Basic Nonprofit Accounting and Operations Boot Camp!

Join Maryland Nonprofits and Aronson LLC Partner Rob Eby on February 21^st for an informative seminar that will answer many of the most commonly asked questions regarding nonprofit accounting and operations:

• What are some indicators of fraud? 
• Why is the 990 so important? 
• How come these nonprofit statements look so different from for-profit statements I’m used to reading? 
• Is my nonprofit required to have an A-133 audit? 
• How do I implement internal controls with limited resources? 
• What are contributions, exchange transactions and agency transactions, and how are they recorded as revenue? 
• Is there anyone who can help decipher nonprofit accounting, reporting and best practices? 

This interactive discussion will address each of these questions and many more.  Click HERE to register today and reserve your spot!

MWAA: Local Board Policies Questioned During Public Upheaval

It must be tough to be a member of the board of directors for the Metropolitan Washington Airports Authority (MWAA) lately.  There are numerous headlines blasting insider deals and lax travel policies.  A former board member has gotten the boot after headlines ballyhooing how she obtained a full-time job with a salary of $180,000 a year to be an “advisor” with full benefits.  The airports authority is adopting stricter travel policies and spending policies in the wake of such embarrassing details as a $9,000 plus ticket for one board member to travel to Prague.  A stricter ethics policy is also being discussed by the board.   Link to the  NBC article:  http://www.nbcwashington.com/blogs/first-read-dmv/Airport-Authority-Setting-New-Rules-168596246.html

The Federal Form 990 informational return filed by most nonprofit organizations, which is open to public inspection, covers every area mentioned above.  Transactions with interested parties, conflict of interest polices, compensation of former board members are all revealed in the public return filed annually by nonprofit organizations.  Good governance suggests the entire board should review a Form 990 before it is filed with the IRS, and during such a process issues such as these come to light for the first time for many board members.   If the MWAA were a nonprofit organization required to file a Form 990, these shady deals and lax policies may have come to light for the board members much sooner, and possibly without all the headlines.

Gaming and Exempt Organizations – IRS Announces Phone Forum

Sign up for a phone forum conducted by the specialists at the IRS on tax exempt organizations, to be held on July 18, 2012, at 2:00 p.m. EST, titled “Exempt Organizations and Gaming”.  Here is the link to register: http://www.irs.gov/charities/article/0,,id=258086,00.html

Topics to be covered:

• Impact of gaming on tax-exempt status
• Internal controls and record keeping
• Form 990 filing requirements
• Unrelated Business Income Tax
• Filing requirements for Payments made to individuals
• Wagering/excise taxes

File Under: Don’t Do This

The Disabled Veterans National Foundation (DVNF) is currently being investigated by the Senate Finance Committee based on allegations of improper spending and charges that not much of the funding raised actually went to veteran aid. The investigation began after reports by Charity Watch and CNN that the charity received almost $56mil in donations from 2008 through 2010 but “little if any direct cash” went to veteran support.

For the record, the DVNF’s official defense is that $16.1mil of cash and donated goods went to veterans and that having only started in 2007, they need to focus on building their donor base. That’s defending that only 28% of contributions are actually going to their intended purposes. Some veteran groups reported receiving cough drops and 11,000 bags of coconut M&Ms. Others reported receiving chef’s coats, hats and aprons that the DVNF claimed as donated goods worth $800K.

Form 990s are publicly available as a way of forcing transparency in organizations that solicit funds from individuals. Individuals are encouraged to look but not that many may be able to interpret quickly what they are seeing. Taking a look at DVNFs 990 filing for 2010 shows over $24.7mil in contributions received and over $10.7mil spent on fundraising. That’s 43.5% of every dollar raised going to raise the next dollar.

Generally people want to give their money to charities they know will actually put that money towards the program mission. This is why groups like United Way and Combined Federal Campaign require that organizations registered and receiving funds through them met certain ratios of program to fundraising.

This is also why your auditor will look at your functional expense ratios and look for any signs of fundraising expenses that have been inappropriately allocated to program in an effort to make the organization look more effective. I have had clients that struggled with ways to efficiently fundraise and asked me how to keep their ratios better. Ways of reaching your target audience fall outside of the scope of my expertise, but I can tell you that the ratio won’t get better without spending less on fundraising and more on programs. If you are spending too much on fundraising – you need to assess how effective your organization really is.

Donors need to learn to look at ratios to decipher where their funding stands the best chance of being used for programs. It’s important, however, to recognize that all organizations require funding to operate and overhead is inevitable and necessary so make a distinction between management vs. fundraising when making this assessment.

All organizations that get involved with direct-mail campaigns should educated themselves about joint costs as making mistakes with those can put your fundraising ratios at risk.

Read more from CNN’s report on DVNF and check out Charity Watch’s Hot Topic on DVNF. Read DVNF’s response here.

Look at Guidestar for public access to Form 990s.

IRS Webinar on Churches and Religious Organizations

The IRS Office of Exempt Organizations is offering a free webinar for people associated with churches or religious organizations.

July 25, 2012

2pm EST, 1pm CST, 12 MST, 11am PST

Sign up using the following link:

http://www.visualwebcaster.com/IRS/87466/reg.asp?id=87466

Topics to be covered in the webinar are:

• What is the IRS definition of a “church” and a “religious organization”
• How to apply for tax exempt status
• How to stay tax exempt
• Special rules for compensation of ministers
• Recordkeeping and filing
• Rules limiting an IRS audit of a church

Congressional Hearing of IRS Monitoring of Nonprofits

Representative Charles Boustany Jr. (R – LA) has called a hearing of the House Ways and Means Committee scheduled for next week to discuss tax-exempt organizations and concern that the IRS has not been aggressive enough in monitoring charity abuses.

Up for discussion are items outlined in Boustany’s letter to the IRS sent October 6, 2011 as follows:

• How many tax-exempt organizations have been audited since 2008 and what issues were identified?
• How has the redesigned Form 990 increased transparency and accountability?
• Analysis of unrelated business income, revenues and the value of assets held by nonprofits for the years 2008 – 2010.
• What is the process for following up on allegations of excessive political campaign activity?
• Discussion of the level of charity care provided by all hospitals.

Click here to see the entire letter.

Per the Ways and Means Committee website, nonprofits are invited to submit their opinions on the topics by written statement. In order to submit your thoughts, go to the Committee homepage, http://waysandmeans.house.gov, select “Hearings.” Select the hearing for which you would like to submit, and click on the link entitled, “Click here to provide a submission for the record.” Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance with the formatting requirements listed below, by the close of business on Wednesday, May 30, 2012.The hearing will take place on Wednesday, May 16, 2012, in Room 1100 of the Longworth House Office Building, beginning at 10:00 A.M.

See specific formatting requirements for submissions and more details on the hearings here.

Additional Source: Chronicle of Philanthropy

Social Security Numbers on Form 990 = Identity Theft Risk

A recent study published by Identity Finder, a security and privacy software company, revealed that nearly half a million social security numbers were included in public filings of Form 990. The study reports that between 2001 and 2006, 18% of all non-profit organizations included at least one social security number on their Form 990. Since these forms are permanently public, this practice opens these individuals to identity theft.

Personal information gets reported when there are individual scholarship recipients, tax preparers, employees and in some cases individual donors. The charities that disclose this information can be held liable if the information is fraudulently misused.

The IRS does NOT require organizations to include social security numbers on Form 990 – even for the tax preparers who are required to provide their tax id next to their signatures. The instructions state that they should NOT provide social security numbers.

Sources: Identity Finder, Chronicle of Philanthropy

#form990 #identitytheft #nonprofit #taxexempt

Erroneous 990 Penalty Notices

The Journal of Accountancy is reporting that some tax-exempt organizations have received penalty notices for late filings even though they properly filed extensions during March.

The IRS e-filing computer system was down for maintenance and programming changes so the IRS extended the filing deadline for organizations that would normally have had deadlines of January 17 or February 15, 2012 to March 30, 2012. However, the system sent some of those filers late filing penalty notices automatically even though the organizations had complied with the adjusted deadlines.

If you received such a notice, call the number at the top of the notice: 1-800-829-5500 and request that the IRS abate the penalty in accordance with Notice 2012-4.

Source: Journal of Accountancy

#nonprofit #taxexempt #990 #penaltynotice #irs

IRS Announces Change in Form 990 K-1

The IRS recently posted a change to the new requirement on the 2011 Federal Form 990 balance sheet regarding reporting assets from partnerships and other joint ventures on the balance sheet in accordance with the Form 1065 Schedule K-1, making it voluntary for the 2011 year.  This is some welcome relief to the nonprofit community which has been grappling with how to comply with this new requirement.  The change has been issued as a “Note” on the IRS website, which means the instructions still contain the requirement.

The “Note” posted by the IRS can be found at: http://www.irs.gov/charities/article/0,,id=233830,00.html.

The 2011 form can be found at: http://www.irs.gov/pub/irs-pdf/f990.pdf.

The 2011 990 instructions can be found at: http://www.irs.gov/pub/irs-pdf/i990.pdf.

#irs #nonprofit #990

Tax-exempt? Yes or No?

The Internal Revenue Service announced the launch of a new online look-up tool, Exempt Organizations Select Check, that will allow taxpayers to find out whether an organization is eligible to receive tax-deductible contributions or has had its tax exemption revoked. Select Check replaces the online version of Pub. 78 and the IRS’s Auto-Revocation List.

(source: JournalofAccountancy.com)