Breaking news: A CPA in Every Board
New program connects CPAs to non-profit boards

Following the Course of Charitable Regulation
The latest developments in the Senate Finance Committee

Against the Grain
Minimum gift levels for Charitable Gift Annuities

Consulting News
Colleagues added to the website

Your Feedback
I'm interested in your opinion

“. . . having an accountant on [your] board adds a financial level of oversight that you especially need today.”

For non-profits looking for more financial direction, take note. This spring, the New York State Society of Certified Public Accountants (NYSSCPA) launches CPAs on Boards, a new initiative designed to train and place CPAs with non-profits in integral board positions.

The idea isn't to provide free accounting services. Rather, CPAs on Boards will give non-profits a vital perspective on finances, which may be lacking, and can tremendously benefit organizations large and small.

Liz Koch, Art Specialist for Brooklyn Borough President Marty Markowitz, agrees. Part of her job entails working with organizations to develop their boards.

"You have organizations, especially small and midsize, that don't have the resources to access the knowledge, connections or skill that having an accountant on board would allow them. Creating budgets, dealing with auditors, all of this is invaluable to non-profits. Plus, the finance committee is always pivotal to the organization. Having a CPA's input would be key to creating a solid financial foundation for the future."

"To move an organization forward to reach its stated goal, you need a budget. And when you have an organization that's at a certain level of sophistication, you want a strong mix of people making those long-term decisions." said Stuart Tash, a New York CPA and formerly with the IRS. "Whether it's reviewing services provided, assessing accounting practices or just even knowing when something needs to be looked at further, having an accountant on board adds a financial level of oversight that you especially need today."

Currently, CPA societies in California, Indiana and Illinois have non-profit matching programs in place. "The most qualified professionals to give guidance in taxation, compensation and updates on the latest federal regulations are CPAs," said NYSSCPA President John Kearney. Giving back to the community, building one's reputation and allowing for broader networking make this initiative "a win-win for everyone."

Decisions on how to allocate funds, especially when dealing with a significant grant or gift, financial projections and future planning, fundraising issues and accountability—all are areas that can benefit from an accountant's unique expertise.

"On every board, you should have someone who is very good on the financial aspect. You really need to understand all the implications of any action," said Peter Morales, a New York accountant who has non-profit clients. "An accountant knows the right questions to ask and can then explain the issues to the other board members."

For more information, you can contact NYSSCPA or visit their website for CPAs on Boards.

Freelance writer Danielle Mowery can be reached at daniellemowery@yahoo.com. She is the first outside contributor to The Martignetti Report. Would you like to write an article for us? Send me a message.

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“Charitable regulation, perhaps the quid pro quo for the CARE Act, is imminent . . . ”

I have pledged to follow developments in Congress and the states regarding the CARE Act and regulation of non-profits. In The Martignetti Report archive you will see a summary of the reforms suggested to the Senate Finance Committee in the last issue and other articles on this movement.

The CARE Act has been around for so long it's hard to know what Congress's timetable is for it and, even, what its fate is. It has yet to go to a conference committee after being passed by both houses of Congress in 2003. Charitable regulation, perhaps the quid pro quo for the CARE Act, is imminent, from Congress, the states (see my California Nonprofit Integrity Act article) or both.

Since my last issue, the Senate Finance Committee, Chaired by Chuck Grassley, R-Iowa, has held hearings on reform. Those testifying include:

• IRS Commissioner, Mark Everson: “We can see that tax abuse is increasingly present in the [non-profit] sector, and we intend to address it. We will act vigorously, for to do otherwise is to risk the loss of the faith and support that the public has always given to this sector.”


• Chief of Staff of the Joint Committee on Taxation, George Yin: Arguing that cost basis is a more certain and more ascertainable amount than fair market value, he defended his Committee's proposal to set tax deductions for appreciated property at basis.
  
  (His argument is not at all what I have seen in my practice. I have struggled with donors to determine the cost basis for stock they wished to give and purchased through dividend reinvestment over many decades (or have just owned for that long). Sometimes the shares have been accruing since childhood when their parent or grandparent gave them one share and they now own thousands through reinvestment. The records of cost basis don't exist. Fair market value, on the other hand, is easy to ascertain, and not only for publicly traded stock. A qualified appraiser can be found for anything, literally anything, that has a market. The better focus for reform in gifts of appreciated property is the qualification and honesty of appraisers.)


• The Congressional Research Service of the Library of Congress, represented by Jane Gravelle: Testified about abuses of donor advised funds, supporting organizations and appreciated property gifts. In donor advised funds and supporting organizations, the main concerns are assets sitting without disbursement to an ultimate charitable purpose (you may have heard the phrase “asset parking”) and self dealing, including advised funds making a gift to a private foundation that then makes a gift back to the same donor advised fund (called “round tripping”). With appreciated property, the CRS's concerns are difficulties with accurate valuation.


• President of United Way of America, Brian Gallagher: “If we in the [non-profit] sector can't make meaningful, common sense reforms that will promote greater accountability, then there should be legislation—because changes in nonprofit accountability must be made in order to restore trust.” He agrees overall with the spirit of the reform movement and specifically supports CEOs signing to affirm knowledge and understanding of Forms 990 (the annual returns non-profits must file with the IRS and make available to the public), the IRS reviewing the tax exempt status of every non-profit every five years and increased funding for IRS enforcement of “exempt organizations” (referring to tax exempt, sometimes called “EO”).
  
  Finally, Mr. Gallagher suggests “that nonprofit organizations be asked to report concrete results annually that are tied directly to their missions, not just the level of activity. Perhaps a results section such as that can be added to the annual Form 990.”


• Managing Director of Martignetti Planned Giving Advisors, Tony Martignetti, Esq.: “Significant reform is coming in the areas of transparency, conflicts of interest, board compensation, composition and responsibility, legal and fiscal accountability, self regulation, officer accountability and commitment to charitable mission.” OK, so I wasn't invited to testify. But you can quote me.

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“It takes no greater effort to close a $20,000 annuity than it does one for $10,000.”

I do a fair amount of work around Charitable Gift Annuities. If not setting up a program and leading the process of obtaining the requisite licensing, then developing or reviewing gift acceptance policies of minimum gift amounts, minimum ages, permissible assets and whether to offer deferred annuities, then proactively marketing the programs.

I'd like to focus this month's Against the Grain on minimum gift amounts for a gift annuity program. My concern is that smaller gifts than possible are given when minimums are too low.

Constituent affinity, giving histories and even organizational culture are important considerations when setting gift levels, and I'm seeing these factors ignored in favor of a disturbing trend toward the popular wisdom. I am hearing of too many programs that want to follow the herd on gift annuity minimums by setting their minimum at the most common amount. That is becoming a common mistake because the popular wisdom is often wrong and doesn't fit everyone.

A consensus is emerging around a $10,000 minimum gift level because “that's what other organizations do.” But that shouldn't be a factor in deciding your organization's gift annuity minimum.

Non-profits that enjoy a particularly close relationship with donors should consider a higher minimum of $15,000 or $20,000. Examples would be higher education, and perhaps other schools, and some religious groups. Really, every non-profit would benefit from a close look at not only giving histories but also the closeness or affinity its constituents feel for the organization.

When an annuity prospect objects that other non-profits will accept less, that's when you trade on your closeness with your constituency: “I understand that, but we have set our minimum according to our needs. In addition, you will receive commensurately higher income, commensurately more tax free income and a higher charitable deduction.”

Some prospects will walk away, but most won't, because of their affinity for the types of organizations I'm thinking of. Your program will gain more than it loses. And you will work no harder. It takes no greater effort to close a $20,000 annuity than it does one for $10,000. Perhaps your organization consoles itself thinking “they can always give more.” In my experience donors usually do not; most give at the minimum level.

I suggest you look closely at the gift annuity program you have or are considering. You may do your organization a disservice if you follow the popular wisdom when making your decision on a minimum gift. Really make it your decision. Don't rely on the previous decisions of others.

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• My esteemed colleagues
  Profiles of Steve Imperato and Laurie Kovens have been added to the company website. It's a pleasure working with each of them. You can read about the terrific breadth of their experience here.


• I am keeping up with speaking engagements
  On May 6, I will be the luncheon speaker at the Foundation Center's day of training for its staff and the librarians at the Center's Cooperating Collections throughout the New York region. It has been my pleasure to work with Susan Shiroma, Senior Librarian, to arrange this.
  
  Earlier this month I delivered a seminar to the Golddiggers, a group of development officers at independent prep schools on Long Island; my thanks to Carl Pozzi, Director of Development at Friends Academy, for hosting me.


• Please forward this
  If you know someone with an interest in Planned Giving or general fundraising, please forward The Martignetti Report to them. Go to the bottom of the page to add yourself to our distribution list.


• Update your address book
  This eNewsletter came to you from tony@mpgadv.com. Please update your address book as I have phased out the old address at plannedgivingny.

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In the next issue: the House of Representatives has passed the immediate and permanent repeal of the estate tax. I will consider what this means for Planned Giving.

What topics would you like to see in future issues?

I am always interested in your opinion of The Martignetti Report. Please send me a message from here with your comments. Or, you can always reach me through the company website.

Best regards,

Tony Martignetti, Esq.
Managing Director
Martignetti Planned Giving Advisors

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