Fraud in a homeschool group

I received a phone call from a homeschool support group leader that had just learned her treasurer had embezzled over $10, 000 from her group during the past two years. Her tale was heartbreaking as she spoke of what painful lessons she had learned and how to go forward.

Some of the signals that the leader saw that tipped her off were:

• The checkbooks was kept locked in the treasurer’s business office and frequently inaccessible.
• The leader had a difficult time getting the treasurer to write checks to members for expenses.
• No budget was ever created.
• The treasurer was not detailed oriented.
• The treasurer also did the bank reconciliation, so no one else saw the bank statements.
• The treasurer’s business income was severely hit by the recession making his personal finances in trouble.
• The treasurer was married to the vice chair, who was a close friend of the leader, so the leader was reluctant to confront her friends.
• The board was small and few people were willing to volunteer, making the leader desperate and grateful when anyone said they would serve as treasurer.

Here is what the group is doing now:

• Adding more board members
• Using a bank account with on-line access for visibility
• Creating a budget
• Amending bylaws and policies to add accountability
• Having someone besides the treasurer do  the bank reconciliation
• Pursuing restitution from the treasurer
• Consulting with a lawyer on when to use criminal prosecution

I hope you don’t ever face a similar situation.  To prevent fraud in your homeschool group, follow the practices mentioned above and in my book Money Mangement for Homeschool Organizations which you can order from the Bookstore page.

Carol Topp, CPA

Independent contractors and W-9 form

Carol,Hello!  I wanted to check with you about a sentence that is in our Independent Contractor Agreement. No one has ever given us a W-9 before even though they have signed the agreement. Why are the contractors submitting any tax related information to us? I thought they were to complete all of that completely on their own. Is that part necessary? Can you please advise on this?

Thank you so much!!!
Tanya B

Tanya is referring to a sample independent contractor agreement I include in my Money Management for Homeschool Organizations and Paying Workers in a Homeschool Organization ebooks. Both are available at my bookstore.

The W-9 is the official way to collect an Independent Contractor’s name and SSN or business name and EIN(Employer Identification Number).  This information is needed if your pay them over $600 a year and issue them a 1099MISC.

It is also the unofficial way to determine if you are dealing with ethical people.  Some people do not like giving their information on a W-9 because they were not going to report the income on their tax return.  Having them fill in a W-9 indicates that your organization obeys the law and expects them to obey the law as well.

Carol Topp, CPA

Carol,
Actually the parents with students in the class pay the independent contractors directly.  It does not come from the co-op’s funds.  Do I still need to keep track of how much they get as an annual total from the parents and work complete these forms?  If so, we may need some additional guidance.
Thank you,
Tanya

What to do with a large gift from my co-op?

Hi Carol–your website and book have provided valuable information to our group as we have grown from a medium-sized support group to a large, full-fledged co-op in just three years.  I have had the privilege of leading the group throughout this process, and I am blessed to be a part of such a wonderful group of families.

They are so wonderful, in fact, that my Board of Directors recently took up a collection from our members as a way of presenting me with an end-of-year gift of appreciation.  This was a complete surprise to me, especially when they presented me with a check totaling over $700!

My question to you is in regard to this check.  The Board collected donations from individual members and then wrote me a check on the group account.  I’m unsure of how to deal with this tax-wise.  We are a 501(c)3 with gross receipts under $25,000.  I read on your website the faq about paying an honorarium–is that what a gift of this nature is?  The gift was given with the intent of paying my expenses for our state’s homeschool convention, including the leadership conference.  If I didn’t cash the check and used the funds by using the group’s debit card to pay my hotel expenses, would this alleviate the filing requirements (since the amount would then be under $700), or does the hotel payment constitute income as well?

Thank you for taking the time to answer.  I want to make this as easy as possible for group record keeping, and I’m not sure if this is the correct way to go about it.

Blessings,
Barbie T, Florida