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Tuesday, August 10, 2010

Friends and the IRS...

sounds like an oxymoron!

The editorial in today's Observer Dispatch, Dunham library needs its friends, refers to a "tiff" and "spatting over a major fundraising policy" regarding the Memorandum of Understanding recently adopted by the Dunham Library Board of Trustees.

The editorial goes on to say:
The good people who support libraries through their volunteer efforts — at Dunham or anywhere else — are vital partners when it comes to these wonderful community facilities.
No one would disagree that the work of the Friends group associated with any library is essential. However, this isn't about a tiff or spat; this is about new 990 reporting requirements for not-for-profit entities. After reading this editorial, we have to wonder how up-to-date the OD editorial board is on the new IRS 990 forms or the requirements to maintain a 501(c)(3) tax exempt status.

The Library Board of Trustees, by signing the MOU, is trying to clearly define the relationship between the Friends and the Library and set the ground rules going forward. It is very apparent that the Friends group simply does not understand the whats and whys of the Memorandum of Understanding... surely they would not want to do anything to jeopardize the tax exempt status of the library.

The Foundation Group, posted an article, Radical Changes to Form 990 dated January 14, 2009. The article starts out by saying:
For the first time since 1979, the IRS has completely overhauled the Form 990 – Return of Organization Exempt From Income Tax. And boy, is it a doozy! This time, they weren’t fooling around.
Further on the article says:
Approximately 80% of the new Form 990/990EZ deals with questions concerning compliance, governance, structure, procedure, activities…in excruciating detail.
The IRS means business with this overhaul. They want to know what your organization is doing and how it is doing it. Proper structure and governance, along with tight controls on procedure and recordkeeping are simply a must.
Previously Friends groups, to include Dunham Friends and New Hartford Public Library Friends, have been fundraising under the umbrella of the respective library, that is, they have collecting donations without the benefit of a 501(c)(3) tax exempt status and relying on the exempt status of the sponsoring libraries.

However, none of the funds collected by these groups has been handled directly by the library; the Friends groups have had complete control of the money to include what it is used for and how much is used versus how much sits in a bank account.

The problem is...with the new IRS 990 reporting rules now in place, the Library's required annual reports, including the annual report filed with the State Comptroller [that New Hartford Public Library has failed to even submit] and the Annual 990 report, must answer questions about all activities and monies raised [including the Friends group] and how they are spent, yet the Library did not have access to any of that information regarding the Friends group.

According to a statement by Dunham Public Library Board President, Patricia Samarco [please read the full statement on the Dunham Public Library website to get a better understanding of the MOU]:
It was discovered that the Friends of Dunham Public Library have been functioning under the designated 501(c)3 status of the Library itself. It does not have its own 501(c)3 not-for-profit designation. It cannot provide a tax deductible receipt for contributions. Only the Library can legally do this. Effectively, as the Memorandum of Understanding states, the Friends of the Library is an agent of the library and acting on the Library’s and the Library Board’s behalf. And yet they collect money and maintain financial accounts outside of the Library’s audit trail and inspection. They collect donations outside of the oversight of the Library. This cannot continue. This Memo is an attempt to define and articulate the relationships between the Friends of the Library and the Library Board of Trustees.
Bottom line...the library's tax exempt status is on the line.

Getting back to The Foundation Group article, it further states:
The IRS released a video “webinar” in December that was a panel discussion of the new form. In that webinar, one of the IRS representatives stated that the intent of the changes was to push compliance and transparency in a way that hasn’t been done before. She went on to say that the IRS was attempting to “influence the behavior” of 501(c)(3)s through these new reporting requirements. Gone forever are the days of operating over the line, or even flirting with it…unless you’re prepared to lie under penalty of perjury on your Form 990!
We are hopeful that cool heads will prevail and the Friends will be able to understand that no one is trying to devalue their work...they are a necessary arm of the Library, but the Library is obligated to follow IRS rules in order to protect their own well-being!

Are you listening Town of New Hartford? This is only one of many issues plaguing the New Hartford Public Library and it needs to be addressed by the Board of Trustees NOW! Time for the Town Board to make any necessary changes to the Library Board of Trustees so that the Library can move forward. The current Library Board of Trustees consists of two lawyers, a former teacher, a couple of doctors, a former not-for-profit employee, and other business leaders and yet they are acting like a bunch of 'spoiled brats'. It's time to put the personalities aside...everyone needs to 'put on your big girl panties' and get to work. The future of the New Hartford Public Library is at stake!

By the way, the next Town Board meeting is scheduled for tomorrow, Wednesday, August 11, 2010 starting at 7:00 p.m. at Butler Hall. The Library is one of the topics of discussion.

The agenda is now online!

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