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EXCEL-ENCE IN TAX COMPLIANCE

September 19, 2006

A non-profit agency, Excel Community Outreach Center, has lost its $60,000 in funding from the City of Des Moines, the Des Moines Register reports:

Officials of the agency, Excel Community Outreach Center, were in line for the money to help run two programs for juvenile delinquents and people who need help with rent or house payments.

Grant money to Excel was frozen on May 22 after city staffers discovered that some of the agency's board members were paid employees, a violation of federal rules for nonprofit grant recipients.

That sort of thing should be reported on the agency's federal Form 990, Return of Organization Exempt from Income Tax. What's this?

Receipts aren't normally more than $25,000? That seems odd, based on this segment from the article:

Records show that Excel's Youth Enrichment program also received $100,000 in state money over the past two years.

"Youth enrichment?" If I were a youth, I wouldn't turn down $100,000 worth of enrichment. But why would they say they earned less than $25,000? Well, it certainly makes preparing the tax return easier:

(click image to enlarge)

You don't have to say much of anything! Especially not part IV of the return, which lists directors and their compensation. Here's what Excel reported:

For an agency that said it normally has less than $25,000 in income, it does pay well:

Auditors also noted that Jeremiah Reed, leader of the Christ Apostolic Temple church with which the agency is affiliated, had a $300-an-hour consultant contract, which the city said was excessive. Reed, who helped form Excel in 2003, is a former board member of the agency.

Well, it had to help with his "rent or house payments."

It seems likely that the IRS may have some problems with this return, if the numbers that the Register is reporting are correct. It's not clear from the article exactly how much grant money was received in 2004.

The Moral: If you are on a non-profit board, it's not a bad idea to look over the annual tax filings, just to be sure they look ok. And remember, Form 990 is a public document, so don't expect a bad filing to pass unnoticed.

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