Embezzlement. Could It Happen in Your Group?

From the Ohio Society of CPAs comes this warning:

Small nonprofits ripe for embezzlement

They’re often diligent, caring workers, and yet tempted by seemingly easy cash.

Working on the inside, thieves can hit school groups, athletic leagues and churches, especially when they’re surrounded by trusting colleagues and loose security.

And according to one expert, because of the disgrace and embarrassment that the crime brings an organization, their transgressions often are not reported.

The median loss to fraud for religious, charitable and social-service organizations was $106,000 last year, according to an annual survey by the Association of Certified Fraud Examiners. “We estimate that organizations lose about 7% of their net worth to fraud each year,” said Scott Patterson, the association’s spokesman.

“There are so many people doing the good work that nobody steps back to say, ‘Should we begin looking at ourselves. We’ve grown. We better put some checks and balances in,’” said Gary Zeune, a fraud expert whose speakers bureau, “The Pros and Cons,” travels the country. “The only people who can steal you blind are those you trust and who don’t have controls.”

Smaller organizations, such as school parent-teacher organizations, are often vulnerable because neighbors and friends are reluctant to offend by suggesting that dishonesty is possible.

“This is typically mothers stealing from their own kids,” Shaw said. “The kids are the shills out there selling cookie dough or doing the walk-a-thon, and the mothers are stealing it.

“If the board is too embarrassed to have checks or balances, they need to have a new board,” she added. “But if you’re an honest person, you shouldn’t be insulted by having a second set of eyes.”

I’m sad to hear about embezzlement taking place in a homeschool groups, but I know from homeschool leaders that it can and does happen!

How can you prevent embezzlement?

1. Sign up for my newsletter (upper right corner of the website) and receive my report “Best Financial Practices for Homeschool Groups.” If you already belong to my mailing list and still want the reposrt drop me an email at Carol@HomeschoolCPA.com and Ill send you a copy.

2. Buy Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out. In the chapter “Money Management”  in I outline some guidelines for groups to avoid embezzlement such as:

• Have a separate checking account in the organization’s name
• Appoint a treasurer
• Have bank statements mailed to the board chair, not the treasurer
• Have the board chair, not the treasurer to sign checks
• Require regular financial reports
• Prepare a budget

Order your print or electronic copy here

3. Order my ebook Money Management for Homeschool Organizations. It  has helpful tips for keeping records and preparing reports for your group’s treasurer. Read a sample and order a copy here

Keeping you safe,

Carol Topp, CPA

Do liability waivers really protect homeschool leaders?

As we draw up a liability waiver, do we need to have an attorney in our state look at it to make sure it is okay, or are they generally pretty generic forms? It seems those I have filled out in the past were basically the same, with just a few minor changes to make it appropriate for the group and/or event. Judy K. (Tennessee)

I wasn’t sure how to answer Judy, so I turned to Christine Field, an homeschool parent and attorney with Homeschool Legal Advantage:

You don’t think of homeschool groups as engaging in potentially dangerous activity, so the whole idea of waivers and liability insurance may seem unnecessary. Yet many groups are increasingly called upon to obtain liability insurance. The insurer may insist on your group having a release of liability form or a liability waiver.

Many people believe that a signed waiver makes them invulnerable. This is not true. Here are some common misconceptions about liability waivers:

1. If someone signs a waiver, they can’t sue us. This is not true. An injured party can still attack the validity and scope of a waiver.

2. If I have a waiver signed, I send it to the injured party’s lawyer and they won’t sue. Also not true. As a homeschool group, you still need to report the claim to your insurance company along with sending them a copy of the waiver to be used as part of your defense.

3. If I have waivers signed, I don’t need insurance. Definitely not true! In fact, if you have insurance, the insurer will often insist that you obtain waivers or releases from participants.

An enforceable waiver of liability is one which is prepared in accordance with state law, sufficiently describes the risk and is understood by the reader.

Some things to look out for in your releases are as follows:

1. Remember, minors generally cannot release liability. Parents or guardians must sign the release on behalf of the minor.

2. A release can only release from ordinary negligence. In other words, if there is gross negligence or intentional injury, the release will not be effective.

3. The language of the release must be in compliance with the state law and the signer must understand the language of the release. Look for language barriers or other inability to understand.

It is always good to have an attorney licensed in your state take a look at your liability waivers or releases. Doing so provides the best possible protection for your group as well as your directors.

Carol Topp, CPA

Ever tried team teaching in your co-op?

Have you ever tried team teaching in your homeschool co-op?  Most homeschool parents are pretty independent, or may have a Lone Ranger mindset and may never consider team teaching.

But you may be missing out on something good.

Elain from The Community Co-op blog shares how well team teaching worked for her.

Team Teaching Saves the Day!

When the founders of co-op got together and got serious about starting this not for profit organization, we asked ourselves, “How can parents lead quality, consistent classes?”

After all, it’s one thing to homeschool your own children, quite another to plan an entire semester, and lead a class of 12 or more children!

Some of us had prior teaching experience in some form or another, one teaching in a school, another teaching adults in continuing education — but most parents coming in as volunteers wouldn’t have that.

Lori had the idea of Team Teaching. The idea is that two parents are the Leads of the class and lead as, well, a team. The two leads plan the class together and teach together. If one person is having a hard time with a project, or an explanation, the other team member is there to step in and help out.

Another part of the team work is ongoing debriefing, checking in, how’s it going? How did I do today? Was that clear? Did the class flow well today? Do we have the right number of stations set up?

Initially, I was hesitant about this team teaching thing. Bit of a Lone Ranger type. In our first year of co-op, I didn’t have a co-lead, it just worked out that way, there didn’t happen to be someone available.

This year, I do, and it’s great! No more Lone Ranger for me. My co-leader and I got together to plan our class, Studio Art. She had a wonderful idea that I never would have had — why not have as our organizing theme, the history of art? You know, the entire history of art, starting with the cave paintings?

One semester in to the plan, it’s going great. The class this year is larger than last year, but since we have this teaching team in place, class actually feels easier.

After the Winter Break, we’ll start in on the Middle Ages!

Thanks, Elain, for sharing your story! Sounds as if team teaching is Co-operation at its best!

Carol Topp, CPA

The benefits of a board to avoid burn out

My friends Kristen & Denise at Homeschool Group Leader have been running an interview they did with me as a blog series on leader burn out.

There are lots of times when a leader may have to step down. Maybe because she is burned out, but also it could be that her family moves out of town. We’ve had that happen. Or maybe she becomes ill or someone in the house becomes ill, and she has to step down from her responsibilities for a while. Every group out there and every leader out there ought to be saying, “If one of us had to leave, could we keep going?” Who could step in—always have that in the back of your mind.

What does the IRS mean by not allowing “private benefit” in a fund raiser?

Rich, a fellow CPA, wrote:

I do very little with the non-profit world these days. Our group has a
fundraiser which raises a fair amount of money (for us) $600-$1000. The
question is in regard to spending the money. Does the money have to be
spent on group activities as a whole, or can it be used to for individual
educational activities (i.e. worldview camps, etc)? In a nutshell, the
question is what constitutes private benefit/private inurement?
Thanks,
Rich

Rich,

Good questions and difficult to answer in a nutshell, but I’ll try!
Does the money have to be spent on group activities as a whole Yes, it does.

can it be used to for individual educational activities (i.e. worldview camps, etc) No; that would be inurement to the individual.

what constitutes private benefit/private inurement?

From the IRS (GCM 39862 (11/22/91)):

“Inurement is likely to arise where the financial benefit represents a transfer of the organization’s financial resources to an individual solely by virtue of the individual’s relationship with the organization, and without regard to the accomplishment of exempt purposes.”

Translation from IRS-ese to plain English: Inurement is when a group transfers some of its money to specific individuals. The individuals benefit just because they are members of the group and not because it represents the purpose of the organization.
In other words, a homeless person can benefit by receiving a meal from a charity whose purpose is to feed the poor. A family cannot fund their own child’s educational activities (worldview camp) just because they are a member of a parent booster club or a homeschool group. The benefit is supposed to be to the group (or a clas of people, i.e., the homeless) for its tax-exempt purpose, not to specific individuals.

And this from the IRS, again (1993 EO CPE Text ATHLETIC BOOSTER CLUBS: ARE THEY EXEMPT? by Debra Cowen and Gerald Sack)

“In fact, the earnings of the organization are being used directly and specifically to pay for benefits to specific individuals rather than to a class (of competitive gymnasts) as a whole. ”
“Inurement of income is strictly forbidden under IRC 501(c)(3) without regard to the amount involved. Violation of the inurement proscription is sufficient to defeat exemption.”

Translation: A gymnastics booster club was sharing it earnings with specific individuals. The IRS defines that as inurement or private benefit. Inurement is a serious issue in the eyes of the IRS and an organization can lose its tax exempt status for benefiting a specific individual with money meant for the group.
I hope that helps!

Overcome Common Co-op Problems

My guest blogger today is homeschool leader, Caren Joye. She shares a great article

How We Overcome Common Co-op Problems

Truly, there can be some negative aspects to homeschool co-ops, and we want to avoid or prevent as many problems at Academy Days as we can. As a Christian co-op, we try to keep our focus on what the Lord wants for our children. We are also respectful of the fact that our families are homeschoolers first and foremost. Our goal is to go along side the parent and enrich what they already do at home.

Here are specific ways we try to prevent the most common co-op complaints.

Too much like school
Co-op is not a school! The primary teacher is always the child’s parent, not the co-op teacher. Unlike some local co-ops, we do not administer tests nor assign grades. Our weekly classes are spent on discussions, debates, simulations, re-enactments, experiments, and hands-on activities that enrich studies at home, such as the science experiment pictured at left. Since co-op meets only once a week, the majority of coursework is completed at home, so really only the parent knows the full extent of her child’s knowledge in a subject. It stands to reason that the parent, then, would be the one to assign grades.

Too much homework
Only high school classes and a few junior high classes actually have homework. All kindergarten and elementary classes are enrichment only. Co-op is supposed to lift our burdens, not increase them, so co-op is all about projects, experiments, educational games, simulations, re-enactments, learning activities, discussion, debate, arts and crafts that can be completed during class time. We do not want homeschooling families stressing over homework in addition to regular curriculum studies at home. Plus, only the parents know how their child learns, and that child should be free to learn that way without pressure to conform to the majority. As a result, the responsibility for homework is placed on teenagers, who should be learning how to manage their time anyway, particularly in preparation for college. Even then, because some families use a different curriculum at home, we try to be reasonable regarding homework even for high schoolers.

Too many illnesses
We do not want co-op to be a source of illness for any family. A standing rule is to stay home if you or your children are sick or even just recovering from an illness. We have a substitutes list and a list of illnesses, and we expect members to be symptom-free for 24 hours before they return to co-op. As a result, we do have a lot of absences, but we much prefer filling in for an absent parent than catching a cold from a sick child or teacher.

Too many unsupervised children
Co-op is not a drop-off service, so we do not have children running around without parental supervision. If your child is at co-op, then you must be, too. As a small Christian co-op, we lovingly correct and encourage our children and try to channel their energies into positive directions. Plus, we intentionally keep classes small to prevent a “crowd-control” situation during class time. Except for PE, classes are limited to 12 students, although the number usually ranges between 4 and 10, as pictured in this 5th-6th grade creative writing class.

Too much work for parents
Many hands make light work! You do not have to teach, but all parents at least commit to helping in a class. Everyone gets one break period in the four-period day, and usually two. Additionally, most classes have two teachers, so teaching each week does not fall on just one person. Furthermore, teaching itself is limited to lessons and activities during class time; teachers do not have to correct homework nor prepare and grade tests. Also, every class has at least one parent helper, if not two, for additional help.

Too expensive
We aim to keep co-op affordable. Unlike other local co-ops, no one at co-op gets paid, and all our workers are volunteers with a degree, special knowledge or passion for the subjects they teach. Class fees, which range from $2 to $15 for the entire 14 weeks, pay for materials only. Because many of us homeschool on a budget, we diligently search for the cheapest copier in town and research the Internet for the lowest prices on books, so we can pass those savings on to our members.

Too disorganized
A group cannot function efficiently without some organization. Written procedures help our group rely on a plan instead of on quick decisions made in a crisis. Plus, guidelines ensure our safety and help us manage the use of the facilities that the Lord has provided for us. We know that parents and children are most comfortable in an environment where they know where they are supposed to be and what they are supposed to do in any given situation. We try to provide that structure while at the same time maintain flexibility. As a result, our co-op runs very smoothly; indeed, many of our members who used to participate in other co-ops have stated that our co-op runs more smoothly and comfortably than any others they have attended.

Too much conflict
Personality conflicts and misunderstandings may be inevitable in a group environment, but we aim to manage them by proactive means. To prevent becoming a “mega co-op,” we limit membership by keeping classes small. In addition, we have written procedures which help everyone understand expectations. Also, we advocate the resolution method commanded by God, that of peacemaking – which includes overlooking an offense, reconciliation, negotiation, mediation, arbitration and accountability.

We started Academy Days co-op in fall 2006, so we are still a young co-op. Each semester we address a new issue and smooth out fewer and fewer kinks. As we do individually in our own lives, we are working on perfection!

About the Author:
Carren W. Joye is the author of Homeschooling More Than One Child: A Practical Guide for Families (ISBN 0-595-34259-0), Alabama State History Curriculum for grades K-9, and A Stay-at-Home Mom’s Complete Guide to Playgroups (ISBN 0-595-14684-8). A homeschooling mom of four children, she has founded four successful playgroups, a homeschool support group, homeschool covering, and homeschool co-op. For more information on her books and state history curriculum, visit her web site at www.carrenjoye.com.