Advice on helping nonprofit formation and ongoing administration

[rkhan71]

Hello folks,

I am going to preface my paragraph with the notion that yes I understand that not being an attorney I have to be careful in advising / helping a potential client form and make sure that they are following the protocol of having a nonprofit. That said, though, I seek the forums comments on whether it is a good idea from a business / tax consultant standpoint to provide A to Z assistance in nonprofit guidance?

I have talked to fellow colleagues who say that getting involved in nonprofit consulting is not a good idea, and can have responsibility implications for me as an adviser from beginning to ongoing work. Can the forum please provide the "gotchas" or pros / cons of doing this work or advising? It would be greatly appreciated.

Thanks.

RFK

[Jiggers]

If I was interested in taking on non-profit organizations, I would seek out some good CPE and then spend time studying.

I used to do a few non-profits. I no longer do any work for non-profits.

The IRS is pursuing audits of non-profits and the penalties are significant that could put you out of business if you don't have the due dilligience.

Personally, I wouldn't do the work as most small town non-profits think that since they are a non-profit that you should do the work for free or at a reduced rate. You can't pay the bills like that. Been there, done that.

[taxmandan]

Small business owners can be high-maintenance clients, non-profit operations have a bunch of 'owners' known as the Board of Directors which takes 'high-maintenance' to a new level. They are all volunteers and by nature busy-bodies but clueless about bookkeeping, accounting, payroll, etc. Especially the Treasurer, seldom a person who knows how to even balance a checkbook but they consider themselves your boss. And the turnover of people on the Board means new faces with new ideas that can impinge on your efforts to keep things on track.

We have one non-profit as a client, and that has lasted years because the Executive Director thinks I walk on water and won't allow anymore guff from the new Directors that join the Board from time to time. Once had a bank manager sign on as the Treasurer who thought she was a numbers person, what a nightmare! Bank managers know customer service but know next to nothing about finances. The Executive Director actually had to ask her to resign from the Board due to all the turmoil she caused.

You'll need lots of people skills to be successful with non-profit businesses, more so than even your tax/accounting skills.

[Jiggers]

Small business owners can be high-maintenance clients, non-profit operations have a bunch of 'owners' known as the Board of Directors which takes 'high-maintenance' to a new level. They are all volunteers and by nature busy-bodies but clueless about bookkeeping, accounting, payroll, etc. Especially the Treasurer, seldom a person who knows how to even balance a checkbook but they consider themselves your boss. And the turnover of people on the Board means new faces with new ideas that can impinge on your efforts to keep things on track.

We have one non-profit as a client, and that has lasted years because the Executive Director thinks I walk on water and won't allow anymore guff from the new Directors that join the Board from time to time. Once had a bank manager sign on as the Treasurer who thought she was a numbers person, what a nightmare! Bank managers know customer service but know next to nothing about finances. The Executive Director actually had to ask her to resign from the Board due to all the turmoil she caused.

You'll need lots of people skills to be successful with non-profit businesses, more so than even your tax/accounting skills.

You are very correct. Especially about bankers and bank employees. Being a member of this profession doesn't mean that you know anything about accounting/bookkeeping. One local church hired a bank teller. She couldn't balance anything and had no clue about budgets. Really screwed stuff up. She finally saw the light and resigned.

[Snaggletooth]

Quagmire

My experience is similar to those described above, and in recent years I have simply refused to do any more 990s.

Classic accounting structure differs for non-profits, as now there are more buckets for programs, purposes, etc. It adheres
to "fund" accounting as well, instead of GAAP - and most of these folks don't even know GAAP. In recent years, Form 990
has been doubled in length and in complexity.

Some of the folks dealing in non-profits are really good salt-of-the-earth people who have no idea how to treat their
bookkeeping elements. Some of them are also associated with non-profits to serve their own personal aggrandizement,
and these folks are those most likely to put pressure on you to deliver services for nothing.

If you choose to do this, be candid that:

1) They should expect to pay for the services rendered
2) The IRS has established reporting standards that may be beyond what their conventional bookkeeping covers.

[rkhan71]

Very good info - Nonprofits

Thanks for the information about taking on the idea of working with nonprofits. I will be discussing my thoughts with the client this afternoon and will probably tell them that the work to pay to headache ratio (in a nice way) is not going to be possible.

RFK

[JohnH]

Oftentimes they are so enamored with their desire to help others that they cannot see past the good they are trying to do. They just assume everyone else shares their passion for their chosen work. They can't imagine why everyone else wouldn't have that same sacrificial desire to see it succeed. Even had one to express some irritation over my lack of enthusiasm for their project, even though they had no particular interest in the mission work I do.

I usually tell them that Non-Profit accounting & tax filing is such a specialized area that only a very small number of accountants are qualified to work in that area, and I'm not one of them. (Which in my case is true, even though I've worked with tax exempt organizations for a long time).

[BOB W]

Been doing a non-profit since 1985 with no problems until recently. New President wanted to hire office help( no volunteer). I required that they get WC and disability coverage. After a while she gets back to me and says she is covered under the master plan issued by the the State/Regional Local. Ok let's get the help she needed in the office. 9 Months later they get a letter asking for proof that they have WC. Long story short, they paid in the $40,00 area in fines.

The point learned is, don't believe everything you are told by these novices. The president tried to blame me for the problem but back-off when I showed her a copy of the Text she sent me saying she had coverage.