For Nonprofits - IRS Released Results of its Governance Study

IRS Governance Study—Preliminary Results

The Internal Revenue Service Exempt Organizations Division ("EO") completed its analysis of 1,300 checksheets from 501(c)(3) organizations, and has produced preliminary findings. According to EO, this analysis included only public charities that already had been selected for examination, so the results are not statistically representative of the overall 501(c)(3) population. Nonetheless, this analysis offers some insight into which governance practices might be useful indicators to the IRS of tax compliance.

The presence of the following factors was associated with compliance for the group that were reviewed:
 Have a written mission statement
 Always use comparability data when making compensation decisions
 Have controls in place to ensure the proper use of charitable assets
 Provide for Form 990 review by the entire board of directors before filing

So what is associated with non-compliance?  According to the IRS, having control of the organization concentrated in one individual, or in a small, select group of individuals.  That's a red flag and will invite greater scrutiny.  Read the entire IRS EO 2012 Annual Report and FY 2013 Work Plan here.

Bottom Line
A few factors indicate compliance to the IRS.  If these factors are pretty straightforward and if in place, further inquiries or examinations might be avoided.

If you have any questions, contact me or visit my website.

Yahoo Says No to Telecommuting!

On Friday, Yahoo informed its workforce that effective June 2013, all employees would have to report to the office to work.  No more work from home – its work from work at Yahoo from now on.  Initial reactions ranged from anger and outrage to confusion: how/why does a tech company that presumably knows how to utilize its own superior resources and technology no longer allow employees to utilize that technology to be productive from other locations?

According to the memo from Human Resources to the Yahoo workforce, the reason for this policy change is that in order “to become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side . . . that is why it is critical that we are all present in our offices."  Read the memo here.

The reality is that at its core, and irrespective of industry, Yahoo is a company just like any company and struggles with issues of productivity and workforce management just like the millions of much smaller businesses in the US.  In general, employers are not legally required to allow employees to telecommute.  Therefore question for employers seems to be whether the ability to work from home leads to greater productivity or inhibits collaboration (which can affect productivity).

Keeping in mind that not all jobs lend themselves to telecommuting (neuro-surgeon leaps to mind), what are some advantages and disadvantages to employers for allowing employees to telecommute?

Advantages

• Higher productivity from employees due to fewer interruptions 
• Improved employee morale
• Improved retention and lower need to recruit and train new employees.
• Reduced need for actual square footage 
• Reduced relocation costs 

Disadvantages

• Need to have the appropriate technology (and related security) in place to handle telecommuters 
• Need to change methods of management 
• Managers have to find innovative ways to create a productive team environment that includes the physically absent employee(s)
• Tracking time worked, which is important an important FLSA issuer if the employee is non-exempt 

Bottom Line
Allowing employees to telecommute can affect your bottom line in direct and indirect ways.  If you're interested in providing a telecommuting option for your employees, you need to do a few things first:

• Decide which jobs are appropriate for telecommuting 
• Draft and communicate a telecommuting policy that outlines eligibility and terms of telecommuting in addition to performance expectations and how performance will be evaluated
• Be prepared to train supervisors on how to manage telecommuting employees

If you have any questions about telecommuting or other flexible work arrangements, contact me or visit my website.

Merrill Lynch Pays $12 Million to Settle OT Case

Merrill Lynch has agreed to settle with more than 5,000 broker assistants who filed a class action alleging that the brokerage firm failed to pay them overtime in violation of the Fair Labor Standards Act (FLSA).  The lawsuit alleged that the firm required associates, who assist brokers/financial advisors, to work more than 40 hours a week but failed to pay overtime.  Merrill Lynch did pay base salaries to these assistant and the assistants also earned commissions from their assigned brokers.

Merrill Lynch will create a $12 million fund to be used to pay wages, overtime, and attorney fees to the broker assistants.  The settlement is not final and must be approved by the court.

Bottom Line for Employers
This is another example of the costly consequence of failing to pay overtime.  The good news is that this liability can be avoided.  Here's how to start:

• Take time to review the job descriptions and exempt/non-exempt classification of each job category. 
• Make sure that the duties and responsibilities in the job description match the job functions that are being performed.
• Correct any classification errors

If you're not sure which job functions are exempt from overtime, check out the Department of Labor Fact Sheet here.  If you need assistance with any of these steps,  contact me or visit my website.