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Financial liability

 
 
Heeven
 
  1  
Reply Tue 17 Feb, 2004 05:30 pm
For those people who you are paying travel/accommodation expenses for, is it possible for them to pay those expenses themselves and declare them as charitable donations on their tax returns, thereby being able to deduct these amounts pre-tax?

Insurance is not going to help you at this stage since the charitable event planning is already in full swing. An insurer is not going to take a risk on something that is halfway done. I am no expert on charities or fundraising insurance but from what I remember of my classes, hedging is what you are talking about when you refer to something making a profit or not. Your mainstream insurers generally do not insure profit/loss scenarios.

D&O (directors & officers) and E&O (errors & omissions) are good insurance products to have for charitable organisations. These cover the board of directors and any decisions they might make which affect the profitability of an entity. Is is also handy to have a crime or fidelity bond which ensures that employee theft/deception is also insured (sticky fingers running off with the funds!)

In the meantime, I think you need to look at the organization of the event and either cut the current costs by renegotiating where you can, delaying payments, refiling for additional grants, tacking on some additional fundraising events, stretching the dollars you already had ear-marked, getting the community involved in doing things that cost money - like decorating, deliveries of equipment, sound systems borrowed from Joe Schmo, getting napkins donated from the local restaurant, having the hotel provide cheaper utensils, cutting back on the bar bill, etc., etc.

If not enough responses have been received for the tickets you are hoping to sell, get a good "closer" to start making phone calls to encourage participation, collecting the credit card numbers and sending out the tickets.

Lots of businesses try ventures that come back as a loss. I am of the opinion that charitable events can have similar experiences and it is not the end of the world, however these things can only happen few and far between to keep the organization afloat. Since you have not offically signed anything, I won't fret just yet that you will be held financially responsible. There should be funds within the charity coffers to cover small losses like this, or the next planned event will have to be a better money-maker to make up the loss from this one. Start yelling at the committee right now about your concerns - bring them all into the discussion and plans on how to turn this around because you don't want them being surprised or coming back and pointing a finger at you!
0 Replies
 
cicerone imposter
 
  1  
Reply Tue 17 Feb, 2004 05:31 pm
I think they cover non-fraudulant "errors and omissions." They absolutely do not cover paying on unfunded contracts. That's called sloppy money management, and no insurance is going to cover it.
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sozobe
 
  1  
Reply Tue 17 Feb, 2004 05:42 pm
The biggest problem here is the impossibility of predicting what is going to happen. This is the second time this event has happened, the first was 10 years ago. It was much more modest then, they expected about 500 people, sold a smallish number of advance registrations -- maybe 250 -- and then they were absolutely inundated with at-the-door registrations, and ended up with nearly a thousand participants. For some reason, this community HATES to buy in advance, even if they have to pay more.

So everyone is telling me, there will be enough people at the door, there will be enough people at the door, but I'm really nervous about it, and I my skin positively crawls at the aspect of just hoping that there will be enough, and if not...?

Thanks for the further info, appreciated. Board meeting tomorrow, I will definitely be yelly.
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Heeven
 
  1  
Reply Wed 18 Feb, 2004 08:09 am
Pity you can't drag a celebrity along at the last minute and get it printed in the newspaper - now that might incite people to turn up in droves begging to get in!
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Thomas
 
  1  
Reply Wed 18 Feb, 2004 10:17 am
Questions that go through my mind as I re-read this thread: What kind of non-profit organization do you work for? Is it a nonprofit corporation, is it a nonprofit limited liability company, or what? I imagine there are lots of different kinds of organization, and each has its own rules for the case of insolvency which you can look up.

Which brings me to the next question: What does the balance sheet of your organization look like? How valuable are its assets, and can you mortage them in case the fund raiser produces a loss? Are the mortagable assets more or less valuable than the worst case loss of your event?

Finally, and feel free not to answer this if you don't want to: Do you have a personal financial stake in that organization, or are you just volunteering for it? If you won't be held liable personally -- and I don't think you are if you haven't signed anything -- just think of bankruptcy as the hard way of driving incompetence out of this world, and think of the threat of bankruptcy as a big stick to carry as you persuade your board to brush up on their competence.

Good luck with the yelling! And if you kill someone with your legendary Glare of Death, I'd happily donate money for a video of it! Twisted Evil
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husker
 
  1  
Reply Wed 18 Feb, 2004 10:23 am
Thomas don't you think the bankruptcy of a charity is a bad deal in the long run and could hurt other like minded charities in the area where Sozo is at or even put a bad taste in people's mouths about supporting a charity - expecially a 501c3 nonprofit?? They need to find a way to make it work, usually most nonprofits have a goto person with deeper pockets than the average joe, if only to provide security and integrity for the charity???
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husker
 
  1  
Reply Wed 18 Feb, 2004 10:25 am
Sozo
If I where there our close by, I'd come and open a can of whoop-arse on some of those people.

Breaking public confidence is a no-no!
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Thomas
 
  1  
Reply Wed 18 Feb, 2004 10:34 am
husker wrote:
Thomas don't you think the bankruptcy of a charity is a bad deal in the long run and could hurt other like minded charities in the area where Sozo is

Absolutely. But two years ago, my mother was held personally liable for the bankruptcy of a small firm she co-owned. So without going into details, I can tell you with authority that you can create great unhappiness if you contemplate such high-minded questions before covering your own butt -- as my mother did, and I suspect Sozobe might do if something is very important to her. If I sounded sloppy and cynical, I apologize.
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sozobe
 
  1  
Reply Wed 18 Feb, 2004 10:39 am
Smile

Quick summary, best I can (most of this info is out there but in drips and drabs, so apologies for being repetitive):

The main event, our raison d'etre, is a conference. The conference will be happening in May. This conference has taken place one time before, in 1994. At that time, the expenses were much more modest, and the fact that so many people showed up at the door meant that they had about $10,000 in profit. That was put into a bank account and saved for a future conference. At that time, however, the conference organizers were just a loosely allied group, not a non-profit organization.

Fast-forward about 8 years, and an entirely new group convenes to organize a second conference. I, foolishly, succumb to cajoling and agree to the job everyone is scared of, fundraising coordinator. We become a 501 (c) 3 so we can get grants. That only came through last fall.

I have established a variety of fundraising events (to raise funds for the conference) and have been trying to get sponsorships and grants. I have gotten some of each, so far, raising almost $17,000. I just received word that one grant I have been working on looks good, and I will be getting money from them, I just don't know how much yet. (Fingers crossed.)

The current budget calls for me to raise $22,000. The budget doesn't include assets, per se. We don't have, like, stock. We do have the $10,000 from last conference, which is not in the budget (sigh). It is just expected expenses and expected revenues. (Exhibit booths, registrations, advertising, etc.) (The expected revenues part was only added in December, at my urging -- before that the budget was only expected expenses.)

At any rate, I wanted to have a silent auction, and thought having some sort of event to host it would be good. It was decided (I think this was a good decision, for once) to approach this fundraising event as a "dress rehearsal", with the whole committee organizing it. So, while it was my idea, my role in the event was just the silent auction -- the Entertainment Coordinator set up the entertainment, the Souvenirs Coordinator priced, bought, and distributed souvenirs, etc., etc.

I protested vociferously at several decisions -- the price of tickets to the event, the cost of the entertainment -- but was overruled.

So, an event that was supposed to MAKE us $17,000 (if all of the tickets had been sold) instead COST us a few hundred dollars, and the thousand dollars I managed to earn with the silent auction was wiped out.

(I can't tell you how many times I said, yes, IF we sell all the tickets that would be a lot of money, but if the price is too high we just won't sell 'em! Deep sigh...)

As a dress rehearsal, that sucks big time.
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sozobe
 
  1  
Reply Wed 18 Feb, 2004 10:42 am
Oh, there were more back-and-forths...

Husker, I completely agree about bad faith, etc., and hope hope hope that all of this can be avoided. No, no deep pockets. The deepest made a $200 contribution and that was a big deal.

Would love to see you open the can of whoop-ass on 'em. Smile

Oh and in terms of "work for", this is all purely volunteer. I should be getting paid, it's standard for my position (grantwriter), but I'm not and nobody else is, either.
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sozobe
 
  1  
Reply Wed 18 Feb, 2004 11:02 am
I just crunched the numbers, figured some things out...

The NYE event was supposed to raise $17,000, but what I didn't figure was the cost, ~$13,000. (About $13K! Is that obscene, or what? <shaking head.>) So we made just under 13K, but it all went to expenses, rather than netting ~$4,000 in profits.

The amount not covered by projected expenses was $22,000 -- the amount I need to raise. Since the budget was written, that has gone up by 4K (non-existent profit), to about 26K. I have already raised about 17K, and the 10K from the previous conference is not in the budget. So that means we have 27K to cover a projected 26K shortfall!

That does not include the many things that could go wrong, and is predicated on at least 500 registrations. But getting 500 registrations is not my problem.

I still plan to get as much money as I possibly can, but that is somewhat reassuring.
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ehBeth
 
  1  
Reply Wed 18 Feb, 2004 11:21 am
Is the money you've raised so far dependent in any way on the event going forward?

Have they got their insurance sorted out? I'd be extremely hesitant to do anything further, even as a volunteer, without knowing there is insurance in place.

I've been involved with a couple of fund-raising things of this sort, and I'm just stunned that the insurance doesn't appear to have been in place from the beginning. And those board members better be ready to put some of their own $$ on the table. With the dress rehearsal not going particularly well, they could be personally on the hook for quite a bit.
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Thomas
 
  1  
Reply Wed 18 Feb, 2004 11:23 am
Sozobe wrote:
The amount not covered by projected expenses was $22,000 -- the amount I need to raise. Since the budget was written, that has gone up by 4K (non-existent profit), to about 26K. I have already raised about 17K, and the 10K from the previous conference is not in the budget. So that means we have 27K to cover a projected 26K shortfall!

Sounds okay, as long as nobody else secretly assumes those $10k are available as a cushion for him too. Better get mutual understanding about this.
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sozobe
 
  1  
Reply Wed 18 Feb, 2004 11:29 am
True, Thomas. I'll be bringing that up at the meeting. ("Where is the 10K from 1994 in the budget?")

Will also ask about insurance. Who knows, maybe they have it and just haven't talked about it.

No insurance will cover a shortfall, though, right?

The money I've raised so far is for the event, yes. Again, to clarify -- the event/ conference IS the organization. It's not an organization that does other things, and occasionally holds a conference -- the conference is it. That is what we are organizing, that is what we do. When the conference is over, we're done. We will hold any profits for a future conference (5 years? 10 years?) but the conference is it.
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husker
 
  1  
Reply Wed 18 Feb, 2004 11:29 am
Thomas wrote:
husker wrote:
Thomas don't you think the bankruptcy of a charity is a bad deal in the long run and could hurt other like minded charities in the area where Sozo is

Absolutely. But two years ago, my mother was held personally liable for the bankruptcy of a small firm she co-owned. So without going into details, I can tell you with authority that you can create great unhappiness if you contemplate such high-minded questions before covering your own butt -- as my mother did, and I suspect Sozobe might do if something is very important to her. If I sounded sloppy and cynical, I apologize.


The reasoning on the LLC with your mother mayhave been and that's a problem with an LLC vs S corp. If they determine the officers were at fault with an LLC there may be a larger price to pay. I have that documentation here - in only that I take extra safeguard with doing business with a LLC. Lot of time the LLC owners get angry with me when I ask them to sign a personal guarantee - because of piercing the corporate vail, but I say HEY! what are you afraid of? Are you going to do something questionable?? If they say "no" then I say - you should have no problem signing - works about 99% of the time.
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husker
 
  1  
Reply Wed 18 Feb, 2004 11:35 am
next time maybe you need to have an advance reservation\registration thing if you pre-register you get x% discount on the regular price, make it attractive so that the bulk of registrations occur before the event to give you better planning advantages. Or some perk to encorage pre-registration.
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sozobe
 
  1  
Reply Wed 18 Feb, 2004 11:38 am
Oh, we have. They did last time, too. That's what I'm saying about the community, though, they seem to just not want to buy in advance.

But the early bird is $150, at-the-door $185, still ain't really happening. (We'll see, early bird deadline is this Saturday, maybe there will be some good news.)
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ehBeth
 
  1  
Reply Wed 18 Feb, 2004 03:40 pm
Maybe try to get them to look at how much they can afford to lose on this?

A friend of mine who started a fund-raising event for the cancer society about a decade ago - that's his bottom line. What could he (personally, at the beginning) / the organization (now) afford to lose?
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cicerone imposter
 
  1  
Reply Wed 18 Feb, 2004 03:52 pm
sozobe, Tell the board you're going to use some of the money YOU raised to buy insurance for the event, and go buy it - TODAY. I would never work for a nonprofit organization that fails to buy liability insurance for the event. That's too big a gamble, and you could end up paying claims for the rest of your life. Not worth it.
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sozobe
 
  1  
Reply Wed 18 Feb, 2004 04:04 pm
Eek.

First, could I end up paying claims for the rest of my life? That's one of my main questions. I'm a run-of-the-mill board member, not one of the officers.

Second, it looks like insurance won't cover the specific eventuality I am worried about -- not having the money needed to pay the bills.

ehBeth, I'm not sure how the "afford to lose" thing applies here -- I've been trying to explain that the conference itself is NOT a fundraiser, but that seems to keep being a source of confusion. The conference, in May, is what I am raising money FOR. The cost of the conference is approximately $150,000 -- the hotel, travel expenses, souvenirs, yadda yadda yadda.

So if we lose money on the conference, there isn't some larger organization to absorb the cost. The conference is the organization. If money is lost, bills don't get paid.

As an aside, I have been very busy and very aggressive lately with the committee, am trying to get donations or reduced prices for various expenses, and will be VERY vociferous tonight about the need to cut unnecessary costs. (Example -- the plan was for one night of the conference to have a "film festival" and then a marquee performer/ entertainer perform a full set. They wanted to have 3 films, at a couple of thousand each, PLUS the performer. I said if they had to have a film, for the love of dog just one. We don't NEED 3. This is a DEAF conference, people want to look at each other and chat. Everyone listened, the subject was changed, and now I see that they plan to have two. Tonight I will demand to have some sort of formal objection recorded -- zero or one, two is ridiculous. I work SO hard, would be SO thrilled with a donation of a coupla thou, and then to have it frittered away like that...)

Anyway, I digress... my point is that while I am still trying very hard to not make it my problem, (for example, I think I would rather say that I will resign if THEY don't get insurance rather than get insurance, myself), I am going to be loud and obnoxious and on the record.
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