When you donate that money, where does it go?
More than a few nonprofit organizations make their home in Park City. They include arts organizations, private foundations, schools, churches and the U.S. Ski and Snowboard Association, among others, and their impact is undeniable. Most nonprofit organizations, including those in the Park City area, are 501(c)(3) organizations that is, organizations which are allowed to operate exempt from taxes under section 501(c)(3) of the Internal Revenue Service (IRS) federal tax code. "We deliver a service which we might or might not receive money for," said Insa Riepen, executive director of Recycle Utah and a member of the Utah Nonprofits Association board of trustees.
Diane Hartz Warsoff, executive director of the Utah Nonprofits Association explained a non-profit organization simply.
"The corporation does not exist to make money for its investors," she said. "Gifts made to the organizations are tax-deductible," she noted. "These organizations have been determined by the IRS to be worthy of charitable donations."
"You’re trying to do something to better the community," said Pam Crowe-Weisberg, a member of the Utah Nonprofits Association board of trustees and executive director of the Kimball Art Center. "For us (at the Kimball)," Crowe-Weisberg noted, "the point is to be a community art center."
Each 501(c)(3) organization has its own mission typically set by its board of directors and is required by law provide a service to the community. According to IRS Publication 557, nonprofit organizations must have a mission that is charitable, religious, educational, scientific or literary, or the organization must test for public safety, foster national or international amateur sports competition, or work to prevent cruelty to children or animals. "It’s important to be very clear to the community, what you’re all about," said Greg Balch, currently the treasurer on the Mountain Trails Foundation board of directors. Otherwise, the main restrictions for a nonprofit can be summed up more easily by a book of tax code than a newspaper article.
"It’s how your spend your money, what you spend your money on," said Teri Orr, executive director of the Park City Performing Arts Foundation. Some restrictions on the way a nonprofit spends its money are mandated by law, but most of the time, those restrictions are self-imposed ones. "If a nonprofit organization receives a donation for a specific project or initiative, that money has to be used for that," said Warsoff.
While, how a nonprofit spends its money is largely unregulated, legal obligations are not the only ones binding a non-profit. The Utah Nonprofits Association Web site notes, "There is a difference between operating legally and operating ethically."
"Whether it’s a requirement or not, ethically we (non-profits) want to be meeting our obligations."
The Utah Nonprofits Association outlines a code of ethics for its members. "There’s a code of ethics to follow, it must be renewed every year," said Riepen. "We are ethically bound by a different standard than a business," Riepen added.
"Because we are stewards of public funds, we are held to a higher standard," said Warsoff. "You’re a transparent organization," said Crowe-Weisberg, "so people see what you do."
All non-profits are required to file a 990 federal tax return form, which is a public record. The form enumerates an organization’s income and expenditures, its assets and the compensation for it most highly paid employees. An organization’s 990 form is available from the IRS and from that organization.
"I’m a firm believer that the 990 should be posted on an organization’s Web site," said Riepen. "We are accountable for that."
With a 990 form posted on a nonprofit’s Web site, she noted, a citizen can easily see how an organization is spending its money.
Such transparency is important for two reasons. First, by making the documents easily accessible to the public, an organization can readily prove the veracity of its efforts. Second, by doing so, non-profits can regulate themselves, without making the government do it for them. "We need to do this individually," said Warsoff, "so it’s not pushed upon us."
She added that people inevitably judged an organization on how it spends its money.
"We are scrutinized for our overhead," said Warsoff, speaking about non-profits in general. Balch said it isn’t always going to be easy for a regular citizen to know exactly what’s happening with a nonprofit’s finances. "It’s kind of tricky for a community member to analyze what’s happening with an organization and to see the whole picture," he said.
But he also noted how important it is for an organization to make that information available to the public. If it is not available to the people, problems can arise. Because of several organizations that have misspent donated funds, Warsoff said there is a movement toward greater federal oversight of nonprofits.
"The Senate Finance Committee is totally looking at how non-profits are funded and how they’re regulated federally," she noted.
And while she said she believes non-profits must be held accountable for their actions, she also noted that meeting additional requirements and jumping through more hoops can place an undue burden on some organizations, particularly smaller ones.
"The problem," she said, "is that a lot of the oversight the government and the public is asking for costs money."
So, that factor must be considered when regulator legislation is crafted, she said. "There’s a fine balance," Warsoff concluded, "between onerous oversight and effective oversight."
Some overhead, she noted, is necessary, so a nonprofit can have an executive director and not rely exclusively on its board for administration. Park City puts forth the resources to support a whole pantheon of different nonprofit organizations. According to the nonprofit watch-dog Web site GuideStar.org, 166 different nonprofit organizations have Park City mailing addresses, although those do include some statewide organizations and some organizations that operate primarily in other communities. But still, the Park City area contains well over 100 nonprofits. "I think that we have an extraordinary group of individuals with big hearts here," said Orr. "I think it’s a very generous community," she continued, "and part of it is because they can see very directly the benefits of it in the community."
Riepen put it more bluntly. "We have a very well educated and moneyed population, and they want their services," she said. "This community is asking that these nonprofits exist."
Orr also noted that the number of nonprofits has grown and multiplied as the area’s population has grown and matured. Twenty-five years ago, she said, most of the organizations in the area were in their infancy or not yet created. Then, she said, the Kimball Art Center was one of the only organizations in town, and it provided the visual arts, theatre and music, among other things. But with the explosion of nonprofit groups in the area, the organizations also gain certain responsibilities. Warsoff said one of the problems facing the nonprofit community is a proliferation of unnecessary groups, organizations whose missions have a large overlap with other groups or who duplicate a service. She said that before anyone ever starts a nonprofit, he or she should make sure that effort can’t be placed behind another, similar organization.
Crowe-Weisberg expressed a similar sentiment, with relation to the existing organizations in town.
"I think it’s really important," she said, "that the nonprofits in Park City remember who they are and what they’re there for."
Riepen said it most simply. "We’re in business to deliver a service." For more information about nonprofit organizations in Utah, visit the Utah Nonprofits Association Web site at http://www.utahnonprofits.org. For the minutia of nonprofit tax law, visit http://www.irs.gov.
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