… and charitable organizations make the 2008 list.
The IRS listed the misuse of charitable organizations as one of the 12 most egregious tax scams by taxpayers. Abuse by donors who try to maintain control over donated assets or income from donated assets is just one example. Taxpayers are also claiming overvalued property donations for a larger deduction. Finally, taxpayers are disguising private tuition payments as contributions to charitable or religious organizations.
This information is good to keep in mind. We all like to think that our donors have the best intentions but the IRS is saying that these scams are happening on a large scale basis. If you have someone who wants to control how their donation is used, you should know that the donation is considered a donor advised fund and is subject to strict rules.
Noncash contributions also have certain requirements. Individuals are required to file a form 8283 for noncash donations over $500. A form 8282 is generally required to be completed by the charitable organization (aka you) to report dispositions of certain charitable property made within 3 years after the donor contributed the property. Yes, I did say 3 years. Certain charitable property is any donated property other than money and publicly traded securities over $5,000.
Remember there are usually exceptions to the rules but I have listed the general rules.
This article (http://www.msnbc.msn.com/id/30089614/) reminded me of a fraud prevention principle – Most church embezzlements are probably not committed by crooks. Sinister looking guys usually don’t hang around churches with cigarettes hanging out of their mouths looking for the right opportunity to jump. Instead, I think more financial attacks on churches are committed by people who are basically good but, for one reason or another, find themselves in bad circumstances such as addictions (gambling being the most frequent), business reversals, and health issues.
Unfortunately, many churches operate under the belief that you have to be a crook to be a church embezzler, and convince themselves that since “We have no crooks here we have nothing to worry about.” What they forget is this: they do have hurting people. Probably more than they realize. In fact, every church has plenty of wounded members and employees with all sorts of “issues”. And unfortunately, many of their wounds can be eliminated, or at least, soothed with money.
I don’t know if the need for plastic surgery and Botox constitutes an “issue”. But it did for this particular priest. And his church is $85,000 the poorer for it…
At our most recent monthly breakfast for church business administrators, Lawrence Swicegood offered great info on Crisis Management. He runs Clarion Call Marketing. Very insightful! Everything from how to be prepared even before a crisis erupts, how to handle and how to do a "post mortem." Topics, in outline form:
- Everyone is Affected by a Crisis
- Characteristics of a Crisis
- Planning for a Crisis
- Potential Crises for a Church
- Developing a Response Plan
- Internal & External Communications
- Post Crisis Analysis
For more info, contact Lawrence (firstname.lastname@example.org) or give us a call at PSK.
Because of our involvement in fraud prevention we make it a point to keep up with the latest news by periodically searching the web for news stories. It seems like the pace of fraud occurrence is quickening.
PSK is not involved in any of these situations so I have no idea about anyone’s guilt, innocence or the ultimate outcome of the cases. But, I am sure of one thing; no church or ministry wants to make these types of headlines.
To avoid this kind of publicity we have been urging, almost pleading with churches to take this situation seriously. A "clear and present danger" exists and every church should immediately perform an analysis of their current management structures to determine their vulnerabilities to fraud.
This does not have to be complicated. For example, a great start would be to simply hold a brainstorming session with key employees and volunteers. The meeting agenda could be organized around a few key questions. For example you could start with the revenue streams of your church:
What are our church's different sources of revenues? (Offerings, counseling fees, tuition, fund-raising events, etc.)
Do we have processes in place to effectively and safely account for ALL sources of revenues?
Who is involved in the money collecting, counting, recording, and depositing processes?
So a chaplain at the University of Dallas wanted to be kind and reach out to someone who seemed needy. And now the Chapel at the University is $100,000 poorer! See the article in the Dallas Morning News.
Your church needs to have a clearly written benevolence policy – AND it needs to be followed! The policy should address questions like –
- To whom will your church offer assistance?
- For what reasons?
- How much?
- How many times?
By the way, you cannot offer assistance to anyone on staff or their relatives. By law, that is taxable income that MUST be reported to the IRS!
So take care! If you don't have a formal benevolence policy, give us a call – we'll provide help and a policy template.