Name: Live Webinar: 2025 Not-for-Profit Executive Forum
Uploaded: 2025-11-06T16:30:06.713Z
Duration: 2 h 45 min
Description: Live Webinar: 2025 Not-for-Profit Executive Forum

Transcript for "Live Webinar: 2025 Not-for-Profit Executive Forum": Good morning, and welcome to our twenty twenty five not for profit executive forum hosted by PKF OConnor Davies. Before we get started, I'd like to go over a few housekeeping items so you know how to participate in today's call. We're pleased to offer live closed captioning throughout the webinar. To access the captions, please use the StreamText link located in the attendee in the chat section of your attendee panel. You will have the opportunity to submit text questions to today's presenters by clicking on the Q and A tab on the right hand panel. You may send in your questions at any time during the webcast. We have a lot of material to cover, and if time permits, we will make an effort to respond. If we cannot get to your questions, a response will be sent post event. This webinar is offering one CP credit in specialized knowledge and one CP credit in taxes. Polling questions will be launched in the polls tab on your right hand panel, and you will need to respond to six of the polling questions to receive credit. Polling questions will only appear as they launch. Please pay special attention as these polls will be launched periodically. CPA certificates will be issued within eight to ten days via email. A copy of the PowerPoint slides and a recording of today's webinar will be made available to you via email four business days post event. As we near the end of the webinar, we do have a very short survey which will be prompted, and your response is greatly appreciated. At this time, I would like to introduce Mark Pisco, partner in charge of our not for profit services. Mark. Okay. I'll be with you in a second. If we're still on. And then we gotta allow a little bit of time for, for this transition with the, the timing of the the software here. But, hopefully, everyone can hear me. Good morning, everyone, and welcome to PKF OConnor Davies not for profit executive forum. Our program today will focus on safeguarding the future of not for profits, fraud financing compliance, and a shifting landscape. I'm Mark Pisco and I'm very happy you can join us this morning. We've got a record number of folks registered today, including executive directors, finance professionals, board members, advisors and other leaders from throughout the not for profit sector. It's really no secret that this is a challenging time for not for profits between economic uncertainty, new regulations, and increasing risks of fraud. Organizations are being asked to do more with fewer resources and tighter oversight. That's why we're here today, to talk about practical ways to manage these risks, tighten internal controls, and plan confidently for the future. We're especially honored to be joined by Jim Sheehan, chief of the New York State Attorney General's Charities Bureau, who share meaningful insights into how not for profits can stay compliant and accountable while continuing to drive their missions forward. You'll also hear from a few of my outstanding PKFOD colleagues, including Alex Buchholz, Garrett Higgins and even Luke, which bring deep expertise in not for profit finance, tax and compliance. Together we'll cover everything from fraud prevention and governance to budgeting through uncertainty to staying ahead of tax and regulatory updates. Thank you all for being here. We look forward to a great discussion. So let's jump right in starting with our first speaker end session, fraud risks for not for profits, prevention, detection, and response. Jim, you wanna join me on stage? Very much. Alright. See me. Well, we can see it. Jim, take it away, and, good luck. Thank you very much, Mark. And thanks to, PKF OConnor Davies for doing this presentation, which is very timely, and I think should be very helpful to the listeners, we hope. I'm gonna start off. So I'm the chief of the charities bureau here in New York State. We are the primary regulator for charities under state law. And as I suspect most people know, the the primary regulator is not the IRS. The primary regulator for for public charities and for foundations is the New York state attorney general for New York and other state attorneys general in other states. So we're gonna talk today a little bit about some of the risks that organizations face, as Mark said, in a in a very difficult time and, what you can do about it. So I'll start off with an experience that since I usually own cars that continue long into their, middle age that I've seen on occasion, and this is the check engine light. And if you're like me, you dread the check engine light. So I want you to think about if you if you've seen the check engine light, what do you do in response? So here are the options that I've heard from people. One, hope it goes away by itself. This is a strategy that we've seen, in certain circumstances and and that I hear from people. And in fact, their the diagnostics and the check engine light sometimes will self correct in five or 10 miles. The second thing that people do is buy a do it yourself, onboard scanner for $30, which gives you a series of mysterious codes that you can figure out yourself, maybe. The third thing people do is go the same day to the dealer and pay $200 for a complete diagnostic workup and then do what the dealer says. And the final one is wait until your annual inspection to get your vehicle tested and repaired. And, again, I've seen people do this as well. But I want you to think of fraud risk in the context of a charity the same way you look at the check engine light on your dashboard. And what you'll hear from people in the auto business is it's a very bad idea to wait until that annual inspection to see if your car needs repairs. So let's go next slide. So I wanna talk next about what are the check engine lights for charities and their fiduciaries? And I'm gonna, have a paper copy too so I can read the print. So what are the from from our perspective, that is from the Charities Bureau perspective, what do we see as check engine lights for charities? One of them is hard lender borrowing. We'll talk more about that with high interest rates and big fees against whatever whatever real assets that your entity has. The second one is no credit card or debit card tracking. The third is delayed or no bank reconciliations. Fourth is significant delays in travel submissions and reimbursements. And the fifth is no or limited board review of September conflicts and finances. The next one is cash or third party managed donations. Next is auditor management letters. Next is, long time CFO with no oversight. Next is loans to officers and directors, which is prohibited by New York law, except for educational institutions under certain circumstances. But it also means that's that's, there's private enrollment, which can be an IRS issue. And finally, no enforcement of conflict of interest disclosures. And if you look at each of these check engine lights, it's sort of like the check engine light. If your car if your car is still running, the temptation is not to worry about it. And this is especially true of what I'll call the internal control bullets here, the credit card tracking, the bank reconciliations, the delays in travel submissions and reimbursements, and the review of the nine nineties. In each of these cases, the car continues to run, and, fiduciaries who don't have a lot of knowledge of the financial side of the house, are sometimes nervous about getting in touching into this, and, also, they don't really know what they should be asking. So we're gonna talk today about some of the cases that have risen where the check engine light came on and the organization did not take appropriate action. Okay. So what strategies do we see in both my friends with their check engine light on the cars and in charities? Hope it goes away. Right? Not an uncommon reaction. Short term problem, maybe it'll fix itself. The do it yourself scanner. So the board may take a look or the CFO may take a look and say, gosh. Well, we have some issues here we have to address, and then it drifts off the agenda for the board and, doesn't get raised again. Next one is pay an expert for complete diagnostic workup. And if you've dealt with car dealers, I'm gonna be neutral about this, they're gonna find things and they're gonna wanna charge you to fix them, which often is a good idea because if you let the check engine check engine light run for too long, you may lose your catalytic converter and you're looking at $1,500 repair. But it is also very expensive in certain circumstances. So making that judgment about whether you do the do it yourself scanner or you pay an expert for complete diagnostic workup, it depends on the risk to the organization. And finally, they wait until your annual audit to get your organization tested and repaired. And this is a plug for auditors generally and not only for PKF OConnor Davies. One of the challenges here is the idea of waiting for an annual audit, it's not like you want the auditors are gonna find things across the board. Most frauds are not found by auditors. But the key is that in the discussion required by law with the with your order before they do the audit, if you have concerns, the the audit committee or the board needs to raise these issues with the auditor and say, can you please take a look at our check engine light and see what else we need to think about and what we need to address? And so it may they may do additional testing. They may they may ask additional questions. They may have work papers that demonstrate they've looked under the rocks that you've identified. So I wanted to in the check engine like world, I wanna talk about a few cases that the Charities Bureau or other investigative, government agencies have addressed in the last couple of years. So one of them is the American Society for Psychical Research. This is an organization which was founded back in the eighteen hundreds in New York City, and it explores the boundaries between, empirical science, that is science based upon observation, and, things that we can't see and can't know. And it's been around, as I said, since since the eighteen hundreds. In 1966, a very generous donor gave the American Society a five story home on West 70 Third Street. Now in 1966, that was relatively valuable, but not that much property. Today, a house in that neighborhood can go for 10 to $20,000,000. And what happened at at ASPR was that between 2002 and 2019, they didn't have a lot of income. So it they basically did, a series of hard loans in mortgaging the property. Right? And each of those loans, as it turned over, would take money from the loan to pay the installments for the near future, and then they would default be in danger of defaulting. And each of those incidents, each of those refinances, involved interest going up to as high as 15%, fees for the loan, refinances, and and the defaults. And so looking at at this pattern, those loans, typically, the board had to approve those loans. And you can imagine in each case, the discussion and I don't know this I don't know this as a fact, but since the board had to approve it, the minute you reflect that they considered what the implications were of taking those loans and what the alternatives were. As we go forward so that's that's check engine light number one. Number two, in 2019, there's a loan to the president of $1,700,000, president of the board. And we know that because it was set forth on the IRS nine ninety. Well, again, in New York, that's an illegal act to make a loan to a to a an officer of the organization and would have to be documented in the in the minutes. And the board members who approved it would have I just got one of those, update your software things. I think I killed it. So each of those that loan, if approved by the board members, would expose the individual board members to personal liability as well as the the president. And, again, we've seen this in the past. We've reached out to organizations which report those loans and say, you gotta pay it back, and you gotta tell us what the terms were. Not not with the goal of making life miserable for charities, but saying this is the law. You can't have that internal benefit. 2023, that very valuable townhouse property on West 70 Third Street was foreclosed upon. The next thing we look at, and this is all in the public record, there are $550,000 in credit card expenditures to the by the executive director. And, the the so each of these was a check engine light from American Society for Psychical Research. And the question is, what did the officers do? What did the board do? And we would look back at the minutes of the board meetings to see how these actions were undertaken, who approved them, and what kind of controls they had. We would also look at the audit for, for, sorry. We also look at the audit. If there had been an audit, they have over a million dollars in revenues to see what the auditors found and what they said. So what we're doing now with American society, there are two major, bequests, which they are seeking to, obtain from the circuit's court in New York and in Maine for millions of dollars. And we're saying it's not an appropriate place, we think, to put your money, but put that money because the the the check engine light is on, and these issues have not yet been addressed. Next one, National Rifle Association. So looking at National Rifle Association back in 2018, we found that, and we didn't have to look very hard because it was in the Wall Street Journal and the New York Times and several other publications just looking at their IRS September. So we based upon the information we got from that, we took a hard look at the NRA. And what we found was, for mister Wayne LaPierre, who'd been the long term, executive director of the NRA by going back to the nineties, that that there were conflict of interest disclosures required by the bylaws and were required by the the, internal procedures of the NRA, but they were, at first, not filled out. And then when they're filled out, no one checked. Right? So this is a little tough one. No. So looking at, one of the things that Wayne did was get a very close relationship, as we'll see, with a the largest vendor and got certain gifts, but there was no disclosure of those gifts even though the conflict of interest policy said you have if it's over $250, you have to report it. He also managed to pay for significant private plane travel expenses for himself and his family flying to The Bahamas, as we'll as we'll see, from various locations around The US. The next thing was there was no board review of the September, although the September, schedule o said there was. Whenever someone would leave the NRA at a senior position, Wayne would arrange for a consulting contract. No services required in these consulting contracts, and they involve payments of hundreds of thousands to millions of dollars to executives. The next thing that they did you know, we talked about credit card reconciliation and expense reconciliation. They paid the expenses through their vendors so that they never showed up in the internal system of the NRA. Now any of these things, let's say, is a check engine leg. You know? People conflict of disclosure is not always complete. Sometimes their travel expenses and they aren't reconciled. The board review of the September should happen. And typically, the September says that it does. In this case, they did have a review. Fifteen minutes before the board meeting occurred every year, they would put out the nine ninety for all 75 board members to look at. They'd have one copy to look at for fifteen minutes before the board meeting started. The consulting contracts were executed by Wayne and sometimes by the president, and the personal expenses were paid through the vendors. There was no review of those. And they had a a custom at the NRA called Wayne Says. So whatever the rules were, if Wayne says, you can override the rules. Okay. So what happened as a result? When we did our investigation, and, again, we had these series of check engine lights, and we found out during questioning Wayne during his examination before we filed the case about the boat. So I'm sitting there with with Wayne and and his counsel, and I said, you you have this thing you you flew to The Bahamas. When you went to The Bahamas in December or January, where did how'd you get there? Well, I took up the plane, the NRA plane and the NRA chartered plane. Oh, mister Lapp here, where did you stay? I thought here, you know, some fancy hotel on Paradise Island or whatever. We stayed we stayed on a boat. Okay, mister Lapp here. What tell me about the boat. Well, it's a big boat. How big? Well, we're in a we're in a conference room in Washington DC at this point, which is like a 115 feet long because it was a boardroom for, a very large organization. And he said, about as big as this room. And, mister Lapeer, what was the name of the boat? It was called the Illusions, which is still perfect as a theme for our case. And he said, so we went back and we had a second day with him, and we got a picture of the Illusions and found out who owned it. And it was owned by what he called a business friend. And the business friend, would arrange for these trips for Wayne on the illusions in The Caribbean in the winter and in The Mediterranean on the Grand Illusions in the summer. For a week, he'd bring his family. Now I don't know how many people in this audience have chartered yachts. It's not exactly a nonprofit activity generally, but what what we found out was, bareboat char that is without a crew is about a $100,000 a week for this boat. Thank you for that. But then you have to add the crew, and you had a chef and four crew members. Then you have to add the fuel, then you have to add the food, then you have to add dockage and and entry fees. So you're basically looking about $200,000 for the week. And remember, this is a man who signed a disclosure statement saying that he had got no gift from anybody more than $250,000,000. I'm sorry. Oops. Then got no gift from anyone more than $250. This particular vendor had contracts for over a $100,000,000. So a a helpful fact for us to to understand the relationship between Wayne and the vendors of the organization and also that the check engine light was not just a minor blip, but was a major issue that we needed to address. So five fast forward five years, we had a trial with the NRA last year. And after eight weeks of trial, here's what the jury found. NRA did not properly administer its charitable assets. LaPierre violated suisuring duties. The CFO, who was basically whatever Wayne told him, because Wayne Wayne says was the rule, violated his fiduciary duties. The judgments totaling 6,000,000 against LaPierre and Phillips, general counsel violated his fiduciary duties, and the NRA violated the whistleblower rights to multiple board members and colonel Oliver North, which we won't go into in detail. But the idea is that the board failed here and the NRA as a result was liable because board failure exposes not just the board members, but also the organization to liability under our law. Next and and I should say there we got an opinion. So the jury trial was eight weeks. We've been on a trial with just the judge. There's an excellent opinion that if you email me or or call me, you can get, which lays out the compliance program that the judge imposed on the NRA after identifying these issues, which is really, you know, we didn't agree with every detail of it, but it's a great product in understanding what a good compliance program for nonprofit looks like. Okay. Next one. Sydney Tapp was a major financial officer at the New York University. And she left there in 2018 and went to Yale where she had a similar job. And it was only six years after she left that they discovered that, she had embezzled $663,000 from NYU. So one of the things we look at here this this is for the, for their Metropolitan Center for Research on Equity and Transformation. Large institution as a whole, small part of it. Essentially, what she did was a six year fraud, and it was related to the state grants for programs for children with special needs and English language learners. So she used some of these funds for the payments that they were supposed to, but she also kept the 660, and the 660 included renovations to her home and an $80,000 swimming pool at the home in Westport, Connecticut. She pleaded guilty to one count of grand larceny, sentenced to five years probation, paid full restitution. So no jail time for that $660,000 fraud, but, obviously, embarrassing for the institution, embarrassing for Yale that hired her afterwards. And one of the lessons of this one is often people think because they have a grant from a state or federal institution that the state or the federal organization will oversee the grants sufficient that you don't have to worry about it beyond that. As it turns out, that's absolutely not the case. Next slide is I'm sorry. Here we go. Next one, Keith Taylor. He was the founder and CEO of the Modest Needs Foundation in Manhattan. And the Modest Needs Foundation sounds like a great charity. Right? You give your money directly, and they provide individual grants for 5,000 people who apply for assistance under self sufficiency or veterans or COVID relief. And if you go if you go on the Internet today, you will still see, at least as of last week, that ModestNeeds is still soliciting for money. And they say on their website, why support ModestNeeds? We operate with integrity. However, again, check engine light. No filings with the New York State Charities Bureau. No audit by a CPA despite the $1,600,000 in revenues. And on schedule o, prior to the filing, it says the the $9.90 and the audit and review were distributed to all board members. But here's the this and and they're have the opportunity to ask questions. And so this is language that you often see on schedule o. It's very important for your accountants not just to accept, same as last year, but the auditors to make sure or not to make sure, the auditors do feel comfortable that, in fact, the board does review these activities. Because if they didn't and if there's a problem, the board members are are have exposure the organization has exposure for that failure. So let's see what happened in modest means. Mister Taylor pleaded guilty in August, for the $2,500,000 embezzlement and failure to file personal tax returns. Remember those board of directors in Schedule o were looking at these September and asking questions? The board members were all fakes. They didn't they were real life humans. They had no idea they were on the board. He spent $270,000 for a personal brokerage account, $300,000 for personal apartment. As of today, we're still awaiting sentencing. And this is a case the attorney general's office participated in. This was a US attorney case in in New York. We were witnesses to explain they have not filed. Here's the records in there, and it shows that they didn't do what they're supposed to do. They also lost their tax exemption for failing to file for three years. Again, all check engine light issues. Anyone by itself. Right? The no audit is is not just a check engine light. That's a broken catalytic converter, and your car is clunking down the road. But the the issue of who prepares those nine nineties, and is the board actually does is there actually a board of active participants? And are they looking at the nine nineties? Very, very important for the protection of the organization and for preventing fraud. Next one, Marsha Joseph, who's at Goodwill. She is a former senior fiscal officer at Goodwill. She stole 2.3 plus million dollars And, basically, this is a a a false invoice scheme, right, with an insider with her as the insider collaborator. Did it for seventeen years to a sham company she had set up. So they they went through once the investigation took place, mortgage payments, credit card payments, car payments, Amazon expenses, home remodeling, etcetera etcetera. So, you know, Goodwill is is a major recognized charity. One of the significant issues in check engine light, she'd been there for seventeen years. Goodwill is primarily a social service organization, who was mining the store and how closely were they looking at the the system the financial system and internal controls that this organization had. Next one. Now did I say this is this is all this is all in the last few months in New York. Over here. Come on. Here we go. So doctor Michael Lucchese, who is at Downstate Medical. Now Downstate Medical is a state affiliated institution and is not a charity, but it is like other similar institutions and that it's a hospital system. And so doctor Lucchese was chairman of emergency medicine at Downstate, and he somehow managed to get $1,400,000 again over seven years to by using his work credit card for cash advances and personal spending. And you can see all the expenses. Right? Personal travel, pet some of my favorite is a $176,000 from pet care, which means that that expenses and housing have gone up since the last time I looked, and $46,000 in tuition payments for his children. So who was looking? Who was looking at at these expenses and making sure that they were valid and consistent? And, again, the check engine light is, if no one's looking at at expenses charged on credit cards, you have a significant risk. That's a check engine light point. You need to make sure that someone who is who is separated from this person, from the senior executives and managers, is looking at those expenses and making sure that timely timely reconciliation takes place. And, obviously, it didn't happen downstate for seven years. You know, these these expenses showing up on the credit card should flag anybody who's looking at them that there might be you need to make sure you have records and the records are accurate and the expenses were properly incurred for the charitable purpose. Next one. Fire companies. In outside of New York City, the vast majority of fire departments are volunteer fire companies, and they're staffed by people. It's it's both a social experience for that community, but it's also a critical part of protecting the community from fire. And often, they have ambulance and rescue services too. Here's the challenge. The peep the people who wanna fight fires do not wanna be the treasurer or in charge of reconciling checks. Right? They're it's not these are these are people who like to respond into emergencies and like the adrenaline and also like the community service. And the idea of looking at checks and making sure they're valid and looking at expenses and making sure they're properly incurred, no one wants to do it. I mean, it's just not a a popular job. And so either people are take it because they're good spirited, but sometimes, because they have very weak internal controls as a volunteer organization, people just help themselves to the money. My favorite one this year is the Shawmont Volunteer Fire Department. They said there's $500,000 missing, and they filed a lot the Shawmont, at the urging of the state controller, filed a lawsuit against John and Jane Doe because they couldn't figure out from the passwords passwords and the numbers who actually took the money. And I tried to find out what happened since then, but hard to believe that you can have credit card expenditures, and there's no way to tell who made them. Right? That's that's very basic failure. But, again, what happens is no one wants to be the treasurer. It's an opportunity for someone who wants to steal. And the other problem is once they realize how easy it is to do, the temptation is to continue doing it. The Sheraton Park Tonawanda Fire Company, Again, my least favorite well, my least favorite addition to the social scene in New York from my perspective are casinos throughout the state because for people with gambling habits and access to money and organizations, especially charities, it's a major temptation. So here's a hint. If you see, if you see, cash withdrawals at casinos by your CEO or your CFO, which we have found, you only need to take a much closer look. That's definitely a check engine light. So mister Hoffman was sent stole over a half million dollars from the small fire company and was sentenced to two to six years last month. Mister Storrs, $101,000, in Marble Town, four weekends in jail. John l Rose from Vernon Center Fire Company, again, over a six year period, he wrote checks to cash. He deposited checks from vendors into his personal accounts or written to vendors into his personal accounts. He also had a guilty plea on on October 28. We see these cases all the time. And here in New York, not just in New York, but in other states as well. And again, because no one no one even notices the check engine, like, very often. And if they do, their belief the common belief that I've heard expressed is, well, I trust him to follow me into a fire and put his own life at risk. Like, how can I not trust him to handle the finances? Different personality requirements, different types. And as we'll see, the fact that people risk their lives often has has implications in other context for managing finances. Churches. This is exactly the next one I was going to. So we look at at some of the pastors of rich parishes. The Newberg one was not that rich, but father Dammeroth was able to steal $300,000. There I've seen the same thing in rich communities in Connecticut and New Jersey. No one was looking. So how is it that somebody who signs up to be a pastor is stealing money? And there there's a there's a theory. Of course, there's theory for everything, but there's theory for this, and it's called moral licensing. And, basically, if you're doing good deeds and you're making a difference, what you what you are tempted what some people are tempted to do is say, I have a license to borrow or to steal. The classic example of this is, classic example of this is the Smithsonian, Air and Space Museum, which had volunteers running their gift shop. And they when they found a significant shrinkage in their inventory, they put in cameras. They thought people were stealing stuff from the the customers walk in and steal stuff from the counters and other places. It turned out the volunteers were taking it. They felt since they were involved in good deeds that they were entitled to help themselves to a certain portion of the goods that were there. But this article is a very useful way of thinking about that. I think for nonprofits, and I've seen this in governments, working for the human resource administration and working in the Medicaid as inspector general, that there's a temptation for people, otherwise, who are doing good deeds, surrounded by people often with more money to think to to justify in their own minds why it's appropriate to take the money. Okay. The next thing that that really troubles me and and tells me that to some degree, embezzler crimes are crimes of opportunity as well as bad intent are the suicides. So the the one case is that of the handle again, a fire company, steals $850,000. Investigators were accessing his records. He killed himself. The and he had unauthorized checks and credit card advances. There's Cecilia Chang, dean of Asian studies at Saint John's, was testified at trial on 2012. After her cross examination, she killed herself. We've seen this in in fire companies and in police departments and in, religious organizations as well. So it's not just about the money. To some degree, having internal controls and check engine light responses means that you're protecting people from themselves because the temptation often is is, I wouldn't say overwhelming. The temptation is there, and once people start down this path, it's it's harder to stop. They start with a justification. They're gonna pay it back, particular family emergency, and then it turns out that, they can't stop themselves. We brought a case this year against Peter Brimelow, who is the head of an organization called VDARE. And what Brimelow did, he he raised funds for his nativist organization in the millions of dollars. And then, he got a very big gift one year, and he decided to move from Connecticut and buy a castle in Berkeley Springs, West Virginia. This is a picture of the castle. And then to transfer ownership of that castle to people out people and entities outside the organization. So we filed a lawsuit September that's that's currently, in the early stages of litigation. We expect a trial in the next two years, but we're talking, hundreds of thousands of dollars that Brimelow and his wife obtained as a result of this activity. The other thing about this the Brimelow case was that instead of being paid as an employee, he paid himself through a separate contracting entity, which then, classified the activities as management services and not a salary. Again, when you look at significant dollar numbers from management services by people who work there on a day to day basis, that's a significant issue. And I'm I'm sorry. It's a check engine light for charities. So where do we go with all this? What we're looking at here is, had charitable governance. Are they using charitable funds for charitable purposes? Do you have a conflict of interest policy? Do you have a whistleblower policy? These are all in the statute in the guidance documents that the charities bureau has on its website. And the independent audit committee, which is required by law unless the whole board is the audit committee. I'm gonna skip over some of these slides which are available to you, but the the key, I think, for fiduciaries and nonprofits is to understand what the obligations of fiduciaries, that is board members, officers, and key persons. And that is you have to exercise good faith, reasonable to care, protect the organization from unnecessary exposure risk of loss. Transactions not for the legitimate purposes of the organization can be improper administration, and it has to adversely affect the assets. So I'm not gonna again, I'm not gonna go into detail in the jury instructions, but there's these are the issues you need to think about. Right? Related parties, violations of the of the policies of the organization, the review of the September, and your procurement policy and your travel and entertainment. Next is a pitch for looking thinking about your auditor. You're required to have an audit committee, as I said, under seven twelve a, unless, in fact, you have a, a board as the whole as the audit committee. They have to be independent members. They cannot be employees. Your CFO cannot be on the audit committee. They have to select the auditor. Some some organizations think that management should select the auditor. The statute says it has to be selected by the audit committee. They should review scope and planning. Should review material risks and in weakness and internal controls after the audit is finished. And you should evaluate your auditor to make sure that they're doing the job you want them to do. Okay. I'm not gonna walk through the related party transaction detail, internal controls. These are very basic things. These are your basic check engine lights. Restricted funds that is for particular purposes are identified and controlled. Checks and cash are banked on a regular basis. Checkbooks are kept in a safe place. No one's pre signing blank checks. And you say, this is all obvious stuff, but in our investigations, we found each of these being violated by some charities that we had to take a closer look at. There's a clear policy for use of credit cards. Again, we've seen organizations without that. You want dual authorization for electronic funds transfers because, a lot of people don't understand how these work, and you wanna make sure two people are on the hook because there's a problem. Finally, think and not quite finally. Thinking about charitable organizations. The again, there's a temptation by board members. I didn't sign up for this. It was an allegation of fraud or embezzlement. The the we're at announced investigation by law enforcement. The temptation is is to just hope it goes away. Right? That that light goes away. American Legacy Foundation waited three years after warning me, called the investigators. And if you look at page six of your nine ninety, you'll see, did you become aware of a significant diversion of assets? And that if the question the answer to that is yes as a board member or as an officer, you need to take a very close look at where you are. Finally, it's this is finally. I think the key to understand this issue of embezzlement and misappropriation of funds, it happens. It happens to governments. It happens to elected officials. It happens to professionals. It happens to lawyers and accounting firms. And the the key here is to under we're not here as the attorney general's office to say you did a bad thing because this happened on your watch. The issue is what once this bad thing happens, what do you do to respond to it? Did you act against the offender, unlike American Legacy Foundation? Did you report it, to law enforcement? Did you try to get the money back? Did you fix the risk problem after the embezzlement? And that's that's where you need to talk to your auditor and say, okay. This happened. It's bad. What how do we show that we've we've made the changes necessary to prevent it from happening again? Okay. I wanna step, couple of additional slides here. While we talked about audit and oversight of audits, the key here to me is don't ignore the check engine light. When you have these issues and when or if you wanted to identify them, or if you as a board don't have a compliance program that looks at at these internal controls and the, risk of significant deficiencies, you need to make sure that management can tell you we're we're taking action to respond. Here's what it is. Here's the timetable. Here's where we're gonna do it. I will tell you the biggest biggest sort of check engine light issue that we see is reconciliation of credit cards and travel expenses and making sure that that the documentation is there. And the second one is conflict of interest reporting. Each of these two items is boring. No one wants the job. It's and it it requires a lot of, checking the boxes to make sure the stuff is there. But very important that it happens because in organizations where the the you're not seeing these checks, the conflict of interest, or the credit cards and bank bank statements and travel expenses, things get out of hand relatively quickly. So check check your engine light. Next, thank you for your attention. I really appreciate the opportunity to speak to you today. And, we have Charity Bureau guidance documents on our website that talk about the audit process, the the conflict of interest process, the, right from the start. And again, we these are all available. You can call me where we can we can refer you to this and send you the specific documents. And with that, Mark, I think there are other questions that during the chat that I should address. Yeah. Sure, Jim. Just just wanna say thanks and, because we're all thinking the same thing, keep us off of, Jim Sheehan's slide deck in the future. Okay. Right. So really like the metaphor to the check engine light. You know? It's something that's so sort of everyday kind of thing, you know, where you look at the check engine light and you're you're either going, oh my god. What's next door? Or you ignore it, like you said. It's also remarkable how many of these things are committed, just top to bottom. Right? There's no oversight by the board. There's no, you know, oversight by executives. A low level person is doing this or even a high level person is doing this. So I think the message here really is there has to be a collaborative effort to enforce internal controls, enforce internal oversight, but that's also complemented by external sources. Right? Your auditors and folks like your office, because everyone's watching. And and what you might get away with one day, you're not gonna get away with the next day, and everyone's watching. But don't take trust for granted. You know, it's something that has to be earned, and don't assume everyone's doing the right thing. The controls exist for a reason. Some are redundant, some seem silly, but they're there for a reason and they should reinforce. So so great pointers, Jim, and and reminders to to many of us about what a good system internal controls and oversight looks like and should be in effect. There is a question here, we've got one minute. Jim, this is what is an appropriate process for reporting consulting contracts with departing executives outside of form nine ninety disclosure requirements. Who should be responsible for overseeing the contracts to ensure transparency, accountability, and compliance? This sounds like a lawyer thing to me, but it doesn't Okay. What? I I I moonlight as a lawyer, so let me Right. So the first thing is it should be on the nine ninety, and it should be in schedule l, and sometimes in schedule j, and should be reported on your balance sheet in the in the, you know, in the the form nine ninety. The second issue to me in looking at these is under the related party transactions, statute, the board has to review it, approve it, write down who voted yes on it, and make sure that the there is a discussion of what the alternatives were that were considered and why this this particular consulting contract was the best alternative. All has to be in the minutes for the board, and that's required by statute. Excellent. Okay. Well, 09:30 on the button, Jim, as promised. Wish you safe travels and I have a day job. Thank you again for for, appearing today, and, we'll be in touch. Thank you, Mark. And thank you, Alana, who organized you'll see it. She's in the background, but she's done a great job of making sure the system works and the materials are there. So thank you very much. Okay. Thank you. Jimmy, you just hit that, leave stage button. Here we go. Okay. So we're we're ready for our next, speaker. Okay. As we wait for Jim. Excellent. And there's Alex. So if we can just tee it up, Alex, to our slides. Real interesting presentation here, and I think a lot of people are are are really focusing on on finances these days and what their organizations are going through and and how to prepare, what might have been a routine sort of process in the past and and, you know, things are taken for granted that that contracts will exist, contracts will get I got it last year, I'll get it this year, and then I'll just budget and and go by my way. But that's become a little bit more difficult at these uncertain times and and lots of questions you should be asking yourselves as you're going through the process. And I think Alex will unravel some of the things that are now going on and some of the considerations you should be doing and making as you're doing your budgeting process. So so, Alex, I'm gonna leave the stage and and, leave the presentation up to you. Okay. Thank you very much, Mark, and good morning, everybody. So and I was trying to put together these slides, you know, trying to think of what we can do to get through it. And, hopefully, maybe we'll give you some extra credit in terms of CPE. Gonna read you a quote, give you credit if you can guess who it is. But, hopefully, down the road, it's something that we'll be able to say, it was the best of times. It was the worst of times. It was the age of wisdom. It was the age of foolishness. It was the epic of belief. It was the epic of incredulity. It was the season of light. It was the season of darkness. It was the spring of hope. It was the winter of despair. So we'll give you a minute to kinda respond in the chat if you can guess who who wrote that famous quote there or even the the novel it comes from. But that kinda sets the stage for what we're gonna talk about today. It's the worst of times, a lot of despair out there. What's gonna happen tomorrow? Where is the future gonna hold for a lot of us? So, hopefully, as we go through it today, we'll give you some guidance, maybe not necessarily the ultimate solutions. But, again, something to get you to think. I'm just trying to see if anybody wrote the chat. But, yeah, I can always depend on, you know, Mark, do you wanna bring it back to The States? I'm sure you know who this quote's from. Mark, do you wanna come back on and say you gotta click the button there? Because I can always count on Mark for this one. Mark, any ideas of taking off mute? Who might have written this, famous quote or the novel that it came from? It had to be Jim Sheehan. Right? Am I wrong? Or It's pretty good. That's not bad. Yeah. No. Not not not let's go a little a little couple years back than Jim. Alright. I've I've got a few here that it's Dickens. Dickens Town of two Cities. Alright? Very good. Very good. From the audience. Yeah. That's perfect. Pretty nice. Not bad. Thanks. Alright. Thank you, Mark. I'll leave you. Got you motivated a little bit over there now. So, again, taking a look what we have over here, our overall agenda is to review some of the executive orders that have been passed in 2025. We're gonna talk about the one big beautiful bill act because obviously that does have an impact. And, of course, the implications of current federal landscape and some considerations. Alright. So what's been going on this past year? That's really what it comes down to. What's been going on in the world? So the first thing that was passed was this executive order, one four three three two, improving the oversight of federal grant making. This was issued back in the summertime. And, basically, what the EO did is it aimed to strengthen accountability over, you know, how we as taxpayers how our funds are being spent. And, again, the way the administration intended to do this was improved oversight, improved coordination of grant making, making sure that the grants that were given out by the feds were used to really advance the interests that were here in The United States and security and prevent funding for activities deemed improper, including those with ideological, forum, or politically contentious agendas. It was applicable only for those organizations that were receiving discretionary grants, and it did not apply to programs where the legislation establishes an entitlement to the funds on the part of the, recipient. So, you know, what did that really do for a lot of organizations? You know, basically, it it gave more oversight. Right? We're not just gonna give this out to to folks that applied. There had to be a methodology, a mechanism. So what basically the feds wanted to be done is that the federal awarding agencies would appoint a senior staff member to oversee the due diligence process before giving the grants. So, again, making sure that it's not promoting anti American values, making sure that it's being awarded to, you know, broad range of political recipients, not just the same repeat organizations. Okay? You know, if we've given it to you in the past, that's great. But, you know, why should we continue to give it to you? Have you demonstrated that you've advanced the administration's policies? Tracking funding announcements through interagency coordination, that it's not being duplicated. You know, is one grant being at given out by one federal agency that's already been given out by another agency? Identifying high risk grant recipients or program types across all agencies again this accountability The office of management and budget OMB which you've all heard about will oversee the revisions that's going on over here. And, again, streamlining the application process, reviewing discretionary grants to limit their use for course related to facilities and administration, Kind of echoing what we just heard from Jim Sheehan, requiring the periodic audits, making sure that you have your audit teams in place, or your own internal structures to make sure that audits are being conducted and that the grants are being used properly, are being tracked the right way, and, of course, limiting the amount of federal grant awards used to cover administrative costs, which obviously leads to another question. Well, if the federal awards are not covering my my m and g, where is that money coming from? So then in July, we had the one big beautiful bill act. And, again, sweeping tax and policy law that impacted tax exempt organizations. And, again, each nonprofit is unique in its own regard. So, you know, we recommend that you kind of review your situation, your funding streams, what's going on in your world, and how this act could impact your organization. And this is effective four years ending after 12/31/2025. So what's going on right now in the current federal landscape as of today? So, obviously, we're seeing now, you know, current certain federal agencies, are having their grant programs being terminated or certain cases, we're seeing agencies being abolished. USAID, again, Department of Education, you know, allegedly on its way, you know, winding down. So that's number one. Number two, waivers of COVID nineteen spending deadlines are now being scrutinized and retracted. Again, a lot of our clients that we see are not really getting any COVID monies anymore. It's still out there, but not like it was back in the pandemic ages. Some federal agencies stopping funding, canceling funding, and the reason that they're giving is, well, you no longer align with our agency goals. It's no longer a viable partnership that we're seeing with the organization. So you need to make sure that if your organization, and this does happen, that your missions do change as you go throughout the tenure of an organization's lifespan, that maybe you no longer align with what the grant was originally intended for, be cautious that now someone on the federal side may say, well, we gave it to you for, we'll say, for special needs purposes, and your organization has kind of gotten away from that program. It's not a main program anymore. It's more of an ancillary. This grant really is no longer for you, so be aware of that. Court cases being filed constantly. Alright. So, you know, obviously, they're being filed. We're waiting for court decisions. So that's another kind of, you know, pins and needles type of deal for a lot of agencies out there. Been an uptick, report an agency follow-up on previous audit findings. So, you know, the goal we would hope again, hope being in quotes. We would hope that, you know, you do your audits. They're smooth. There's no management letter comments, no findings, no no, you know, no issues that come about. But sometimes it happens. You get a finding, and it may just be an innocent finding. Something wasn't done the right way. It's an oversight, but it's a finding. It makes its way to a financial. It makes its way to a single audit report. We're now seeing that more federal agencies are writing back to clients saying, well, you got a finding. May I ask, what are you doing about the finding? How's it going with the finding? What's the status of the finding? Has it been, you know, remediated for the current year? Do you expect your auditors to have a repeat of the funding? So, again, these are things that definitely, you wanna make sure that you are on top of as an organization, kind of, you know, avoiding that check light coming on. You wanna be proactive with this. So definitely something to consider. We also know that, you know, other things going on with the feds that we're gonna talk about shortly, our current federal shutdown. You know, we have a delayed compliance supplement for a lot of recipients of federal awards. So a lot of you do get federal awards and, obviously, are in the midst of doing your year end fiscal audits. And along with that goes the single audit. Okay? Or for those of you more seasoned on this webinar, the a one thirty three going back, you know, years past. And right now, you're kind of at a little bit of a standstill that you're hearing your auditors say, well, we can do the audit. We can go through the steps. However, we're not gonna be able to issue these audits until the supplement comes out. And right now, we don't know when that's going to be, and, obviously, the shutdown is not helping things either. So, you know, that's also a a little bit of a pins and needles for a lot of agencies that, well, my funding source is gonna need this single audit. I'm having people ask the question, what what am I doing? Oh, we're not really able to issue it this time. And, again, it's not a PKF OConnor Davies thing. It's an industry thing. No CPA firm is allowed to issue a single audit report for those years that are ending in the current supplement period. So if you got your 12/31/2024 out, which we know many of you should have done, you're okay. We're now talking about our 06/30/2025. Changes at federal agencies and in grant funding, obviously, causing a lot of uncertainty and potential new risks. I've been getting the grants for many, many years. It it's been, you know, kind of a routine thing. Well, you know what? There's another agency down the road, and you know what? They do it a little bit better, and we're gonna give the award to them as well. Historic federal funding winding down, again, very big now with the current administration, and continued staffing resources at organizations. You know, right now, one of the biggest things we hear is there's no one out there. Nobody wants to do the work. We can't find anybody. Couldn't tell you where everybody is, but they're just not out there. So that's a big challenge for people, and that does cause a problem that if multiple people are doing, you know, the jobs that should be done by even more of those people, it was their segregation of duties challenge. We come in there. We do the audit. Well, you should have, you know, segregation of duties. How? I have two people only trying to do the job of four. So we do recognize that. Again, it's it's something that organizations are struggling with. So now what are some considerations that organizations need to consider during the shutdown? So on October 1, and we're still going through to today, the federal government did shut down because of congress not being able to pass the budget. So, obviously, this, you know, disrupts funding streams for many nonprofits that rely on federal grants and contracts. What should you be doing? And again, a lot of these things you're probably already doing as part of your normal business procedures, not changing because of the shutdown. But what's your funding exposure? What are your cash flows? What are your contingency plans? And obviously, the big thing here is communication. Communicating proactively with whom? Your staff. Let them know what's going on. Your boards. And, again, we heard from our prior speaker that board involvement is so important and making sure that you have an active board. You know, if it's just a board that's coming online, doing their once a month meeting or, you know, just going through the motions, that's not good. You need to make sure your board is not only involved, but trying to give you some suggestions of what you can do during this time. Speaking to donors. Hey. Listen. You know, now we need your support more than ever. You know, we're not gonna be able to do the work that you have so, you know, diligently give you know, supported for all these years unless you can help us out. Scenario planning, strong internal control coordination are essential to navigating operational uncertainty during a prolonged short term. Again, it's it's constant scenario planning, you know, constantly updating those Excel spreadsheets and just, you know, if this, then that, how does this impact my cash flow needs as we move throughout? Contacting your federal liaisons to determine if any of the federal grant funding is affected by the shutdown. Is it going to, you know, with the federal funding for specific types of grants, going forward, is it gonna be diminished? Is it gonna be eliminated? And again, this this isn't just for the shutdown. This could be post shutdown. I had a grant. It was coming in. Hell, you know what? We've rethought things. We're not gonna be giving it to you anymore. Try to get some other funding, some other grants. And for many of you that apply for grants on a regular basis, you know a grant application hits a big deal. It's a big deal. It's like doing the college application just about. So it's a lot of, you know, maneuvering, program mission statements, budgets, and you need to make sure you're putting your best foot forward to get that grant. Are your payments right now being suspended? Are they being delayed? Alright. Well, if they're being suspended and or delayed, we gotta make sure we're paying certain people. Employees are not gonna work for free. Employees have to eat as well. What are we gonna do? Are we gonna be dipping into reserves potentially? Review your revenue streams. That's gonna be something else that we wanna consider. Making sure that at this point in time, as you review your revenue streams, as you review your spending budgets, determine the extent of your reliance on federal funding. A lot of you are dependent on federal funding. You may not be aware of it because, well, well, no, Alex. My funding comes from New York state. May may may be coming from New York state, but a portion of it is passed through from the feds. Many of you have that when we're doing, of course, the single audit. So really go back and determine, yes, the, you know, check or the ACH may be coming from New York state, but is a portion of that coming from the feds at this point? And if that's the case, you know, what do I now need to do? Each revenue stream obviously carries unique risk, unique timing. Diversification, you know, obviously, is the best way to do it. Can you diversify your funding? Some federal, some state, some local, some discretionary funds. Obviously, fundraising. Right? That's another big thing that we always tell clients. Are you able to fundraise? And a lot of times, clients say, no, not really. But, you know, now is the time. Be creative. Right? Think about it. Can you really do your fundraising? Do you have a success story that you cannot only share, but somehow market? And try to tell that to your your prospects to to different clientele. Hey. You know, look at the success story of a person that was in our head start program and now CEO of a great company and and look at the great success story and having a fundraiser for that. What programs are gonna be affected, you know, by the loss of federal funding? It's also an opportunity for you as organizations to evaluate your funding. Again, we we we know that's a tough thing, but is the program the right program for you? You know, a lot of times, we see the word not for profit, we get confused. You're still a business. Your objective may not necessarily be the profits or the dividends that we see in the public companies, but your dividends are more of the intangibles that you're giving that good feel good feeling, doing something good for the community. How do you do that? You need money. You need to be able to pay for things. So you're still a business. If you're running a program that has had deficits for many, many years, is this the time to now say, you know what? Now is the time. This program is not a moneymaker. We're gonna have to really rethink it and potentially get rid of it going forward. What alternative, sources of funding are available to you? Working together, collaboration. One of the great things about nonprofits is you all do work nicely. You know, it's not a very adversarial type of relation. If you can work together, if you can do synergies, that's the way you would do it. What program activities we said need to be reduced, need to be eliminated, or consolidated? Do you need to furlough employees? Do you need to terminate employees? If you need to do that, you need to let them know. How do you discuss the impacts of the shutdown with employees? And sometimes, discussing the unknown is better than not discussing the unknown. Talk to your employees. Have that town hall meeting. We don't know what the future's gonna be, but we're gonna keep you advised. We're gonna keep you in the loop because one of the worst things that your employees can can feel is, gee, no one in my organization is saying anything. What's gonna happen? Tell them you're all in this together. Make scenario planning a priority. Right? That's got to be a key aspect of what your organizations are doing at this point in time. It needs to be something that you're doing, on a regular basis because, you know, again, how long can your organization continue with the current levels? If we're shut down another month, what's that gonna mean? Do you have a contingency plan? Are your contingency plans flexible enough for rapid implementation? Again, depending on how things go and, you know, we don't we don't have the crystal ball in front of us. We don't know. But, again, even if we'll go a different a different route. If the federal shutdown stops tomorrow, we know there are different moving parts with the way the administration is moving currently. You know? So we still have to think, don't you know, let's not assume, oh, the federal shutdown ends tomorrow. Smooth sailing. These are still uncertain times. Federal shutdown is done. Great. We've got everything. We're good. But the next day you get a notice, yeah. No. We're not renewing your grant. No. We're not doing this. How do we get past that? Is it what what are your contingency plans? And can you move on it rapidly? Hey. There is an opportunity. One of our nonprofit organizations is gonna be, you know, going out of business. Can we maybe take over the program? Can we possibly do it a little bit better and then get those funding, get those employees? The traditional set it and forget it budgets no longer work. No longer work. Flexible budgeting, rolling forecast, scenario based models allow NFPs to adjust quickly as the condition shift. You need to make sure that you have that constant maneuverability in your forecasting models. We can't just do, like, days of pet days of old where this was the budget, don't touch it. And then at the end of the year, we'll benchmark it. That rolling budget is now, you know, has to be part of the new norm. Consider the size of your availability, cash resources, and reserves. This is a constant thing we're always trying to impart to our clients and the people we advise. You know, do you have enough cash? The rainy day fund, as many of us have often been exposed to that word, you know, the rainy day. Do you have a reserve of cash? Do you have something set aside, a board designated fund perhaps? Something for that rainy day. And we did see a lot of people doing that, you know, in the COVID postcode phase that, gee, we're gonna have to set aside some sort of reserves so that we could have it for that, god forbid, emergency. Do you have that? Has it been set up? Is it liquid? If not, can we go to the bank? A lot of you have lines of credit, and right now, you're not using it. You have it. Right? The balance is zero by the time we get there to do the audits, but could we possibly use, you know, loans or credit facilities? Recognizing, again, our fiduciary duty, if we do take out a loan, we have to be able to pay it back. Alright? It's not that it's a gift. It's a loan. We've gotta make sure we can pay it back on a regular basis, with interest. Very important, this last bullet here, restricted funds can only be used for specific purposes. Alright. Well, unrestricted funds provide some flexibility. We know the best type of of gift, so to speak, is the unrestricted, right, because you have a little more liberty. But if you've got a restricted fund for a certain purpose and you are well, I'm I need cash. Oh, there's that endowment that I have sitting there. I'm gonna take money from that for general operations. Can't do it. Can't do it. You cannot, you know, necessarily take it from there. Alright? And if you do, there's all sort of implications. You know, it's borrowing, and and and you don't wanna get into that. That that's really not something you wanna be doing. Maybe going back to our donors. Hey. You gave an endowment. The endowment wasn't making this up a million dollars. These are hard times. Can can you maybe undesignated? Maybe make some of it, you know, unrestricted to give us you know, to get us through this. And you'll see donors are able to work with you. Review your weekly, monthly, or longer obligations to vendors, landlords, creditors, and others. How much do you need for these cash outlays? Can you talk to your vendors? Hey. I I can't make the payment. What can we do? We work out a payment arrangement. You know, speak to those vendors. Obviously, certain things you can, you know, payroll, taxes, that you're not gonna borrow. But certain vendors, can you extend your credit terms? Can you extend your credit terms? I'm sure by that same token, as as Mark gonna be getting emails. Can we, you know, hold up payments for a couple more months? So, hopefully, I then, you know, hope I open up a can of worms with that one, but we'll see what happens with that one. But we'll work with you as best we can best we can. Ensure your board is aware of the financial stresses. That board should be aware of what's going on. And I'll be honest, not maybe at a a scheduled board meeting, but through regular email communication or a lot of you use different board websites and and, you know, different dashboards. That board needs to be aware of what is going on and not just what's going on, but what are you doing. Right? What are you really doing at this point as as members of management, and what do you need from that board? K? Have you discussed with them, you know, clear potential programmatic and financial impacts? Hey. Listen. You know, just letting you guys know, if this continues, we're not gonna be able to provide services. We may have to shut things down. What are the potential ramifications? Do they need to vote on anything as a board? And some of these decisions, I'm gonna say during the shutdown and even post shutdown, may require some very big decisions to be made by the board. Needs to be documented and well thought out. And it could just be something as simple as restructuring. It could be something as simple as mergers. We are hearing those questions a little bit now too. You know, are there any mergers in the in the pipeline? We are seeing that. And, you know, it could also be that, you know, maybe a plan could be to to shut down an organization. We hope not. But just to be aware, shutting down an organization takes time also. A lot of people think, oh, we're gonna go out of business. We're done tomorrow. Uh-uh. Takes time. Gotta be a well thought out plan. Gotta be a transition. So it's not that simple either. So that's something to consider as you're doing your planning. Ensure your donors, your constituents understand the impacts of the government shutdown on your nonprofit. Is there anything that's gonna be impacted for existing services? Okay. We're we're, let's say, maybe in a group home, and, you know, we usually do some sort of activities or day trips. Well, we're not gonna be able to do that right now just because of staffing. We may need to furlough people. Do you have any contingency plans available? What's plan b going to be? Did you address any concerns donors or constituents may have? You have a long standing donor and the donor has a pledge to you over several years, which is not unusual. Be prepared. If the donor comes and says, hey. I have five years remaining on my pledge, but you know what? Talk to me. How is this shutdown or even the the climate of the world? How is that impacting your organization if I wish to continue giving you money on the pledge? You need to have a, you know, talking points prepared for that. And on the flip side, did you consider asking donors to increase their funding to make up for the decrease? As we kinda spoke about earlier. Hey. Yeah. Listen, enough times are tough and and obviously, you know, the more we can get through charitable giving and everything else, we really would appreciate it. So, you know, whatever you can give, whatever your friends can give, we really would appreciate it. Understanding the cost structures. And some of these things, it sounds silly, but we we still wanna go over it anyway. Fixed costs. Right? Fixed costs. Rent, salaries, as the definition says, are fixed. So the revenue may go down, but those fixed costs are still going to remain. Variable costs obviously, fluctuate with activity. Kinda give you a little cost accounting lesson here. But still, knowing which course can be flexible will help your leadership make responsible adjustments. You know, certain things like supplies, event expenses, we could be a little more liberal on. Alright? Gee, we're not gonna be ordering a lot of supplies or try not to be paper driven. Try to do everything electronic wherever you can. Okay? Your budgets must reflect the full cost of operations, including administration, technology, risk management, transparency about overhead supports long term sustainability. Obviously, we spoke about earlier that a lot of the federal grants, even if there was no shutdown, do not support the level of overhead that we're all used to. Where is that money coming from, especially now? Sensitivity analysis. Test how the changes in variable cost will affect the bottom line. 10% drop in revenue, how is that gonna work? Obviously, if you're gonna give out a wage increase, which, again, you need to be a little cautious. I know nobody wants to hear that, but, you know, be cautious with that. If you're gonna have a delay in funding, how does all that impact? Dashboards, key performance indicators, KPIs, which, again, a lot of clients, I do see you using them very nicely. You know, use those visuals to communicate how the performance is going, how the program margins, liquidity ratios, fundraising efficiency, you know, spend a dollar to get a dollar, what's that really costing us? Alright? And, again, the more you can have these KPIs, that will give you a better indicator of how the organization is doing in these uncertain times. The best practices for organizations to navigate in the current federal landscape, stay informed. Don't necessarily panic. There's plenty of information that's out there between webinars, thought leaderships, talking to each other. Right? Many of you are in good networking organizations, so you're all in this together. Evaluate internal controls. Conduct those risk assessments internally, identify your potential areas of concern, and develop strategies to mitigate those risks, Maintain open and transparent communication between your audit firms. Call up your audit partner. Hey. Listen. What's going on? What are you seeing? Is there anything we should be aware of? Or, hey. Listen. This is what's going on. We're getting ready to cut a program. We're getting ready to cut this. You know, how is this gonna impact things? What's gonna happen? Be flexible. Be adaptable to changing circumstances. A lot of us are resistant to change. It's just nature of the beast, but we do need to be flexible. Following existing policies and procedures, don't be rash. Think it through. When you're doing your audits, consider the need for additional footnote disclosures in financial statements. Again, not required. That's why I highlight the word here consider. Consider it. The financials tell a story. Alright? So you might want to just embellish the story a little bit more. Identify and document the executive orders and how you are complying with them and assess how you are following those rules and regulations. Review the federal stop orders closely regardless of how you may feel about them. And when in doubt, document any positions that you are taking. Speak to your auditors about it. Make sure everyone's on the same page if you're doing anything that might be a little bit different. Right? So that's something to definitely take into account. So, again, when in doubt when in doubt, document. It's very similar to the Academy Awards. Mark's still on stage. They're choosing my time that the song's about to begin, and my time is almost up. But with that, I think we could open it up at five minutes that I can allow for some q and a or some words of, any words of wisdom, I would say. But, Mark, I'm gonna turn it over to you, see if there's anything in our chatterbox. Thanks. Thank you, Alex. Yeah. And I'll have to do this without music, but, you know, you you made a great point in that presentation, With an open dialogue with your orders, right, we are your partners in this and if there's questions about the budget, the finances, things that you're unsure of, we certainly welcome those calls throughout the year and don't just again, we've said this many times, don't wait until the audit period, but rather have those discussions well ahead of time. And if we can assist you in any way, of course, we can do that. It's not easy. It's a trying time. My advice would be to to start early. If you're gonna be doing a budgeting, don't don't, you know, again, assume that you can get this done as you have in the past, but rather allow yourself some lead time to to make sure you've considered all the, the pieces that fall into your budget and and make the accommodations that you might have to. You know, fundraising is a big deal now. Fundraising, well, it's always been a big deal, but even more so now. The BBBA has got some changes there as well, and and I guess Garrett and me will probably touch on that as well, in our next session. But another consideration there and then the pivoting into perhaps different donor bases and such, is or should be at top of mind. Gary, before you do go, I do have a couple of questions that came in. The first being, what concerns are you getting from clients in light of current events? So, obviously, the concerns that we are hearing about is really that, you know, certain considerations they should be taking. So a lot of things we spoke about today, what should I be doing in the shutdown? How should I be communicating it to donors, to staff, to to banks? Those are the concerns that we are getting from clients at the present time. Okay. Okay. The next question is and and it's funny because we see this on the professional services, area. But are you seeing more consolidations or talks or mergers with your clients? It's an interesting question that you're bringing up there, Mark. We are seeing that. We or you are starting to see maybe not necessarily the word merger or consolidation, but a lot more partnerships that people are trying to do the shared services. So maybe, you know, the accounting department of one organization is servicing several others, so that you could avoid having an accounting department in each group, billings being consolidated as well. And in some cases where programs are not doing well in one not for profit, yep, let let's do a merger. It makes better sense and, you know, to avoid that excess, of course. So, yes, we are seeing that that newer trend of this merger consolidation. Got you. And I and I think as you stated during your presentation, things like this take time. Right? It's not something that happens overnight. So plan ahead. Yes. Excellent. Okay. Well, appreciate the session, Alex, and and thank you for your wise words. We're gonna bring in our next and and final speakers. And I'm gonna preface their presentation by three words, compliance, regulation, and disclosure. Okay? Not most of us are very fond of those words, but even Garrett thrive on those words. They live those words on a daily basis. You know, unfortunately, we all have to abide by these types of rules. But Garrett, you and Eva, tops in your field, and I'm sure you can enlighten us with some of the things that are going on now on the state and federal level, things we should be aware of as not for profit organizations and not for profit leaders and and, looking forward to some enlightenment. So we'll see you in a few time, Lee. Thanks, Mark. I like to sleep at night. I think rules and regulations keep people accountable, organization is accountable. So, at least that's how I run my household too. So all my kids are required to understand the internal revenue growth by five. But, thank you, for that, Mark. So welcome, everybody. Today's presentation, we're gonna go over, regulatory updates. We're gonna briefly mention about the government shutdown, how it's impacting all taxpayers including nonprofits. We'll go over some highlights of the the BBB Act, one big beautiful bill. I think, you know, nonprofits escaped a lot, out of that bill that didn't make it. So we're just gonna focus on the stuff that did make it. It impacted a lot of taxpayers with nonprofits not too much. We'll go Eva will go over some case law and updates, key decisions impacting nonprofits while we can lean from them. Some client spotlight checks and governance, so we'll go over and it would go over governance risk, some form nine ninety data with what what's what's happening on that front, and and some state oversight as well. So without further ado, we're we're gonna get right into this government shutdown. So as many of you know that the federal government, entered the shutdown on October 1. The furloughs began on October 8. So what does this mean? The IRS came out and said, well, although we're still working and functioning, but only mission critical functions are continuing. Things like processing electronic payments and e filing. So they're still accepting returns, so you gotta get them in on time. So they're gonna make your payments on time. Some things that are not priority such as application for taxes of status, applications for a new EIN number. It's causing disruption in for new organizations or or new structures. Maybe organizations are are creating. We can't get an EIN number even though that's an electronic function. There's been some hiccups in there. And determinations letters, so you are not really being processed. Correspondence and appeals are also delayed. So basically, the IRS is not responding to paper mail and live phone assistance is extremely limited. So that's what we have. That's what we've been encountering. So, you know, what? The other day I was on a call. I was late for a meeting. I said I couldn't get off the call because I finally got an IRS agent. So it's been it's been difficult for professionals, as well as everybody else. Finally, the key takeaways here are tax deadlines are not suspended, so you still have to file on time or filing the payments, dates remain in effect. And those are the key takeaways. That's where you bring up to today. So hopefully, it ends sooner when we get back to doing business, a a regular way. Some just, I would say key points here is continue filing and paying your terms of time, retain proof of submission. If you do have to submit something in paper, expect no movement right now, but and just monitor the IRS updates and we'll help monitor, for our clients as well. Moving on to the the OBB Act, which, we refer to as the one big beautiful act. I'll focus on two key provisions, I think, that are impacting, tax exempt organizations. One is under code section forty nine sixty, which is the excise, executive compensation, tax. The app expanded the definition of covered employee, so that once an individual is considered covered, they remain covered indefinitely. So it's no longer a certain period of time, the five years or whatever, it's indefinitely. Even if their compensation later falls below a million, it still now, counts. This means all organizations will need to closely track executive transitions and for comp arrangements or related party pay, and just be mindful. You have to keep that ongoing list. So the IRS is also expected to clarify how aggregate compensation across disregarded entities, and related organizations and how to handle common payment structure. So there's also expected to come out with governance, principles, and documentation, best practices. So, hopefully, when the government opens it, we'll get around to it. But that's that's one thing they're gonna be working on. Second thing the act, I think, focused on was, it modified the 4968 tax, which is for college and universities with 1.4% excise tax on net investment income of certain private colleges and universities. Beginning in 2026, the IRS will implement a tiered rate system based on the institution's student, adjusted endowment value. So these are extremely large college universities, that meet certain requirements, have to pay that excise tax. The IRS is gonna come out with a tiered system. They felt they didn't capture enough, or congress felt they didn't capture enough colleges to try to get this excise tax. And, they so it could have some impact, but not on many colleges, but extremely large or maybe the the next year. So there may be some extra ones out of there. Tearing the rates, captured by this. Charitable giving. So charitable giving, the two takeaways here is is this is more on your fundraising side. So you have to think about in 2026, these rules take place. So in 2025 tax planning reasons, you know, it used to be an individual can give to an organization. If they didn't itemize, you only get a certain deduction. They bumped that deduction, for $2.20 26 to a thousand dollars, if you don't itemize. If you do itemize, what's coming down the road is, there's a point 5% floor. So, basically, if I'm an individual and I itemize, my first point 5% of my AGI that I give does not count towards a, a deduction, contribution deduction on my schedule a. So just keep in mind how it may impact, tax rate. So maybe you want maybe some taxpayers to make a fundraising effort before this goes to effect. Maybe maybe, people will be influenced, by not taking a haircut on the amount of deductions. Same thing on the corporate side. It used to be 10% of the AGI. If the corporation gave, they can give up 10% of the of the taxable income for the year. In 2026, there's also gonna be a haircut on that, provision, so basically a 1% haircut. So corporations have to give over 1% of the taxable income and then the next 1.1% will in forward will count towards qualifying distribution. So, the incentives are out there to kind of accelerate giving in 2025 to avoid some of this. I've worked with some, you know, clients that that fundraising departments that are actually, making a push to try to, yeah, request that, individuals and corporations give, ahead of time before these law of income is enacted in 2026. And then there's other provisions on donor advised funds, to increase, for inflation on IRA qualified distributions, that up to $108,000. This is where an individual supposed to take a required mandatory distribution, but want to donate. They can donate up to a $108,000. That will still satisfy the required minimum distribution requirement, but not take it into income and not get a deduction. So that's increased. And the last thing, for individuals given the public charities, with the tax debt and job debt, it increased the AGI floor to 60%. It it now solidifies that and and it now is going forward. It will be the mandatory 60% as opposed to the old 50%. So, those are some of the provisions on the giving side. Every year, the IRS comes out with a priority guidance plan, areas of focus for tax exempts. The first area this year I'll mention is is is the implementation of the big, one Big Beautiful Act. That's their priority. We expect draft regulations, expanding definition of part of employee, covered employees, as I mentioned, the aggregation rules and introducing the tiered levels for that endowment tax. Second area, I'll say that the priority guidance focused on was modernizing public inspection requirements, making it a little bit easier, easing the burden of reduction paperwork, etcetera. So modernizing that, updating donor advised fund rules, refining the expenditure responsibility standards. Basically, the goal here, with with this priority guidance plan will be reduced administrative complexity, while approving transparency. And finally, there's other five zero one c three policy issues within this, priority guidance. The two most popular we talked about are racial nondiscrimination standards for private schools. So those have those rules haven't updated since the nineteen seventies. So the IRS is looking to update those rules for nondiscrimination standards for private people. So we're going to wait and see what the guidance comes up with that. And clarification of the Johnson Amendment, you've seen that where nonprofits can conduct some political campaign intervention if it's in the normal course, especially with the religious organizations, the normal course of of their sermons, etcetera. So we're gonna see some guidelines come out on that as well. And some other things I think the priority guidance that were made maybe other priority guidance lists in the in the past or I think I just think are important. One is the regulation around the unrelated business income, and how to allocate and, expenses. So the you know, back in the the Tax Cuts and Jobs Act, the IRS changed the unrelated business income rules where, if you had to conduct certain different types of activities, you have to silo those. We usually call that the silo rule. They never gave guidance on how to allocate expenses across those silo siloing rules. So we're looking for, I think they're still working on it, and it should make the priority guidance list because I know they're coming close to addressing the dual use type, assets and whatnot and how to take it. This is an area that is a recurring examination issue. So if you do have unrelated business income and you do have different silos, I would just say be consistent with your methodologies because there's no guidance. But if you're consistent, you did the best you can do, if if looked at. The second, area, I think, that was omitted, just to mention of the organization and group rulings, the IRS still has not issued they they basically paused new group exemption, rulings and approval several years ago. They said they were gonna, you know, overhaul it. They haven't gotten around to it. They They they know they're working on it. So if you're you're a member you're an organization looking to, create a group ruling for your subordinates, you're still gonna have to wait and and and deal and interpret the rules as they currently exist, but the applications may not be processed. Also, in the private foundation world, private foundation is investing, along their their top management officials or founders in partnerships. You know, whether it's permissible or not, there's a couple rulings out there where courts permitted it. The IRS is supposed to actually come out with a set of rules and regulations rules or road to follow to to avoid self dealing and excess business holdings. I've seen that in other priority guidance. I know that we're definitely working on that from notices, that I've seen Foundation get. They just had to pull the trigger on on kinda creating a Google road, what's permissible, what's versus what's stepping over the line. But but they definitely are working on that. And then there's several donor adviser provisions, talk you know, addressing private benefit of a donor advised fund and who can use it and where payments are made and certain excise tax on distributions that are under donor control that can give rise to private benefit or self healing type issues. I'm gonna now pass it over to Eva. She's gonna go over to give us a case law update. And it's important to watch these cases because they give you kind of the intent of the IRS, how they process rules, etcetera. Eva? Thank you, Garrett. So as we were looking at this year's regulatory and legal landscape, one one thing was pretty clear while while we were pulling up these, tax and legal court cases, the courts and the IRS are actively shaping what it means to operate a compliant and transparent and mission driven not for profit organization. So the first one is the Johnson Amendment, and this addresses political activity and the rule that keeps five zero one c three organizations and charities nonpartisan. So the Johnson Amendment has guided five zero one c three organizations for over, nearly seventy years. So it's once again under, national scrutiny and facing facing detention. The there was a recent Texas lawsuit filed by a a number of churches that challenged the constitutionality of the the rule that bars charities from endorsing or opposing political candidates, and the proposed settlement would block IRS enforcement of that rule for those churches. So that, of course, prompted a very strong reaction from the sector. Over a thousand not for profits have spoken out, and are urging the IRS not to weaken the ban. So the argument there is, that charitable organizations should not really become tools for partisan politics. And, from what we see, the IRS appears to agree, and the IRS is listening because it's preparing new guidance to clarify what counts as a campaign intervention, particularly for houses of worship and advocacy groups. So until that new guidance is issued, not for profits should, you know, stay the course, keep advocacy focused on on education, not, electioneering, encourage civic engagement, but really not endorse candidates. That really should be a no no. Strong, nonpartisan reputation kind of will protect, you know, the not for profit's credibility and its tax exemption. Another court case is the BSOA versus commit commissioner, and this has to do with charitable documentation. So in this case, I guess now is a good time since it's the end of the year, and people making charitable donations. It's a good reminder that, good intentions are are really not good enough without good records. So in this court case, the, court ruled against a donor who made over 6 or $7,000 of noncash charitable contributions, and the court acknowledged that they believe that he donated those items in good faith. But the receipts were incomplete. They were missing dates, missing descriptions, missing valuations, and the court, unfortunately, disallowed the deduction entirely. So how does this impact NAFO profits? You know, when we talk about donor confidence and compliance, that's directly tied to a not for profit's documentation, and getting acknowledgement letters to its donors. So ensure that all the proper information is reported there. You know, the donor's name, the address, the contribution date, a clear description of the property, and a statement of whether goods or services were received in in return. Incomplete documentation can put the donor and the not for profit at at risk. The next the next court case is the Catholic Charities Bureau versus Wisconsin, and this is a state level court case. And here, the Supreme Court's decision in this case was one probably one of the most important religious freedom rulings for Innocco profits this year. So here, Wisconsin denied Catholic Charities a state unemployment tax exemption because it determined that the Innocco profits work, which was, primarily serving the poor, the elderly, and the children was too secular. The state claimed that because the charity wasn't operated primarily for religious purposes, it denied the unemployment tax exemption. Here the US Supreme Court, unanimously disagreed ruling that's that that's basically that this interpretation violated the first amendment. And the court held that charitable work that's inspired by by faith, even if it doesn't include religious teachings, still remains a legitimate expression of religious purpose. So I I think the takeaway here is if there are any not for profit organizations here that have a religious affiliation, you don't have to really choose between mission and ministry, just as long as your governance purpose and maybe activities are guided by, you know, the, you know, the religious character and definitely makes intact even if the services are open to everyone. So this ruling basically strengthens that, you know, legal protection for faith driven service, and and it sets a precedence also for states to use a more a broader, a more exclusive, standard when interpreting religious exemption laws. The next case, and this has been ongoing for, many years, is the Mayo Clinic versus United States. And this has to do with a hospital, but also, learning facility education institution. So a way of background, the Mayo Clinic decision, went through different layers of of court, layers. You know, the decision from the eighth circuit court of appeals basically redefined what it means to be an educational organization under the tax law. And the outcome, was just a a great significant win for these integrated mission type models. The case centered on whether the Mayo Clinic it's, of course, known for its hospital system, but also a medical school, and whether it could qualify for an exemption on investment income tied to debt finance property that's available for educational institutions. The IRS argued here initially that it's a health care operation, and not a school. You know, courts that disagreed. You know, Mayo's, clinic's teachings and and patient care functions were so caught, closely connected that basically, if they couldn't have been separated, but the court held that the term primary purpose means substantial and not exclusive. So as long as education is a substantial part of what a not for profit does, the, other activities that support the mission just won't undermine the exemption. So the the takeaway here is that not for profits that have a blended, purpose, education, research, hospitals, you know, document document the integration and, you know, there was they were awarded, I believe, a 100, 11,500,000 refund on their unrelated business income. So this was a a win win for the Mayo Clinic. And lastly is, the IRS and the Treasury are revisiting the fundamental public policy doctrine, And that's one of the principles that defines kind of what it means to be charitable in the five zero one c three. And the doctrine originated with Bob Jones University, back in the nineteen eighties when a Supreme Court ruled that an organization that engages in racial discrimination could not be charitable because they violated fundamental public policy of the school. So I'm gonna kind of fast forward to 2025. The IRS priority guidance plan that was just released now includes a project to reevaluate reevaluate reevaluate this doctrine, you know, particular in this context, you know, in the form of discrimination. So it could be, you know, gender identity, disability. And so public debate on this has intensified. So it's, something to watch out for. And, you know, the takeaway here maybe is, you know, review policies, admissions, hiring, scholarships, and governance to ensure that they're on the way to establish non discrimination principles. So on the sector, in in the crosshairs of the IRS, taxes and hospitals have received a lot of press over the last year. One of them looked at are one of more closely watched industries. Years ago, they were, and then back in the radar screen, in 2025, the Treasury Inspector General did release an audit findings of major weaknesses of of, IRS oversight of PACSIP hospitals. They specifically the report found that existing guidance under five zero one r, which is the last time they were scrutinized, they they passed the IRS, and Congress passed five zero one r, which basically was a set of guidelines for for the possible to follow, that distinguished them from for profit hospitals, particularly around community benefit standard, because it was vague or outdated or more importantly, the report when I read it, it said it they that HOPWA applied them inconsistent. So there was no standard. Every the interpretation was a little different. So we don't have a standard. You know, everybody thinks they're meeting and, the report shows that really they're not. So as a result, you know, we're seeing increased scrutiny in the regulatory, also congressional pressure. There's been a lot of comments on both sides of the aisle about it. So, I know Elizabeth Warren, has been very critical and outspoken as well as Chuck Grassley. So that you know, you can't agree anything today in politics, but they can agree on that, it seems. So I think what should hospital expect? Deeper reviews of their charity care program, billing and collection practices, and, how hospitals document their community benefit, especially on schedule eight. So as accountants, we we get a lot of information while we're preparing the nine ninety, and we we can glean information on scheduling, but it really comes from the hospitals themselves. So the the I think the standard that needs to be correct, you know, is is that this is the information that's used for every hospital, not subject to, discretion. For hospital systems, I think this means a renewed focus on govern governance and documentation. Boards and compliance committees should reduce their charity care and financial assistance policies, ensure consistent application, across the board, and, verify their billing collection policies are not predatory. Hospitals should also reevaluate how community benefit is quantified and disclosed, especially with respect to Medicaid. So they may not you know, you you put stuff in the reports, but you also wanna keep documentation and say, how did you come up with this? How did you come up with that? I think that's what the IRS and and the congress says is is inconsistent. So that's what they need to provide a little guidance on. So in short, the clear signal is five zero one r enforcement, hospital room, put on notice, and they said the IRS said we'll be conducting orders of of this, I guess, as soon as they open. The other area we are finding, a lot of traction on here is this NIL college universities. You know, the NIL, for those of you who aren't familiar, is name, image, and likeness. It's basically capitalizing on college athletes' names and stuff, and and then waiting to try to get them, money, whether through booster clubs. Iris did weigh on this last year and the year before, I think, 2023 it started really. They put out an advice memorandum, 2023 dash 2004, concluding that many of these types of institutions that are established do not meet the qualifications of five one c three. Although, some of them who got approval and a determination letter from the IRS, they are circling circling those wagons because they what they say is this is really not to, further a charitable purpose, but really private benefit back to individuals, which are the student athletes. So collectives often organize the race, and distribute funds to student athletes for promotional appearances and sponsorship deals, but the IRS says the substantial impact is not to the charitable community, but rather to the individual. And that's that was their conclusions, on that, as well. I think, a few other areas I'll mention, would be foreign grant making and anti terror compliance. The IRS treasury regulations are coordinating with FinCEN to examine cross border grant documentation, whether you're a private foundation or you're a a a public charity that's working abroad, adherence to OFAC rules is imperative, and the IRS is looking at this area. Digital asset donations. You're hearing a lot about Bitcoin and and cryptocurrency. That becomes more popular. Donations of that, how do you book it? How do you evaluate it? The IRS is providing guidance, on valuation, acknowledgement, and tracking of cryptocurrency donations. So they're gonna be working on that as well, area, focusing. Energy credits. So we we've seen this come and go, but, nevertheless, some nonprofits took advantage. So a heightened review. No different than the ERC credit. So once the I the government gives you, they they gotta police, make sure it's used appropriately. That's what what phase we're in now too. That's another important one. And I'll say the last one is charitable solicitation of fundraising. So state attorney generals are intensifying, I think, enforcement over online fundraising, third party platforms. There's creative ways nowadays to raise funds and and and the and the attorney generals are are on top of that. You know, mister Shane, was on, and I'm sure he can can focus, you know, tell you about that too. But it is an area of their concern. With that being said, I'm gonna turn over talking about governance of risk, back to Eva. Thank you. So I think what we're seeing this year, there's really just one trend that really stands out, and there are studies to support this that show that 97% of organizations plan to diversify revenue streams over the next twelve months. And we'll also see this because we're getting a lot of client projects, in reviewing structuring and new revenue streams and activities. So not for profits, you know, can diversify their revenue streams by, you know, launching fee for service type revenue activities, corporate sponsorships, you know, engaging in partnerships even, commercial social enterprises. So with these new type of income streams, you know, brings new compliance, risk and compliance, issues. If, the activity isn't closely tied to the not for profits tax exempt mission, it could generate unrelated business income, which is not always a bad thing. Although if unrelated business income is substantial in nature, it can jeopardize the not for profits tax exemption. So there where, you know, we propose could propose different, structures, you know, pulling that that activity into a for profit subsidiary, and there's other, structuring, ideas as well. But, you know, diversification can trigger UBTI, so tax exemption is at the heart of the matter in protecting, the tax exemption. So always the question that should be asked is, is the activity and the initiative emission related, or is it essentially a commercial type activity? We always say that the form nine ninety just isn't a tax form. It's a public transparency report that just anyone can read. So, you know, making tax compliance a strategic priority, is imperative. We also always, recommend, when planning new initiatives, always involve, you know, your tax advisers, legal counsel, early in the process because it makes things, easier and just far less costly to, you know, structure ventures correctly from the start and to fix compliance issues later later on. So proactive tax governance, is is important. The next slide addresses the state level oversight and the intensified regulatory focus. So state charity oversight is is just more coordinated than ever. There's limited resources. State regulators are teaming up, from what we understand and sharing data and pursuing these joint investigations. So they're not just watching the big organizations, even, like, the smallest not for profits can, do all, scrutiny simply, you know, by accepting maybe online donations. You know, now it's the, popular fundraising platforms. So no no not for profits. It's it's really too small to be, like, on the on the on the radar. So, to stay ahead of state requirements, you know, keep state charitable solicitation registrations current, you know, filing state registrations and renewals on time, reviewing, what states. Often the question is what's where should I call and and in what state? So this certain threshold has to be on a regular basis. Ensure that fundraising material and your website disclosures, meet each state's legal requirements because each state rules vary. And, a good protocol is willing to centralize compliance. So assigning one or a person or a team to manage, the state filing. They they can be quite, cumbersome. So as we wrap up today's tax update, if you could key takeaways, I think we we can see through through the presentation, the hires and treasury priorities are shifting other, you know, the implementation of the, the act as well as enforcing hospital standards and other five zero one c policy issues that may not show up in the priority guidance, but nevertheless, all being worked on and are still a priority, of the IRS. With as far as college universities, higher ed, the NIL collectives, face new questions and whether they're gonna be able to coexist. I think it's gonna come down to whether they provide private benefit or more mission aligned with, promoting education, which is what college universities are designed to do. And as you heard from Eva, governance and compliance standpoint, I believe transparency, documentation, consistent application, and being aware of changes in any regulatory, any regulatory changes, will help protect an organization, if questioned. Mark, I I, turn it over to you, Eva. I don't know if you have anything to add. No. Well, I'll jump in then, Eva. Yeah. Great presentation, guys. Thank you. Lots of information there and and so current and and important to many of our clients, including myself as well, you know, being sort of an auditor, but learning these things on the tax side is always important as well. There were a few questions though, and I'm glad we have a few minutes here. So the first being for the nonitemizer deduction, do gifts of stock count or is it cash only? So, that's a good question. I I I think I'd have to look it up, but I believe it applies to cash and non cash. But I I have to look. You also have to watch to make sure you don't make it to a donor advised fund because that could, you know, may not be it may be impermissible. So it has to be a bonafide charity. I know that. I would believe that both count. Okay. I think that's a fair response. I would lean that way as well. Again, not a tax debt, that sounds reasonable. For organizations reviewing governance before year end, what's one quick compliance or disclosure area they shouldn't overlook? Maybe you wanna have that. I would say policies. Right? Conflict of interest policies, the whistleblower policy, you know, the document retention policy are three policies that the IRS probes on the form nine ninety. So, if they are not adopted, they should be adopted. There's other policies. There's gift acceptance policies, investment policies. The most that we see and we urge, not for profits to annually look at is outdated policies, policies that have been old, relooking at them and revising them. I don't know, Gary, if you have anything to add. Absolutely. I mean, either I agree, conflict of interest in how you, go make sure everything's done at our own length. That's that's important. Also, board review of the I 90. Make sure you have, you know, interactive, board that that actually looks at things. And last but not least, when you do have a policy, especially, even if I said the I the I 90 is a self audit. It's a full disclosure document. And anything put on there should be what you live in. It talks about policies and procedures. And what's what's what we find out sometimes is when you have a change in management, they call me a look at this. Is this the policy we really we we we really go through? Is this a procedure? And a lot of people are, well, no. We really haven't done that. And for years, you've been writing that. It's extremely important that whatever you put on that document, you live and breathe. So if there are changes to it, that's why that's why you need that board collaboration to look at that and say, yes. We do do this policy with that policy and procedure. So I think, you know, looking at your policy and procedures, updating them, keep them relevant, follow the new regulations, and implement them, and then obviously live there and reflect the property of the nine ninety. Yeah. Great. I mean, these are all living documents. Right? They have to change with with current legislation and and and whatever the case. So, you know, they have to be current as you explained. I like the next question because this is this is one that it's always out there and and do I or don't I, do I or don't I? How can not for profit safely diversify revenue without triggering unrelated business income issues? Do you wanna handle that? I know you go up revenue streams. Sure. You know, before determining whether an activity is in fact unrelated business income, there's three prongs. I'm not going going going to go through all three of the prongs. But keep in mind that there are certain exceptions, to the rule. So just a few to throw out, you know, the volunteer volunteer work, you know, if most of the labor is done by volunteers, that income could be exempt. There's a rental income, that's popular, Getting rental income is rental income, unrelated business, unrelated business income. So, if it's not debt finance and there's no services being provided, that could be exempt. Then there's these passive income exceptions, royalties, if they're structured correctly, that could exempt, UBTI. But, Garrett, do you have more to add? I would just say that that years ago, UBIT was kinda taboo. Mhmm. It's just another generator, the revenue generator. And if you have to pay a little patch, you have to pay a little tax as long as it's not, change your substantial focus of your organization. And there's ways to deal with if if monetarily becomes substantial where you you kinda roll that, activity into a for profit if they tax anyway. But the first we we approach it this way. We we do approach looking at an activity and try to make it mission related to something. So or find an exception. And and and and so this way it's not taxed. And if you cannot do that, then you structure in a way that protects you, the the that that you can make the most money, you know, after tax, that'll be most beneficial to your organization while protecting the organization's expense. And and that's that's technically our approach. And then, obviously, when you do have an unrelated business activity, you do get to take expenses. So on the expense side of that unrelated business activity, documentation remember, when you have an unrelated business income activity, you only can take expenses that are primary to the generation of that revenue. And, you know, if if it's allocable, you have to come up with some sort of active allocation methodology for consistency and having a good way about it. A lot of it is discussion with attorneys and and structuring and and your account. Okay. Right. So so it's not always a bad thing with the appropriate safeguards as you explained. Right? So okay. It could be another source of revenue. Okay. Last question. We got time for one more. With state regulators increasing enforcement, what's your advice for managing multi state charitable registrations or online fundraising? Okay. Right. So so organizations are expanding their data or donor base, to multiple state situations. So what what's the situation there with that? Take it? Yeah. Ava, the the old request, I'm going to write the wrong direction. So what what what what when it comes to state chartable registration compliance, I mean, that's like one of the fastest growing, I think, risk area for not for profits. And it's a it's a, quite burdensome as well. I think they, what I wanna say is not for profit should audit their fundraising footprint. So where are the donors located and where is the not for profit publicly ask asking for funds? Not per se where they're receiving the funds, but where the ask is. And if that takes, you know, a a centralized tracking, you know, keeping a a a master log of of of where the donors are coming from and just monitoring that. But it's it's quite a task, under to undertake. Okay. Wonderful. Well, thank you both for a great presentation. And, looks like, unfortunately, the old clock on the computer says that's all the time we have for today. Thank you all for joining us for our two thousand and twenty five not for profit executive forum. We hope today's discussion gave you some valuable tools and insights to strengthen your organization and protect your mission. Again, a big thank you to Jim Sheehan from the New York State Attorney General's Charities Bureau and of course to my PK, O'Connor and Davey's colleagues, Alex, Garrett and Eva for your or sharing your expertise. And of course, thank you to everyone in attendance. Your commitment to the not for profit community truly makes a difference, and it's an honor to support you in that mission. On behalf of PKF OConnor Davies, I'm Mark Pisco. Thanks again for being with us, and we look forward to seeing you soon. I'll pivot to to, Lana just for a few, wrap up, comments. Thanks, Mark. And thank you to our speakers, and thank you everyone for attending. If you haven't completed it already, we have launched our survey located in the survey tab of your panel. Just a reminder that a copy of the PowerPoint slides and a recording of today's webinar will be made available to attendees via email four business days post event. Thank you again. Have a great rest of your day.