| |
| |
| |
Setting the Stage: Some Preliminaries | |
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| |
| |
The Need for Action | |
| |
| |
| |
Part of the Bigger Scheme | |
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| |
| |
Assumption | |
| |
| |
| |
Generality of Coverage | |
| |
| |
| |
Using Qualified Professionals | |
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| |
| |
Before Starting a New Organization | |
| |
| |
| |
Start by Looking for an Existing Charity | |
| |
| |
| |
Consider Partnering Opportunities | |
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| |
| |
Identify Funders | |
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| |
| |
Retain a Qualified Attorney | |
| |
| |
| |
Advice to the Wealthy | |
| |
| |
| |
Concluding the Preliminaries | |
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| |
| |
Before Signing On | |
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| |
| |
"Give, Get, or Get Off" | |
| |
| |
| |
Ask Questions | |
| |
| |
| |
Review Materials | |
| |
| |
| |
Meet with the Executive Director and Other Officers | |
| |
| |
| |
Review Other Resources | |
| |
| |
| |
Step Aside if the Information Is Not Forthcoming | |
| |
| |
| |
Your Role | |
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| |
| |
Organizational Basics | |
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| |
| |
Nonprofit versus Tax-Exempt Status | |
| |
| |
| |
The Corporate Form Is the Prevalent One | |
| |
| |
| |
The Players | |
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| |
| |
The Board of Directors | |
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| |
| |
The Officers | |
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| |
| |
Members | |
| |
| |
| |
The Regulators-State Attorneys General | |
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| |
| |
Standing | |
| |
| |
| |
Organizational Documents | |
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| |
| |
Using Forms | |
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| |
| |
Core Documents | |
| |
| |
| |
Statutory Default Provisions | |
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| |
| |
Amendments | |
| |
| |
| |
Director Review | |
| |
| |
| |
More than Boilerplate | |
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| |
| |
Meetings | |
| |
| |
| |
A Recommended Meeting Format | |
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| |
| |
Meeting Minutes | |
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| |
| |
Executive Sessions | |
| |
| |
| |
The Internet and Meetings | |
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| |
| |
Major Events | |
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| |
| |
Formation | |
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| |
Dissolution | |
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| |
| |
Operations | |
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| |
| |
Legal Duties and Obligations | |
| |
| |
| |
A Well-Known Case | |
| |
| |
| |
Director Duties and Responsibilities | |
| |
| |
| |
The Duty of Care | |
| |
| |
| |
The Duty of Loyalty | |
| |
| |
| |
The Duty of Obedience | |
| |
| |
| |
Standards for Judging Behavior | |
| |
| |
| |
Business Judgment or Ordinary Prudence | |
| |
| |
| |
Other Statutory Duties That Can Lead to Liability | |
| |
| |
| |
Liability Arising from Joint Ventures and Subsidiaries | |
| |
| |
| |
The Standards as Applied to Common Decisions | |
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| |
| |
Exercising Due Care-Compensation | |
| |
| |
| |
Exercising Due Diligence-Investments | |
| |
| |
| |
Avoiding Conflicts of Interest-Selling Assets | |
| |
| |
| |
Resisting Founder's Syndrome-Diversification | |
| |
| |
| |
Director Rights | |
| |
| |
| |
A Further Look at Investment Decisions | |
| |
| |
| |
What the Process Is Not | |
| |
| |
| |
Reserves or Endowment? | |
| |
| |
| |
Investing Endowment-The Standard | |
| |
| |
| |
Translating Legal Standards into Actual Conduct | |
| |
| |
| |
Corporate Trustees and Charitable Beneficiaries | |
| |
| |
| |
Another Look at Conflicts of Interest | |
| |
| |
| |
Need for a Conflict-of-Interest Policy | |
| |
| |
| |
Loans to Directors and Officers | |
| |
| |
| |
Moving from a Volunteer Director to a Paid Employee | |
| |
| |
| |
Relief for Directors and Officers | |
| |
| |
| |
State Relief | |
| |
| |
| |
Federal Relief under the Volunteer Protection Act | |
| |
| |
| |
Good Faith: A Storm on the Horizon for Nonprofit Directors | |
| |
| |
| |
Avoiding Trouble As a Director | |
| |
| |
| |
Avoiding Trouble As an Officer | |
| |
| |
| |
The Litmus Test for Good Conduct | |
| |
| |
| |
Financial Statements, Internal Controls, and Sarbanes-Oxley | |
| |
| |
| |
Where Accounting Rules Come From | |
| |
| |
| |
The Three Nonprofit Financial Statements | |
| |
| |
| |
Statement of Financial Position | |
| |
| |
| |
Statement of Activities | |
| |
| |
| |
Statement of Cash Flows | |
| |
| |
| |
Guidance for the Bookkeeper | |
| |
| |
| |
Ratio Analysis | |
| |
| |
| |
Seven Basic Ratios | |
| |
| |
| |
Other Ratios | |
| |
| |
| |
The Milwaukee Public Museum-What the Financial Information Foretold | |
| |
| |
| |
Donor Insights into Financial Information | |
| |
| |
| |
Using GAAP-Prepared Statements versus IRS Form 990 | |
| |
| |
| |
Disclosing Fundraising Expenses | |
| |
| |
| |
Expensing Fundraising Expenditures | |
| |
| |
| |
Allocating Overhead | |
| |
| |
| |
Consideration of Contributed Services | |
| |
| |
| |
Consolidating Affiliated Entities | |
| |
| |
| |
Auditor's Report | |
| |
| |
| |
Audit Committee | |
| |
| |
| |
Audit Committee Review | |
| |
| |
| |
Audit Committee and Whistleblowers | |
| |
| |
| |
Audit Committee Membership | |
| |
| |
| |
California's Approach to Audit Committee Membership | |
| |
| |
| |
GAO Audit Guidelines | |
| |
| |
| |
Best Practices | |
| |
| |
| |
Prohibited and Permitted Services | |
| |
| |
| |
Case: Big Food Basket and Personal Impairments | |
| |
| |
| |
Internal Controls | |
| |
| |
| |
Three Basic Internal Control Functions | |
| |
| |
| |
A Closer Look at Financial Controls | |
| |
| |
| |
A Case Study | |
| |
| |
| |
Recommended Internal Controls | |
| |
| |
| |
Considerations for Organizations Making Grants | |
| |
| |
| |
Financial Control Recommendations and Requirements for Recipients of Federal Funds | |
| |
| |
| |
Fraud and Theft | |
| |
| |
| |
The Three Categories of Fraud | |
| |
| |
| |
Avoid a Narrow Focus | |
| |
| |
| |
Employee Tips | |
| |
| |
| |
Internal Fraud Detection | |
| |
| |
| |
The Lone Perpetrator Accounts for the Highest Percentage of Frauds | |
| |
| |
| |
Background Checks May Not Be the Answer | |
| |
| |
| |
Tenure Is an Erroneous Basis for Trust | |
| |
| |
| |
Loss Recovery | |
| |
| |
| |
The Lessons | |
| |
| |
| |
Fraud and the Certified Audit | |
| |
| |
| |
Sarbanes-Oxley Reforms | |
| |
| |
| |
Financial Certification | |
| |
| |
| |
Auditor Independence | |
| |
| |
| |
Auditor Rotation | |
| |
| |
| |
Audit Committee Member Independence | |
| |
| |
| |
Financial Expertise | |
| |
| |
| |
Making Audited Financial Statements Publicly Available | |
| |
| |
| |
Other Sarbanes-Oxley Provisions | |
| |
| |
| |
Summation: Steps for the Board | |
| |
| |
| |
Federal Tax Exemption | |
| |
| |
| |
Tax-Exempt Entities | |
| |
| |
| |
Charitable Organizations | |
| |
| |
| |
Social Welfare Organizations | |
| |
| |
| |
Labor and Agricultural Organizations | |
| |
| |
| |
Business Leagues | |
| |
| |
| |
Social Clubs | |
| |
| |
| |
Fraternal Societies | |
| |
| |
| |
Veterans' Organizations | |
| |
| |
| |
Employees' Associations | |
| |
| |
| |
Political Organizations | |
| |
| |
| |
The Breakdown | |
| |
| |
| |
A Detailed Look at Section 501(c)(3) Status | |
| |
| |
| |
Definitions of Educational and Religious | |
| |
| |
| |
Organizational Test-The First Requirement | |
| |
| |
| |
Operational Test-The Second Requirement | |
| |
| |
| |
No Private Inurement-The Third Requirement | |
| |
| |
| |
Obtaining Tax-Exempt Status | |
| |
| |
| |
The Exemption Process-Preliminaries | |
| |
| |
| |
The Exemption Process-Completing and Filing Form 1023 | |
| |
| |
| |
Other Organizations-Form 1024 | |
| |
| |
| |
Approaching the Exemption Process | |
| |
| |
| |
State Exemption Requirements | |
| |
| |
| |
Private Inurement-The Prohibition | |
| |
| |
| |
Compensation | |
| |
| |
| |
Other Potential Instances of Prohibited Inurement | |
| |
| |
| |
Intermediate Sanctions | |
| |
| |
| |
Excess Benefit Transactions | |
| |
| |
| |
Disqualified Person-Basics | |
| |
| |
| |
Excise Taxes | |
| |
| |
| |
Abatement of Taxes | |
| |
| |
| |
Rebuttable Presumption | |
| |
| |
| |
Contemporaneous Substantiation | |
| |
| |
| |
Exceptions for Certain Income and Transactions | |
| |
| |
| |
Pulling It All Together-A Comprehensive Example | |
| |
| |
| |
Additional Punishment for Evildoers | |
| |
| |
| |
What Is Really Going On | |
| |
| |
| |
Compliance Procedures | |
| |
| |
| |
Comparables: Justifying Compensation | |
| |
| |
| |
IRS Direction to Agents Conducting Audits | |
| |
| |
| |
Private Foundations | |
| |
| |
| |
Public Charities versus Private Foundations-Workable Definitions | |
| |
| |
| |
Typical Private Foundation | |
| |
| |
| |
Reasons to Avoid Private Foundation Status | |
| |
| |
| |
Alternatives To Private Foundations | |
| |
| |
| |
Termination of Status | |
| |
| |
| |
Conclusions | |
| |
| |
| |
Political Activities | |
| |
| |
| |
Charitable Organizations | |
| |
| |
| |
Private Foundations | |
| |
| |
| |
Other Organizations | |
| |
| |
| |
Politics and the Internet | |
| |
| |
| |
Political Activity: The Other Regulatory Regime | |
| |
| |
| |
Lobbying | |
| |
| |
| |
Lobbying Defined | |
| |
| |
| |
Excluded Activities | |
| |
| |
| |
"Insubstantial" Level of Activity | |
| |
| |
| |
The Election under Section 501(h)-Eliminating Uncertainty | |
| |
| |
| |
Lobbying by Other Tax-Exempts | |
| |
| |
| |
UBIT-Not All Income Is Tax Exempt | |
| |
| |
| |
Organizations Subject to the Tax | |
| |
| |
| |
Reason for the Tax | |
| |
| |
| |
Tax Rate | |
| |
| |
| |
Triggering the Tax: The Three Critical Conditions | |
| |
| |
| |
Exceptions from Tax | |
| |
| |
| |
Some Common Types of Income | |
| |
| |
| |
Deductions in Computing Unrelated Business Taxable Income | |
| |
| |
| |
A Workable Approach to UBIT | |
| |
| |
| |
Reporting Requirements | |
| |
| |
| |
Information Returns-The Form 990 Series | |
| |
| |
| |
Other Reporting Requirements | |
| |
| |
| |
Reporting and Withholding for Gambling Activities | |
| |
| |
| |
Reporting Requirements | |
| |
| |
| |
Withholding Requirements | |
| |
| |
| |
Backup Withholding Requirements | |
| |
| |
| |
Protecting the Organization in the Case of Noncash Payments | |
| |
| |
| |
Excise Taxes Triggered by Wagering | |
| |
| |
| |
Terrorism and the Nonprofit Sector | |
| |
| |
| |
Tax Aspects of Charitable Giving | |
| |
| |
| |
Deduction Basics | |
| |
| |
| |
Overview | |
| |
| |
| |
The Deduction's Value | |
| |
| |
| |
Qualified Organizations | |
| |
| |
| |
Charitable Class-Disaster Relief | |
| |
| |
| |
Payments for Services | |
| |
| |
| |
Quid Pro Quo Contributions | |
| |
| |
| |
When to Claim a Deduction-Timing | |
| |
| |
| |
Amount of the Deduction | |
| |
| |
| |
Bargain Sales to Charities | |
| |
| |
| |
Contributions of Encumbered Property | |
| |
| |
| |
Limits on Individual Contributions | |
| |
| |
| |
Carryforwards | |
| |
| |
| |
Guidelines for Working with the Reduction and Limitation Rules | |
| |
| |
| |
Limits on Corporate Charitable Contribution Deductions | |
| |
| |
| |
Volunteers | |
| |
| |
| |
Concluding Thoughts | |
| |
| |
| |
Disclosures and Notices by Charities | |
| |
| |
| |
Quid Pro Quo Contributions | |
| |
| |
| |
Substantiation Requirements | |
| |
| |
| |
The Board's Role | |
| |
| |
| |
Substantiation by the Donor and Appraisals | |
| |
| |
| |
Appraisals | |
| |
| |
| |
Special Rule for Automobiles, Boats, and Airplanes | |
| |
| |
| |
Planned Giving | |
| |
| |
| |
Pooled Income Funds | |
| |
| |
| |
Charitable Remainder Trusts | |
| |
| |
| |
Charitable Lead Trusts | |
| |
| |
| |
Charitable Gift Annuities | |
| |
| |
| |
Other Partial Interests in Property | |
| |
| |
| |
New Devices Are Proposed All the Time | |
| |
| |
| |
Other Benefits | |
| |
| |
| |
Property Taxes | |
| |
| |
| |
Three Cases | |
| |
| |
| |
PILOTs | |
| |
| |
| |
Checklist | |
| |
| |
| |
Sales Taxes-Purchases by Nonprofits | |
| |
| |
| |
Sales Taxes-Sales by Nonprofits | |
| |
| |
| |
Postal Nonprofit Standard Mailing Rate | |
| |
| |
| |
Basic Rules | |
| |
| |
| |
Comprehensive Example | |
| |
| |
| |
Applying for Favorable Rates | |
| |
| |
| |
Practical Issue | |
| |
| |
| |
Securities Offerings | |
| |
| |
| |
Tax-Exempt Financing | |
| |
| |
| |
Grants | |
| |
| |
| |
"Do Not Call" Registry and Other FTC Limitations | |
| |
| |
| |
Two Rules | |
| |
| |
| |
Additional Rules Applicable to Telephone Solicitations | |
| |
| |
| |
State-Level Rules | |
| |
| |
| |
Federal Funding for Faith-Based Organizations | |
| |
| |
| |
Vendor Programs | |
| |
| |
| |
Conclusions | |
| |
| |
| |
Registration and Reporting by Charitable Organizations | |
| |
| |
| |
Registration: The Basics | |
| |
| |
| |
Registration Is Constitutional | |
| |
| |
| |
Easing the Burden | |
| |
| |
| |
Discovering Failures to Register | |
| |
| |
| |
Annual Financial Reports | |
| |
| |
| |
The Internet Raises Difficult Questions | |
| |
| |
| |
Professional Fundraisers Generally must Register | |
| |
| |
| |
Using a Charity's name | |
| |
| |
| |
Some Concluding Thoughts | |
| |
| |
| |
Lobbying | |
| |
| |
| |
Lobbying Disclosure Act of 1995 | |
| |
| |
| |
Compliance with State Law | |
| |
| |
| |
Registration Provides Useful Information | |
| |
| |
| |
Fundraising, Pledges, Gift Policies, and Restricted Gifts | |
| |
| |
| |
Truth in Solicitation | |
| |
| |
| |
Fundraising and Mission | |
| |
| |
| |
Pledges | |
| |
| |
| |
Enforceability of Pledges | |
| |
| |
| |
High-Pressure Tactics | |
| |
| |
| |
Pledges Can Serve Useful Functions for Donors | |
| |
| |
| |
Financial Statement Treatment | |
| |
| |
| |
Restricted Gifts | |
| |
| |
| |
Examples | |
| |
| |
| |
Legal Action | |
| |
| |
| |
Restrictions, Contracts, and Taxes: Does Good Planning Create Tax Issues? | |
| |
| |
| |
Loans, Pledges, and Sales | |
| |
| |
| |
Donor-Restricted Endowments | |
| |
| |
| |
UMIFA Basics | |
| |
| |
| |
Donor Restrictions | |
| |
| |
| |
Accounting for Endowments | |
| |
| |
| |
Changed Circumstances-Cy Pres and Equitable Deviation | |
| |
| |
| |
Gift-Acceptance Policies | |
| |
| |
| |
Types of Assets | |
| |
| |
| |
Specific Forms | |
| |
| |
| |
Donor Benefits | |
| |
| |
| |
Gift-Acceptance Committee | |
| |
| |
| |
Bingo and Raffles | |
| |
| |
| |
Federal Grants | |
| |
| |
| |
Types of Federal Grants | |
| |
| |
| |
OMB Circulars | |
| |
| |
| |
Federal False Claims Act | |
| |
| |
| |
State and Local Grants | |
| |
| |
| |
Fundraising through the Internet | |
| |
| |
| |
Avoiding Operational Liabilities | |
| |
| |
| |
Avoiding Operational Liabilities from the Interaction of Core Activities with Organizational Culture | |
| |
| |
| |
Nature Conservancy | |
| |
| |
| |
Opportunities Industrialization Center of Greater Milwaukee | |
| |
| |
| |
Avoiding Operational Liabilities through Record Retention Policies | |
| |
| |
| |
Basics | |
| |
| |
| |
The Policy | |
| |
| |
| |
The Judicial Perspective on Document Destruction Policies | |
| |
| |
| |
Destruction in the Face of Existing, Imminent, or Foreseeable Litigation or Investigations | |
| |
| |
| |
Digital Documents | |
| |
| |
| |
Copies | |
| |
| |
| |
E-Mail | |
| |
| |
| |
Other Issues | |
| |
| |
| |
Criminal Acts | |
| |
| |
| |
Assessing a Document's Value | |
| |
| |
| |
Legally Mandated Minimums | |
| |
| |
| |
Retention Period Resources | |
| |
| |
| |
FACTA-Method of Destroying "Consumer" (Employee and Job Candidate) Information | |
| |
| |
| |
Conclusions | |
| |
| |
| |
Avoiding Operational Liabilities from Employment Practices | |
| |
| |
| |
Employment at Will | |
| |
| |
| |
Federal Antidiscrimination Statutes | |
| |
| |
| |
Fair Labor Standards Act | |
| |
| |
| |
Family and Medical Leave Act | |
| |
| |
| |
Americans with Disabilities Act | |
| |
| |
| |
Avoiding Problems-Cases | |
| |
| |
| |
Uniformed Services Employment and Reemployment Rights Act of 1994 | |
| |
| |
| |
Other Laws to Consider | |
| |
| |
| |
Preventive Measures | |
| |
| |
| |
EPL and Director Liability | |
| |
| |
| |
Avoiding Operational Liabilities from Volunteer Service | |
| |
| |
| |
Avoiding Operational Liabilities from Service to Children | |
| |
| |
| |
Basic Steps | |
| |
| |
| |
Employee and Volunteer Screening | |
| |
| |
| |
Avoiding Operational Liabilities in the Work Environment | |
| |
| |
| |
Avoiding Operational Liabilities from Restraints on Trade-Antitrust | |
| |
| |
| |
Overview | |
| |
| |
| |
Unreasonable Restraints of Trade: The Sherman Act | |
| |
| |
| |
Other Restraints-Do Not Be Misled by Lists | |
| |
| |
| |
Price Discrimination-The Robinson-Patman Act | |
| |
| |
| |
Anticompetitive Mergers-The Clayton Act | |
| |
| |
| |
Trade Associations and Restraints on Trade | |
| |
| |
| |
Permitted Restraints-Covenants Not to Compete | |
| |
| |
| |
Avoiding Operational Liabilities Arising from Events | |
| |
| |
| |
Security | |
| |
| |
| |
Food Sales | |
| |
| |
| |
Liquor and Dram Shop Laws | |
| |
| |
| |
Fun Runs, Marathons, Carnivals, and Other Events | |
| |
| |
| |
Celebrities and Musicians | |
| |
| |
| |
ASCAP, BMI, and SESAC Licensing | |
| |
| |
| |
Summary | |
| |
| |
| |
Avoiding Operational Liabilities from Conference Hotels and Rented Facilities | |
| |
| |
| |
A Lesson from the Federal Sentencing Guidelines | |
| |
| |
| |
Risk Shifting, Indemnification, and Insurance | |
| |
| |
| |
Relationship between Indemnification and D & O Insurance | |
| |
| |
| |
Indemnification | |
| |
| |
| |
Indemnification-Legal Issues | |
| |
| |
| |
Indemnification-Questions to Ask | |
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| |
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The Problem Posed by Losses | |
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D & O Insurance | |
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Cost and Availability | |
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Basic Considerations When Evaluating a D & O Policy | |
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A-Side, B-Side, and C-Side Policies | |
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Time Frame-Two Basic Approaches | |
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Noteworthy Clauses | |
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Insurers | |
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Tax Considerations Arising from Indemnification and D & O Insurance | |
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Effect on Availability of Volunteer Protection Act Coverage | |
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Conclusions | |
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Identifying and Shifting Organizational Risks | |
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Risk Management | |
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Insurance Policies in General | |
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Available Coverage | |
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Special Coverages | |
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Evaluating Your Organization | |
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The Self-Assessment Survey | |
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Survey-Organizational Structure | |
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Survey-Directors | |
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Survey-Financial Oversight | |
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Survey-Financial Controls | |
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Survey-Internal Controls (Other Than Financial Controls) | |
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Survey-Tax Considerations | |
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Survey-Fundraising | |
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Survey-Registration, Reporting, and Disclosure | |
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Survey-Employment Practices, Volunteers, and Antitrust | |
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Survey-Risk Management | |
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Using Metrics to Evaluate Your Organization | |
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Four Basic Ratios | |
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Applying the System-Case 1 | |
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Applying the System-Case 2 | |
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Concluding Thoughts on Ratios | |
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Independent Review Standards | |
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BBB Wise Giving Alliance | |
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Maryland Association of Nonprofit Organizations' Standards Project | |
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Charity Navigator | |
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Conclusion | |
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Grantor Review Standards | |
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The Combined Federal Campaign | |
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United Way | |
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A Final Thought | |
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Index | |