Board training

HR tips for charities

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Image courtesy of DollarPhotoClub.com

Unless there is a religious exemption in an area of employment law, religious charities are required to follow all the rules and regulations that apply to businesses.

3/8 – CPA Practice Advisor – 6 HR Must-Knows for Small Businesses in 2016 – These “must-knows” apply to churches and parachurch ministries just as much as small businesses. If you’re not familiar with these issues, your organization could trip over the rules and create big problems.

The issues described in the article and my brief comment:

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Jim Ulvog

“4 Tips to Prevent Fraud at Faith-Based Organizations”…

Photo courtesy of DollarPhotoClub.com
Photo courtesy of DollarPhotoClub.com

… is the title of a great article by James B. Jordan to help churches and other faith-based charities protect their contributions from theft and protect volunteers from temptation.

Setting up internal controls is difficult in small organizations, even more so for local churches. The place churches routinely have the most difficulty is keeping control over contributions between the time gifts go into the collection plate until a deposit is ready for the bank.

Mr. Jordan’s tips:

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Jim Ulvog

What to do if your charity gets a subpoena or is drawn into an official investigation

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Image courtesy of DollarPhotoClub.com

If you receive a subpoena from some regulator or police agency asking for documents, it is imperative you process documents properly. Goofing up could cause serious problems, even if you aren’t the actual target of the investigation. If you are the target and you mess up, things could get really bad, really fast.

The law firm of Gammon & Grange provides some ideas on how to work through the serious issues without getting your organization in trouble:  When the Knock at Your Nonprofit Door is Not Some Pizza, but Subpoena.

There are many places in the audit rules where the guidance says something like consider consulting with legal counsel before taking the next step.

If you ever receive a subpoena, that would be an incredibly wonderful time to consult with legal counsel. Get your attorney on the phone. Immediately.

Jim Ulvog

A few of the ways charities can create a requirement for reporting on foreign activities

Image courtesy of DollarPhotoClub.com.
An ocean of paperwork. Image courtesy of DollarPhotoClub.com.

Doing ministry overseas can generate several requirements to file reports with the IRS that you had no idea even existed.

CliftonLarsonAllen provide some background on IRS Foreign Reporting Requirements for Nonprofit Organizations.

Here is their technically worded description of the most common situations:

  • Transfers of property to, or ownership interests in, foreign entities
  • Financial interest in, or signature authority over, foreign bank, securities, and financial accounts
  • Certain payments of U.S. source income to foreign persons

I will mention just a few of the situations they describe which could trigger a reporting requirement. Keep in mind there can be some serious penalties for missing these reports. Serious, as in $10,000 per filing year, assuming the IRS doesn’t allege the failure to file was willful. If they raise that allegation, penalties can get really ugly. Also keep in mind that if you missed one of these reports once, you probably missed it all the years for which the statute of limitations is open.

Control of overseas affiliate

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Jim Ulvog

Here’s a new scam you may not have heard about: e-mail from your boss telling you to wire some money to a ministry partner right away

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Image courtesy of DollarPhotoClub.com

Let’s say you are the controller in the finance office. Let’s say your boss sends you an email telling you to wire some money to a new organization in the field that he just met because they have the ability to do something great and they need the funds to seize the opportunity right now. Today. Oh, the amount is within budget and he gives you the routing information for the wire. Email is signed using your boss’ nickname and based on a quick glance, the e-mail address is legit.

You quickly send the wire, right?

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Jim Ulvog

California Attorney General sues charity and their auditor over RRF-1 filing and 990

909 page 1

Sometimes there is a perception in the charity community that those pesky filings with the charity regulators are no big deal. Sometimes board members don’t pay much attention to the 990.

Well, last week the California AG sued one charity in the state for allegedly misleading information in the RRF-1. That is a simple one-page form that has only two numbers: total revenue and total assets. The AG claims the 990s have misleading information in them.

How can the AG of a state sue over a tax return filed with the federal government? Here is the path they take. They allege the one page RFF-1 was misleading because attached to the RRF-1 is the federal 990, which is where they find the information that they consider to be misleading. That gives the state grounds to sue.

The sobering lesson for CPAs who serve the charity community is the AG also sued the CPA firm. In addition, they sued the audit partner personally.

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Jim Ulvog

If your NPO does work overseas, might be worth pondering the risks again

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Image courtesy of DollarPhotoClub.com

If your ministry recruits staff and sends them overseas to carry out your programs, you might want to spend a bit more time thinking about the risks your staff face.

A court ruling in Norway found a charity liable for the physical injuries, psychological harm, and aftercare of a staffer who was kidnapped in Kenya and held four days before being rescued. The staffer was shot in the leg. The incident understandably left this staffer with post-traumatic stress disorder. Another staffer was killed.

The court noted the organization treated this and other staff persons as troublemakers because they complained internally about the lack of aftercare.

The court found the Norwegian Refugee Counsel guilty of gross negligence and liable for damages equal to US$500,000. The court also criticized the follow-on security investigation and found that NRC improperly accessed the risks that staff faced. The court noted other staff persons were upset with their aftercare.

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Jim Ulvog

The underside of the charity world

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Image courtesy of DollarPhotoClub.com

Bad stuff is everywhere. Call it evil if you wish. Or simply sin.

The underside of the charity world needs to be addressed and dealt with. Here are two articles, one secular and one spiritual, on how to deal with bad stuff.

Also a general article on complexity. I have been holding all three articles for a few months. Time to post them.

On dealing with bad stuff

7/21 – New York Times – Denver Church’s Security Efforts Highlight New Reality – Check out the five-minute video. It is superb.

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Jim Ulvog

“How to get ready for a financial audit”

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Image courtesy of DollarPhotoClub.com

The website XPastor discussed How to Get Ready for a Financial Audit. Figuring out how to get going on an audit for the first time is a challenge. Main points from a CPA who is now an executive pastor:

Hire an audit firm

This is a board responsibility. Staff helps but it needs to be driven by the board with the real decision made there.

Meet with the auditors before the audit

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Jim Ulvog

Looking for ways to beef up internal controls in a small organization?

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Image courtesy of DollarPhotoClub.com

Small charities usually cannot afford enough staff to put in place great internal controls. If you want a few ideas on how to make modest improvements at low cost, Charles Hall suggests How to Lessen Segregation of Duties Problems in Two Easy Steps.

Second set of eyes on bank statements

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Jim Ulvog

Case study in dealing with molestation accusation in a local church

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Image courtesy of DollarPhotoClub.com

Church Law & Tax has a long (3,600 word) article providing a detailed case study of how one church handled an accusation of improper (and illegal) contact between an adult youth worker and a minor in the church.

All pastors and church leaders ought to read the article and file it away.

The article explains how the situation was discovered, evolved, and how the church handled each stage of the crisis.

The most valuable part of the article for me is an attorney discussing the situation at each stage and assessing how the church responded at each step.

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Jim Ulvog

A few more labor law issues to keep your eyes on

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Image courtesy of DollarPhotoClub.com

Here are a few changes in labor law likely in the near future and a couple more issues on the distant horizon.

Nearest are proposals to make more people subject to overtime pay and classify more people as employees instead of independent contractor.

You can find more info from Accounting Today:  Labor Department Driving Changes Accountants Need to Know About.

Overtime

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Jim Ulvog

Filing deadline for FBAR moving from June 30 to April 15

If you, or your ministry or business, own an overseas financial account, you are required to file an FBAR annually. This is also called a Report of Foreign Bank and Financial Accounts, or Form 114. This would also include accounts for which you have signature authority.

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Jim Ulvog

Primer for local churches on legal and finance issues from Church Law & Tax

A 21 page e-book, Protecting our Ministry with Integrity, is available from Church Law & Tax, which is the writing platform for Richard Hammar. If you are new to leadership in the church world, he is one of the leading writers on legal issues in the community.

At the price of signing up for future sales pitches (when you consider the quality of the resources available, that is a really low cost), you can read about: (more…)

Jim Ulvog

Frequently asked questions about the overhaul of Nonprofit accounting

FASB has released three in a series of FAQs about the exposure draft that will drastically change accounting for all nonprofit organizations.

This discussion is cross-posted from my other blog, Attestation Update, since the overview of the massive changes will be helpful to accountants in the nonprofit community.

  • The first Q&A provides background and general discussion. One of the main goals of the exposure draft is to improve reporting and disclosures about liquidity. The FAQ links to the exposure draft and a May 2015 webcast discussion.
  • The second Q&A goes into some detail on specific issues.
  • The third Q&A explains some alternatives available within the exposure draft.

Watch for more FAQs in the future.

Jim Ulvog