From: Florida

Dear TaxMama,

In the last 4 years our animal rescue has purchased 3 lawn mowers to mow the property of our organization's president (which is where the dogs are kept but is not in the rescue's name). No matter how much we gripe and complain, the mowers are not being maintained and are being left out in the yard, exposed to the elements. After a year, they are non-functioning.

We are a tax exempt, 501 (c)(3) organization and are using the money that we make through adoptions, fundraisers, and donations to keep purchasing these mowers (which is taking money away from the animals!).

Is there any IRS code or rule against this sort of activity? Many of us feel that this is misuse of our 501 status and we want it to stop before we lose our status or the person spending this $$ gets us in trouble.

We'd like to present this information to her so that our funds may no longer be misused.

There is a board of directors and I am one of them. The board is split down the middle as to what to do about this.

Those of us who see this as a misuse of funds are at our wits end trying to prove to these people that this is wrong and simply not our responsibility.

Growling in the Grass

 

 

Dear Growling,

I understand your frustration.

You care about the cause. Your boss is careless and wasteful.

There is no section of the code that says you have to use the money wisely. Wish there were.

Here's something you can try:

Intermediate Sanctions - Excess Benefit Transactions

Also, see item 9 on this page

IRS IS on the rampage with respect to charitable organizations and the way they compensate their officers. At the most recent IRS Stakeholder meeting in Los Angeles, an IRS attorney told us about a list of specific cases IRS has prosecuted for abuses in compensation of executives of charitable organizations.

Although your costs for the lawn-mower are relatively small, it can be construed as being spent on the personal expenses of the officer. If the situation attracts IRS's attention, for whatever reason (complaining contributors or Board Members?), it might open up an audit on other issues, too.

It would be wise for the Board to put a stop to the abuse of the organization's funds. A lawnmower, properly maintained, should last for decades. If not, let the homeowner buy her own.

That's just one TaxMama's opinion.

But remember, I have to support my clients' expenses in audits - and it's really hard to support an annual expense that wasteful.

Best wishes,
Eva Rosenberg, MBA, EA