Bad Acting Nonprofit Board Members

I like crime novels and murder mysteries. So I was intrigued with a series of cases that the Ohio Attorney General shared regarding bad acting nonprofit board members.

https://www.ohioattorneygeneral.gov/Media/Newsletters/Nonprofit-News/August-2020/Enforcement-Actions

Board members paying themselves for board work

Most of these cases involved board members’ breach of their fiduciary duty.

They usually paid themselves a boatload of money when the organization dissolved.
That’s a “no-no” for nonprofits with 501c3 tax exempt status. When a 501c3 dissolves the money goes to another 501c3 (including churches) not to the board members.

Two board members claimed the money they paid themselves was “a retroactive payment for service as trustees.” Ohio’s Attorney General disagreed and ordered payment of $16,380 in restitution and a $1,820 civil penalty. The board members were also ordered to not serve in any role in a charitable organization for one year.

Failing to file IRS and state reports

Another board of a nonprofit, a cheerleading gym, failed in their fiduciary duties by failing to file the annual IRS information return, Form 990, and failing to file a statement of continued existence with Ohio Secretary of State’s Office. The board members’ (a married couple) penalty was $10,000 and a 5 year ban from serving a charitable organization and can never incorporate another nonprofit.

So forgetting to file your IRS and state reports can get you in pretty serious trouble!


If you are unsure of what reports your homeschool organization should be filing I have some resources for you:


I hope I NEVER read of a homeschool organization getting penalized for breaching its fiduciary duties!

Read more about board duties.
Podcast episode on Board duties

Please talk your job as a board member seriously.

Ask a lot of questions about how the money is being handled and what reports your homeschool group should be filing each year.

My book Money Management in a Homeschool Organization is a good place to start.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Planning an Uncertain Future webinar for homeschool leaders is available for viewing!

Carol Topp and three homeschool leaders offered a webinar for homeschool group leaders on planning for an uncertain future this fall (2020).

Here are some of the comments for live attendees:

Enjoyed the webinar very much! Took away some great snippets that have had my head swimming with possibilities for the coming school year. Really excited about this year!

My co-leader and I have much to discuss in the next few days. Things we didn’t realize we should be considering were brought to light. I think, as a result of our attendance last evening, our planning will be more strategic.

Thank you ladies for doing this. Very helpful and insightful. I really appreciate your time in putting this together. ??

The webinar was recorded and is available for viewing:

The webinar panelists discussed:

  • Making Decisions as a Board
  • Planning Tools
  • Social Distancing in a Homeschool Group
  • Ideas from Homeschool Leader Panelists
  • How to Communicate Your Plans to Members

The webinar is offered at no cost to you. We hope it is helpful.


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Help a New Homeschool Group Start Up Quickly

Homeschooling is exploding in light of the COVID-19 pandemic and existing homeschool groups cannot accommodate all the newcomers.
But homeschool leaders want newbie homeschoolers to be successful and have support, so what’s to be done?

How about your existing homeschool group help start another homeschool group? It can be pretty easy. It’s called a “fiscal sponsorship” arrangement Here’s how it would work:

Step One:

Read up on a concept called “fiscal sponsorship.”
These blog posts will get you started:

Step Two:

Meet (online via Zoom) with the leaders of the new group. Explain the arrangement. The new group will exist as a “program” or a committee running the program under your existing homeschool organization.

The new program or committee leaders will get:

  • Use of the parent organization’s EIN (employer Identification Number)
  • Use of the parent organization’s nonprofit incorporation status. This means the new group does not have to form a new nonprofit entity
  • Use of the parent organization’s bank account. The parent organization may want to set up a new checking account for the new group with its existing EIN. Make sure the treasurer has online access to the new checking acocunt.
  • Use of the parent organization’s 501c3 tax exempt status. This is a HUGE advantage. The new group won’t have to apply to the IRS to grant tax exempt status. They can be up and running immediately!
  • Use of the parent organization’s bylaws. The new group will be under the parent organization’s bylaws as a new program, so the new group doesn’t need its own bylaws.
  • Use of the parent organization’s Policy Manuals, registration forms, etc.
  • Use of the parent organization’s website, Facebook account, and other online services for registration.
  • Coverage under the parent organization’s insurance policy. Another HUGE advantage. The parent organization should call its insurance provider and explain it is expanding. Ask for a new quote on what the increased cost will be. Make sure the new group pays the parent organization for their share of the insurance.

The new group will need to:

  • Set up a committee of at least 3 people to operate the new program. One of the parent group’s board members should be invited to all committee meetings to offer help and advice. She should report back to the parent organization on how the new program run by the committee is doing.
  • Find a location to hold their program, meet-ups, classes, etc.
  • Pay the parent organization their share of the insurance
  • Give financial reports to the parent organization at least every 3 months, although monthly is recommended.
  • Make 2-3 year plan for launching itself to be an independent organization.

Agreement in writing

I strongly recommend a written agreement signed by the Chair of the parent organization and the new program committee chair.

The agreement should outline the bullet points given above and add any other issues you think of.

If you want examples of agreements, you could look at some fiscal sponsorship samples
or read

Fiscal Sponsorship: 6 Ways to Do It Right by Gregory Colvin. It describes six models of sponsorship that have been approved and accepted by the IRS. It details how the models work and why, how they differ and how they are similar.

Summary of the book and its six models of fiscal sponsorship by the author: Fiscal Sponsorship: 6 Ways to Do It Right synopsis Colvin.pdf

Advantages

The advantage of this idea is that your group can help start a new group as a program and there is very little you need to do except offer advice! The new group will have the advantage of being able to focus on starting their activities and not have to worry about paperwork, setting up a bank account, government filings, etc. The parent group has already done all that!

This comparison chart of starting a new organization or creating a committee as a fiscal sponsorship under an existing nonprofit was created by attorney Gregory Colvin. It shows how fast a committee can get started on running a new program.

It can work!

This idea is really something new and existing homeschool groups could do together to help new homeschoolers learn from the experienced ones!

If you have more questions about fiscal sponsorship or starting a new homeschool group, I am happy to set up a phone consultation. Contact me and we can discuss what questions you have!

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

A Decision Making Tool for Homeschool Leaders

Homeschool leaders are having a hard time planning for the future this summer (2020). There are concerns about member’s safety as the COVID-19 pandemic rages on, parents needing support homeschooling, and new families considering homeschooling long-term.

There are so many decisions to make. Is there anything to help homeschool leaders?

Yes. there is!

It’s called a decision matrix.

When I was in homeschool leadership, our board had four different locations to chose from. We created a decision matrix to help us evaluate all the options and what criteria was most important to us.
We considered the location, rent, facilities, and relationship with he host church. It was a visual tool to help us see which option was the best choice.

A decision matrix could be a bit help to your homeschool group as you plan your activities for the fall of 2020.

Some of the criteria you might want to consider include:

  • Low risk of spreading the coronavirus
  • Cost to run the activity
  • Ease of social distancing
  • Ease of sanitation
  • Popularity with members
  • Indoors or outdoors
  • Availability to everyone or just some
  • Welcoming to newcomers
  • Ease of running the activity
  • Does the activity help accomplish our purpose?

Below is a snapshot of a possible decision matrix. This example has five activities the homeschool group is considering (including a new idea) and the criteria they will use to evaluate offering each activity in the fall.

The support group meetings (in homes and moms only) received a high score, but unfortunately the in-person co-op classes did not; they were too risky.

You can also add a weight factor since not all criteria are equal in importance. In this example the criteria were ranked from one (low importance) to five (highest importance). Your group may have several ones and more than one five.

This decision matrix spreadsheet is available to download. I hope it is helpful to your group as they evaluate their programs and activities in the future.


Feel free to edit the Activities and Criteria and, of course, the scores to fit you particular group.

Be sure the wording of your criteria and scores are consistent. High scores means good, low scores are bad. For example, a low risk of spreading disease gets a high score. A high risk of spreading disease would get a low score. It’s easy to get the wording and scoring mixed up!

You are allowed to share this spreadsheet with other homeschool group leaders but please attribute Carol Topp, CPA at HomeschoolCPA.com


You might find my webinar Homeschool Leaders: Planning an Uncertain Future helpful. It’s meant to help homeschool leaders who are facing difficult decisions.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Webinar Recording Homeschool Leaders: Planning an Uncertain Future

Homeschool leaders are facing an uncertain future and tough decisions this fall as the COVID-19 pandemic has caused governments to impose social distancing laws and new health and safety guidelines.

Carol Topp and three homeschool leaders hosted webinar for homeschool group leaders on June 1, 2020.

Here are some of the comments from live attendees:

Enjoyed the webinar very much! Took away some great snippets that have had my head swimming with possibilities for the coming school year. Really excited about this year!

My co-leader and I have much to discuss in the next few days. Things we didn’t realize we should be considering were brought to light. I think, as a result of our attendance last evening, our planning will be more strategic.

Thank you ladies for doing this. Very helpful and insightful. I really appreciate your time in putting this together.

The webinar was recorded and can be viewed on YouTube https://youtu.be/AaQ1c_XuUvY?

The topics discussed included:

  • Making Decisions as a Board
  • Planning Tools
  • Social Distancing in a Homeschool Group
  • Ideas from Homeschool Leader Panelists
  • How to Communicate Your Plans to Members

A handout of the slides is available. Slide Handout


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

IRS guidance on nonprofit boards

A client recently asked me what the IRS had to say about nonprofit boards. In general, the IRS is not the rule enforcer on nonprofit hoards. The states define the requirements to be a nonprofit and the size and make up of the board

As the IRS puts it,

“And while the tax law generally does not mandate particular management structures, operational policies, or administrative practices, it is important that each charity be thoughtful about the governance practices that are most appropriate for that charity in assuring sound operations and compliance with the tax law. As a measure of our interest in this area, we ask about an organization’s governance, both when it applies for tax-exempt status and then annually as part of the information return that many charities are required to file with the Internal Revenue Service.”

Click to access governance_practices.pdf

IOW, the IRS asks questions in its application for tax exempt status and in the annual returns nonprofit file (Form 990). These questions try to drive good behaviors.

In an IRS document titled Governance and Related Topics – 501(c)(3) Organizations the IRS recommends good practices for nonprofit boards. Some of the topics covered in the 8-page document include:

  • Mission-Know your mission, and purpose and review it regularly
  • Organizational Documents– includes bylaws and Articles of Incorporation (for nonprofit corporations) or Articles of Association (for unincorporated associations).
  • Governing Body-your board should consist of qualified, involved members who are independent and not dominated by employees or paid staff.
  • Governance and Management Policies-Have policies on compensation, conflicts of interest, investments, fundraising, documenting governance decisions, document retention and destruction, and whistle blower claims.
  • Financial Statements and Form 990 Reporting– The board should ensure the nonprofits funds are properly spent.
  • Transparency and Accountability-The Internal Revenue Code requires a charity to make its Form 1023 exemption application, Form 990, and Form 990-T available for public inspection.

How is your board doing in these areas? Need improvement?

How about we talk about it?

I’d love to set up a conference call or Zoom video chat with your board to discuss ways to improve your nonprofit’s governance. All this leads to better run organizations and less work and stress on your hard-working board members!

Contact me today and we can set up a call.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

How are nonprofits monitored, regulated, and governed?

A homeschool leader asked me recently, “Who holds nonprofit organizations accountable? Is it the IRS?”

While there are some issues, such as taxes and tax-exempt status, where the IRS has some oversight of nonprofits, the true watchdogs of nonprofit organizations are their own boards and their states.

BoardSource.org has a article that explains who monitors and regulates nonprofit organizations. They list the organization’s board of Directors as the “first line of defense against fraud and abuse.” The board is followed by the states’ Attorney General, the IRS, donors and finally the media.

No government agency exists exclusively to monitor the activities of nonprofits

BoardSource.org

“Nevertheless, nonprofits have many lines of defense against fraud and corruption:

  • Boards. All nonprofits are governed by a board of directors, a group of volunteers that is legally responsible for making sure the organization remains true to its mission, safeguards its assets, and operates in the public interest. The board is the first line of defense against fraud and abuse.
  • Private watchdog groups. Several private groups (who are themselves nonprofits) monitor the behavior and performance of other nonprofits. Some see their mission as serving as advisors to donors who want to ensure that their gifts are being used effectively; others are industry or “trade” groups that provide information to the public and encourage compliance with generally accepted standards and practices.
  • State charity regulators. The attorney general’s office or some other part of the state government maintains a list of registered nonprofits and investigates complaints of fraud and abuse. Often the state attorney general serves as the primary investigator in cases of nonprofit fraud or abuse. Almost all states have laws regulating charitable fundraising.
  • Internal Revenue Service. A small division of the IRS (the exempt organizations division) is charged with ensuring that nonprofits are complying with the requirements for eligibility for tax-exempt status. IRS auditors investigate the financial affairs of thousands of nonprofits each year. As a result, a handful of organizations have their tax-exempt status revoked; others pay fines and taxes. In 1996, legislation authorized the IRS to penalize individuals who abuse positions of influence within public charities and social welfare organizations. Formerly the only weapon available to the IRS was to revoke tax-exemption, which resulted in the denial of service to the clients and constituents the organization was created to help. Because they fall short of revocation of tax-exempt status, these provisions are called intermediate sanctions.
  • Donors and members. One of the most powerful safeguards of nonprofit integrity are individual donors and members. By giving or withholding their financial support, donors and members can cause nonprofits to reappraise their operations.
  • Media. Most of the major scandals involving nonprofit organizations in recent years have surfaced as a result of media investigations and the resulting news stories. While many nonprofit leaders feel misunderstood or even maligned by negative media coverage, this media watchdog role has resulted in increased awareness and accountability throughout the sector.”

The full article (and many more excellent articles about nonprofit boards) is available at :

https://boardsource.org/resources/legal-compliance-issues-faqs/


Resources for Homeschool Boards

So how is your board doing in its oversight and prevention of fraud and abuse?

My book Money Management in a Homeschool Organization devotes a chapter to helping your nonprofit avoid financial mismanagement.

Additionally, the Homeschool Board Member Manual will help train your board in its duties and help organize your important papers.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Closing Your Homeschool Group During COVID-19

Has COVID-19, the novel corona virus pandemic, caused your homeschool group to close, suddenly? How did you make the decision to cancel your program?

Carol Topp, the HomechoolCPA, is joined on today’s podcast by Doreen Browning, co-moderator of the I am a Homeschool Group Leader Facebook group and Jamie Buckland, Classical Program Consultant.

Listen as Carol, Doreen and Jamie discuss:

  • Making hard decisions to close your homeschool program.
  • The benefits of having a team help you make quick decisions under stress
  • What to do if there is push back about your decisions.
  • Future decisions about re-opening.

Join the Facebook group for homeschool leaders: I am a Homeschool Group Leader. 1200+ homeschool leaders offer ideas, encouragement and respectful exchange of ideas. https://www.facebook.com/groups/72534255742/

Webinar: Starting an Academic Homeschool Program

Are you interested in starting a homeschool program with a classical and academic focus? Jamie Buckland started Appalachian Classical Academy (ACA) after running a for-profit classical community. Now she is the Executive Director of ACA. She explains how ACA is set up with not one but two boards to run the Academy as a nonprofit organization!

Jaime and Carol teamed up to present a webinar on the ABCs of Starting an Academic Homeschool Program. You can benefit from their combined knowledge in this webinar (and you’ll get several helpful resources as well). http://homeschoolcpa.com/how-to-start-an-academic-homeschool-program/


Jamie Buckland, the Classical Program Consultant is available for phone consultations regarding starting and running a classical homeschool group. Contact her at https://jamiebuckland.net/

San Antonio, Austin and Houston: Q&A with HomeschoolCPA this week

San Antonio, Austin and Houston, Texas will all be getting live Q&A time this week with Carol Topp, CPA, the Homeschool CPA!

San Antonio: Tuesday February 25, 2020
from 7:00 to 8:30 pm
on the lovely grounds of
Family Educators Alliance of South Texas (FEAST)
7735 Mockingbird Lane • San Antonio, TX • 78229
Register here for San Antonio

Austin: Wednesday February 26, 2020
from 6:30-9:15 pm
at
Calvary Worship Center (North Austin, close to TX 45 & N Mopac Expy)
14901 Burnet Road
Austin, TX 78728 
More information and to RSVP for Austin

Houston: Thursday February 27, 2020
from 6:30-9:15 pm
at
University Baptist Church  (Chapel area)
16106 Middlebrook Dr
Houston, TX 77059  
More information and to RSVP for Houston

Each event is free, but the organizers would appreciate you register so they have a head count.

The San Antonio event is sponsored by Family Educators Alliance of South Texas and the Austin and Houston events are sponsored by Texas Homeschool Coalition with much appreciation!


Each event will have:

  • A brief session presented by Carol Topp, CPA, the HomeschoolCPA on “Topp Tips for Running a Homeschool Organization”
  • A Town Hall session for you to ask question and get advice from other homeschool leaders
  • Q&A time with Carol Topp, CPA
  • Professional advice on finances, legal structures, taxes, employees, insurance, etc.
  • A chance to look at HomeschoolCPA’s books
  • An opportunity to be encouraged by other leaders who understand you!

I hope to see you in San Antonio, Austin or Houston!

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Homeschool Teacher Accused Molester: How to Safeguard Children

The headlines that came proclaimed something we all fear: A homeschool teacher molests 17 year old girl.

Arkansas mom held for sexually abusing teenage girl

As homeschool leaders we never want to read about the horrific things that could happen in a homeschool program.

In this specific case, the events between the accused and victim did not take place during the co-op time.

Take time to assess your risk based on your activities. Develop, communicate, and stick to a plan. The links below will help.

Check with your state to determine who is mandated to report child abuse.

In this case, a parent reported her concerns to the pastor of he church where the homeschool co-op was held. He is a mandatory reporter and the pastor reported the abuse to the police.

Reporting is typically confidential.

Your leadership needs to know what to do if there is a report of suspected abuse. It is never the leadership’s responsibility to investigate, only to report to authorities.

Often, leaders feel they should investigate to see if it really happening – feeling that they need to have the claim substantiated before reporting, but that’s not true.

 

Resources to Safeguard Children

There are lots of websites that offer guidelines on assessing your risk and creating a response plan. Below are two that will get you started.

This important thing is not that you read these sites.

The important thing is that your board create and stick to a plan.

Get educated and act on it.

Managing and reducing risk in your program

Key Principles in Youth Protection

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders…to safeguard children