Can a homeschool group give perks to board members?

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Can a member of the board (of our homeschool group) be given free tuition as a perk? Or could this be a conflict of interest?

Ashley

 

Ashley,

It is a conflict of interest if the board votes itself tuition discounts. A nonprofit board member has a duty of loyalty to the organization above themselves. So if a board votes themselves a tuition discount, their loyalty comes into conflict with their personal benefit.

If only one member receives a discount, the rest of the board could vote to give that person a discount in appreciation for her volunteer efforts. That member benefiting should not be in the room during the discussion on discounts and they should not be allowed a vote.

If the entire board wants a discount for each member, then perhaps the bylaws should state that. If the bylaws are amended, I’d recommend  a vote be put to the membership at large approving the discounts as a “perk” of serving on the board.

I’d also recommend a conflict of interest policy. See samples here:http://homeschoolcpa.com/leader-tools/sample-documents/

Carol Topp, CPA

Create a board binder of important papers for your homeschool organization

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I was helping a homeschool leader apply for 501(c)(3) tax exempt status for her homeschool co-op when she mentioned that she had created a binder of important papers. That’s an excellent idea!

I suggested she create three binders and share them with her board members, especially:

  • The secretary who is the keeper of the paperwork for the organization
  • The treasurer who is responsible for the annual reporting to the IRS and their state.
  • The board president whose job it is to make sure everyone else is doing their jobs.

All the board members are responsible for management of the nonprofit and compliance with nonprofit laws. Having a binder of important papers that leaders can to pass down future leaders will make sure the organization is managed well and in compliance with all its reporting obligations.

Here’s what to put in your homeschool organization binders:

  • Employer Identification Number (EIN) letter from the IRS.
  • Articles of Incorporation from your state. This should be the official certified copy with a date stamp proving that your Articles of Incorporation were filed with your Secretary of State.
  • Bylaws. Date them so you have the most recent copy.
  • IRS 501(c)(3) determination letter.
  • IRS Annual Information Returns, the Form 990N, 990-EZ or full 990s
  • IRS Form 8822-B to change the contact name associated with your EIN or to change your address
  • Any state annual reports you file. (If you don’t know what reports you need to file with the state, contact me and I can help.)
  • Helpful articles from HomeschoolCPA.com
  • Books by Carol Topp, CPA especially Money Management in a Homeschool Organization
  • HomeschoolCPA.com website.

 

I highly recommend that you laminate or protect in plastic sheets these important documents.

Pass these binders down to the leaders who succeed you!

Carol Topp, CPA

Easy to understand financial reports for a homeschool organization

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I see a lot of financial reports from homeschool groups. Some are clear, easy to understand and helpful to the board members.

Others are a confused mess.


Read about the most common record keeping mistakes that homeschool groups make and how to correct them in my book Money Management in a Homeschool Organization


 

Recently, I looked over a financial report from a large homeschool organization. They had two goals:

  • Make the financial statements easy to read and helpful to their board.
  • Make it easy to prepare their annual Information return, IRS Form 990. Because their financial reports were confusing, I spent extra time and money reclassifying their information to fit the IRS annual information return.

I recommended that this homeschool organization create a Chart of Accounts similar to the IRS Form 990 and other nonprofit organizations.

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Organizing the Chart of Accounts by categories and using subcategories and indents will make the financial reports easier to read and understand. This Chart of Accounts clearly separates Program Expenses and Administrative Expenses. Categories and subcategories  can be added as needed, but I encouraged the organization to keep the list short to make it easier to read the financial statements.

This organized report will make preparing the Form 990 easier (and less expensive).

 

Carol Topp, CPA

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Compensating board members can be troublesome!

man_with_bylawsI was recently reviewing the bylaws for a homeschool organization that stated,

Members of the Board of Directors may receive reasonable compensation for their services and may be reimbursed for actual expenses incurred in the maintenance of their duties

The board decided to pay its members for serving on the board. This board also selected its own members. There was no election or vote by the general membership on who served on the board.

It seems like a nice thing pay board members, right? They probably put in a lot of time and effort to run this homeschool group. What not pay them a bit for serving?

The IRS doesn’t like it.

A homeschool organization can compensate your board for their service, but compensation to officers is taxable income and the board members must be paid as employees. Other board members who are not officers can be paid as independent contractors and given a 1099-MISC.

Did you catch that? If board members are compensated, the IRS laws say they must be paid as employees. That means creating paychecks, paying payroll taxes (Social Security and Medicare), preparing W-2s, quarterly filings with the IRS and your state, and may mean Unemployment and Workers Comp taxes!

Does your homeschool group prepared to manage payroll? My new book Paying Workers in a Homeschool Organization can help with that!

Also because this board appoints itself, it is self-dealing to vote itself compensation. This is what the IRS calls private benefit or inurement and it is forbidden by the IRS. Your organization could lose its tax exempt status if you practice inurement or too much private benefit. The IRS is serious about this!!

What counts as compensation? Here’s some guidance from the IRS

1) salary or wages
2) contributions to pension and profit sharing plans
3) unpaid deferred compensation
4) payment of personal expenses
5) rents, royalties or fees
6) personal use of organization’s property or facilities

Look at  4) payment of personal expenses, such as paying a hired teacher on behalf of the board member, is taxable compensation.

Reimbursement of expenses is OK, but compensation of board members for their service is taxable compensation.

My advice to this homeschool group was to stop paying board members compensation for serving on the board. Paying board members is complicated, requires they be paid as employees, and is probably illegal for this self-appointed board.

Carol Topp, CPA

 


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Paying Workers in a Homeschool Organization-2nd edition

$9.95 paperback
130 pages
Copyright 2017
ISBN 978-0-9909579-3-5

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Coming soon…how to motivate every member in your homeschool group

Way back in 2009, I was asked by Denise Hyde to review her book One By One: The Homeschool Group Leader’s Guide to Motivating Your Members.

It was fantastic! Really good. Really helpful. Here was my review:

“One by One is a book that every homeschool leader needs, but does not realize the need until it is too late! Every leader has difficulty motivating members or getting volunteers, but they only ask for help when it’s too late and they are tired, frustrated and want to quit! Instead, leaders should read Kristen and Denise’s very practical and encouraging book.

Inside you will find the three secrets to successfully motivating every member and then practical, real-life ways to apply those skills to everyone from moms to teenagers. I especially appreciated the true stories of how Kristen and Denise implemented everything they suggest.

They know their stuff and have a heart to share what they know with others. Take some of the advice, share it with your fellow leaders, apply it and you will find happier members, a more relaxed leader and a successful group!”

 

Well, now I’m pleased to announce that Denise is updating the book and I will be helping her get out the word about this terrific resource.

She’s going to set the price a bit (well, a lot) lower and offer it in print and in ebook format.

There is a little more work to do on the book, but it should be ready  in a few weeks.

I’ll send out an email when it’s ready. And I’ll probably have Denise on my Dollars and Sense podcast to help you motivate every member!

 

Carol Topp

 

Ask your board these question to spark discussion and planning

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Does you homeschool organization’s board meeting always seem to focus on minor details and irritations? Do you lack direction and forward thinking?

Nonprofit guru TomOkarma shares some great ideas for you board members in  Board Presidents That Don’t Bore

He recommends taking 10 minutes at the beginning of your next board meeting and asked questions like:

  • If we were starting up our organization today brand new, what would it look like?
  • Would we recreate what we have now, or create something that looks different?
  • Say we just came off the most successful year we ever had from programming, fund development and organizational standpoints. What key steps or decisions did the board make resulting in these great results?
  • If we could do one thing right now that would improve our organization (whether internally or externally in our service delivery) and neither time nor money was an issue, what would that be?
  • Ask each member to explain your organization’s history, mission, and programs. It will be a good test!
  •  Pretend it was the worst year ever – what happened and how do we right the ship?
  • How about using the approach “Here’s what the organization is trying to achieve. In the past, it has achieved “A”, “B” and “C” in this way. It has not been able to achieve “D”, “E” and “F”. What do you think we should do in order to achieve these things?

Those ought to generate some discussion! You may have to set a timer to stop the idea flow and get down to business!

Or set aside an evening or a weekend to organize a board retreat and discuss these questions.

HS Co-ops Cover_400If you don’t have a board, make that a goal. My book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out will help you find members to help you lead your group.

And later in 2015 I hope to offer a new resource to help you motivate every member of your homeschool organization…details to come!

 

Carol Topp, CPA

 

3 essential tools for homeschool leaders

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At the Indiana Association of Home Educators 2014 conference, I spoke to homeschool leaders about

Tips and Traps for Homeschool Leaders

In this video I discuss the 3 essential tools that homeschool leaders need.

In the video I mentioned a handout. You can download it here: http://wp.me/aF6pa-1c4

I hope the video is helpful.
For other videos for homeschool leaders visit HomeschoolCPA.com/Videos

 

Carol Topp, CPA

HomeschoolCPA.com

3 Tools for Running a Successful Homeschool Co-op (video)

Are you in a homeschool co-op or thinking about leading one? I have some advice for you! (I even write a book about homeschool co-ops!).

Here’s a video clip from my recent presentation of Homeschool Co-ops Are Like Marriage: Know What You’re Getting Into given at the Midwest Great Homeschool Convention in 2014.

Part 5 is titled 3 Tools for Running a Successful Homeschool Co-op.

In the video I mentioned my book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.

Here’s a handout for the presentation.

More clips from this presentation can be found at HomeschoolCPA’s YouTube Channel.

 

Carol Topp, CPA

Should your homeschool group have members? Maybe not!

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Many homeschool organizations file to become nonprofit corporations in their state and they are usually asked

 Does your corporation have members?

 Well, naturally most homeschool groups have members, so the answer is “Yes”, right?

Maybe not.

 

Read the question carefully. It asks if your corporation has members. Your group may have members, but not the corporation.

What’s the difference?

For-profit corporations have shareholders. These shareholders are entitled to a vote on matters brought to their attention. A nonprofit corporation may have members, but is not required to have members. If a nonprofit corporation has members, then those members are entitled to a vote on matters brought to them. Typically, this might be electing board members, approving the budget, choosing  to hire paid staff, etc. (the bylaws usually spell out what members vote on).

Voting memberships are useful when an organization wishes to be democratically controlled by its constituents. Voting memberships structures are commonly used by member driven organizations such as social clubs, churches, chambers of commerce and trade associations. In such cases, the organization exists to serve its members and its makes sense for control to be vested in the members.

Source: http://charitylawyerblog.com/2011/04/26/nonprofit-law-jargon-buster-voting-members-vs-self-perpetuating-boards/

Some nonprofit corporations do not have members; instead decisions are made by the board. The members do not have a vote, nor do they elect board members. The board appoints replacement board members (it’s called self-perpetuating).

Many homeschool organizations may have members participating in their activities (co-op classes, field trips, clubs, etc), but not have voting members of the corporation. Instead, they have a board that makes the decisions.

Advantages of a board-run organization (i.e., no members of the corporation)

  • A board-run homeschool group does not have to gather members together for a vote.
  • Decisions can be made more quickly.
  • A smaller group of people, the board, makes the decisions

Disadvantages of a board-run organization (i.e., no members of the corporation)

  • No input from the members
  • The board replaces itself and could become insular with no new ideas.

 Should your homeschool nonprofit corporation have members?

Well, of course, that is up to you, but I believe that it is more cumbersome for most homeschool organizations to have voting members. Many homeschool organizations are run by a self-perpetuating board very successfully.

What if your Articles of Incorporation state you have members, but you want to change that?

You will have to amend the Articles of Incorporation. This will probably take a vote of the members. State law dictates who can change the form of the corporation. Start researching “amend nonprofit corporation and YOUR STATE”  It usually involves holding a member meeting to change the Articles of Incorporation, filing some paperwork with your state and paying a small fee to your state (typically $30-$50).

 

Carol Topp, CPA

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What can you do when your leader is overly-controlling?

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Does your homeschool group suffer from a dominate leader? She may have founders syndrome.

What can you do when your leader is overly-controlling?

How-matters.org offers this advice for boards:

  1. Understand and take full responsibility for the role of board member. Insist on focused board training to review the roles and responsibilities of a governing board. Undertake a yearly self-evaluation of the board to ensure it is operating effectively.
  2. Once a year, conduct a key exercise: pretend the founder suddenly left the organization. Who will/can quickly step in? Are you sure? What activities are the staff really doing to carry out programs? In the case of non-profits, what grants does the organization have to perform against and report on when? What is the cash flow situation? What stakeholders must be contacted? Where are the files/records?

I really like the idea of pretending your key leader suddenly left. It’s a great idea!

The blog post from How-matters.org offers other terrific suggestions for boards facing a founder who won’t let go.

Author Stephen G. Donshik in an article “The Creator or the Destroyer: Dealing with Founder’s Syndrome”  says it can take a long time, many months, to get a founder to loosen the reins.
It might require many discussions between the parties; it may take months before the founder acknowledges the need for a change in leadership.
What should you do if the founder won’t let go of leadership? Mr Donshik advises,
At some point if the founder is not receptive to planning for a succession of leadership in the organization, the board of directors may have to make a difficult decision to remove the founder from her leadership position when her continuing in the role is destructive to the agency.

I hope your organization will deal with founders syndrome and come out stronger and continue to serve more homeschool families.

Carol Topp, CPA