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Nonprofit Law/501c3 gymnastics booster club

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QUESTION: feel I need to give you the background so you can better understand this unique situation
Our gym owner gives an estimate to each family in September before our competition season begins (January-April) this estimate is anywhere from $1000-$1400. The estimate includes perceived entry fees to each meet we attend, the coaches fees for coaching at the meet, the per-diem for the coaches hotel stay, the per-diem for the coaches food and the estimated cost for fuel.
Every family is required to pay the estimated amount no later then January (basically before our fist meet of the season)
This money is deposited into our individual accounts to be drawn from as the meet season goes on. The gym owner will take from each account what is necessary to cover the costs or the meet.
At the end of the meet season we will either have a balance still due to the gym ( basically the estimate was too low and we still owe) or there will be a credit due (the estimate was too high)
In the past 8 years the estimate has always been too low and families have had to pay more money to the gym.
Enter the booster club, for the past 8 years the booster club was poorly ran and barely made any money off of fundraising. However for the 2014/2015 season of gymnastics we had a great group of parents who put forth great effort to see that our fundraising was successful.
This last year we raised $9000 dollars. There are 20 girls on the team roster and so that $9000 would evenly be split at $450 each.
In December 2014 we had at that time only raised $5000 so we deposited $250 into each teams account at the gym, thus bringing our out of pocket expenses to the gym down by that amount.
Between December and April the booster club raised another $4000 and we have voted to distribute that money evenly ($200) into each team account.
Here is the problem, the gym owner over estimated our meet season fees by $188.00 meaning each family currently holds a credit in their account. The gym owner is refusing to accept our $4000 dollar check saying "she can not put money in each account when we currently already have a credit"
Basically she worries families will want to withdraw the money to reimburse them selves for things such as hotel, gas, food etc while traveling last meet season.
If this money is not distributed then the $4000 rolls over in the booster club general account until next September when the process starts all over again
The biggest problem with that, is we currently have 20 girls on the roster and every September several other girls join the competitive team. Meaning the $4000 would have to be split by several more families.
The second problem is that we solicited these funds for a specific purpose, we asked business to donate money, or items to be sold to helps support the 2014-2015 competitive team. From what I have read if the funds are not spent exactly how we stated they would be, then we would have to contact each business and ask their permission to redirect their donation to the 2015/2016 team.
My questions to you are
1. Can the gym owner deny our payout after it was a majority vote by the club to do the distribution?
2. Can families withdraw the $388 (the $188 over estimate amount plus the $200 from the booster club)from their accounts to reimburse them self for expenses during their child's competition season?
3. Instead of giving the money to the gym owner to distribute, can families turn receipts in to the booster club for reimbursement up to $200

After this fiasco I think we all have realized that there needs to be some changes in how the booster club distributes their funds, such as sending checks to the gym hosting our meet, instead of having parents pay the gym owner and then she turns around and pays the fees.
Our bylaws can be re wrote before next September when the new team is formed...however we feel we owe it to the 2014-2015 families that worked so hard to earn this money to pay it out as promised and start fresh next year.

ANSWER: You wrote, "From what I have read if the funds are not spent exactly how we stated they would be, then we would have to contact each business and ask their permission to redirect their donation to the 2015/2016 team."  You would not be required to do so unless the particular business made particular use binding by a written directive.   Generally, donors give up any authority over donated items and funds, unless they had a specific signed agreement with the nonprofit with a reverter clause or at least a letter indicating
the conditional nature of the gift.  That is an issue called "enforceability of a restricted gift to a nonprofit organization." A case that discusses the issues is at http://goo.gl/YQB5s starting in the middle of the first column. Although that was a Connecticut case, most states would have similar treatment.  In other words, a donor who has made a completed charitable gift to a nonprofit organization does not even have standing in a court to bring an action to enforce the terms of that gift unless the gift instrument contained an express reservation of control over the disposition of the gift, such as a right of reverter or a right to redirect. A right of reverter means
that the donation would be refunded if the charity breached the agreement.

You may want to inform the donors of your issues and your desire to use the funds in another way and request their permission. That is a way to protect your reputation for future donations.  See also http://bit.ly/3lPY5 "The Importance of Respecting Donor Wishes" from Guidestar which is not in reference to the law but is in reference to
maintaining good relationships with existing donors.

You asked, " Can the gym owner deny our payout after it was a majority vote by the club to do the distribution?" Evidently your organization has either a written or oral contract with the gym owner as to the use of funds that are provided to the gym owner.  Therefore, you would need to comply with that agreement.

You asked, "Can families withdraw the $388 (the $188 over estimate amount plus the $200 from the booster club) from their accounts to reimburse them self for expenses during their child's competition season?"  It is not the family's money to withdraw unless the money was their own and it was not money that was raised, tax-free, by sales operations of a 501(c)(3) organization.  Also, as I wrote above, it depends upon the agreement with the gym owner.  In addition, the gym owner was correct that valid expenses of a 501(c)(3) organization would not include, "things such as hotel, gas, food etc while traveling last meet season" unless those expenses were required for the youth to compete.

You also asked, "Instead of giving the money to the gym owner to distribute, can families turn receipts in to the booster club for reimbursement up to $200?".  Yes, if the booster organization approves the expenses and they are necessary for the youth to compete.


Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather more information.

---------- FOLLOW-UP ----------

QUESTION: the booster club fundraising money was raised with the intent to help off set the expenses associated with competitive gymnastics.  For instance, coaches fees, uniforms, travel expenses...etc.
All families put into their accounts $1100 personal dollars and the booster club will have donated $450. The money all went into the same account, so now that there is a credit in our accounts of $388, some families are wanting to withdraw the funds. Saying that they put more personal money into the account then the booster club did, so they are not withdrawing "non profit funds" but simply asking for some of their own money back so that the funds raised by the booster club can pay for the meet season as they were raised to do in the first place.

The money is mixed into an account and so it could be argued that because there is more personal money in the account then what was given by the booster club, the families should be allowed to get their personal money back.

I hope that makes since. 😀

Answer
A booster or other organization may certainly refund part of the amount that families paid, even though the money merged temporarily with other funds.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather more information.

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Harvey Mechanic

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I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

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I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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