Charter agreement question

[seldon]

Hi, first time posting here. Reading Scouter.com forum has been very informative for me as a leader and now committee member, and now I'm hoping y'all can help answer some rather technical questions.

 

Our charter organization is, as many of you have found with yours, unhelpful with finances. They help fund the units, which is great. In their opinion the funds disappear into a black hole once the check is written. I assume the scouting units are treated as an expense on their books.

 

If you've read the BSA fiscal procedures for units, you know that's not how it's supposed to work at all. BSA considers scouting units and their assets to be part of the CO. The funds don't leave the CO until they are spent by the unit.

 

However, there seems to be an inconsistency between the Annual Unit Charter Agreement and the Fiscal Policies and Procedures. The charter agreement says the CO has to provide facilities, training, and leaders and to conduct the program according to BSA rules. OF COURSE the CO doesn't understand that the scouting units are under their umbrella, because it's not actually specified by the agreement. It's not even mentioned in the Rules and Regulations. The only place I have seen it specified is in the Fiscal Policies and Procedures for units.

 

Practically speaking, there is nothing I can take to the CO that says they have agreed to take ownership of unit assets and report income and expenses to the IRS.

 

Or is there? Is the Annual Unit Charter Agreement all there is between the council and the CO? Or does the agreement refer to some document that specifies that the scouting unit is not a separate entity from the CO?

 

Seldon

[Sentinel947]

Welcome to the forum. I'm not a committe member, so I have no experience with this issue. Remember that this forum is not an Official BSA website, and very few of us are BSA professionals. I recommend chatting with your DE, and if they doesn't know anything, your Councils Scout Executive.

Edited February 24, 2016 by Sentinel947

[Krampus]

DE or council? Please. This is something an accountant or tax professional should help with. @@seldon wants real answers, @@Sentinel947.

Edited February 24, 2016 by Krampus

[seldon]

It seems like a common enough problem. I was just wondering if anyone had successfully resolved something like this, or knew of any additional documents involved in the chartering process. Also maybe venting a bit.

 

DE did not have any helpful advice.

[T2Eagle]

Seldon, 

 

Is your concern academic or is there a specific action you want the CO to take?

 

What kind of organization is your CO?

 

What do you mean take ownership of the unit's assets?  Do you want them to keep some sort of balance sheet reflecting the depreciation of the inventory of your tents?  

 

What do you mean by report income and expenses to the IRS?  If for instance your CO is a religious organization they probably don't have to report much if anything about income and expenses to the IRS.  For non Church COs it's a little more complicated, but unless you're bringing in a lot more income to the troop than your spending there probably isn't anything about the troop's finances that the CO needs to report.

 

I suspect your looking for some complicated reporting regimen that just isn't necessary.

[SSScout]

"They help fund the units""   Huh??

 

Tradition:::   (your DE can help with the printed legalities)

 

In most cases, the Unit "makes" the money, "spends" the money, and keeps their own books (monthly report to the Committee by the Unit Treasurer).  But the CO realizes they are the overarching cover / owner of the operation.  Unit uses CO tax ID, sales tax forgiveness ID #.

 

In some cases, the Unit "makes" the money, the money goes into a splinter account of the CO, the CO Treasurer keeps track of expenses and issues checks to whomever in the unit spent it, the Unit Treasurer (if any. The unit DID make the money, wouldn't the Unit want to keep track of it too?) works with the CO Treasurer to  keep things straight. "A Scout is Trustworthy".  Ditto tax ID, etc.

 

In some cases,  the Unit makes the money, the Unit is it's own entity, has it's own tax ID and does whatever it wants with "it's" money. Unit Treasurer reports to Unit Committee  about things. Policy is made by the Committee. Unit has to apply for it's own sales tax forgiveness doohickey.

 

Mostly, Scouts is a low priority with the IRS and state tax folks, unless they find out that one of your Scouts sold $50K worth of popcorn.  (Scout in our Council sold $28K).  Hence the recent interest in K-Oing  Scout Accounts.

 

Seldon:  Welcome to the forums!  Glad to see you are giving us reason to post!    Specificity on your own situation will make for interesting reading by other folks, yes?

[Sentinel947]

DE or council? Please. This is something an accountant or tax professional should help with. @@seldon wants real answers, @@Sentinel947.

Lol. I don't feel like it's optimistic that the people who's job it is to create units would know the rules and process behind it. Maybe I'm asking for too much.

[Krampus]

Lol. I don't feel like it's optimistic that the people who's job it is to create units would know the rules and process behind it. Maybe I'm asking for too much.

 

ROFL...I hear you. This sounded like more a tax and accounting question though. If it were me, I would go that route. There's nothing BSA can really know that a good accountant won't This is tax law and book-keeping.

[seldon]

Thanks for the feedback.
 
Our CO is a secular non-profit. In addition to providing facilities they also donate money to the units.
 
By assets I mean money, trailers, tents and whatever else.
 
SSScout, units applying for their own tax doohickeys is explicitly discouraged by national. I'm not saying we won't do it if we have to, but I want to exhaust all other options first. Popcorn money is sent to the troop from the council? Or to the CO? By tax doohickey do you mean state sales tax exemption, or the full-on federal business?

[T2Eagle]

So, I'm still not sure what you're really asking about.

 

Regarding assets, here's how it works.  Let's say you want to buy a handful of tents.  Whether you get the money for them from a direct check from your CO, or a donation of money from someone else, or a levy of dues on your families, or a bake sale or other fund raiser, the CO probably doesn't want and there's no legal reason why they would need, to get involved with  that decision.  Your Troop Committee and your PLC work together to decide what to buy, where to get the money, etc.  Then you buy the tents.  There is no need for there to exist any kind of formal inventory report about these tents, there's no balance sheet they need to be included on, no tracking of depreciation, nothing like what you might need if you were a for profit business.  As a legal matter the CO owns the tents, they don't have to make any formal acknowledgement of this, it is simply a fact.  That means that they can dispose of them if they want to, they can tell you to share them with other organizations if they want to, or they can simply not care at all about whether you bought some tents that now formally are their belongings if they want to.  There are some caveats about what happens if they close the unit, but they don't matter here.  The most likely thing is that they don't care; they selected the COR who selects the CC, who selects the committee, and they trust you to do what you think is best.  They don't have to take any other action or paperwork or anything.

 

Next you mention money.  You probably have or want a checking account, but it's at least conceivable that you could operate all cash.  the checking account can say Troop XX as the named owner, but the Tax ID necessary to open and maintain it is your CO's tax ID, if you earn any interest on the account and receive a 1099 you should give that to the CO Treasurer, but it's likely that if you earn any at all it is so diminis an amount that it really doesn't matter whether they track it or not.  The CO does not need (they can if they want) to know what else happens inside that account.  Like the tents they are the owner of that money, they don't need to acknowledge that, it is simply a fact.  Like the tents they can tell you what to do with the money or they can decide to delegate all that decision making to you and not give it another thought.  

 

A trailer pretty much works the same way as tents and money, the CO can care a little, a lot, or not at all about what you do.

 

As to popcorn money, at least in our council you order it and receive a bill for it which you pay to the council out of what you collect in sales.  The council doesn't send money back to the units they just let you keep whatever the profit is after you pay them.  Your council may work differently.

 

I feel that you have more specific questions or concerns, if you provide more detail about what's happening or what your specific problem is lots of folks here have some experience they can share to help you.

[SSScout]

Seldon:  All good advice above.  If your unit(s) are BSA chartered to a "secular non-profit" org, then the all the tax ids  need to be its, with it's permission, natch.. No worry about being "self" chartered.

Popcorn is as described by T2Eagle.  Your unit can certainly do your own fundraising,  Contact the DE or Commissioner or go to your Council website for the Unit Money Earning   Permission Form (looks like this: http://www.scouting.org/filestore/pdf/34427.pdf  ) , which gives good guidance about such things. No raffles, gambling, can't just ask for money, have to give "value for the price".  Christmas wreaths, spaghetti dinners, car washes, flag raising,  flamingo elimination,  yard raking,   all good. See the other forum/thread.

Be careful about political things:   You can help at the polls, but cannot ,as a Scout,  advocate for any given candidate or issue, or raise money AS A SCOUT for another organization.

You can, however, go hiking and camping.   Now,  go!

[CalicoPenn]

Let me see if I understand this issue - the CO holds the charter, provides a place to stay and even funding to purchase equipment.  Does the unit do any other kind of fundraising or does the CO contribute enough to fund your entire program?  The CO thinks any money going to the unit is dropping in to a "black hole".  And on top of that, the Charter itself doesn't mention that the CO "owns" the unit.

 

Let's tackle the easy one first - the CO believing that any money they give to the unit is going in to a "black hole".  If they have not received any financial statements from the Unit on at least an annual basis, then of course they're going to think the funds are just disappearing.  I would do three things right now - the first would be to take a full inventory of every piece of equipment that the unit has.  If it's a Cub Scout Pack - what does it own?  Perhaps a Pinewood Derby track?  If it's a Boy Scout Troop, inventory every tent, Dutch oven, mess kit, tarp - etc.  (If it's a Troop and you have a functioning Quartermaster, you should already have this - if not, now is a good to get in to the practice of inventory control).  If possible, include on the inventory the purchase year and purchase price - this is something that should be on every inventory.    When a piece of equipment is lost or damaged and removed from inventory, there should be a separate record of equipment removed from inventory, how it was disposed of, and why it was removed  - it should remain on the list for a certain amount of time before rolling off the list (I use 7 years).  The goal here is to remove any and all doubt about where the money is being spent and on what - it's easy to say you bought a tent - here's where you prove that not only did you buy a tent (proven by receipt) but that it went in to the inventory (and not just the SM's closet).  You should be able to show that there is an inventory entry for 5 tents if you bought 5 tents this year - if you bought 5 and only show 4, that's a red flag that needs to be investigated.

 

The second thing I would do right now is to provide them with reports going back 3 to 5 years showing where money has come in (including their donations) and how it was spent.  An annual detail on this probably suffices.   The third thing I would do is to start copying the CO's treasurer on the unit treasurer's monthly report to the committee - a report that should show income, expense and a reconciled bank statement.  Once a year, I would have an informal audit conducted by two other committee members and send that as well.  Not getting a monthly report from the Treasurer?  Time to get started on the habit (and sometimes that's the reason - it's not how it's been done before - now is a good time to start the practice).  Treasurer balking at an annual audit?  I don't know any good volunteer Treasurer that wouldn't welcome someone else looking at the books once a year to make sure things are on the up and up or to catch any mistakes that might have been made.  If they won't submit to an annual audit of the books, then it's time to find a new Treasurer - right away - that should be a huge red flag. 

 

So the simple part is done - you've shown the CO where their money is and how it's being spent, and that you've got good records on it.

 

Now for the Charter part - the Charter is necessarily vague an a lot of things - it's a fairly simple document that just can't possibly cover every question.  However, the Charter refers to the BSA's rules and policies - which can be found on the BSA website.  You are correct when nothing says outright that the CO owns the Unit - and that's because the Unit consists of a number of different things and I hope I can do justice to the different ownership parts.  The policy states that any funds or equipment must be used to benefit Scouting.  That doesn't really clear things up.  It also says if a Unit dissolves, the Unit Committee needs to pay the bills first then send any excess to the local council.  Ok - now we're getting somewhere - except this is where it get's hinky.  It also states that, in the case of a Chartered Organization, that the Chartered Organization is to hold the funds and equipment in trust until the unit can be resurrected or unless the funds and equipment are used to benefit Scouting in some other way.  So there is a contradiction - what's going on?  Though not explained well, it's a solution to how units are organized.  If a unit is chartered and is operating under a CO's Taxpayer ID, then the Unit Committee can't legally,  in most jurisdictions, send excess funds to the Council - it's not theirs - the money is tied to the TIN (or EIN if you prefer) and remains with that organization.  However, if the unit has their own EIN number and disbands (or if the unit is chartered by a Friends Of organization that exists solely to charter the unit), the BSA is simply making the claim that because it was a Boy Scout unit and the funds were raised by Boy Scouts, that the funds can't go to The World Wildlife Fund (as an example) if the unit breaks up. 

 

So where does that get us?  A unit chartered by a CO operating under the CO's TIN belongs to the CO, and all funds and equipment belongs to the CO, though must be used to benefit Scouting.   All that being said, there is something the CO does NOT own, that is retained by National (and local Council) even though it's an important part of the Unit's identity.  What the CO does not own is the Unit Number.  Let's say the Church of the Green Man has been chartering Troop 280 for 20 years, and for some reason, the Troop disbands and the Church does not renew the charter but 5 years later, starts a new Troop.  There is no guarantee that their new Troop will be Troop 280.  National and/or the Local Council, can re-assign that number to another new unit once the unit has dissolved.  Is that very likely?  Probably not - but the possibility is there because the CO does not own that number.

 

By the way, something most people don't think about - we all know we need Council permission for fundraisers - most people are unaware that you also need the CO's permission for those fundraisers too.  Just another way that shows the Units are owned and controlled by the CO.

 

If I were you, my first priority would be to get your inventories and financials to the CO Treasurer - eliminate that "black hole" thinking and let them see what you're doing.  I don't know that I would worry about fund and equipment ownership unless you're about ready to disband - and then it's simply a matter of pointing out to the CO the portion of the rules and regs that state a CO is to hold the units funds and equipment in trust until another unit is started of for some other Scouting purpose.

[CalicoPenn]

 

 

What do you mean take ownership of the unit's assets?  Do you want them to keep some sort of balance sheet reflecting the depreciation of the inventory of your tents?  

 

What do you mean by report income and expenses to the IRS?  If for instance your CO is a religious organization they probably don't have to report much if anything about income and expenses to the IRS.  For non Church COs it's a little more complicated, but unless you're bringing in a lot more income to the troop than your spending there probably isn't anything about the troop's finances that the CO needs to report.

 

I suspect your looking for some complicated reporting regimen that just isn't necessary.

 

For what it's worth - I wouldn't bother to reflect depreciation of inventory for most units chartered by 501c3's - unless the CO is actually paying taxes (and most don't), there is nothing to do with any depreciation amounts as depreciation is used as a credit against taxes.

[T2Eagle]

Calico, 

 

My interpretation of the "black hole' was not a money sucking black hole but a "the money is gone and well spent" black hole where the CO had no further interest in the details.  

 

Does your CO want that kind of detailed inventory? We're chartered to a Catholic Church and have been for 50 years, neither the business manager for the parish, nor the pastor, not the financial advisory committee has any interest in anything like that kind of detail.  There is a diocesan rule that if we have a particular cash level in the bank for "a substantial period of time" we need to report that fact to the parish and they need to add that to their reports to the diocese.  But nobody really wants us complicating the books with that either. If we have a really good wreath sale we might approach that figure, but then we'll make some planned purchases a little early or subsidize a fun part of an outing and we're back to where everyone is comfortable.

 

What do the rest of you report to your COs?

Edited February 24, 2016 by T2Eagle

[blw2]

sorry, don't have time to read some of the long replies here

 

But I'll chime in quickly

I've recently been doing a fair bit of research around this, having been asked to become the troop treasurer

I find a lot of unofficial/anecdotal recommendations, guidelines, or what have you that all basically indicate what I'm guessing others have posted already.  Some of it is official from the bsa side,

BUT...

everything I have seen to date gives the out to the CO, saying basically that this is the suggestion, but it's up to the CO.

Basically, I found that the folks in the church office think that the troop is "owned" by the BSA

 

I'm guessing, but it seems that this might at least partially come from what seems like a bad practice.... some time long ago, it's been set up so that the troop stands alone.  Nothing financial or otherwise is every seen by the church office.  My bet is that a lot of units are set up that way.

 

The most logical way I've seen it explained is still anecdotal

but it goes like this -  the troop's assets are owned by the co

the troop manages these assets

and if the troop ever folds, it's the committee's responsibility to use said assets to settle any debts, then whatever is left goes to the co

 

What I'm working moving forward, is to make the church's address the troop's in the eyes of the bank, so that statements go to the church

and I figure I will need to send periodic reports to them

No doubt lots of questions will be raised when they see the volume of dollars going through