Getting your nonprofit listed on GuideStar

GuideStar’s website states that one of the questions they get most frequently is “How can I get my organization added to your database?” They go on to explain different circumstances.

For example, GuideStar won’t list organizations that don’t yet have IRS approval for their exempt status even if approval has been applied for. GuideStar will list organizations once IRS publishes them in the Business Master File, but that process takes months, so it is okay for you to send IRS approval information directly to GuideStar.

Some organizations such as churches, or organizations that file a combined return, won’t get listed by IRS, so you will have to contact GuideStar and provide necessary information. For example, religious organizations that have not applied for recognition of exempt status to IRS and which have their own employer identification number must provide information about the year they were established and other information confirming their status (GuideStar lists 3 different sets of documents that are acceptable). Organizations that are part of a group ruling must provide a copy of IRS confirmation of their employer identification number and documentation that the organization is an official chapter or affiliate of the national organization.

Guide Star even provides procedures for small nonprofits with a charitable fiscal sponsor to become registered.

You can contact GuideStar by email at outreach@guidestar.org, by fax at 757-229-8912 by mail to GuideStar, 4801 Courthouse St., Suite 220 Williamsburg, VA 23188 or visit their website at GUIDESTAR WEBSITE.

Gaming by Charities in New York State

With all of the pressure on funding and fundraising, gaming will be an option for some charities. Whether it involves an annual raffle as part of your major event, or bingo that happens throughout the year, if you are going to consider gaming you need to know the rules.

There are federal and state rules about charitable gaming. Federal rules are primarily about what kinds of activities constitute unrelated business income and what reporting is required.

New York State Gaming Commission regulates gaming activity in the state. If you carry on gaming, you are required to register with New York State Wagering and Gaming and in your local county.

New York State has guidance and regulations for raffles, Bingo, Bell Jar tickets a.k.a. Pull Tab Tickets and Las Vegas Nights or casino games.

Some of the key rules that you need to be aware of are:

  • You need to first apply for registration and an identification number with New York State. You can find this form if you Google “New York State 1A Application for Registration and Identification Number”.
  • You may also need a games-of-chance license and supplemental forms
  • For bingo, you need a special bingo license, and there are several reports to fill out, including cash control reports and quarterly statements of bingo operations.

Reporting is simpler for charities that have less than $30,000 in raffle profits for a calendar year. Much more extensive reporting is required if you are over that limit.

IRS focuses on whether activities are subject to Unrelated Business

Income (UBIT) reporting and taxation. Raffles are generally exempt from UBIT, and bingo is exempt from UBIT in New York State (because for-profits cannot carry on bingo in New York State). However, there is a strict definition of bingo that requires that winners be determined and prizes be distributed in the presence of all persons with wagers in that game.

Several games such as pull tabs and scratch offs, as well as instant bingo and internet bingo, don’t meet IRS’ definition of bingo. These games are not automatically exempt from unrelated business income taxation, although they may be exempt if substantially all activities related to these games are carried on by volunteers. Substantially all means at least 85%, and volunteers are defined to include individuals who don’t get regular compensation, tips, goods or services or other benefits that are proportional to the services they provide. Even contributions to another exempt organization in exchange for volunteer labor provided by that organization will violate the volunteer exception.

IRS also has regulations about reporting winnings. Specifically, when a winner receives at least $600 and that amount is at least 300 times the wager, this must be reported on form W-2G. For example, someone who wagered $5, and wins $750 would not be subject to this reporting requirement because $750 is not 300 times the wager. However, bingo winnings are only reported once they total $1,200.

Withholding is generally required when winnings are more than $5,000 or more than 300 times the amount wagered. This doesn’t apply to bingo but does apply to raffles and poker tournaments.

More information can be found in IRS’ recent publication 3079. This publication also points to other resources for gaming. Including the NYS Gaming Commission website on charitable gaming found HERE

Final note – IRS and the state share information about charitable gaming. IRS wants to make sure that it is being properly reported and New York State wants to be sure that registrations and reporting are complete.

Charitable gaming can be a useful source of additional unrestricted revenue, as long as you understand and follow the rules.

Federal Internal Control Standards – the Green Book Is Released

Standards for Internal Control in the Federal Government has been issued by the Comptroller General. What color is it? Green! Why should you care? Because the new rules for Uniform Grant Guidance say that you must have internal controls over administration of federal awards and they should be compliant with COSO or this publication.

The Green Book is manageable in length, under 70 pages of content with some clear illustrations, a concise list of the components and principles of internal control, and an appendix that lists the principles that should be followed.

More importantly, it is not dramatically different from the COSO standards that you are probably already familiar with. The 5 components of internal control (control environment, risk assessment, control activities, information and communication, and monitoring) are the same as COSO.

Internal controls are critically important in nonprofits, and documentation of your controls is a must for organizations receiving federal and other funding, so familiarity with this new guidance is valuable.

Google “standards for internal control in the federal government” or Use the links in our website.

Volunteers’ out-of-pocket expenses for charity

Volunteers who provide services to charities and have unreimbursed out-of-pocket expenses are generally able to include them as personal itemized deductions.

Individuals must have records to support the amount of their expenses and, if any of the expense categories exceeds $250, the individual must get an acknowledgment from the charity that describes the services provided, states whether and the extent to which expenses have been reimbursed, and a include statement that no benefits were received in return. This acknowledgment must be received before the due date of the volunteer’s tax return for that year.

As an example, if an individual purchases a plane ticket costing over $250, to provide services under the supervision of a charitable organization, they will need a receipt for the ticket to prove the expense and a statement from the charity about the services that were performed and information about any reimbursement or goods or services received in return.

IRS and the Tax Courts have been disallowing contributions when acknowledgments are not received or not timely so this is important.

Dashboard Reporting for Nonprofits

As CPAs who are very focused on good controls, we advocate for complete reports directly from your accounting system to your board and finance committee, but we also understand the value of financial highlights that can be found in a dashboard report.

Some people have the personality for a dashboard report “give me the big picture and let’s move on”. Some people just don’t like the detail and avoid it at all costs, and still others find dashboard information to be a very useful supplement and interpreter of more detailed information.

What should be in your dashboard? There are books on the topic, for example boardsource.org has a publication available in print and PDF versions called “The Nonprofit Dashboard: Using Metrics to Drive Mission Success”. They also have four member resource PDFs on dashboards.

Dashboards can address financial information, program activities and program service accomplishments.

What financial information is important to your organization? If cash is tight, cash account balances will be key. It will be useful to compare them to the prior month and, if your activity is seasonal, compare them to the same month one year ago.

Total income, total expenses, and year to date surplus or shortfall can be an important alert.

What about client statistics? The total number of clients you are currently serving and the first-time clients served this month.

If volunteers are a key part of your service delivery, what about the number of volunteers or volunteer hours?

Other significant events that occurred since the last report can be listed. Examples might include renewal of a large grant or approval of a new grant or program, or funding source that was discontinued.

One of the objectives of dashboard reports is to provide information so you can make adjustments before a problem arises. Like your car’s dashboard tells you gas is low, or you better slow down, your business dashboard should warn you about deficits, cash flow challenges, funding changes, or additional demands for service and support.

It’s healthy and can be fun to brainstorm about what key information will keep the organization and its board informed about the organization’s direction and progress.

Acknowledging Contributions -What to Say When You Get a Donation

Say thank you. Also, you should also know that earlier this year IRS released an updated version of their publication 1771 “Charitable Contributions-Substantiation and Disclosure Requirements”. This publication contains useful information about recordkeeping requirements and the flexibility you have with required contribution acknowledgments.

The publication does confirm that donors need to obtain a written acknowledgment from the charity for any single contribution of $250 or more.

Your acknowledgment should include your name, the amount of cash contributions, or a description of non-cash contributions (not the value), and a statement that no goods or services were provided in return for the contribution. If goods or services were given in return, include a good-faith estimate of the value of what was given in return.

There are some exceptions to the requirement to list items given in return. For example, low cost items that have your name or logo, or items given in return which don’t exceed the lower of 2% of the contribution or $106, are considered insubstantial. Certain membership benefits such as discounts and admissions are excluded as well.

One of the most beneficial parts of the publication is examples of written acknowledgments. There is sample language for gifts when nothing is given in return, when something is given in return, and when non-cash contributions are received.