Volunteers

This is framed more as an HR topic than accounting one, but I'm going to guess many of the nonprofit financial staff out there where multiple hats. I like to say that I do all of the "non-fun" stuff in a nonprofit; accounting, HR and IT.

Many of us use volunteers, but are we doing it the right way? Volunteers work with us because they care about the cause and want to help so by nature may be disinclined to take action against us should something go wrong. But that is not something we should count on and you will be exposing your organization to unnecessary risk if you do so. This article presents something for us to think about and these resources from the Nonprofit Risk Management Center can help set up an run an effective volunteer program.

New 990-N Filing Deadline Approaching

May 15, 2008, is the first deadline to file the brand new form 990-N, the form for small tax-exempt organizations whose gross receipts are normally $25,000 or less for tax years ending on December 31, 2007. Check out the latest information by clicking here.

The Commensurate Test

From the Independent Sector's Memo To Members come these interesting bits of news:

1. IRS Plans to Make Greater Use of "Commensurate Test" in Oversight of Charities

   The commensurate test generally measures if a charity is undertaking, through contributions and grants, a charitable purpose commensurate in scope with its financial resources. Miller said that the Service will "re-energize" what he called a "little-used line of legal precedent."

   Thanks to some news about nonprofit college and hospital spending and levels of endowments the IRS wants to make sure we are using our funds for our charitable purposes and not hording our funds.
   

2. Senate Bill Proposes FTC Jurisdiction over
   Charities
   

   The business practices of 501(c)(3) nonprofits would be subject to Federal Trade Commission regulation and enforcement under a bill introduced last month by Senator Byron Dorgan (D-ND). The FTC Reauthorization Act of 2008 (S.2831) would expressly extend FTC jurisdiction by changing the current definition of “corporation” in the FTC Act to cover 501(c)(3) organizations. FTC commissioners stated in written testimony that their lack of jurisdiction “has prevented the commission from taking action against potentially anticompetitive conduct of nonprofits engaged in business.”

   Just to look at the dark side of this there have been a number of for-profit entities that have sued nonprofits because the for-profit businesses thought that the nonprofits had an unfair advantage over them because they didn't have to pay taxes. Is that what this is related to? Maybe they haven't heard of Unrelated Business Income?
   
   
3. IS Announces New Estimate for Value of Volunteer Time

More Talk About Efficient Charities

I'm not the only one to write about the IRS Commissioner's speech. The Chronicle of Philanthropy mentions others who are talking about the issue. You should read the article and follow the links in it to see what others are saying.

Efficient Charities

Two stories from the Chronicle of Philanthropy last Thursday caught my eye.

The first is about congressional rumblings to have nonprofits post fundraising ratios and costs on a Postal Service web site.

Seriously.

No information was given on where the charities would pull this information from, when it would be updated and weather it would be checked out or not for accuracy. Not to mention who would maintain this database, how it would be funded or what kind of education and outreach about the information on said site and how to use it.

The second article is more in depth. It starts out with the IRS Commissioner Steven T. Miller stating that, even though the IRS may not have the jurisdiction to, it will be more aggressive in monitoring the "efficiency and effectiveness of charitable organizations." He was also disappointed that the IRS gave up the idea of placing "efficiency indicators." on the front of the 990 because he wants to help make "apples-to-apples" comparisons possible.

I was against having the "efficiency indicators" there precisely because I don't think that it helps much for comparison. Standard benchmarks like the ones listed in the article may be informative but I do not believe they tell you how efficient a charity is, especially in comparison to other charities. For profit businesses are formed to make profit. A dollar of profit is the same at one business as it is at another, so ratios work and are comparable. But nonprofits are formed to do many different things, too many to be able to come up with easy ratios and benchmarks that cross the sectors of the charitable universe.

Would you compare a big nonprofit hospital to a small after school sports program? You could but I don't think you would get much that is useful. Now hospital to hospital, sports program to sports program? You could make some comparisons with benchmarks and ratios that could yield some interesting information.

The myopic thinking that all nonprofits are the same just because they are nonprofits still baffles me. Especially in people who task themselves to regulate us.

Is A Donation To An Individual Tax Deductible?

The short answer, according to the IRS and Publication 526, is no. I have been asked this question several times over the years and there is one thing people always get stuck on: They want to donate money to a specific person that charity XYZ works with. They will write the check to the charity but specify who the money should be spent on. That is a charitable donation, right? Wrong. To quote from the IRS:

You cannot deduct contributions to specific individuals, including the following.

• Contributions to individuals who are needy or worthy. This includes contributions to a qualified organization if you indicate that your contribution is for a specific person. But you can deduct a contribution that you give to a qualified organization that in turn helps needy or worthy individuals if you do not indicate that your contribution is for a specific person.

  Example. You can deduct contributions for flood relief, hurricane relief, or other disaster relief to a qualified organization. However, you cannot deduct contributions earmarked for relief of a particular individual or family.

• Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses.

• Expenses you paid for another person who provided services to a qualified organization.

  Example. Your son does missionary work. You pay his expenses. You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services.

• Payments to a hospital that are for a specific patient's care or for services for a specific patient. You cannot deduct these payments even if the hospital is operated by a city, state, or other qualified organization.
  

This is not to say that those donors cannot donate to those individuals at all, just that those donations will not be tax deductible.

Pledge Contracts

This article from the Chicago tribune reminded me of a few emails I have received recently. Several organizations have asked for samples of any "pledge contracts" I might have. I was mystified by this concept having never heard of such a thing. These callers wanted to make sure board members or other big donors would follow through with any pledges made and wanted legal recourse if they failed to do so.

I can see the rational of course, especially if it a large amount of money and the organization has budgeted for it. But it strikes me as a harsh way to do it, as the article mentions, like a sort of prenuptial agreement. But maybe that is the way to go, keeps everything on a nice professional level.

The article quotes an attorney on what he recommends for such an agreement:

Conduct a credit check on donors; include a "bad boy" clause in gifts
that come with naming rights so the non-profit can remove the name if
it deems necessary; wait to begin construction of a new, donor-paid
building until at least 30 percent of the pledge has been paid; and
make sure the donor's spouse signs any gift agreement.

Has anyone else encountered agreements like these?

For the QuickBooks Users Out There

I received this email from QB today about a potential conflict between the 2008 version of QuickBooks and Windows:

Dear QuickBooks 2008 customer,
We have discovered that a recent Microsoft Windows update may be
triggering problems for some users of QuickBooks 2008 software. When
the problem occurs, QuickBooks does not open.

Common symptoms include the following:
1.The QuickBooks splash screen flashes, and then disappears.

OR

2.On launch of QuickBooks, an error message reports that the Web

Connector has failed to initialize and QuickBooks does not open.
It turns out that the Microsoft update introduced a problem in the
.NET 2.0 Framework.
To resolve this issue, please do not uninstall and re-install
QuickBooks. We do not recommend this, as it will not address
the problem.

The best thing to do is to go to the source of the problem, so you
will need to remove and reinstall the .NET 2.0 Framework. To help
walk you through it, we have provided detailed instructions in our
QuickBooks Knowledge Base that provides some easy to follow steps and
also includes additional links to the Microsoft site:
support.quickbooks.intuit.com/support/pages/

We are continuing to work on this issue and if we find out anything
new, we will be sure to let you know right away.
Thanks for your patience,
The QuickBooks Team

Has anyone noticed any problems out there?

Updated 990 Draft Instructions Released

It is finally here! On April 7, 2008, the IRS released for public comment draft instructions for the 2008 Form 990. Here is a link to the announcement and the link to find draft versions of the instructions. Public comments on the draft forms will be open until June 1, 2008. You can submit your comments directly to them or in the comments section of this post and CAN will aggregate them and send them in.

Many of the draft forms have a highlights section in the beginning where the IRS describes what is new, different and where the IRS really wants our comments. Lats years comments on the draft 990 had many comments and critiques on the current instructions including:

• No glossary of key terms, too few definitions, and unclear definitions that are scattered throughout the form and that are difficult to find
• Too much extraneous material specific to particular types of filers is placed in the front end before the specific line-by-line instructions that apply to most filing organizations
• Ambiguous reporting standards for executive compensation, particularly with respect to the types of compensation that must be reported, and when and where they must be reported on the form
• Lack of examples in particularly difficult areas

The IRS is promoting new tools in these updated instructions to address these and other concerns so be sure and check them out and give us your feed back.

Public Inspection of Form 990-T

And other things from the IRS.

This week guidelines were released on how to request a copy of the form 990-T which is now a publicly available document. The 990-T is used to report a nonprofit organization unrelated business income (which is taxable income).

Below is an excerpt from this PDF:

The Tax Technical Corrections Act of 2007, Pub. L. 110-172, H.R. 4839, provides that
the Internal Revenue Service is required to make Forms 990-T that are filed by a section 501(c)(3) organization publicly available for inspection and copying pursuant to section 6104(b). This provision is effective for returns filed after August 17, 2006, the date of enactment of the Pension Protection Act of 2006, Pub. L. 109-280 (PPA).

Form 4506-A, Request for Public Inspection or Copy of Exempt or Political Organization IRS Form, is used to request from the Internal Revenue Service a copy of an exempt or political organization’s return, report, or notice pursuant to section 6104(b). The Form 4506-A does not currently contain a check box for a Form 990-T, although the Internal Revenue Service is in the process of revising the Form 4506-A to include this provision. If you want to inspect or copy a Form 990-T that was filed after August 17, 2006, please mail or fax a copy of the Form 4506-A to the Internal Revenue Service following theinstructions for that form. In line 7 of the Form 4506-A, however, please write in “Form990-T”.

A Copy of the Form 4506-A can be found here.

The IRS also updated it's Form 990-N FAQ's, click here to check them out.