3)

Charity Check v1.5

100% compliant with IRS FAQ and

Revenue Procedure 2009-32

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Pension Protection Act ImplicationsWhy Verify?

Two Unique Due Diligence To-Do’s:

Verify Current Charitable Status

Publication 78 and

Internal Revenue Bulletin

Identify Supporting Organizations with

509(a)(3) status

IRS Business Master File

To-Do: Data Source:

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How it Works

Incorporates Weekly Internal Revenue Bulletin Marries Publication 78 data with IRS Business Master File data

Married, but never modified OFAC verification included: EIN-level 9 year track record of working with IRS data

An Integrated, One-Stop Verification Solution

GuideStar Charity Check

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What it Delivers

Date and time stamp

Latest Quarterly Pub 78

Weekly Bulletin Date

An Integrated, One-Stop Verification Solution

GuideStar Charity Check

Reason for Non-Private Foundation Status

EIN

IRS BMF Date

Verify Current Charitable Status

Identify Supporting

Organizations with 509(a)(3)

status

Electronic or hard copy documentation

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An Integrated, One-Stop Verification Solution

GuideStar Charity Check

Why it Works

The grantees’ name, EIN and public charity classification (aka “reason for non-private foundation status”) under section 509(a)(1), (2) or (3) is presented in the report

A statement that the information in the report is from the most currently available IRS monthly update to the BMF,

along with the IRS BMF revision date

The date and time of the grantor’s search is included on the report

The third party IRS BMF data and report must be in a form which the grantor can store in hard copy or

electronically.

Fully compliant with IRS Revenue Procedure 2009-32 concerning reliance on third-party

resources for IRS BMF data:

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Charity Check User Experience

Two Clicks to Compliance

Pamela Jowdy

Senior Product Manager, GuideStar

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Perspective: Client PersonaLee: Grants Manager, Community Foundation

Profile:

Distributes ~ $30 million annually Manages 600 funds, including DAF, unrestricted, scholarship and agency Distributes 1,000 grants annually Verifies at application and prior to distribution Identification of supporting organization status particularly important MicroEdge GIFTS user

GuideStar Charity Check Business Integration:

Verification of charitable status at time of initial application Publication 78

Identification of 509(a) status to identify potential supporting organizations Further research on Type III 509(a)(3) supporting organizations Excise tax sensitivity

Financial and trending analysis: for potential grantees and vetting of potential DAF investments

Documentation and compliance: via date and time stamped PDF report

GuideStar Charity Check

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1. Data Delivery Options

Subscription

Data Sets (Ad Hoc and Recurring)

XML* / Web Service

Hosted Solutions

2. Tools for Prospecting

Download versus Custom Data

3. Verification Best Practices

4. Compensation Analysis

5. GuideStar Exchange

6. Feedback and Suggestions

Common Participant Questions

*Extensible Markup Language =

easy way to share structured

data via ether

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GuideStar Compensation Report:Benchmark, Establish and Justify Key

Executive Compensation Levels

99,827 Forms 990 157,406 unique observations / data points Only report to use official IRS digitized data 14 key job categories Executive Summary National, MSA, State, NTEE Breakdowns Incumbent Analysis Static PDF annual format

http://publications.guidestar.org/private-inurement-primer/

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GuideStar CEO Checkpoint Report:Custom Peer Group Comparative

Analysis Aligned with new 2008 Form 990 requirements Establishment of Rebuttable Presumption Documentation and verification that private inurement

/ excess benefits transactions do not exist Avoid Intermediate Sanctions Penalties: individual may be required to repay the

excess benefit amount to make the charity whole as well as 25% penalty to IRS

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GuideStar Exchange:Share Your NPO’s Story

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GuideStar Exchange:Share Your NPO’s Story

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Dynamic, Persistent Feedback Mechanism

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GuideStar Professional Solutions:

Non-Profit Tools and Intelligence to

Fuel Your Research, Analysis and Pre-grant Due Diligence

© 2010, GuideStar USA, Inc. All Rights Reserved. This information is copyrighted subject matter owned by GuideStar USA and is protected by United States and international copyright law.

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Appendix

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Pub 78 and Internal Revenue BulletinWhy Verify: IRS Data Sources

Establish Tax Deductibility and Verify Current Charitable Status

IRS Publication 78: Also known as Cumulative List of Organizations Includes all organizations to which charitable contributions are tax deductible Current tax-exempt status, percentage of contributions that are tax deductible Deductibility limitations Published quarterly

IRS Internal Revenue Bulletin: Also know as the ‘IRB’ Lists organizations whose charitable status has been changed or revoked Updated weekly

Rev. Proc. 82-39, 1982-1 C.B. 759 Sec.3.01 and Sec.3.02 states that grantors “may rely on the classification of an organization listed in or covered by Publication No. 78.”

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IRS Business Master File

Determine 509(a) Status

IRS Business Master File: Lists all tax-exempt organizations registered with the IRS Published monthly Includes reason for non-private foundation status, aka “public charity classification” Reason for non-private foundation status = 509(a) status

Why Verify: IRS Data Sources

509(a)(1) and 509(a)(2): A public charity that receives a substantial amount of public support to fund its

operations

509(a)(3): Supporting Organization A public charity that provides support to one or more publicly supported organizations Must demonstrate that is has a particular type of relationship with the organization it

supports

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Supporting Organizations SnapshotIRS Business Master File

Why Verify: Pension Protection Act

32,191 509(a)(3) Supporting Organizations:

21,505 have filed a form 990 4% of all 509(a) orgs

12,305 of the 32,000 largest foundations, or 38%, made a grant to any supporting organization between 2000 and 2004

While the supporting organization universe is fairly discrete, failure to identify these organizations creates an exponentially greater fiscal and operational risk for private

foundations and sponsors of donor-advised funds.

509(a) Universe IRS Business Master File

509(a)(1)68%

509(a)(2)28%

509(a)(3)4%

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Internal Revenue Code Grants Administration Milestones

1969 August 2006

Pension Protection Act

New requirements on grants to certain

supporting organizations [509(a)

(3)]

Definition of Type III supporting

organizations

Definition of Type III functionally integrated

supporting organizations

GuideStar Charity Check v1.5 Released

Fully compliant with IRS Guidance on methodology for

determining 509(a) supporting

organization status

Tax Reform Act

The legal framework for the regulation of private foundations and public charities

is established

December 2006

April 2007

Internal Revenue Code

Interim Guidance Regarding

Supporting Orgs and Donor-Advised

Funds

Grantor may rely on IRS BMF or Letter of

Determination for identifying supporting organization 509(a)

status

March 2007

IRS FAQ on Business Master File

Reliance

Allows grantors to use third party resources

to obtain required IRS BMF information about a potential grantee’s charity

classification under section 509(a)(1), (2)

or (3)

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Access Points: ResultsGuideStar Charity Check

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Access Points: ReportGuideStar Charity Check

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509(a)(3) Supporting OrganizationGuideStar Charity Check

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OFAC Organization: Results GuideStar Charity Check

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IRS Guidance on BMF Reliance

March 2007

Why Verify: Pension Protection Act

Source: http://www.irs.gov/charities/charitable/article/0,,id=168531,00.html

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Grantmaker Verification Options

IRS website provides search functionality for Pub 78 Does not include IRB weekly updates; must search separately for changes and / or

revocations Cannot search by EIN No date or time stamp

IRS Publication 78

IRS Publication 78 Online

Source: http://apps.irs.gov/app/pub78

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Grantmaker Verification Options

Includes status changes and revocations Published weekly in pdf and html format Not searchable

IRS Internal Revenue Bulletin

IRS IRB

Source: http://www.irs.gov/irb

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Draft of manual solution for 509(a)verification directly from

IRS BMF

Grantmaker Verification OptionsIRS Business Master File

IRS Downloadable Business Master File

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Isn’t this good enough?

What it is

The Letter of Determination

What it is NOT

Static, historic snapshot

Only accurate at time of issuance

Confirms 501c3 status

Inclusive of changes in charitable status since date of original issuance