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Fundraising from America - 'Managing the fundraising' 2014

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Designed for everyone involved with 501(c)(3) governance, management and fundraising, including board members, officers and development staff. This is also suitable for organisations wishing to learn …

Designed for everyone involved with 501(c)(3) governance, management and fundraising, including board members, officers and development staff. This is also suitable for organisations wishing to learn the requirements and the benefits of a 501(c)(3) prior to obtaining a 501(c)(3) status.

Content:

- What are the responsibilities of Directors & Officers of a 501(c)(3)?
- Banks, Brokerage and Credit Cards
- Stationary, Receipts & Donor Forms
- IRS Audit. Liability Insurance.
- What is a Registered Agent ?
- Board Meetings, Annual Meeting, Whistle Blowers, By laws.
- Trademarking.
- Anti-Money Laundering Strategy
- Sanctions and Anti-Terrorist Guidelines, Conflict of Interest, Document Retention.
- Programs & grant making.
- Form 990. Public Support Test.
- State of Incorporation, State Registration.
- Events & Auctions
- Saying Thank You

Slides taken from the 25th March 2014 Webinar

A recording of this webinar presentation is available. Please contact websupport@chapel-york.com for further information

**Legal information, not legal advice**

Published in: Education
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  • 1. Fundraising from America: Managing the Fundraising This webinar is designed for everyone involved with 501(c)(3) governance, management and fundraising, including board members, officers and development staff. This is also suitable for organisations wishing to learn the requirements and the benefits of a 501(c)(3) prior to obtaining a 501(c)(3) status. First, a quick recap on some key points from ‘Fundraising from America: Starting up and Fundraising’…
  • 2. Fundraising from America: Starting up and Fundraising [Recap] Opportunities USA is a huge philanthropy opportunity, fantastic tradition of philanthropy, highest percentage of givers and highest levels of giving in the world. Americans inside & outside the USA expect to be asked to donate to charity. Grant making Foundations expect to be asked for money and the larger foundations fund huge projects throughout the world. Americans are amazing fundraisers, will form a committee and put on an event and set very high targets for their fundraising if they really believe in your organization.
  • 3. Fundraising from America: Starting up and Fundraising [Recap] SO NOW... If an individual taxpayer wishes to make a grant to a non-profit set up outside the USA, AND GET A TAX DEDUCTION, the donor can make a donation to an accommodating Public Charity and suggest the recipient. It can only be a suggestion. If the Public Charity doesn’t have full discretion & control over the funds it becomes a conduit, and no tax deduction. The US non-profit must establish that the non-US charity is a suitable grantee under US law.
  • 4. Fundraising from America: Starting up and Fundraising [Recap] YOUR CHOICE IS…… If you want to attract donations from American taxpayers for your organization you must either (a) work with an existing US Public Charity that will accept donations and consider a suggestion of a non-US charitable recipient, or (b) set up an accommodating US Public Charity to support you.
  • 5. Fundraising from America: Starting up and Fundraising [Recap] (A) WORK WITH AN EXISTING PUBLIC CHARITY E.G. American Fund for Charities www.americanfund.info The American Fund retain a percentage of each donation to cover its overheads. Minimum retained $50. Up to $10,000 7.50%. Next $90,000 5.00%. Over $100,000 $2.5%. Maximum retained from any donation generally $10,000. Evaluation $250 | Annual Renewal $150. No management or governance obligations but no name recognition, no individual listing online on GuideStar and no individual listing by IRS etc.
  • 6. Fundraising from America: Starting up and Fundraising [Recap] (B) SET UP A PUBLIC CHARITY TO SUPPORT YOUR ORGANIZATION You are setting up an entirely independent organization in the USA. You can refer to it as a (brother or) sister organization, but should avoid getting into the habit of calling it “our ....”
  • 7. Fundraising from America: Starting up and Fundraising [Recap] REQUIRED TO SET UP: - Name - Incorporate in a US State - Identify Board of Directors - Appoint a Registered Agent - Apply for a tax exempt status (Form 1023) - Negotiate with the IRS. May take several months. 501(c)(3) status, when granted, is good for all 50 States plus DC.
  • 8. Fundraising from America: Managing the Fundraising Act in accordance with the bylaws Ensure board members approve activities undertaken by 501(c)(3) Annually elect officers who may also be directors Ensure that State & Federal Returns are prepared and filed What are the responsibilities of Directors & Officers of a 501(c)(3)?
  • 9. Fundraising from America: Managing the Fundraising Directors & Officers Liability Insurance Most experts think that nonprofits need "Directors and Officers" (D & O) liability insurance. Members of the board and/or officers of your nonprofit could be sued individually or as a group. Your board members are volunteers who often make difficult decisions. They should have D & O insurance to protect them. Not having such insurance can make it difficult to attract and retain good board members, who simply cannot afford to serve if they run such risk to their personal assets.
  • 10. Fundraising from America: Managing the Fundraising More on... Board Policies Conflict of Interest The IRS requires much more information from 501(c)(3) nonprofits these days. One area that gets tremendous attention is potential financial conflicts of interest, especially in regard to board members. In fact, the IRS Form 990 now asks, specifically, for disclosure of potential conflicts of interest. What Should a Conflict of Interest Policy for My Corporate Board Include?
  • 11. Fundraising from America: Managing the Fundraising More on... Board Policies Whistleblower Protecting whistleblowers is an essential component of an ethical and open work environment. Whistleblower protection should not be viewed only as a mechanism designed to avoid employee lawsuits. Instead, protecting whistleblowers from retaliation and encouraging constructive whistleblowing benefits nonprofits by increasing transparency and by giving management the opportunity to learn early on of unethical or unlawful practices directly from their employees rather than from the media, law enforcement, or a regulatory agency. In addition, effective whistleblower protection helps foster a work environment in which all employees are held accountable, thereby improving performance and empowering employees.
  • 12. Fundraising from America: Managing the Fundraising Your first Board Meeting The first meeting of the board of directors of your nonprofit is an important meeting. Typically at this meeting, the Board of Directors will: -Acknowledge that the Articles of Incorporation have been filed (and approved, if that is the case) with the state in which you are incorporating. -Designate a specific bank as the official depository for corporate funds. -Elect corporate officers, usually a President, Vice President, Secretary, and Treasurer -Direct the Treasurer to pay organizational expenses -Approve the corporate by-laws -Approve the conflict of interest policy and require all board members to sign the policy.
  • 13. Fundraising from America: Managing the Fundraising Annual Meetings For many nonprofits, having an annual meeting is a legal requirement. The organization will review its previous year's achievements, elect board members and disclose account information. The nonprofit's constitution might require public notice of the meeting and that certain items be on the agenda, such as an address from the board chair.
  • 14. Fundraising from America: Managing the Fundraising 501(c)(3) Financial Administration: - Banks & Banking - Credit Cards - Brokerage Account for gifts of stock
  • 15. Fundraising from America: Managing the Fundraising Stationery, Receipts and Donor Forms - Name and address of the organisation. - American paper size unique (its not decimalized). - Send a written receipt for any donations of £250 or more.
  • 16. Fundraising from America: Managing the Fundraising Receipts for donations
  • 17. Fundraising from America: Managing the Fundraising Licence Agreements, Registering Name / Logo Safeguard your organization’s name by trade marking it (in every State).
  • 18. Fundraising from America: Managing the Fundraising Anti-Money Laundering Strategy Don’t accept significant anonymous donations. Retain the name & home address and other contact details of every donor.
  • 19. Fundraising from America: Managing the Fundraising Sanctions & Anti-Terrorist Guidelines Charities should consider taking certain steps before distributing any charitable funds (and in-kind contributions). These suggested steps are voluntary. The purpose of these steps is to enable charities to better protect themselves from the risk of terrorist abuse and to facilitate compliance with U.S. laws, statutes, and regulations, with which all U.S. persons, including U.S. charities, must comply. Depending upon the risk profile of an individual charitable organization, adopting all of these steps may not be applicable or appropriate. When taking these steps, charities should apply a risk-based approach, particularly with respect to engagement with foreign grantees due to the increased risks associated with overseas charitable activity.
  • 20. Fundraising from America: Managing the Fundraising Document Retention Below are the documents that need to be kept permanently - Audit reports - Checks (for important payments and purchases) - Contracts (still in effect) - Correspondence (legal and important matters) - Deeds, mortgages, and bills of sale - Depreciation Schedules - Year End Financial Statements - Insurance records, current accident reports, claims, policies, etc. - Minute books, bylaws and charter - Patents and related Papers - Retirement and pension records - Tax returns and worksheets - Trademark registrations and copyrights
  • 21. Fundraising from America: Managing the Fundraising IRS Audit By far the least welcome interaction your nonprofit can have with the IRS is an audit -- the process where an IRS employee examines your nonprofit's tax returns, books, and records. Even for nonprofits that have absolutely nothing to hide tax-wise, the audit process can be disruptive and time-consuming, with interviews and visits to your office not uncommon. Why Would the IRS Want to Audit a Charitable Organization? Potential Penalties for Noncompliance Why Certain Groups Get Audited
  • 22. Fundraising from America: Managing the Fundraising What is a Registered Agent? Every company incorporated in the USA is required by law to have a Registered Agent. A registered agent, also known as a statutory agent, is a business or individual authorized by a US State to receive legal notices on behalf of a corporation. The registered agent for a business entity may be an individual member of the company or (more often) a third party, such as the organization's lawyer or a service company. Failure to properly maintain a registered agent can affect a company negatively.
  • 23. Fundraising from America: Managing the Fundraising Programs and Grant making - Identifying recipient organisations. - Retain on file information capable of demonstrating that the organization(s) you are making grants to are suitable grantees of a US nonprofit organization. - Evaluating organisations outside the USA.
  • 24. Fundraising from America: Managing the Fundraising Form 990 IRS Form 990 is the tax document that tax-exempt nonprofit organizations file each year with the IRS. The 990 allows the IRS and the public to evaluate nonprofits and how they operate. Beginning with tax returns filed in 2009 for 2008, nonprofits must file the new Form 990 that requires more disclosure of potential conflicts of interest, compensation of board members and staff, and other details having to do with financial accountability and avoidance of fraud.
  • 25. Fundraising from America: Managing the Fundraising Form 990 Who has to file a 990? - Private foundations. They file a Form 990-PF. - Larger nonprofits that have gross receipts of more than $50 ,000 (as of Jan 2010) have to file Form 990 or 990-EZ. - Small nonprofits with gross receipts of $50,000 (as of Jan 2010) or less must file the new form electronic 990-N (e-Postcard) in order to maintain their exempt status.
  • 26. Fundraising from America: Managing the Fundraising Form 990 What organizations are exempt from filing any Form 990? - Churches. The criteria for being classified as a church are listed in the Tax Guide for Churches and Religious Organizations (IRS Publication 1828). - Subsidiaries of other nonprofits. - Nonprofits not in the system yet. If you are an incorporated nonprofit in your state but don't plan to apply to the IRS for exemption from federal income tax, you don't have to file a Form 990. - Religious schools. - State institutions. Some state institutions are exempt because they provide essential services (a university is an example). - Government corporations.
  • 27. Fundraising from America: Managing the Fundraising When do we file the 990? You must file your 990, 990-EZ, 990-N, or 990-PF by the 15th day of the 5th month after your accounting period ends. So, if your fiscal year ends on December 31, the 990 is due on May 15 of the following year. If I want to see the 990 of a particular nonprofit, how do I do it? Many nonprofits now make 990s available for viewing on their websites. You can view them at Guidestar, an organization that compiles information about nonprofits. Can a form 990 be e-filed? An organization can file Form 990 and related forms, schedules, and attachments electronically. However, if an organization files at least 250 returns of any type during the calendar year ending with or within the organization's tax year and has total assets of $10 million or more at the end of the tax year, it MUST file Form 990 electronically. How difficult is it to prepare? Can we do it ourselves? Unless you have substantial experience in nonprofit compliance, we do not recommend trying this on your own. For an annual fee, Chapel & York undertakes everything necessary to maintain a US 501(c)(3) including Tax Returns. For more information please visit our website www.chapel-york.com
  • 28. Fundraising from America: Managing the Fundraising Public Support Test When a US corporation is recognised by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code as a tax exempt entity, having declared in its application that it expects to be publicly supported, it is classified as a publicly supported charity. The organization retains its public charity status for its first five years regardless of the public support actually received during that time. Then beginning with the organization's sixth taxable year, it must establish that it meets "a public support test" based on the previous five years. Following the first five years, if it fails to meet the public support test for two consecutive years it will be reclassified as a Private Foundation.
  • 29. Fundraising from America: Managing the Fundraising Public Support Test There is a computation to establish if a 501(c)(3) is publicly supported. A summary of the computation is as follows: 2% of total income over 5 years from individuals, companies, private foundations public charities and state or federal government plus interest from investments is calculated. If the total given by any individual, company or private foundation or earned from interest is more than 2% the excess is disregarded. A computation is then made which consists of a fraction, the numerator of which is all the donations minus the disregarded excess, divided by the denominator which is all the donations received. The remainder must be 33.3% or more for the organization to be a public charity. - Unusual Grants, 10% Facts & Circumstances.
  • 30. Fundraising from America: Managing the Fundraising State Registration Most States have some requirement for 501(c)(3)s to register if they are planning to operate or to solicit charitable gifts from people or organizations resident in or located in the State. All States have different rules. New 990 Makes Nonprofit Fundraising Registration Unavoidable The new IRS Form 990 has now made neglect of fundraising registration rules impossible, at least for nonprofits with incomes of more than $25,000 per year. Those nonprofits have to file a 990 or a 990-EZ, and the new forms require information about where organizations are registered to fundraise.
  • 31. Fundraising from America: Managing the Fundraising State Registration – Key Points Here is some basic information and tips about fundraising registration. Be aware, however, that you'll need to do your homework on this issue and/or get legal advice for your particular nonprofit. - Register before you start fundraising. - Register in your home state--this is called your state of domicile. - Register in every state where you solicit funds. If you receive less than $250 in donations from a particular state, don't register and do not send postal mail or email to that state. It's too expensive to register where you receive little value. Several donation processing programs allow you to screen out states. - If you accept online donations, do register in Florida and New York state, even if you don't solicit there. Those states require registration for simply accepting a donation from the state. If you are a local or regional organization, consider donation software that will allow you to block donation online from other states. - Follow the rules of each state for registration, reporting, documentation, etc. [Continued…]
  • 32. Fundraising from America: Managing the Fundraising State Registration – Key Points - 38 states do accept the Unified Registration Form, but they often differ in the documentation that they require. So you can't just submit one registration to all of those states and forget it. You'll need to customize each registration with the required documents. - In most states that require registration, you also have to renew annually. Each state's requirements are different and deadlines for renewal vary. Fees for registration differ state to state. - If you do not register properly in other states before you fundraise, your organization risks penalties and even felony charges. Some donations have had to be given back as a result of not registering or registering too late. Your auditors and grantors will also require that your registrations are in order. Since the new 990 requires organizations to report where they are registered, it is impossible to ignore out-of-state fundraising registration. Chapel & York’s administration service deals with State Registration. More info at www.chapel-york.com
  • 33. Fundraising from America: Managing the Fundraising State Registration RE: Internet Fundraising The Internet has revolutionized nonprofit fundraising and has had an equally big impact on fundraising registration. Today, even the smallest nonprofit can reach a nationwide audience through an inexpensive website or email, and collect contributions from donors location anywhere in the country. Consequently, many small nonprofits that have never had to deal with registration other than in their home state must now figure out where and how to register in multiple states… Under the Charleston Principles (Google for a helpful flow chart), you do not need to register with a state simply because you have a website that people in the state can view. Something more is needed, such as sending a fundraising email to state residents, applying for grants from private or government funders in the state, or making telephone solicitations there. These guidelines are not legally binding on any state. Most states follow the Charleston Principles. Two states - New York and New Jersey – DO NOT follow these principles.
  • 34. Fundraising from America: Managing the Fundraising State Registration RE: Social Network Fundraising If you use social networks to solicit contributions and you meet the requirements for an interactive or non-interactive website, then you would have to register. For example if your nonprofit's Facebook page contains a "donate now" button, you would be soliciting contributions through the page. A Facebook page would be considered an interactive website. You'd have to register if your nonprofit targeted a state's residents or received substantial contributions. RE: Charity Portals One of the best known charity portals is Network for Good, which is operated by a donor-advised fund - a tax exempt nonprofit that exists to distribute funds to other nonprofits. Donors can use these websites to make online contributions to virtually every tax-exempt nonprofit in the United States. Donor Advised funds like Network for Good have usually already registered in all the states where they are required to register. It seems likely that a nonprofit that receives money from such a fund would not have to register in a state for that reason alone.
  • 35. Fundraising from America: Managing the Fundraising Events - Register in the state -Sales Tax - US non-profits are exempt from sales tax in some US States Auctions Donors (successful bidders) may take a tax deduction on the difference between the fair market value and what they pay BUT they must know the fair market value before they bid.
  • 36. Fundraising from America: Managing the Fundraising Saying Thank you Saying thank you to a donor ends one transaction but builds a bridge to future support and deeper engagement. Do it well, and you are on your way to future fundraising success. - Speed - Make it personal - Reference what the gift was towards - Acknowledge past giving - Include a PS. Mention a social network, new blog etc - Contact details for any questions - Never ever ask for a second gift! a.k.a ‘the soft ask’
  • 37. Fundraising from America: Managing the Fundraising Chapel & York does everything you need to establish a 501(c)(3) charity, from initial discussions and setting up as well as maintenance and administration services. For more information & brochure downloads please visit: www.chapel-york.com/fundraisingusa
  • 38. Fundraising from America: Managing the Fundraising Contact details Presenter: David Wickert +44 1342 871915 david.wickert@chapel-york.com Twitter @davidwickert Further information about all Chapel & York’s services can be found at www.chapel-york.com For latest information about our publications, seminars, workshops, webinars and much more, please follow us on Twitter @chapelyork PLEASE NOTE: This information was not intended to be legal advice. It is advised that you consult your own attorney in regard to your specific situation.

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