This document summarizes a presentation about keeping nonprofits compliant and reducing risk. It discusses common nonprofit horror stories that resulted from noncompliance or abuse of nonprofit status. It emphasizes the importance of compliance with IRS and state requirements, accountability in financial reporting and governance, and developing a risk management plan to prevent issues. It warns of "danger zones" like lobbying, charity gaming, and improper use of nonprofit status that could result in audits, fines, or revocation of tax-exempt status if not managed carefully. The presentation aims to provide best practices for nonprofits to safely navigate requirements and avoid common pitfalls.

1. Safe Passage for Nonprofits:Keeping Your Nonprofit on the Right Path Reduce Risk Increase Confidence Manage Compliance September 12, 2011 Sponsored by : Indiana Nonprofit Resource Network DeKalb County Community Foundation Presenter: Miriam Robeson, Attorney

2. Why Are We Here? Information Level –Intermediate Assumes some familiarity with basics of nonprofits

4. Medical Association of Atlanta ED pleads guilty to embezzling more than $300,000

5. Nonprofit Status of 30 credit counseling organizations revoked for failure to achieve a nonprofit purpose and for excessive executive compensation

7. Employment Taxes

8. Executive Compensation

9. Activist Agenda

10. Compliance (Tax forms)

11. Since 2008, the IRS has added more than 100 employees to the Exempt Organizations Section

13. Accountability

14. Transparency

15. Risk Management

17. Compliance – State Requirements

18. Compliance – State Requirements

19. Compliance - Federal Failure to file – automatic revocation of §501(c)(3) status

21. http://www.irs.gov/charities/article/0,,id=96136,00.html

22. Go to IRS website and search “Publication 78”

24. Compliance - UBIT

25. Accountability

27. Financial Controls

28. Monitor appropriate use of nonprofit funds

30. Handling Money

31. Recording Money

34. Accountability - Personal Benefit

35. Accountability - Ethics

37. Donations of time are not tax-deductible

38. Donor “influence-buying”

39. Improper arrangements with donors

40. Failing to include both spouses in joint gift paperwork

41. Staff/ED/Board/Volunteer accepting gifts from donors

42. Failing to take responsibility (“Not My Fault”)Only 10% of the public believes that charities are ethical

44. Capital contributions used for operational expenses

45. “Borrowing” from restricted funds

46. Purchases from Board-member business without proper disclosure (the copy shop example)

47. Failure to consult professionals for assistance, when needed (lawyer – accountant)

48. Improper oversight of spending (financial control policies) - Indianapolis Humane SocietyMore Examples - Ethics

49. Transparency – Credibility to Public Regularly provide information to the Public

50. Risk Management for Nonprofits Best Practices to Prevent Financial Crisis Identify Risk Ranks Risk Identify Policies to manage risk Implement protections Implement procedures in event of crisis

51. Risk Management PlanTypes of Risk to Manage

52. Risk Management - People Poor economy has resulted in an increase in criminal conduct against nonprofits Embezzlement by employees Embezzlement by officers Fraud from “outsiders” Phrase of the Day – “Trust But Verify”

53. Nonprofits and FraudWhat to do when it happens to you! Fraud Alert!

54. See - Handouts PR for NonprofitsPublic Relations During Fraud Crisis

55. Preventing Fraud

56. Other Danger Zones

57. Danger Zone - Lobbying

58. Danger Zone – Charity Gaming

59. What is “Charity Gaming?”

60. Danger Zone - Abuse of Status

61. Has Your Status Been Revoked? Google: “recent IRS revocations” http://www.irs.gov/charities/charitable/article/0,,id=141466,00.html Comprehensive List of “Automatic Revocations” (organized by state)http://www.irs.gov/charities/article/0,,id=240099,00.html

62. What if you LOSE nonprofit status?

64. Must go through re-application for tax exempt status

65. May include request for retroactive reinstatement to avoid taxes for “interim period”

66. Requires payment of user fee ($400 or $850)

67. Small nonprofits might be allowed to pay $100 user fee

68. Must write “Automatically Revoked” on application

70. Publication 557 – Tax Exempt Status Info

71. Publication 78 – Approved nonprofit list

72. Indiana Charity Gaming Commission

73. Indiana Secretary of State

74. Indiana Department of Revenue

75. Guidestar.org

77. Any Questions? Thank you for your attention! Miriam Robeson, Attorney Today’s materials are available on Miriam’s Website: http://blog.lawlatte.com/index.php/upcoming-workshops/