February 2015

Schedule A Compliance for Supporting Organizations (SO)

• An SO’s governing documents must specify the beneficiary organization (BO) supported.

• When the BO does not have authority to regularly elect the majority of a Type I SO’s board, the SO must specifically describe how the BO supervised the SO’s activities.

• When a Type I SO is operated for the benefit of a separate organization, the SO must describe how those operations effectively support the BO.

• If the majority of a Type II SO’s directors were not also the majority of the governing board of the BO, the SO must explain how control was vested.

• If a Type III SO’s officers or directors were not also either appointed by or are serving the governing board of the BO, the SO must indicate how the SO maintained a close working relationship with the BO.

• Type III Functionally Integrated SOs must explain 1) how its activities advance the exempt purpose(s) of the BO; 2) how the SO was responsive to the BO; 3) how the SO determined that those activities substantially included all of its activities; and 4) why the BO would have otherwise participated in those activities.
  

Board Members and Redesign

1. Involve the right people early. Speaking to relevant people early on in the process can be a useful way of assessing common ideas and potential road blocks.

2. Create a framework. This will highlight the key attributes that are necessary for a successful design and allow for input about the decision to be weighed against the framework.

3. Educate participants on the psychology of change. To prevent the human tendency to side with familiarity over change, those involved in the process should take measures to acknowledge and counteract these tendencies.
   

Computer Readable Charity Tax Forms

Reporting Activities with Related Entities

• If the cooperative activity is not housed in a new legal entity, and the reporting organization is a participant in a collaborative arrangement:

  • The reporting organization reports costs and revenues generated from the cooperative activity when the reporting organization is the principal participant for the transaction.

• If a new legal entity is not created, and the governing body of the reporting organization cedes control of its operations as a condition of participation:

  • The reporting organization is consolidated with the other entity beginning on the acquisition date. If the reporting organization is required to provide separate financial statements, a new basis may be used.

• If a new legal entity is not created, and the governing body of the other entity cedes control of its operations as a condition of participation:

  • The other entity is consolidated with the reporting organization and the reporting organization applies the acquisition method [FASB ASC 958-805] to account for the activities.

• If a new legal entity is created to carry out the cooperative activity:

  • The other entity cedes control to the new legal entity and applies the acquisition method to account for the activities.

  • The reporting organization cedes control to the new legal entity and applies the acquisition method to account for the activities.