© Copyright 2009 Nan McKay & Associates Earned Income Disallowance © Copyright 2008 Nan McKay &...

© Copyright 2009 Nan McKay & Associates

Earned Income Disallowance


Housing Help SessionsName of session – date of session

NMA Host:Trainer Enter your name here


Earned Income Disallowance


Housing Help SessionsCreating & Managing a Housing Nonprofit – May 29, 2009

NMA Host:Trainer Patti Zatarian



Housing Help Sessions

Creating & Managing a Housing Nonprofit –May 29, 2009Slide 2

PHA Nonprofits One of the most common methods that PHAs

utilize to expand into the development of additional affordable housing is to establish a nonprofit

Nonprofits may also be used to establish programs that increase services to residents including self-sufficiency and youth activities




PHA Nonprofits Nonprofit established by PHA is “captive” This is an organization that is set up for

specific purposes and recognized by the IRS as tax-exempt

Do not make “profits” but can have a surplus to purchase services from the PHA




PHA Nonprofits Many PHAs establish nonprofits because it is

easier to enter into business deals and do business as a nonprofit rather than a much regulated PHA

PHAs are established under state enabling legislation, which means that the powers of a PHA may be limited and even prohibit development




PHA Nonprofits The increasing number of HUD mortgage

prepayments and “opt-outs” has resulted in a situation where many affordable housing units are in danger of being lost

These prepayments and “opt-outs” often create preservation opportunities for agencies to acquire and maintain properties to add to their asset portfolio




PHA Nonprofits The current foreclosure crisis may result in

nonprofits acquiring and rehabilitating properties as rentals or first-time homebuyer opportunities for low-income families




PHA Nonprofits Nonprofits associated with housing authorities

are generally set up to provide low and moderate income households with affordable housing by acquiring or developing publicly financed low and moderate income housing and renting to eligible households




Setting Up a Nonprofit PHA powers can be very

limited, depending on state legislation

Important to have general counsel research state law before setting up a nonprofit




Setting Up a Nonprofit Establishing a nonprofit should be carefully

analyzed to determine if it will be in the best interest of the PHA

The question you MUST answer is “why do we need a nonprofit?”




PHA Nonprofits Reasons for PHA using a nonprofit:

- PHAs cannot be both the owner and administrator for prepaid or “opt out” projects that still have project-based housing assistance available to the project

- If a PHA did acquire a prepayment project, the Section 8 assistance would not be available




PHA Nonprofits A nonprofit entity is necessary in order to sell

tax credits generated by a project Many states have laws concerning public

acquisitions that would not pertain to a nonprofit Any liabilities incurred by the nonprofit would

not pass on to the PHA




PHA Nonprofits Although it’s relatively uncomplicated to set up

a nonprofit, it does take time because tax-exempt status is needed from both the IRS and any state tax authority And may require expertise out of the PHA Needs a lot of groundwork laid to get buy-in




How to Set Up a Nonprofit When considering the formation of a nonprofit,

there are areas each entity must address. These include at a minimum:

Purpose of the nonprofit corporation – many PHAs set up the nonprofit entity for specific project, e.g., to sell tax credits from the project




How to Set Up a Nonprofit Areas that must be addressed:

It may be beneficial to establish the corporation with a more flexible purpose, such as:

“To form a nonprofit public benefit corporation to provide very low, low and moderate income housing through purchasing publicly financed low and moderate income property for rentals”




How to Set up a Nonprofit Powers of the nonprofit corporation –

Activities and affairs of the nonprofit are generally conducted under the direction of the Board of Directors. The Board may elect to delegate the daily activities to any person, management company, or the PHA




How to Set Up a Nonprofit The make up of the board is an important

consideration to assure there is no conflict of interest between the PHA board and the nonprofit entity

The PHA may want to have board members that are not the same as the PHA board




How to Setup a Nonprofit Directors: Establish the number of directors

(always an odd number) and the terms of the directors.

Terms should be staggered so there is always someone on the board that can provide a historical perspective for new directors




How to Setup a Nonprofit Quorum: Establish how many directors are

needed so that official actions can be taken and business can be transacted.

Note: Board members should be selected based on their commitment to the mission and vision of the nonprofit




How to Set Up a Nonprofit Areas that must be addressed:

Officers: President, vice presidents, sergeant at arms

Election: Usually done at annual meetings Amendments: Method to amend by-laws




The Nonprofit Advantage If the PHA decides to establish a nonprofit entity

to pursue development activities, it is worthwhile to consider organizing as a community housing development organization or CHDO

Under the HOME program, participating jurisdictions must set aside at least 15% of their funds for use by CHDOs




The Nonprofit Advantage A Community Housing Development

Organization (CHDO) is a private nonprofit community-based service organization that has obtained or intends to obtain staff with the capacity to develop affordable housing for the community it serves




The Nonprofit Advantage In order to qualify as a CHDO, a nonprofit must:

Provide housing affordable to low and moderate income persons

Have effectively carried out activities such as those financed by HOME

Have a history of serving the community where the HOME financed project will be located




The Nonprofit Advantage Is organized under state or local laws and exempt

under Section 501(c) of the IRS Meet standards of financial accountability Have a governing board of at least one third of

low income residents A formal process that allows low income resident

input




The Nonprofit Advantage A CHDO cannot be a public body nor can it be

controlled by an individual or group seeking to make a profit from the organization

A CHDO can receive HOME funds to help pay OPERATING costs as well as funds for specific projects




The Nonprofit Advantage The nonprofit entity may also be eligible for

Community Development Block Grants (CDBG) The statutory objective of the CDBG program is to

develop viable communities by providing decent housing and a suitable living environment for persons of low and moderate income




The Nonprofit Advantage Eligible uses of CDBG funds include:

Acquisition of property Planning activities Assistance to nonprofit entities to carry out

community or economic development activities Rehabilitation of public and private buildings




The Nonprofit Advantage Information on CHDO requirements can be

found at: www.hud.gov/offices/cpd/affordablehousing/librar

y/building/CH08.pdf This link lists CHDO requirements and activities Additional information may be found in HUD

Notice CPD 97-11




Policy Considerations for a Nonprofit PHA will need certain organizational systems &

policies specifically for the nonprofit Will depend on amount of separateness the PHA

wants from the nonprofit Captured nonprofit may cause others to worry

the PHA’s nonprofit will receive favorable treatment from the jurisdiction




Policy Considerations for a Nonprofit

PHA Separateness from the nonprofit There should be a a distinct difference between

the PHA and the nonprofit Consider the PHA staff time spent on nonprofit

activities, including funding, space, IT, equipment, supplies, etc.

Typically, a new nonprofit has no MONEY!




Policies to Consider For the Board of Directors

Vision and mission statements Board member recruitment Attendance policy Chair and office descriptions Legal review process CEO performance review process Board calendar




Policies to Consider Planning policies

Strategic or business plan Marketing plan Fund raising plan Yearly operational plans

Includes staff work plans




Policies to Consider Evaluation

Methods to assess client needs Established outcomes Data collection for goals and objectives




Policies to Consider Information management

Client records Personnel records Financial records Mailing lists Inventory of computer hardware & software Procedures for each major computer function Back up plan Disaster recovery plan




Policies to Consider Personnel

Board adopted personnel policies Performance appraisal system Professional development plan




Policies to Consider Finances

Board adopted fiscal policies Board approved budget Financial procedures/internal controls Inventory system Depreciation schedules Monthly/quarterly financial statements Yearly audit Tax and other reporting requirements




Policies to Consider Communications

Logo Website Web usage Annual reports Brochures/videos Media relations strategies




Policies to Consider

Insurance Risk management policies Office liability coverage Assessing need for professional liability coverage Assessment of need for director & officer liability Assessment of need for bonding Contingency plans for replacing key personnel




Policies to Consider Legal

Complete corporate records and retention policies

Updated By-Laws Incorporation and tax status documents Non-discrimination policies and practices




Application for 501(c)(3)

IRS Form 1023 Activities and operations Technical requirements Financial data Filing under IRS




Application for 501©(3) Activities and Operational Information

This part of the application requires a detailed narrative description of all the activities of the organization – past, present, and planned.

The detailed description of the activity must include its purpose and how each activity furthers your exempt purpose




Application for 501©(3) This description should be well thought out and

considered during the application process The other area that should be well thought out is

the organization’s sources of financial support Fundraising, both actual and planned , including

fundraising activities, i.e. mailings, volunteers, or professional fundraisers must be detailed in the application




Application for 501©(3) IRS Form 1023 – Application for Recognition

of Exemption is a 10 page document The application can be downloaded from the

IRS website Completing the application will require time

and careful analysis




Minutes of a Nonprofit Corporation Minutes of the meeting should include the business

activities listed on the agenda Minutes are documentation of the nonprofit’s

business activities The time, location, and business conducted should

be well documented to assure the board has legitimately conducted the business of the nonprofit




By-Laws for a Nonprofit Offices Purpose Membership Directors Committees Officers Indemnification Amendments




By-Laws for a Nonprofit By-laws are the ruling legal document of a nonprofit.

Consult your legal counsel before adopting by-laws to assure compliance with state law

Sample nonprofit by-laws can be found at http:/non-profit-governance.suite 101.com/article.cfm/how_to_write_bylaws_for_nonprofits




Articles of Incorporation




Articles of Incorporation Sample Articles of Incorporation can be found

at managementhelp.org




Management Agreement If the PHA is going to be the management

agent for the nonprofit, a management agreement is required

The management agreement clearly provides a comprehensive and detailed description of the policies and procedures to be followed in the management of the project or program




Trouble Spots PHAs get into trouble when they co-mingle

funds, staff time, policies and procedures When using HUD funds, fail to get prior approval Operate the nonprofit like a PHA Do not consider board membership as separate

from the PHA




Strategic Planning Planning enables the Board to set policies and

goals to guide the organization Provides a clear focus to the Executive Director

of the nonprofit and staff for program implementation and agency management

Enables the organization to look into the future in an orderly and systemic way




Strategic Planning Strategic planning is the process which leaders

of an organization determine what it intends to be in the future and how it will get there

Planning is designed to help an organization define its vision for the future and then determine how it will get there




Strategic Planning To begin strategic planning you must:

Identify specific issues that should be addressed Create a planning committee Clarify roles and responsibilities of committee

members Identify the information that must be collected to

make sound decisions




Strategic Planning Develop an organizational profile

An organizational profile is a snapshot of your organization, how you operate and the challenges you face




Strategic Planning Define mission and vision

Purpose – why the organization exists and what it seeks to accomplish

Business – the method or activity which the organization will fulfill its purpose

Values – the principles or beliefs that guide an organization as it pursues the organization’s purpose




Strategic Planning The mission statement summarizes the what,

how, and why of an organization’s work The vision statement presents an image of

what success will look like




Strategic Planning Conduct an environmental scan

How does the organization relate to its external environment

Identify and assess opportunities and threats in the external environment

Identify and assess organizational strengths and weaknesses in the internal environment




Strategic Planning This process is commonly referred to as

“SWOT”: strengths, weaknesses, opportunities and threats




Strategic Planning Develop strategies, goals and objectives

After defining the organization’s mission and critical issues have been identified, you must decide what to do about them

How do we approach the critical issues (strategies)? What are the general and specific results to be

sought (the goals and objectives)?




Strategic Planning The planning committee should have detailed

discussions about what was discovered during the environmental scan

Additional information or a reevaluation of the goals and objectives may be necessary to create the best possible plan




Strategic Planning An outline of the organization’s strategic

direction should be developed to include general strategies, long-range goals, and specific objectives of its response to critical issues identified during the environmental scan




Strategic Planning Once the mission has been articulated, the critical

issues identified, and the goals and strategies agreed upon, it is time to write a draft of the final planning document

A committee member responsible for writing the final draft should be identified early in the process (i.e. executive director or planning consultant)




Strategic Planning The final draft should be submitted for review

to all key decision makers (usually the board and senior staff).

The planning committee needs to develop action plans to accomplish the goals proposed in the strategic plan




Strategic Planning Some foundations provide management

assistance grants that can support consultant and other support for the entire process and make possible an in-depth environmental scan

The first strategic plan for a new organization is typically for a three-year period




Strategic Planning Be sure to document not only the plan but

also the process so you can improve upon it with each cycle when updating your strategic plan




Conclusion Questions and comments




Upcoming Housing Help Sessions 06/05/09: HCV Owners 06/12/09: PHAS for Property Staff 06/26/09: FSS Program Coordinating

Committee

© Copyright 2009 Nan McKay & Associates Earned Income Disallowance © Copyright 2008 Nan McKay &...

Documents

Transcript of © Copyright 2009 Nan McKay & Associates Earned Income Disallowance © Copyright 2008 Nan McKay &...