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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.

Keep Your Nonprofit Current with Online Giving Trends

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Here are some quick tips to help your nonprofit stay current with online giving trends and maintain legal compliance:

  1. First, good news! Most local nonprofits are already registered with the California State Attorney General. And, unless you are receiving very large donations or many smaller, passive donations from donors outside of California, no further filing is required. If you start to email those smaller donors for new donations, or if the amounts of the donations increase, you will need to file in other states.
  2. Consider filing the Uniform Registration Statement which, can be found at www.multistatefiling.org. Note, the form only applies to 31 jurisdictions; please review the form carefully to determine if additional filings are needed in the states where your donors are located.
  3. New York, New Jersey, Pennsylvania and Florida have very strict filing requirements for online solicitations and the use of “Donate Now” website buttons. Because these states have large populations, if you’re conducting an extensive national online fundraising campaign, you can minimize legal risk by directly filing in each of those states. Likewise, you can also choose to have a statement on your website stating that your organization is unable to accept donations from donors located in New York, New Jersey, Pennsylvania and Florida.
  4. When in doubt of whether or not to file, simply call the state’s charity regulatory offices. The staff at regulatory agencies are usually very helpful and responsive.
  5. If you’re just not sure where to start, remember that Spokes is always here to help! Call us at 805-547-2244 or email us.

Nonprofit Tax Filing Requirements

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Most of you will already be familiar with the time frame for filing your organization’s non-profit returns with the IRS and the Franchise Tax Board.  These forms must be filed no later than the 15th day of the fifth month after the fiscal year end.  For example, if your entity’s fiscal year ends on December 31st, your filing is due on May 15th.  The filing requirements have changed over the past few years, and the filing requirements are different for the IRS than they are for the Franchise Tax Board.  For 2012, the filing requirements are as follows:

IRS Requirements

Form to File
If your gross receipts are:
990-N 
Normally equal to or less than $50,000
990-EZ
Normally less than $200,000 and total assets are less than $500,000
990
Equal to or more than $200,000 or more and total assets are equal to or more than $500,000

FTB Requirements

Form to File
If your gross receipts are:
199-N
Normally equal to or less than $25,000
199
Normally greater than $25,000

All non-profit organizations must file one of the above returns.  If you qualify to file forms 990-N and 199-N, these are postcard filings that can be done very easily online.  If you need more information you can check the IRS or Franchise Tax Board websites, or contact your tax preparer.

Speak and Be Spoke(n)!

So, tell us!  Do you have any lessons learned to share with your fellow nonprofits regarding tax filing requirements?

Nonprofit Property Tax Filing Requirements

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It’s never too early to start planning for the next tax season. Why? California law will prescribe a yearly tax on your organization based on property as it exists at 12:01 a.m. on January 1st.  All entities, unless granted an exemption by the County Assessor’s Office, are required to file the annual property tax form “Form 571-L Business Property Statement” with the County Assessor’s Office.  This form is due every year on April 1st but is still considered to be timely filed if sent by May 7.  On the Form 571-L, entities are required to declare all business property owned as of January 1.  Examples of business property include supplies, equipment, buildings, building improvements, etc.

Nonprofits are required to file the Form 571-L until the Assessor’s Office has specifically granted them an exemption.  In order to qualify for an exemption from the Assessor’s Office, the entity must submit the appropriate documents to the assessor’s office (i.e. exemption claim form, articles of incorporation, tax letter designating the organization’s non-profit status, etc).  This is a one-time process to be granted with the exemption.

Once the assessor determines that the nonprofit organization is a qualifying religious, church and/or welfare organization and is eligible for an exemption, there is a simplified annual filing process in which the entity will be assessed with a zero tax bill.  The annual filing due date for this type of filing is February 15th. If you have any questions you can call the Transfer Exemption department of the Assessor’s office at (805) 781-5643.

Speak and Be Spoke(n)!

So, tell us!  Do you have any tips to share with your fellow nonprofits regarding how to file for property tax requirements?

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