Gentoo Archives: gentoo-nfp

From: "William L. Thomson Jr." <wlt@××××××××××××××××.com>
To: gentoo-nfp@l.g.o
Subject: Re: [gentoo-nfp] Tax return and accounting discrepancies
Date: Fri, 25 Mar 2011 18:30:42
Message-Id: 1301077823.16773.29.camel@wlt
In Reply to: Re: [gentoo-nfp] Tax return and accounting discrepancies by Matthew Summers
1 On Fri, 2011-03-25 at 16:21 +0000, Matthew Summers wrote:
2 >
3 > We have been fortunate thus far in that the IRS has not actively
4 > sought to investigate or audit the organization
5
6 They are super slow, NPOs rarely show up on their radar without
7 substantial revenue. After all the IRS is a business, and anyone they go
8 after has to have considerable benefit vs the cost. If the cost of an
9 auditors time is greater than any amount recovered. IRS will likely just
10 move on to something higher paying :)
11
12 > (however I want a
13 > complete audit, just not by the IRS, but this has been nearly
14 > impossible given the absence of documentation prior to 2008) .
15
16 My concern over the ~$9k adjustment is that it occurred in Q3 2010. Had
17 the adjustment taken place sometime in 2008, it would make much more
18 sense. But how can accounts be off for ~2yrs, and only
19 adjusted/corrected in Q3 2010.
20
21 > I hope that no rash action by anyone on this list would provide
22 > encouragement for the IRS in seeking an investigation or audit before
23 > we have the opportunity to establish proper status.
24
25 Given the change in stance, to having all paper work filed, to doing an
26 audit to check either way. I have no plans to take any action. I am not
27 seeking to harm Gentoo. But some harm will come if these things are not
28 done. That is my only concern.
29
30 Also in the future, this type of response is much better than the first
31 stance of everything is in order. There is nothing wrong with saying, I
32 am not sure and conducting an audit to make sure one way or another. Had
33 that been the initial reply, that would have been suffice for now.
34
35 > I will defer this to my CPA, with whom I will
36 > meet again regarding these items in early April (prior to the 15th, of
37 > course). I will provide a full report to the board at during the April
38 > meeting.
39
40 That is wonderful, but your time is better spent talking to and
41 retaining a CPA for the foundation. I have no doubt your CPA is
42 experienced, however does he practice in the state of New Mexico? If not
43 then he will only be able to help/consult on the federal matters, IRS,
44 not anything with regard to state compliance. Not a huge deal, state has
45 much less consequences, than federal government.
46
47 > As far as visible steps that are available to us at the moment, I am
48 > working with a local CPA specializing in non-profits to assist in
49 > handling our filings for the moment.
50
51 That is good. Also in the interest of disclosure. My father was a self
52 employed CPA with a sizable practice, for over a decade. After working
53 for Arther Anderson, who is not defunct, an my father passed long ago.
54 My mother is also a certified CPA in the state of California. My half
55 sister is also a CPA, but after years of promotions is a partner
56 overseeing internal acquisitions and such at Deloitte.
57
58 I have done my own taxes since as far back as I can recall. Though I did
59 have a CPA for a business out in California, mostly due to payroll. My
60 current business i have mostly 1099, and its a bit easier than dealing
61 with payroll, back payroll taxes, etc. Which is what got the IRS to
62 crawl up a clients but, and dictate their life style, tell them how much
63 they can spent on groceries etc.
64
65 > Since my name is legally
66 > associated with the Foundation, as the signatory officer, I have
67 > knowingly accepted full responsibility and legal obligation.
68
69 That is appreciated, as I know what its like to stick my neck out on the
70 line. Most involved with Gentoo do not realize the personal liability.
71 Its not tremendous, but its very different than being a dev, foundation
72 member, user or anything else.
73
74 > I am also
75 > gathering quotes from CPAs across the country, based on
76 > recommendations from various non-profit directors with whom I have
77 > personal relationships, in the hope of identifying the most cost
78 > effective means of obtaining the long term support the Foundation
79 > needs going forward.
80
81 Ideally will be one located in New Mexico, but if not one that is versed
82 in New Mexico's laws as well as federal. Which federal is moot as to
83 where the CPA resides.
84
85 > This will require an allocation of funds, and yes
86 > the other board members are aware of this. I believe we have
87 > sufficient funds to secure the required professional support.
88
89 Even to clean up the mess at top rate, should not be more than a few
90 thousand, maybe $5k or so at best. Likely no way to get an exact quote
91 upfront.
92
93 > I think
94 > the dominant reason we need to contract a professional is the simple
95 > fact that with a contract we have greater accountability and legal
96 > recourse available, whereas with volunteers we do not have that.
97
98 Also when an accountant files, some of the liability is transfered to
99 them :)
100
101 > At
102 > some point in the near future I believe a composite of professional
103 > and volunteer support will be possible, and this will be a good thing
104 > when the time comes. Now is not that time. Now is the time for
105 > professional assistance and support.
106
107 That would be great, but again payroll brings about its own tax issues.
108 Definitely need to proceed in order.
109
110 > In terms of the bottlenecks, there are a few. For one, it has been
111 > impossible to conduct an appropriate financial audit for the period
112 > prior to 2008. The records are simply unavailable to the best of my
113 > knowledge. Further, the original bank was purchased by another entity
114 > and we were only able to recover the funds from that previous account
115 > last year. Thankfully we were successful in recovering those funds as
116 > it was a good amount of money.
117
118 That is great, I was going to inquire about that as well. However I an
119 unable to see when that took place in the quarter financial statements
120 that are available. Even going back to 2008, there is no line item of a
121 deposit of money transfered from the previous account.
122
123 Are you sure this took place? Do you know the amounts and when it was
124 deposited into Gentoo's current bank account? Just something to check on
125 as part of your audit.
126
127 > We are all indebted to Mr. Joshua Jackson for his persistence in that matter.
128
129 That is wonderful, and appreciate Joshua's efforts. Though having worked
130 with him, and understand he has a day job. Some of those matters get
131 dealt with much slower than they should be. This is nothing personal
132 against Joshua, I have met him in person more than once at LWE and have
133 no issues with him personally.
134
135 That said I was doing some of his duties back in 2008, simply because
136 time kept passing. Its good the money from the old bank account was
137 recovered. But I would be more pleased if that occurred back in 2008, or
138 2009, but that it happened in 2010, better than not at all ;)
139
140 > Additionally, we have no
141 > idea what paperwork, if any, has been filed with the IRS prior to
142 > 2008. There is some indication that the Foundation and/or D. Robbins
143 > was attempting to solicit donations to fund the application costs for
144 > Gentoo to become a 501(c)(6) trade organization, but we have no idea
145 > what became of that. We need some, if not all, of this information to
146 > satisfy the reporting requirements of the IRS since we are well past
147 > the 27 month filing 1023 form deadline. This deadline was passed in
148 > late 2006, so its been a long time ago.
149
150 And its also been 3yrs now since 2008. Plenty of time to correct both
151 the past and the present. The slowness in dealing with foundational
152 matters, was one of the other factors in my resignation. Since it was a
153 reason I told people not to vote for me, being time constrained. I
154 wanted to get as much done as fast as possible. Which many things could
155 have happened much faster and should have.
156
157 > Regarding the 1023 form, I
158 > have completed the components that I was able to. We were working with
159 > the SFLC to handle the requirements to satisfy the late filing.
160 > Unfortunately they have not been able to provide this material after
161 > one year. Hence why I am now turning to familiar local resources for
162 > this support. This was discussed at the last board meeting, as well as
163 > general status, etc.
164
165 Has the SFLC invited Gentoo to join, after they have received adequate
166 funding. Last communication we had with them in 2008, they did not have
167 enough funding to take on any other entities. Nor had they invited
168 Gentoo or what ever to be part of the SFLC.
169
170 I was very hopeful after first the SFLC could help gentoo, but after
171 communicating with them. It became apparent quickly we were mostly on
172 our own.
173
174 > I will keep everyone posted on all pertinent developments. I really
175 > appreciate the interest and well reasoned questions. Gentoo is very
176 > important to a whole host of people, and we all want its health to be
177 > maintained and provide for its growth and future. I promise to
178 > continue to do my level best in this endeavor.
179
180 Thank you very much for your time on this matter, and serving Gentoo
181 through your foundational efforts. Please do not take my comments, or
182 inquiries personal. I am not bringing this stuff up for negative
183 purposes at all. Though its clear people react that way taking things
184 bot personally and negatively. Its business, its not personal ;)
185
186 --
187 William L. Thomson Jr.
188 Obsidian-Studios, Inc.
189 http://www.obsidian-studios.com