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Ten Regulatory-Compliance Items That Require Your Attention

By Gerald J. Archibald


Another summer season is rapidly drawing to a close. Once again, the calendar appears to fly by. The changing of the seasons prompts myriad topics for this column. That is to say, the recommendations and suggestions that follow should be addressed by your organization before the fall season turns to winter.


As is my custom, the following 10 regulatory-compliance areas may require your attention and action depending upon the programs and services offered by your organization.




1. Compliance with unclaimed property reporting requirements


Virtually every corporation, including tax-exempts, has an obligatory requirement to voluntarily report unclaimed property to the Office of Unclaimed Funds (OUF) at the New York State Comptroller’s Office. For most tax-exempts, payroll checks (three years) and vendor checks (five years) that are not cashed and remain outstanding on your bank reconciliations are the most common source of unclaimed funds. Make sure you are in compliance with the requirements of the OUF. The website that provides the necessary information is located at Pay particular attention to the frequently asked questions section, since the reporting requirements are rather byzantine.




2. Sales tax compliance for tax-exempt organizations


The New York State Sales Tax Department continues to monitor and audit tax-exempt organizations for purposes of verifying sales-tax compliance as well as recouping funds for the State Treasury. Changes are made frequently and, as a result, we have found the majority of our tax-exempt clients having responsibility for sales-tax collection and remittance.


For example, in the past few years, the following areas were added to the extensive list of taxable items. Please review the following to the extent that they relate to your organization:


§ Any lease or rental of tangible personal property


§ Maintenance, service, or repair of real property


§ Most utility services sold to others


§ “Regular” sales of any property by telephone, mail order, or the Internet


A management-team member in your organization should be designated with the specific responsibility for maintaining sales-tax compliance.




3. Independent contractor rules and compliance


Federal and state auditors are routinely enforcing the governmental definition of an independent contractor versus an employee. In most cases, government enforcement is focused on re-classifying independent contractors as employees, so that the employer has responsibility for withholding taxes, Social Security, and Medicare tax obligations. A list of 57 criteria (Form SS-8) for determining whether an individual qualifies as an independent contractor or an employee can be found at




4. Exempt vs. non-exempt employees — are you liable for overtime that you are not paying?


Department of Labor (DOL) audits are becoming routine with a specific focus on whether individuals qualify as exempt (i.e., salaried with no overtime paid) versus non-exempt. In addition, you will find that the DOL does not believe that non-exempt employees “eating at their desk” qualifies as a mandatory lunch break. This area requires a review by your HR department to ensure that your policies and day-to-day reality match DOL compliance requirements.




5. Conflict of interest disclosures by board and management


Many tax-exempt organizations have calendar-year ends and will be filing Federal Form 990 by May 15, 2014. As such, the fourth quarter is an opportune time to verify that all management and board conflict of interest statements have been properly obtained. By doing so, you will be able to provide an affirmative answer to the Form 990 question related to conflicts of interest.




6. Obamacare and its impact


There are daily news reports regarding the Patient Protection and Affordable Care Act, also known as “Obamacare.” Many of its regulatory provisions are scheduled for implementation as of Jan. 1, 2014. The recent deferral of the “employer mandate” requirements to Jan. 1, 2015, has created a false sense of compliance relief for many employers. For more information on this topic, visit to view last month’s column.




7. Proposed New York legislation — Nonprofit Revitalization Act


Currently being debated by state legislators, I expect it to be passed in some form. The framework for this legislation was published by New York Attorney General Eric Schneiderman in his “Nonprofit Reform and Revitalization Report” during the first quarter of 2012. Whether all of his recommendations are included in the final legislation is somewhat irrelevant. The attorney general clearly views his recommendations as “appropriate best practices.” Therefore, a member of your management team should be assigned responsibility for completing a gap analysis. This process will identify any required modifications to your existing policies and procedures.




8. Medicaid enrollment increases as of Jan. 1


One of the major provisions of Obamacare is a significant change in the eligibility requirements for Medicaid benefits. Specifically, the individual income thresholds are being increased to 133 percent of the federal poverty limit. This single change is estimated to add 1 million New York citizens to the Medicaid eligibility rolls. The increase in Medicaid eligibles from 5 million to 6 million New Yorkers (25 percent of our population) may have a sweeping and significant impact on tax-exempt organizations’ programs and services. If not already addressed, every Medicaid service provider should perform a strategic-positioning analysis in response to this influx of new Medicaid enrollees.




9. Health-insurance benefits for your employees


Time is growing short for employer decisions regarding health insurance benefits offered to employees. Specifically, each organization should address the following three questions:


§ If health-insurance benefits are currently offered, what changes in the employee benefit should be implemented?


§ Based on Obamacare requirements, what employer changes must be implemented to comply with this massive health-care legislation?


§ From an employer’s perspective, is it beneficial to consider the elimination of employee health-insurance coverage? If the answer is yes, elimination could result in a salary adjustment for the lost benefit and having employees “shop” for their own health insurance.




10. Liability insurance rider for EFT / ACH transfers and cyber crime


Most general-liability insurance policies do not cover employer risk related to cyber crime. Specifically, a hacker gaining unauthorized access to your network may be able to initiate Electronic Fund Transfer / Automated Clearing House wires without your knowledge. Please contact your insurance agent or broker and make sure that you clearly understand the coverage, if any, currently provided. A conversation with your bank relationship manager is also appropriate. If an insurance rider or other coverage modification is required, process it immediately or as soon as possible.


Every organization struggles with the challenges associated with regulatory-compliance matters. Your organization can mitigate future risk by addressing the topics discussed in this column.


If done promptly, you can then fully enjoy your fall foliage tours.




Gerald J. Archibald, CPA, is a partner in charge of the management advisory services at The Bonadio Group. He can be reached at (585) 381-1000, or via email at





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