What are the IRS requirements for my CIL?

Just because your non-profit doesn’t pay federal income tax doesn’t mean you have no dealings with the Internal Revenue Service. You are required to file an annual report to the IRS of your standing as a non-profit. This form is called a Form 990, and it is important for all CILs and those SILCs that are not-for-profit to file correctly and on a timely basis. If you don’t you risk losing your non-profit status and if you don’t have that private, non-profit status, your CIL is no longer eligible to receive your federal grant for Independent Living services.

The form 990 is a public document, so when you complete it remember that you are communicating both with the IRS and with the public. Be sure that the board of directors has reviewed your filing document prior to submission. Best practice usually requires that the board chair signs the document on behalf of the organization. It is not unusual for foundations and other private and public funders to check what you’ve said in your Form 990. Take it seriously.

If your tax-exempt organization has gross receipts of more than $200,000 or assets worth $500,000 you must complete a full Form 990. Smaller non-profits with gross receipts of $50,000 or less have an e-Postcard version called the 990-N. Those that fall between $50,000 and $200,000 can file a 990-EZ. Every center is required to be a private, not-for-profit entity so every center must complete the appropriate form annually.

Your timeline for this form is the 15th day of the 5th month after your fiscal year ends (which may or may not match your state or federal fiscal year). If your organization’s fiscal year ends June 30, your 990 is due November 15. If your fiscal year ends September 30, your 990 is due February 15. If your fiscal year ends December 31, your 990 is due May 15. NOTE: if you lose your exempt status by not filing the 990, according to the IRS there is no appeal process. If a CIL loses exempt status, they are no longer eligible for either Sub-chapter B or Sub-chapter C funds through the Rehabilitation Act. It is possible to reinstate your status, but this lengthy process can include paying income taxes during the period you were out of compliance, and other penalties and fees, including not being able to draw funds from your grants.

More soon about the content of the 990.

Your non-profit is also required to withhold both taxes and social security from employee paychecks following the employee’s W4 form, matching social security and providing a report of the withholding on an annual W2 form, which is provided to both the employee and the state and federal tax entities.

You are also required to report any payment you gave to a contractor or other non-employee that was in excess of $600 for the year. This is filed on a 1099.

Contractor or Subrecipient? Does it matter?

In a couple of states the DSE (Designated State Entity) is allowing only overdue reimbursement and not advances or timely payment. Both SILCs  are considered contractors by their state. I wondered if there is enough difference between a contractor and a sub-recipient to make the case that SILCs and CILs are sub-grantees/sub-recipients and not contractors. Here is what I found.

EDGAR, the regulations that most DSE’s fall under, specifies that contractors do not need to be paid an indirect cost rate, while SILCs and CILs are required to have and use a negotiated federal indirect cost rate. I think it is arguable that, since funds are set up in the Rehab Act to go to these entities, that is another argument for sub-recipient status.

Here’s some other criteria that will help you differentiate whether you should be paid as a subrecipient or a contractor, from 2 CFR 200.330 Subrecipient and contractor determinations.

The non-Federal entity may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor, depending on the substance of its agreements with Federal awarding agencies and pass-through entities. Therefore, a pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. The Federal awarding agency may supply and require recipients to comply with additional guidance to support these determinations provided such guidance does not conflict with this section.

(a)Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. See § 200.92 Subaward. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity:

(1) Determines who is eligible to receive what Federal assistance;

(2) Has its performance measured in relation to whether objectives of a Federal program were met;

(3) Has responsibility for programmatic decision making;

(4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and

(5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.

(b)Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity‘s own use and creates a procurement relationship with the contractor. See § 200.22 Contract. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor:

(1) Provides the goods and services within normal business operations;

(2) Provides similar goods or services to many different purchasers;

(3) Normally operates in a competitive environment;

(4) Provides goods or services that are ancillary to the operation of the Federal program; and

(5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons.

(c)Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases, and the pass-through entity must use judgment in classifying each agreement as a subaward or a procurement contract.


Grants.gov puts it this way in Grants Learning Center’s Terminology page :

Subaward: An award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a Federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a Federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract.


So there is a distinction, even if you have a “contract” to describe the relationship. If any of you find this useful in your discussion between the SILC and the DSE, please comment here or let me know what has been helpful.

Which comes first?

Strips of paper reading How to comply, New compliance rules, How rules affect you,

As Centers and SILCs, we have a number of regulations that we follow, and some take priority over others. So if they don’t say the same thing, which one are we supposed to follow?

White board with large letters stating KNOW THE RULES. This is being underlined by a hand with a pen.

Recently the Independent Living Administration clarified to us that the Assurances for the Designated State Entity (DSE) are now included in the remarks section (6) of the ILS Notice of Award (NoA). The Assurances are adopted when the DSE Administrator accepts the NoA.

The terms and conditions of a NoA and other requirements have the following order of precedence: (1) statute (in our case the Rehabilitation Act); (2) executive order; (3) program regulation found in 45 CFR 1329 (which references some other applicable regulations); (4) administrative regulation found in 45 CFR Part 75; (5) agency policies; and (6) any additional terms and conditions and remarks on the NoA.

A good example of how one of these pieces might contradict another is found in the requirement in the Rehabilitation Act that Centers for Independent Living conduct Resource Development (Section 725 (b)(7). This is juxtaposed with the prohibition on spending federal dollars to fund raise found in 45 CFR Part 75. As you can see, the Rehabilitation Act as the statute takes precedence over the administrative regulation.

This is not to say that Resource Development and Fund Raising are precisely the same thing, but it is allowed for SILCs and required for CILs to conduct resource development using federal funds. At the very least, you should have a category for the cost of resouce development in your chart of accounts and your own internal definition of these terms to assure you are not paying for fund raising with federal dollars.

Are indirect costs the same as administrative costs?

Question: I am interested in your thoughts on something. I know we’ve always said that the indirect costs are not the same as G&A. However, when we submit the proposal we have to include the statement of functional expenses from the audit which breaks out G&A and also 990 which breaks out the G&A. I assumed they compare the indirect cost proposal to those G&A figures, so I’ve always made sure they match. Is that not the case?

Response: The proper answer is that indirect does not always match general and administrative, but in many cases it will.

Sometimes there are direct costs that are minor and for practicality get combined with indirect (copies as an example).

Sometimes there are indirect costs like accounting or insurance that may be required to a much greater extent, for a specific program, so those are directly allocated.

In the absence of those unusual situations indirect will equal general and administrative

A dozen ways to reduce the risk of theft

Business man pulling a big green dollar sign concept on background

It happened again just a few weeks ago. This isn’t the first time a center has been victimized by employee theft. And usually it is the bookkeeper or accountant, someone you trusted. Often they are not small thefts, but larger ones that have been going on for awhile before being detected. So what can you do to prevent or at least find and end such theft?

Most centers depend on their auditors to protect them against theft. However, unless you are spending at least $750,000 in federal funds you are not required to have an annual audit. Even if you do have a review of financial statements, that is not an engagement to investigate fraud. When auditing financial statements, the theft might not be found, depending on the level of sophistication of your financial person.

Remember that the person holding the financial position in the organization has an understanding of the audit process and its inherent limitations. They may be able to divert the center’s assets into their own pocket through several deceptive practices. It is your responsibility as the executive director or a board member, to make sure that your practices limit the possibility of theft. Here are some important practices that will offer protection:

  1. The executive director or board treasurer should receive bank statements directly from the bank and review them. Look at each check. Are some made out to a staff person that don’t seem right? How was the check endorsed? (Some staff create an account for themselves with an innocent-sounding name, but they have to endorse the check to deposit it.) If cancelled checks are not returned by the bank, arrangements can generally be made for online access enabling the key officer to view scanned images. After this review, the bank statements and checks can be given to the accounting department for reconciling to the books. The completed reconciliation should then be returned to the key officer for review and approval.
  2. Review credit card bills including the original receipts. Employees have been known to use cards for their own utility bills, for example. If you see the original receipt you will see the address. If the original receipt isn’t available, request it from the vendor or the credit card company.
  3. Employees have been known to add some of their own items to their cart at the office supply store. Someone different from the person who ran the errand should put away the supplies, checking them off the receipt.
  4. Make sure that someone other than the accountant picks up the mail and opens/directs it. This is where late payment notices are hiding, and where donations may be received and pocketed rather than deposited. If the receptionist or the executive director reviews the mail they can log in the donations and stamp checks for deposit only.
  5. Regularly check payroll. Verify the names. Notice whether the amounts withheld agree with what is sent to IRS. Check the hours. Make sure your withholding is sent on a timely basis. Thefts can occur by siphoning off payroll related funds.
  6. Do not allow the controller or bookkeeper to sign checks.
  7. Occasionally verify the names of all the suppliers.
  8. Do not sign checks which have not been completely filled in.
  9. Require that checks that were cut in error are saved and filed, so that you know if a check is missing. Typically the signature is torn off the check and the original, not the copy, is kept to insure that a missing check can’t be used.
  10. Require employees with accounting functions to take annual vacations and have others perform their duties.
  11. Prepare and carefully review monthly financial statements in detail. Especially look at significant variances from prior year or budget to the current year.
  12. Carry insurance for employees in sensitive positions. Consider fidelity insurance, bonding, and directors and officers insurance to protect the organization.

These steps cannot prevent all fraud, but should allow you to find most of the sources of fraud and take appropriate action. When you have routine policies and practices like these in place, the likelihood of fraud is greatly reduced.

One more note. You are required to report any fraud to your funders immediately. You will want to make sure your board is informed, and that you have turned the investigation over to law enforcement at the local, state and/or federal level for appropriate prosecution of anyone guilty of theft, fraud or abuse of funds.

What are some interview questions for candidates for the Executive Director position?

We are seeing a lot of Executive Director positions open up as the Baby Boomers retire. Here are some potential questions for the interview, and a few tips as well.

Interview Questions for candidates for Executive Director

  • Tell us a little about yourself and why you feel you would like this position.
  • How did you learn about this job opening?
  • Why are you leaving your current employer? (Or why did you leave?)
  • What do you know about this organization, and what would you like to know?
  • What are three words that describe your ideal working environment?
  • Tell us why you think you would be a good match for this organization.
  • What is your personal experience with disability? (If they do not have a visible disability and do not bring up having a disability, you can’t ask more at this point.)
  • Describe your experience with promoting human rights.
  • What professional achievement are you most proud of?
  • What is one area of weakness and how are you addressing it?
  • What is your experience supervising staff? What do you find is the most difficult part of being a supervisor?
  • Have you ever had to lay staff off? What did you do and what do you wish you had done?
  • Tell us about your strategic or long-range planning efforts with organizations where you’ve worked. What is your approach? Who is involved?
  • How would you describe your management style?
  • If you get this job, what is the first thing you will do?
  • What financial records would/do you provide to the board and how often?
  • Have you ever had to investigate a complaint against a staff member? What was your process and how did you feel about the resolution?
  • A board member is quoted in the newspaper saying something inaccurate about your organization. What do you do?
  • What is the best/most effective community partnership that you developed in your professional life?
  • What excites you about this position?
  • What questions do you have for us?

Tips for your interview process:

  • Allow at least an hour for each interview. Ninety minutes might be better. That gives you a little time to make notes and discuss impressions before the next candidate arrives.
  • Introduce the interviewers to the candidate and shake hands all around. (If the board members aren’t aware, it is appropriate to shake hands even when the candidate has limited use of them.)
  • Make sure the candidate has water or coffee.
  • Provide the board committee with the printed questions and room to jot down the candidate’s comments and to make their own observations.
  • Don’t try to fill in silence or finish sentences. Let the candidate say all they want to say about the question.  If they don’t say enough, follow up with, “Can you tell us about a time when you applied what you just said?”
  • Ask followup questions if you are unclear about the meaning of a statement.
  • It is nice when several people take turn asking the questions.


Privacy and Confidentiality

What are the privacy rights of the people you serve? Can they expect staff to keep visits and personal information private? Do you need consumers to sign a release of information? If yes, when?

Some centers seem like tight-knit communities, where everyone knows everyone else, and sometimes everyone else’s business. It isn’t unusual for a consumer to ask staff, “Hey, has Joe been in lately? I haven’t heard from him. Is he okay?”

While Centers aren’t usually privy to health or medical information, the same type of privacy is expected for a CIL’s consumers as what you think of when you consider HIPAA (Health Insurance Portability and Accountability Act). You don’t have the right to share or talk about a consumer’s personal information without their permission.

This includes not sharing with other staff or volunteers unless they have a need to know and the consumer grants permission. The records are confidential — both paper and electronic — and should be locked or safeguarded. Privacy includes not sharing with other members of the same consumer group, or with their friends or relatives without the consumer’s written permission.

The permission is usually in the form of a written release of information form, which specifically indicates who can receive information, what information can be shared, and is signed by the consumer and kept in the Consumer Service Record.

I’m retiring. How can I assist my successor?

We have talked about succession planning before — how an executive director can assist the board in a transition to a new executive director. I’d like to drill down to a very specific role that the out-going ED plays — transitioning responsibilities and relationships to the new person filling that role. (And if the ED leaves against their will, the board and new ED must still do all these things.)

The first thing you need to know is that the world will not automatically change the name of the responsible person just because you announced your retirement and the new pick. You actually need to contact each of the places you access and make sure your successor can access them before you leave. Think of all your key responsibilities, and how the new ED can assume them.

Let’s start with money. Do you have access to read your QuickBooks reports on line? How about your bank statements? The website you use to draw down federal money? Your successor needs his/her own user name and password for each of these, and needs to know what duties are separated with other staff and board for good fiscal practice.

What about reporting access? Since your program progress reports (704 reports) are due this week, some of you discovered first hand how difficult it is to change the name of the person submitting the report. There are a number of centers, unfortunately, that haven’t submitted yet. I hope you have access, but if you don’t you need to start working on it NOW. You can start with the help desk on the site. If you are new, you also have to be approved to do this by your Project Officer at the Independent Living Administration. Many states also have an on-line submission of program information.

What is your access to community communication? Does the incoming ED have access to your website, your Facebook page, the Twitter feed and any other communication you are engaged in? It is good practice to send an email to key community contacts and give them the new ED’s name, phone number (even if it is the same) and email address. CC your new person, so they have all those addresses and can shoot out a greeting after they are in the position. Write a separate note with the information for your Board of Directors and another to all staff. While they all probably know, it gives everyone equal access to the contact information for the new person and makes a nice handoff as you exit.

Who else needs to know that the person in charge has changed?  ILRU maintains a directory and would like to be informed when you change anything included in the directory, including the name and contact information of the Executive Director. Your Project Officer at ILA/ACL needs to know, as do any other funders for your organization.

The first time I served as an interim executive director, I spent the last few weeks writing down every single thing I needed to access. By making notes in real time, my list was quite comprehensive. Once the new person began working, I overlapped just a couple of days so that we could go through that long list (four typed pages in the end) of things they would need to know and got them set up on all the lists and websites with their own user name and password when applicable.

How does a center determine eligibility?

Question: At a recent staff meeting, staff were asking for clarification about our Eligibility Statement on our consumer intake form and what exactly they were certifying by signing. I am embarrassed to say that I did not have a good answer for them, but promised to look into it.

Our intake eligibility statement reads:

Eligibility Statement:In accordance with Department of Education 34 CFR. Parts 364, 365, 366, 367 Subpart D, Paragraph 364.40 this statement of eligibility is necessary. By the signature of the staff below, it is certified that the applicant has met the basic requirements specified in Paragraph 364.40.

These are: The individual applying for services experiences a significant disability.  

Can you shed some light on this? I don’t even know where to begin to look for paragraph 364.40. 

Reply: The statement does need to change because we are no longer under the Department of Education (34 CFR) but are now under the Department of Health and Human Services, Administration on Community Living, Independent Living Administration (45 CFR). The CFR is the Code of Federal Regulations. You can find it with a search for 45 CFR 1329. Do look at the one from .gov and not the version posted by other entities – I have found they are not always up to date. SO an important hint — if your policies reference 34 CFR you need to update them.

45 CFR 1329.4 is the new regulation section with definitions, and states:

Cross-disability means, with respect to services provided by a Center, that a Center provides services to individuals with all different types of significant disabilities, including individuals with significant disabilities who are members of unserved or underserved populations by programs under Title VII. Eligibility for services shall be determined by the Center, and shall not be based on the presence of any one or more specific significant disabilities.

Note that the Center is to provide services to people with significant disabilities. All that is required for eligibility is that you ask the consumer if they have a significant disability. If the answer is yes, then they are eligible.

The technical definitions of significant disability is found in the same section of the regulations, and states:

Individual with a significant disability means an individual with a severe physical or mental impairment whose ability to function independently in the family or community or whose ability to obtain, maintain, or advance in employment is substantially limited and for whom the delivery of independent living services will improve the ability to function, continue functioning, or move toward functioning independently in the family or community or to continue in employment, respectively.

I want to emphasize this definition. It is important that centers are consistent in assuring that the people they serve, and the majority of the people on their board, are those with significant disabilities as required in the law and regulations. On occasion, when I am working with a center board, I ask if the majority of their board members have a significant disability. What happens next is very disturbing. Sometimes there is a scramble for board members to think of what their disability is because, frankly, they have not been meeting this requirement. If the board member doesn’t see themself as part of the disability community, I would challenge that they probably don’t have a significant disability.

Staff that do too much?

Question: 

I’m looking at the ILRU website hoping to find an existing training on Boundaries … topics like doing things for consumers rather than empowering them, stepping on consumers’ toes, respecting consumer privacy, etc.

I’ve been having some difficulty with peer advocates maintaining appropriate boundaries, so I’m going to do an advanced training with the group. Before creating training materials, I’m seeking on your website hoping something is there as I know you provide high-quality trainings.

I like to start with some philosophy, because the Rehabilitation Act, the first paragraph of Title VII begins with that.  It reads: The purpose of title VII of the Actis to promote a philosophy of independent living (IL), including a philosophyof consumer control, peer support, self-help, self-determination, equal access,and individual and system advocacy, in order to maximize the leadership, empowerment,  independence and productivity of individuals with disabilities,and to promote the integration and full inclusion of individuals with disabilities into the mainstream of American society…

That language – “a philosophy of consumer control, self-help,self-determination … in order to maximize leadership, empowerment, independence and productivity” – state our goal clearly in terms that emphasize the individual’s control of their life and decisions.

We also have a four-part series of videos around the history and how that philosophy came to be. Each is about 20 minutes and works well as part of a staff meeting. You can find these at https://www.ilru.org/il-history-and-philosophy-orientation-for-il-staff

As you move from philosophy to action,  an Introduction to Consumer Service Records, IL Plans and Service Coordination is always a good foundational piece https://www.ilru.org/introduction-consumer-service-records-independent-living-plans-and-service-coordination-for-cils

You might help them think about scenarios in their own lives, or give sample situations for discussion and learning. A scenario promotes discussion and gets everyone’s thoughts as you address a hypothetical situation. Keep them open-ended so that your discussion can cover multiple possibilities. Here are a couple of examples:

Sue is 31 years old and living at home with her parents. She would like to move out on her own, and you have worked with her to develop a budget to make that possible. “I don’t know how to tell my mom,” she confides. “Will you talk to her?”

You are giving a couple of consumers a ride home from your annual dinner. They ask you to drop them off at a local bar. And then they ask you to join them. What do you do? How do you separate your activities as staff from your activities as a friend?

Dad calls you about his adult son, Joshua. “Josh has been coming over there every week for a couple of months now. Is he making any progress?” What do you say?

I am sure you can think of other examples. Your own written policies and procedures should then mirror your philosophy and specifically state that the individual is in charge of their decisions. When it comes to helping staff understand boundaries, no tool is greater than their own experience as people with disabilities. 

Those things should get you started. Reach out again when you are ready for more.