Mark: Welcome to Unsuitable on Rea Radio, the unique financial services and business advisory show that challenges your old school business practices and the traditional business in culture. We’ll hear from industry professions who think beyond the suit and tie to offer meaningful modern solutions to help you and your company’s growth. I’m your host, Mark Van Benschoten.
I like to think that most people are good by nature and in my work with nonprofits I have seen the vale of human kindness first hand. Our guest today also knows a thing or two about generosity and about doing things right for the right reasons. I’ve been told Maribeth also has a dark side, but for more than 30 years Maribeth, who is a principal here, frequently advises donors who are seeking to gift their funds to charity. She also works with not for profits to help them take advantage of ways to legitimize their organizations. Maribeth, welcome to Unsuitable.
Maribeth: Thanks, Mark.
Mark: Really glad that you’re here, Maribeth. I’ve known you coming up on eight years now and I haven’t heard about this dark side. Do you want to elaborate?
Maribeth: Not really, no.
Mark: It is a family-friendly show. How did you get started working with exempt organizations?
Maribeth: Part of it was I started out as I volunteer, then I moved back to Cambridge. Cambridge is a small town and I really wanted to get involved in the community, so I started to volunteer with United Way and then it just met a lot of agencies and found out they had needs and as a result I had just ended up working with them and learning about how to prepare 990’s. At the time, audits were one page, so there was not a to to do-
Mark: I think you’re dating yourself there.
Maribeth: Yeah, well I am.
Mark: When you started your volunteer was that at Rea, prior to Rea?
Maribeth: Actually, I worked for another firm for eight years prior to Ray and Associates.
Mark: That’s the dark side people keep talking about.
Maribeth: Yeah.
Mark: I didn’t see you at the bar late at the last retreat, so I don’t know if that’s what they’re talking about.
Maribeth: I don’t know, I was there. Maybe it was you that was having a dark side.
Mark: Maybe it was me, maybe it was me. In your experience advising people to give money to charities, I think it’s important, what kind of things do you talk to them about?
Maribeth: First of all, you talk to them about something that they really have a passion for and just letting them know the various avenues out there. A lot of people this day and age, not everybody, but people that have accumulated some nice wealth are concerned about what if I have to go into a nursing home, so they really are hesitant to give large sums of money away at this time. I don’t want to generalize, but you see it frequently with that older generation that grew up during the depression. What they’ll do is, we’ve talked to them about possibly planned giving and even in some cases there are foundations that we can set up a fund, whether it’s a donor advised fund or whether they just want to give it to them or in our case the Guernsey County Fund or whether they just want to give it to to them, like in our case the Guernsey County Foundation for which we could make distributions on their behalf, but it’s really about having the passion for the organization that they want to support.
Mark: When you first mentioned “passion”, you took it a different direction than I thought you were going to go, passion like being I want to give to helping children which means it’s not going to go to something agricultural related, that’s what I thought, but you’re talking about an overall passion that they just want to be philanthropic.
Maribeth: Want to be philanthropic or in some cases possibly somebody in their family has had a cancer diagnosis and they’ve seen what the cancer center in Guernsey County has done through Southeastern Med and they want to really support that because of the fact that they saw the benefits that their family member got … Or a passion just for … I think doing projects for a humane society if you’re really involved with wanting to help animals. It can be very general or it can be very specific, but it’s got to be something that you really feel.
Mark: One thing that I personally struggle with, it seems like every time that I open a piece of literature or read something, I think “Oh, that’s the cause I want to support.” I struggle with trying to narrow it down and then sometimes unfortunately it’s like I don’t do anything because I just get bogged down.
Maribeth: It is that time of the year and you will be getting those in the mail, but there are resources out there to help donors to see if the organizations, they get those mailings if it’s something that they do want to support. GuideStar.org is a location now, I use that one most frequently because I can pull up the 990 fines which is the exempt tax return and be able to review that and because of my experience I’m able to make some judgments, so to speak, based on based on that information. There’s also resources called charitable navigator and Wise giving and both of those-
Mark: I’m not familiar with the Wise giving one.
Maribeth: It’s fairly new, but what it does is charitable navigator and WiseGiving BBB will actually rate the organizations. You do have to be a little careful about that because maybe compare a couple of them to make sure, but what they’ll do is they’ll analyze and say “Okay, of your donation, eighty percent of it is going to program and ten percent is going to fundraising and ten percent is going to general administrative.” They do an analytics on it to see whether or not your dollars are going to fundraising or they’re going to general administrative and very little going to program.
Mark: We’ll come back up to those percentages in a moment. Previously, you mentioned different avenues and is that what you’re referring to by the Planned Giving Campaign, you mentioned different avenues that people can … How they can go about doing it instead of just writing a check once a year. Can you talk a little bit about different avenues how people can contribute?
Maribeth: One of them is that there are set foundations and most all communities have some type of community foundation or some type of affiliation that they can utilize to be able to build a base for giving back to the community endowment on and ongoing basis.
Mark: Okay. Getting back to the percentages and you and I might-
Maribeth: Okay, there’s … I know what you’re going to ask me, but-
Mark: I mean, it is one evaluation for somebody to look at a nonprofit and say “Is this organization worthy of my contribution?” To look at that spread, but I contend that should be one and I would say a small one. I hope that people are evaluating “What did this organization do? What did they contribute? How did they help whatever cause they’re trying to help?” Those percentages could be manipulated, I know that’s a bad word in accounting terms and I offer that example I use, if I go out and I spend ten million dollars on administration, but I cure cancer, who cares? I cured cancer, who cares? It is important. I guess I wouldn’t want it to go to fundraising, I’d rather it go to administration than versus you get the calls on your telephone at night and I’ll contribute a dollar and you go back and look and fourteen cents of that dollar went to the organization. I struggle with telling people that’s the only thing they should look at when making a contribution.
Maribeth: You do want to look and make sure that the funds are going towards program because that’s really what you’re raising the dollars for. You’re right because a lot of people don’t understand that the people that call you at night are actually professional solicitors,
Mark: Correct and they’re scraping off a vast majority that even before goes to the organization. I also offer that if somebody is trying to again use that bad word, manipulate those percentages, they cut down on their overhead, I would say they might of put the organization at greater risk because they might be cutting an internal control that’s critical to the organization. I like when people say “I give to them because one hundred percent goes to-” and I’m like “Oh” it needs to be deeper than that.
Maribeth: It does.
Mark: Oh, we agree. Look at that.
Maribeth: Yeah, I know.
Mark: What other … Obviously, you and I are blessed or cursed depending on how you looked at about being able to read a 990. What would you say to somebody else who may not have our experience about reading 990’s, is there like a page in the 990 you would point them to when they’re looking at Guidestar.org and they pull up somebody’s, is there something particular you think they should look at?
Maribeth: Well, now the new 990’s will summarize on page one-
Mark: That’s easy.
Maribeth: The total financial picture of the organization and that of there’s a misunderstanding about a not for profit making a profit.
Mark: True.
Maribeth: They refer to it “Revenue over expenses” and that’s not the cases. They need to be fiscally responsible just like everybody else and you don’t spend everything in your purse or your wallet, you need to hold some back whether it’s for growth, whether it’s just for challenging economic times. The fact that their might be reserves is not an issue, it’s if we’re not doing our program from which we were formed. Page two is another very interesting highlight because what it does is it takes the three largest programs in the organization and it breaks down what those three programs were, how much was spent on those individual programs, and whether there was any revenue generated from that.
Mark: Great, that’s good information. Switching over to the other side to helping the nonprofits and be compliant. I think most people start the exempt organizations, the tax exempt, with a bleeding heart, want to do something good, but a lot of times they don’t do what’s necessary. What are some of the things that you’ve seen in your career about what people are doing that really shoot themselves in the food from a regulation stand point?
Maribeth: Well, it’s really not, you know, in 2008 they revamped the 990 significantly to make it more transparent to not only donors, but also to the IRS and one of the things is just really having a good understanding of the information that is being compiled and put into that return so that you have an understanding as a board and as an executive director on the information that is actually compiled and going into the 990. What I’ve seen over the years is possible we’ll get a new client and everything will be put right into program, there will be no general and administrative, that’s unrealistic.
Mark: True.
Maribeth: That’s unrealistic. It’s also a management tool, can help to be a management tool because in a lot of cases it will just be revenue and then expenses in some reform. With a 990 it gets broken down between program, fundraising, and general administrative, ad a lot of times we will work with the executive directors or the senior management to come up with those allocations. There is a little bit, not intentional manipulation, but somebody will go “Oh, well I’m not real sure. I think about ten percent.” That at least gives some kind of idea too with the donor and-
Mark: I’ve seen where organizations have started and they’ve been in existence ten years and it might have been small at the time and ow it’s grown over the years and you look at the tax payer ID listed on the bank account and it’s like the executive director that the organization filed for it’s own tax ID number, it hasn’t filed for it’s application for exemption. I think you’re seeing fewer of those, I think the IRS I don’t want to say has done a good job, but done a better job of notification and getting the word out on what needs to be done, but I remember seeing those throughout my career.
Maribeth: You can apply for, a lot of cases too, you could apply for an EIN or a tax identification number and you just set it for banking purposes only and there was no tieback requesting any followings for not for profit status, it was just given to you. There are some exemptions actually, but it’s very minimal, you have to be under five thousand dollars and there’s some other tests that have to be met to be able to exempt you from actually going through the process of being recognized as a not for profit. In the old days too with banking things were a little bit … Especially your community bank “Oh, yeah, I know Mark [inaudible 00:13:42], just go ahead and open up the account and give him his number.”-
Mark: It never changes.
Maribeth: It never changes, yeah.
Mark: Kind of scary. The other things you mentioned the change with the 990 in 2008 disclosure of compensation and some people just say “I’m not going to do it”, but that’s not a complete return, that’s an easy get for the IRS>
Maribeth: It is and we’ve worked, for the most part everybody didn’t like it, okay, but they understood the reason for it and we were able to supply the support and said this is the reason that we have to report this and everybody was willing to be compliant because the last thing they wanted was an organization unit, that’s always my first question when I get a return and I see that it’s like who’s running this organization if there’s no compensation? Now, there are volunteer organizations, but if you have an executive director that’s there everyday, more than likely they’re being compensated. Actually, there’s only been a couple cases that we’ve run into that and we’ve actually documented it in a footnote-
Mark: On a return?
Maribeth: On the return.
Mark: That there was no compensation.
Maribeth: The reason being is because they were actually compensated by a related organization, it just got … They were concerned that if they put it on this return that there would be this misconception that this person was make four hundred thousand dollars, which was not the case, so we just documented it in the footnote which was acceptable.
Mark: What other hot topics are out there on non compliance on not for profits? A few years ago it was private endearment, is that still an issue for non profits out there?
Maribeth: No, not too much. Some of the issues are if you’re involved with gaming or bingo, fundraising activities, those seem to be the areas that will enlighten the IRS to asking additional questions.
Mark: Good questions or bad questions?
Maribeth: Well, it depends on how you look at it. There is this cross reference especially in the bingo area that if you buy instant bingo tickets the State of Ohio reports to the IRS what they think you should be generating off those sales based on your supplier.
Mark: Interesting.
Maribeth: There is a way to be able to cross reference that.
Mark: I never knew that. I guess they view that’s a high risk area?
Maribeth: They do view it as a high risk area because a lot of times if you don’t have internal controls, there’s always that possibility that inappropriate activities might take place and that could actually shut down, if you’re not aware of it and take corrective action, that could actually jeopardize your not for profit status.
Mark: One thing before we start wrapping up is something that I guess I would say I personally experienced is donor fatigue. You contribute to an organization and you feel good about it then you start getting weekly solicitations. I contribute at year end and now they’re hitting me up in June. Any comments on that, any ways you handle that, do you advise people, your clients to try to stay away from that?
Maribeth: Actually, most of the clients that we work with are usually on their annual donation cycle, they don’t have the resources or the manpower to be able to do a significant amount out of mailings. What I’ve done in the past is I’ve just kind of returned the request and noted if I continued to get these because I don’t want my dollars spent in mailing that I’ll cease to donate. I know that sounds a little harsh, but I’m exactly with you because a lot of times you’re getting-
Mark: This is the dark side.
Maribeth: This is the dark side. You’re getting labels, or you’re getting ads of paper, or you’re getting cards and exactly and its kind of like the credit card, when you get your credit card that you just turn it in and send it back and the same thing goes here.
Mark: I apologize, I told you we were wrapping up, but I have another question. Crowd sourcing for nonprofits, it’s gaining in popularity, any comments on that?
Maribeth: Actually, the Attorney General’s office just sent out a notice regarding that just to kind of let everybody know that you want to be very alert to the fact that this is going on because anybody can start a crowd sourcing page in the name of an organization. They don’t really have the controls in place to be able to manage that, but I’m going to say with the Attorney General’s office now involved, and that’s another good site to go to too especially for Ohio charities. They will talk about whether there’s been any complaints against the charity, but the crowd sourcing … A friend of mines father recently passed away, one of their friends started a crowd sourcing page, we just all thought that’s what they want to do, well most of the family members did not know that this page had been set up. It was all legitimate and it went to the cause for which it was started, but it’s so easy to go ahead and set those up.
Mark: Sure. Thank you for bringing that up. I promise this is the last question. We have a question we ask every guest.
Maribeth: Every guest, okay.
Mark: If you could have one superpower what would it be?
Maribeth: Oh wow … If I could have one superpower.
Mark: Longer legs?
Maribeth: No. Wow.
Mark: You don’t have one?
Maribeth: I don’t know. I feel pretty good about what I have.
Mark: That’s a great answer right there. That’s impressive. Well, thank you for joining us today, Maribeth and thank you to our listeners for tuning in. If you want to learn more about he value supporting charitable organizations, check out or website at www.raycpa.com/podcast and don’t forget to subscribe to Unsuitable on iTunes or Soundcloud. Remember to share the wealth with your friends or colleagues. Until next time, I’m Mark Van Benschoten on Rea Radio and I encourage you to loosen up your tie and think outside the box.
