[middleofnowhere]

I thought I'd put this post here because while it was inspired by the controversy over two rescue organizations, it is also pertinent to training clubs, dog clubs and any not-for-profit organization to some extent.

Often you will find an organization that needs volunteers, members, fund raising and so on. There are ways to check into the legitimacy and the organizational health of any organization. Some of this will help protect you as a member, volunteer, board member or donor. Some of it relates to the formal structure.

Although organizations with incomes under I think it is 150,000 have another year or two to comply, the IRS is requiring a more extensive form 990 be filed by NFPs claiming tax exempt status. This new 990 requires disclosure of compensation, a mission statement, a statement about the board of directors and much more. The cool thing about a 990 is that by law any 501c3 institution is required to provide it to you upon your request. You may have to pay a photocopying charge but they are required to provide it.

I'd like to hear from other board members what they would expect of these organizations. How much structure do you need to keep them honest and on track? If you could have access to all their records what would you look for?

 

[CMorton]

Excellent topic!!
I am a real stickler about this with our club, ask any fellow board member.
I want accurate and organized records with a cohesive flow, a constitution and bylaws that ARE FOLLOWED, and with the new 990 form being required it's very important to adhere to it.
Regular, and frequent treasurers reports are a must.
I think accountability, and an ability to be unbiased even though you may be dealing with friends, is very important.
Having a wide range of people on the board is important as well, helps keep everyone in check.
Making sure nobody personally $ profits $ from any activity also, some people may try to mix it up (personal business ventures) with out making sure clear lines are drawn...that's where I come in to harass them and raise a stink if I have to.
I also cc all board members on a lot of items.

 

[ILGHAUS]

From the IRS website:

The new form will be used for the 2008 tax year (returns filed in 2009). The IRS plans to release the related instructions in early 2008. “We are continuing to work with the nonprofit sector to complete the new form’s instructions,” said Lerner.

The IRS also announced a graduated transition period for smaller organizations. These organizations will be allowed to file the Form 990-EZ instead of the Form 990. For the 2008 tax year (returns filed in 2009), organizations with gross receipts over $1.0 million or total assets over $2.5 million will be required to file the Form 990. For the 2009 tax year (returns filed in 2010), organizations with gross receipts over $500,000 or total assets over $1.25 million will be required to file the Form 990. The filing thresholds will be set permanently at $200,000 gross receipts and $500,000 total assets beginning with the 2010 tax year. Also, starting with the 2010 tax year, the IRS will increase the filing threshold for organizations required to file Form 990-N (the e-postcard) from $25,000 to $50,000.

“This phase-in process will allow organizations to become familiar with the new Form 990,” Lerner said.

and

The new form requires each filing organization to provide certain information regarding the composition of its board or governing body, certain of its governance policies and practices, and the means by which it is held accountable to the public by making governance and financial information publicly available. Many of the questions request information on practices or policies that are not required by federal tax law. However, good governance and accountability practices provide safeguards that the organization’s assets will be used consistently with its exempt purposes. This is a critical tax compliance consideration, especially for organizations that are subject to private benefit, excess benefit, and private inurement prohibitions. In addition, well-governed and well-managed organizations are more likely to be transparent organizations with regard to their operations, finances, fundraising practices, and use of assets for exempt and unrelated purposes.

Date posted: February 8, 2008


A heads up to potential volunteers and donors:
Those nonprofit organizations that do not not believe that they have to be transparent or "share" their information are in for a very rude awakening when they apply for their 501 tax status. There will be more and more such organizations showing extreme lengthy "501(c)(3) pending" on their handouts and websites. I would look after a period of time begin to look at such a claim as a red flag.

 

[ILGHAUS]

Quote: I would look after a period of time begin to look at such a claim as a red flag.

I was timed out before I was able to correct this to --> I would after a period of time begin to look at such a claim as a red flag.

Just because an organization says they are pending they may in fact not be in the actual process of seeking a 501. An organization is able to post such a claim on their website or forms for up to a period of 15 months without in fact ever filling out an application or in any way begin to apply with the IRS. It is a grace period in which the IRS give a nonprofit time to complete and have processed their application packet. So if a representative of a nonprofit tells you or if you read that they are pending on their website, you may want to check a little further.

Donations of goods or money made to a nonprofit (state only) are not deductible for the donor. A nonprofit organization must be a 501(c)(3) -- IRS determined tax status -- for donations to be tax deductible for the donor.

 

[ILGHAUS]

Quote: If you could have access to all their records what would you look for?

Articles of Incorporation
By-Laws
IRS Determination Letter
Mission Statement
Vision Statement
Purpose (Goals)
A Code of Conduct and Ethics for Board Members and Staff

 

[CMorton]

And from my experience with our specialty club, being the one to fill out and submit the paperwork, it did not take a terrible amount of time, nor effort to get it completed. Of course it's been 3 years now since we did it, so I may be blocking out horrible memories LOL ))

 

[Kayla's Dad]

Originally Posted By: ILGHAUS

Quote: If you could have access to all their records what would you look for?

Articles of Incorporation
By-Laws
IRS Determination Letter
Mission Statement
Vision Statement
Purpose (Goals)
A Code of Conduct and Ethics for Board Members and Staff

Since the 990's are public record, I would also try to get a handle on spending-how much is going toward the stated mission/vision/purpose, how much is overhead/administrative type costs. Do need to be a little careful analyzing this.

 

[ILGHAUS]

Quote: I would also try to get a handle on spending-how much is going toward the stated mission/vision/purpose, how much is overhead/administrative type costs.

Here in FL the percentages are calculated by the State of FL, Division of Corporations, and as such this information can be obtained through them. We must submit a financial statement each year in order to keep our nonprofit status active. I have no idea how many other states do the same.

 

[middleofnowhere]

How about an understanding of conflicts of interest? In my experience and in looking at the BrightStar case, that's one that seems to slip. A board member pulling dogs independently from the organization would certainly be perceived as a conflict of interest.

Another thought would be that if you were considering being a board member to a not for profit org., you should be give a copy of the by-laws and constitution to review. It slips people's minds that as board members they are liable for the actions of that organization.

I would also want to see that the organization held regular board meetings, that these were advertised ahead of time and open to the membership. Minutes should be kept and available to membership. I've worked in the nfp world quite a bit although I've been government for the past 16 years. What I found is that committees and boards often want to do things ad-hoc rather than systematically.

I'd want written policy and procedure, too.

Fine. Now do I ever bother to really look for all this? I've served on 3 boards and, golly, no I didn't!!! Sheesh! But when I'm serving boards that start out with little policy and procedure, oh they get it! I write that stuff up & submit it for revision! Sometimes it explodes but often it goes through. Even after it explodes someone will pick up the pieces and put it back together.

Now I need to get off the computer because we're having a thunderstorm. Technically I shouldn't shower but it was 90 degrees here & I moved a finger outside.... I need to shower!

 

[ILGHAUS]

My answers and opinions will not match those of many individuals and organizations, but are of course mine and also reflect the Board of Directors approved procedures of the nonprofit Public Charity that I am associated with.

Quote: How about an understanding of conflicts of interest?

This is something that I see as important as an internal governance policy. We at KsKs have a Code of Conduct and Ethics for Board Members and Staff Statement that is available for view by the general public, and if someone really wanted to see one of our internal blank <u>Conflicts of Interest Forms </u>I wouldn't have a problem, but I would not show a completed form without cause. As of April 1 of this year all of our Board of Directors and Staff must complete this form on an annual basis.

Quote:I would also want to see that the organization held regular board meetings,

The frequency of meetings should be made available in the By-Laws. All members should be aware of the method of notice and also how to obtain for viewing a copy of the minutes. But when speaking of members, it must be noted that not all nonprofits have a "membership" ie. people who pay dues or are considered "members" according to the IRS. Again this is something that should be addressed in the By-Laws and must be made available when applying for 501 tax status.