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

Homeschool Leader, Do You Need Help?

Should a co-op be a separate organization?

Carol,

We have one entity (group) that works outside of our association, this is our Co-op group. This group does take in money – I believe it’s run out of a separate bank account. I know our Co-op group has a board, and bylaws but not an EIN number, which I know is very easy to get. What are they benefits of us staying as one group? My question is: should our Co-op group run their funds separately like this?

Sandy in TX

Sandy,

Your co-op could be organized as under your association or as a separate group. It’s really up to you. Since they have their own separate board and bylaws, perhaps they are really operating as a separate unincorporated association already. You could be officially separate if they obtain their own Employer Identification Number (EIN) from the IRS.

There might be advantages to staying as one group. There are fewer volunteers for the board positions, consolidated financial reports, and shared workload. The co-op could remain a part of your organization, but with a separate checking account and its own budget. It could be self-sustaining financially, but still part of your association. Many church-run schools operate like this, financially self-sufficient, but still under the umbrella of the church.

Carol Topp, CPA

Using Quickbooks for reports

Hi Carol,

Our Board of directors for our homeschool group of 100 families just received your 2 books (Money Management for Homeschool Organizations and Tax Exempt 510c3 Status for Homeschool Organizations).  I have read them.  It has reassured me that we are on the right track and that we have instituted many of the things that you mentioned.

We have purchased Quickbooks and our treasurer is working hard to learn  the software.

What financial reports do we need to generate monthly?  We need these reports to be a simple process.The Balance Sheet and P&L (Profit and Loss) statement in Quickbooks looks are overwhelming.

We are not accountants and double entry lines are confusing.We have reconciled our checkbook successfully.  YEAH!

Any advise would be helpful,

Hilary S

Hilary,

I’m glad that my books were helpful.  Your organization sounds as if they are getting things set up well.  I hope you’ll be serving homeschool families for a long time to come.

I think Quickbooks (QB) can be as simple or as complicated as it needs to be. The reports your treasurer generates is dependent on what the board wants to see. When I was treasurer, I gave my board a P&L (Profit and Loss) statement.  They really liked to see the budget in one column and actual P&L in another column.  Then they could see how we were doing compared to our budget. This report can be generated in QB as a Budget Report.
I also created a mini balance sheet at the bottom of the P&L.  I took the amount in the checking account and then listed payments to be made.  This gave the board an idea of how much cash we had on hand and where it was planned to go.

If the P&L statements in QB are too overwhelming, then perhaps you’re not using QB correctly.  I frequently see QB users make their Chart of Accounts too long.  Then the P&L becomes 2-3 pages long.  I recommend that a P&L be condensed into one page or less.

If your treasurer would like my help in setting up QB, I’d be happy to help.  She can e-mail me with what needs to be done and I’ll give you an estimated cost.  I also do QB training over the phone. I keep things as simple as possible.

I hope that helps.  I wish you the best of success! (Congrats on balancing the checkbook!)

Carol Topp, CPA

Off to Home Educators Assoc of Virginia (HEAV) Convention

For the next few days I will be at the Home Educators Assoc of Virginia (HEAV) Convention in Richmond, VA.

They have a pretty busy schedule for me. I’ll be giving workshops on:

• Budget Is a Dirty Word: Money Management for Those Who Hate to Manage Money
• Wanna Be a WAHM? The Pitfalls and Possibilities of Being a Work at Home Mom
• Small Business for Teenagers
• Is Your Homeschool Group Ready for the Next Step? Becoming a 501c3 Tax-Exempt Organization
• How to Start and Manage a Homeschool Organization: Boards, Budgets, and Bylaws

(see full descriptions of the workshops here and get the handouts here)

I’ll also be attending the homeschool leaders lunch and I am serving on a Q&A panel for leaders. I hope to meet some of you.

If you’ll be at HEAV, come by my booth #237 or to a workshop and say hello!

Carol Topp, CPA

Alert to homeschool leaders

The Homeschool Group Leader blog had this alert to homeschool leaders:

We want to bring your attention to a situation that occurred recently so you can be on your alert for any suspicious calls. Yesterday, the Home School Foundation (the charitable branch of HSLDA) received a call from an HSLDA member family who had received a suspicious call from a”Dr. Carey.”

Dr. Carey claimed to be a homeschooling mother of 12 gathering information for research work on behalf of the Home School Foundation. She told the family, in this case, the leader of a local homeschool group, that their group had been nominated by members in their group for a compassion grant from HSF.

To qualify for the grant, Dr. Carey explained she needed to ask some questions. These questions started with general queries about homeschooling and quickly led to questions concerning the family’s disciplinary techniques. The family then called HSF and confirmed that there isn’t a Dr. Carey on the payroll with either HSF or HSLDA.

While the Home School Foundation does offer compassion grants to homeschooling families in need, neither HSLDA nor the Home School Foundation would ever call their members and question them on the discipline of their children.

Also, if you have caller ID, all calls from HSLDA read: (540) 338-5600 while all HSF calls read: (540) 338-8688. This caller showed up as a restricted or blocked number. HSLDA does not block our number from your phone.

If any families in your group receive any calls from someone claiming to be from HSLDA or HSF and the caller’s number is either blocked or doesn’t match either of the numbers above, please gather as much information as possible and let us know. And let’s pray that this person will not be successful in deceiving any HSLDA members or other homeschooling families.

Please contact Abigail Dunlap at DiscountGroups@ …if you have any further questions or need to report a suspicious call.

Regards,
Abigail Dunlap
Discount Group Program Administrator
Home School Legal Defense Association (540) 338-5600

There are legitimate researchers out there, but be suspicious if a researcher’s questions become too personal. You do NOT have to answer anyone’s questions if you don’t want to.

Be very suspicious of any organization offering you a “grant” that you didn’t apply for. Grants are difficult to obtain and very competitive; foundations do not make unsolicited grants. It just doesn’t happen.

Carol Topp, CPA

Ten Ways to Torture a Tired Leader

My friends Kristen and Denise of Homeschool Group Leader have a sense of humor.

You have to be able to laugh at human weaknesses if you are a homeschool leader.

Here are their 10 Ways to Torture a Tired Leader:

1. Don’t Listen ~ Talk all during the announcements, the meeting discussions and while your leader shares important information.
2. Be Clueless ~ Ask your leader repeated questions about the information that you didn’t just listen to. Send them one-line questions in individual emails spread out over time.
3. Fill Other Members’ E-mail In Boxes ~ Send your repeated questions and comments to everyone on the list, filling all in-boxes, instead of only the in-box of the leader to whom you’re writing.
4. Quit at the Last Second ~ Volunteer to help with, or better yet–lead–an activity, then back out at the very end, leaving it all for the leader to complete.
5. Gossip ~ Discuss the leader’s clothes, kids, home life, homeschool, and leadership style –openly and with great fervor.
6. Complain ~ Never be happy with the place, the decisions, the agenda, the trips, the teachers, or the way the leader looks at you.
7. Show Up Late ~ Choose carefully the events that need to start at a specific time and strategically and systematically show up 15 or 30 minutes late.
8. Never Help Clean Up ~ Don’t stay after any event and help clean up. After all, isn’t that what the leader is there for??
9. Don’t Watch Your Kids ~ Let them run wild or talk while someone else is talking. Then get offended when someone asks them to be quiet or to sit down.
10. Be Demanding ~ Always express your opinion as fact. Be sure you speak every time someone else does, making sure that your frustrations and wants are very clear each time.

Recognize anyone?  Maybe you at times? Some of these are too close to the truth to be truly funny!

Carol Topp, CPA

Observations from the Midwest Homeschool Convention

On April 16-18, 2009 , I attended the Midwest Homeschool Convention here in my hometown of Cincinnati, Ohio.

I did two workshops, one on Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out (named after my book of the same title) and the other on Micro Business for Teenagers (my upcoming book).

Here are a few of my observations:

Homeschool leaders from across the country all have similar problems:

• No one wants to work or join the board
• Older, experienced hoemschool mothes are not coming to meetings
• There is a need for a clear vision and purpose. Leaders want to be everything to everyone.
• Policies and bylaws are sorely needed to elect new board members, deal with conflict, and to prevent burnout

Meeting and talking to attorney David Gibbs of the Homeschool Legal Advantage was a highlight.  We look forward to a wonderful working partnership helping homeschool organizations. Individual families have long had access to legal advice, but now there is a need for homeschool groups to have access to legal advice also.

Some homeschool leaders lack business sense. I heard about fund raising disasters, mistakes with charging fees and offering discounts, etc.

Meeting some of my virtual friends in person was fun.  And I’m so sorry that I missed some of you! I was stuck in my booth (I shared a booth with Mary Hood, the Relaxed Homeschooler) and didn’t get out much.

Here were some of the questions that were asked during the Homeschool Co-ops workshop:

• What does your co-op charge? Is it by student or by family?
• How often does your co-op meet? How long each time?
• Do you interview potential members?
• How do we ensure everyone is like minded?
• How can we encourage members to help out more?
• Do you group grades/ages in your co-op?
• What classes do you offer?
• Ho do you “fire” a volunteer?
• How do you elect a new baord?
• Can a co-op keep the same director/leader forever?
• Why collect a registration fee?
• Where do you meet for co-op classes?
• What is a typical rental fee?

Aren’t those great questions? I’ll work on answering them on this blog in the future.

I will also be presenting this workshop and several others at the Home Educators Association of Virginia convention  June 11-13.  Stop by my booth and say hello if you attend the convention!

Carol Topp, CPA

New EIN for New Officers?

Does your group need a new Employer Identification Number (EIN) when there are new officers?

Hi Carol,

Thanks to your wonderful services in the past we have gone from a ministry under a church to an informal non profit support group within the community. Thanks so much for what you do for homeschool groups!

I was just reading through the list of FAQ’s and have one that has a little twist to what is already there about EIN’s so I thought I would run it past you.

As the current director (board leader), I had been the person to apply for the EIN for our group. I am nearing my finish on the board and we will have new board leaders. Do we have to have a new EIN issued? I know this current one was opened with my name as the responsible party, so I don’t know if that would “tie” me to the non profit for any thing down the road if I am no longer on the board?

Thanks so much for your help and/or direction.

Blessings,

Shawna B, CA

Shawna,
Thank you for your kind words. It was my pleasure.

You do not have to apply for a new EIN just because of a switch in officers. Nonprofits change leadership frequently.

If you are a 501c3 tax exempt organization with more than $25,000 in gross revenue annually, you should be filing the annual Form 990 with the IRS. On the Form 990, you list the new officers’ names.

If your organization makes less than $25,000 per year then you should be filing the 990N, an electronic postcard, with the IRS. The 990N requests only the name of the “principle officer” not the entire board.

Carol Topp, CPA

Director and Officer Insurance for homeschool groups

A support group leader in Alaska asks about Director and Officer (D&O) insurance.

Dear Carol,
I got to your website from an Old Schoolhouse article about insurance. (Read it here)

We are a support group in Alaska and we serve 90-120 families. We are trying to formalize our ministry partnership with the church and would love to see someone else’s model for a successful ministry partnership agreement. Do you have any thoughts or recommendations?

Also, 7 people on board this year and we would like D&O insurance. We are covered for liability on church’s policy, but not D&O at this point. I have talked with an attorney at HSLDA and because we are
1. a large group
2. high turnover (military community)
3. have at least once a month field trips
we think it is in our best interest to have D&O. I would love to hear your thoughts about other support groups getting D&O and if we should pursue it through the church or through another agent.
Thanks,
Kelly F in AK

Kelley,
I do not usually see a need for a typical homeschool group to need D&O insurance. I was interviewed by Home Education magazine about insurance for homeschool groups. You can read it here: HEM Interview with Carol Topp

Here’s what I said about D&O insurance:

*Director and Officer insurance: This is to protect the leaders from being personally sued for liability. Insurance agents have told me that these policies start at $1,000 per year. They explained it is expensive because of the litigious society that exists in America today. Also D&O policies cover litigation over employee issues such as sexual harassment, wrongful termination, etc. Most homeschool organizations do not have employees, so this type of insurance may not be necessary. However, I have known of potential board members that will not serve on a board without D&O liability insurance. They are usually high net worth individuals and are concerned about personal liability.

By all means purchase D&O insurance if you feel there is a risk that needs to be managed. In addition, I recommend that a homeschool group consider nonprofit incorporation as a means to offer liability protection for their leaders and officers. It is not the same as an insurance policy, but it does offer limited liability protection. Read this article I wrote to learn more about nonprofit incorporation.
Seven Great Reasons to Incorporate

I hope this helps!

Carol Topp, CPA

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