I am involved in a Medieval reenactment group called the society for creative anachronisms (www.sca.org)
One of our ongoing financial challenges is we are strictly forbidden from utilizing any kind of credit card or merchant processing for handling fees, donations, etc. This policy extends to third party handlers like Paypal, GoFundMe, stubhub or any place else.
The reasonings we are given is a blend of inadequate security and concerns about comingling of funds. Every solution they seem to find palatable is an extensive purpose built system when there are hundreds of systems out there far more elegant and secure than we could ever hope to do on our own.
For example, I own a business, I process credit cards.
If an upcoming event was going to cost $20/person and I wanted to allow 10 members to use my merchant services and then writing a check for $200 to the group for those payments. They refer to this as “commingling funds” in a way that is dangerous to the group. I want to assume there is a deeper issue that I do not understand, but the “official” answers we get are so generic as to leave the general rank and file feeling like its just “because we said so”.
How is this problematic?
If I write a check for $200 or 10 people write checks for $20 does the IRS really care?
Is there a bookkeeping/accounting challenge I am not grasping?
I understand the basic commingling of funds argument. The people who paid by card have no real guarantee that you paid it on to the SCA, and the SCA has no guarantee that you’re not skimming something yourself.
From a merchant services perspective, this is usually forbidden by the service agreement, since you’re really just processing on behalf of a third party. That could be a stick issue if someone challenges the charges.
The IRS might get confused about what is or is not income to you. A client of mine used his business PayPal to collect donations for Haiti. It took several attempts to explain to the auditor that we were 1) not trying to claim this as a charitable deduction and 2) it should not be included in his income either. The auditor seemed unusually dense about understanding this and told us that his decision to allow the exclusion from income ultimately came down to things he read on the client’s Facebook page at the time he was collecting the money.
Easily managed by a receipt. The local bookkeeper/Exchequer could easily reconcile my check against 10 people bringing the receipt I generated.
I get that but this is primarily a risk to me and my accounts not the org.
Feels more like a tax risk to me personally rather than any potential blowback to the org. I could understand not wanting to encumber organization accounts with merchant service contracts and some of the challenges that accompany them, but if I am willing to bear the risk, how does this threaten the org?
Well, I’m not saying that I agree with their policy overall… especially since it’s trivially easy for them to set up something like PayPal for themselves.
Still, they’re not without some reasons to prefer that you not try to help out on the side.
I understand that it is the policy, the challenge is I will be attending a meeting where we will be able to discuss said policies and I am hoping to find out if the reasons they are giving are just smoke and mirrors. I as a business owner understand the basics of comingling situations, I am just wondering if there is a reason why if at all this would be different for a NPO or a larger corporate structure that I am unfamiliar with any specialized rules.
A non-profit is staffed from top to bottom by non-business people. And a certain percentage of folks are avaricious. Others are clueless and will fall for any scam a 5 year old ought to see through.
So non-profits, particularly large and dispersed non-profits, tend to have either no money control policies at all because they haven’t been burned yet and a re too clueless to see the risks, or else very restrictive money control policies because they have been burned and their lawyers or central accounting advisor went hard over. Sounds like SCA is the latter.
My experience with CC processors in in Canada, but yes. ‘Not allowed’ may not be too far off. The big processors usually want to see certain expected transaction volumes, and they’ll go over your bank statements to make reasonably sure they can pull any chargebacks out of your account. The smaller processors (who basically are just resellers for the big boys) may be more flexible but aren’t always that fun to deal with. And for small volumes of money the various fees can quickly make taking credit pretty unattractive.
Yes, my god yes. I assisted the treasurer for the local chapter of an internationally known service club (He wanted to step down, and I actually have bookkeeping experience so he wanted me to take over). There were essentially no controls on cash or costs, 9(!) bank accounts, and the reporting was disorganized enough that I doubt I could have figured out if anyone was dipping their hand in the till.
As treasurer of a couple of small charity nonprofits over the last decade, I’m with Zipper in saying WTF? That’s a ridiculous policy. Any nonprofit that doesn’t accept either Paypal or credit cards is a nonprofit that’s not going to bring in any money or be able to grow like a healthy organization. With the new CC processors that take mobile payments like SquareUp and Paypal you don’t need to establish merchant accounts with all the CC companies like in the past. You only need to sign up with those two companies, and then you can accept all cards. Paypal’s transaction fees are fair, and SquareUp is even better (2.7% across the board).
We have several upper level management for the society attending one of our larger events for a kinda AMA session I plan to make a bit of a scene since from my POV the reasoning they have given so far is kinda thin. Something like GoFundMe or Eventbrite could be fabulous for us but the head honchos are “not no but HELL NO.” There was a system in place that some large events could use but I think some part of the new CC liability shifts spooked them and the plug was pulled on that with a huge 3000+ person event that was using it caught midstream and got special permission to use manual paypal invoices to finish prepayments for the event. It was a nightmare…I ended up getting invoiced for the same thing 3 times.