In a recent seminar conducted by the Fort Worth Chapter of the Texas Society of CPAs, Darren Moore, an attorney for Bourland, Wall & Wenzel, P.C. defined a fiduciary relationship as:
1. A relationship of trust and confidence whereby a party is bound to act for the benefit of another
2. Existing as a matter of law
3. Grounded in equity and therefore application of duties varies depending on the context.

Directors serving on the board of directors and officers are governed by statutory law and case law which dictate three basic fiduciary duties:
1. Duty of care
2. Duty of loyalty
3. Duty of obedience

These fiduciary responsibilities provide organizations the framework of strong governance.

How do you define “care”, “loyalty”,” obedience”? Continue reading… Read the rest of this entry »

Would you like your audit to go smoother?  Would you like to know the difference between a financial statement audit and a compliance audit?  Would you like to shorten the time the auditors are at your office?  If you answered “yes” to any of these questions, then you should attend the “Executive Exchange” hosted by the Funding Information Center on Wednesday, March 4th (11:30 – 1:00). 

Compliance=Accountability: Preparing for an Audit will be presented by Linda Low, Audit Partner and Donna Mayes, Audit Manager, both with Rylander, Clay and Opitz, LLP.  During this informative workshop, you will learn what can make your life easier, how to make the auditors’ happy, how to reduce/eliminate internal control deficiencies, and how to easily remedy common compliance issues associated with your single audit. 

For more information and registration, contact the Funding Information Center .

In this down-turned economy, all business entities are looking to enhance or supplement their current revenue sources, and not-for-profit organizations (NPO’s) are no exception.  Because a number of charitable organizations are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, the revenue generated by these organizations must be in accordance with its stated mission in order to be tax-exempt. Go back and review the organization’s Form 1023 and the IRS determination letter and verify “why” your organization is exempt from taxation. 

So what if an opportunity presents itself to increase your bottom line that may not fit your mission? Does that mean as a NPO you can not take advantage of this opportunity?  Not necessarily.  The income can be earned, but depending on its source, it may be considered unrelated business income. If the revenue is unrelated, then net income in excess of $1,000 is subject to the excise tax.

What types of property or transactions are specifically exempt or subject to being taxed? Continue reading…

Read the rest of this entry »

In a recent Economic Summit hosted by the United Way of Tarrant County, several panelist discussed several factors that affect tax-exempt organizations. Linda Low and I presented suggestions on evaluating programs and operations in light of a possible decrease in funding. What programs are critical to the organization’s mission? How investments are critical component of earnings? Is the organizaiton in the midst of a capital campaign for a new facility?  These and other factors should be critically evaluated by key management personnel.

Board members must continue to protect the organization’s mission and exempt purpose. They must continue to be fiduciary stewards, strategic and generative. 

Executive directors and management must critically evaluate all significant programs and events, determining how expenses can be refined. Read the rest of this entry »

Special events are an effective way for a non-profit to both raise money and also raise awareness of the organization and its mission in the community. Special events that are well planned and consistent year to year are often very successful. An important aspect, however, is the tax deductibility of purchases or contributions made by the attendees. Often the organization and the attendees incorrectly assume that all purchases of tickets, tables, registrations, auction items, etc., are 100% tax deductible. 

The IRS clearly states that, “If a donor received something of value in return for the contribution, a common occurrence with fund-raising efforts, part or all of the contribution may not be deductible.” 

So what is deductible? The amount that is deductible is actually the amount given over and above the fair market value of the event or purchase. This is where the organization should step in and give some assistance to the attendees.  Read the rest of this entry »

The overriding responsibility of every member of every board of directors is oversight – to continually monitor and assess the effectiveness of  the organization they serve.

But when was the last time your board took a look in the mirror at it’s own effectiveness?

Even the most effective boards can lose their “edge” over time, especially volunteer boards whose membership and leadership changes each year.  Many nonprofit boards have adopted the best practice of performing an annual self-assessment.  The self-assessment process can be very difficult, especially if there has not been a consistent pattern of evaluating the board’s performance in the past.

Consider the following items, as you develop a self-assessment checklist. Does the board… Read the rest of this entry »

Situation:  You are interested in setting aside a pool of assets for use in current and future charitable giving.  You aren’t certain to whom contributions will be made. You would like to receive a tax deduction for the funds you set aside. How can you accomplish your objectives?

Short Answer:  A private foundation (PF) or a donor advised fund (DAF).

Question:  Which one should I choose?

Deeper Answer:  It depends. 

Both a PF and a DAF meet the primary objective of generating a charitable deduction in the year of transfer, even though no funds may actually reach a charitable organization that puts those funds to use in their particular charitable endeavor. There is one primary reason that a PF may make sense for a donor – control. The donor of a PF will determine the initial members of the foundation’s board, and usually serves on the board. The board controls the ultimate distribution of funds to outside charities and controls the selection of all investments made by the PF. With a DAF, the donor can recommend charities to receive disbursements of funds, but the final decision rests with the management of the DAF. Also, depending on the DAF, available investment choices may not allow for investments that meet the donor’s wishes.

For assistance in determining your best alternative, contact us.

If you are a Texas nonprofit organization you should consider checking the “status” of your tax-exempt agency. Perform the following steps to determine if any taxes are listed and the filing status of your non-profit agency:
1. Go to this government website and click on Texas Taxes, Filing and Paying, Exempt Organizations.
2. Do an Exempt Search, (this will show the various taxes and the status of each.)

If the information is incorrect, you may need to file a new application or contact the Comptroller’s office.
If your agency is not listed at all, you will need to do a search on SOS Direct website. Do not assume that the organization is exempt from sales and franchise tax simply because it is properly incorporated. Nonprofits must request exemption by filing the appropriate form.

Some organizations have found that their corporation has been involuntarily dissolved, usually due to failure to respond to notices. This happens when the registered agent and/or mailing address has not been updated. The important thing to remember is to update the registered agent and address for your organization. For more information, continue reading…

Read the rest of this entry »

The mission of your organization is why it was created. It is its purpose. It exists for this reason(s) only.

The mission is a pretty important thing. Much thought should be put into the creation of a mission statement. It should be clear, concise, and to the point. Many good mission statements are a paragraph or less in length. There is no set rule, but the more specific your mission statement, the easier it will be to build a framework for your organization, the easier it will be to set the strategic goals of your organization.

Remember – If you believe in something, there is no reason not to be passionate about it. It’s the reason you chose nonprofit work in the first place, now isn’t it.