People Angry About an Elevator Are Angrily Marching to Deloitte’s Vancouver Office Today
Today, residents of the Portland Hotel in Vancouver are marching to Deloitte offices to speak to Varun Banthia, Policy Specialist at Deloitte Future of Canada Centre. The issue? Their nine-story dwelling does not have a working elevator and Banthia sits on the board of directors of the PHS Community Services Society, a charitable non-profit that […]
Oh Look, CliftonLarsonAllen Is Ranked No. 1 In a Couple Other Things Too
As we mentioned last August, CliftonLarsonAllen—the love child of Clifton Gunderson and LarsonAllen—has been the most dominant public accounting firm that no one really cares about the past three years when it comes to serving clients in the construction industry. But apparently construction isn’t the only client base that C to the L to the […]
A Different Bottom Line: Today’s Nonprofits Offer Challenging Work, Huge Employee Benefits
The temptation to pursue a big ticket job at a publicly-traded company is one that dangles above many accountants like the fruit of Tantalus–forever enticing, but just out of reach. And for some, the desire to be America’s Next Top CFO acts more like the sword of Damocles, hanging perilously overhead and threatening to doom […]
Non-Profit Involvement: You Give and You Get
You are involved in the community for all the right reasons. You are giving back and helping others. You’ve also heard it’s a path into the higher echelons of the local business community and a way to get business. How does this happen? WIIFM – What’s In It for Me?You are in the country club […]
What Does ‘Getting Involved’ at a Non-Profit Really Mean?
People are taught: “One way of getting new business is getting involved at a non-profit.” You should be getting involved for different reasons, specifically a belief in the cause and a desire to give back to your community,but it can lead to business. So what does “getting involved" actually mean? It doesn’t stop at joining. […]
Any Accountants Looking for a Holiday Volunteering Opportunity Should Contact Occupy Wall Street Immediately
You may have noticed that the media coverage of Occupy Wall Street has died down quite a bit in recent weeks. With many Americans going into food-induced comas in late November and with the twilight of the football season fast approaching, several of our fellow citizens simply quit giving a shit every time someone got […]
Small Pennsylvania Town Sues the Fire Department Over Shady Accounting
I would expect more and more items like these in the news in the months and years ahead but that’s just my humble opinion.
Apparently commissioners in Lawrence Park Township, Pennsylvania are sick of messing around and would like an Erie County judge to appoint a custodian to handle the volunteer Lawrence Park Fire Department. On Friday, the township filed a petition, after a July 12th vote of 3-2 to go to court.
The three commissioners are claiming the Fire Department is violating a township ordinance by not providing an accounting of how the department is spending township money. The commissioners are arguing a custodian should be in place long enough to bring the department in compliance with the law.
The commissioners and the Fire Department have been feuding over the department’s finances since 2009. The firefighters have said the department is fiscally sound.
The funny part of all this is that the fire department claimed part of the reason why their finances were so jacked up was the Form 990 they “never knew existed” according to department president Maureen Crotty. Apparently the township commissioners felt the lack of a 990 (which reveals any non-profit organization’s expenses and revenues and is required for all non-profits above $250,000) was one of many good reasons not to give the department more money.
So back in April, almost a year after the IRS said all required 990s better be in or else, the fire department was still waiting to get a completed 990 back from its newly hired accountant, who didn’t have time to fill out the simple form while also auditing the department’s financial records by request of the stingy township commissioners.
Back then, Crotty stated she hoped the finished 990 and audit would help repair the strained relationship between the fire department and the five-member board of commissioners. Guess that didn’t happen.
Non-Profits Get Picked On (And Deserve Some of It)
When budgets are tight, it only makes sense that non-profits would become targets since they tend to get the most free rides. We’ve seen it with this 990 push (kind of like 404(b) for < $75 million and new health care rules that require companies to send in 1099s for every vendor purchase over $600, it feels a little like bureaucratic busywork to me) and now non-profit executive compensation is in New Jersey tie’s crosshairs.
A provision in his state’s recently passed budget limits executive salaries at nonprofits that do business with the state.
Firedoglake foamed at the mouth over recent comments by Tom Coburn after he shot down $425 million in fresh money for the Boys and Girls Clubs. FDL appeared absolutely incapable of comprehending caps on non-profit salaries when for-profit CEOs earn “500 times” more than their non-profit counterparts.
On Capitol Hill, four senators this spring refused to approve a $425 million package of federal grants for the Boys & Girls Clubs of America after staff members looked at the organization’s tax forms as part of a routine vetting process and were surprised to learn that the organization paid its chief executive almost $1 million in 2008 — $510,774 in salary and bonus and $477,817 in retirement and other benefits.
“A nearly $1 million salary and benefit package for a nonprofit executive is not only questionable on its face but also raises questions about how the organization manages its finances in other areas,” said Senator Tom Coburn, Republican of Oklahoma.
We covered S.2924 back in March when Chuck Grassley wrote a nasty note asking for – gasp – accounting details. While I totally support FDL’s outrage towards for-profit CEOs, I have to remind them that we already have the accounting details of for-profit corporations; so if Jamie Dimon gets $42 bazillion a year, we can just dig into his financial statements to figure out why. Chances are assets > liabilities so he can do that (unless he’s asking for a bailout but I don’t recall hearing him ask in 2008). With the Boys and Girls Club posting a $13 million loss in 2008, President Roxanne Spillett still earned $593,926. You don’t think that might warrant a little investigation?
FDL goes on to wonder out loud if all non-profits are created equal:
If Senator Coburn is going to stagger down that path, arms flapping wildly at the injustice of these non-profit salaries, then by his reckoning, the NRA’s Wayne LaPierre should forego his $1,139,568 annual salary (as of 2008), and Robert Mazzuca of the Boy Scouts of America needs to pay back that $1,577,600 he received in 2009. (Note: Yaron Brook, President and Executive Director of the Ayn Rand Institute, only pulls down $350K a year. Methinks someone’s not living up to his objectivist potential.)
I’m all for reform but only when applied equally across the board. The alternative is letting the market decide by being an informed donor (using tools like Charity Navigator to see how much particular non-profit execs are making and how they are using their money). If you don’t believe in a non-profit’s compensation practices, don’t give them a thing.
The government can continue to do so without caring or it can get smart about the money that it does not have and start taking a closer look at how non-profits operate. If you ask me, the entire thing is a gaping hole of waste and confusion and you could possibly confirm that with anyone familiar with non-profit accounting.
Reno’s “Hot August Nights” Goes For-Profit and Skips Town?
Though the connection between the non-profit Hot August Nights organization that’s been putting on Reno’s biggest party for 24 years and the newly-registered for-profit Hot August Nights of Las Vegas is unclear, what is clear is that part of the event will be held in Long Beach this year due to “horrific” costs to put the event on in Reno.
Reno, if you don’t already know, is in pretty bad shape. I used to live there so I know that it always was but it’s in really bad shape right now. With the iconic Fitzgerald’s Hotel and Casino indefinitely boarded up directly under Reno’s “Biggest Little City in the World” sign as a direct result of the Corus Bank failure 1,500 miles away in Chicago back in late 2009, downtown looks more destitute than ever. I take full artistic license for use of the word “iconic.” This is Reno we’re talking about.
You’d think Reno city commissioners would want to encourage fun and leisure, mostly through the only event any of us with the big money to the West are familiar with (Hot August Nights) but all signs point to the city losing it.
On the same day paperwork was filed in Nevada to establish the for-profit, non-profit Hot August Nights officials announced part of the event would be held in Southern California in 2011.
There’s been a bunch of bitchfighting in Reno (and neighbor Sparks, who gets some of the tourism run-off for the event) and it continues.
We don’t expect you to be familiar with the Reno area (unless you happen to work for Deloitte or E&Y in town, though we don’t like those odds) so for a little background on Hot August Nights, it’s a yearly car show stamped as family fun for everyone. The event costs $700,000 to put on each year according to organizers who swear they aren’t looking to move the show to Long Beach in 2012.
The Reno Gazette-Journal breaks down the non-profit side:
In the 2004 tax year, Don Schmid, then listed as executive director, was paid $93,962 in salary.
On the nonprofit corporation’s 2008 income tax return, current executive director Bruce Walter is listed as collecting $256,890 in salary and $11,940 for a housing allowance, resulting in total compensation of $268,830.
Yes, I’m sure it’s the costs of putting on the event that are inspiring a move. Anyone been to a convention in Reno lately? It’s got to be the cheapest place in the country if you don’t count middle states. You’re telling me it’s cheaper to host the event in Long Beach?
For-profit Hot August Nights corporation created in Vegas [The Reno Gazette-Journal]
Nonprofits Could be Forced to Pay to Save the Postal Service
It’s difficult to find numbers that don’t contradict each other, some reports say nonprofits are doing better than expected in this uncertain economic environment while others insist it’s still rough out there, especially for organizations that rely on donations to get by. For nonprofits, it doesn’t matter how the year is going, it may soon cost more to send out those pleading donation mailers.
The Postal Regulatory Commission is looking at a 2 cent increase for first class mail, an 8% increase for periodicals (just what the doctor ordered for struggling print publications) and a 23% increase on parcels. While they have not specifically mentioned an increase in nonprofit mailer pricing, the PRC has already identified certain “underwater” mail classes, non-profit mail being one such case.
As is, authorized nonprofits get a price break of about 40% over commercial mail prices so you could see why a struggling USPS might go straight for non-profits when looking for additional revenue sources to close its $7 billion budget gap.
Overall, postal prices are expected to rise 4 – 5%, a huge jump from the legally allowed .6% the Postal Service can use to adjust for inflation. Seeing as how we supposedly haven’t experienced any inflation this year, the jump is that much more disheartening to mass mailers.
Not surprisingly, there’s a nonprofit set up to focus on postal issues around nonprofit mail and they’re all over it. Said Tony Cooper of the Washington-based Alliance of Nonprofit Mailers, the USPS delivery system “is a system that’s built to handle about 300 billion pieces of mail, and they’ve got about 170 billion, and it’s set to decrease. It’s basically twice as big as it needs to be. It’s that excess capacity and costs that are creating the need in their minds to do this.” Hear that, USPS? Cut the fat before you start going after the little guys.
Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor. You can see more of her posts here and all posts on the CPA Exam here.
Non-Profits are Now Exempt from Political Contribution Rules (Well Three of Them at Least)
Out of millions of non-profit organizations in America, three have been hand-picked by the authors of the DISCLOSE Act, a House bill meant to bring transparency to political contributions.
The bill is inspired by a Supreme Court decision that overturned a cap on corporate contributions to political campaigns. So to compromise and soften the hard-ass bill a little bit, they threw in an exemption for certain non-profits that meet specific requirements.
They must have more than 1 million members, be at least 10 years old and receive no more than 15% of their contributions from corporations to receive this exemption. OK, how many non-profits could that be?
The NRA and 2 others (AARP and the Humane Society).
Reform at its finest, I guess.
Just a note, Charity Navigator doesn’t do the NRA for the following reason:
We don’t evaluate National Rifle Association.
Why not? We don’t evaluate 501(c)(4) organizations because they are allowed to spend a substantial portion of their revenue on lobbying our government and not every donation to them is tax-deductible. You may be interested in our evaluation for The NRA Foundation.
If you’re curious, “DISCLOSE” stands for Democracy Is Strengthened by Casting Light On Spending in Elections and I don’t think light is what we need in this situation. Companies, unions and other groups that spend more than $10,000 would be required to disclose donors who have given $1000 or more.
Why does this matter? Should lobbying groups really receive any tax deductions at all?
Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor. You can see more of her posts here.
Top Ten Worst Administrative Expense Offenders in the Non-Profit Sector
Administrative expenses are a part of any non-profit’s overall operating expenses and though donors generally give to charity with the hope that their contributions will help fulfill the organization’s mission as opposed to cover SG&A, Charity Navigator has a top ten of the worst offenders when it comes to admin expenses. Let’s take a look, shall we?
10: Center for Individual Rights 46.1%
9: Changed Lives 47.4%
8: Vision New England 48.7%
7: Charleston Area Medical Center Foundation 48.8%
6: National Museum of Racing and Hall of Fame 55.1%
5: Cherokee National Historical Society 58.2%
4: Union Rescue Mission Little Rock 62.1%
3: National Council of Negro Women 64%
2: Boys Choir of Harlem 66.3%
1: American Tract Society 68%
For its last available income statement through Charity Navigator, the American Tract Society brought in $2,194,730 and spent $1,615,847 on administrative expenses, compared to $711,854 in program expenses and $47,210 in fundraising expenses. This is twice what the charity spent the year previous on admin expenses.
The American Tract Society’s mission is to distribute religious literature to spread its message. Well actually its mission is officially “to make Jesus Christ known in His redeeming grace and to promote the interests of vital godliness and sound morality, by the circulation of Religious Tracts, calculated to receive the approbation of all Evangelical Christians. The mission of ATS is to provide relevant tools for presenting the gospel.”
Perhaps someone needs to say a prayer to St Matthew asking for a little accounting help.
By comparison, similar charity Bibles for the World, based in Colorado, spent only 6.4% of its $4,215,202 in revenue on administrative expenses in the same period.
The second worst offenders on the list, the Boys Choir of Harlem, spent $140,787 out of $299,729 in total revenue on administrative expenses in 2007. At that point, the charity was nearly $4 million in the red and has since ended. The group spent 30 years bringing the joy of music to at-risk inner-city youth and the choir had performed for sitting presidents since Lyndon Johnson.
Would-be donors are welcome to peruse Charity Navigator for detailed information on just about every charity in the country before making donations, lest that $100 feel good gift end up paying mostly for secretaries and prime office space.
Convio Users Indicate That Things in the Nonprofit Sector Aren’t So Bad
Convio provides technology solutions to nonprofits and recently released a bit on its user base, showing pretty reassuring data that things are not that bad in the nonprofit sector.
When the Nonprofit Finance Fund released its 2010 outlook earlier this year, a nice calming Xanax was recommended before reading. So this is certainly a bit of good news for nonprofits, at least for the customer base from which the data was compiled.
Online giving grew 14 percent despite a difficult economy. Overall, 69 percent of organizations raised more in 2009 than 2008, while 31 percent saw declines in their online fundraising.
An increase in gifts drove fundraising gains. Of those that grew fundraising in 2009, 92 percent saw an increase in the number of gifts in 2009 compared with just 43 percent of organizations seeing an increase in their average gift amount.
Small organizations grew fastest. Organizations with fewer than 10,000 email addresses on file, many of which are participants in the Convio Go! program, grew online revenue by 26 percent, and gifts by 32 percent.
Web traffic growth continued for most, but at a slower rate. 60 percent of organizations grew their website traffic from 2008 to 2009. Web traffic growth in 2009 was in the single digits at 6 percent compared with double digit growth seen in previous years.
Web traffic was strongly correlated with email file growth. 38 percent of an organization’s success building large email files could be directly attributed to the amount of traffic to the organization’s website.
This year’s study analyzes data compiled from 499 nonprofit organizations that have at least 24 months of data to compare. The study aggregates results into benchmarks that nonprofit organizations can compare against their peer group and the industry as a whole. In addition the study provides separate benchmarks for 15 nonprofit industry sub-groups, or verticals across 19 key metrics. In total Convio’s clients raised more than $920 million online in 2009.
Convio Releases Annual Study of Nonprofit Sector’s Online Fundraising and Marketing Trends [BusinessWire]
GAO Audit Uncovers Fraud at Head Start Programs
The Head Start Program, under the Department of Health and Human Services, provides child development services to mostly low-income families and their children. Up to 10% of Head Start-enrolled families can be over-income, with an income 130% above the poverty line.
Of course, things don’t always work out as they are supposed to and the GAO has discovered problems with about half of the centers it examined through the investigation, just a small sample of the 1,600 nonprofit centers running 3,000 Head Start programs.
GAO received allegations of fraud and abuse involving two Head Start nonprofit grantees in the Midwest and Texas. Allegations include manipulating recorded income to make over-income applicants appear under-income, encouraging families to report that they were homeless when they were not, enrolling more than 10 percent of over-income children, and counting children as enrolled in more than one center at a time. GAO confirmed that one grantee operated several centers with more than 10 percent over-income students, and the other grantee manipulated enrollment data to over-report the number of children enrolled. GAO is still investigating the other allegations reported. Realizing that these fraud schemes could be perpetrated at other Head Start programs, GAO attempted to register fictitious children as part of 15 undercover test scenarios at centers in six states and the District of Columbia. In 8 instances staff at these centers fraudulently misrepresented information, including disregarding part of the families’ income to register over-income children into under-income slots. The undercover tests revealed that 7 Head Start employees lied about applicants’ employment status or misrepresented their earnings.
GAO managing director for special investigations Gregory Kutz told a House education committee last month that “the system is vulnerable to fraud.” No kidding.
While unable to determine the motivation of Head Start employees to commit fraud by adjusting income levels on applications, Kutz theorized that management of nonprofit agencies receiving Head Start funds pressured staff to fudge, fiddle with, or straight up fake figures on applications in order to keep federal funds coming in.
Head Start has served over 25 million children since 1965 and there are currently over 1 million children enrolled in Head Start programs.
Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor . You can see more of her posts here.
Dear Small Nonprofits, the IRS Still Wants Your 990s
In a show of understanding for nonprofits who may have been completely unaware of the Form 990 requirement in place for the last three years, IRS commissioner Doug Shulman sent out a really sweet letter encouraging smaller NFPs to go ahead and file anyway even though the deadline has come and gone.
Now that the May 17 filing deadline has passed, it appears that many small tax-exempt organizations have not filed the required information return in time. These organizations are vital to communities across the United States, and I understand their concerns about possibly losing their tax-exempt status.
The IRS has conducted an unprecedented outreach effort in the tax-exempt sector on the 2006 law’s new filing requirements, but many of these smaller organizations are just now learning of the May 17 deadline. I want to reassure these small organizations that the IRS will do what it can to help them avoid losing their tax-exempt status.
The IRS will be providing additional guidance in the near future on how it will help these organizations maintain their important tax-exempt status — even if they missed the May 17 deadline. The guidance will offer relief to these small organizations and provide them with the opportunity to keep their critical tax-exempt status intact.
So I urge these organizations to go ahead and file — even though the May 17 deadline has passed.
The Service assures us that the 990 e-Postcard is simple and easy to fill out, no need to drag your CPA into this mess.
Though the IRS sent friendly reminders to 600,000 charities over the 3 years this new rule has been effect, up to 215,000 charities may have missed the May 17th deadline. Seriously, it isn’t too late. Someone get on that.
There were complaints that the IRS was swamped with last-minute 990 filers (go figure) rushing to meet last week’s deadline so we’re going to guess that when Shulman says it’s okay to send those forms in anyway, he kind of means it. And perhaps that will teach everyone to file on time next year.
Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor . You can see more of her posts here.
Panera Bread Combines Free Markets and Nonprofits in Missouri
In a test run to see if expenses can get covered at the end of the day, Panera Bread has opened a unique new location in Clayton, MO that combines the benefits of nonprofit status with the fundamental principle of the free market system: let the market determine what an item is worth. But it adds a unique qualifier to the traditional concept of the need determining price: human nature.
The menu is exactly the same as other Panera locations (sick foodies can check that out here if they aren’t familiar with Panera’s offerings) but instead of charging a fixed price for each item, this special little spot will ask only what customers can afford. “Take what you need, leave your fair share,” says the sign at their entrance, just in case one is confused by such a foreign transaction model. No prices? Do we even know how to value items independently any more?
Panera is hopeful that the “Cares Cafe” model will thrive and grow to a series of donation-based stores that rely more on empathy than capitalism. “Hopefully we’ll be able to open them across the country, but our original St. Louis location must succeed first!” tweeted the fine folks behind Panera’s official Twitter account.
Can someone confirm Missouri rules on sales taxes related to the sale of food? And is it a sale if the exchange is really a donation? I’m really confused.
Anyway, not everyone is thrilled about this concept. Though it is obviously well-intentioned, the donation model may not necessarily transfer outside of St Louis. Trends consultant Marian Salzman reality-checked USAToday saying “while young people are very much attuned to helping out and making a difference, if they find themselves sitting next to other customers with whom they don’t feel comfortable, they’re not coming back.” You know, as in the possibility of homeless and otherwise destitute individuals (of which our country has plenty nowadays) lounging around with the nerve to eat a cheap meal.
Hedging against operating losses, this particular location has one slight difference from other Panera stores: its bread (except for sandwich bread) is really day old product from other locations around the St Louis metro. Hey, nothing wrong with getting the most out of inventory with a horrible turnover rate.
In the end, it’s hard to say whether this nonprofit experiment will float but if it does, Panera wants to open two more within six months. Good luck with that.
Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor . You can see more of her posts here.
Reminder to Nonprofits: 990s are Due By May 17th
Nonprofits don’t need the reminder but we’re going to remind them anyway: May 17th is the new deadline to file your Form 990s (it would have been the 15th but that happens to fall on a weekend, consider yourselves fortunate, procrastinators).
The Boys and Girls Clubs and Goodwills of America have probably already filed their 990s but what about the tiny, grassroots organizations that didn’t get the memo when Service rules changed to require even small non profits under $25,000 to file 990s?
The guess is that up to 1/4 of all non profits could inadvertently lose their tax exempt status by missing the May 17th deadline without even realizing they were supposed to file anything at all. It costs $750 to refile after losing said status, so blowing it could be a costly alternative to hiring a professional to get the 990 in order for a small, simple nonprofit.
This isn’t merely busywork presented to nonprofits for shits and giggles, as we all know the Service would never EVER waste anyone’s time with bureaucracy and paperwork just for kicks. The IRS is seeking to clean up tax exempt status claims to exclude agencies that exist in name only or simply for the tax break. In its view, leaving NFP organizations that take in less than $25,000 a year largely unchecked left the fraud door swinging wide open. And as we all know, the Service has a duty to the taxpayer to collect everyone’s fair share.
The Pension Protection Act of 2006 mandates that all nonprofits must file a 990 for three consecutive years, making 2009 (and thus May 17th) the 3rd year. Orgs that have not filed 990s will automatically lose federal tax exempt status.
The good news is that if you are trying to claim a tax deduction for a donation to one of these little bitty nonprofits that will be losing their exemption, you can still do so up until the date the Service notifies the charity that it can no longer claim tax exempt status.
All is not lost, of course, as those familiar with IRS tactics presume that “offenders” will be offered a chance to redeem themselves (after steep penalties and late fees, of course).
More on the 990 Filing Deadline:
When a Tax Time Bomb Goes Off: Repurcussions Await Some Small Nonprofits
Adrienne Gonzalez is the founder of Jr. Deputy Accountant, former CPA wrangler and a Going Concern contributor. You can see all of her posts here.
Looking for a Tax Break? Try Donating Your Erotic Artifacts to the Museum of Sex!
Using a foundation to fuel your for-profit business is never nice, especially when there is an extensive collection of BDSM memorabilia involved.
New York’s Museum of Sex does not claim to be a non-profit but it has obtained over 1,000 items donated through its tax-exempt Muse Foundation for tax deductions. Well? You wouldn’t donate your old brushed-steel bondage machine to Goodwill for the deduction now would you?
Want to help by bequeathing your great-grandma’s old pasties? There’s a handy donation link on their website that explains this bizarre relationship between for-profit museum and non-profit foundation:
The Muse Foundation of New York is a fully registered private foundation affiliated with The Museum of Sex. Its mission is to work with The Museum of Sex to preserve and make available a comprehensive collection of materials relating to the history, evolution and cultural significance of human sexuality.
That’s awesome but does the Treasury realize taxpayers can get fat deductions for contributing to this effort?
Museum founder Daniel Gluck claims that his lawyers allowed this relationship (plenty of for-profit companies have non-profit foundations that share their name) and the Museum would love for its Foundation to be, erm, profitable enough to serve its stated goal of providing underwriting art grants but that plan just hasn’t quite worked out. Yet. After more than a decade of operation. “The Muse Foundation is completely its own separate entity,” he said. “We can’t take money from the foundation and we don’t plan to. We aim to build it up into a foundation whose interests are aligned with the museum.”
Gluck told the NYT that the museum earns 70% of its income from admissions fees – nearly $17 a pop – and the remainder by selling cute Sex Museum tchotchkes in the gift shop (perhaps your dog is sexually frustrated and desperately needs a modern and arty $650 toy to hump?)
Before you ask, no the $300 bunny bondage hood is not tax deductible. But hold onto it long enough and you might just be able to get one for donating it back to the museum if Treasury still hasn’t caught on to this unique foundation/corporation relationship.
Tax Break for Erotica? A Museum Favors It [NY Times]
New Jersey May Limit Pay For Nonprofit CEOs
Nonprofits doing business with government agencies take note, the days of bloated compensation structures may be over.
Starting July 1st, 1200 nonprofit social service agencies contracted by the state of New Jersey’s Department of Human Services with budgets above $20 million will be subject to a salary cap of $141,000 for its top executives. Executives of NFP agencies with budgets from $10 to $20 million will be limited to salaries and compensation of $126,900; those with budgets of $5 – $10 million will be capped at $119,850 and agencies coming in under $5 million will be limited to $105,750.
The limit would affect at least 30 executives who received compensation packages in excess of what is allowed by the new rules.
The state would save about $5 million by paying less money in CEO salaries, as well as cutting back on travel, education, severance, and vehicle expenses for all nonprofit employees, said Nicole Brossoie, a rep from the state’s Human Services office.
“In light of the state’s fiscal challenges, the department has been exploring cost efficiencies in every part of our budget,” Brossoie said. “The department’s continued goal is to ensure that state dollars are being spent in the most efficient ways.”
While that’s an admirable goal, the proposed changes would also impact organizations that do not feature over-paid executives or frivolous waste of precious funding. One CEO of an NJ nonprofit is worried that her organization may be barred from rewarding staff with cheap gifts (think $5 Starbucks cards) under the new rules – though she is not compensated enough to be impacted by any new restrictions on executive salaries.
State may limit pay for top leaders of New Jersey non-profit social service agencies [Press of Atlantic City]
Michael Oxley Is Spreading the Good Sarbanes-Oxley Word to Nonprofits
Presented by Serenic Software. Download our free whitepaper – “5 Key Reasons Why Great Financial Management is So Important for Your Nonprofit Now”
If you’re a non-profit leader and free on April 12th, why not head to Washington and listen to Mike Oxley (yes, that Oxley, without whom SOX would still be the property of a certain Chicago baseball team and not the bane of accounting’s existence) speak about transparency and accountability for non-profits?
The ironic part, of course, is that non-profits don’t really have to suffer with the legislation named after Oxley but he’d like to see a little more, well, Oxley in NFP, even if it isn’t necessarily required by law.
[Oxley] will speak about the importance for nonprofit organizations to be transparent and ensure greater accountability with their financial standards to build on and preserve donor trust, strengthen the reputations of nonprofit organizations and associations, and enhance the overall nonprofit sector.
Attendees will include thought leaders from foremost nonprofits, trade associations and key congressional staff members. Both the House and Senate Ethics committee’s staff have deemed this a “widely attended event.”
My feelings on Sarbanes-Oxley have been expressed more than once here on Going Concern but I can sum them up thusly: more useful things could be done to “protect” the investor interest besides arcane SOX compliance and the PCAOB including but not limited to random auditor cavity searches, TSA-style interrogation of management, and waterboarding the internal audit team. Is Oxley trying to imply that non-profits should follow suit but only voluntarily and out of obligation to donors instead of investors?
Surely his plan is not that sinister.
Only because non-profits already have their own version of SOX in the Form 990 (which I have complained about before as well) that has all of their bases covered. The only SOX carry-overs are strengthened whistleblower protection and retention of documents in lawsuits, perhaps because non-profits may have been where Mike Oxley got his ideas.
SOX compliance costs averaged $2.9 million during fiscal year 2006, actually down 23% from the fiscal year previous according to FEI. Do you know many nonprofits who have that sort of cash lying around?
I think it might be better to get some advice from the guy who wrote the bill and start tightening up the ship just in case.
Recommended reading by April 11th if you’re checking out Oxley’s “I just want to be helpful” presentation: The Sarbanes-Oxley Act and Implications for Nonprofit Organizations (last updated January 2006). Bring a notepad.
Former Congressman Mike Oxley to Speak at Nonprofit Summit [Council for Non-Profit Accountability]
A Wisconsin Non-Profit Learns an Important Lesson in Internal Controls
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What is in the water up in America’s Dairyland? We’ve been going on and on about the internal control failures at Koss in Milwaukee but now there’s more of it at a non-profit organization just up the road. Let’s hope everyone at UW Madison is taking notes.
The latest tale of non-profit fraud stars 56 year-old Leonard V. Lauth of Beaver Dam.
Wings Over Wisconsin bills itself as a conservation organization dedicated to natural resource preservation and education through youth and community involvement. Spelling errors and obvious lack of updates since 2006 on its website aside, WOW manages nearly 1,300 acres of land and provides mostly young hunter education to the future gun-toting blue-stater babes in Wisconsin.
While it prides preservation of Wisconsin’s precious wetlands, internal controls do not appear to be high on WOW’s priority list. Hopefully this changes that.
It’s a textbook fraud case, starting with the mounting medical bills and the poor internal controls that allowed its Treasurer to lift $16,875 since 2005. Lauth’s advanced methods of fraud include writing checks to himself labeled “office supplies” in the books and taking home banquet funds after the event insisting he’d deposit them at the bank in the morning.
While typically WOW practice to require two signatures, Lauth had been with the organization for 24 years, leaving the “trust” issue totally taken care of. Opportunity, motive, what else do we need?
Rationalization, of course! Lauth told Beaver Dam Police Lt. Joel Kiesow he thought he’d taken $788 from the organization in the four year period in which he executed his fraud. When informed it was more like $17,000, Lauth was shocked. I guess he didn’t realize how expensive “office supplies” can be these days.
“Maybe I was robbing Peter to pay Paul on different things,” said Lauth in regards to using WOW funds to pay off family medical bills. Actually, he was robbing the little Dustins and Bobbys with their baby shotguns and wildlife of Wisconsin who counted on the funds to which he so sloppily helped himself. Shame shame.
Let this be a lesson to all you non-profits: cash management and financial literacy (including fraud prevention measures) are not only best practices for public companies and private industry. If anything, non-profits need sharper internal controls – without shareholders to answer to, money can easily slip into the fraud vacuum undetected for years, as in the case of Mr Lauth and WOW.
Calls to WOW left after business hours were not returned.
Man accused of taking funds from non profit [Beaver Dam Daily Citizen]
Ninety Percent of Nonprofit Execs Expect 2010 to be as Financially Difficult as 2009
Presented by Serenic Software. Download our free whitepaper – “5 Key Reasons Why Great Financial Management is So Important for Your Nonprofit Now”
Not to be the harbinger of doom but the Non-profit Finance Fund released a survey Monday that reflects the less-than-optimistic hopes of non-profit leaders for the year ahead. Though it’s far more depressing than Financial Armageddon, it shows that non-profits are far more prepared for the worst (and more deft at handling adversity) than their for-profit counterparts. For-profit CFOs still seem preoccupied with the credit crunch while non-profits are merely trying to meet increased demand with less to provide.
America’s nonprofits expect that 2010 will be financially more difficult or as difficult as 2009, according to a survey released today by Nonprofit Finance Fund (NFF). The survey of more than 1,300 nonprofit leaders in markets nationwide also found strong evidence of the dramatic and creative steps that organizations are taking in order to maintain and even expand service delivery to meet increased demand during this time of continued economic uncertainty.
• Nearly 90% expect 2010 to be as difficult or more difficult than 2009; only 12% expect 2010 to be financially easier for their organizations.
• 80% of nonprofits anticipate an increase in demand for services in 2010; 49% expect to be able to fully meet this demand level.
• Only 18% of organizations expect to end 2010 above break-even; 35% of organizations ended 2009 with an operating surplus.
• The majority — 61% — have less than three months of cash available; 12% have none.
“We expect 2010 to be another treacherous year for many nonprofits that routinely take heroic measures to meet demand for services,” said Clara Miller, President and CEO of NFF. “The economic ‘recovery’ has not yet reached people in need, or the organizations that serve them. We must do more to repair the tattered social safety net.”
Interestingly, only 46% of non-profits surveyed said they believed they would not be able to replace government stimulus money from other sources when the money is gone. Also curious, non-profits appear to be having an easier time of getting loans. Only 30% of survey respondents said they’d applied for a loan in the last 12 months but incredibly 74% of those secured the loan. Oh and 26% said they only applied for a loan because they were waiting for late government payments.
There were quite a few memorable responses from survey participants but I think this one sums up the theme of NFF’s results pretty well: “WE DIDN’T GIVE UP.”
Senators Want Accounting Details From Boys & Girls Club of America
Presented by Serenic Software. Download our free whitepaper – “5 Key Reasons Why Great Financial Management is So Important for Your Nonprofit Now”
A group of Republican senators (including Chuck Grassley) want Boys & Girls Clubs of America executives to answer for such egregious non-profit sins as high executive salaries, fat retirement plans, and lobbying expenses. You see, Chuck Grassley is a sharp guy (wild statements about executive suicide notwithstanding) and as ranking member of the Senate Finance Committee, he’s the one keeping an eye on the sort of action non-profits get from Congress. So when an $85 million a year initiative to provide blanket funding to the non-profit group slipped by the committee, the red flags went up.
Iowa’s Grassley is joined by Tom Coburn, R-OK; Jon Kyl , R.-AZ.; and John Cornyn, R-TX in questioning a multitude of sins including CEO Roxanne Spillett’s $1 million a year compensation package, half a million dollars a year in lobbying and $4.3 million in “travel expenses.” Not really a problem if the funds are unrestricted and coming from donors who know their donations may go to, say, trips and renting a Senator here and there. Nah. After reviewing the org’s 2008 tax return, the senators concluded that 40% of Boys and Girls Club funding comes from the federal government.
The new Senate bill, S.2924, changes the original intent of a 1998 bill that granted $20 million a year to provide “seed money” for 1,000 new Boys & Girls Clubs from 1997 – 2001. Grassley argues that this new legislation essentially turns money that should go to keeping low income at-risk youth off the streets, into a vague piggy bank for the organization. Naturally, Chuck & Co. have a problem with that.
The Boys & Girls Clubs of America posted a $13 million loss in 2008. In 2009, it cut 10% of its full-time workers, instituted 26 furlough days a year, and closed chapters in DC, Florida, Georgia, Virginia, and others.
Though the organization hasn’t had time to personally respond to Grassley’s nice letter last Thursday, they told the Journal they’d be complying with the investigation and not at all afraid of what the committee may find, insisting they are no more poorly-managed than any other non-profit nor do they spend more on lobbying than anyone else either.
Sounds like an excellent defense; I don’t see how it could go wrong.
Senators Demand Accounting from Boys & Girls Clubs [WebCPA]
Sens Try To Block Funding To Boys & Girls Clubs of America [WSJ]
For-profit Higher Ed. Moving on Non-profits Could Reap Taxpayer Funds
Prostitution in the industry is nothing new, you have to take what you can get even if that means devouring struggling non-profits or whoring yourself out for otherwise wholly un-big-business-like busywork (I’m staring directly at you, Big 4).
Daniel Golden of Bloomberg reported yesterday that “ITT Educational Services Inc. paid $20.8 million for debt-ridden Daniel Webster College in June. In return, the company obtained an academic credential that may generate a taxpayer-funded bonanza worth as much as $1 billion.”
With education little more than a vague directive to “teach” at this point (except for the chosen few professors who put their hearts into it, of course), schools are being encouraged to “convert a school to a charter school or a similar education management organization, a for-profit or nonprofit organization that provides ‘whole school operation’ services” (via firedoglake) in California districts where schools have fallen way short of federal education “guidelines”. Hint: that’s when you know it is bad. Firedoglake implies that recent protests and riots by California state university students facing severe class cuts and hikes in tuition are directly related to the push to privatize education.
In the case of small but favored not-for-profit educational institutions, they don’t have much of a choice but to end up recycled into the ITTs and the DeVrys if they can’t make it. For-profit education is the way to go, ask DeVry. They didn’t make $369 million last year for nothing.
Said Karen Pletz in the Kansas City Star, “the not-for-profit mission, whether it be in education, health care, or other human services, is really about values and is intrinsically focused in bettering lives and community.” Not to carelessly go name-calling but what can a for-profit, publicly-traded institution possibly know about that mandate or education for that matter? Its first loyalty is to the shareholders, not the students.
Perhaps not coincidentally, in December of 2009 WSJ pointed to a Department of Education report revealing a 21% default rate in the first three years for those coming from for-profit institutions like ITT over there gobbling up broke Daniel Webster College. For-profit education institutions are accused of aggressive loan procedures to get students through their programs; meanwhile non-profit private education remains picky about who they’ll take and for good reason. It’s a sweeping generalization to say default rates somehow correlate with the quality of instruction but one can assume loans are easier to pay off when the debtor is not just gainfully employed but paid well.
Company’s purchase of N.H. college could earn it $1 billion [Bloomberg via Boston Globe]
Former Pastor Figures Eighth Commandment Is Overrated, Steals from Nonprofit
It takes a certain kind of person to defraud a non-profit organization. In a word: scumbag. Now consider the idea of a pastor of a church defrauding a non-profit organization. A non-profit organization that is tasked with providing cash and food for those in dire need. This person would be David Croyle, the former pastor of Stahl Mennonite Church in Johnstown, PA.
Croyle embezzled around $18,000 from St. Francis Sharing and Caring Inc. from 2005 to 2008. We figure he Either came to the conclusion that doing the Good Lord’s work was incredibly overrated or that he just plain needed the money. Seriously though, $18k? Did he really want a slightly used Honda Civic or something?
Regardless of the motive, Croyle has been charged with “56 counts each of theft by deception, failure to make required disposition of funds, theft and receiving stolen property,” according to the Daily American.
Part of Croyle’s duties at St. Francis was to determine eligible individuals, so he created C&A Management Services. Magically this company was “eligible” and then he requested checks payable to the company. Eventually someone found this a little fishy and hired Wessel & Co. a local accounting firm who discovered the embezzlement.
Somewhere God is shaking his head and somewhere else entirely, Sue Sachdeva is thinking, “Was this guy even trying?”
Police: pastor swindled nonprofit [Daily American]
Priests Snitch on C Street Center to IRS for ‘Masquerading as a Church’
In case you’re not familiar, C Street is the destination spot for washed up, morally-tainted Republican All-Stars like South Carolina governor Mark Sanford post-Appalachain Trail (it’s called “decompression” and I suppose I’d do it too if I was hooked on an exotic South American beauty that wasn’t my wife) and Mississippi’s Chip Pickering who used the C Street facilities to entertain his mistress.
At least Sanford is classy enough to claim he was there for spiritual advice after his wife found out and started planning her book tour.
I guess we know what the C stands for (hint: it ends in “U Next Tuesday”) and there’s plenty of it running around the joint. Must be all that awesome Bible study.
WaPo:
The owners of a $1.8 million townhouse on Capitol Hill that has been home and refuge to conservative members of Congress are wrongly claiming a federal tax exemption reserved for religious establishments, 13 Ohio clergy members contend in a complaint to the Internal Revenue Service.
The clergy suspect that the C Street Center, which rents living space to lawmakers, is “an exclusive club for powerful officials . . . masquerading as a church,” according to a request for an investigation addressed to IRS Commissioner Douglas Shulman.
The questionable spirituality of C Street is nothing new but this is the first time real live priests have taken to snitching to front off the “organization”. Jim DeMint (another South Carolina Republican) defended the place (though mentioned nothing about whether or not he’d do Sanford’s mistress) saying, “We kind of make that commitment to each other to get together once a week. Sometimes it’s a Bible study; we always have a spiritual or scriptural thought. But sometimes we just talk about each others’ lives, try to get to know each other, remind each other that we are not important, that it’s just a title.”
How about lying, cheating, fake non-profit-status-having family values hypocrites? Is that just a title?
What’s up with C Street? Religious group for morally bankrupt politicians at the end of their rope seeking comfort and companionship or fundamentalist flophouse? I guess that’s for the Service to decide.
So far it doesn’t look good for our merry bunch of can’t-keep-it-in-their-pants GOPers, as DC already revoked 66% of C Street’s property tax exemption last year due to the fact that 66% of the facility was used as a residence and not a church.
Does getting on your knees count for that other 34%? Hallelujah and yay conservative family values!
Hallelujah! Church Accounting Miracles!
I had no idea how much a minister can make but now I do. Wait a minute, this just tells me how to bypass Service rules by writing checks in the church’s name. I might totally be in the wrong line of work.
Free Church Accounting (I’m not kidding) brings us a question from “Sharon” of Corsicana, Texas:
How much money does a minister have to make in order for money to be reported?
I started my church back up after 12 years vacancy. I do not have very many members. Right now we are 3 active members and other people stop in from time to time. I do not actually receive money. Since the church is striving I use the money to pay the light bill, get the grass moved.
Answer:According to the IRS website, “Earnings of $400 or more are subject to self-employment taxes.” (that includes qualifying ministers)
If you are a church employee, income of $108.28 or more is subject to SE tax.
It would be better for you, if you opened a checking account in the church’s name and paid expenses out of it. If that’s not possible, just make sure and keep all of the receipts that show where the church funds are going.
Fascinating! I took the preliminary “Are You a Tax-Exempt Church” quiz on their website and failed miserably so I guess I’d make an awful 501(c)(3) but that’s probably for the best.
There are ways to fail at this of course, like the Spokane, WA priest who couldn’t keep his arms and legs (and other parts) inside of the vehicle at all times, financial mismanagement in the University of North Carolina system, and JDA favorite the University of Colorado’s wild credit card user with horrible hair.
I would never imply that more regulation is the answer; I’m merely pointing out that there’s a bit of work to be done in identifying non-profit fraud. Seriously, how can one detect fraud when the core basis of fund accounting is an imbalance between “expenses” and expenditures?
The Church of Jr Deputy Accountant Scientist? I’m down.
Non-Profits Are Feeling the Pain
WSJ has a Monday piece “Once-Robust Charity Sector Hit With Mergers, Closings” (the Recession Forces Nonprofits to Consolidate) that may be found here. It tells the story of a “homeless” woman with terminal lung cancer and a charity no longer able to afford to help her out. Sad.
When one charity’s COO says “we’ve had funding cut after funding cut, and we never know when the next shoe is going to drop,” that is a bad sign.
Hit by a drop in donations and government funding in the wake of a deep recession, nonprofits—from arts councils to food banks—are undergoing a painful restructuring, including mergers, acquisitions, collaborations, cutbacks and closings.
“Like in the animal kingdom, at some point, the weaker organizations will not be able to survive,” says Diana Aviv, chief executive of Independent Sector, a coalition of 600 nonprofits.
I saw that on the Discovery Channel and it wasn’t pretty.
Note: the Service says the value of your blood is not deductible as a charitable donation but cars are. As of 2005, cars are only deductible at FMV, not Blue Book. Damn you, fair value, foiled by the free market again!
Blame the Service for tightening its charitable donation rules at the worst possible time? Not sure on that one. While you’re reluctant to donate your $200 Toyota (ha) to charity because you could have claimed $2,000 under old rules, find some comfort in the fact that (alleged) terrorist “non profits” can not file for 2 years and somehow get away with it. You wonder why I advocate fixing the system from the ground up?
You can text $10 to Haiti but what about the “Economic Homeless” here in America? asks Young Money.
If this were a survey and you asked me “What do you think the IRS could do to encourage charitable donations?” I would answer “Tax breaks. It isn’t the Treasury’s job to distribute bailouts.” Yet they continue to behave as though it is their duty.
See the problem yet?
People are Getting a Little Worked Up Over Proposed IRS Non-Profit Guidance
YOU SHALL NOT STIFLE MY CONSTITUTIONAL RIGHT TO BE A PARTISAN GROUP PRETENDING TO BE A SOCIAL WELFARE GROUP! Richard Rubin points out this morning that the topic at hand — Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities (REG-134417-13) — is generating quite the vocal buzz. This should come as no surprise […]