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

Homeschool group wishes to grant college scholarships

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Carol,

Our 501(c)(3) non-profit homeschool support organization would like to award a $1000 college scholarship to a graduating senior in our chapter of the Eta Sigma Alpha home school national honor society. The criteria for receiving the scholarship is the student must be a member of our homeschool honor society chapter and be a graduating senior that will be attending college in the fall. The students will be judged on their accomplishments in areas of scholarship, character, service, and leadership.

The plan is that I would donate the $1000 to our 501(c)(3)non-profit home school support organization, which would in turn award the scholarship to a student in our honor society chapter. The scholarship winner would be determined by an independent panel of judges. I would not be one of the judges and I have no children involved in the program.

Are there any hoops we need to jump through to accomplish this?

Janis H in Texas

Janice,
You’re to be commended for establishing a scholarship fund and already having good policies in place.

You should look at your organization’s original application for 501c3 status (Form 1023) to see if included Schedule H Scholarships. If your organization included Schedule H, you’re all set. Award away! 🙂

If you did not file a Schedule H, then you’ll need to notify the IRS that you are adding a new activity.

According to this IRS webpage, you report changes and additions in your activities on Form 990 or 990EZ.
http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Reporting-Changes-to-IRS

It would be a very good idea to look at the Form 1023 Schedule H (scroll down to page 28) and it’s instructions. From the questions the IRS asks, you get a very good idea of how they think a scholarship fund should be set up. It sounds as if your organization already has in place many of the IRS’s recommendations. Include a paragraph outlining your policies based on Schedule H questions when fling Form 990 or 990EZ.

If your organization does not typically file Form 990 or 990EZ because you are eligible to file the online e-postcard Form 990N (Annual gross revenues less than $50,000), you should file the longer 990EZ for the year you launch the scholarship program.

I hope that helps.

Carol Topp, CPA

Homeschool co-ops and money!

Homeschool CPA, Carol Topp, was recently interviewed on the podcast Homeschooling Co-op Style by host Pat Wesolowski.

Podcast host Pat Wesolowski

 

 

Carol and Pat discussed the ins and outs of money matters in regard to co-ops and other issues that pertain to homeschoolers (such as fund raising)!

The thought of formalizing your co-op into a non-profit might not have entered your mind.

However, there are benefits to becoming a non-profit and, if you hire teachers you may find it quite beneficial.

Listen to the podcast here

The podcast runs about 30 minutes. Listen in iTunes here!

Got donations? Confirming contributions in a homeschool organization

donation_money_insert_400_clr_5537Is your homeschool group fortunate to have received a donation this year?

It’s important you you to know what your organization needs to do confirming contributions.

Only if your homeschool organization is a 501(c)(3) tax exempt organization, can your donor deduct the donation on their tax return.

If your group does not have 501(c)(3) status, you should thank the donor, but not give them a tax deductible receipt.

(Not sure if your group is a 501(c)(3) tax exempt organization? Read more here…)

 

Here’s some advice from a fellow CPA, Dennis Walsh on confirming contributions.

From http://www.blueavocado.org/content/treasurers-all-volunteer-organizations-eight-key-responsibilities

 

Confirm contributions

A prompt thank you letter that includes what donors need for tax purposes is an effective way to keep your contributors up to date on the great work you’re doing.  The IRS says it’s okay to send this information by email. When different financial duties are assigned to a variety of people, the chances increase that any misappropriated donations will be detected more readily.

Here’s a sample of the essential information to include in your thank you letter:

“Date

“Name and address of nonprofit
“Donor name and address

“We wish to thank you for your 20xx contribution of cash in the amount of $500.00.  We did not provide any goods or services in exchange for this contribution. XYZ Nonprofit is an organization exempt under Section 501(c)(3) of the Internal Revenue Code and contributions are deductible to the extent allowed by law.”

Remember to separately list any single contribution of $250 or more.  If the donation is other than cash, describe the property but do not indicate a value.

If you provided the donor with goods or services as part of the contribution, you could delete the second sentence in the above example and substitute the following:

“We provided you with two theater tickets with a fair market value of $50. Your tax deduction is limited to the amount of cash and value of any property contributed, reduced by the value of any goods or services received in return.  Accordingly, the amount eligible for a federal income tax deduction is $450.”

There are exceptions for items of minimal value such as pens and mugs.  See the discussion regarding “quid pro quo” donations in IRS Publication 1771.

Dennis Walsh, a certified public accountant who lives in Jamestown, North Carolina, is the author of Legal and Tax Issues for North Carolina Nonprofits. Through the Deborah and Dennis Walsh Foundation, he provides volunteer technical assistance to help empower community nonprofits. He can be reached at drwalsh at triad.rr.com

Starting a nonprofit homeschool group correctly! Dollars and Sense Show # 5

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In this episode of the  Dollars and Sense Show host Carol Topp discusses

Starting a nonprofit homeschool group correctly

In this episode,  Carol  discusses how to start a nonprofit homeschool group. She shares her knowledge as the Homeschool CPA on important steps to take when organizing a group such as having a board and a clear mission. She’ll also share tips on how to legally operate your homeschool group.

Listen to the show here

Three steps to launching (or running) a successful homeschool organization:

1. Board: Chose a group of leaders so no one carries the burden of leading alone.

2. Bylaws: Write up bylaws to structure your group. Decide the Who, What, Where, How often and How much issues. In the bylaws mention its purpose (what), its members (who) and its leaders. The Where, how often and how much change frequently and do not belong in the bylaws.

Sample bylaws here

3. Budget: Planning with numbers. Estimate your income and your expenses. Plan a small surplus for emergencies.

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Carol’s new book, Money Management in a Homeschool Organization will help your treasurer create a budget and stick to it!

 

On the show Carol mentioned:

Tune in for the next Dollars and Sense show on December 19, 2013 when Carol will discuss tax exemption and how to get it for your homeschool group.

 

How much money can a homeschool group keep year to year?

Is there a cap to how much we can keep in our checking account from year to year as a homeschool support group?

No, there is not a cap on how much money a homeschool support group can accumulate.

While it is prudent to have a small surplus to meet future needs, most nonprofits do not accumulate a lot of money year after year. If you have plans for a big event in the future, then it is acceptable to accumulate funds for a few years. But without a reason to be accumulating money, the funds should be spent on your current members (but always keeping a small reserve).

Here’s a rough rule of thumb: If you have more than one year’s income as a surplus (and no plans for the future use of the money), then you should probably make plans to spent some of it on your current members. If you have 2-3 years of accumulation, it’s time to readjust your dues or plan a big party with all expenses paid! 🙂

Having a budget should help you manage how much surplus you carry forward.

Sad but true story: My support group leader realized she would end the year with a surplus, so she threw a very nice catered dinner for all the members and their husbands. It was a lovely date night with babysitting provided!

Unfortunately, the leader drained the checking account and didn’t realize that the annual insurance bill was due in the summer before she had collect dues from the members! Ouch! She had to ask several members to loan the group money in order to pay the bills over the summer.  Good planning, a budget, and carrying a surplus would have avoided her embarrassing situation.

Cover Money Mgmt HS OrgDo you have a copy of my ebook Money Management in a Homeschool Organization?

It might be helpful to you.

 

 

Hope that helps,

Carol Topp, CPA

Handling supply fees in a co-op

 

The Facebook group I Am A Homeschool Group Leader recently helped one leader, Particia,  with managing her co-op’s supply fees:

We have the teachers… reimbursed dependent upon how many students they have in that class. This is not working! We must set class fees before the schedule goes out (obviously), but sometimes the teachers may end up with 3 in their class, and sometimes 15. Therefore, sometimes they divide the cost of their curriculum among more students then they receive, and we can only reimburse them the amount that we take in. Please tell me a better way to handle class fees!

 

 

My comment on charging fees: Since I’m a CPA, I think like I was taught in my accounting classes. You have fixed costs (same regardless of number of students such as a teacher’s guide or equipment the entire class uses) and variable costs (increase as number of students increase such as individual books). Some classes have both fixed and variable costs. Most probably have only variable costs.


I recommend in my book “Money Management for Homeschool Organizations” that you charge more than enough to cover your variable costs. IOW, include a buffer for the variability.
http://homeschoolcpa.com/bookstore/managing-a-homeschool-organization/ ($3.99 for the ebook)

Consider this policy: The co-op could reimburse for fixed costs if the co-op remains the owner of the book/equipment. If the teacher wants to keep the book/equipment herself then there is no reimbursement. This assumes the co-op wants to own some supplies and has enough in their budget to purchase them.

 

Patricia replied: Yes Carol, I have read that before! We do pay for certain curriculum that the group itself can then accept ownership of, and loan out to families who may need it in the future.

But, the idea of the teacher paying for the books that she is keeping, is a great idea! That would definitely help with the cost of the class, by focusing mostly on the variables. I have an accounting back ground as well, I think that’s why this stuff drives me crazy!!!

 

Miriam explains how her group manages the money:
We don’t buy any supplies for our teachers because they are considered independent contractors. The teachers set their material fees and those fees are collected in May. On July 15th teachers can deposit them, but they are refundable up through August 7th if a family drops the class. Material fees vary according to subject. Tuition is a set yearly fee and is collected in monthly installments, if parents wish to pay that way. Materiel fees collected in May by registrar, tuition collected by teachers (we have folders for parents to put checks into and teachers collect at the end of the day).

 

If you are a homeschool group leader that would like to join this conversation, please “request to join” with a note stating that you are a homeschool group leader and where you lead.
https://www.facebook.com/groups/72534255742/

 

An alternative to a full audit

A homeschool leader in North Carolina recently wrote to me looking for help with doing an audit:

We offer boys and girls soccer, basketball, baseball, softball, volleyball, and cheerleading. In January we received our 501c3 status as a non-profit group. It is time for our annual audit, but I am not sure which way to go now and who to get to do the audit.

This group had bylaws that required their financial statements to be audited by qualified individuals.

For small nonprofits (revenues less than $25,000 per year), audits are rarely needed and are frequently too expensive and time consuming. Most nonprofit audits cost at least $3,000. Instead of an audit, I recommended changes to their bylaws and some practices and policies to help them be fiscally responsible, but not over burdened.

Some of my suggestions were:

  • Separation of duties
  • Monthly bank reconciliation
  • Regular financial reporting to the board
  • Create and monitor a budget

These practices do not replace the role of an full audit, but they help provide accountability.

Finally, I recommended they consider performing an internal audit occasionally. An internal audit can be preformed by volunteers from your organization. Here are a few websites that offer more information.

The following website explains internal audits for small churches and nonprofits:

http://www.freechurchaccounting.com/churchaudit.html

It also contains a checklist for conducting an internal audit

http://www.freechurchaccounting.com/support-files/internalauditchecklistguidelines.pdf

MoneyMgmtCoverDoes your group have good financial policies and practices? You can start with my article, Best Financial Practices for Homeschool Groups. It is available when you sign up for my newsletter here.

Also my ebook Money Management for Homeschool Organizations has advice and tips for properly handling the finances in your homeschool group. Ebook price $10
Read more here.

Here’s to keeping your homeschool group strong!

Carol Topp, CPA

HomeschoolCPA ebooks mentioned by HSLDA

I am pleased to announce that Homeschool Legal Defense Association (HSLDA) has mentioned several of my ebooks and articles on their Group Services webpage.

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While homeschool groups are not HSLDA members, HSLDA does offer their group services staff, with more than twenty years experience in local and/or state support group leadership, to assist groups by providing examples of how other leaders have handled similar circumstances.

http://www.hslda.org/GroupServices/Leaders.aspx/Legal

On the Leader Support tab you’ll see Legal and Finaincial Resources and my ebooks are articles are metioned there including:

Money Management for Homeschool Organizations by Carol Topp, CPA. (e-book)

How Do We Become a Recognized Nonprofit?” by Carol Topp, CPA

Do We Need to Incorporate?” by Carol Topp, CPA

Q&A for Homeschool Leaders (e-book) by Carol Topp, CPA—The most frequently asked questions from homeschool leaders on the IRS, nonprofit and tax exempt status, boards, conflict, money, fund raising, volunteers, paying workers and insurance.


Thanks HSLDA in helping to assist homeschool leaders!

Carol Topp, CPA

Are fund raisers harming your chances for tax exempt status?

Many homeschool organizations depend on fund raisers to help run their homeschool co-ops and support groups. These fund raisers could actually harm a group’s chances of obtaining tax exempt status.

True Story:

Julie is treasurer of a homeschool co-op in OK that desires to file for 501c3 tax exempt status with the IRS. I examined her financial statements and saw that the group depended heavily on profit from fund raisers including candy, food and flower sales. These fund raisers required Julie to collect over $12,00o a year in sales. The co-op made a profit of nearly $4,000 every year from their fund raisers.

“It’s a blessing to the co-op, because many of our families cannot afford even the small co-op fees we charge. And friends and neighbors beg us to keep selling our products, especially the locally made food.”

The profit from the fundraisers was actually more than the amount collected in co-op dues.

Unfortunately, with most of the co-op’s income coming from fundraisers and not co-op fees, the IRS may not grant Julie’s co-op 501c3 tax exempt status.

The IRS requires a significant portion of your income come from public support (i.e., the dues from your co-op families) and not from an “unrelated businesses” (i.e. selling products in a fund raiser). The IRS defines “significant” as having more than 1/3 of your income come from public support.

Fortunately for Julie’s group, the IRS has several exceptions. One of them worked for Julie’s group. Her fund raising efforts were all done by volunteers and so the IRS considers that fund raiser as part of the group’s support and they meet the 1/3 test mentioned above.

The IRS rules and exceptions get a bit complicated and both the homeschool leader, Julie, and I did our research. We will be very careful and thorough when explaining the fund raising programs to the IRS when Julie’s co-op files for tax exempt status with the IRS.

If your group has concerns about their fund raising practices, these related blog posts might help:

The IRS’s Word on Fundraising Do’s and Don’ts

The IRS and Fund Raising

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

QALeadersCover3DAlso, my ebook, Question and Answers for Homeschool Leaders addresses fundraisers in detail.

Read more including a sample chapter here

Order a copy (in pdf format) for immediate dowload for $8.00 here.

…working to keep you on  the right side with the IRS!

_____________________________________

Finally, attend my free webinar on Fund Raising in a Homeschool Group on Tuesday, November 30 at 8:00 pm EST, 7:00 pm CT. You can listen in on-line and participate in the chat room or phone in and attend the webinar that way. For details on the login in information, phone number to call and workshop handout, click here.

Feel free to tell other homeschool leaders in your area about my webinar. The more, the merrier!

There is no charge for the webinar, except long distance phone charges if you call in .

Carol Topp, CPA