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Beware of Penalties in Transactions With Not-for-Profits

Posted By Celeste Viator, Hannis T. Bourgeois, LLP, Thursday, July 19, 2018

Tax law provisions and IRS regulations may have a significant impact on improper transactions between top officials and a tax-exempt organization.

Under old rules from years ago: When the IRS determined that a top official engaged in a transaction and received an unfair benefit given his or her position in the organization, the only recourse was to revoke the tax-exempt status. This penalty was so severe that it was rarely imposed by the IRS because it would hurt innocent parties.

Under newer rules: The IRS now has an intermediate checks and balances measure to impose financial penalties on parties involved in an excess benefit transaction. With this more reasonable option, the IRS is more likely to penalize individuals.

The relevant provisions, which apply to all transactions with non-profit organizations after September 14, 1994, are commonly referred to as the "Intermediate Sanctions." These sanctions are designed to protect charities and donors from those insiders who wield the influence to permit excessive executive compensation. Intermediate steps allow the IRS to target guilty parties for punishment, rather than inadvertently punishing innocent parties by revoking the charity's tax-exempt status. The IRS later issued regulations to assist in interpreting the law.

Key point: Applying the Intermediate Sanctions penalty doesn't preclude the loss of tax-exemption. Rather, it may be imposed by the IRS in addition to the loss of the tax-exempt status. 

Who is Liable?

Individuals who are in a position to exercise substantial influence over the affairs of a tax-exempt organization at any time during the five-year period preceding the date of the questionable transaction. The IRS calls these individuals "disqualified persons."

The regulations state that "substantial influence" is likely present if an individual:


•Is a voting member of the organization's governing body (such as the Board of Directors or Board of Trustees).
•Is an executive officer of the organization such as CEO, COO or president.
•Manages the organization's finances (such as the Treasurer or CFO).
•Has a material financial interest in a Medicare+Choice provider-sponsored organization, which is owned (at least in part) by an exempt organization.
•Has compensation that is primarily based on revenues from activities that the person controls.
•Manages a segment or activity of the organization that represents a substantial part of the activities, assets, income or expenses. 

Arrangements that are subject to the Intermediate Sanctions Rules are known as excess benefit transactions. The Internal Revenue Code defines an excess benefit transaction as one in which the economic benefit provided, directly or indirectly, by a tax-exempt organization to an individual exceeds the fair market value for the consideration received by the tax-exempt organization.

When Determining if a Transaction is an Excess Benefit, the IRS Considers:

1. The compensation received by the disqualified individual.

2. Any other benefit received (except the value of certain non-taxable fringe benefits and benefits provided to volunteers or charitable beneficiaries). This may include items such as salary, bonus, luxury travel or paid travel of a spouse, property given to the individual and certain insurances paid by a tax-exempt organization.

3. Embezzled amounts. Ironic as it may seem, the regulations suggest that -- notwithstanding the other legal implications — embezzled amounts by a disqualified individual are also to be considered as an economic benefit and are subject to this law.

Note: The regulations don't provide guidance regarding revenue sharing transactions. For top officials and tax-exempt organizations alike, this has been a subject of great confusion in recent years. Both the IRS and the Office of Inspector General have issued conflicting opinions regarding the legitimacy of revenue sharing or gain sharing transactions. 
 
In determining fair market value, the total compensation for the services provided is compared with the amount that would ordinarily be paid for similar services by a similar organization. Unfortunately, what constitutes "reasonable compensation" is often uncertain because every transaction must be evaluated separately given the applicable facts and circumstances.

As with many tax laws and regulations, the regulations are extremely complex. If you're uncertain whether this law applies to you, contact your tax advisor. It's important to correct any possible excess benefit transactions before an IRS audit. If you do that, you should be able to avoid any financial penalties under the Intermediate Sanctions rules.

 

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Monroe Financial Inclusion Summit

Posted By Katelyn Smith, Louisiana Association of Nonprofit Organizations, Tuesday, July 17, 2018

Please SAVE-THE-DATE for AUGUST 8 and plan to join us for the Monroe Financial Inclusion Summit from 11:00 am to 4:30 pm at the Monroe Civic Center, 401 Lea Joyner Memorial Expy., Monroe, LA 71201 . The event is being hosted by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Bank of Dallas and the Office of the Comptroller of the Currency (OCC), in partnership with The City of Monroe. 

 

Our agenda will feature programs and resources that are helping households and businesses to build and preserve assets and to access the benefits of the mainstream economy. Topics will include:  building household financial capability and resilience; creating and preserving affordable housing; strengthening small businesses and promoting entrepreneurship; and providing opportunities for unemployed and underemployed workers to improve their skills and increase their income.

 

This is a Save-the-date.  An invitation will be forthcoming with more information about the agenda and registration will open at that time.

 

Event Information: 

Monroe Financial Inclusion Summit

Date:  Wednesday, August 8, 2018

Time: 11:00 am – 4:30 pm

Location:  Monroe Civic Center, 401 Lea Joyner Memorial Expy., Monroe, LA 71201

Lunch:  Provided at no charge; REGISTRATION IS REQUIRED

 

Please watch for registration information to come and, in the meantime, contact Scarlett Duplechain with any questions. Scarlett.duplechain@occ.treas.gov

 

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CPA DAY OF SERVICE

Posted By Katelyn Smith, Louisiana Association of Nonprofit Organizations, Thursday, July 12, 2018

The Society of Louisiana CPAs (LCPA) will host a statewide CPA Day of Service on Friday, September 28. This single, yet powerful, day brings together LCPA members to improve the quality of life within their communities and across the state. LCPA is working to identify non-profits who have service opportunities on September 28 which could benefit from volunteer help for a few hours or the entire workday.

 

“LCPA’s Day of Service is a hands-on, all-hearts-in project that gives our members the opportunity to give back to their communities and serve united as caring professionals,” says LCPA CEO Ron Gitz, CPA, CGMA.

 

If your organization would like to register a service project, simply complete a Non-Profit Project Registration Form. You will be listed on our Day of Service webpage, and interested member volunteers will contact you directly. The details you provide will help our CPAs select the project that best fits their passion, and it raises awareness about your organization too.

 

Need more info? Contact LCPA Communications Director Ann Lupo, alupo@lcpa.org or 504.904.1125.

 

LCPA (lcpa.org) is a non-profit professional association serving more than 7,000 current and future Certified Public Accountants. It is the premier organization of accountants in the state.

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Senior Community Service Employment Program

Posted By Katelyn Smith, Louisiana Association of Nonprofit Organizations, Thursday, July 12, 2018

Enrollment in East & West Baton Rouge, East Feliciana, Iberville, Livingston, Pointe Coupee, Tangipahoa, & Washington Parishes

 

Enrollment Guidelines:

·        Over age 55

·        Unemployed

·        Under Federal Poverty Level

Entitles participants to:

·        20 hours per week hands on training

·        Pay of $7.25 per hour while in training

·        Assistance in resume writing, interviewing skills, job search and use of job clubs

·        Free Economic Security Initiative screening to assist you in obtaining additional assistance in improving present economic situation.

If you:

·        Are sincere in seeking either full or part-time employment

·        Improving your economic situation

·       Taking back control of your life

 

Contact us to set up a local interview:

 

Capital Area Agency on Aging

225-922-2525 or 1-800-833-9883

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Baton Rouge Community College Certified Clinical Medical Assistant Course

Posted By Katreena Moses, Baton Rouge Community College Foundation, Thursday, July 5, 2018

Certified Medical Assistant

 

Upon successful completion of course, the student will receive a certificate of completion as having completed the training requirements of the Certified Medical Assistant. This programis designed to provide thorough didactic and practical instruction anda basic system overview of the role of the medical assistant in a practical setting.Classroom lectures cover the theory, anatomy and terminology pertaining to each system. Practical instruction provides hands-on training in the listed procedures verified through a skills check-off system.

 

Upon completion of this competency-based program students are eligible to take the national Certified Clinical Medical Assistant (CCMA) exam from the National Healthcareer Association.


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Tags:  brcc  CMAtraining  funding available  training 

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Nominate Young Entrepreneurs

Posted By Katelyn Smith, Louisiana Association of Nonprofit Organizations, Tuesday, July 3, 2018

Do you know aspiring young entrepreneurs? Are they creative and motivated, and do they demonstrate a strong work ethic? Please introduce us!

Nominated students will receive information about YEA and how to apply.

 

 

Nominate Here Today: https://www.yeabr.org/nominate/

 

Deadline is August 31st

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The Infamous Overhead Myth

Posted By Sarah Cortell Vandersypen, CFRE, Philanthropic Partners, Monday, July 2, 2018
Updated: Monday, July 2, 2018

The “Overhead Myth” is one of my favorite topics to talk about because it’s one of the most concerning challenges nonprofits – and funders – face.

“Overhead” is the percent of a nonprofit’s expenses that goes to administrative and fundraising costs. For decades, overhead was seen as bad, wasteful. It was seen as money that could be supporting the organization’s mission that was going to bloated administrative and fundraising budgets. Rating agencies, such as GuideStar, Charity Navigator, and the Better Business Bureau, would rate nonprofits based on their overhead percentage as if this was an indication of effectiveness.

Most – if not all – of us in the nonprofit sector know that overhead has nothing to do with effectiveness. We also know that depending on your type of nonprofit, you can have very different overhead costs. And that’s okay.

In 2013, GuideStar, BBB Wise Giving Alliance, and Charity Navigator wrote an open letter to the donors of America in a campaign to end the Overhead Myth. You can read that letter here. They released a second letter to nonprofits in 2014. The same agencies that perpetuated the Overhead Myth now ask us to consider other ways to evaluate nonprofits.

So what are those other ways? How should donors and the organizations themselves evaluate their effectiveness?

  • Does the organization have a clear mission?
  • Can it clearly articulate how its programs address a need?
  • Does it have SMART (specific, measurable, attainable, realistic, time-specific) objectives?
  • How is it investing its funds to make a real impact?
  • Do you see a ROPI (return on philanthropic investment) of your money?


What other ways do you think donors should evaluate nonprofit organizations?

 

--

Sarah Cortell Vandersypen, CFRE is the owner of Philanthropic Partners, a Baton Rouge-based consulting firm helping nonprofits build their philanthropic capacity. Check out her new website, webinars, and free white paper at https://philanthropic-partners.com.

 

Tags:  fundraising 

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What To Do With Unwanted Donations

Posted By Celeste Viator, Hannis T. Bourgeois, LLP, Monday, June 25, 2018

Everyone agrees that donations are the lifeblood of not-for-profit organizations. At the top of most wish lists is cash, and depending on your situation, you may accept other assets and in-kind contributions.

 

But what should you do when offered donations that are not usable or appropriate? For example, how should a charity react when it is offered an item so worn that the only option is to send it to the local dump? Unfortunately, this can be a drain on the charity's staff. And if there's a fee to use the dump, it can cost the organization. 

Another sticky situation that some not-for-profits face is what to do with donations of real estate. Although property is potentially valuable, many organizations don't have the staff or skills to manage real estate and may not want to accept the environmental liabilities that go along with it. 

 

And how should you cope with contributions of old computers? Since computer parts may contain lead and are considered hazardous waste, many areas charge a fee for proper disposal. 

Of course, not-for-profit organizations don't want to run the risk of offending donors -- especially when a few months down the road, the same individuals might come up with something that perfectly meshes with the organization's needs.

Honesty and politeness are the best policy. Most contributors respond well when gently told that the organization appreciates the gesture, but the donation is something you cannot use. Furthermore, most people understand that a not-for-profit must watch expenses. Explain that it isn't fiscally prudent to accept something, such as out-of-date computers, which will cost the organization money to dispose of. 

Some not-for-profit managers tell donors they can't accept contributions because they lack storage space, while others smooth over any ruffled feathers by letting donors know of other items the organization needs -- including volunteer hours.

Another trick to minimize the problem is to use local media -- send press releases to newspapers and local television stations, for instance -- to get the word out about what your organization really needs and what it cannot accept. 

Or consider making use of clearinghouses in which for-profit organizations advertise what they have to donate -- office furniture and equipment, for example. For a small annual fee, not-for-profits have access to a "bulletin board" and can scan it for items on their wish lists. 

Here are a few other suggestions to minimize any bad feelings and get what your organization really needs.


• Try to steer donors to a more appropriate venue -- another not-for-profit group that might be able to use the items.
• Consult with your not-for-profit adviser about whether it's possible to accept certain assets, such as real estate and the best way to go about handling such transactions.
• Try to find out if the donors have other items that you need and let them know about those needs. When soliciting contributions from for-profits, remind them of what donations can do for their companies in terms of image enhancement and tax benefits. This approach is frequently more effective than talking up the impact a donation has on people's lives.
• Another good method for getting items you need is to ask someone from a particular for-profit company to sit on your board of directors. 

And, of course, the best policy in some situations may be to graciously accept a well-intended, but inappropriate, gift and quietly take it to the dumpster, or to be recycled.

 

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Have you Celebrated your Favorite Nonprofit Leader or Organization Lately?

Posted By Emilie E. Bowman, Louisiana Association of Nonprofit Organizations, Monday, June 11, 2018

On August 16, 2018 LANO will recognize nonprofit leaders and organizations that are making a tremendous impact on the lives of Louisiana citizens. Every year LANO takes nominations for the Nonprofit Leader and Organization who have selflessly spent their time and energy going above and beyond for their community, at the Force for Good Awards Luncheon.

There are countless moments where we are inspired by the work of our nonprofit community, and I hope today you will take a few minutes to acknowledge those heroes by nominating them for a Force for Good Award. Nominations are open until end of day on June 30th. Don’t miss this chance to say “Thank You” to those who make Louisiana great!

 

To nominate an individual or an organization visit, LANO Force for Good Nomination Form. 

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Intermediate Grantwriting on July 25

Posted By Nora Ellertsen, The Funding Seed, LLC, Thursday, May 31, 2018

Intermediate Grantwriting
Wednesday, July 25, 1:30pm - 4:30pm
Ashe Power House Theater
1731 Baronne St.
New Orleans, LA 70113

So you've written a few grants and feel like you've got the basics down.  

Are you ready to take your grantwriting to the next level?

Intermediate Grantwriting will help you improve your grant proposals and raise more money for your nonprofit.   Through this workshop, you'll learn specific ways to make your proposal more appealing to a funder, including how to make a compelling case to someone unfamiliar with your nonprofit's work and what kind of research and data to include.

Registration $40 per person. Discounts available for students, AmeriCorps members, and organizations registering two or more people.

Participants will receive a Certificate of Participation for completing the workshop.

 

CLICK HERE TO REGISTER

For more on services offered by The Funding Seed, visit www.thefundingseed.com. To reserve your space and pay at the door, or for any questions, please email info@thefundingseed.com.

Tags:  development  donations  fund  fund development  fund raising  funding  Fundraising  funds  grant  grant writing  grants  grantwriting  nonprofit  nonprofit sector  non-profits  sustainability  training  workshop  workshop. grants 

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