MESSAGE
| DATE | 2003-02-23 |
| FROM | Dave Williams
|
| SUBJECT | Subject: [hangout] Non-Profit
|
You should repost this to Hangout.
Ruben
On 2003.02.21 19:21 Dave Williams wrote:
> Hi Ruben -
>
> I thought I would share my memories of working for a non-profit
> organization, just to give you some idea of what you might be able to
> expect. For the record, I believe there is a difference between
> "non-profit" and "not-for-profit" -- they are classified under a
> different code number and mean different things, unless I'm mistaken.
>
> Regardless, a long time ago I worked as the office manager for a small
> non-profit office in central Virginia, the National Kidney Foundation of
> Virginia. What I observed was that they were authorized to use a form
> of bookkeeping known as "functionalized accounting". By this it seems
> that they could describe their assets and liabilities based upon the
> "function" they performed -- for example, "Patient Services" or
> "Community Education". Many of these categories are total abstractions,
> and although the organization was required to hire an auditor every so
> often, no CPA who examined the books ever complained about the use of
> these categories or examined their application closely.
>
> I bring this up because the NKF-VA was doing virtually nothing to help
> dialysis patients, and the majority of their expenses were actually
> re-classified employee bonuses and benefits. All perfectly legal,
> apparently. I could have an expensive lunch with someone and just talk
> about helping Kidney patients and that was good enough for the
> accountants. This is nothing new, of course.
>
> What the NKF-VA actually did was provide information (little pamphlets)
> and help connect patients to the different dialysis centers. Every now
> and then they would give a small grant to a local center, amidst much
> fanfare and local publicity. They also had a program for issuing small
> grants to patients in need, such as for car repairs to help them get to
> a clinic. I'm talking really small here, like around $300 tops.
>
> How did they get money in the first place? Well, as an extension of a
> national organization (a franchise, really) they had obligations to the
> main organization and would get some funds from them occasionally. And
> of course as a non-profit any donations made to them were tax
> deductible. They had an office in a small office-park, and they had all
> they supplies they needed (stationary, postage, etc.). They had a
> public relations director who made a nice salary, an office manager who
> did okay (me), a development director who lived comfortably, and a
> director who really made a nice living out of it. They had a board of
> directors, many of whom were businessmen involved in the local banking
> industry (Richmond has a Federal Reserve, and that's about all it has
> besides tobacco, aluminum and Chap-Stick).
>
> Donations from individuals didn't amount to much; it's the local
> businesses that really pump in the capital. To do this several annual
> high-profile events were held, such as a "chocolate festival" at a local
> mall that got all over the local news, or an amateur golf-tournament
> sponsored by Cadillac. Everyone who participated in these events could
> write off their expenses, and all money made beyond the basic expenses
> went to the organization. The board members gained prestige by being
> behind the high-profile events, and possibly other advantages I wasn't
> aware of.
>
> But the real cash cow was something else entirely, and it's a program
> used by several health-related non-profits (such as the American Cancer
> Society). It's the "Donate your old/totaled car program", the one where
> you can call a number and a tow truck driver will cart off your old
> car. Then the non-profit's representative at the parts yard will send
> you a form acknowledging the donation. The non-profit will send you a
> quote from a recent Kelly Blue Book for your vehicle, but they leave the
> amount you claim for the value entirely up to you. When you file your
> taxes you can say that your old Nova was worth $3000, and deduct that if
> it helps you.
>
> The parts yard sells the car for parts, until nothing is left and they
> sell the cubed remains for scrap. They make a nice profit off of the
> parts, and occasionally they get a nice old car in decent shape. For
> that they have an annual donated car auction. The parts yard keeps a
> percentage of the sales, and keeps track of all the donated cars in a
> database. They cut a check each month to the non-profit, based on their
> part of that month's sales. In a large, well-run program this is where
> the serious change comes in. The IRS can't hold a person to the amount
> they claim for the donation because odds are the car is still sitting in
> the yard being cannibalized.
>
> Between the fast-and-loose nature of functionalized accounting and the
> legal scams for financing these organizations, I developed a bad
> impression of charities. Especially when you consider how little they
> do to actually help the cause the represent. A small amount of money
> was earmarked for research donations each year, but it wouldn't make a
> dent in the fight against kidney failure.
>
> Anyway, I hope that's informative. Being a non-profit can be a license
> to print money if you do it correctly. In central Virginia a small
> handful of dialysis patients would get the occasional bit of pocket
> change, while the director of the NKF lived well, got a lot of local
> press, and had a lot of nice dinners.
>
> - Dave
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