NORTHCENTRAL
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Student: Bayo Elizabeth Cary
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Cary, B. ACC7020-8-Assignment # 5
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ACC7020-8
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Dr. Wendy Achilles
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Accounting For Non-For-Profit Organizations
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Assignment # 5
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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.
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.
Works
Cited
Conway, Catherine F., Sebranek, Tony A. (Spring2002).
403 (b ) and 401 (k ) Retirement
Savings Programs: A Guide
for 501 (c ) (3) Organizations—Part 1. Journal of Pension Benefits: Issues
in Administration, 9. Retrieved from http://eds.a.ebscohost.com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?vid=1&sid=be23d9ad-1f0e-48a8-bd5e-809bcbdace88%40sessionmgr4005&hid=4208
Kattelus, Susan C., Reck, Jacqueline L., & Wilson,
Earl R.(2010). Accounting for Governmental
& Nonprofit Entities. Boston: McGraw-Hill
Irwin.
Kertz, Connie. (Aug/Sep2007). Politics in the Pulpit:
Political Campaign Intervention by Code
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
Scharf, Kimberley. (Feb2013). Impure Prosocial
Motivation In Charity Provision: Warm-Glow
Charities and Implications for Public Funding. Journal of Public
Economics, 114, 50-57.
doi:
10.1016/j.jpubeco.2013.10.002
Tutaj, Adam J. (Nov/Dec2012). Choice of Entity Corner.
Journal of Passthrough Entities, 15.
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:
Wilkins, William J. (Aug/Sept2014). Tax Administration
Priorities From The Office of Chief
Counsel. Journal of
Tax Practice & Procedure, 16. Retrieved from http://eds.a.ebscohost.com.proxy1.ncu.edu/eds/pdfviewer/pdfviewer?vid=7&sid=be23d9ad-1f0e-48a8-bd5e-809bcbdace88%40sessionmgr4005&hid=4208
