bank accounts for small orgs

[The Gorn]

Benali, do you see anything the matter with how I use my own Paypal account as I described it (business and personal funds flowing through it, with all business related funds accounted for)? I'm an S Corp and I am the sole shareholder.

The way I see it, Paypal is like a cash drawer but with an attached permanent record of transactions.

[DG9]

Gorn - What does your lawyer or accountant say.  It sounds like the kind of commingling of funds that could pierce the corporate shield.   You must already have a business bank account(s), just attach a paypal account to an isolated one of these. 

*** Not a lawyer, no legal advise intended.  ***

[Carrie Cobol]

Yes, we have legal 501c3 status.  Benali, you've asked all good questions.  Ones that I didn't think to ask myself, since I'm a newbie.  The president did ask me once to go with her to the bank to get me added on as someone who can sign checks, but I declined.  Since she does all the cash handling and their chosen bank is in a nearby-but-inconvenient town, I didn't see the need for it and didn't want to be then forced to do all the banking.  I've since realized that I'm not acting as full treasurer because of that, but she's such a control freak that she'd probably insist on doing half or most of it anyway and we'd just clash over that.

Anyway to your very good questions, I have no idea.  We do have some kind of liability insurance but I don't know what it covers.  One thing I've noticed since joining the board is that they don't disclose things they should.  For example, they "co-opt" people to the board instead of having a system of promotions into greater volunteer responsibility.  If they like someone they just say "hey sally, why don't you join us on the board?"  And at no time do they tell you what's all required of board of director members.  Only after I came on board we had an issue where the person who joined just before me was skipping meetings and they revealed verbally that missing two meetings in a row gets you thrown off the board.  I've asked before to see the org's policies and procedures and bylaws and they ignored me.  I don't get the sense that they're hiding these things to perform fraud, just that they don't want to be questioned.  That old control freak attitude of "I know what I'm doing, you don't need to worry your little head about it."

All of which, though, does make me want to disengage.  But DH thinks the professional thing is to stay until my term expires, which is one more year.  But you can bet that I've learned alot of new stuff about how to screen volunteer opportunities before I agree to do things!  Even stuff I haven't mentioned here, like how NOT to recruit volunteers.

[Origisaurus]

DH thinks the professional thing is to stay until my term expires, which is one more year.

Well, I'm not your DH, but with respect, professionalism has its limits.

As an individual, you should assure yourself that the org is operating legally and not somehow exposing you to liability.  As a director, you should continually seek assurances that the org is operating legally and not risking disaster that could destroy the org.

The common-law implicit covenant is that you accepted the Directorship with the understanding that the org intends to operate legally.  If you can't now be sure of that, the professional thing to do is withdraw.

I don't recall - has anyone asked you about independent audits?

[Carrie Cobol]

No, who would ask that?  Is something requested by an outside party, the IRS or something?

[Origisaurus]

No, who would ask [about independent audits]?  Is [it] something requested by an outside party, the IRS or something?

Well, I meant who in this forum.

At some point, it might seem appropriate to a member, Director, or some other interested party to ask for an audit.

Perhaps you could do homework about non-profit audits? Google is your friend.  Ask a question, get an assignment. 

[Carrie Cobol]

Yay, homework!   

Well, I did a bit of googling, and it seems that our gross revenues are too small for a formal audit.  One site I found said that audits are required if you have more than 100k revenue from federal grants, to make sure that the guv money is used as promised.  We don't get any grants right now.  I know that's just one site, but others implied. The same thing about the revenue level.

Another thing I found was that it's recommended that the person doing the books is not the same person doing cash handling.  So actually I'm good there.  I felt like I was only doing half the job, but I'm doing the right job as bookkeeper.

Since our revenues are below 25k/year, maybe I worry too much about this stuff.

[The Gorn]

Gorn - What does your lawyer or accountant say.  It sounds like the kind of commingling of funds that could pierce the corporate shield.   You must already have a business bank account(s), just attach a paypal account to an isolated one of these. 

*** Not a lawyer, no legal advise intended.  ***

I have separate business bank accounts (I have to - I have an S-Corp.)

One of these business accounts (in the name of the corp) is a checking account that is dedicated to electronic payments like Paypal. It is the business account attached to Paypal.

I also have a personal checking account that is dedicated to Paypal also and is also attached to Paypal.

Within Paypal incoming or outgoing funds can be commingled. But I transfer any business related income out of Paypal directly to the business checking account.

It's up to me to see to it that this transfer of business related income to a business account takes place. 

Like I said earlier,  I have a paper trail of all such activity: I invoice the client in a certain amount, he pays via Paypal, and Paypal has a log of all incoming payments. I transfer that sum directly to my business account. The money is accounted for.

If I receive personal funds through Paypal (IE, donations toward this board), proceeds are deposited to my attached personal checking account; or I just leave the money in Paypal and I spend the money on something for myself. And I have a business credit card, as well as a couple of personal credit cards, attached to the Paypal account for the purpose of making business or personal purchases.

I see it kind of like a business owner who operates on a cash basis. Someone hands him payment for something from his business and he rings it up and deposits the cash in the bank account for the business (such as a store).  Someone else, perhaps a family member, gives him a cash gift, or he receives cash in return for selling some personal item in the classifieds. He sticks that money in his wallet and he spends it directly on himself.

I see the way I am using Paypal like that.

[Origisaurus]

Since our revenues are below 25k/year, maybe I worry too much about this stuff.

Yup, that's small potatoes.

It only leaves the personality issues.  I say, if doing good stops feeling good, stop.

[Carrie Cobol]

I'm starting to think I have a personality defect.  That's too strongly negative, but let me explain what I mean.  When I get interested in something, I go crazy researching and learning all about it.  When I felt I'd learned all I could about software engineering and wanted to bump my career up a ladder rung, I started learning about project management.  I read books and studied for the PMP certification.  As I did so, I realized that the PM I worked for (this was a couple jobs ago) did everything the PMI said NOT to do.  He pretty much used all *worst* practices.  Since he was mentoring me at the time, teaching me on the job how to be a project manager, I felt this was a huge conflict.  It made me very disgruntled and discouraged.  (Partly because I realized that all of the worst practices he was teaching me wouldn't be applicable to the experience requirement for the PMP certification.)

Similar thing with learning the business analysis best practices.  Software engineering best practices as well.  And now with the non profit, I'm learning about governance and accounting and as you can see I'm going into the same conflict between what we currently do and what we should do.  I know there are gray areas and ranges of when best practices apply and when they don't.  But I don't know how to estimate how much best practices should apply to any given situation.  I do know that at some point best practices just get too process-intensive and bureaucratic and that's when you've gone way too far.  But identifying the sweet spot of knowing "this is right for this situation and if we do more then we've gone too far" - THAT's what I have a problem knowing.

I don't expect you guys to be able to tell me where that spot is, it's totally situation-dependent.  I'm just sort of blowing off steam about the way I handle things.  It seems like other people are always easier about taking things casually than I am, and I take things way too seriously.

[Origisaurus]

I'm just sort of blowing off steam about the way I handle things.  It seems like other people are always easier about taking things casually than I am, and I take things way too seriously.

Or, kinder and more gently, your need for excellence is higher than that of your peers.  It's hard to know "good enough".

[The Gorn]

I don't expect you guys to be able to tell me where that spot is, it's totally situation-dependent.  I'm just sort of blowing off steam about the way I handle things.  It seems like other people are always easier about taking things casually than I am, and I take things way too seriously.

"Other people" screw things up royally.

If things were decently and responsibly run already, you wouldn't be stressing. That is the parallel theme that runs through your examples in this paragraph.

This is what I don't like about "teamwork" and volunteer work in the real world. Almost no one else takes the work seriously.

Meh. Just be yourself.

[David Randolph]

DH thinks the professional thing is to stay until my term expires, which is one more year.

Well, I'm not your DH, but with respect, professionalism has its limits.

The common-law implicit covenant is that you accepted the Directorship with the understanding that the org intends to operate legally.  If you can't now be sure of that, the professional thing to do is withdraw.

One of the key points of being a professional is knowing our limits - when it is time to fire a client or fold a project. While you may be learning a lot about what not to do, it is important to realize when a volunteer job has become more effort than it is worth.

[Carrie Cobol]

Absolutely.  I don't yet feel it's more effort than it's worth, partly because I don't know if I'm picking my battles wisely or just tilting at every windmill.  And having just typed that, I realize my next dog needs to be named Quixote.