Do your due-diligence, then be generous in your support.
Most of us are involved at some level with a non-profit organization. Perhaps you donate money to support their cause or volunteer your time. Maybe you serve on their board of directors. There are many worthy causes to support. Is your favorite non-profit worthy?
The Internal Revenue Service has long known that some organizations abuse their non-profit status. To address this problem the IRS made considerable changes to the non-profit tax return, or 990, to include more information than was previously disclosed.
For example, the board of directors' names, addresses and any compensation must be disclosed. Many of the returns are required to report the salaries of their highest-paid individuals. Board members are required to report any conflicts of interest with the agency. Furthermore, the agency must have in place a conflict-of-interest policy, a whistleblower policy, and must report how the board members get access to the 990 return to review it before it is filed.
If you have any questions about a non-profit, its sources of revenue and how it spends its money, you can log on to guidestar.org, a service that provides detailed information on non-profits. You can view the latest tax return of a nonprofit on the website.
If you are asked to be a member of a board of directors or a non-profit, or are currently serving on a board, you should understand the organization and its controls and operating procedures. Of course, for your protection you should confirm that the organization carries liability insurance on directors and officers. Furthermore, you should be familiar with the following:
* Who are the current board members? Are they ethical and respected members of the community? Do they take their role seriously as board members and are they active in the support of the organization?
* Are the executive director, the chief financial officer and other management positions filled with qualified and competent individuals?
* Are the financial statements audited by a CPA?
* Does the organization have internal controls in place and are they operating effectively?
* Does the organization understand its filing requirements under the IRS and is it current on its filings?
* Does the organization have an operating budget? Does it operate within that budget each year?
* Has the organization developed long-term goals for growth and sustainability?
It is important to understand the operations of any non-profit organization you are involved with, small or large. The local newspapers are filled with articles about a trusted employee who in some way committed fraud within a non-profit organization and misappropriated funds.
A well-run non-profit, no matter its size, will have controls in place to ensure that funds are properly accounted for. As auditors of many of the local non-profit agencies in Northwest Indiana, we have had the pleasure of working with high-integrity organizations that have been the backbone of our local social service and arts community for many years, and we have offered guidance on internal controls and accounting and tax reporting.
In these current economic times, non-profits are struggling even more than in the past to secure funds and support for their mission. A well-run non-profit will be happy to share information with you about their organization. We urge you to continue supporting these important organizations as informed donors and volunteers.
Jill A. Jones, CPA, is the audit partner at McMahon and Associates Certified Public Accounts, P.C., in Munster. Her 18 years of accounting and auditing experience includes working with many local non-profits in various capacities. Debra Waisnora, CPA, is the audit manager for McMahon and Associates Certified Public Accountants, P.C. She has a degree from Valparaiso University, where she majored in social work, and received her accounting degree from Indiana University Northwest.