N.J. Court Rules On Donor Intent

By The NonProfit Times - August 12, 2013 
Read full article here.       
It’s a simple concept: If a donor gives an organization a restricted gift, the organization must use that gift for the purpose determined. Some see it differently and that’s how it ends up in court.
The New Jersey Superior Court, Appellate Division, ruled that charities that do not follow donor intent must return the gifts. A three-judge panel ruled that a Mercer County animal shelter must disgorge a $50,000 gift originally slated for specialized construction.
Judge Jose Fuentes wrote in the opinion, “we hold that a charity that accepts a gift from a donor, knowing that the donor’s expressed purpose for making the gift was the fund a particular aspect of the charity’s eleemosynary mission, is bound to return the gift when the charity unilaterally decides not to honor the donor’s originally expressed purpose.”
The case turned on a gift given by a Princeton couple, Bernard and Jeanne Adler, to animal shelter SAVE (now SAVE, A Friend to Homeless Animals). The gift was to finance the building of an area for larger dogs and older cats, whose adoption prospects are limited, as part of a new facility in Princeton.
Before construction could begin, SAVE merged with another animal welfare nonprofit, Friends of Homeless Animals. The new plan was to build a new shelter in nearby Montgomery Township roughly half the size of what the new Princeton facility would have been; construction is expected to begin in the fall of 2013. Though SAVE trustee John Sayer testified that the new shelter would “absolutely” have rooms for large dogs and older cats, according to court documents, the court said that evidence suggested otherwise.
“Based on Mr. Sayer’s testimony and the letter announcing the merger between SAVE and Friends of Homeless Animals, we are satisfied that the 15,000 square foot shelter to be constructed in Montgomery Township does not include two rooms specifically designated for the long-term care of large dogs and older cats,” wrote Fuentes.
The Adlers filed suit in Mercer County in 2007, and a judge ruled in their favor in 2010. SAVE appealed, saying the first judge erred when he determined the Adlers’ gift was restricted. SAVE also argued that even if it was restricted, its purpose would have been fulfilled and, barring that, the lower court should have reworked the gift so SAVE could spend it on a project as near as possible to the original intent.
The appellate court disagreed, saying SAVE had courted the Adlers, who had been long-time supporters but who had never made a significant gift prior, with a campaign that specifically included the two rooms and a naming opportunity. “To be clear, the record shows that SAVE: (1) decided to construct a substantially smaller facility; (2) outside the Princeton area; (3) without any specifically designated rooms for large dogs and older cats; and (4) without any mention of plaintiffs’ names,” Fuentes wrote.
The appellate court affirmed the lower court’s decision on August 5. “By opting to disregard plaintiffs’ conditions, SAVE breached its fiduciary duty to plaintiff,” wrote Fuentes. “Under these circumstances, requiring SAVE to return the gift appears not only eminently suitable, but a mild sanction.”
Read more here.

Observer-Dispatch: Nonprofit, Rome Mayor at Odds Over Recycling Initiatives

Nonprofit, Rome mayor at odds over recycling initiatives

By NED CAMPBELL

Observer-Dispatch

Posted Jul 20, 2013 @ 01:37 PM

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ROME —

Rome Clean & Green wants to increase the city’s recycling rate.

But first, the nonprofit needs city funds that the mayor is not willing to provide, said Tanya Davis, executive director.

“We have the council’s support, a lot of community support, and you have one person saying, ‘I don’t think so,’” Davis said. “The mayor holds all the cards on this at this point — that’s what’s frustrating.”

The Board of Estimate recently tabled the organization’s $48,000 contract to provide educational services to the city.

“We are looking into expanding our recycling program, and at some point, I think Clean & Green can be of assistance to us,” Mayor Joseph Fusco said. “We just don’t know at what level that assistance is going to be.”

The organization has pledged to bring the recycling rate from 17 percent to 27 percent, which would save the city $120,000 in garbage tipping fees, Davis said.

The national average is 34.1 percent.

 “It’s a small investment with a big return,” she said.

Last year, the city gave the nonprofit $20,000 in federal block grant money that allowed it to hire Davis part-time for 10 months.

As a result, the Keep America Beautiful affiliate regained good standing with the national organization, Davis said.

The local nonprofit also leveraged $36,500 in grants, added 80 members, organized into 10 committees and transformed its marketing efforts, she said.

In the organization’s proposal to the mayor, President Tim Birnie said the Environmental Protection Agency recommends cities partner with nonprofits to convey effective messages to the community as peers rather than enforcers.

“Nonprofits are viewed as approachable and helpful, and why wouldn’t you take advantage of having that in your community?” Davis said.

Read more: http://www.uticaod.com/news/x997485320/Nonprofit-Rome-mayor-at-odds-over-recycling-initiatives#ixzz2Zmt34HY8

Call to Action: Oppose Paid Board Members

Dear Nonprofit Members & Devoted Board Members, We're calling on our members to  TAKE ACTION today! ISSUE: The Attorney General's Nonprofit Reform Bills (S-5198A/A-7337) are being finalized over today and over the weekend for introduction and likely passage next week.  They are to go into effect on July 1, 2014. NYCON's POSITION The AG continues to support the harmful practice of having paid, voting board members on nonprofit boards. Paid board members are the single greatest source of conflicts of interests for charities and one that seriously threatens the integrity of and public confidence in our sector.     Excellent board leadership includes board members"giving and getting" resources for mission, not"making and taking" them for private gain. The AG's endorsement of paying board members means that these types of conflicts of interests will continue to occur and plague us.   The inevitable result will be the emergence of more harmful public scandals that tarnish the good work of the over 99% of charities that believe in and practice volunteer board leadership. NYCON believes that the opportunity is right now to stop it at its source! ACTION REQUESTED- CALL TODAY! We urge staff, board leaders, donors, volunteers and all who care about protecting the ethical integrity of our state's charities to call today and Monday at the latest,  the offices of Michael H. Ranzenhofer and   James Brennan  the Bill Sponsors, to voice your support for amending the proposed Bill to prohibit compensated board members. Tell them that true reform means taking solving the problem not adding new, complex regulations trying to manage it. *A revised bill will be submitted early next week, so please, call and make your case. Both offices are well aware of NYCON's position, so even calling and stating your support for NYCON's case against this bill is a step in the right direction! PLEASE CALL TODAY!  Michael Ranzenhofer Albany Office Phone:(518) 455-3161 Regional Office: (716) 631-8695                           (585) 454-0322 James Brennan Albany Office: (518) 455-5377 Regional Office: (718)-940-0641                          (718) 788-7221                          There are other options out there, if we're going to do this, then let's do it right! NYCON fully supports  Senator Marcellino and Assemblywoman Amy Paulin who have both introduced Bills that would end compensated board members! Check out this bill here.              Sincerely,            Doug Sauer, CEO            New York Council of Nonprofits, Inc. (NYCON) Learn More on NYCON's Position   [Watch it Now] Public Hearing: To examine the re-codification of New York State's not-for-profit corporation law in an effort to reduce unnecessary burdens on nonprofits and to enhance nonprofit governance and oversight Changing the Nonprofit Corp Law in NY: Let's Try to Get it Right the First Time...  Understand  the Legislation   A.G. Schneiderman, Senate And Assembly Committee Chairs Propose Groundbreaking Legislation To Reform New York's Charities Laws    Contact Us ! Its up to the nonprofits of New York to educate policy makers, and this is your chance to do so today! Tell these offices you support NYCON's case against compensated board members! Send us Your Feedback! Proud Member of  the National Council of Nonprofits

Utica Obsertver-Dispatch: How Will New Regulations Affect Local Nonprofits

How will new regulations affect local nonprofits?

By AMANDA FRIES

Observer-Dispatch

Posted Jun 09, 2013 @ 07:03 AM

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Beginning July 1, some for-profit and nonprofit organizations will have to adjust their executives’ compensation — limiting it to $199,000.

Gov. Andrew Cuomo proposed regulations last year that will limit providers that receive more than $500,000 each year in state funding and at least 30 percent of their annual funding from the state to spend no more than $199,000 for executive compensation.

The regulations were proposed to limit “excessive executive compensation or administration costs” to protect the recipients of services by providers as well as taxpayers against wasteful use of public funds, the order stated.

While there are 11 local nonprofit organizations with executives making more than the proposed cap, officials were unsure how the regulations would be implemented.

“How can you put an arbitrary number on it and say this is what the cap is?” said Oneida County Judge Norman Siegel, chairman of the Board of Trustees for St. Elizabeth Medical Center in Utica.

Thomas Pollak, program director for the National Center for Charitable Statistics at the Urban Institute, said organizations voluntarily issuing limits would be more effective.

“I can see both sides. I’m very sympathetic to the view,” he said. “Despite preferring voluntary measures to limit compensation, I certainly understand the rationale in mandating it also.”

Providers could pay an executive more than the $199,000 if they keep the compensation below the top 25 percent in the field determined by a compensation survey. They also must have the salary approved by its board of directors, including two independent directors, and must have a review of comparability data.

The key difference between for-profits and nonprofits is that for-profit employees get profit margins, said Elizabeth Boris, director of the Center of Nonprofits and Philanthropy at the Urban Institute in Washington, D.C.

Boris said there’s probably no reason for a cap because the Internal Revenue Service requires nonprofit providers to do a comparable analysis of similar organizations.

She emphasized that salaries might be higher because of the environment people work in.

“If you went to a nonprofit hospital, would you want to feel like you’re getting inferior care compared to a for-profit hospital?” Boris said. “I think some people like to think that people working in nonprofits accept lower salaries because they value the work, but that isn’t to say that we should mandate that they have lower salaries.”

Read more: http://www.uticaod.com/news/x460062364/How-will-new-regulations-affect-local-nonprofits#ixzz2W6ZohEda

Camp Finance to Welcome Dan Pallotta, October 10

Camp Finance to Welcome Dan Pallotta Keynote Address - October 10th "Uncharitable: How Restraints on Nonprofits Undermine Their Potential" NYCON is pleased to welcome Dan Pallotta as this year's Camp Finance Keynote Speaker. Camp Finance will be held at the Mohonk Mountain House on October 10th & 11th. You may know of Dan Pallotta as the TED Talk Phenomenon (over 1.6 million views to date) or as the author of Uncharitable and Charity Case or as the inventor the multi-day charitable event industry with the AIDS Rides and Breast Cancer 3-Days, or as a regular blogger for theHarvard Business Review or maybe as the founder and President of the Charity Defense Council, a new national leadership movement dedicated to transforming the way the donating public thinks about charity and change... But no matter how you heard of Dan, we're sure you are going to want to be there to hear what he has to say at this year's CAMP FINANCE Conference. Register Today   Keynote Address: Uncharitable: How Restraints on Nonprofits Undermine Their Potential The way we've been taught to think about charity and change is upside down. If we changed the way we think about charity, charity could change the world. Our Camp Finance Keynote, based on Dan's book, Uncharitable, the best selling title in the history of Tufts University Press, will challenge you to change the way you think about charity.  The Stanford Social Innovation Review has said Uncharitable "deserves to become the nonprofit sector's new manifesto."  Find out for yourself! About Camp Finance 2013 Given the financial challenges of the past few years, your participation at CAMP FINANCE 2013 offers a welcome opportunity for New York's nonprofits to convene, access experts and connect with peers as we look to the future. Celebrating our 12th year, Camp Finance provides the very best in knowledge, skill and strategy sessions for your staff and volunteer leaders. This year´s workshops are responsive to your professional development and organizational needs with the latest information and tools to empower you to continue to build an effective, compliant, vibrant and sustainable nonprofit organization. From basic concepts to best practices, CAMP FINANCE 2013 has something for everyone. Workshop Tracks Include: Basic Nonprofit Accounting        Accountability and Compliance Issues     Marketing, Fundraising and Communications      Nonprofit Governance Camp Finance Sponsors & Exhibitors Thank you to this year's event sponsors and exhibitors (as of May 14th, 2013)   Sponsors:    Exhibitors: JMT Consulting, Central Business Solutions, The Network Place, Inc.  Camp Finance Pricing  Information Member Full Conference Pricing(Including all meals, activities & classes on 10/10 and 10/11) is $469 per person for a double room and $569 for a single room. Non-member Full Conference Pricing is $669 per person for a double room and $769 for a single room. Day Rates are Available: Members $210 Non-Members $310 REGISTER TODAY Testimonials & Reviews for Dan Pallotta "...we've received high marks for your keynote speech along with comments such as: 'Dan Pallotta was AMAZING - I wish everyone who works for a non-profit could see him speak!!', 'Dan Pallotta was the best keynote speaker since I have been attending ACM Interactivity.'" -Janet Rice Elman, Executive Director, Association of Children's Museums  "The nonprofit world needs innovation, and Dan Pallotta is helping us see how new ideas can help make our world more successful. In these tough times, we need his out-of-the-box ideas!"  -Bobby Shriver, cofounder, Product (RED) More Testimonials for Dan Pallotta

News from The Non-Profit Times

Audits Show Widespread Underreporting of UBI

By The NonProfit Times - April 29, 2013

Unreported unrelated business income in higher education was found in almost every case examined by the Internal Revenue Service (IRS).

“The audits identified some significant compliance issues at the colleges and universities examined,” said Lois Lerner, director, Exempt Organizations division of the IRS. “Because these issues may well be present elsewhere across the tax-exempt sector, all exempt organizations need to be aware of the importance of accurately reporting unrelated business income and providing appropriate executive compensation.”

This is part of the multi-year project on tax-exempt colleges and universities. The Colleges and Universities Compliance Project was launched in 2008 with the distribution of detailed questionnaires to 400 randomly-selected colleges and universities. The IRS selected 34 of the 400 for examination because their questionnaire responses and Form 990 reporting indicated potential noncompliance in the areas of unrelated business income and executive compensation.

Unrelated business income (UBI) is the income from a trade or business regularly conducted by an exempt organization and not substantially related to its exempt purpose. Unrelated business taxable income is the UBI that is taxable after deducting expenses directly connected to the trade or business. Because UBTI is calculated by totaling the UBI from all activities and subtracting the total allowable deductions, losses from one activity can offset profits from another. Examinations have resulted in:

• Increases to UBTI for 90 percent of colleges and universities examined totaling about $90 million;
• More than 180 changes to the amounts of UBTI reported by colleges and universities on Form 990-T; and
• Disallowance of more than $170 million in losses and Net Operating Losses (NOLs, i.e., losses reported in one year that are used to offset profits in other years), which could amount to more than $60 million in assessed taxes.

The primary reasons for increases to UBTI in the completed exams were:

• Disallowing expenses that were not connected to unrelated business activities.

The IRS found that examined colleges and universities were reporting certain losses as connected to unrelated business activities when they were not. The misreporting occurred in two ways:

1. Lack of profit motive: The IRS found that organizations were claiming losses from activities that did not qualify as a trade or business. Nearly 70 percent of examined colleges and universities reported losses from activities for which expenses had consistently exceeded UBI for many years. UBI must be generated by a trade or business.

An activity qualifies as a trade or business only if, among other things, the taxpayer engaged in the activity with the intent to make a profit. A pattern of recurring losses indicates a lack of profit motive. The IRS disallowed reporting of activities for which the taxpayer failed to show a profit motive. Those losses no longer offset profits from other activities in the current year or in future years, with more than $150 million of NOLs disallowed.

2.  Improper expense allocation: The IRS also found that on nearly 60 percent of the Form 990-Ts examined, colleges and universities had misallocated expenses to offset UBI for specific activities. Organizations may allocate expenses that are used to carry on both exempt and unrelated business activities, but they must do so on a reasonable basis and the expenses offsetting UBI must be directly connected to the UBI activities. In many cases, the IRS found that claimed expenses, which generated losses, were not connected to the unrelated business activity.

The IRS checked the calculations for all NOLs reported on returns under exam and found that NOLs were either improperly calculated or unsubstantiated on more than a third of returns. As a result, the IRS disallowed nearly $19 million in NOLs.

The IRS also determined that nearly 40 percent of colleges and universities examined had misclassified certain activities as exempt or otherwise not reportable on Form 990-T. Fewer than 20 percent of these activities generated a loss. The examinations resulted in the reclassification of nearly $4 million in income as unrelated, subjecting those activities to tax.

Examinations resulted in more than 180 changes to UBTI reported for specific activities by colleges and universities. More than 30 different activities were connected to the changes. The majority of these adjustments came from the following activities: Fitness, recreation centers and sports camps; advertising; facility rentals; arenas; and, golf.

To see the online aricle click here.

Comptroller Thomas P. DiNapoli's Weekly News

DiNapoli Audit Finds $7.7 Million in Questionable Charges by Special Education Providers

The Lake Grove School and the Mountain Lake Children’s Residence, two special education providers run by the same company, overcharged taxpayers by as much as $7.7 million over a four–year period, according to an audit released Friday by New York State Comptroller Thomas P. DiNapoli.

DiNapoli: State’s Brownfield Cleanup Program Needs To Reach More Sites; Be More Cost–Effective

The New York State Legislature should examine options to restructure the state’s primary program to revitalize contaminated properties – the Brownfield Cleanup Program – in order to fully achieve the important economic, public health and environmental goals set when the program was created, according to a report released Monday by State Comptroller Thomas P. DiNapoli.

DiNapoli Supports Lobbying Disclosure and Independent Director Proposals at Peabody Energy

New York State Comptroller Thomas P. DiNapoli Tuesday announced support for two shareholder proposals at Peabody Energy Corporation’s annual meeting on April 29 calling for Peabody to disclose corporate lobbying expenses and to require the chairman of the board to be an independent director.

DiNapoli Refers Investigation of Substance Abuse Provider to U.S. Attorney

Phoenix Houses of New York, Inc. provided inappropriate perks to its executives exceeding $223,000 while under contract with the Office of Alcoholism and Substance Abuse Services, according to a report released Wednesday by State Comptroller Thomas P. DiNapoli. DiNapoli referred the findings to U.S. Attorney Preet Bharara’s office for review.

Comptroller DiNapoli Releases Municipal Audits

New York State Comptroller Thomas P. DiNapoli Wednesday announced his office completed the following audits: the Bloomingburg Joint Fire District; the Village of Depew; the Essex County Probation Department; theEssex County Sheriff’s Department; the Town of Johnsburg; the Town of North Castle; the Town of Owego Fire District; the Rescue Fire Company, Inc.; and, the Village of Village of the Branch.

Comptroller DiNapoli Releases Audits

New York State Comptroller Thomas P. DiNapoli Wednesday announced his office completed audits of the the Beacon City School District; the Chenango Valley Central School District; the Fairport Central School District; the Monroe–Woodbury Central School District; and, the Oppenheim–Ephratah Central School District.