NORTHCENTRAL
UNIVERSITY
ASSIGNMENT
COVER SHEET
Student: Bayo Elizabeth
Cary
THIS FORM MUST BE COMPLETELY
FILLED IN
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Cary, B. ACC7020-8-Assignment # 5
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ACC7020-8
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Dr. Wendy Achilles
|
|
Accounting For Non-For-Profit
Organizations
|
Assignment # 5
|
This has been, my favorite class
activity, thus far. I choose, to not only learn the material well, I also
choose to follow through, and establish my own non-for-profit organization:
Emergency International Internet Relief. I am awaiting the final paperwork,
that I just recently filed online, through legalzoom.com, to establish my
non-for-profit organization, to operate here, out of Florida, U.S.A.. I will
email, my direct quote, assignment writing notes, and guidelines, to your
Northcentral, email address. Thank you.
Faculty Use Only
March 29, 2015
Establishing a Non-For-Profit
Organization
Assignment 5, Advanced Accounting:
Bayo Elizabeth Cary, A.A., B.A., M.L.I.S.
1. Prepare a memo to the group that outlines the process
involved in creating a tax-exempt not-for-profit entity. Be sure to point out
particular alternative strategies, including the advantages and disadvantages
you believe the incorporating officers should spend time considering.
2. What resources are available on the
Internet to help this group understand the regulatory, taxation, and
performance measure issues that they will face as officers of a tax-exempt,
not-for-profit organization?
3. Visit a local NFP in your
neighborhood other than a religious facility. You can usually find a food bank,
or neighborhood service facility. Interview a member of the board preferably
the financial accountant or the Director. Ask them 3-5 questions about the
start-up of organization. Document your questions and their responses as a
supplement to your paper.
What is a non-for-profit organization? A non-for-profit organization, is an
organization which is established, as a non-business entity-meaning, the organization
does not operate for profits, or for the benefits of owners, or shareholders. A
non-for-profit organization, operates for the benefit, of the public good, and
the community as a whole. Because a non-for-profit organization, is established
to assist people, in various capacities, the U.S. government, tries to
encourage the formation of non-for-profits, and, private contributions to
non-for-profits, by providing certain tax exemptions, for operations, and
contributions.
The first step in establishing a non-for-profit organization, is
to define what type of non-for-profit organization, you want to establish.
There is information available of the web, at Wikipedia, and at the IRS
website, regarding the various non-for-profit non-business structures, that can
be utilized, when creating, a non-for-profit organization. The most common
type, of non-for-profit organization, is established as a corporation. I choose
to establish a corporation: Emergency International Internet Relief. The different
structures, and nomenclature, for the various non-for-profit organization
designations, allow for different charitable programs and activities.
Although, it is clearly stated, that non-for-profit
organizations, must re-frame, for participation in politics, there are in
place, allowable exceptions. I read through the exceptions, which allow
non-for-profit organizations, to in some ways, contribute to the field of
politics, in the U.S. . I was not at all comfortable, by the thin line, that is
spanned, and the excuses that are made by non-for-profit organizations, when
they state that their affairs, are not really political activities, although,
they are clearly interacting, in the field of politics.
I think that the U.S. government, should issue a strict
restriction, on non-for-profit organizations, participating in any political
activities at all. The IRS said, that a number of complaints, are filed, about
non-for-profit organizations, engaging in political activities, and then-even
after investigations, and the establishment of guilt, very little, other the a
warning, is ever done, to the non-for-profit organizations, who are violating
the rules, of their tax exemption status. The IRS, upon discovery of a
violation, of one of the rules, pertaining to a non-for-profit organization,
for participating in politics, is supposed to revoke, the non-for-profit
organizations tax exempt status, however, that rarely happens.
In order to establish a non-for-profit organization, as a
corporation, an individual must follow certain required guidelines, for:
articles of incorporation, bylaws, filing with the state, obtaining an employee
ID number, etc. .There are soo many requirements, which must be met, for a
corporation, to be established as a legally operable non-for-profit
organization, that, I choose to pay legalzoom.com, to establish my non-for
profit identity/organization, for me.
I paid legalzoom.com, a reasonable fee, after answering a
series of questions, pertaining to: what I wanted the non-for-profit to be
called, where I am located, what operational structure I wanted, how the
organization would be operated, etc., and legalzoom, set into motion, the
filing of paperwork and the obtaining of all legally required documents, and
regulative bodies, in order for me to operate, in the state of Florida, as the
president, and director, of my own, non-for-profit organization: Emergency
International Internet Relief. I am right now waiting, for the legal documentation,
establishing my non-for-profit, to arrive in the mail to me, from legalzoom.
I have assisted with establishing, a non-for-profit
organization, in the state of Florida before. However, the process of writing
the bylaws, was long and tedious, and therefore, for my non-for-profit
organization: Emergency International Internet Relief, I choose to hire a
company, called Rocket Lawyers Incorporated, to write my bylaws for me. Rocket
Lawyers Incorporated, offered me 1 week, of free services, after having
constructed my non-for-profits bylaws for me, as well as the ability, to submit
questions online, to a lawyer, who specializes, in the establishment of
non-for-profit organizations. I am right now, waiting to hear back, from a
legal representative, at Rocket Lawyers Incorporated. I can already download,
and print, the bylaws, that the Rocket Lawyers Incorporated, have prepared for
me.
There are resources available online, on the IRS, U.S. website,
which provide step by step directions, for establishing a non-for-profit
organization, without the assistance, of an online company, who will perform:
the filing, registration, and other required paperwork for you. Establishing a
non-for-profit organization, by going through each step on your own, without
the assistance of a lawyer, and experienced professionals, is a long and
tedious task-although, it can be done. I would not suggest establishing a
non-for-profit organization that way, just because it would be soo time
consuming, and, there are many legal requirements, which must be met.
Non-for-profit organizations, under the auspice of
corporation, can be run in two different ways-as a membership organization, or,
as a board of directors only, organization. When a non-for-profit
corporation, is run as a membership organization, members help the board of
directors, and the president to decide, how the organization functions. When a
non-for-profit organization is run, as a board of directors only organization,
then, the board of directors, and the president of the non-for-profit, make the
decisions, pertaining to how the organization operates, who to accept financial
donations from, what services are provided to individuals, and the community,
etc. . When establishing a non-for-profit organization, it is important
for the board of directors to consider, what structure to adopt: a membership
structure, or a board of directors only structure, dependent on how much input,
and control, the board of directors, and the president, want over their
non-for-profit organization.
When operating, a non-for-profit organization, decisions pertaining to how the
organization operates, are crucial, to how well the organization, will be able
to assist people. When a non-for-profit organization, allows for membership,
the organization can get bogged down, by disagreements between various members,
who have different social concerns, and ideologies, about: how service should
be provided, to whom service should be provided, and where to accept financial
contributions from, etc. . It is important, for smooth transitions and delivery
of services, that, a non-for-profit organization be run, with as few
disagreements, as possible.
There are two main ways, to finance a non-for-profit organization: the first
major financing option, is to turn to the government, for funding and grants.
The second major financing option, is to rely, on donations from private
individuals, and private organizations. When accepting donations, a
non-for-profit organization, must consider, any stipulations and funding
allocation requirements, which are attached to the donations. The spending
requirements, attached to money donated from governments, varies to a great
extent, from stipulations for spending, that are attached to donations, granted
by individuals, and organizations, to non-for-profits.
When accounting, for non-for-profit organizations-according to: Kattelus, Reck,
and Wilson (2010), donation monies are classified into, the following four
categories:
1. unrestricted net assets;
2. board-designated net assets;
3. temporarily restricted assets;
4. and permanently restricted assets.
(p. 583)
Unrestricted
net assets, are donations that can accessed, and utilized, to further the
charitable objectives and goals, of the non-for-profit organization, with no
stipulations, restrictions, or funding guidelines, as to how the money must be
spent. Board designated assets, are financial donations, which are designated
for use, in ways that the board of directors chooses, and therefore, to spend
these monies, the organization, must obtain the approval, of the board of
directors.
Temporarily restricted assets, are assets which are
available to be spent, only after certain criteria, by the organization is met.
Temporarily restricted assets are moved, for accounting purposes, from
temporarily restricted assets, to unrestricted assets, when the required
conditions, for spending the donations, have been met. Permanently restricted
assets, are assets that can never be spent, and which are often invested, and
earn interest. Most of the time, interest earned by the permanently restricted
assets, can be spent by the non-for-profit organization, however, the
permanently restricted asset itself, cannot be liquidated.
When accepting donations, for a non-for-profit
organization, it is important to consider, any restrictions, or stipulations,
that may be attached, to the spending of the money. It has be argued by some,
that it may be better, to rely on the government, for financial donations, and
grants, when operating a non-for-profit. A government, usually can afford to be
more reliable, in offering the same large sums, to a non-for-profit
organization, year after year. Non-for-profit organizations in the U.S., have a
history, of competing with the private sector, for qualified employees. Often
times, the talent pool, for possible employees, for non-for-profit
organizations, is small, because the private sector, is a more attractive work
environment.
The private sector, compared to the public sector (non-for-profit
organizations), traditionally pays a hirer salary, more benefits, and is a more
stable and reliable support system, for employees. Some non-for-profit
organizations, choose to accept government funding, over the contributions of
private individuals, and organizations, to attempt to maintain, a relatively
stable work environment, with higher pay, lower stress, and a higher retention
rate, of non-for-profit employees. Accepting government funding, can have
serious draw back however. Government donations, because of how the money is
allocated, do not generally require, the high accountability, and
verifications, for charity work and contributions out-put, that private
donations, and donations from other organizations require.
Studies show, that non-for-profit organizations, which are
supported by private donations, and organizations, do a much better job,
serving individuals, and the community, with much needed, and required
services, because people who choose, as individuals, to donate to a
non-for-profit privately, usually, check the reputation of the organization,
and their track record, for not over spending on administration, and for
producing demonstrable-both: qualifiable, and qualitative results-for actively
working in the field, of charitable contributions to society. When
non-for-profit organizations, are held accountable for what they accomplish, in
so far as their charitable service goals are concerned, then, more gets done.
Donating money, to a non-for-profit organization, for charitable services, is
an investment in people, and in a community. When people donate to
organizations, that are non-for-profit, which accept funding from both
government, and private individuals, then-even if the organizations are well
known, there are no guarantees, that the charitable objectives, and goals, that
the organizations purportedly works towards, will really receive the services,
that they have been promised. Many non-for-profit organizations exist, in the
U.S., and abroad, which are well known, and which receive copious amounts of
funding, and, however, do very little, to actually solve, any of the charitable
issues, that they are supposed to address-Amnesty International, and Human
Rights Watch, are examples.
Another problem, with government funded,
non-for-profit organizations, is competition, in the non-for-profit services market.
When government funds, large, and popular non-for-profit organizations, that do
not have to meet many measurable charitable goals, or standards-many times,
money, and attention, are diverted away, from smaller, more effective
non-for-profits, which offer services in the same, or similar areas, and, which
rely primarily of private donations-so, they are more effective. When the
non-for-profit market, becomes over crowded, the efficacy, of non-for-profit
organizations, that really want to help, becomes diluted, and less effective.
It has been suggested, that some new guidelines be introduced, to weed out
non-for-profit organizations, which do not really serve, for the benefit of
mankind, out of the non-for-profit service market.
It has also been argued, by non-for-profit organizations,
which accept donations, primarily from private donors, and from organizations,
that the 501 (c ) (3 ) tax exemption benefits, that are offered by the IRS, in
the U.S., are not a strong enough incentive, to attract more financial
donations, from private contributors. Non-for-profit organizations, often times
struggle a great deal, to obtain financial contributions, to meet their program
goals. If the U.S., would be willing to increase the financial benefits,
associated with contributing financially, to non-for-profit organizations,
then, non-for-profit organizations in the U.S., that work very hard, toward the
betterment of society, could attract more financial support.
Information, is available online, from the IRS, U.S.,
regarding the filing of a 501 (c ) (3 ) tax exemption qualification form, and
other documents, that are required, when operating, a non-for-profit
organization, in the U.S. .There is a financial threshold, that has to
met, before a non-for-profit organization, is required to file for a tax
exemption, and, certain non-for-profit organizations, like churches, are not
required to file with the IRS, in order to establish, their tax exemption
status. Financial, and accounting records, that a non-for-profit organization,
is required to file, with the IRS, in the U.S., are filed as, and considered,
public records, and are supposed to be, completely transparent, for public
scrutiny. The following, is a list of organizations, and websites, which can be
accessed, for assistance with establishing a non-for-profit organization in the
U.S., and with obtaining additional information, of the tax, and accounting
requirements, associated with establishing, and running, a non-for-profit
organization, in the U.S.:
Internet
Resources
Non-For
Profit Organization Establishment/Bylaws&Articles of Incorporation
Legalzoom
99.00 USD
Speak to a
Customer Care Specialist: (866) 738-1730
IRS
Before
Applying For Tax Exempt Status
IRS
Definition
of A Corporation
IRS
Application
Form
IRS
Tax
Information for Charities and Other Non-Profits
IRS
Applying for
Tax Exempt Status
Rocket
Lawyers Incorporated
877.881.0947
Bylaw
Creation
Bylaws Blank
Templet
I had no trouble, because I utilized legalzoom, establishing the paperwork, for
my non-for-profit organization. All the required documents, and paperwork, and
support associated, and required for establishing, and operating a
non-for-profit organization in the U.S., will arrive to me shortly, by mail. I
interviewed, Mrs. Pam Demers, and asked her what the most difficult task was
for her, when she established her non-for-profit organization, and she stated,
that it was writing the bylaws. My bylaws, were written by Rocket Lawyers
Incorporated. I too, have hand written bylaws for a non-for-profit organization
before, and I must agree with Mrs. Demers, that it was a time consuming, and
daunting task.
I then asked Mrs. Demers, how she came to be the director,
of her non-for-profit organization, and she stated, that she inherited it. That
he husband, initially established the non-for-profit organization, and then, he
returned to work as clergy, with a local church. Obtaining financing, for non-for-profit
organizations, can be a challenging task. When I worked in Tallahassee, FL, in
1999, I was pre-medical, and employed by the Florida State University College
of Medicine P.I.M.S. Program. While employed with the F.S.U. College of
Medicine in Tallahassee, FL, I wrote a successful grant application, to the
United Way of Tallahassee, FL. As part of my volunteer work, with Mrs. Demers
non-for-profit organization, I was able to locate a grant online, that her
organization qualifies for.
Finally, I asked Mrs. Demers, how she handles the financial
side, of her non-for-profit organization, in so far as audits, and record
keeping is concerned. Mrs. Demers told me, that she hires out, for the services
of a CPA, to assist with any accounting requirements, associated with her
non-for-profit organization, including audits, and financial statements.
Running a non-for-profit organization, can be labor intensive, however, I see
it as a labor of love, and a fun, and helpful way, to give back to individuals,
and to the community as a whole.
References
Kattelus,
Susan C., Reck, Jacqueline L., & Wilson, Earl R.(2010). Accounting for
Governmental
& Nonprofit Entities.
Boston: McGraw-Hill Irwin.
Sec. 501 (c
) (3 ) Organizations. Journal of Tax Practice & Procedure, 9.
Retrieved from http://eds.b.ebscohost.com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?vid=9&sid=4607f13c-a044-429b-9b95-67b0bcc15174%40sessionmgr111&hid=111
Unknown
Author. (n.d.). Nonprofit. In Legalzoom. Retrieved from
Unknown
Author. (n.d.). Non-Profit Bylaws. In Rocket Lawyers Incorporated.
Retrieved from
Unknown
Author. (n.d.). Application Form. In IRS Website. Retrieved From
Unknown
Author. (n.d.). Applying For Tax Exemption Status. In IRS Website.
Retrieved From
Unknown
Author. (n.d.). Definition of A Corporation. In IRS Website. Retrieved
From
Unknown
Author. (n.d.). Non-For-Profit Organization Establishment. In legalzoom.com.
Retrieved from http://www.legalzoom.com/non-profits/non-profit-corporation-
Unknown
Author.(n.d.) Corporation Bylaws. In Rocket Lawyers Incorporated.
Retrieved from
Unknown
Author. (n.d.). Tax Information For Charities and Other NonProfits. In IRS
Website.
Retrieved From http://www.irs.gov/Charities-&-Non-Profits
Wikipedia/501
(c ) organization. (n.d.). Retrieved March 28, 2015 from the Wikipedia Wiki:
Wikipedia/Nonprofit
Organization. (n.d.). Retrieved March 28, 2015 from the Wikipedia Wiki:
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