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Rethinking Your 990: It’s a Marketing Tool, Too!

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For many nonprofit organizations, January is the season for closing your books, preparing your financial annual report, generating W2 and 1099 Forms, and preparing all the information you’ll need to complete your Form 990 Tax Filing. It’s all about presenting the numbers to the IRS, right?

Wrong. Your 990 filing tells a story – and lots more folks are reading it than you may realize.

Did you know that your 990 tax filing is immediately posted online for everyone to see once you file it with the IRS? Did you know that you are legally required to provide it to any member of the public who may ask for it and you cannot ask why? Did you know that it has become standard protocol for foundation and corporate donors, government contractors, prospective board members, and financial institutions to view your 990 before investing in or partnering with your organization?

In their article, “Telling the Not-for-Profit Story Through Form 990,”  Marian Butler, CPA, Ph.D. and Brian Butler, identify four (yes, 4!) sections of the 990 and 990EZ that allow nonprofits to write narratives to better convey the value and importance of their mission and programs. Unfortunately, most of the CPAs who prepare the tax forms are not well versed in their clients missions and programs and many will simply copy a few lines of text from a website or re-enter language that has been used in your organization’s filings for years and is no longer relevant or accurate.

Remember, it is a best management practice that all nonprofit board members review and approve their organization’s tax filing prior to finalizing and submitting it to the IRS. When reviewing this year’s tax forms, read the narrative sections carefully and, if necessary, provide your CPA with more accurate or compelling language that will resonate with a wider audience. (And, if the language in the form is outdated and was taken from your website, make sure to update the website, too!) If possible, ask a marketing professional to assist you in crafting the narratives and never miss another opportunity to educate your community on the importance of the work you do!

For more tips on how to better market your organization through your Form 990 tax filing, read the full article here. 

NOTE: Only the 990 EZ and 990 include the narrative sections. If your nonprofit generates less than $50,000 in revenue per year, you will use the 990N. However, you have an opportunity to tell a story with your tax filing, too. Your 990N will automatically be uploaded to guidestar.org and you may logon to the website and post narrative information that enhances the limited information included in your abbreviated tax filing. Contact Spokes if you have questions on how to update your guidestar.org profile.

 

Help for Best Hiring (and Firing) Practices

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PICMaybe it’s evidence that our economy is really improving and our organizations have more resources to make long-overdue budget and program to expansions? Or, maybe, as our society ages, more longtime volunteers and donors are making the “ultimate gifts” through generous bequests in support of critical operating needs? Or, maybe, volunteer and employee turnover continues to reoccur and has us looking for solutions to end the cycle that plagues our organizations? Whichever the reason, Spokes has received a rash of recent inquiries and requests for assistance in hiring new employees (especially executive leaders), staff restructuring and mergers. In response to these inquiries, we’re pleased to offer a few quick resources and announce the launch of our new Executive Search Services!

Hiring a new employee can elevate your entire organization when you hire the “right” person. Likewise, it can be downright treacherous and cause lots of expensive and collateral damage for the organization and other staff when you hire the “wrong” person. “Background Checks Vary but Need to Be Robust and Fair” by Eden Stiffman, an article recently published by the Chronicle of Philanthropy, offers some practical considerations for researching a candidate before making an offer. Suggestions include using a third-party to conduct a verified background check and establishing a formal policy regarding if/how social media will be reviewed as part of your candidate evaluation. Read the full article here.

NOTE: If your organization would like to conduct background checks on candidates, remember that the California Association of Nonprofits has discounted services available to its members. Your insurance provider may also have cost-effective options for you. And, if you have a payroll services contractor like Paychex, you may have access to employee screening services through your payroll processor. Remember to budget these checks into your search and hiring costs as they can be expensive.

Often, hiring a new employee is proceeded by the unfortunate reality of dismissing another one. The best practices for dismissing an employee due to reorganization are different from the best practices of dismissing an employee for performance-related issues. Read the Chronicle of Philanthropy’s article, “Advice: How to Know if it’s Time to Fire an Employee” by Pratichi Shaw, to learn what steps are best to take for your specific situation. And, the Chronicle’s article “Terminating an Employee: Handling the Aftermath in Your Organization” also by Shaw offers additional advice to help guide your organization through the after-affects of any employee changes.

Looking for a little more hands-on help? Spokes may have just what you’re looking for! We’ve recently finalized and launched our NEW Executive Director Search Services to assist you in finding your organization’s next great leader. We offer a full suite of services from soliciting and evaluating candidate applications to facilitating your interview and decision-making processes. Services can be provided “a la carte” or comprehensively, based on your organization’s unique needs. For more information, please complete our online consulting inquiry form or call our offices at 805-547-2244.

Nonprofit Cost Saving Strategies: Reimbursing vs. State Unemployment Insurance Taxes

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Do you have former employees collecting unemployment benefits?  Does your nonprofit employ more than 20 employees (or at least 10)?  If so, you may be missing an opportunity to save some significant costs for your nonprofit.

In 1972, the Federal Government enacted legislation granting 501(c)(3) Nonprofit employers the right to self-fund for unemployment, rather than pay State Unemployment Insurance (SUI) taxes. Today, thousands of Nonprofits across the country utilize this little known tax break and save millions of dollars on their unemployment expenses.

Here’s how it works – rather than pay SUI taxes that cover all of their employees in case they become unemployed, Nonprofits that self-fund are only responsible for the actual benefits that their former employees collect. This self-funding strategy is also known as “Reimbursing,” and typically saves Nonprofit employers about 50% a year on their unemployment expenses.

Although understandably appealing to for-profit employers, this right to choose which unemployment option they use (SUI tax paying vs. Self-funding) is only available to 501(c)(3) Nonprofit employers.  Read more here to learn more about Self-funding and determine if it’s a potential cost-saving solution for your organization.

Remember: Embezzlers Don’t Want You To Know What They Are Doing

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Click to download this 5-page Accounting Controls Checklist

Far too often, nonprofit board members assume that their organization’s finances are safe because large sums of money haven’t gone missing.  What they don’t know is that embezzlers rarely steal large sums of money.  They don’t want anyone to know that they are stealing money so they do their best to stay “under the radar” in their illegal behavior.  In fact, most embezzlement occurs in increments of $100 – $300 and are recorded as payments to fake vendors.  Sometimes, the embezzlers even create fake invoices to justify the fake payments, further deluding board members who try to track funds carefully.

And, did you know that there is actually a group of criminals who prey on athletic clubs and programs?  Many of these entirely volunteer-run organizations have minimal accounting controls making it easy to manipulate financial data and steal funds.  In fact, just last month, another athletic program fell victim to an individual who stole up to $700,000 from their organization and a local business, both located in Paso Robles, CA. Read the story below.

Protect your organization – and your own liability as a board member – by ensuring that your organization is using proper accounting controls.  Following is a list of several recommended controls any organization can implement to help prevent financial misappropriation.  Employ as many as you can, check references and backgrounds on bookkeepers (volunteer, contracted and salaried) and remain diligent in monitoring your organization’s financial reports and accounts. If you need more assistance in protecting your organization, know that Spokes is always here to help!

Bookkeeper suspected of embezzling from Paso Robles business

By Matt Fountain

[email protected]

March 23, 2015

A Paso Robles bookkeeper was arrested last week on suspicion of embezzling at least $700,000 from a local manufacturing business over a period of six years and possibly embezzling money from the North County youth sports nonprofit where she was treasurer for about seven years.

Police say they are still investigating whether the nonprofit suffered any losses.

Denna Carol Serda, 56, was arrested following an investigation that included a Feb. 5 search of her Paso Robles home and a subsequent review of her personal bank accounts, according to Paso Robles police Sgt. Tod Rehner.

As a result of their investigation, detectives secured an arrest warrant for Serda, who turned herself in to the Paso Robles Police Department on Friday.

She was booked into San Luis Obispo County Jail on Friday on suspicion of felony grand theft exceeding $950 as well as forgery, and the San Luis Obispo County District Attorney’s Office is considering filing additional criminal enhancements for taking property exceeding $50,000, aggravated white-collar crime exceeding $100,000 and the denial of probation for a crime exceeding $100,000.

Rehner would not identify the nonprofit or the private company Monday, but The Tribune has learned they are Make-It Manufacturing of Paso Robles and the Paso Robles Youth Sports Council. Serda is no longer with either entity.

The Police Department said in a news release that Serda is suspected of embezzling more than $700,000 from her for-profit employer between 2008 and 2014. Officers believe Serda also forged more than 450 financial documents in order to embezzle those funds.

Detectives are compiling additional financial documents from the Paso Robles Youth Sports Council; that investigation remained ongoing Monday afternoon.

Greg Powell, president of Make-It Manufacturing, confirmed Monday that Serda was hired as his company’s bookkeeper in 2008.

Powell said he was served with a summons by the Internal Revenue Service, which stated that Serda and her husband, Steven Serda, were being audited for suspicious income. When he met with auditors, Powell said, he was presented with a document on his company’s letterhead approving an employee loan to Denna Serda with his signature at the bottom, which he said was forged.

Before hiring her, Powell said, he knew Serda for years through family and friends, as well as through local youth sports.

He said that he brought the matter to his insurance agent, who is also involved in the Paso Robles Youth Sports Council, for which Serda was treasurer.

“He literally went white,” Powell said. They then contacted police, he said.

Marc Dart, current president of the sports council, said Monday that Serda was one of the founding organizers of the 501(3)(c) and served as its treasurer from 2007 until January 2015.

The nonprofit consists of representatives from local sports organizations, elected board members and liaisons from the city and the Paso Robles Joint Unified School District to advise and petition the city and school district on matters related to youth sports.

Serda’s husband previously served as the sports council’s president beginning in 2006.

Dart confirmed that the organization’s board became aware of concerns about Serda from her employer and asked to discuss it with her. She came in accompanied by her husband, Dart said, and both promptly resigned in January.

Dart added that the organization has gathered financial records and is cooperating with detectives and the District Attorney’s Office.

According to court records, Denna Serda was convicted in 2003 in San Luis Obispo Superior Court for grand theft of more than $400 in property. She served 30 days in County Jail and three years of formal probation and was ordered to pay about $720 in restitution and $700 in other fines.

She remained in County Jail on Monday evening in lieu of $1.2 million bail.

All public phone numbers listed for Steven Serda in Paso Robles were disconnected as of Monday afternoon.

Assistant District Attorney Lee Cunningham said Monday that prosecutors had not yet filed charges against Denna Serda; Cunningham was not able to comment on the possibility of criminal charges against her husband.

Online Giving: An Opportunity & Legal Pitfall

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What do Blackbaud’s 2013 Charitable Giving Report, the 2013 Millennial Impact Report and the 2013 eNonprofits Benchmark Study have in common? More and more donors are donating online. All three reports announced double-digit increases in the percentage of online gifts received in 2013 over 2012. The Boston Marathon bombings, Midwest storms, Philippines’ typhoon disaster and #GivingTuesday are cited as key drivers in increased online giving, however, the trend also reflects a cultural shift in philanthropic values and donor engagement. Having a “Donate Now” button on your nonprofit’s website has become a requirement for any nonprofit that wishes to grow its donor support.

But, online donations present a unique legal challenge for nonprofits. Every nonprofit must register in any state where it conducts fundraising activities. So what does an organization do when faced with the prospect of online giving and soliciting gifts nationally – or worldwide? Do you register your organization in all 50 states?

In response to these questions and as an effort to minimize charitable solicitation fraud through the internet, a group of attorneys and state charity officials convened as The National Association of State Charity Officials (NASCO) and defined a set of guidelines for internet fundraising known as The Charleston Principles (visit www.afpnet.org for details).  The following is a summary of the principles to help determine when and where your organization needs to register:

  • Every nonprofit must register in the state identified in its principal place of business address. If you are hosting fundraising or educational events where donations are accepted or soliciting local volunteers and donors, your non-Internet activities alone require registration in your home (“domicile”) state.
  • Every nonprofit using an interactive website (“Donate Now!” button) should register, at minimum, in its home state with the assumption that most of the online gifts received will come from your surrounding proximity.
  • If your organization specifically targets persons physically located outside of your home state – either by email or website – it must register within that targeted state. Clarification: If your organization receives a handful of donations from donors located outside of your state, there is no need to register in the donors’ states. If, however, your organization later sends an email  appeal requesting a second donation from one of those donors located outside of your state then  your organization is targeting persons physically located outside of your home state and would be required to register with the donor’s state.
  • If your organization receives online contributions from persons located outside of your home state on a repeated, ongoing basis or of a substantial amount, it should be registered within those states where the online donors are located. Clarification:  As an example, if a donor from Nevada makes a $50,000 online donation to your California-based organization (a gift that represents 25% of your total annual funds received), such gift would be considered “substantial” by the Internal Revenue Service and require your organization to register with the state of Nevada.

Keep your nonprofit current with these 5 online giving trends.

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