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
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
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.
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
the new environment of auditor independence and its problems, the
New Jersey non-profit tax landscape, preventing conflict of interest,
and fraud risk analysis.
internal audits for Jefferson Wells International;
of W.A. Broadus Accountants; attorney
runs a solo practice centering on non-profit needs in Minneapolis;
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
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
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
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:"
administrators are selected on their abilities to do programs or fund
raise. Thus, while record numbers of homeless are being fed, the
takes a back seat. Books get done hurriedly and haphazardly by someone
who doesn’t really understand accounting or tax laws.
pressures for greater accountability have made their way into the
charitable sector. Last April it was proposed before Congress that
the 1996 Internal Sanctions law be broadened and that even non-profits
be subjected to internal review. "This is more of a carrot than
a stick," insists Bornstein. "It would give your charity
to the donating public."
Too many charities make wish lists, instead of budgets. A full and
thoughtful financial statement, says Bornstein, helps the executive
administrator 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 your
budget, perhaps it is time to pull in your horns.) Finally, financial
statements for preceding years can be sliced and diced, helping the
board see the exact outlay for similar future projects.
member on your non-profit forever and owns the land on which your
charitable summer camp is annually held. Then one day he announces
that wife Irma is making him move to Florida and he must sell the
land. Instead of listing it through a real estate broker, he
offers 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 shaking
in her hands. "Did anyone ever think to ask what the appraised
value was?" she asks. "Were realtors called to evaluate the
land and check for liens? Would you buy your new home based strictly
on last year’s appraisal?"
Such conflicts of interest occur frequently and range from
accepting this type of deal to hiring a director’s spouse. They are
not necessarily wrong and do not necessarily involve attempted fraud,
but they can undercut the charity’s integrity, and can place a
blot on your fund-raising capabilities. The solution is simple: always
get expert, objective comparisons; get two outside appraisals for
gifts; do a salary study as a matter of course. Upon hearing the
complaint of "such formality would offend our people,"
answers, "Imagine how not checking up would offend your
workers are paid less than peers in the for-profit sector. Thus, when
Henry collects $118 in expenses for the Atlantic City conference he
never attended, the tendency is let it slide. It can be written off
as a "perk" for all his good work. In the for-profit sector,
Henry would have some explaining to do, but too many charity
can’t be bothered enforcing integrity and allow these occasional
Sticky fingers also tend to develop when checks are signed by
not officially with the organization. Members tend to rotate in and
out of non-profits, and often, board members officially retire, but
for convenience sake keep on running some aspect of the program.
these semi-outsiders may end up collecting dues or fees, and storing
them in their account or desk drawer. Hopefully everything gets
into the company’s pot, but, says Bornstein, that is not always the
your greatest nightmare. During this past fiscal year, 90,000 501C
tax-exempt status forms were submitted to the 800 IRS workers in the
non-profit division. They are truly inundated. "However,"
she warns "your charity is still being watched. Ever-more diligent
consumers are getting on their computers and looking up your agency’s
financials before giving. If they see blanks or contradictions, they
turn you down."
Be efficient, says Bornstein, and show donors you’re efficient. Your
reputation will continue to shine and chances are that you will pull
in a more cash, enabling you to do a lot more good.
— Bart Jackson
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