Nonprofit Essentials Conference, August 20, 2015 LEGAL REQUIREMENTS & THE IMPORTANCE OF BEING TRANSPARENT

Transcription

1 Nonprofit Essentials Conference, August 20, 2015 LEGAL REQUIREMENTS & THE IMPORTANCE OF BEING TRANSPARENT

2 About the Presenters Emily Robertson Attorney Robertson Law Amy Sinykin Associate Director Charities

3 Required Disclosures IRS Public Minnesota Attorney General Multi-State Solicitation Disclosure Requirements State Corporate Filing Requirements

4 Disclosure to IRS Application for Exemption: IRS form 1023 or 1024 Annual Information Report: IRS form 990/990-EZ/990-N

5 Disclosure to IRS Failure to file for 3 years results in automatic revocation Exceptions to filing requirements Churches and certain church affiliates Governmental units and affiliates of government units

6 Disclosure to the IRS Filing thresholds 990N: $50K or less in gross receipts 990EZ: less than $200K in gross receipts and $500K in assets 990: $200k or more in gross receipts and $500k or more in assets 990PF: For all private foundations Due Date: 15 th day of 5 th month after end of accounting period, automatic 3 month extension if you ask for it and another 3 month extension (So 11 months and 15 days)

7 Disclosure to the IRS 990 Highlights* Who is on your board, whether you enter into any business transactions with them Who are your highest paid employees? What programs did you conduct and what did they achieve? Your governance practices Amount of revenue and where it comes from How you spent your funds *990-EZ filers disclose much of this, but to a slightly lesser degree

8 FORM 990 Focus on Governance Mission Statement # of directors & independent directors Business and family relationships between insiders Changes to organizational documents Diversion of assets Policies (Conflict of Interest, Whistleblower, etc ) Executive Compensation Use of Comparability Data Practice for board review of IRS form 990

9 Part VII Compensation Anyone who was an officer or director during the tax year (no minimum) Chief operating and financial officers, regardless of title Key employees (over $150K) High five employees (over $100K) Former officers, employees (over $100K) Former directors as directors (over $10K) Five highest independent contractors (over $100K)

10 Compensation/Director Independence Filing organization must make a reasonable effort to provide accurate information on the return Distribute a questionnaire annually to each officer, director, key employee, highest paid employee, and independent contractor requiring name, title, date and signature The questionnaire should contain the family and business definitions set out in the instructions

11 Automatic Revocation IRS website page: Exempt Organizations Select Check is the place for information If automatically revoked, must reapply on 1023/1023-EZ or 1024 Generally, exemption is lost for period between revocation and application An IRS document (Rev. Proc ) describes a streamlined process to follow for reinstatement, and explains when reinstatement can be retroactive

12 Disclosure to the Public All exempt organizations must make certain documents available to the public and provide copies upon request Exemption application + supporting documents Three most recently filed 990s (Not Schedule B) 990T

13 Disclosure to the Public Widely Available Option: If an organization makes information widely available, it need not comply with individual requests Must tell requesters how to access information

14 Disclosure to Members & Directors Minn. Stat. 317A.461 Members and Directors have access to books and records for proper purposes at any reasonable time Articles of Incorporation, Bylaws, accounting records, minutes of Board and Committees with authority of the Board 6 years of information should be kept Last year s Financial Statements Serious remedy for relief in the Statute

15 Disclosure to Attorney General Soliciting charitable organizations must register before soliciting in Minnesota under Minn. Stat. 309 Charitable organizations that do not solicit register as charitable trusts under Minn. Stat. 501B

16 Disclosure to Attorney General Exemptions: No paid staff, and no professional fundraiser, and less than $25,000 in contributions last year Religious organizations Some educational institutions Alumni, trade, professional associates who solicit members only Single person solicitations Private foundations, if fewer than 100 persons solicited per year

17 Disclosure to Attorney General For Charitably Soliciting Organizations: Initial Registration: Charitable organization registration statement, financial statements, $25 Annual Reports: Annual report form 990, audited financial statements if revenue of $750,000, and filing fee of $25 When? 15 th day of 7 th month, and a 4 month extension is available if requested in writing before expiration of 7 th month Additional disclosures (dissolution, etc.)

18 Professional Fundraiser Registration Registration is Required with the Attorney General s Office for all persons who (for pay) provide professional fundraising services Grant Writers are professional fundraisers if they are paid AND they are not employees The Attorney General s Office watches 990s for professional fundraising expenses

19 Other Fundraising Disclosures Prior to asking for a contribution or at the same time as a written request, charitable organizations and their professional fundraisers must disclose: The name and location by city and state of the charitable organization; The tax deductibility of the contribution; and A description of the specific charitable program funds are requested for; and, if different, a description of the programs and activities of the organization generally. If the solicitation is made in person, these disclosures must be made both orally and displayed prominently in writing. If the solicitation is not in person (i.e., radio, television, letter, telephone, or internet) the disclosures must be clearly made in the solicitation. In addition, professional fundraisers must also disclose their name as on file with the Attorney General and that the solicitation is being conducted by a professional fundraiser. Minn. Stat /18/2015 Copyright 2013 Charities Review Council. All Rights Reserved 19

20 Multistate Solicitation and Cause Related Marketing Soliciting in other states can trigger registration requirements in those states explain which states require registration and has a link to a unified registration statement Cause Related Marketing is allowing a for-profit to use your name in connection with the sale of a good or service In many states registration is required, and it is regulated Best practices require a contract and full disclosure

21 Secretary of State Filing Annual corporate filing By December 31 st No fee unless change of address/registered agent Annual failure = Administrative dissolution (but law holds name for one additional year)

22 Who we are Mission: Mobilize informed donors and accountable nonprofits for the greater good. Nonprofit Services: Accountability Standards Accountability Wizard & Meets Standards Seal Nonprofit Strengthening Projects Donor Services: Giving Guide Enhancing the relationship between donors an nonprofits

23 Our History

24 Accountability Standards Co-created Benchmarks Shared expectations for donors, nonprofits and the Public A foundation of nonprofit strength Nonprofit Sector Practices Legal and Regulatory Adherence Donor and Public Expectations IRS Form 990

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26 WHY DOES TRANSPARENCY MATTER? TO WHOM DOES TRANSPARENCY MATTER? WHEN DOES TRANSPARENCY MATTER?

27 PUBLIC DISCLOSURE

28 Annual Communication & Reports

29 Annual Communication & Reports WHAT TO INCLUDE: Mission Statement Description of each major program, with specific & objective accomplishments for each Geographic location(s) or population(s) served Financial Statements Including: Total cost of each major program balance sheet (assets & liabilities) statement of activities (revenue & expenses) List of Board of Directors Key Staff members (as defined by the IRS Form 990), or volunteer staff (if no paid staff)

30 Impact on Community Your So What? We served 150 Kids 90% of the kids we served increased their reading skills two grade levelsthis year.

31 Financial Transparency Audits are required for organizations over $750K Accounting Don t confuse your donors: Be Consistent between IRS form 990 and Annual Communications Finance Training & Philosophy Software Strategic plan & leadership Controls & Processes Bookkeeping

32 LegalCompliance IRS Determination Letter IRS Form years of IRS Forms 990s upon request Comply with all applicable laws Registered to solicit (when required) Donor acknowledgements Document Retention & Destruction policy Much of this information is already available to the Public!

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34 GOVERNANCE 34

35 Monitoring Mission & Strategy Board of Directors complete annual review of mission and strategies Are you doing what you say you re doing? Ensure your are being stewards of the public, participants and donors support!

36 Diversity, Equity & Inclusion

37 Diversity, Equity & Inclusion A majority of support for nonprofits comes directly or indirectly from the public. Being representative & inclusive of the population identified by a nonprofit s mission and goals is key to maintaining public trust!

38 Chief Executive Assessment & Compensation VS [It] builds public trust to assure that compensation decisions are carefully considered and that pay is reasonable.

39 Conflict of Interest Policy Real or perceived Conflict of Interest can cause public, financial and legal issues. Include staff and board of directors Ask about conflicts perceived or real Disclose Recuse Document & share if needed

40 FINANCIAL ACTIVITY 40

41 Use of Funds At least 65% of the nonprofit s three year average of expenses should be used to directly support programs

42 FUNDRAISING 42

43 Fundraising Disclosures Solicitations include: Purpose the funds will be used for specifically. Contact information for the organization The tax deductibility of the contribution Your gift is tax deductible to the extent of the law.

44 Donor Financial Information Security & Donor Privacy Donor Information Security: Have a plan for keeping information safe Don t keep financial information on site Vet your plan and stick to it! Donor Privacy: Create a policy that clearly communicates: what you collect, why you collect it, how it will and will not be used. Stick to your policy and honor it!

45 ANY ORGANIZATION CAN MEET STANDARDS!

46 Earn Meets Standards Seal: Accountability Wizard Review Cloud-based capacity building tool: Focused on education Help along the way as you work to Meet Standards Self-paced Goal of review process: Strengthen Nonprofits Connect strong nonprofits to thoughtful donors and funders

47 Earn Meets Standards Seal: Accountability Wizard Review Cloud-based capacity building tool: Focused on education Help along the way as you work to Meet Standards Self-paced Goal of review process: Strengthen Nonprofits Connect strong nonprofits to thoughtful donors and funders 47