June 20, 2011

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By Mark Hrywna and Samuel J. Fanburg

Americans gave an estimated $290.89 billion to charity during 2010, probably.

Initial estimates show that overall giving was up 3.8 percent last year (2.1 percent adjusted for inflation), from $280.3 billion to $290.89 billion, according to Giving USA, a publication of Giving USA Foundation™ researched and written by the Center on Philanthropy in Indianapolis, Ind., and released this morning by the Giving Institute.

At that rate, it could take five or six years for giving to return to pre-recession levels, said Patrick Rooney, Ph.D., executive director of the Center on Philanthropy (CoP) at Indiana University. Adjusted for inflation, total giving exceeded $280 billion a year every year for the past decade, and surpassed $290 billion in six of the last seven years, he added.

Most nonprofit leaders regard the federal Form 990 to be an additional burden, if not another pitfall just waiting to hurt them.

During the Georgia Society of CPAs’ 2011 Nonprofit Conference, Mike Sorrells and Sandra Feinsmith of BDO USA, LLP, said that although it offers plenty of potential problems, the Form 990 also has areas of opportunity to tell the organization’s story, to present its good side and to serve as a marketing tool.

Following is a sample of the opportunities for a positive image to emerge from Form 990:

• Page 1, Description of mission or significant activities. Consider a succinct statement that fits on Page 1.

• Page 2. Line 1, Mission Description. Try to make it brief enough that it doesn’t spill to Schedule O, and make it different from what was provided on Page 1.

• Part VI, Governance, Management and Disclosure. Family or Business Relationships. If you have them, be sure to describe them in Schedule O. If there are too many, consider the impact this will have on a reader. Documentation of board meetings: A must. Not having minutes is a sure sign of poor governance.

• Part VII, Statement of Revenue. Program service revenue: Consider breaking out into components instead of lumping together.

The evil that men do lives on after them, and that can be especially true for wills.

Nonprofits have benefited from bequests made to them in wills, but they can also become embroiled in long-term litigation that eats away at any financial benefit.

Speaking during the AFP International Conference on Fundraising, Frederick B. Weber of JPMorgan Chase and Stacy Singer of The Northern Trust Company discussed the rights and responsibilities of charitable beneficiaries in estate and trust administration. Both work in Chicago, so they used Illinois law as a point of reference, but the information they gave might be helpful in a general way.

Among the points they offered:

• After an individual dies, a will becomes a public document, and anyone can request a copy and review its contents.

• A trust is a private document that never needs to be filed with or provided to anyone other than those with a vested interest.

• A specific bequest means that a beneficiary might be entitled to a specific item of tangible personal property or specifically identifiable intangible property.

• A pecuniary bequest is a specific amount of money, to be paid as long as there are sufficient funds to allow for payment.

As the wording goes on a joke Internal Revenue Service (IRS) tax form that has made the rounds for many years: How much money did you make? Send it in.

The need to comply with a maddening, and ever-changing, array of regulations is enough to make any nonprofit leader long for the simplicity, if not the command, of the joke form. Alas, it is not to be.

All is not lost, however. You’re not going to believe this, but it is actually possible to narrow the IRS’s concerns down to a Top 10 list.

Janis Ratica and Lynn Moneyron of Cherry Bekaert & Holland, LLP did exactly that when they spoke at The Georgia Society of CPAs 2011 Nonprofit Conference.

According to Ratica, an attorney and CPA, and Moneyron, a CPA, the Top 10 not for profit tax issues are:

• Governance. “Board member independence” is a significant, but by no means the only, consideration here.

• Compensation. Executive pay, disqualified persons and excess benefit transactions factor in here.

• Political activities. This means participating in political campaigns.

• Lobbying. No substantial part of activities may consist of lobbying.

• Unrelated Business Income (UBI).

• Employment taxes. Every employer is a potential target.

• Tax-exempt bonds. Compliance is important here.

• Failure to file a Form 990.

• Failure to qualify as a public charity. This is not the same as tax-exempt status.