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Permanently Restricted Funds Should Be Designated As Permanently Restricted on Pa. Financial Statements

Accountants have been confused by state’s adoption of statute which permits trustees to set income as a percentage of fund value

More than five years after the Pennsylvania legislature passed Act 141 of 1998 giving charitable trustees the right to adopt a unitrust-type spending policy to determine distributions from endowments, there is still no generally accepted consensus on the classification of such funds or the presentation of gains or losses in the funds under generally accepted accounting principles.

What May You Ask in Employment Interview?

Nonprofits can reduce the risk of liability by avoiding questions that suggest illegal discrimination in hiring.

Claims of employment discrimination are among the leading causes of lawsuits against nonprofits. Some of that litigation could be avoided by following some simple rules about asking questions in pre-employment interviews.

The Employment Law Department of the Philadelphia law firm of Montgomery, McCracken, Walker & Rhoads, LLP, has put together a summary of some general legal requirements which apply to any inquiry, whether written or oral. (List included in article.)

Employment Record-Keeping Requirements

Federal statutes set forth employment-related records which must be preserved and the period for retention.

This Ready Reference Page covers:

The records which must be retained and the period for retention for each of the following statutes:

Title VII, Civil Rights Act of 1964
Title VII; ADA
Title VII
Fair Labor Standards Act
Family & Medical Leave Act of 1993
Immigration Reform and Control Act
Occupational Safety and Health Act
Employee Retirement Income Security Act ("ERISA")
Department of Labor
Age Discrimination in Employment Act ("ADEA")

Classify: Employee or Independent Contractor?

The IRS has listed 20 factors in determining whether a worker is an employee or an independent contractor, but, in the final analysis, control is the key

When the IRS audits a nonprofit organization, one of the first things it looks at are the employment records and the classification of any independent contractors. If the organization has not been withholding income taxes and FICA payments for those the IRS considers to be employees, it can be a costly experience for the organization, and potential personal liability for the "responsible persons" who failed to withhold. Although it may seem like a real bother, err on the side of withholding.

Six Steps for Effective Internal Investigations

The risks of legal action by a complainant, the accused, or a third party can be reduced by a thorough and effective inquiry and convincing documentation of the process

Nonprofit managers are often called upon to conduct investigations of possible employee misconduct. The issues include theft of property, embezzlement, sabotage, fighting, drug or alcohol use, theft of trade secrets, sexual or racial harassment, and acceptance of bribes.

 

An effective investigation can be essential to defending a claim brought by a former employee, such as a discrimination, harassment, wrongful discharge, or defamation claim.

Permanently Restricted Assets Should Be Classified as Permanently Restricted Under UPMIFA

FASB recommendation to distinguish between permanently and temporarily restricted has no basis in law

Charities and their accountants are struggling to understand how to account for donor-restricted endowments held by charities under the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”) which has now been adopted in about 43 states. 

The Financial Accounting Standards Board has given considerable discretion to the boards of directors of the charities to determine how much should be treated as permanently restricted, and how much should be classified as temporarily restricted.  In our opinion, that bifurcation does not reflect the board’s power under the law and will lead to huge variation in financial statements across the country.  In our...

Charities Respond to Senate Committee With Varied Views on Proposed Reforms

Consensus seems to support additional funding for IRS to enforce present regulations

Representatives of major charity umbrella groups, lawyers and other consultants provided a wide range of responses to the Senate Finance Committee White Paper proposing charitable reforms at a closed-door “roundtable” with Committee staff in Washington, July 22. (For a description of the proposed reforms, see Ready Reference Page No. 74, July 1-15, 2004.)

Grassley Questions Status Of Nonprofit Hospitals

Senator complains about lack of reporting standards,country club dues, and ‘billions of dollars in tax breaks’

Sen. Chuck Grassley (R-IA) issued a statement highly critical of nonprofit tax-exempt hospitals while releasing answers of 10 major nonprofit hospitals prior to a Senate Finance Committee hearing on September 13. He questioned whether the public was receiving measurable benefits in return for “billions of dollars in tax breaks.”

A partial text of the statement follows:

Non-profit doesn’t necessarily mean pro-poor patient. Non-profit hospitals may provide less care to the poor than their for-profit counterparts. They may charge poor, uninsured patients more for the same services than they charge insured patients. They sometimes give their executives gold-plated compensation packages and...

The Uniform Management of Institutional Funds Act Sets Rules for Charitable Endowments

Proposed changes would expand factors to be considered for standard of care, would allow donors to enforce restrictions, and ease process of removing restrictions in certain cases

The Unifrom Mangement of Institutional Funds Act, first promulgated by the National Conference of Commissioners on Uniform State Laws in 1972 and subsequently adopted in the same or modified form by 46 states, has long established the basic rules of mangement of charitable endowments.

In simple and direct language, the Act defines an "institutional fund", provides broad powers of investment, permits delegation of investment management, establishes a prudent investor standard for investment managers, and deals with the release of restrictions.

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