Corrections or additions?
This article by Bart Jackson was prepared for the December 4, 2002
edition of U.S. 1 Newspaper. All rights reserved.
Doing Good Without Being Bad: Eva Rose Bornstein
Urban legend assures us that the executive handcuffs
are reserved only for those greedy board members who mishandle funds
in their for-profit firms. But growing numbers of non-profit agencies
are finding that the Enron tarnish can easily rub off on even their
pristine image and good-hearted causes. To attract funds from an
increasingly
cynical public, non-profits are learning that like Caesar’s wife they
must be totally above any fiscal reproach.
Accountants, attorneys, and all non-profit professionals seeking to
eschew financial sloppiness and embrace IRS compliance are the
audience
for the full-day Non-Profit Conference sponsored by the New Jersey
Society of Certified Public Accountants (NJSCPA) on Thursday, December
5, at 8:30 a.m. at the Sheraton Woodbridge Place. Olympia
Dukakis
is the keynote speaker. Cost: $319. Register on-line at
The conference presents a broad range of legal and financial topics
including embezzlement, the IRS tax climate and new Yellow Book
updates,
the new environment of auditor independence and its problems, the
New Jersey non-profit tax landscape, preventing conflict of interest,
and fraud risk analysis.
Speakers include John Hall, North American practice director,
internal audits for Jefferson Wells International; W.A. Broadus
of W.A. Broadus Accountants; attorney Eve Rose Bornstein, who
runs a solo practice centering on non-profit needs in Minneapolis;
Frank Mahon, specialist for the New Jersey Division of Taxation,
and several others.
“What I typically see in non-profit charities,” says veteran
attorney Bornstein, “is really, really well-intentioned people
doing really, really sloppy and almost fraudulent things.” For
the past two decades she has labored to correct these nice, if
not-to-exacting
folks. Born and raised in Teaneck, she did her undergraduate work
at Brown and Rhode Island University, where she majored in women’s
studies and history. It was in the latter that she gained her first
taste of non-profit agencies, working in a battered women’s shelter.
After moving to the University of Minnesota for her legal degree,
she joined tax law specialists Ernst & Winney before opening her own
practice 14 years ago.
The problem, as Bornstein sees it, is that most charities are
receiving
not nearly enough of the spoken legal advice nor the accountants’
work on their books. And while board members may be frighteningly
hard-nosed business folk on their day jobs, many come to the
non-profit
table at night and morph into forgiving souls who allow every form
of due diligence to slide by. As a result, their marvelous cause may
find its fundraising ability brought up short in the face of some
newspaper expose. Bornstein warns all her non-profit accounts to guard
against her “standard list of blunders:”
The non-business, business manager. Too frequentlyexecutiveadministrators are selected on their abilities to do programs or fundraise. Thus, while record numbers of homeless are being fed, theaccountingtakes a back seat. Books get done hurriedly and haphazardly by someonewho doesn’t really understand accounting or tax laws.Forgetting to publish regular financial statements.Increasingpressures for greater accountability have made their way into thecharitable sector. Last April it was proposed before Congress thatthe 1996 Internal Sanctions law be broadened and that even non-profitsbe subjected to internal review. “This is more of a carrot thana stick,” insists Bornstein. “It would give your charitycredibilityto the donating public.”Too many charities make wish lists, instead of budgets. A full andthoughtful financial statement, says Bornstein, helps the executiveadministrator balance the checkbook and cover the immediate bills.In the longer run, it helps keep the organization on financial track.(If it is only May and you have already spent two-thirds of yourannualbudget, perhaps it is time to pull in your horns.) Finally, financialstatements for preceding years can be sliced and diced, helping theboard see the exact outlay for similar future projects.Conflicts of interest. Imagine old Irv has been a boardmember on your non-profit forever and owns the land on which yourcharitable summer camp is annually held. Then one day he announcesthat wife Irma is making him move to Florida and he must sell theland. Instead of listing it through a real estate broker, hegraciouslyoffers to sell it to your non-profit for last year’s appraised value.Everyone on the board nods and gratefully receives Joe’s generosity.Done deal. Everyone except Bornstein, that is, whose head is shakingin her hands. “Did anyone ever think to ask what the appraisedvalue was?” she asks. “Were realtors called to evaluate theland and check for liens? Would you buy your new home based strictlyon last year’s appraisal?”Such conflicts of interest occur frequently and range fromoff-handedlyaccepting this type of deal to hiring a director’s spouse. They arenot necessarily wrong and do not necessarily involve attempted fraud,but they can undercut the charity’s integrity, and can place apermanentblot on your fund-raising capabilities. The solution is simple: alwaysget expert, objective comparisons; get two outside appraisals forgifts; do a salary study as a matter of course. Upon hearing thefrequentcomplaint of “such formality would offend our people,”Bornsteinanswers, “Imagine how not checking up would offend yourdonors.”Just a little embezzlement. Everyone knows that non-profitworkers are paid less than peers in the for-profit sector. Thus, whenHenry collects $118 in expenses for the Atlantic City conference henever attended, the tendency is let it slide. It can be written offas a “perk” for all his good work. In the for-profit sector,Henry would have some explaining to do, but too many charityadministratorscan’t be bothered enforcing integrity and allow these occasionalbonuses.Sticky fingers also tend to develop when checks are signed byindividualsnot officially with the organization. Members tend to rotate in andout of non-profits, and often, board members officially retire, butfor convenience sake keep on running some aspect of the program.Eventuallythese semi-outsiders may end up collecting dues or fees, and storingthem in their account or desk drawer. Hopefully everything getsreturnedinto the company’s pot, but, says Bornstein, that is not always thecase.In the end, notes Bornstein, it is not the IRS that will proveyour greatest nightmare. During this past fiscal year, 90,000 501Ctax-exempt status forms were submitted to the 800 IRS workers in thenon-profit division. They are truly inundated. “However,”she warns “your charity is still being watched. Ever-more diligentconsumers are getting on their computers and looking up your agency’sfinancials before giving. If they see blanks or contradictions, theyturn you down.”Be efficient, says Bornstein, and show donors you’re efficient. Yourreputation will continue to shine and chances are that you will pullin a more cash, enabling you to do a lot more good.— Bart JacksonPrevious StoryNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
