Introducing guest author, Stephen Tatum, Partner and Attorney with Cantey Hanger, LLP.
Service on tax-exempt boards is attractive to the public for a number reasons, allowing us to give back to our community. Most never think of potential liability arising from such service, or are satisfied that state law provides adequate protection for members of tax-exempt boards who act in good faith. The United States Court of Appeals for the Fifth Circuit recently affirmed a decision from a Federal District Court in Beaumont that could cause many members of tax-exempt boards to have second thoughts. The February 26, 2009 opinion on Verret v. USA, should provide individuals considering board service a new set of questions that should be answered before agreeing to accept a board appointment.

The facts in this case are important both for the purpose of demonstrating why the Court held the board chairman personally liable for payroll taxes unpaid by the hospital he served as chair of its board, and so that others can evaluate their own potential for liability in this situation. Read the rest of this entry »

Ask most parents, teachers, administrators and board members at a private school the following three questions:
Would you prefer high or low:

• tuition?
• student/teacher ratio?
• teacher pay?

You are most likely to hear a desire for low tuition, low student to teacher ratio and high teacher pay.  This sounds great and appeals to almost everyone…until the bankruptcy.

The trick is to find a balance among these key, interrelated factors. Read the rest of this entry »

Sarbanes-Oxley laws showed public companies how serious the government takes the clarity of financial statements. The new 990 IRS form is also an indication of the government’s intention of keeping an eye on nonprofits. A nonprofit should stick to its mission, produce financial statements that give a clear picture of its financial position, and maintain internal controls so that both of these objectives are met.

In today’s regulatory environment, a nonprofit’s audit committee function is vital. It should be comprised of dedicated board members and can also include independent external parties. There should be no member of management on the audit committee. All of the audit committee members should have a basic understanding of financial statements. It is imperative that at least one of the members be an expert at reading and preparing financial statements and be knowledgeable about GAAP (generally accepted accounting principles).

This financial literacy allows the committee to evaluate the preparation of the NPO’s financials, the effectiveness of internal auditors and internal controls, as well as being able to converse openly with the external auditors.The nonprofit benefits when the committee functions correctly.

Al Weber, CPA and partner of McGladrey and Pullen has written an Audit Committee Guide for Not-for-Profit Organizations that you might find helpful.www.nam.org/~/media/Files/s_nam/docs/233000/232980.pdf.ashx