America's First Choice for Nonprofit Startup and Compliance

When Foundation Group launched in 1995, we were the first specialty firm in America dedicated exclusively to starting nonprofits and helping them to stay compliant with state and federal regulations.

20 years later, we're still going strong!  In fact, our client base continues to grow exponentially every year...and we've never been more committed to bringing our clients the expertise they need to see their vision come to pass.  Simply put, we love what we do and we're passionate about doing it with excellence!

We were the first...and we've never stopped leading!  Call us and see why we are America's first choice for nonprofit startup and compliance services.

Nonprofit Executive Compensation

Nonprofit Executive Compensation

Nonprofit executive compensation tops the current list of IRS hot button issues. In recent years, the IRS has been ramping up its oversight and enforcement of nonprofit executive compensation.  With all the rancor surrounding executive perks and bonuses on Wall Street, expect that populist sentiment to spill over into the nonprofit sector as well.  It all adds up to the equivalent of a message written in the sky:  get your house in order!

So, how do you do that?  Let’s take a look at a few key points that will go a long way toward ensuring that the compensation package for your nonprofit’s leader(s) is appropriate.

Reasonable compensation. It all starts here.  The IRS requires compensation packages for nonprofit executives (and other nonprofit employees, for that matter) to be reasonable.  Unfortunately, the IRS doesn’t really define reasonable…at least not in a way that you could look up in Websters.  Reasonable compensation is best understood in light of factors the IRS examines when determining whether or not a charity is exceeding reasonableness with its compensation arrangements.  These factors look something like this:

  • Actual job description
  • Required level of education or experience
  • Compensation averages in your area
  • Number of hours worked
  • The overall budget of the charity
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Paying an Independent Contractor? Are You Sure?

This is a conversation our staff members have with clients at least 4 or 5 times per week:  The issue of a nonprofit hiring and paying an independent contractor.  What is fascinating is the degree of resistance we often get when attempting to explain the way the IRS and the state see such matters.  Seems like everybody has a story about how somebody else is doing things.

“If they can do it, why can’t I?”

The reason businesses (including nonprofits) like to use independent contractors is simple:  it saves on employment taxes.  The problem lies in the fact that the person your nonprofit is paying is not an independent contractor simply because you want her to be.  Whether or not someone is legitimately an independent contractor depends upon a set of well-defined rules.  And understanding these rules can save you a lot of headache with Uncle Sam.

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IRS 501(c)(3) Audits – 5 Potential Sources

There is one phrase in the English language that generates more fear and trepidation than any other out there:  IRS AUDIT.  Just hearing the words is enough to cause many a fearless person to break out in a cold sweat and to shrink in terror.  It is bad enough when an individual has to deal with IRS questions.  But when it happens to a nonprofit organization, there is plenty of pain to go around.  Directors, employees, members, donors…all can be affected.  Plus, just the potential bad publicity is enough to cause nonprofit leaders to reach for the Rolaids.

So how does a nonprofit avoid an IRS examination?  It helps to understand some of the situations and events that can trigger an audit.  In this article, we are going to look at 5 sources of audits and give you advice on how stay out of Uncle Sam’s cross-hairs.

1.  Complaints. One of the most common causes of IRS examinations is a complaint filed by a third  party.  Such “whistle-blower” situations may or may not have a shred of credibility to them.  Typically, if the IRS decides to look into the allegations, it will start out as a compliance exam.  It is possible for one of these exams to progress to the status of a full-blown audit, but most do not…at least for those organizations that are operating completely above board.

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How to Protect Your Nonprofit’s Board Members

Your board of directors is one of the most important assets your nonprofit has.  Assuming they understand their role and are there for the right reasons, your board members provide invaluable insight, direction and oversight.  They volunteer their time and expertise, usually for little more than a pat on the back.  They also assume a certain level of liability in exchange for their efforts.  The old phrase, “No good deed goes unpunished”, is not something you want to see come true.  Let’s explore how to protect those who give of their time to your organization.

Understanding the issues. The first step to properly protecting your board members is to educate them as to what they are responsible for.  It is discouraging to see the level of ignorance that many boards operate under.  We frequently encounter boards where some members are merely placeholders who are doing a favor for the founder.  They rarely participate in substantive discussions or planning, nor are they consulted with by the program director.  They have no idea that there is any liability to them, but there is.  This liability usually falls into three categories:  1) corporate (state), 2) federal (IRS) and, 3) general liability.  Let’s take a closer look at each:

  1. Corporate liability:  Board members are the legal, governing body of a nonprofit corporation.  They collectively represent the organization and its interests.  Each nonprofit corporation is incorporated in a particular state, according to that state’s corporate law.  Board members are responsible to make sure the corporation follows state law and that it follows its bylaws.  It is not terribly uncommon to hear of court cases involving other board members, or members of the public, accusing the organization of not abiding by its bylaws.  And, if the corporation is an employer, the board members have a fiduciary responsibility to ensure that employment taxes and related things are properly handled.
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