| |
| |
| |
| Setting the Stage: Some Preliminaries | |
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| The Need for Action | |
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| |
| Part of the Bigger Scheme | |
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| Assumption | |
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| |
| Generality of Coverage | |
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| |
| Using Qualified Professionals | |
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| |
| |
| Before Starting a New Organization | |
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| |
| |
| Start by Looking for an Existing Charity | |
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| Consider Partnering Opportunities | |
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| Identify Funders | |
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| |
| Retain a Qualified Attorney | |
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| Advice to the Wealthy | |
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| Concluding the Preliminaries | |
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| Before Signing On | |
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| "Give, Get, or Get Off" | |
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| |
| Ask Questions | |
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| |
| Review Materials | |
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| |
| Meet with the Executive Director and Other Officers | |
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| |
| Review Other Resources | |
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| Step Aside if the Information Is Not Forthcoming | |
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| |
| Your Role | |
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| |
| Organizational Basics | |
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| |
| Nonprofit versus Tax-Exempt Status | |
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| |
| The Corporate Form Is the Prevalent One | |
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| |
| |
| The Players | |
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| |
| The Board of Directors | |
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| The Officers | |
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| Members | |
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| The Regulators-State Attorneys General | |
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| Standing | |
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| |
| Organizational Documents | |
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| |
| |
| Using Forms | |
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| Core Documents | |
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| |
| |
| Statutory Default Provisions | |
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| Amendments | |
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| |
| Director Review | |
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| |
| |
| More than Boilerplate | |
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| |
| Meetings | |
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| |
| A Recommended Meeting Format | |
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| |
| Meeting Minutes | |
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| |
| |
| Executive Sessions | |
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| |
| 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 | |
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| |
| A Well-Known Case | |
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| |
| Director Duties and Responsibilities | |
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| |
| The Duty of Care | |
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| The Duty of Loyalty | |
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| The Duty of Obedience | |
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| |
| Standards for Judging Behavior | |
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| |
| Business Judgment or Ordinary Prudence | |
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| |
| Other Statutory Duties That Can Lead to Liability | |
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| |
| |
| Liability Arising from Joint Ventures and Subsidiaries | |
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| |
| |
| The Standards as Applied to Common Decisions | |
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| |
| Exercising Due Care-Compensation | |
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| |
| Exercising Due Diligence-Investments | |
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| |
| |
| Avoiding Conflicts of Interest-Selling Assets | |
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| |
| |
| Resisting Founder's Syndrome-Diversification | |
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| |
| |
| Director Rights | |
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| |
| |
| A Further Look at Investment Decisions | |
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| |
| |
| What the Process Is Not | |
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| |
| |
| Reserves or Endowment? | |
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| |
| |
| Investing Endowment-The Standard | |
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| |
| |
| Translating Legal Standards into Actual Conduct | |
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| |
| |
| Corporate Trustees and Charitable Beneficiaries | |
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| |
| |
| Another Look at Conflicts of Interest | |
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| |
| |
| Need for a Conflict-of-Interest Policy | |
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| |
| |
| Loans to Directors and Officers | |
| |
| |
| |
| Moving from a Volunteer Director to a Paid Employee | |
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| |
| |
| Relief for Directors and Officers | |
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| |
| |
| State Relief | |
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| |
| |
| 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 | |
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| |
| |
| Statement of Financial Position | |
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| |
| |
| Statement of Activities | |
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| |
| |
| Statement of Cash Flows | |
| |
| |
| |
| Guidance for the Bookkeeper | |
| |
| |
| |
| Ratio Analysis | |
| |
| |
| |
| Seven Basic Ratios | |
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| |
| |
| 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 | |
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| Liquor and Dram Shop Laws | |
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| Fun Runs, Marathons, Carnivals, and Other Events | |
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| Celebrities and Musicians | |
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| ASCAP, BMI, and SESAC Licensing | |
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| Summary | |
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| Avoiding Operational Liabilities from Conference Hotels and Rented Facilities | |
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| A Lesson from the Federal Sentencing Guidelines | |
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| Risk Shifting, Indemnification, and Insurance | |
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| Relationship between Indemnification and D & O Insurance | |
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| Indemnification | |
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| Indemnification-Legal Issues | |
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| Indemnification-Questions to Ask | |
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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 | |