Episode 77: Nonprofits Are Accountable - Don't Get Placed on the Suspended or Disbarred List
Nonprofits are required to adhere funder, IRS, and authorized agency's rules and regulations. Failure to follow pre-established rules and remain in compliance could land your organization on the suspended or disbarred list. Learn what to do to avoid being placed on those lists.
LINKS:
Wave Apps – The Dashboard
NONPROFIT SPOTLIGHT: Safe Parking LA
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Podcast Transcript
Speaker 1 (00:04):
Welcome to On Air with Amber Wynn, where nonprofit leaders learned to fuse passion and commitment with proven business strategies to create long-term funding impact and sustainability. And now here's your host and resident, Philanthrepreneur, Amber Wynn.
Speaker 2 (00:29):
Good morning fam. Welcome to On Air with Amber Wynn. Today's episode is talking about nonprofits being a business, but specifically about avoiding getting your organization placed on the suspended or disbarred list. If you are a for-profit, you can get into a world of trouble for mismanaging funds. Guess what? The same goes for a nonprofit. You may get funds if it is earmarked, meaning if it is restricted funds and you do not use the funds in which you promise to use them, your organization could land on the suspended or discard list. And so that is a practice of being a business, right? There are rules. You follow the rules. If you don't follow the rules, there are consequence. So today we're going to spend a little bit of time talking about how to avoid being placed on the suspended or disbar list. When we come back.
Speaker 3 (01:40):
This is you and this is your business. From invoicing your first client to your 10th to your hundredth client, you'll need to get paid quickly. Pretty soon you'll be ready to hire some help and you'll need to pay them. As your business grows, wave is there to grow with you.
Speaker 2 (02:10):
Welcome back to On Air with Amber. Today we're talking about a nonprofit being a business and how you can avoid getting your organization placed on a suspended or disbar list. You do not want that for multiple reasons. I mean, it sounds bad because it is bad, but the reality is, if your organization is placed on a suspended or disbar list, it will for quite some time, I'm not going to say for forever, but it will quite some time create suspicion around your organization. And as if I said it once, I've said it twice, I've said it a hundred times, there are always more applications than there is money. So if all things considered, you're applying for a grant, the funder does their due diligence, they see that you have been placed because you can get off of it. All you've got to do is make right the wrong.
(03:06):
But if they see that you've been placed on a suspended or disbarred list, who do you think they're going to fund? An organization that's never been a placed on that list or you? And here's the thing, you'll never know. You'll never know if they look and they find your organization on the list, formally on the list and decide not to fund you because of that. So you want to avoid being placed on a suspended or disbarred list altogether. How are the ways that you can get placed on the list? Well, first of all, let me tell you that nonprofits are accountable. You're accountable to your funders because the money that you receive comes with strings. It's never grant. Money is free money. I hear that all the time. I'm going to give some of that free money. Grant money is not free. It comes with strings.
(03:58):
It comes with strings because the entity that is giving you the money has to report out to it. They have to report to the IRS. They have to report to their board. They have to report to the investors and the funders. So they need to be able to track it. So you can't just take the money and do with it what you want. People think they get this money and I'm going to pay for salaries. Well, if in the proposal you said you were going to pay for equipment and programs, that's what you have to use it for. If in fact you take that money and you say, Ooh, we have a shortfall for salaries. I'm just going to borrow some of this money and I'm going to pay for that. That could get you on the suspended or discard list because that is called misappropriation of funds.
(04:44):
And you say, oh, well, how will they know? This is why we have these things called financial statements. They track the funds, they track the money, and you may not know that because you're not an accountant, but have you heard of these people called forensic accountants? That's what they do. So they know where the money's being spent, how it's being spent, and if you said you were only going to spend your money on these specific budget line items and you spend it on something else, guess what? You will be placed on the suspended or disbar list, and that is not what you want you to do. So what you want to do is just ask them. I know that sounds simple, but if you have a funder and something goes awry or something's off, or let's just say you have a budget savings, what you should do is reach out to your program officer and say, Hey, hey, this is what happened.
(05:41):
Is it okay if we can reallocate our funds or it's towards the end of the program? It looks as if we're going to have a budget savings. Is it okay if we request a no cost extension, meaning no cost, meaning I'm not asking you for more money. The extension is for more time. So if the grant comes to an end in June, but you still have savings sometime in May, the beginning of May, when you know that you're not going to be able to spend all of that money, you reach out to your program officer and say, may we have a no-cost extension to the end of the year so that we can continue with the program and spend down that money. You don't want to just take that money and spend it on something else because everyone's heard the saying, don't give back the money.
(06:32):
If you give back the money, then when you go to apply again, they're going to say, well, I'm going to give you less because you didn't spend what you had the first time. But at the same time, you don't want to misspend, right? You don't want to just, oh, well, let's just spend it on this so that we don't give it back. It's going to create a world of problems for you. So be sure that when you have the funds that you use it the way that you're supposed to, because if you don't, it can get you in a world of trouble. The best example I can give you of misappropriation of funds is if you hire a grant writer and you pay them for writing that grant after the grant is awarded, that's called misappropriation of funds. And if it comes out, if it's found out that you paid that grant writer after they got the grant from those funds, and that wasn't one of the budget line items, you are misappropriating funds.
(07:30):
And in that space, you could be placed on the suspended list, the BART list. They could ask you to give back all of that grant money. They can even revoke your tax exempt status because as a business, that's not an ethical business practice. If you are suspending the funds like going out, buying cars and things of that nature, that's not a part of the program. You can get your tax exempt status revoked and you can go to jail. So I'm saying all of that to say because there are a lot of bad ideas, misinformation out there about what a nonprofit is. It's not this holding place to just get all this free money and you can do with it what you want. It is a special tax exempt status like the government is trying to encourage people to support the nonprofit sector because it recognizes that the nonprofit sector is doing the work.
(08:29):
So they're going to give people and companies and organizations a tax write off for supporting these organizations. But these organizations have got to use that money ethically. So if you're bringing in money and you're using it for the wrong reason, they've got to punish you because they've got to show you that this is not money that you can do anything with. It comes with consequences. That first line is being placed on a suspended or disbar list, and you don't want that. I don't want that for you. So make sure that you're doing the things that you're supposed to do, and if you have a budget savings, reach out to your program officer and ask them if you can reallocate the funds. All right? I am going to provide for you in the link a sample request to reallocate or a request for a no-cost extension. So you have verbiage language on how to even ask because it's not just, Hey, can I use this money for something else? It's very detailed and it's very specific, but don't worry, your girl got you in the link. Click on the sample request to reallocate funds or the sample request for a no-cost extension. I got you. All right, we're going to take a pause, but when we get back, we have another question for Amber in our Ask Amber segment. When we return,
Speaker 4 (09:53):
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Speaker 2 (11:06):
Welcome back to On Air with Amber Wynn. Today we're talking about a nonprofit being a business, and specifically how to avoid getting placed on the suspended or disbar list. This is the time of the episode where you get to ask me your pressing questions. Ask Amber today I have a question from Lakshmi,. Hi Amber. I had the good fortune of receiving a grant from the County of Los Angeles. Congratulations. We had a significant savings as a result of a generous in kind donation in the grant. We asked for $7,500 for equipment that our development officer was able to get donated. Do we report the in-kind donation to the funder? Do we use the money for something else in the grant? Do we give the money back? We don't need two pieces of equipment. This is a great question, and it does happen. You figure you've got this consistent well, you have to consistently reach out for support, but you don't know when or how the money's going to come in.
(12:20):
So what do you do when you get, in this case with Lakshmi, you have the money in the grant, but then someone donates in kind to cover that. So this ties really well into what we're talking about and what can get you on the suspended or disbarred list. What you want to do, Lakshmi, is to reach out to your program officer. Let them know, listen, we have been robustly fundraising for this. We sent this out months before we applied for this grant. Now we have an in-kind donation. We would like to request a reallocation of these funds and use them for something else. Don't just do it without letting them know or getting permission. If she says no, then the answer is no. But more than likely, they will understand you've got the equipment now. Now you want to use it for something else.
(13:15):
They will either tell you that you can reallocate it there or they will tell you to return the money, but you want to have a really good relationship with your funder. Let them know that you're trying to be ethical, that you're trying to do the right thing. You're not just trying to take this money and use it for other purposes, but you have the equipment already. So I want to emphasize one, get permission to move it. Two, tell them what you would like to move it to, if at all possible. Make it be the same value. Don't have it. Be less, don't have it. Be more. Figure out how you can use that $7,500 for exactly $7,500. Why it makes the ask easier to be yes. If it's more, then they've got to move and shuffle stuff around. If it's less, then there's the savings.
(14:07):
So ask for the same amount, but make sure that it's going to be on the same line item. And then make sure you get it in writing. Don't call them on the phone. They may say, yes, oh yeah, that's not a problem. But then forget the conversation. You don't have any proof. If you talk to them verbally, then follow up with an email. Say thank you for the conversation. Just to recap, I requested a reallocation of this funds to use it for X, Y, and Z. You stated that that would be fine. Just wanted to memorialize that in an email. You always want to have it documented because if there's an audit or like I said, your program officer has multiple people that they're working with, they may forget.
(14:55):
Yeah, and that's my recommendation. So again, congratulations, Lakshmi on your award. Just be sure to reach out to your program officer to see if it's okay to use that money for another item on your budget. Alright, so now we get to move to my favorite portion of the session, which is shining a light on a nonprofit. You guys do so much work. A lot of times you are in the weeds doing the work. You don't have the opportunity to toot your own horn. So I'm going to toot it for you because visibility is extremely important, not only for recruiting potential clients, customers, but also for making sure that funders see you. We see this increase in funders moving towards unsolicited proposals. Like you can't send it in if you haven't been asked to submit a proposal. So how do they get to see you? They get to see you by being out in the ether.
(16:02):
And so that was one of the reasons for me creating the nonprofit spotlight topic is, well, today's nonprofit is Safe Parking LA. I'm here in LA and we have a huge homeless issue. I dare say it's huge across the country because housing is not affordable. So today I wanted to just shine the light on Safe Parking LA because they're trying to do their part to address some of the homeless issues. It's not a perfect fix, but they're trying. Founded in 2017, safe Parking LA is now the largest safe parking program in Los Angeles, and it's the only provider of safe lots exclusively focused on vehicular homelessness. They currently operate in San Fernando Valley, Hollywood, downtown Los Angeles, LAX, and West Los Angeles, including a program on the Veterans Administration campus. Let's take a look at Safe Parking LA.
Speaker 5 (17:03):
Is it some uncomfortable? No. No, not at all. It's very uncomfortable.
Speaker 6 (17:09):
Each night, Lauren Kush climbs into the back of her Toyota Prius, turning it into a bed.
Speaker 7 (17:15):
My knees basically get to here, and my torso barely fits in here. So it's like
Speaker 6 (17:19):
This. She's part of a surging population of homeless in California, living in their vehicles, cars, and RVs. 16,000 in Los Angeles County alone. More than a quarter of the nearly 60,000 homeless throughout the county, even though it's on wheels, it's still a house. Megan Sue Belafonte and Sharonda Beavers are living in this rickety RV on the outskirts of San Francisco.
Speaker 8 (17:43):
I like being in control and I get to change my neighbors all the time
Speaker 6 (17:47):
Without it. They say they'd be on the streets living in a tent over
Speaker 9 (17:51):
Medium. You flip over
Speaker 6 (17:52):
Here, they say they can spread out and cook their own meals. It's an element of the crisis. Far less visible, but no less painful for people like Megan Sue who says she was evicted from her home three years ago after her husband died of cancer.
Speaker 9 (18:07):
I didn't have the money for first last month's down payment. I didn't have any credit. It was all my husband's name. I
Speaker 2 (18:13):
Tried to save all my receipts.
Speaker 6 (18:15):
Homeless advocates say the growing number of people living in their vehicles has prompted a need for so-called Safe Parking Spaces,
Speaker 10 (18:23):
The two largest populations that apply to a safe parking program. Seniors over the age of 62 on a fixed income, and people under the age of 40 saddled with college debt.
Speaker 6 (18:34):
Emily Yetta Tantra manages the nonprofit Safe Parking LA, which works with churches and other organizations to provide parking spaces at night for the homeless. This lot in LA's Koreatown has security guards, basic restroom facilities, and is situated in a quiet neighborhood, allowing occupants to get some rest. How long do people typically use the lots?
Speaker 10 (18:57):
I mean, it could be anywhere from a week to, very sadly, it could be over a year for someone who has very high needs is working with a case manager.
Speaker 6 (19:06):
San Francisco has opened up its first safe parking lot joining other Bay Area cities like San Jose and Oakland, pioneered by Santa Barbara more than 15 years ago. Safe parking lots have reached other states as well, including Oregon and Washington.
Speaker 7 (19:20):
I don't have to worry about being raped, don't have to be worried about being robbed in the middle of the night.
Speaker 6 (19:25):
Lauren. Now, an Uber driver calls the LA lot a lifesaver. She's been using it since June, a college graduate. She worked a number of decent paying jobs before things bottomed out. She recently enrolled in a computer coding class determined to make a better life for herself.
Speaker 7 (19:42):
I'm going to be an office worker again. I'm not going to be here doing this. I'm moving out of the situation,
Speaker 6 (19:51):
Making a night's rest enabled. She says, by a safe parking space, all the more important. Dan Simon, CNN, Los Angeles.
Speaker 2 (20:01):
So thank you Safe Parking LA for what you're doing to try and address this homeless issue. For more information, you can reach safe parking@safeparkingla.org. Alright, so as we wrap up this episode on a nonprofit being a business and how to avoid getting on the suspended or disbarred list, I wanted to just end with my mindset minute. My mindset minute is when I just share a few minutes about something that's on my mind. And today I just wanted to focus on grant money not being free money. It ties back into our topic today about getting placed on a suspended or disbar list. You can't get placed on a suspended list if you're not doing anything wrong, but if you are spending money in a way that not has been prescribed in your proposal in a way that you have agreed with your funder, then there's no way you could be placed on a suspended or disbarred list.
(21:05):
They exist because there are processes in place. They exist because nonprofits are accountable to their funders, they're accountable to the IRS. They're accountable to agencies that govern them. So I need for my nonprofit founders, executive directors, my nonprofit leaders to understand that a nonprofit is a business and that there are rules and regulations that govern this sector. And grant money is not free money. It's either taxpayer's money or its money coming from a corporation that has to be accounted for. If they can't account for it, then they get in trouble. So it's a partnership. Grant money really is a partnership. The purpose of funders is not to fund your nonprofit. The purpose of a funder is for them to accomplish their funding goals. So if you look at it that way, if you understand that this money is a gift to make a difference in the community and it should be used in the way that it was prescribed in your proposal and in your agreement, you'll be fine.
(22:19):
And if all else fails and you're not sure, reach out to your program officer and ask them for clarity because they will provide it. Don't just make it up. Don't just do what you want to do, Nelly, Willy. All right. So that's all we have for today's episode. I'd like to thank you for joining me. Remember, if you are interested, there's a link in the bio with the sample request for reallocation or no cost extension. If you like this episode, be sure to share it with a colleague in the sector. Be sure to like, subscribe, and as always, be sure to take care of yourself like you take care of your community. We'll see you next time.
Speaker 1 (23:02):
Thanks for listening. If you enjoyed this episode, subscribe and leave a review on iTunes. Head over to www.amberwynnn.net/podcast for the links and resources mentioned in today's podcast. See you next time.
