Budget Cuts Could Be the Swan Song for Some and an Answered Prayer for Others

The recent budget cuts have been critized as problematic for nonprofits, however, some of the redirection of funds may be beneficial to certain areas of the nonprofit community. As pointed out in this article  from Nonprofit Quarterly, several programs related to housing help for the low income are either being terminated or reduced in size due to the recent budget cuts announced.  A number of programs from the Department of Health and Human Services are also either being cut or terminated. However, there are increases to the American Opportunity Tax Cut and the Pell Grant program and also increases in money given to schools.  For a complete list of budget cuts visit http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/trs.pdf and to see the complete budget broken out by department visit http://www.whitehouse.gov/omb/budget/Overview .  While some of these cuts may spell trouble in the short term for some nonprofits others may benefit from the additions.

Is There a Downside to Instituting Term Limits for Boards?

We all know the upsides of board terms: they allow for new perspectives from new members; the ability to grow, etc., but what are the downsides?  Columnist Rick Moyers goes over them in his latest column entitled “The Drawbacks of Board Term Limits”.  The biggest downside from his point of view is a lack of continuity within the board allowing for a lack of leadership to become a possibility.  He addresses this and more in his article which is a good read for all organizations with boards.

Government Shutdown – Guidance for Government Contractors Coming Soon

On Friday, February 25th, Aronson will post guidance on FedPoint for government contractors in preparation for a potential federal government shutdown. Some of the topics to be covered include: 

• -          Impacts of a shutdown
• -          Things to consider
• -          Actions to take

While none of us want a government shutdown, you need to be prepared in case one happens. Check back with FedPoint on Friday so you can take action!

Joint Activities Criteria

What are joint activities? If you have a mailer that is providing mission related material to your mailing list and on the back of the flyer is a request for donations (those little  check-boxes that encourage $75, $100, $150 pledges), that mailer is possibly a joint activity (also referred to as joint cost). Other joint activities might include special fundraising events that also function as member drives or serve educational or awareness purposes. Joint activities can create some accounting confusion in terms of how to allocate the expenses between program and fundraising.

Organizations need to familiarize themselves with the three criteria that must be met in order to break out some of the costs as program related. If any of the criteria are missing then the cost should be considered 100% fundraising, even the costs that are otherwise identifiable as program. This could skew a number of organization’s expenses if they aren’t careful. Groups that must maintain certain ratios of fundraising to program costs may find themselves in trouble if their mailers get reviewed and are found to fail any of the three criteria which are as follows:

Continue reading »

Senate Passes Bill with 1099 Repeal

The Senate passed a bill on February 18th that included provisions to repeal the new expanded 1099 reporting requirements. The House Ways and Means Committee has also approved its own bill including a similar repeal with additional passages covering rental property businesses. The House bill includes some controversial off-sets involving getting some repayments from low-income and middle-income taxpayers who received credits and subsidies under the original health care act. The Senate’s version of the bill has non-specific offsets comprised of spending cuts as opposed to repayments. The House is expected to vote on the Senate’s bill when they return from recess.

See more about it here.

It’s a bank rush! Diamondback hit with $1 Billion in Redemptions

The New York Times is reporting that one of the major hedge funds, Diamondback Capital Management is experiencing a mass exodus of investors. Diamondback is one of four hedge funds raided last November for accusations of insider trading.  The raid trigged a bank rush and investors have initiated the process to remove their funds, over $1 Billion in total funds so far.  The other funds raided are feeling similar heat.  To read more about it see the New York Times.

So What Type of Supporting Organization Are You?

All 501(c)(3) charities are classified as either a public charity or a private foundation.  Classification as a public charity is more beneficial from a tax perspective than classification as a private foundation.  You can read the disadvantages of a private foundation as presented by the IRS on their website.

In general, supporting organizations fall into one of three categories – Types I, II, or III – depending on the nature of the relationship between the supporting organization and the charities being supported.  Unfortunately, IRS determination letters do not indicate whether an organization qualifies as a Type I, II, or III supporting organization.  Determining the type of supporting organization will require a review of governing documents and knowledge of the specific requirements for Types I, II or III supporting organizations.

So what type of supporting organization are you? Continue reading »

MACPA Events – seminars

The Maryland CPA association has several upcoming conferences and trainings that relate to non-profit organizations.  See below for a list of topics and dates.

• The Anne Arundel County Chapter is hosting a CPE event on February 28^th entitled “Fraud & Embezzlement:  How it Happens and How to Avoid It!”
• March 22, there is an ethics course entitled “Ceasar’s Wife: Tipping the delicate Balance of Leadership and Ethics”
• April 29 is the 2011 Government and Not-for-profit Conference

Staying Exempt: The Supporting Organization Challenge

Private benefit is prohibited for any 501(c)(3) organization. It’s against the very purpose of a charity. Inappropriate private benefit is referred to as “inurement”. The IRS states, “Any amount of inurement, no matter how small, is grounds for revocation of exempt status.” Revocation means taxes and penalties as well as other nasty side effects.

The IRS has turned its scrutiny towards supporting organizations, and recently disclosed the revocations of 72 groups as a result of an ongoing investigation. The problems cited in the investigation were support organizations that had been established in ways that essentially served as tax dodges and other questionable financial relationships. The organizations that lost exemption are listed on the IRS website. Continue reading »

Madoff Claims Banks “Didn’t Want to Know”

The first interview with Bernie Madoff since his arrest in December 2008 hit the press yesterday in a New York Times article. During the interview, Madoff claimed that the banks had an attitude of “if you are doing something wrong, we don’t want to know about it.” He stated that the banks were complicit in the fraud by maintaining a “willful blindness” to obvious discrepancies in his reporting. His focus during the interview stayed on the wrong-doing of the banks and defrayed his own guilt by claiming investors had made significant real gains beyond what they could have earned elsewhere before any of the fraudulent activity even began.

More on the interview here: Huffington Post