Designated Staff Donations Q & A    8501-06  ZZMis

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                              TO:  Interested Mission Agencies                                                                                FROM: Jim Bramer, Retired CPA-Auditor
                                                                                                                                                                             FILE: 8501-06/mis

                               RE:  Designated Staff Donations Q & A                                                                    Originated:   November 1994                   


        The Internal Revenue Service (IRS) continues to ask serious questions of Exempt Organizations (E/O), or Mission Agencies in particular, on the subject of "pass-through" of Designated (we recommend the term "Preferred") Donations when a Staff Member goes out Deputizes and/or "raises" their own financial support.   Please also access 8503-01 as a source of assistance in proper tax accounting of such income.  See also 8505-02 for more insight on such matters.  Please Click Here and go to what ECFA  provides about the Deputized effort, etc.
        As a means for a Mission Agency dealing with this issue, we have produced the following worksheet.  Please notice that it is designed so that your response to the "PLEASE DO" or "PLEASE DO NOT" statement will assist you to hopefully improve your current situation. 
  
         Click here and go to List of FAQs at www.bcidot.org


NOT

 

P L E A S E     D O

NO

SURE

YES

   1> Have well understood Finance and Personnel

Policies and Procedures that clarify these issues

---- up front.

____

____

____

   2> Explain to donors that donations are going into

a "Pool" but the E/O will recognize that the donor

has expressed a preference BUT the final decision

belongs to the Exempt Organization (E/O).

____

____

____

   3> Include the Staff Members Donors

within the E/O mailing list where the E/O

has policies as to solicitation limits,

etc. Monitor/control appeal letters to

insure that they are within the "Fund

Raising" belief and policies of

the Ministry.

____

____

____

   4> Perception is important; make it

clear that such Preferred Donations

'must past muster' as they are properly

placed within a Board authorized "Pool"

before they can be used, etc.

____

____

____

   5> Make the Staff Member's compensation

as much 'flat rate", as possible.

____

____

____

   6> Have an understanding about the

"Ministry Expense Reimbursement" (MER)

practices; clarity about the distinction

between Personal expenses and Ministry/

Project Expenses and the exact system

of caring for such items within the "Pool"

Budget to Actual control, as much as

feasible.

____

____

____

   7> Place the "Pool" expenses under

Actual to Budget control, as much as

feasible.

____

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____

   8> Do have Policies to handle large

Donations (such as Estate Income) as

earmarked for a certain Staff Member;

how is this handled under the Preferred

Gift setting and the ability for the

Ministry to reallocate to areas where

most needed.

____

____

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   9> Have established Staff Member

Salary "Mini and Maxi" attributes.

Regardless of the amount of "Preferred"

Donations, said Staff Member always has a

Minimum Salary or a Maximum Salary ---

tie this in carefully with project or MER needs.

____

____

____

                   P L E A S E     D O      N O T

   A> Structure your E/O whereby the Staff Member is

almost a 'law as unto him/herself" since s/he raised

funds for it, etc.  Such Ministry decentralization

"culture" can lead to questions of who

really is in control of Ministry resources.

____

____

____

   B> Allow the Staff Member to mislead

"his/her" Donors to believe that every

dollar given does in fact flows to the

Staff Member; they need to emphasize

that the Donations are made to the E/O and

not precisely to a specific Staff Member.

____

____

____

   C> Pay the Staff Member the exact amount

of a Staff Member Fund Balance remaining

after allowable Assessments and/or MERs.

____

____

____

   D> Leave the impression (Ministry culture,

etc.) that such Donations 'belong' to the

Staff Member.

____

____

____

   E> In our accounting structure and

processing, place such Preferred Donations

in liability accounts, as if they are a legal

obligation to said S/Members. In reality, they

should be reflected as Income to various

"Pools", departments or Funds.

____

____

____

   F> Allow the E/O to process such

Donations in a 'conduit' fashion ---

dollars in and dollars out ---- as if you are

functioning as an agent for the Staff

Member and accommodating them by

handling "their" money for them.

____

____

____

   G> As an alternative to being under

"Budget Control," be under Account (Fund)

Balance Control ---- if there is a balance

in the Account (Fund) I can spend it; if

not I can not, etc.

____

____

____

   H> Have the E/O accommodate S/Member's

family members in 'passing through' large

gifts so Staff Member can make certain

investments. Example, near the end of the

Staff Member's tenure with the E/O, the

Staff Member is to retire and needs retirement

resources, etc. Long time supporters or

family members flow the means of so acquiring

these resources through the E/O and, since

it is Income to the Staff Member, it is also

a Tax Deduction to the Donor.

____

____

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        Let us know if you have any comments or questions.

                                Thank you.


      Please Click Here for a list having to do with Mission Agencies topics here on www.bcidot.org.     The bulk of the publications originated in November 1994.  UPTD:April 20, 2010   

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