Wednesday, June 12, 2024

County adopts budget application procedure for nonprofits

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The Hood County Commissioners Court unanimously agreed to adopt a budget application procedure for nonprofit organizations during a regularly scheduled meeting May 14.

This new procedure will require local nonprofit organizations that are requesting funding through the Hood County budget to submit three items as part of the application process: a certificate of good standing from the state of Texas, the last audited financial statement and tax form 990. Nonprofit organizations in contractual agreement with Hood County that covers an annual subsidy and associated responsibilities are exempt from the procedure.

Precinct 2 Commissioner Nannette Samuelson explained how last year during the budget process, she received quite a bit of feedback during the budget hearings.

"The feedback I received last year was along the lines of, ‘So, people just come up and ask for money and you don't ask them for a financial statement? Why do you not vet?’” Samuelson said. “When I looked back, and I saw what we had actually put in place during our ARPA process, I thought, ‘OK, well, here's something that we can use.' We had already built something that was in the ARPA application process, and (we could) use that as part of our budget process when it comes to requests from the budget for non-county expenses.”

Samuelson then suggested that the county require additional information from nonprofits to ensure members of the court are being “good stewards of the taxpayers’ money.”

She suggested nonprofit organizations submit the following:

  1. Certificate of good standing from the state of Texas
  2. Last audited financial statement
  3. Most current financial statement
  4. Budget report showing actual receipts and expenses for the last 12-month period
  5. Liquidity calculated as cash on hand divided by average monthly expenses
  6. Program expenses as a percentage of total expenses
  7. Cash flow from operations

Ten speakers signed up to speak on the agenda item. Executive Director of Hood County Committee on Aging Trish Burwell was first called to the podium, where she expressed her concern over the new application process.

Burwell said the most impactful information that proves a nonprofit is a viable and trustworthy organization is the nonprofit tax form 990. She also agreed with Samuelson that a third-party financial audit and a certification of good standing from the state of Texas are also good indicators that the organization has been vetted.

But while she agreed with a few of the application requests, Burwell voiced some concerns regarding client confidentiality and privacy regarding item (d), which involves nonprofit organizations submitting budget report showing actual receipts and expenses for the last 12-month period.

“Any organization seeking funds is bound by ethical behavior, fiduciary responsibility and a steadfast dedication to serving clients with respect and dignity. I personally do not take that responsibility lightly,” she said. “Nonprofits who serve this community are aware of the need for plausible transparency and proof of financial stewardship that proves the organization is worthy of investment. Nonprofits are also keenly aware of our responsibility to ensure the privacy of our clients, and confidentiality of our donors who wish to silently serve without fanfare.”

She explained that if community nonprofits were required to hand over boxes of receipts with personally identifiable information, not only would they set themselves up for Health Information Portability and Accountability Act (HIPAA) violations, but they would also violate the trust clients and donors have put in them as charitable providers.

"I can tell you with certainty that no one serves the underserved the way nonprofits do in Hood County,” Burwell said. “We are not in this field because it pays well. We serve because we are called. We serve those who are personally and profoundly impacted by adversity, but most importantly, we serve those who served us and can no longer serve themselves.”

Following Burwell’s statements, Samuelson clarified that item (d) that Burwell was referencing could also just include one line item that summarizes expenses — not necessarily “boxes and boxes of receipts.”

"To me, you were asking for receipts and unfortunately, most of those receipts can definitely have those identifiers on them,” Burwell said. “Myself personally, I have 16 staff members and seven of them are part time. We serve 80 meals a day and we have 250 volunteers that deliver meals every day, five days a week, so we don't have the staff to pull 200 boxes out of the attic to look those up, and that's what we would have to do. It's cost prohibitive.”

“That’s not what I was asking at all,” Samuelson said.

Hood County Judge Ron Massingill then asked if the tax form 990 the nonprofits are required to turn in shows transparency. Samuelson said yes, but that the nonprofits had not been turning their tax forms in to the county.

“That's incorrect,” Burwell said. “We did actually with the court last year. I know that the Hood County Area Agency on Aging did turn that into the court.”

“One did, but it's not something that we have as part of our budget process, which I think we should adopt as a best practice to follow what the committee of aging did,” Samuelson said. “I'm sorry for the misunderstanding. But I wasn't asking for any details, just like a summary of receipts and disbursements."

Samuelson made a motion to adopt a budget application procedure to require nonprofits requesting funding through the Hood County budget to submit the following three items of information: certificate of good standing from the state of Texas, audited financial statement and tax form 990.

After Samuelson entered her amended motion, other speakers declined to comment, except for Dr. Harold Granek who cautioned the court about “going too far” with the application process.

"I think the idea of having some set of rules is good, just let's not get too complicated,” he urged.

“I think we’ve listened and modified, so thank you,” Samuelson said.

Massingill then brought the motion, which was seconded by Precinct 4 Commissioner Dave Eagle, to a vote. The motion passed unanimously.