Desktop Guide for Nonprofit Directors, Officers, and Advisors Avoiding Trouble While Doing Good

ISBN-10: 047176812X

ISBN-13: 9780471768128

Edition: 2006

Authors: Jack B. Siegel

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How to keep any nonprofit out of trouble, running smoothly, and accomplishing its mission "Jack Siegel-lawyer, accountant, management consultant, and computer whiz-takes the putative director or officer of a nonprofit organization on a useful and often entertaining voyage throughout the realm of the tax-exempt organizations universe, pointing out its quirks, foibles, and legal liabilities along the way. His handbook will make mandatory-and arresting-reading for those who are already serving as trustees, directors, officers, and key employees of exempt organizations, particularly charitable ones. Siegela??s goal, in which he succeeds, is to help directors and officers of nonprofit organizations a??make better decisions.a?? The book is full of large policy analyses and paragraphs on the details, such as board size, board committees, board meeting formats, the contents of minutes, and the duties of officers.Salted with some excellent real-life examples, what also sets this book apart from most in its genre is the tone: the writing style, the brusqueness, the bluntness. He complains that too many directors a??check their good judgment at the boardroom door.a?? He advises individuals who a??desire agreement and demand adulationa?? to stay off boards; he insists on a??commitmenta?? and a??institutional tensiona?? with the executive director. He warns prospective directors that some organizations want, in addition to time and judgment, a??either your money or your ability to raise money.a?? To my delight, he extols the virtues of a??some level of expendituresa?? for qualified lawyers and accountants.Please join me in adding this most helpful handbook to your nonprofit library." -Bruce R. Hopkins, Attorney at Law, author of The Law of Tax-Exempt Organizations, Eighth Edition and Starting and Managing a Nonprofit Organization: A Legal Guide, Fourth Edition
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Book details

Copyright year: 2006
Publisher: John Wiley & Sons, Incorporated
Publication date: 4/28/2006
Binding: Hardcover
Pages: 744
Size: 7.32" wide x 10.47" long x 1.70" tall
Weight: 3.432
Language: English

Setting the Stage: Some Preliminaries
The Need for Action
Part of the Bigger Scheme
Generality of Coverage
Using Qualified Professionals
Before Starting a New Organization
Start by Looking for an Existing Charity
Consider Partnering Opportunities
Identify Funders
Retain a Qualified Attorney
Advice to the Wealthy
Concluding the Preliminaries
Before Signing On
"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
Organizational Basics
Nonprofit versus Tax-Exempt Status
The Corporate Form Is the Prevalent One
The Players
The Board of Directors
The Officers
The Regulators-State Attorneys General
Organizational Documents
Using Forms
Core Documents
Statutory Default Provisions
Director Review
More than Boilerplate
A Recommended Meeting Format
Meeting Minutes
Executive Sessions
The Internet and Meetings
Major Events
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
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
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
Political Activities
Charitable Organizations
Private Foundations
Other Organizations
Politics and the Internet
Political Activity: The Other Regulatory Regime
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
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
Guidelines for Working with the Reduction and Limitation Rules
Limits on Corporate Charitable Contribution Deductions
Concluding Thoughts
Disclosures and Notices by Charities
Quid Pro Quo Contributions
Substantiation Requirements
The Board's Role
Substantiation by the Donor and 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
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
"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
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 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
Enforceability of Pledges
High-Pressure Tactics
Pledges Can Serve Useful Functions for Donors
Financial Statement Treatment
Restricted Gifts
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
The Policy
The Judicial Perspective on Document Destruction Policies
Destruction in the Face of Existing, Imminent, or Foreseeable Litigation or Investigations
Digital Documents
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
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
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
Food Sales
Liquor and Dram Shop Laws
Fun Runs, Marathons, Carnivals, and Other Events
Celebrities and Musicians
ASCAP, BMI, and SESAC Licensing
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-Legal Issues
Indemnification-Questions to Ask
The Problem Posed by Losses
D & O Insurance
Cost and Availability
Basic Considerations When Evaluating a D & O Policy
A-Side, B-Side, and C-Side Policies
Time Frame-Two Basic Approaches
Noteworthy Clauses
Tax Considerations Arising from Indemnification and D & O Insurance
Effect on Availability of Volunteer Protection Act Coverage
Identifying and Shifting Organizational Risks
Risk Management
Insurance Policies in General
Available Coverage
Special Coverages
Evaluating Your Organization
The Self-Assessment Survey
Survey-Organizational Structure
Survey-Financial Oversight
Survey-Financial Controls
Survey-Internal Controls (Other Than Financial Controls)
Survey-Tax Considerations
Survey-Registration, Reporting, and Disclosure
Survey-Employment Practices, Volunteers, and Antitrust
Survey-Risk Management
Using Metrics to Evaluate Your Organization
Four Basic Ratios
Applying the System-Case 1
Applying the System-Case 2
Concluding Thoughts on Ratios
Independent Review Standards
BBB Wise Giving Alliance
Maryland Association of Nonprofit Organizations' Standards Project
Charity Navigator
Grantor Review Standards
The Combined Federal Campaign
United Way
A Final Thought
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*A minimum purchase of $35 is required. Shipping is provided via FedEx SmartPost® and FedEx Express Saver®. Average delivery time is 1 – 5 business days, but is not guaranteed in that timeframe. Also allow 1 - 2 days for processing. Free shipping is eligible only in the continental United States and excludes Hawaii, Alaska and Puerto Rico. FedEx service marks used by permission."Marketplace" orders are not eligible for free or discounted shipping.

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