Re: [gentoo-nfp] Tax return and accounting discrepancies

[Rich Freeman]

On Wed, Mar 23, 2011 at 3:50 PM, William L. Thomson Jr.
<wlt@××××××××××××××××.com> wrote:
> On Wed, 2011-03-23 at 15:23 -0400, Rich Freeman wrote:
>> Is there any controversy over the requirements, or is there a
>> consensus that we have a problem here?
>
> I am sure the IRS and state of New Mexico would care the mandated
> requirements are not being fulfilled.

Well, neither the IRS nor the state of New Mexico is posting on this
mailing list.  Clearly from the responses of others there is in fact a
controversy over whether a problem exists, and perhaps over the
details of the requirements.

>
>> Certainly interested in an answer to this.  The way I read it was that
>> sometime in the past there was a problem and the correction just makes
>> the register reflect reality.  That might not be something we can fix.
>
> At what point in the past? There needs to be specifics there, not just
> some general statement. This is not anyones money, but alls money.
> Therefore there needs to be accountability for all to see, and there
> won't be any questions.
>

Ok, so priority 1 has to be that all activity going forward is clearly
documented.

If there was some error or mess in the past, then by all means we
should look into it.  However, we may or may not ever be able to
resolve it, depending on the state of the records.  The current (and
to be elected) board needs to held accountable for the things they did
- and only in part for their ability to clean up something that
happened in the past.

Sure, the issues of the past, if uncorrected, may cost us something.
That alone doesn't mean that they can be corrected.

I'm not suggesting that we shouldn't try to find out more - only that
this may or may not end up being possible, and so it is what it is.

>> Any suggestions as to solution?  Hiring a CPA as a part-time treasurer
>> might be a solution - if we can afford it.
>
> If the foundation wants to remain as such and have control over it's
> assets and IP, remain a legal entity. Then it must retain a CPA, and
> file the mandated annual reports and financial statements.

So, I'll agree that any reports required by law must be filed.
Whether a CPA is required depends on the law and the complexity of the
task.  I don't doubt that the cost is significant - maybe not
thousands of dollars, but they aren't going to do it for $50 unless it
is a donation.  Also, in my experience accountants only work with what
you give them - if your records aren't useful then they can't generate
reports out of nothing.  If your records are good enough to report on,
then there is probably a decent chance we could do the reports
ourselves, and rely on CPAs and attorneys only when there are issues
in controversy, or for auditing.

>
>> The lack of reporting probably stems from one of a few possible causes:
>> 1.  There is not agreement the work needs to be done (perhaps rightly
>> or wrongly).
>
> Who is questioning the federal and state requirements? This is not
> something to disagree on, and anyone who does disagree, clearly is
> unqualified.

So, it sounds like there is debate over whether a problem even exists.
 I was listing possible issues, and your declaration that a problem
exists obviously does not on its own make it so.


>> One thing we should strongly consider is that if we don't have time to
>> legally document an action, then we probably shouldn't perform the
>> action.
>
> You have no choice on this stuff. You are running for the board and you
> should know this stuff. Or not run for the board if you are not
> qualified for such.

I think you misunderstood my point.  You don't need to document
something that you didn't do (sure, you might have to issue a no-op
statement, but that's it).  So, we should focus first on compliance,
and second on activity.  If we keep the reporting ahead of the
activity then we will always be compliant.

Regarding my qualifications - I never claimed to be a CPA, and neither
are most directors in public companies (at least from what I've seen).
 The role of a director is primarily one of oversight normally,
although the reality for Gentoo is that we need to get our hands
dirty.  I certainly have no objections to this.

From what I've seen posted by the trustees in this thread we really
don't have a serious issue to worry about here.  Obviously if elected
I will have full access to all material information and would confirm
that this is in fact the case.  If it isn't then we'll work TOGETHER
to fix it.  That last bit is actually pretty important - what's the
point of Gentoo if we're throwing stones at each other?

>
>> If accepting a check involves 18 hours of paperwork, then we
>> might consider whether the check ought to be accepted at all.
>
> Then why does the foundation exist at all?
>
> The flip side is how will that money be spent, and what impact that will
> have over what period of time. You will likely find out that the benefit
> completely outweighs the cost. Which is some what the entire idea behind
> a non-profit foundation.


Again, I think you misunderstood my point.  I wasn't suggesting that
we shouldn't accept money.  My point was that if any particular
transaction is unusually onerous from a reporting or legal standpoint,
then we should consider that as part of the cost/benefit balance.  If
somebody wants to set up a trust to benefit Gentoo in the amount of
$47, and that trust takes Gentoo 75 pages of accounting over the next
10 years to work out the reporting, then we should probably just ask
them to write us a check or give it to somebody who can handle that.
On the other hand, if that trust costs us writing the number $47 in
line 8 of form ABC then we should take it.

>
>> A report is easy at the start of the reporting period - copy balance
>> forward from last period, activities are all zero, end balance is
>> equal to start.
>
> Problem is neglect has gone on for so many years. Each year that passes
> is just one more to play catch up up. Things were quite behind in 2008,
> and now in 2011, only more so.

Again, priority 1 is that documentation for current activities is
good.  Priority 2 is that we catch up on old messes.  You can't clean
up a mess if you're making it worse every day.

And the current trustees seem to claim that all is in order.

>
>> Might not hurt to use something like Google docs with backups to
>> facilitate/etc.
>
> Thats pretty irrelevant, but many things could be leveraged.
>

Well, I was trying to be constructive.  If you care about Gentoo, and
you're going to point out problems, then it doesn't hurt to suggest
options for solutions.  I won't be hurt if they aren't ultimately
implemented.

If things are actually under control then perhaps the status quo is adequate.

Certainly I'd support increased transparency, like a webpage with
periodic statements.  The checkbook register need not be public -
mainly because it probably contains details that might be personal/etc
in nature.

> (Paraphrased)
> You had commented on losing non-profit status/etc.

I don't know that you specifically said anything incorrect, but there
are a lot of common misconceptions out there around non-profit status
and what that means as far as the IRS goes.

The IRS taxes corporations (that's what we are, legally) and
businesses in general based on PROFIT.  If you don't make a profit,
then you don't owe taxes, period.  You don't need any particular
status to benefit from this.

501(c)3 status is about allowing contributors to claim a tax deduction
in the US on their donations.  You can write a check to Microsoft
right now, and there are no issues for Microsoft receiving that money
(they just have to put it in their revenue, and pay taxes if not
offset by a loss).  However, you can't deduct that from your income
for tax purposes.  If you write that check to the American Red Cross
you can, because they are 501(c)3.

In summary:

Bottom line is that I'm all for transparency.  However, I'm not going
to accuse the current trustees of not doing their job unless I have
evidence that this is actually the case.  Sure, I'd love to see more
transparency, and we can work constructively to have that.  However,
if our interests REALLY are the welfare of Gentoo we can do that
without making accusations.

How about a simple "Hey, I was curious if Gentoo's financial
statements are posted anywhere public.  Can you point them out, or is
there some way we can work towards making them public?"  This is much
more constructive than starting with "I know you're hiding something -
prove that you aren't!"

If you're looking for somebody who is going to antagonize anybody
trying to help out until they all quit then by all means don't elect
me to the trustees.  I'm all for compliance and am willing to pitch in
to help out.  I'm fine with hiring professional help when that makes
sense.  What I'm not for is stirring the pot just to make people run
around.

Rich