Blue Avocado

The Marketplace of Ideas: 8/15/08

Thu, 14 Aug 2008 09:49:57 -0700

Peter Drucker once wrote that every important idea for social change in the last 100 years has come from the nonprofit sector. And when we look around, there's no denying it. Ideas that have been nurtured and grown in the nonprofit sector include the idea that disabled people should not face discrimination, that women should have equal rights with men, that the earth needs to be cared for, that patients should participate in their health decisions, that being gay/lesbian is not a mental disorder, that people of color still face deep discrimination, and that animals should not be mistreated.

The nonprofit sector is also where many ideas have sprung up and yet failed to gain traction. That's why our sector can be called the "marketplace of ideas." Ideas come to the sector and find embodiment as nonprofit organizations, and some grow and become part of our collective consciousness, while others fade out. We are more than service providers and theatres. We are the crucible for the ideas and movements that change the world.

As you know, in every issue of Blue Avocado we have at least one news/feature story, one practical article, and one fun article. This issue you'll see an article on unfair mileage reimbursement rates for volunteers, practical articles on when to get an audit and how to manage FMLA issues, and fun articles on cookies and on fingernail clipping in the workplace. Enjoy the summer! -- Jan Masaoka

Gas Rates, Volunteers, and Justice: Reader OpEd

Susan J. Ellis — Fri, 15 Aug 2008 00:00:00 -0700

Many people don't realize that on their personal tax returns volunteers can
deduct mileage expenses incurred as part of volunteering. For example, if a
volunteer drives 30 miles to volunteer at an art school
or drive a patient to chemotherapy, the volunteer can
deduct $4.20 on her next tax return. Even fewer people
realize that in contrast, if this same person drives 30
miles for her business, she can deduct $17.55!

Clearly we need to help volunteers claim the deductions
they can. And in this Blue Avocado Reader OpEd,
activist Susan Ellis talks both about how we can change
the law, and steps we can take now to
supportvolunteerism in an era of high gas prices:

You may know that the IRS just raised the rate for the business-related mileage
deduction to 58.5 cents. But did you know that the charitable driving deduction
remains at only 14 cents a mile? So volunteers, who often use their cars to provide
life-or-death services to people in need, are deriving less tax benefits as their driving expenses rise.

This issue is particularly important since, as the cost of gasoline soars, Americans are trying to drive less. The high cost of driving is already discouraging some people from volunteering, which should set off warning signals about things we sometimes take for granted. Remember that. . .

Volunteers drive and deliver:

meals and other necessities to house-bound individuals
patients to doctor appointments and dialysis treatments
seniors on outings and field trips
children to visit their parents in prison

What's more, volunteers must drive to:

the sites of disasters and emergencies as firefighters and first responders
the places where they volunteer as museum docents, hot-line answerers, tutors, and so much more
board meetings, the county fair where their organizations have exhibit booths, CPR training, and often hundreds of miles to conferences as well as service projects

This issue is particularly important since, as the cost of gasoline soars, Americans are trying to drive less.

An Ongoing Struggle

The tax deduction for driving as part of volunteer service has been at 14 cents for
the last 10 years, having last been raised from 12 cents by the Taxpayer Relief Act
of 1997. Some of us can remember the struggles in the 1970s and 80s to get past
7 cents a mile, and the determined efforts of now Senator Barbara Mikulski (D,
Maryland) to champion better tax support for volunteer drivers.

Silence is not necessarily a sign that people don't mind the cost. Most volunteers will wait a long time before mentioning that driving expenses are hurting them. Even worse, they may drop out of volunteering rather than ask for reimbursement. Rather than exploit the charitable nature of volunteers, shouldn't we be working to support -- rather than penalize -- volunteering?

Here are first some short-term ideas, and then more on supporting changes in the nonprofit mileage rate.

Small Solutions for Right Now

Helping volunteers decrease their driving costs may give us an opportunity to address some things most volunteers have long wished to change anyway:

Consider organizing carpools among volunteers, especially among employer-based volunteerism or to special events
Raise funds specifically to reimburse volunteers for gas costs
Have fewer-but-longer face-to face meetings, and supplement them with conference calls and listserv exchanges
Actively focus on recruiting on people who can walk or bike to our sites
Find ways to engage parents in volunteering while waiting for their children to be finished with sports, painting classes, or therapy

Changing the Law

In July 2008, the Internal Revenue Service (IRS) raised the business mileage deduction to 58.5 cents per mile (an increase of 16%). IRS Commissioner Doug Shulman commented, "We want the reimbursement rate to be fair to taxpayers." The problem is: gas doesn't cost any less for volunteers, yet the reimbursement rate of 14 cents per mile is 76% less than the business rate!

And . . . it turns out that this figure requires congressional legislation to change! The government gives lip service to "supporting and encouraging" volunteer and community service. Here is an opportunity for a simple, direct way of doing so.

Protest has come from various sources and Congress is responding. The Pennsylvania Association of Nonprofits has been one of the leaders of the effort to raise the charitable deduction rate and urges support of H.R. 2020, which would make the rate equivalent to any number set by the IRS for business-related driving. More information can be found at http://www.pano.org/publicpolicy/publicpolicy-irs_CRR.php. Collectively, we can remedy this injustice!

Sample Letter

Dear Representative/Senator _________________________:

It's wonderful that the IRS has just increased the mileage deduction to 58.5 cents a mile in recognition of the high cost of gas. But do you realize that the charitable mileage deduction has remained at only 14 cents a mile for the last ten years?!

It requires Congressional legislation to raise this rate. Please act now and recognize the enormous contribution of volunteers who use their cars to:
* Deliver meals to those who are homebound and otherwise might not eat
* Drive seniors to necessary doctor appointments
* Make sure people without the means to drive or without mass transit can get medical treatments, visit family members in custodial care, and other vital services.

Please support a bill such as H.R. 2020 that makes the charitable deduction equal to the business deduction, and prevents new legislation from having to be introduced ever few years.

Volunteers deserve this support and assistance. Please change the law now.

---------------------------------------------------------------------
Susan J. Ellis is president of Energize, Inc., a training
and publishing firm specializing in volunteerism. The
Energize website www.energizeinc.com has 1400 free
pages of information and resources for leaders of
volunteer efforts. You can sign up there for their free
monthly email Update, and check out their online
volunteer management training program. Here you see
Susan with her 2006 Civic Hybrid at an event where she has driven to volunteer.

Can an Employee Come and Go Using Family or Medical Leave?

Pamela Fyfe — Fri, 15 Aug 2008 11:47:42 -0700

Dear Rita,
One of our exempt employees -- a children’s therapist -- is keeping me up nights by taking unscheduled and intermittent leave under the Family Medical Leave Act (FMLA). We've been able to plan schedules when other employees have requested either a 3-month leave or regularly scheduled intermittent leave, but this employee has rheumatoid arthritis and she never knows until she wakes up if she will be able to come to work on any particular day. We can’t count on her to keep appointments with our clients. We know that leave under the FMLA is protected, but there must be something we can do without these continuous disruptions to our services. Help!
-- Sleepless

Dear Sleepless,

The administration of intermittent leave can create a headache for the employer. You do have some options and some tools that can help you manage this situation in a way that works better for you and for your ailing employee.

Would a Transfer Help?

First, it's possible that you can transfer her to different duties until she is well enough to work regularly. Employees who need intermittent FMLA leave must attempt to schedule their leave so as not to disrupt the employer's operations. Thus, you may temporarily transfer her to a position in which her unscheduled absences are less troublesome for your nonprofit. The alternate position must have equivalent pay and benefits, but not necessarily equivalent duties.

You must be careful, though, because you may not transfer the employee to an alternate position in order to discourage the employee from taking additional leave. For example, she could not be assigned to perform laborer's work; work a graveyard shift, or to travel to a remote site.

If you do find another position for this employee, she has the right to be placed back in the same or equivalent job as the original job (after she has exhausted her FMLA leave).

You could also reduce her hours, which would allow her to recover in the mornings. You would have to pay her the same equivalent hourly rate as her full-time job and she would enjoy the same benefits, even if you do not offer those benefits to other part-time employees. Of course, group health plan benefits must be maintained on the same basis as if she had been continuously employed during the FMLA leave period. However, you may proportionately reduce benefits such as vacation leave which are based on number of hours worked.

Certification and Re-certification for Intermittent Leave

But before proposing these options, you can require medical certification that the employee has a serious medical condition which requires intermittent leave; create a comprehensive certification form and require recertification every 30 days. Attach a letter to the certification request, including the employee's attendance record, and ask the doctor whether her arthritis is incapacitating enough to warrant the hours she has been absent. If there is reasonable doubt about the validity of the certification, you can, on your dime, require a second opinion. If the two medical opinions conflict, you and the employee can agree on a third doctor to provide the definitive opinion.

FMLA certification for intermittent leave should include:

Whether the employee has a serious medical condition
Date the condition started
Anticipated duration of the condition/treatment
Medical necessity/reason for intermittent leave
Type and duration of intermittent leave required

An employee is entitled to 12 weeks of unpaid medical leave. Did you know that, for purposes of determining the amount of consecutive leave taken, when a holiday occurs during the week, the entire week is counted as a week of FMLA leave, unless you close down for the entire week?

Intermittent leave can be taken in the smallest increment that your nonprofit uses to track time. For example, if your payroll system tracks time off in 10-minute increments, you can designate FMLA time in 10-minute increments. You cannot, however, use a time increment greater than one hour. The FMLA time is time “off the work clock.” An employee may not be required to take more FMLA leave than necessary. However, you may require the employee to use accrued sick/vacation/personal time off (PTO) benefits unless and until the employee is eligible for some type of disability benefit. For example, in California an employee who is on FMLA leave and who is absent more than eight consecutive days may be eligible for paid family leave or short-term state disability benefits.

Once the employee becomes eligible for a disability benefit, the employee may elect to use sick/vacation/PTO, but may not be required to do so. Herein lies another tool. You can require your employee to use accrued leave for the intermittent FMLA leave, unless and until she is eligible for wage replacement through any disability benefit.

You may also make deductions from this exempt employee's wages for the intermittent FMLA leave that is not covered by her taking paid leave without compromising her exempt status, even if her salary falls below the threshold exempt-salary requirement.

To help you administer FMLA correctly, be sure to follow the steps on our checklist for designation of FMLA leave.

Is It Time for an Audit?

Jeanne Bell — Fri, 15 Aug 2008 00:00:00 -0700

Blue Avocado reader Bill Mitchell writes: "As a board member of both a small ($400k/year) and a much larger ($1.8m/year) nonprofit, what are the criteria to determine whether or not to conduct a formal outside audit? I have worked on staffs, sat on boards and have been a foundation program officer and I have never had a clear set of guidelines. Thanks!"

Blue Avocado columnist Jeanne Bell replies:

Dear Bill: In these tough economic times it makes perfect sense that a board of directors would weigh the costs and benefits of spending $10,000 or more on this administrative expense. The short answer to your question is: "As soon as you have to."

The longer answer: A first tier for nonprofit audit requirements may be set by whether or not you receive federal funding. The federal government has not yet issued an across-the-board audit standard for nonprofits, although it could very well happen, given ongoing federal attention to charity regulation. Currently, nonprofits that expend $500,000 or more in federal contract dollars in a fiscal year must obtain what's called a ‘single audit' to test for compliance with federal grants management standards.

(See http://www.whitehouse.gov/omb/circulars/a133/a133.html for more information on these requirements.)

Things get a lot more complicated at the state level. State attorneys general, who regulate nonprofits at the state level, have wildly varying standards for nonprofits, ranging from $100,000 thresholds to no requirement at all. You can contact your state attorney general or any auditor for your state's requirements.

And, in 25 states, audited statements must be submitted if you solicit funds in their states, whether or not you are located there. For instance, if you are based in Seattle but raise funds from donors in all 50 states by mail, phone, or other means, you must not only register annually with the 25 states that require it, you must provide an audit with your registration.

However, the 25 states vary in the amount of annual revenue at which they require an audit. If you have donors residing in multiple states, check out the Multi-state Filer Project to research and potentially simplify this cumbersome annual registration process. (There are another 13 states that require fundraising registration but do not require audited statements to be attached.)

What else triggers an audit?

If you're not spending more than $500,000 in federal funds, nor raising money in states that require annual audits as part of state registration, what other factors should you consider? In many cases, foundation funders ask for an annual audit as part of their grant application process. If you are otherwise eligible for the grant, consider contacting a Program Officer or Grants Manager at the foundation and asking if submission of your IRS Form 990 in lieu of an audit will suffice.

The Form 990 actually provides more information about an organization than an audit does, although it lacks a CPA's sign-off attesting to the accuracy of account balances. Many foundations, sensitive to the fact that smaller organizations may not yet be auditing, will accept Form 990 during the application process, but may require a yearly audit after they have funded you.

You should also be aware that there are many groups that are establishing their own standards for when nonprofits should obtain audits. The Wise Giving Alliance has a $250,000 annual revenue threshold for audits, while the Standards of Excellence Institute's threshold is $300,000. The Independent Sector recommends a threshold of $1 million dollars. Remember, these are not regulating authorities but rather independent organizations attempting to influence nonprofit practice and how the general public evaluates potential donation recipients.

Benefits of audits

Aside from these specific funder and donor-related factors, it's helpful to recognize three inherent benefits that an audit provides to a nonprofit :

1. Donor and Community Confidence: An unqualified audit opinion is a universally accepted indicator that an organization is investing in its financial management and that its financial statements are likely to be accurate. Beyond donors, the audit is a symbol to an organization's broad constituency, including the media and watchdog groups, that the organization is committed to fiscal accountability.

2. Achieving Financial Best Practices: Board and staff leadership benefit from an audit performed by a CPA who's knowledgeable about current nonprofit accounting standards -- such CPAs can help move an organization towards best financial management practices. And even amongst experienced nonprofit finance staff, knowing that they will have to defend accounting judgments to an auditor at year-end encourages accounting discipline throughout the year.

3. Some Protection Against Fraud: An annual audit can bolster the soundness of internal controls. But caution: although the prospect of an audit may play a role in deterring malfeasance, a determined staff person or volunteer can find ways to steal that an auditor testing on-site for just two days each year may not detect.

Alternatives to audits

If your organization's leadership decides that it wants some of these benefits but cannot afford the $10,000+ price tag, it may elect to engage an outside CPA in a financial statement review rather than a full-blown audit. A review does not include on-site testing and therefore does not conclude with an auditor's "opinion" -- a technical term for the CPA's expert judgment -- as to whether the financial statements prepared by the organization were prepared in accordance with accepted accounting principles.

This report is based on limited document review and communications with staff and/or board, and gives limited assurance that the financial statements reflect an accurate picture. For roughly half the price of an audit, you could share a CPA-prepared document with constituents, albeit one with less "bite."

Another recent wrinkle to factor into your deliberation of when to begin auditing is something called, SAS-112: an accounting standard with the full name of "Communicating Internal Control Related Matters Identified in an Audit." As Kate Barr of the Nonprofits Assistance Fund recently wrote in The Nonprofit Quarterly, "At root, the new standards increase the likelihood that control deficiencies will be identified and reported."

In other words, if you are just beginning to professionalize your accounting and have yet to produce audit-like financial statements each month on your own, you will get very little slack from your auditor come audit time. As Barr concludes, "The new standards make clear that an auditor's role is to test and verify the information provided by an organization and issue an opinion?not to calculate and produce financial statements." (Read her full piece on SAS 112 online.)

Bottom line on audits

So what's the bottom line? In most cases, it makes sense for community nonprofit boards with operating budgets in excess of $250,000 to begin considering whether it's time to audit by evaluating their readiness in the context of SAS 112. And recognizing the potential benefits of an audit to build donor confidence and increase protection against fraud will also influence your decision. By the time you reach $500,000, the world at large will expect you to be making this annual investment and your accounting systems should be ready for the scrutiny.

Look for a future column taking up the question of screening, selecting and changing auditors.

Jeanne Bell is CEO of CompassPoint Nonprofit Services, and a frequent writer on nonprofit finance and strategy matters.

Have a 3-Minute Staff Retreat with Cookies

Fri, 15 Aug 2008 00:00:00 -0700

You need a 3-minute vacation. You feel like eating a cookie. There's a wrong way and a right way to have a 3-minute cookie vacation. The wrong way: eat it while working. The right way: Go out and buy a box of cookies (if desperate, buy 5 packages out of the vending machine, but you have to be really desperate). Announce to a few co-workers that you're having a 3-minute staff retreat at your cubicle in 15 minutes. Pass out the cookies and talk (no working!) while you all enjoy the cookies.

I Hear the Sound of Fingernails Clipping

Keiko Rosenstiel — Fri, 15 Aug 2008 00:00:00 -0700

Last issue we asked Blue Avocado readers how they would react to hearing the activity of a co-worker in the next cubicle clipping his fingernails. Ack! Some readers provided
humorous ideas and others gave practical advice, perhaps because of personal
experience? Here are just a few of the letters:

Those of us who have lived in cube environments for years have found the best way is to ignore them with music and headphones. And a few of us can just turn off our hearing aids, which we need as a result of using loud music to drown out the fingernail clipping noise. -- Dave Cannard, Portland, Oregon

I actually witnessed my supervisor clip her toenails into a trash can about two feet from me. What did I do about it? A week later she applied deodorant and I quit. -- Louise

Clearly your co-worker doesn't have enough to do. Since there is rarely a shortage of work in most nonprofits, maybe you should tell him that you're happy to share items on your to-do list. -- Michelle Johnson, Davis, California

Leave an anonmymous bottle of flaming red nail polish and an emery board on "The Clipper's" desk with a note: 'Here's a little something extra to put on your freshly clipped nails." -- Alan E. Yue, Life Foundation, Honolulu

I was the person clipping! For years I thought that talking on the phone at work was the perfect time to clip my fingernails. But one day I overheard two people complaining about someone ELSE who did it. I was stunned to realize this was considered too uncool for words, and embarrassed that no one had ever told me. In retrospect, I wonder if my two co-workers staged that conversation for me to overhear. So remember: some of us are just ignorant or from a different culture, and we would appreciate a gentle soul clue-ing us in. -- Jan Masaoka, Blue Avocado, San Francisco

Lean over the top of the cubicle and ask: 'Would you like to be alone, this seems like an intimate moment for you? Or go to the doorway with your trash bin and at the next clip yell, 'Two points!" BUT, since my boss has been known for the same bad behavior, I'll remain anonymous! -- "Rad-Raw"

Queries and Help Wanted August 15

Fri, 15 Aug 2008 00:00:00 -0700

Hey, it's so great to hear from so many of you! Thanks especially to the 25+ people who wrote in about their personal financial situations as lifelong nonprofit workers: the three-part series on nonprofit retirement starts next issue. Now we're looking for:

* Are you one white person on a nonprofit board of an organization based in and serving a community of color? If so, would you be open to being interviewed on the phone?

* Still looking for someone to work very part time selling ads for Blue Avocado, on commission. Send message and requested rate.

* How does your board sort through taking public policy stands? For example, your organization may often be asked to sign onto various letters and petitions. How do you handle these?

This issue's requests . . . click here to send email to the editor