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Safe passage for nonprofits 09 2011 (web)

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Safe passage for nonprofits 09 2011 (web)

  1. 1. Safe Passage for Nonprofits:Keeping Your Nonprofit on the Right Path<br />Reduce Risk<br />Increase Confidence<br />Manage Compliance<br />September 12, 2011<br />Sponsored by :<br />Indiana Nonprofit Resource Network<br />DeKalb County Community Foundation<br />Presenter:<br />Miriam Robeson,<br />Attorney<br />
  2. 2. Why Are We Here?<br />Information Level –Intermediate<br />Assumes some familiarity with basics of nonprofits<br />
  3. 3. Why Are We Here – Part 2The Horror Stories and Bad Press<br /><ul><li>Investigation of Fiesta, Sugar, and Orange Bowl games for abuse of nonprofit status and “extravagant compensation”
  4. 4. Medical Association of Atlanta ED pleads guilty to embezzling more than $300,000
  5. 5. Nonprofit Status of 30 credit counseling organizations revoked for failure to achieve a nonprofit purpose and for excessive executive compensation
  6. 6. Closer to Home – Fort Wayne – Garrett woman embezzles > $30K from St. Joseph Catholic Church</li></li></ul><li>Why We are Here – Part 3The IRS<br /><ul><li>IRS increases nonprofit oversight
  7. 7. Employment Taxes
  8. 8. Executive Compensation
  9. 9. Activist Agenda
  10. 10. Compliance (Tax forms)
  11. 11. Since 2008, the IRS has added more than 100 employees to the Exempt Organizations Section
  12. 12. As of June, 2011, the IRS has “automatically revoked” the nonprofit status of more than 275,000 nonprofits</li></li></ul><li>Safe Passage for Nonprofits<br /><ul><li>Compliance
  13. 13. Accountability
  14. 14. Transparency
  15. 15. Risk Management
  16. 16. Danger Zones</li></li></ul><li>Compliance<br /><ul><li>Government and other technical requirements</li></li></ul><li>Compliance – State Requirements<br />
  17. 17. Compliance – State Requirements<br />
  18. 18. Compliance – State Requirements<br />
  19. 19. Compliance - Federal<br />Failure to file – automatic revocation of §501(c)(3) status<br />
  20. 20. Compliance – IRS Is your nonprofit “on the list?”<br /><ul><li>IRS Publication 78 – Cumulative List of Nonprofit Organizations approved by the IRS
  21. 21. http://www.irs.gov/charities/article/0,,id=96136,00.html
  22. 22. Go to IRS website and search “Publication 78”
  23. 23. Incorporation as a State (Indiana) nonprofit does not equal IRS nonprofit - 501(c)(3) - Status</li></li></ul><li>Compliance - Employment<br />
  24. 24. Compliance - UBIT<br />
  25. 25. Accountability<br />
  26. 26. Accountability - Financial<br /><ul><li>Financial Policies
  27. 27. Financial Controls
  28. 28. Monitor appropriate use of nonprofit funds
  29. 29. Audit - review</li></li></ul><li>Accountability - Financial Governance Policies<br /><ul><li>Policies for –
  30. 30. Handling Money
  31. 31. Recording Money
  32. 32. Reporting Money</li></li></ul><li>Accountability - Governance<br /><ul><li>Conflict of Interest
  33. 33. Ethical Standards</li></li></ul><li>Accountability - Conflicts of Interest<br />Watch Appearance of Impropriety!<br />
  34. 34. Accountability - Personal Benefit<br />
  35. 35. Accountability - Ethics<br />
  36. 36. Nonprofit Ethical Issues - Examples<br /><ul><li>Improper donor acknowledgements
  37. 37. Donations of time are not tax-deductible
  38. 38. Donor “influence-buying”
  39. 39. Improper arrangements with donors
  40. 40. Failing to include both spouses in joint gift paperwork
  41. 41. Staff/ED/Board/Volunteer accepting gifts from donors
  42. 42. Failing to take responsibility (“Not My Fault”)</li></ul>Only 10% of the public<br />believes that charities are ethical<br />
  43. 43. <ul><li>Failure to properly account and restrict use of donor-specified donations (illegal and unethical!)
  44. 44. Capital contributions used for operational expenses
  45. 45. “Borrowing” from restricted funds
  46. 46. Purchases from Board-member business without proper disclosure (the copy shop example)
  47. 47. Failure to consult professionals for assistance, when needed (lawyer – accountant)
  48. 48. Improper oversight of spending (financial control policies) - Indianapolis Humane Society</li></ul>More Examples - Ethics<br />
  49. 49. Transparency – Credibility to Public<br />Regularly provide information to the Public<br />
  50. 50. Risk Management for Nonprofits<br />Best Practices to Prevent Financial Crisis<br />Identify Risk<br />Ranks Risk<br />Identify Policies to manage risk<br />Implement protections<br />Implement procedures in event of crisis<br />
  51. 51. Risk Management PlanTypes of Risk to Manage<br />
  52. 52. Risk Management - People<br />Poor economy has resulted in an increase in criminal conduct against nonprofits<br />Embezzlement by employees<br />Embezzlement by officers<br />Fraud from “outsiders”<br />Phrase of the Day – “Trust But Verify”<br />
  53. 53. Nonprofits and FraudWhat to do when it happens to you!<br />Fraud<br />Alert!<br />
  54. 54. See - Handouts<br />PR for NonprofitsPublic Relations During Fraud Crisis<br />
  55. 55. Preventing Fraud<br />
  56. 56. Other Danger Zones<br />
  57. 57. Danger Zone - Lobbying<br />
  58. 58. Danger Zone – Charity Gaming<br />
  59. 59. What is “Charity Gaming?”<br />
  60. 60. Danger Zone - Abuse of Status<br />
  61. 61. Has Your Status Been Revoked?<br />Google: “recent IRS revocations”<br />http://www.irs.gov/charities/charitable/article/0,,id=141466,00.html<br />Comprehensive List of <br />“Automatic Revocations”<br />(organized by state)http://www.irs.gov/charities/article/0,,id=240099,00.html<br />
  62. 62. What if you LOSE nonprofit status?<br />
  63. 63. How can you recover NP Status?<br /><ul><li>Loss of Status cannot be reversed or appealed
  64. 64. Must go through re-application for tax exempt status
  65. 65. May include request for retroactive reinstatement to avoid taxes for “interim period”
  66. 66. Requires payment of user fee ($400 or $850)
  67. 67. Small nonprofits might be allowed to pay $100 user fee
  68. 68. Must write “Automatically Revoked” on application
  69. 69. If exemptions do not apply, must provide complete packet of information for re-application</li></li></ul><li>For More Information<br /><ul><li>IRS.gov – Exempt Organizations
  70. 70. Publication 557 – Tax Exempt Status Info
  71. 71. Publication 78 – Approved nonprofit list
  72. 72. Indiana Charity Gaming Commission
  73. 73. Indiana Secretary of State
  74. 74. Indiana Department of Revenue
  75. 75. Guidestar.org
  76. 76. Charity Navigator</li></li></ul><li>Safe Passage for Nonprofits<br />
  77. 77. Any Questions?<br />Thank you for your attention!<br />Miriam Robeson, Attorney<br />Today’s materials are available on Miriam’s<br />Website: <br />http://blog.lawlatte.com/index.php/upcoming-workshops/<br />

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