Once upon a time not-for-profit organizations were left alone to devote as much of the resources they could marshal together on their mission. The board, comprised of individuals from the community, was the only oversight in place charged with making sure the organization did the right thing. This lack of regulation and red tape along with exemption from Federal and State income taxes was part of society’s “gift” to the not-for-profit organization as gratitude for their mission oriented work.

All of that is changing and changing rapidly. The IRS Form 990, annual information return, completed by most not-for-profit organizations has completely changed and is now a document that will consume 40 or more pages and contain information and disclosures never before seen by the general public. Throughout 2008 we conducted half-day seminars for our clients just to get ready for the requirements imposed by this new form. As our clients struggle with the preparation of this form, the learning continues as we both examine transactions and relationships that had not been subject to this level of scrutiny in the past.

The not-for-profit pension plan created under Section 403(b) of the Internal Revenue Code was once a pension plan with an unusual ease of creation and administration. Beginning in 2009 these pension plans come under new levels of regulation including a requirement that the plan be audited by independent accountants if the plan has more than 100 participants.

Executive Directors and board members who may have been identified as the plan administrators of these 403(b) plans are suddenly hearing about the potential of fiduciary liability that has suddenly been identified with these plans. How could I as a Treasurer of a not-for-profit organization have a liability in connection with an employee of the not-for-profit deciding to save for retirement? The organization withholds the money as directed by the employee from their pay and sends it along a few days later to the investment company for deposit into an investment vehicle selected by the employee. What could be easier than that? There is so much more to this simple transaction under the new regulations that we are conducting additional half-day seminars designed to get the information out in a timely manner. The next one is scheduled for October 21, 2009 in our Waltham office.

What is behind all of this increased interest in the not-for-profit organization? One factor is that the not-for-profit organization is much more prevalent in our society than it was 30 years ago. Some estimates have the not-for-profit sector accounting for as much as one third of the general economy. Some would say that the not-for-profit sector, which has always been important to society for the mission work that it does in that society, is now such a significant factor in the economy as a whole that it needs the same level of control, monitoring and oversight imposed on the rest of American business. Another factor may be that there have been some spectacular failures in not-for-profit organizations. By this I mean not-for-profit organizations that were engaged in activities or practices that they should not have been according to their not-for-profit mission. While these failures are really a failure of the Board oversight role, the response to the failures is additional oversight and regulation from the government sector rather than training and qualification standards for Board members.


Whatever the reason, the fact is that the landscape for the not-for-profit organization has changed and the prospects of returning to those days of yester-year are non-existent.


For further information or to register for our upcoming 403(b) seminar please RSVP to Ashley Levesque at: 888-557-8557 or email ALevesque@KahnLitwin.com

By. Frank Monti, CPA
Not For Profit Group

Labels: Accounting, CPA, KLR, Monti, Nonprofit, Not For Profit Group, Tax

Why is the KLR director of the tax-exempt not-for-profit team blogging about taxes? Because I hate paying taxes so much I had to make my career in the tax-exempt area. But in 2010 we individuals have an unusual opportunity to save some taxes for ourselves and our heirs, and it got my attention, so I thought I would share the info with you.

Starting Jan. 1, 2010, all U.S. citizens will have an equal ability to convert traditional Individual Retirement Accounts to Roth IRAs. Currently only taxpayers with modified gross-adjusted incomes under $100,000 are allowed to convert to Roth IRAs--the same limit applies to both singles and couples.

As you know, in a traditional IRA, contributions are tax deductible, but all withdrawals are eventually taxed as ordinary income. While there is no deduction for contributing to a Roth, the contributions are not taxed when they're withdrawn.

Next year, the government is giving us all the opportunity to convert funds that are in our traditional pre-tax IRAs and roll the funds into a Roth IRA. Of course, when you roll the money out of your traditional IRA it will be taxed at the regular 2009 personal income tax rates. But once this money is in the Roth IRA, it is free of tax for you or your heirs who may inherit the Roth IRA account. And, I think it is a safe assumption that income tax rates are going to be higher in the future than they are now. So a Roth conversion may make sense for you.

Although this conversion rule goes into affect in 2010 the old restrictions on who can contribute to a Roth IRA will continue. So if you like the concept of a Roth IRA but your adjusted gross income is high, conversion may be the only way you can get some investment money into the tax-favored Roth IRA vehicle.

Another feature of the Roth IRA is that you are not required to take minimum distributions at age 70½ from a Roth IRA that you are required to take from your regular IRA. This means that if you are so inclined, you can leave money to your heirs in a Roth IRA account. And, the money your heirs receive in the Roth IRA account is not taxable but the money they inherit from your regular IRA account is fully taxable to them. Even worse, if you leave a great deal to your heirs, they may face both the estate tax and the income tax on regular IRA inheritance funds.

Roths allow a non-spouse beneficiary to take out the distributions either by the end of the year of the fifth anniversary of the death of the first Roth owner or the beneficiary can take the money out over their life expectancy. This allows the money to come out tax free and compound tax free for the life of your heir.

One more feature of the traditional IRA to Roth conversion. The government says you only have to report the income and pay the tax on the traditional IRA in three equal amounts in 2010, 2011 and 2012.

So, what do you think about this? How attractive is this? What are some key differences that people should keep in mind as they consider this? Who would benefit from such a conversion?

Contact the KLR Wealth Management Services to see if a Roth IRA conversion would benefit your family.



By. Frank Monti, CPA
Not For Profit Group

Labels: KLR, KLR Wealth Management, Monti, Nonprofit, Tax

As I write in my own KLR blog, I got to thinking about the challenges and opportunities of keeping the nonprofit board involved and aware of what is going on in their not-for-profit organization. It struck me that many organizations are only scratching the surface of technology when it comes to communications with the board.

Many are using e-mail to announce or confirm meetings and many are using e-mail for critical votes that must be taken between scheduled board meetings but technology can assist organizations much more. Here are some ideas.

Sharing documents via e-mail is a great time and paper saver. You may have to purchase a scanner in order to turn documents into PDF files and provide additional training but teaching your board how to comment on documents by inserting comments into the PDF document and “replying to all” may be a way to facilitate understanding and reduce the time required at the meeting to discuss the item.

You might also consider creating a section of your web site which is accessible only to Board members. This provides you with an even easier way to inform members and archive the information so that members can check back whenever they feel the need to double check something in the past.

Prior board minutes, certain policies such as the conflict of interest policy, board meeting attendance policy, etc., could also be available on the internet portal as well as the by-laws and other documents one has an occasional need to refer to but which are seldom easily available when needed.

I’ve been at board meetings where certain staff were presenting an education session for the board about one of the organization’s programs or services. This is very important and helpful information for Board members. An alternative and perhaps better way of providing board members with this information may be in the form of a webinar which a board member can watch at their convenience from wherever they like. In addition this information would be continually available and possibly find uses in other areas.

CEOs might want to consider starting a blog to continually communicate with the Board. Comments and thoughts of the readers would be instantly shared among all board members.

If you would like to discuss ways technology can help your board or would like assistance implementing your ideas, please feel free to contact me. We have a technology arm of KLR that can help you achieve whatever your goals may be.

By Frank Monti, CPA
Not For Profit Group

Labels: Board, CPA, efficiency, KLR, Monti, Nonprofit, Technology

We would all like to think we are invaluable to our employers. But few understand what is valuable to their employer. Valued employees are compensated higher because they are, well, more valuable to their employer than others. There are numerous web sites devoted to the traits of a valuable employee.

I had a recent experience over the holiday weekend that brought this to mind and demonstrated how simple being valuable can be. On two successive evenings, my wife and I decided to go out to dinner. Nothing fancy, just mid-range restaurants where we could have a good meal choice and not have to clean up afterward.

In both cases, I called ahead as I was concerned about the wait once we got to the restaurant. In the first instance, I asked about placing my name on the “call-ahead seating” list and the employee who answered the phone said they did not have one. I asked about the wait and was told it was only about 10-15 minutes. I pushed and asked if he would put my name on the waiting list as I was about 10-15 minutes away from the restaurant. The employee repeated that they “did not do that” and hung up.

On the second evening, I did the same thing to a different restaurant. The employee who answered the phone this time said that reservations were not necessary, but why didn’t I give her my name and she would be sure to have an excellent table waiting for me when I arrived and when did I think that would be.

The difference? On the first evening, I wasn’t convinced that they wanted our business; nothing was making me continue to drive to that restaurant and when we passed other eating establishments on the way we could have turned into any one of them. On the second evening, I felt committed to the restaurant I called; I felt they were waiting for us and we had to fulfill our “commitment” to go there and occupy our special table.

When we got to the restaurant on the second night, we discovered a restaurant that was more than half empty. When we walked in the hostess greeted us by name (obviously no one else had called ahead) and we were shown to our special table (among many empty tables). All-in-all a nice experience in a very ordinary restaurant.

So who is the more valuable employee? It is obvious; the second employee clearly understands what her job is – getting and keeping customers happy – and has figured out a few tactics to accomplish her job. The more customers she brings (or brings back) to the restaurant, the more valuable she is. The difference will be obvious to the employer and the valued employee will have a compensation level that reflects his or her value.

What can you do to increase your value to your employer?


By Frank Monti, CPA
Not For Profit Group

Labels: CPA, KLR, Monti, Nonprofit