Think again. Every two years the Association of Certified Fraud examiners publishes its Report to the Nations on Occupational Fraud and Abuse. It’s amazing to me to see how consistent the results are from period to period and across industries. The report also reminds me how dangerous and costly blind trust can be to organizations. Many of our nonprofit clients tell us that fraud is just not a significant risk for their organization because their employees are commited the cause.  And who could be more trustworthy than someone willing to serve an important cause?

If that’s really true, then why are are nonprofit organizations involved in almost 10 percent of all fraud cases reported in the study?

We often let our desire to trust other people cloud our judgment. Especially people we hired personally and have spent years building relationships with Monday through Friday. Deep down, we all believe we’re exceptional judges of character.

And that’s when it happens. 

If the most important fraud control in place in your organization is the ability to judge character in the people you hire, you may already be a victim.

If you’re concerned that you may be the victim of a fraud, or want more information on preventing fraud, we can help.

On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act. Major benefits include tax cuts, business credits and subsidies for state and local construction bonds. Two specific areas affect tax-exempt organizations:

1. Exemption  of payroll taxes for qualified employees. For qualified employees hired between February 3, 2010 and January 1, 2011, the employer’s share of Social Security taxes (6.2%) on salaries/wages earned after March 18 will be “credited” as reported under the quarterly payroll tax filings. Beginning with the second quarter (March – June) filing, Form 941 has been revised to include the exemption. In order to be considered a “qualified employee” the individual must have been unemployed during 60 days prior to starting work or have worked fewer than 40 hours during the 60 day period; didn’t replace another employee unless separation was voluntary or for cause; and no relationship to employer.
2. $1,000 annual business tax credit for each new employee retained for a least one year. This credit is 6.2% of the employee’s wages during the 52 consecutive week period, up to $1,000.

So what are the reporting requirements?

Beginning with the 2nd quarter reporting period, complete the additional items on Form 941, beginning with line 5a. The exemption can be applied to a future reporting period, are an overpayment may be requested.

For each “qualified employee”, retain a completed copy of W-11, “Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit”.

How does a tax-exempt organization claim the business tax credit? The IRS has not finalized how T-E organization will report the tax credits, but speculation has been Form 990-T. Stay posted for future clarification.

Even if your tax-exempt organization missed the May 17th Form 990 deadline, the IRS encourages organizations to go ahead and file the required form. Because these small tax-exempt organizations are vital to local communities, the IRS is encouraging compliance after the deadline. To help preserve the organization’s tax exemption, the IRS will be providing additional guidance soon. For more information, see the May 19, 2010 communication from Doug Shulman, IRS Commissioner.