Thursday, August 24th, 2017

How your nonprofit can avoid investment fraud

Investment fraud, such as Ponzi schemes, can cause significant financial losses for not-for-profits. But the harm it can cause an organization’s reputation with donors and the public may be even worse. Nonprofits are required to disclose on their Forms 990 whether they’ve experienced a significant loss to any illegal “diversion” that exceeds the lesser of 5% of gross receipts, 5% of total assets or $250,000. Such data becomes public and is likely to be reported by charity watchdog groups and the media.

To avoid such consequences, your nonprofit needs to screen investment advisors carefully. Here’s how.

Profile in deceit

One way investment fraud differs from occupational fraud is that its perpetrators generally are outside advisors — not employees. They may be brokers, bankers, financial planners, investment advisors or even self-styled money experts. In many cases, thieves are registered or licensed, enjoy good reputations in their communities, and have no previous records of wrongdoing.

How, then, can your organization avoid hiring a crook? First, beware of unrealistic promises. If an advisor guarantees immediate results or annual returns of 20% — even in years when the general stock market is down — he or she is either lying or incompetent. Also be wary of investment fund managers who don’t submit to outside audits or report their results publicly.

The right stuff

Instead, look for an advisor who encourages you to discuss investment goals and risk concerns. Your advisor should understand your organization’s investment policy — or be willing to help you develop one. Accessibility is important, too. For example, your board likely holds meetings after business hours and your advisor needs to be able to meet with them from time to time.

Ask other nonprofits, or your attorney or CPA, for investment advisor referrals. And make sure your board scrutinizes your advisor’s investment recommendations, carefully reviews performance reports and constantly monitors account balances. Contact us for more suggestions for finding a trustworthy investment advisor.

© 2017


Investment fraud can cause significant financial losses for not-for-profits. But the harm it could cause your reputation with donors and the public may be even worse. To avoid hiring a crooked investment advisor, beware of unrealistic promises, such as annual returns of 20%. Also be wary of fund managers who don’t submit to outside audits or report their results publicly. Instead, look for an advisor who encourages you to discuss goals and risk concerns, and who understands your investment philosophy. Contact us for help finding a trustworthy advisor.

Wednesday, August 23rd, 2017

Mauldin & Jenkins Welcomes Two New Partners!

Mauldin & Jenkins is pleased to announce the appointment of two new partners:  Melodie A. Rich in Bradenton, Florida and Ron Marshall in Macon, Georgia. This new leadership further enhances the firm’s capacity to continue to deliver the highest levels of client services.

“The partners at M&J are proud to welcome Melodie Rich and Ron Marshall as partners in Mauldin & Jenkins, LLC,” said Donny Luker, Managing Partner of Mauldin & Jenkins, LLC. “Both Ron and Melodie are proven professionals who provide excellent service to clients on behalf of M&J.  Congratulations to Ron and Melodie!”


Ron Marshall, CPA– Macon, GA

Since joining Mauldin & Jenkins in 2006, Ron has spent the majority of his time working in the Entrepreneurial Services area. He focuses his career on income taxes and closely held businesses with a concentration in the professional services, retail, construction, manufacturing, distribution, and real estate industries. Ron’s experience with the taxation of S corporations, partnerships, individuals, and trusts allows him to serve a wide of variety of clients. He also has experience performing accounting services for compilation and review engagements. Ron also provides monthly bookkeeping services for a number of his clients.

Ron is a member of the American Institute of Certified Public Accountants and the Georgia Society of Certified Public Accountants. He also serves on the University of Georgia Terry College of Business Middle Georgia Chapter Alumni committee and is active in the Macon Chamber of Commerce.

In 2005, he graduated from the University of Georgia with a BBA in Accounting.  Ron and his wife, Ally, live in Macon with their daughters, Annalee, Adeline, and Amerson.

Melodie Rich, CPA – Bradenton, FL

Melodie A. Rich has over 20 years of experience in providing a wide range of both individual and business tax services.  She specializes in Estate and Gift Taxes, including income tax planning for trusts and estates.

Melodie is a past president of the Estate Planning Council of Manatee County, Inc.  She currently serves on the board of Realize Bradenton, Charitable Gift Planners of Southwest Florida Council.  She is a member of the Southwest Florida Estate Planning Council, and also currently serves on the board of Estate Planning Council of Manatee County. Melodie is a graduate of Leadership Sarasota, Leadership Manatee and is a member of the FICPA and the AICPA.

Melodie received her BBA in Accounting from the University of Central Florida.


Tuesday, August 22nd, 2017

Yes, you can undo a Roth IRA conversion

Converting a traditional IRA to a Roth IRA can provide tax-free growth and the ability to withdraw funds tax-free in retirement. But what if you convert a traditional IRA — subject to income taxes on all earnings and deductible contributions — and then discover that you would have been better off if you hadn’t converted it? Fortunately, it’s possible to undo a Roth IRA conversion, using a “recharacterization.”

Reasons to recharacterize

There are several possible reasons to undo a Roth IRA conversion. For example:

  • You lack sufficient liquid funds to pay the tax liability.
  • The conversion combined with your other income has pushed you into a higher tax bracket.
  • You expect your tax rate to go down either in the near future or in retirement.
  • The value of your account has declined since the conversion, which means you would owe taxes partially on money you no longer have.

Generally, when you convert to a Roth IRA, if you extend your tax return, you have until October 15 of the following year to undo it. (For 2016 returns, the extended deadline is October 16 because the 15th falls on a weekend in 2017.)

In some cases it can make sense to undo a Roth IRA conversion and then redo it. If you want to redo the conversion, you must wait until the later of 1) the first day of the year following the year of the original conversion, or 2) the 31st day after the recharacterization.

Keep in mind that, if you reversed a conversion because your IRA’s value declined, there’s a risk that your investments will bounce back during the waiting period. This could cause you to reconvert at ahigher tax cost.

Recharacterization in action

Nick had a traditional IRA with a balance of $100,000. In 2016, he converted it to a Roth IRA, which, combined with his other income for the year, put him in the 33% tax bracket. So normally he’d have owed $33,000 in federal income taxes on the conversion in April 2017. However, Nick extended his return and, by September 2017, the value of his account drops to $80,000.

On October 1, Nick recharacterizes the account as a traditional IRA and files his return to exclude the $100,000 in income. On November 1, he reconverts the traditional IRA, whose value remains at $80,000, to a Roth IRA. He’ll report that amount on his 2017 tax return. This time, he’ll owe $26,400 — deferred for a year and resulting in a tax savings of $6,600. If the $20,000 difference in income keeps him in the 28% tax bracket or tax reform legislation is signed into law that reduces rates retroactively to January 1, 2017, he could save even more.

If you convert a traditional IRA to a Roth IRA, monitor your financial situation. If the advantages of the conversion diminish, we can help you assess your options.

© 2017

Thursday, August 17th, 2017

Create a nonprofit executive search plan — before it becomes necessary

Selecting a new chief executive or other senior staffer is one of the most important decisions your not-for-profit board is likely to face. Even if there’s no immediate hiring need, it’s smart to prepare for the process. That way, you’ll be ready to execute an efficient executive search when the time arrives.

1. Form a search team

Forming a search team allows participating board members to stay abreast of compensation trends and be on the lookout for possible successors to current executives. One of your team’s objectives is to determine whether you’ll want to hire an executive search firm. The decision will hinge on many factors, including the position’s complexity and responsibility level.

But before outsourcing a search, you’ll want to look around. The best person for the job may be a current board member, employee or volunteer.

2. Determine candidate criteria

Keep comprehensive, up-to-date job descriptions for key executive positions that detail the knowledge, skills, abilities and attitudes required. Your organization’s strategic goals should also be integrated into the descriptions. As part of ongoing succession planning efforts, your search team should periodically re-evaluate these descriptions. If your nonprofit is moving in a new direction, your next leader might need a different set of skills and experiences.

3. Consider compensation

Your board and the search team should discuss and arrive at a common philosophy about compensation. Factors that influence compensation decisions include:

  • Your nonprofit’s size and complexity,
  • Geographic location, service category and financial stability,
  • Desired qualifications, and
  • Competitiveness of the total package relative to comparable organizations.

Consider whether your goal is to compensate in line with similar regional or national organizations, or with similar positions in the for-profit sector. Also, determine whether compensation will be fixed or have a variable pay component, such as bonuses or incentive pay.

4. Outline the interview process

Think about how you’ll conduct the executive interview process. Who’ll be involved? What format will you use (such as one-on-one or group interviews)? Also prepare some thoughtful questions that reflect your organization’s needs and culture.

Revisit and finalize

Before beginning an actual search, you’ll want to revisit your search plan and finalize some details. But by having guidelines in place, you can jumpstart the process. Contact us for more information.

© 2017

Wednesday, August 16th, 2017

How to determine if you need to worry about estate taxes

Among the taxes that are being considered for repeal as part of tax reform legislation is the estate tax. This tax applies to transfers of wealth at death, hence why it’s commonly referred to as the “death tax.” Its sibling, the gift tax — also being considered for repeal — applies to transfers during life. Yet most taxpayers won’t face these taxes even if the taxes remain in place.

Exclusions and exemptions

For 2017, the lifetime gift and estate tax exemption is $5.49 million per taxpayer. (The exemption is annually indexed for inflation.) If your estate doesn’t exceed your available exemption at your death, then no federal estate tax will be due.

Any gift tax exemption you use during life does reduce the amount of estate tax exemption available at your death. But every gift you make won’t use up part of your lifetime exemption. For example:

  • Gifts to your U.S. citizen spouse are tax-free under the marital deduction. (So are transfers at death — that is, bequests.)
  • Gifts and bequests to qualified charities aren’t subject to gift and estate taxes.
  • Payments of another person’s health care or tuition expenses aren’t subject to gift tax if paid directly to the provider.
  • Each year you can make gifts up to the annual exclusion amount ($14,000 per recipient for 2017) tax-free without using up any of your lifetime exemption.

What’s your estate tax exposure?

Here’s a simplified way to project your estate tax exposure. Take the value of your estate, net of any debts. Also subtract any assets that will pass to charity on your death.

Then, if you’re married and your spouse is a U.S. citizen, subtract any assets you’ll pass to him or her. (But keep in mind that there could be estate tax exposure on your surviving spouse’s death, depending on the size of his or her estate.) The net number represents your taxable estate.

You can then apply the exemption amount you expect to have available at death. Remember, any gift tax exemption amount you use during your life must be subtracted. But if your spouse predeceases you, then his or her unused estate tax exemption, if any, may be added to yours (provided the applicable requirements are met).

If your taxable estate is equal to or less than your available estate tax exemption, no federal estate tax will be due at your death. But if your taxable estate exceeds this amount, the excess will be subject to federal estate tax.

Be aware that many states impose estate tax at a lower threshold than the federal government does. So you could have state estate tax exposure even if you don’t need to worry about federal estate tax.

If you’re not sure whether you’re at risk for the estate tax or if you’d like to learn about gift and estate planning strategies to reduce your potential liability, please contact us. We also can keep you up to date on any estate tax law changes.

© 2017

Tuesday, August 15th, 2017

M&J Macon Volunteers at Middle Georgia Community Food Bank

A big THANK YOU to those who volunteered at the Middle Georgia Community Food Bank from 1:00 – 5:00 this past Friday! Those volunteers included Meredith Lipson, Fred Martin, Ron Marshall, Justin Johnson, Rick Spires, Kellan Shuford, Emily Eubanks, Paul Moran, and Jacob Hall from our Macon office.

“Our group filled 350 bags of groceries for the Food Bank’s Brown Bag Program, which distributes over 1,200 bags of groceries monthly to senior citizens in Middle Georgia Area.  See our group working hard bagging groceries, loading and moving pallets, moving and opening boxes, etc.  Needless to say, a few of us were a little sore this weekend!” – Meredith Lipson, Partner in Macon Office.

For more information about the Middle Georgia Community Food Bank and more programs like their Brown Bag Program, visit their website.


Thursday, August 10th, 2017

Is one of your nonprofit’s board members behaving badly?

Your not-for-profit has probably spent a lot of time and effort attracting board members who have the knowledge, enthusiasm, and commitment to make a difference to your organization. Unfortunately, what begins as a good relationship can sour over time, and you may find yourself in the tough position of having to “fire” a board member.

8 deadly sins

Several behaviors can interfere with your board’s efficacy. Pay particular attention to members who:

  1. Regularly miss meetings. Everyone has time conflicts now and then, but a chronically absent member drags down your board’s productivity and can lower morale among other members.
  2. Don’t accept or complete tasks. Board members who aren’t willing to assume their share of the work force other members to pick up the slack.
  3. Are motivated by personal agendas. Board members who pursue their own interests can waste time trying to convince others of their way of thinking — or can steer your nonprofit off course.
  4. Monopolize — or conversely, never participate in — discussions. There’s a happy medium when it comes to participation. Overbearing members stifle debate and those who sit silently through meetings may not be fully engaged.
  5. Treat peers disrespectfully. Boards are a team, and their members need to work together amicably.
  6. Betray confidentiality. Trust is an essential component of the board-organization relationship and your nonprofit can’t afford to have untrustworthy members.
  7. Don’t disclose conflicts of interest. Board members risk eroding the trust of others, including external stakeholders if they make (or even appear to be making) decisions that benefit themselves over the best interests of your organization.
  8. Don’t realize when it’s time to retire. If a longtime board member is preventing your organization from moving forward and staying relevant, it may be time for him or her to move on.

Take action

Any of these behaviors can be toxic to your organization. When they start to interfere with your board’s work, it’s time to take action. Contact us for more information.

© 2017

Wednesday, August 9th, 2017

DOL’s overtime rule lands in limbo — for now

Employers must comply with a variety of laws involving the minimum wage and overtime. As you may know, the overtime rules were going to change dramatically last year before a federal court stepped in to delay the changes. Now, the Trump administration is signaling that it may revise the current rules and is seeking feedback from the public.


The Obama administration’s 2016 release of an updated rule regarding federal overtime pay for executive, administrative and professional employees (also known as “white-collar workers”) caused quite an uproar among employers. No wonder — the U.S. Department of Labor (DOL) estimated at the time that 4.1 million salaried workers would become eligible for overtime under the rule.

But subsequent events, including a federal district court ruling, the election of President Trump and some moves by the DOL, have thrown the future of the overtime standards into question.

The current rule

Under the existing rules, last updated in 2004, an employee generally must satisfy three tests to qualify for a white-collar exemption from the overtime requirements:

  1. Salary basis test. The employee is paid a predetermined and fixed salary that isn’t subject to reduction because of variations in the quality or quantity of the work performed.
  2. Salary level test. The employee is paid at least $455 per week or $23,660 annually.
  3. Duties test. The employee primarily performs executive, administrative or professional duties.

Different rules apply to certain kinds of employees (for example, doctors, teachers and attorneys) and certain highly compensated employees.

The 2016 revised rule

The 2016 rule change focused mainly on the salary level test. It increased the salary threshold for exempt employees to $913 per week, or $47,476 per year. The levels would automatically update every three years beginning January 1, 2020.

By more than doubling the salary level test, the rule would eliminate the need for employers to even consider an employee’s duties in many cases. If the employee’s pay comes in under the threshold for exemption, the duties would be irrelevant; the employee already couldn’t possibly be exempt.

In addition to potentially increasing an employer’s overtime liability, the revision would have a tax effect. Payroll tax liability would increase as an employer pays overtime to more employees when they work more than 40 hours per week or, alternatively, raises salaries to maintain exemptions. Not surprisingly, the revised rule was met with much criticism from employers, who claimed they would need to cut jobs or hours to manage payroll costs.

The court proceedings

Twenty-one states challenged the revised rule in court, arguing that it raised the salary level too quickly. On November 22, 2016, a federal district court judge granted a preliminary injunction putting a halt to the rule, which had been scheduled to take effect on December 1, 2016.

The judge found that the DOL had exceeded its authority and ignored congressional intent by raising the salary level to the degree that it supplanted the duties test, essentially creating a salary-only test for the white-collar exemption. According to the judge, only Congress could make such a change.

On December 1, 2016, the Department of Justice appealed the judge’s ruling to a federal court of appeals on behalf of the DOL, but the appeal couldn’t be completed before President Trump took office. After the inauguration, the 5th U.S. Circuit Court of Appeals granted the administration three requests to delay the deadline for filing briefs in the matter. Many speculated that the DOL might just drop the appeal altogether, but, on June 30, 2017, the DOJ filed a brief in the case.

The DOL’s latest position

In a surprise move, the brief seeks a reversal of the district court ruling. The DOL opted not to argue for the specific salary test in the revised rule, though, instead asking the appellate court only to affirm that the department does indeed have the authority to set a salary level.

The DOL stated in the brief that it plans to pursue further rulemaking to determine an appropriate salary level. But the department said it has decided not to proceed immediately with the rulemaking process, citing its reluctance to issue a proposal while litigation over its authority to establish a salary level remains pending.

The resulting uncertainty

The DOL’s brief raises the potential for an odd outcome. If the 5th Circuit reverses the lower court as requested, it would presumably vacate the preliminary injunction against implementation of the revised rule. In that case, the rule would take effect, possibly retroactively to December 1, 2016, unless the DOL withdraws the rule before the court enters judgment. Should the DOL withdraw the rule, it would need to do so retroactively. It wouldn’t be enough for the department to simply decline to enforce the rule — employers could still face private lawsuits by employees seeking overtime pay since the original effective date.

Further, the same district court also is considering a separate challenge to the revised rule, brought by more than 50 business groups, including the U.S. Chamber of Commerce. They’ve asked the court to invalidate the revisions on other grounds. If the judge finds that the rule is arbitrary and capricious or unsupported by evidence (which it didn’t address in its earlier ruling), the case could end up on appeal to the 5th Circuit, too, prolonging the uncertainty even more.

And the AFL-CIO filed a motion in December 2016 to intervene in the states’ case so it could defend the revised rule if the DOL withdrew from the case. That motion is still pending with the lower court. The union also has promised to sue if the salary level is scaled back from the level in the 2016 rule.

Seeking comments

The DOL’s Wage and Hour Division announced on July 25, 2017, that it’s seeking comments about whether the overtime rule should be revised — and how. Feedback is being requested on questions related to the salary level test, the duties test, cost of living across the country, the inclusion of bonuses to satisfy a portion of the salary level, and more. Go to for more information about commenting.

Stay tuned

For now, employers will continue to confront uncertainty about their future payroll and tax obligations. It seems likely that the DOL will attempt to revise the salary level for the white-collar exemption, but it’s impossible to say at this point when that will happen or where the level will be set.

© 2017

Tuesday, August 8th, 2017

Will Congress revive expired tax breaks?

Most of the talk about possible tax legislation this year has focused on either wide-sweeping tax reform or taxes that are part of the Affordable Care Act. But there are a few other potential tax developments for individuals to keep an eye on.

Back in December of 2015, Congress passed the PATH Act, which made a multitude of tax breaks permanent. However, there were a few valuable breaks for individuals that it extended only through 2016. The question now is whether Congress will extend them for 2017.

An education break

One break the PATH Act extended through 2016 was the above-the-line deduction for qualified tuition and related expenses for higher education. The deduction was capped at $4,000 for taxpayers whose adjusted gross income (AGI) didn’t exceed $65,000 ($130,000 for joint filers) or, for those beyond those amounts, $2,000 for taxpayers whose AGI didn’t exceed $80,000 ($160,000 for joint filers).

You couldn’t take the American Opportunity credit, its cousin the Lifetime Learning credit and the tuition deduction in the same year for the same student. If you were eligible for all three breaks, the American Opportunity credit would typically be the most valuable in terms of tax savings.

But in some situations, the AGI reduction from the tuition deduction might prove more beneficial than taking the Lifetime Learning credit. For example, a lower AGI might help avoid having other tax breaks reduced or eliminated due to AGI-based phaseouts.

Mortgage-related tax breaks

Under the PATH Act, through 2016 you could treat qualified mortgage insurance premiums as interest for purposes of the mortgage interest deduction. The deduction phased out for taxpayers with AGI of $100,000 to $110,000.

The PATH Act likewise extended through 2016 the exclusion from gross income for mortgage loan forgiveness. It also modified the exclusion to apply to mortgage forgiveness that occurs in 2017 as long as it’s granted pursuant to a written agreement entered into in 2016. So even if this break isn’t extended, you might still be able to benefit from it on your 2017 income tax return.

Act now

Please check back with us for the latest information. In the meantime, keep in mind that, if you qualify and you haven’t filed your 2016 income tax return yet, you can take advantage of these breaks on thattax return. The deadline for individual extended returns is October 16, 2017.

© 2017

Wednesday, August 2nd, 2017

Reporting collaborative activities: A complex issue for nonprofits

More and more not-for-profits are joining forces to better serve their clients and cut costs. But such relationships can come with complicated financial reporting obligations.

Starting with the simplest

For accounting purposes, the simplest relationship between nonprofits may be a collaborative arrangement. These are typically contractual agreements in which two or more organizations are active participants in a joint operating activity — for example, a hospital that’s jointly operated by two nonprofit health care organizations.

Costs incurred and revenues generated from transactions with third parties should be reported, on a gross basis on the statement of activities, by the nonprofit that’s considered the “principal” for that specific transaction. Generally, the principal is the entity that has control of the goods or services provided in the transaction. But you should follow Generally Accepted Accounting Principles (GAAP) for your particular situation.

Payments between participants are presented according to their nature (following accounting guidance for the type of revenue or expense the transaction involves). Participants also must make certain disclosures, such as the nature and purpose of the arrangement and each organization’s rights and obligations.

Mergers and acquisitions require more

In a more complicated arrangement, two organizations may form a new legal entity. A merger takes place when the boards of directors of both nonprofits cede control of themselves to the new entity. The assets and liabilities of the organizations are combined as of the merger date.

Another option is for the board of one organization to cede control of its operations to another entity to enable a cooperative activity — but without creating a new legal entity. This is considered an acquisition, and the remaining organization (the acquirer) must determine how to record it based on the current value of the assets and liabilities of the organization acquired.

If there’s an excess of value, it should be recorded as a contribution. If the value is lower, the difference is generally recorded as goodwill. But, if the operations of the acquired organization are expected to be predominantly supported by contributions and returns on investments, the difference should be recorded as a separate charge in the acquirer’s statement of activities.

Proceed with caution

Of course, this is only the tip of the iceberg. Although the benefits of collaborating with other nonprofits are usually clear, financial reporting rules are anything but. We can help you comply with your reporting obligations.

© 2017