CLN Top Legal Requriments for Sponsored Projects:

(see pdf for current version)

Introduction:

Although there are 20+ policies, guidelines and regulations for CLN Sponsored Projects to help you and us keep everything in synchronized order, we have also developed a list of just the Top Legal Requirements that you MUST do to keep your Fiscally Sponsored Status.  These are basic legal requirements that if are not completed by each Sponsored Project could result in the entire Umbrella non-profit loosing its tax exempt status, or worse yet, credibility in the non-profit sector.  If any Sponsored Project does not not meet these basic legal requirements, they can be put on a 6 month "probation" or can result in immediate reversal of fiscal sponsorship in order to ensure that the umbrella non-profit as a whole is stable and secure.

Disclaimer & Spin-Offs:

At anytime if a fiscally sponsored project feels that the policies or procedures of the CLN are confining for any reason, the leadership committee of that project can vote to spin-off and leave the umbrella network and become its own legal entity.  If fiscally sponsored projects are hindering or could potentially hinder the CLN for any reason, the CLN can also decided to spin-off an separate umbrella organization, or a fiscally sponsored project at anytime, although the timeline to spin-off a new non-profit typically takes about 2 years so it is important to start early.

CLN Inc. Board Decisions:

As an umbrella non-profit, the purpose of the CLN Inc. Board is not to get involved in any individual project or do top down coordination.  Instead the purpose of the CLN Inc. Board is to make sure that all projects within the umbrella are following the law for the security and long term stability of the non-profit tax exempt status.  The best way to understand the processes is that if there is any type of legal or potentially legal decision that will, is or has taken place for your project, that decision needs to go to the CLN Inc. Board.  The Board is the only body within the non-profit umbrella that can finalize legal decisions, although they would still be discussed and decided on within the project leadership committees,  the final proposals must always be brought to the board.  The Board is not allowed to prioritize projects, pit projects against each other, or choose not to allow a project or proposal for personal reasons that aren't legal reasons.  In other words the job of the Board is to be a neutral organizer and allow the projects to flourish.

At anytime if you are not sure how to contact the CLN Inc. Board, just email inc@CommunityLifeNetwork.org

Here is the list of the 9 Top Legal Requirements for Fiscally Sponsored Projects.  Bellow is a description of each.

• Budget Approval Process (has its own document)
• Grants & Grant Reporting
• Personnel: 1099's & Employee Taxes
• Annual Reporting
• Contracts & Long-Term Agreements
• Other Legal Permits/Filings/Reporting/Licenses/Taxes/Insurance/etc...
• Conflicts / Issues / Internal Problems
• Anything in the "Gray Area"
• Basic Financial Documentation
  
  

Budget Approval Process

• Legally no money can be spent until that money has been approved and verified as a valid non-profit expenses.  Any expenses that is made contrary to non-profit tax law could result in the termination of the umbrella non-profits tax exempt status.  Therefore every dollar that is spent must be approved, before the transaction, by the CLN Inc. Board, or at least an acting officer of the Board.  
• This is very simple process, as all your project has to do is compile a budget of all your expenses, and have the CLN Inc. Board approve your budget, and then all of your expenses for the year, or for that project budget are now approved.  
• Although more details are given within the Budget Approval Process document, in summary your project or program simply needs to write out a list of expenditures, and then the cost of each, and the budget should add up to the amount of money you have or expect to have.  Then your draft budget must be approved by your project leadership committee, and then proposed to the CLN Inc. Board. The CLN leadership will encourage you, and we will work with you to format your budget using our templates, categories, and guidelines so that we can easily integrate all of the budgets and finances of the umbrella network for internal synchronization and public reporting.
  
  

Grants & Grant Reporting:

• If you write a grant, that grant is technically a preliminary agreement for completing the proposed program, and is therefore a legal document.  Although the CLN Inc. Board does not need to "approve" grant proposals, the Board does legally need to be informed of every grant, before it is sent in, and should get the opportunity to give legal advice if applicable.  
• If a grant is approved, there really is no reason to refuse the money, but the CLN Inc. Board legally does need to approve the signing of the grant contract, or at least an Officer of the Board.  Therefore it is much better for the Board to be informed of the Grant ahead of time so that when the contract comes it can be signed and fast tracked with the Board having all the information about the grant itself at the time of signing the grant contract.
• Additionally it is the responsibility of the Fiscally Sponsored project to ensure that all grant reporting and legal requirements of the grant are accomplished and reported to the CLN Inc. Board.  The Board needs to recive all grant reports and even if a grant does not require a grant report (which is very rare), our internal policy still requires each program to create a report for each grant, and the board can choose to send that report to the grant agency even if it is not required.  
• We encourage each sponsored project to have a timline of all reporting and legal requirements and to make sure the Board is getting regular updates
  
  
  
  
  
  

Workers & Personel: 1099's & Employee Taxes

• Paying people is a huge legal issue, and all individuals who are hired as employees or indpendent contractors must be doccumeted with the HR Board.  Workers, regardless of pay, employee, contractor, or volunteers, should all be reported to the HR Board, and be encouraged to do evaluations and reporting directly to the HR Board on a regular basis.  hr@heeo.in
• Minimally all work, paid or not, should be reported minimally monthly, but realisticly weekly, and really workers should get in the habbit of simply sending a quick email at the end of each day they worked explaining what they did and / or how long it took.  This can take a little as 1-5 minutes and is directly interconnected with the entire network prioritization and doccumentation procedures.  Everyone should be encouraged to email hr@heeo.in after completing any work, paid or not.
• All personell expenditures should simply be included in proposed budgets to the CLN Inc. Board when approving expenditures.  Legally the CLN Inc. Board does not need to be involved in any hiring procedures, the Board only needs to approve the financial allocation for the worker.  All hiring processes, approvals, reporting, and HR policies are reported and coordinated directly by the HR Board.
• Within the budget, each individual paid position must be listed as a seperate line item, and the line item must also indicate weather or not the position or task will be a employee or a contractor.  The CLN Inc. Board will make all final decision on weather an individual is paid as an employee or a contractor.  In general if the position is internal and following policies, procedures, or guildlines, it should be an employee.  When in doubt just go with employee.  Employee taxes are not very hard, and the CLN leadership can help you get started and keep the employee taxes up to date.  Contractors must recive 1099's if they are paid more than $600 in a calendar year.
• All monies paid to people must be tracked within financial spreadsheets, and be tallied quarterly for employees, and annually for contractors.  Any contractor who is paid more than $600 in a year must recive a 1099 in January of the following year.  The 1099 requirement are not a guidline or a general encouragment, it is a legal necessity and must be done in accordance with the law or we can loose our non-profit status, or your project could loose fiscal sponsorship.  First and formost a 1099 must be issued regardless of weather it is on the correct type of 1099, or on the correct type of paper or any other options.  Just get it done, and report everything the the CLN Inc. Board and we can help improve upon the first efforts.  Not filing 1099's can result in revoktion of fiscal sponsorship.
• Because of the legal, personal, and moral complexities that go with paying individuals and the reliance on money in our society, eventually all fiscally sponsored projects that pay people will be spun-off into a seperate umbrella non-profit organization.  This could take many years to finelize, and will result in no changes to existing sponsored projects as you will be able to use both tax ids as needed, but all employee and contractor payments will be made from the spun-off non-profit.  The origional vision and intention of the Community LIFE Network is that it would always be a volunteer only organizations, and since there is no legal problem with having paid workers, we don't mind that for now, but eventually the CLN will go back to being a volunteer only non-profit, but our extended network will included the new spun-off non-profit so no changes will occur to existing sponsored projects.
  
  

Anual Reporting:

• The Community LIFE Network is required to make annual fillings and reports as a registered non-profit in California.  Therefore the best way to get all the necessary information to compile a integrated report from all of the sponsored projects is to require each individual project to do a mini annual report.  This report only needs to be about 1/2 page, or less, and the following information is required to be in the project annual report.
  • Total Revenue
  • Total Expenditures
  • Total Assets and Bank Holdings
  • Total Debts or Liabilities
  • Main Activities for the Year
  • Highest  Priority Next Steps for the Year
  • List Primary Project Leadership and Positions
• In addition to the Annual Reporting, the CLN Inc. Board currently has a policy of having short quarterly self evaluations (just 1 paragraph) from all active sponsored projects.  These quarterly self evaluations, only have to be 1 paragraph, and are a simple way of helping you track your legal requirements and doccument your groups progress on the requirments on this doccument you are currently reading.  
  
  

Contracts & Long-Term Agreements:

• All contract and agreements, especially long term parntership agreements need to be presented to the CLN Inc. Board regardless of weather or not they are written contracts.
  
  

Other Legal Permits/Filings/Reporting/Licences/Taxes/Insurance/etc...

• Any legal processes involving government paperwork or contracts with external entities must go through the Board for approval.
  
  

Conflicts / Issues / Internal Problems

• Any internal conflicts within your organization must be reported to the board and be delt with acording to the CLN Conflict of Interest and Conflict Evolution policies.  If problems arize you do not need to go it alone, and it can become a legal issue, so it is important to report it early, and keep us informed in case the Leadership Council or Board needs to get involved.  There is always help :)
  
  

Anything in the "Gray Area"

• If you arn't sure if something is a legal issue or not, just send an email to the Board and ask.  It is always better to let the Board know about something and keep us informed, even if the issue already passed, than to just ignore it.
  
  

Basic Financial Doccumentation

• Most  importantly you will need to track total expenditures and total income/revenue.  Overtime it will be more and more important to keep detailed financial records, and for public transparency, our internal  policies already require full financial tracking and transparency of  all expenditures, income, and other financial activities.  The most important legal transactions to track are personel payments, and your project budget.
• Additionally we must get origionals or copies of all financial doccuments, including records of activities the finances were spent on.  This includes physical recipts, invoices, flyers, documents, meeting minutes, and any and every form of documentation that you can think about.  When we are audited, and it is just a matter of time, the only thing that protects us from loosing our non-profit status, is actually proof that we did what we say we did, so we NEED documentation of the money that was spent, this is not optional, this is a legal necessity. All these documents must be stored locally at the organizational HQ.  Send all financial documents to: CLN PO Box 20175 Stanford CA 94305
• CLN Internal Example: https://docs.google.com/spreadsheet/ccc?key=0Ale0JzOpzGIIdFBGMlhiM1hpMlZRNXJOMHFCNFYxVEE&usp=sharing
• Template: