Create a Plumbing Receipt for NPOs Effortlessly

Plumbing receipt for NPOs

by the resilience and the adaptability of the sector and i have to say a big thank you to all of you for all the amazing work that you're doing and how i was saying to kathy earlier you know you're made for this and and everyone's risen to the challenge and it's so incredible to see and whilst we see a number of businesses closing i haven't seen any or in my personal experience non-profit organizations closing over this time although i'm sure they are one or two but i think just by nature of the people involved often the work just continues even with very little means or alternatively some organizations have also found themselves in a position where their activities are very much in demand and they're seeing more funding and there's more work to be done and from my side as well i work often with donors and help them set up foundations to formalize their giving and not since before 2008 have i seen so many donors come forward with requests to actually set up foundations so these are all people who've been giving themselves anyway directly to organizations but not actually wanting to take the next step so i think it's just it's it's been such an interesting dynamic it's brought out so many things in the sector and in donors and the organizations themselves and i just wanted to say a very very big thank you and just to praise you for the the resilience and the adaptability that i've seen so today we're going to have a whole range of participants in this session so some people are going to have a very high level of knowledge and other people are going to be like i know just in some of the questions that have been put forward to me i invited questions to those participants who signed up early just to put forward any questions that they might want answered and and so it was quite clear from that too that some of the participants are going to be people who might not actually even yet have set up the nonprofit organization and are looking to do that so it's quite difficult to pitch the level at you know something that's going to be appropriate for everyone so i just ask the people to bear with me who got very complex knowledge there's always a nice refresher and certain parts of it might be familiar to you but it's always good to remind ourselves and same for those who've got very little knowledge in this area we all have to start somewhere that they just bear with me as well on where we're dealing with the more complex issues so what i've done is i've taken 10 questions and i've used it's things that have come up quite significantly and often during covert questions that have also come through as a result of that invitation that i sent out to put forward queries and just questions that have come up in general practice and although it's only 10 questions you'll see that they actually cover quite a few areas and they raise a few topics and things and as mentioned i can't cover too much because of the time constraints but hopefully this will touch on things and again just for yourselves you're not expected to walk away with with knowing all the answers but certainly just hopefully a few alarm bells ringing where you know that there's certain areas you might need to look at or that if you do come across them in your day-to-day work in this space that you that you need to to investigate further so i've just put the disclaimer up and i think it's it's you know something that applies to all the talks for think good but particularly here in that i'm going to be discussing the legislation and the various rules but every organization is different and the smallest fact can actually change how the rule applies to your organization so it's so important that you don't just take the rule as a given and that it applies exactly in the way i say for your organization you do need to please take advice from a professional just in applying what the learnings are today to your organization and its specific facts please okay so towards a new horizon um i've briefly touched on this anyway you know we're working in extraordinary time sort of the more things change the more things stay the same i think with tax and that the tax doesn't really change but the circumstances in which the to which the tax is applied have certainly changed so we all know we're fundraising differently um we might be um we might have investments that have kept us going we had like a sustainability of funds some in some way or another so tax touches on so many different aspects of how we've been operating during this time have we been doing activities that we weren't normally doing all of these kinds of questions but the rules effectively you know they remain pretty constant and there are a few situations and things that have come up specific to this covert time and i'll touch on those as well so i wanted to start off with the back to basics because today's talk is about pbo and section 18a so already we've got all these acronyms and these section numbers what do they mean and and i see people who've been working in the sector for so many years still still mixing up the the acronyms and the various approvals and things and that's absolutely okay that's why we do these refreshers just to remind ourselves how it all fits together so my famous ice cream for any of you who have attended our training kathy knows this quite well and i just love the way that it exemplifies how you know if we go to an ice cream shop and we order an ice cream we can't just put our hands out and say you know please just put my vanilla ice cream with chocolate and cherry in my hands because it's all going to trickle through we need something we need some kind of container some kind of structure upon which that ice cream can sit so that we can actually enjoy it and it's the same with a non-profit organization so you need a base you need an entity or a structure those are all sort of quite formal legal words but really just something that holds your organization it is your foundation of your organization and within the sector it's generally a trust a voluntary association or a non-profit company so a trust you've got a trusteed and your trustees the voluntary association you've got a constitution and you've also got you the the fiduciary office barriers i find i've got various names with a voluntary association it can be sort of it can be directors it can be trustees it can be you know just there's a whole range of terms um and a non-profit company as well you've got your directors of a non-profit company so you've got your entity and that's that so you are one of those three things then that entity goes off and it can get a number of approvals and this is where all the jargon and the acronyms and things come in so the first one is public benefit organization approval or pbo status so this is what i like to call your vanilla approval so that's the vanilla ice cream there then you might also have as an organization the cherry on top which is your section 18a approval and that's also got to do with tax and is available from size like your pbo organization approval is too then another term that we get sort of always mentioned in the sector is your mpo registration your mpo status now we can all call ourselves non-profit organizations but you can go and formally register as a non-profit organization and i just want to emphasize that this is nothing to do with tax this is specifically to specifically to do with governance and accountability so you've got your your base then you've got the approval potentially as a pbo and potentially as an 89 you could also possibly be registered as a non-profit organization i just want to emphasize that those in fact all of these aren't automatic they're things that you have to do in order to set up an entity or to get these approvals you need to get the approvals and the registration specifically from certain government departments so there's just a summary of it i've included it more specifically so when you've got your your notes you've got that when you get a copy of the presentation you've got this for you and just to emphasize again that your pbo and your section 18 approval comes from sars npo is is nothing and i say this and i know i'm repeating it but but often in our training kathy and i will ask people sort of what your what approvals have you got and they'll say no i'm an mpo and almost assuming that you automatically get the tax approvals or again sort of how are you set up and they said no i'm an mpo and it's the emphasis that there's something behind your npo you know there is that structure there is that ice cream cone and we all have that if we've got an organization so i'd say to you that section 18a approval is not something that it's the cherry on top it's not something that all organizations enjoy and how do you know as an organization if you're entitled to section 18a approval and can apply for it so section 18a approval is basically an approval which is an added benefit and i'm going to go through the benefits of the donor and the organization but it makes you more attractive to donors because donors can actually pay less tax by making donations to your organization if your organization has got section 18a approval so these are the broad categories of activities that if an organization carries these on they could likely qualify for section 18a approval and it's not just that you can say oh i'm sure our sort of activities that we do are they would fall under welfare and humanitarian in the income tax act there's specific lists of specific activities so you need to be able to tick the boxes that you're doing one or more of those specific activities that that are listed in that act to show that you would possibly qualify for section 18a approval so you can see welfare humanitarian health care education and development conservation environment and animal welfare but not all of those activities and land and housing again not all and just out of interest these activities have got added benefits for donors because they're areas that government has prioritized that they'd like to actually attract funding to with government realizing that they can't get to all the you know can't get all the work that needs to be done they need the organizations and they'd like to encourage funding in these particular areas so organizations carrying on activities listed here might not qualify for section 18a approval or their activities might not qualify um if those activities are related to religion belief and philosophy cultural this includes youth development sport research and consumer rights as well now if for example a church applies for pbo status they could get pbo status they might not get section 18 a store they wouldn't get section 18a status if all their organization does is promote christianity as an example but if they've got a feeding scheme of some sort or if on the cultural side it's an opera or ballet organization that does sort of outreach type of programs then those programs themselves might qualify so just because your organization just itself just has a sort of what we'll call the vanilla pbo approval it doesn't mean that that you have absolutely no activities which would qualify you to be able to offer section 18a approval or session 18a benefits to your donors so how do you know which approvals you have got this is the second question and for which activities and this is going to come up a lot because sars used to be quite black and white things and pretty much you either had pbo status or you had pbo and 18a approval for everything you did but over the years that's become a lot more mixed and sars is a lot more open to giving organizations approval for only some of the activities they do for section 18a purposes so it wasn't it's no longer a blanket no you don't do any you know if you either do only 18 activities otherwise we don't give you 18 a um it's now that okay show us which activities of yours are ones that qualify for section 18 approvals and we can possibly approve you for those just those those activities will get that 18 approval so how do you find out which approvals you have well it's your size later so as i said none of these approvals are automatic you would apply two sides have a very clear description of what your activities are took the boxes of all the activities that you're carrying on that you think qualify for the various approvals and then it's up to size whether or not to approve your organization and your letter that you get from sales is generally it's a it's a letter so it's not like i think people are looking for certificates or things sometimes or something that is a little bit more recently dated but it might be that you got your pbo approval from sars in 2000 when the legislation first came out and that is actually your current approval letter still unless you've heard to the contrary from sars i'm saying that your approval is for some reason being withdrawn then that is your letter still and you might have two letters as well it might be again that you've got pbo approval and then you realize hey wait there are some of our activities that qualify for section 18a approval and then you might have a second letter which covers that so it's quite important to know um you know whether you have got a section 18a approval and which activities you've actually got them for so that you don't fall foul of of passing on these benefits to your donors to the detriment of your organization so not only are there ramifications from just a sales perspective where they could potentially take your your approval away and also actually nullify some of the receipts that you give to your donors you know there's a number of consequences you wouldn't want to happen but it's also important from a relationship perspective with your donors so a recent example i came across was a donor client of mine phoned and said you know i made a fee he made a hundred thousand grand donation to an organization which is very generous from an individual in their personal capacity but he said my it's been disallowed by sars because this organization doesn't have section 18a approval and i've actually got the 18a receipt and what had happened it wasn't even the organization's fault but what they done is they changed the nature of their entity they had been in a voluntary association and they changed over into a non-profit company it was the same same organization sars issued a different pbo number and didn't give them section 18a approval for their new entity and that is the bank account into which the client paid the donation so he actually asked for the donation back and he got that hundred thousand grand donation back from the organization and i know that sounds pretty harsh but he's an incredibly generous man you know it's unbelievable sort of what what a social conscience he has and how much he gives but he's also a finance man and he works after the last sort of cent how much he can afford to give each year based on his tax saving and his tax deduction he's going to get from section 18a so he you know he had made it very clearly on the the on the assumption that he was going to get the section 18 a deduction so it's very important that we follow the rules and we're very very clear on on what approvals we have so for those people who are attending today who thinking of starting an organization and for those who've been in this for a long time and just want a nice refresher what does that vanilla pbo approval mean for your organization so pbo itself grants benefits to the organization and it grants benefits to the donor whereas section 18a approval that cherry on trump on top gives financial tax benefits to the donor alone but of course you have that indirect benefit of that it's very attractive for donors to then benefit your organization so there is an indirect spin-off for you but it's not like they direct tax consequences for your organization because if you've got section 18 a approval but for pbo itself public benefit organization status the sort of vanilla status the benefits for both the organization and the donor so for the organization i think you know we talk about the tax exemption unit and we talk about tax-exempt entities it doesn't mean that if you've got pbo status that you've got absolutely no tax liability or no there's no tax payable whatsoever generally speaking a pbo can be completely tax exempt but there are certain circumstances in which a pbo might pay tax and those particularly relate as well to trading so if you are involved in some income generation in order to generate further funds the organization towards self-sustainability which is a very good practice in any event it might be that you have to pay some tax on that trading income and it it depends and also the assets used in trading and the property used in trading and by trading even we're talking about rental properties as well here but i always say to people just because there's a little bit of tax payable doesn't mean that you mustn't do it it's just you're still generating further funds it just means a worst case scenario you do have to pay a little bit of tax on that trading income or in respect of those assets and um it's it's still worth worth doing that but otherwise generally speaking you can as an organization have sort of general tax exemption in exemption and that there's no income tax or capital gains tax etc to be paid by the organization if you're not involved in trading and i also wanted to make the point as well don't want to get into the detail but certain trading is absolutely tax-exempt anyway so it depends on what kind of trading you're doing too and you do have certain thresholds within which you also completely tax exempt so most organizations certainly that i come across don't end up paying tax but you must just know that it isn't just a complete banker tax exemption getting your pbo status doesn't mean that you don't have to pay other taxes like employees tax skills development levy or from paying workman's compensation or unemployment insurance as well and very important to bear in mind that you need to be registered as a taxpayer if the organization needs to be registered this usually when you apply for your pbo status as you lodge your application you usually get registered at the same time automatically by sales but it's just very important that you check you are registered as a taxpayer as an organization and every year you've got to submit tax returns i just want to sort of you know to dispel that myth that there's no tax payable and no tax returns necessary and um there's no tax registration either if sars uses that every year to to assess to continue to assess does this organization still qualify do should we still have them approved should we reconsider etc so those are the advantages of the organization of pbo status then for the donor there are also some significant advantages so one of the first ones is if you've got pbo status then any donations made to your organization no matter the size of the donation will not attract donations tax in the hands of a donor and for those of you who don't know individuals can make donations of up to a hundred thousand rand per tax year without attracting donations tax but anything over and above that attracts donations tax at a rate of 20 percent and even if it's it's larger amounts there's an even higher rate of tax when you reach a certain threshold too so no donor is going to want to make significant donations to your organization if they're going to be hit by donations tax as well also the beauty is is if you're a pbo then you can a donor can make any size donation to your organization and there'll be no donations tax consequences for that donor then there's also possibly no capital gains tax as well for the donors and this is relevant where a donor donates something a donation in kind to an organization that has some kind of a value so maybe they donate a share portfolio to your organization rather than selling the shares first and donating the cash to you if they've made a nice gain on that share portfolio if they donate the share portfolio directly to your organization and you've got pbo status then they won't pay any capital gains tax as they would have had they sold it and then given you the funds and same with transfer duty depending you know on what if it's an immovable property that's being transferred to a public benefit organization it might be that there's no transfer duty payable as well by the donor this is just in a bit more of a sort of picture format for you just to give you an example so if a donor makes an 150 000 rand sages cash donation to a public benefit organization if you look on the right where it's it's this rectangular box there would be no donations tax in respect of that a donation although as we said after a hundred thousand rand would be free at um donations tax-free assuming that donor hadn't made any other donations that year also possibly if that 150 000 rand donation was a share portfolio there would be no capital gains tax and if it was a property there could possibly be no transfer duty and there are a few other lesser taxes as well that that also saving say potentially from the side sorry from the side of the pbo if we can look in the orange rectangle there's you know if they've got if the organization's got pbo status the advantage is just generally not only in respect of this donation are that there's limited tax exemption from income tax cgt transfer duty and a whole range of other taxes i've also just added in in blue there that if that organization is also section 18 approved then not only does this donor not have to pay or not have a liability for various taxes but over and above that they actually get a limited tax deduction up to 10 percent of their taxable income generally speaking in respect of making that donation so they're actually paying less tax by making that donation so on to frequently asked question number four our organization has got section 18a approval and can we issue a receipt to every donor so i have heard people sort of mentioning about how a number of methods of issuing section 18a receipts within the organization some have talked about a computer program that would just automatically churn these out because sometimes they're a bit of a hassle to have to turn out and then others say that no well they're just given to to sort of pretty much someone who isn't responsible for finance or tax in the organization to just also just continue to to give these out and what is so important is that every single receipt that you issue is well thought through so for those of you who are not aware for your donor to be able to claim that section 18 a deduction in respect of a donation and to pay less tax they need to receive a receipt called the section 18 a receipt which has got a very specific format and that receipt they don't necessarily have to submit with their tax return but they have to keep and then if they ever audited then they would submit those returns as those those receipts as proof so you would need to so donut you don't have to unless the donor asks you don't have to issue a section 18a receipt each time but it is just very important that when you do issue a section 18 a receipt someone does apply their mind to whether or not one should issue it in those circumstances so can you so when do we issue a receipt well it depends on which activity the donation will be used for do you have section 18a approval for that so for example um malia i see you online here can i use you as a bit of an example with scouts they've got certain of their activities are section 18a approved if i could remember correctly so now what milli needs to do is she needs to make sure that if someone gives a donation to the organization and they would like a section 18a receipt she can only spend that money that she's issuing the 18 a receipt for she can only spend it on those activities that sars have said have got 18a approval for scouts she can't spend it on anything else that's where the organization runs into trouble um even on the certificate as i mentioned it's got a very specific format and there's an undertaking on the part of the organization too that says we undertake to spend this money on section 18a approved activities also sars are becoming a bit stricter and stricter actually see they've just bought out a new tax amendment bill and they mentioned the audit certificate and this audit certificate has perplexed us practitioners in this area for many years because it's not clear who issues this or where or how besides is putting the onus on you as an organization to say every year if you do do both if you do activities that are approved or just as pbo activities and others and only some that are approved with 18 a you need to actually submit an audit certificate which which certifies that 18a or funds that you've given an 18 a receipt for are only spent on activities that you have got section 18a approval for so that's very very important also just another slightly more practical issue too but if you are a funding trust so you get two types or not even a trust if you're a funding organization that should just say organization you get activities organizations and you get sort of funding organizations an activities organization would be like a scouts or st luke's hospice whereas a funding organization is more like a grant maker and when you have got section 18a approval as a funding organization as soon as you issue a receipt you actually you almost you tie up and restrict those funds so that they have to be spent within a certain time period um and what's nice as we know as an organization is to be able to have that freedom to decide when to spend the funds and not to to be tied into a particular time period particularly if they're any sort of capital projects that you're working towards but i want to stress that this is only to this is only applicable this time within which you must spend sort of funds for which you issued 18a receipts only applies to funding organizations or grant makers it doesn't apply to the activities trusts like scouts you know who run the programs on the ground then it also depends very much on the type of donation as well and we're going to go through two slides that specifically deal with which donations do not qualify for section 18a receipts and this is always an area where i think you know people just just by way of practice that it applies to so many people so many sort of so many of these different scenarios and and people are often very unaware that that that we can't issue section 18 overseas for these types of donations so now we know that the world of fundraising has changed quite significantly a lot of it's happening online i attended two quizzes during lockdown for that we're raising funds for charity and so we had to pay a certain amount as a donation to to enter the quiz which was held online and and we would basically those organizations would not have been able to issue a section 18 a receipt for that amount that i paid to enter that quiz and the general rule that follows through all the way here is that if you're going to get something in return if there's some kind of quid pro quo sar's just using latin terms now sars doesn't see it as a bona fide a donation so they saying you're getting something back that's not really a donation so you're getting some kind of benefit and in those instances you cannot or you as the donor cannot be issued with a section 18a receipt they don't see it as a sort of bona fide a donation so they you're getting the opportunity to take part in a quote so i'm sorry it's not really strictly speaking a donation so you can't get an 18-0 receipt same for those quizzes as well or not only those quizzes but i certainly i'm sure with all of us i've been on social media sadly a lot during this period of lockdown and i've seen all sorts of things and so many organizations being innovative where they're auctioning weekends away for when those could be used or jewelry for example just as different ways to raise funds for an organization so the person who donates that weekend away or to donate the jewelry cannot get a section 18a receipt for the value of that donation nor can the person who buys it on auction for in that particular setting as well same with the prizes and sponsorship certainly the quizzes i did there were lots of prizes um again the people and the companies giving those prizes and sponsorships can't get a section 18 a receipt for that because again they're getting marketing or some kind of exposure through this school fees school levies as well educational organizations can't issue section 18a receipts for the payment of those again someone's benefiting and receiving education through that raffle tickets this one i think is potentially quite relevant here within our time of covert is the free rent and utilities provided by lesser i know many lessors have let their tenants off fully for the payment of their rent sometimes giving them payment holidays or giving them reduced rental if they had to ask you for a section 18 a receipt for the value of that rent that you would have paid unfortunately you cannot provide that to them same with the payment of a debt owed if an organization is struggling they say don't worry this is one of the ways we'll help you we'll pay that debt for you one cannot give a section 18 a receipt for that tithing to a church too the church cannot issue section 18 air receipts for that and membership fees to one cannot issue section 80 no receipts because you get the benefit of membership so again that's common thread running through that there's some kind of a a benefit that comes through tithing is different tithing is you know usually promotion of religion is not a um it's not a section 18 approved activity then services this is a very important one is you cannot issue a section 18a receipt to a donor who has donated services to you so this could apply to and it's the obvious ones are your lawyer or maybe a plumber or an accountant saying we're not going to charge you but it would have cost you 30 000 runs so can you please issue a section 18a receipt for that but the less obvious ones and examples that have come up over time is allowing the leasing of a motor vehicle for free or allowing people to stay in hotels for free or designing a website or providing free advertising in a magazine so these things are less obvious examples but they're seen as services rather than actual tangible donations it's quite weird i must say just giving these talks virtually because i can't see if you're all nodding or if anyone looks confused so i'm just gonna assume that you're all okay with everything because i can only see four faces here on my screen okay then moving on frequently asked question number five so my organization has received a donation in kind um i think a lot of organizations have been receiving donations in kind particularly feeding schemes over this particular time what value do i insert on the section 18a receipt i mean we've heard all sorts of stories where the value seems particularly inflated or donor says oh yes he has a tool slip this is this is exactly you know how much i would have sold it for in my shop or i'm giving you food that's expired but this is how much it would sort of cost so can i have a section eight yeah sex can i have a section 18 a receipt for this now who's whose duty is it to actually insert that value and and at what you know at what point do you actually just take the donor's word for it and that there are very very clear rules set out in section 18a which determine how which set out how you determine the value of a donation in kind and the general rule is it's got to be whatever is the lower of the cost to the donor or the market value of the item there are also some rules in there for for for various types of assets but the general rule is this so whose responsibility is it to determine the value and i would say that you know you can't be expected as an organization for every single donation to go and send in an independent auditor and do a due diligence to see exactly how much that cost that's just not practical or reasonable i think one has to take it at face value but there are certain rules as well in that for example a till slip that sounds very much to me like market value and there in that instance it would more likely be that you need to go back to the donor and say what would it cost what was the cost to you of the items not what is the market value there was also a question about that too is the donor submitted an invoice as proof of what the value of of the items donated in kind were and included that on that so it should be without fat it should be the amount less fat also items that have got no resale value to the donor for example food past and sell by date should not be given any value whatsoever so there's certain instances where yes you know one does generally have to defer to the donor unless it looks glaringly like there's something wrong there um that you do need to maybe ask questions and and i know it's tricky from a relationship perspective because we appreciate the donors and the donations made but just point out your donors that this could have a serious impact on your tax approvals and your tax registration or your 18a and your pbo and also for the donor itself it might be that that size actually and i think that's actually quite a quite a nice way of actually you know just dealing with the donors saying you know it might actually mean that your receipt gets nullified anyway if sars isn't happy with the value put in there because that's the power that sars does have if they um if they're not happy with how section 18 a is being complied with by an organization they can just nullify the organization's 18a receipts also we've been asked in our training as well about invoices and um at first you know we were a bit confused as to why donors were asking for invoices and section 18a receipts in respect of a donation and in one scenario it is just for sort of financial compliance within that organization and they can't just make a donation without there being some kind of paper trail so they ask the organization please issue an invoice so that i can actually get my finance department at the company to pay this donation over to you and i want to section 18a receipt as well now that's fine but provided that that invoice is very very clear that it's not in respect of services that you are providing to the company but it's very clear that it's in respect of a donation and should clearly refer to to the word the donation being made so it is literally a way for them to claim payment but if that you they cannot claim you know just a normal invoice as well as a section 18 a receipt because then that would allow the company a double deduction they get their deduction in terms of section 18a and then they can also claim um a deduction as an expense on that invoice as well okay so the next sort of three questions are questions that came up very very often for me during the period of lockdown where people were doing things that hadn't maybe been involved in in doing sort of charitable non-profit type activities before but had seen the need and rose to the challenge and started whether it was just to give one example of someone i know who from her house was doing a feeding scheme and was buying the food herself putting it together with friends driving into different areas and distributing it herself um so a lot of people were getting involved in activities and i think it brought out really one of the more beautiful sides of human nature and then what happens inevitably is you know some people have got the time and and they're willing and able to do that and then others want to support that so then that person finds themselves in a position of oh okay well i was just doing this with my own money now people are starting to give me more money and people are are giving me more and more and more money and i'm feeling a lot more responsible it's going into my bank account and people are starting to ask if i've got pbo and section 18a approval so the question is is do you set up a separate entity and can you or can you just fundraise in your own name so the answer the simple answer is yes you absolutely can go out and just fundraise in your own name there used to be the fundraising act which you needed to actually get a proper registration number before you could raise money and i think we all used to see people holding tins many many years ago and there would always be a number a sort of registration number to show that they were authorized to fundraise now with the non-profit organizations act there is no requirement but and certainly in extreme times like we've had in the past couple of months there's been a need for people to perhaps fundraise in their own names they haven't had an entity so it's a question of oh am i just bogged down by red tape and then i don't actually do anything to make a difference or do i just go ahead and do it and a lot of people just would go ahead and do it and i think it you know that's fine for extraordinary times um of course they're going to be people who can abuse that but you know for the people who who are doing it sort of correctly and with best intentions it did free them up to be able to do this very very important work that they were doing now whether those people go on to set up their own organization depends so i think the first question is it depends on their long-term intentions so is this going to be a longer-term project or is it something that over the next couple of months is is going to whittle out as the economy hopefully gets back on its feet and there's less of a need i mean that would be a an amazing reason for the work to to no longer be required that that that it's what that for it to wrap up that it's no longer needed but um but you know otherwise i would say to those those individuals you know don't if you're not going to set up an organization you're not going to do it for the long term carry on what you're doing but ideally this was my advice was actually go and partner with an existing established organization and i'll run through that in the next question too um but there are a couple of reasons for you or any individual thinking about doing this work is in setting up a separate entity and the first one is governance and accountability so it's it's reputational risk it's also just you know the fact that no one likes to pay money except in these extreme circumstances we've had into an individual's banking account it doesn't look good it's a lot of responsibility on the individual receiving it a lot can go wrong you need to be able to account to your donors you need to show exactly where every single cent went and so ideally you want a separate entity and the only way you can get a separate bank account really is by having a separate entity then also the more and more people who make donations and the larger those donations get people are going to start asking for where are your various approvals you know where is have you got pbo status i don't want to pay donations tax have you got 18 a i want my tax deduction and of course that has benefits for the person as well who's doing the activities in that they also want those tax exemptions and they also want to be able to attract donors by having section 18 approval then another good reason is personal liability we always want to create some kind of separation between the work we're doing and us in our personal capacity if you're carrying on the work without an entity between you then if someone something had to terribly go wrong and someone wanted to take action or legal action it would be against you and your personal capacity so you would want that separation that a separate entity and the entity being a separate ice cream code affords you either a trust an association or a company and then also you can only get mpo registration if you've got that ice cream cone or that entity and this is something that that we've all come across just through experience that most donors particularly when they're going to make a larger donation or their government donors or corporate donors will ask you for your mpo registration and your mpo certificate registration certificate so you can only get that with a separate entity so um just to touch on this very sort of short-lived um piece of legislation which was interesting the disaster management tax relief act which was brought out which actually only applied for the period of the beginning of april until the end of july so it's already passed its sort of shelf life but what sars did is they said if you're a covert relief organization then providing relief in these circumstances specifically because of the pandemic then you would be assumed to have public benefit organization status and you would have been assumed to have had section 18a approval just to enable you to attract donations as well it was very very short-lived in any event apparently the tax exemption unit was was prioritizing any organization that was doing covert related work they were actually putting straight to the front of the queue and organizations were being approved in a matter of days literally so it's not like this this legislation was absolutely essential but if i suppose if if the teu hadn't done that it certainly would have been helpful but it was a very sort of it wasn't really known about and and it's as i said had such a short short little lifespan that it's already something historic and not something that you know these things you could have relied on it but but who knows how it would have actually been applied in practice so for those people who've been fundraising in their own name the realistic thing of having an organization set up in time to get pbo and section 18a approval um it might have meant that they had to carry on fundraising in their own name for a little bit or partnering with another organization if they've got long-term intentions of carrying on the work then absolutely it's it's it is every reason to set up a separate entity so this leads me to my next question which is frequently asked question number seven it's i'm fundraising in my own name and donors are asking for section 180 receipts and are concerned about donations tax can i borrow another organization's approval and this doesn't only apply to those individuals but it also applies to organizations who don't have section 18a approval or who have been waiting for section 18a approval and a donor is insisting on an 18a receipt and they say oh you know let me just chat to this sort of next door organization maybe they'll receive it for me and pay it over to me and the simple answer is you absolutely cannot borrow another organization section 18 approval and you'd be crazy as an organization to lend it to another organization but i know these have been very challenging times as well and what you can do um is you know very importantly substance over form you can actually work with another organization almost run like a program of theirs and if they've got section 18a approval it would be a way of that organization getting in further donations as well but the channels towards a particular program which is is the program that you are running um but it has to be genuine it has to be real um it's that you're like almost a service provider to that other organization it cannot just be like a bank account kind of arrangement um there's a very real risk of um you know of there'd been severe ramifications from assad's perspective and interestingly just as an aside um someone contacted me and they were looking for an organization even to partner with and they were told that that the organization wanted a 25 share of any donations received so that in itself from ethical perspective was questionable but when i thought about it if they were genuinely going to be a program and they were going to be using resources of of that organization that had 18 a then then fair enough there might be some costs attached but if not then it was just unconscionable and in any event not the right route to follow if it was just going to be a sort of bank account type of arrangement so frequently asked question number eight another thing that came up in covert is a number of organizations not being able to offer the services that they usually offer and so then changing direction or using their facilities and this is where i talk about the adaptability of the sector it's an amazing thing to actually say well we can't do that but we can do this and this is what's needed right now so we're doing different activities now and it doesn't have to mean that you've changed your entire organization but there's just sort of different programs now for example maybe you were a training facility and now you're using your premises to provide feeding schemes so how does this all fit in and is that okay so first of all we don't want to be donor driving a driven knee driven is absolutely fine and i think that's what a lot of the changes were motivated by during this particular time but it's a it's a governance issue and it's a tax issue as well so you know if you are carrying on new activities it's just very important to get your house in order so as a company or as a trust or as an association with a constitution you're actually set up in such a way with all the documents that set you up to do particular activities you've got particular objectives and those objectives if they don't include your new activities then you definitely should go back and and chat to your lawyer about getting your documentation changed to make sure that you actually got the power as a board and as an organization to carry on those activities and then from a tax perspective as well one of the strict rules is that if you've got pbo status you can't distribute your funds to any person other than in the course of doing a public benefit activity and you've got to use your funds solely for the object for which it has been established so when you got your pbo approval and possibly your 18a approval as well you ticked certain boxes and you told sars you were doing certain activities so when you change your governing documents you also need to go back to sars as well and say we're also doing these activities and it might be that those new activities actually allow you section 18a for those activities so that might be an added bonus but it's just very important to make sure that everything is in place for you to carry on these activities frequently asked question number nine um conditional donations i've also come across a few of these examples during during this time and it's where say so here a donor is insisting i use a particular service provider to purchase certain items using the funds donated by him what is the situation with conditional donations so now it's absolutely fine if you want to if you receive a donation from a donor and they say we would like you to spend it on that particular project or in that particular area there's absolutely nothing wrong with that or you need to give us reports on impact those are all conditions but they're not essential and even i'm only giving you this donation if i can definitely get a section 18 a receipt for it and it's all valid and if it's not that's one of the clear reasons in the legislation where the donor can actually take their donation back but we've seen a few instances here where they'll say for example say say for example it's an animal welfare organization and it's a a pit pet food company and they say we're willing to give you um sort of we're willing to or maybe yeah so okay that's a sort of a tricky don't a tricky example but let's just say if we're willing to give you um a certain amount of money but you must spend it at absolute pets and that's and we've actually got a share in absolute pets but besides that um we would like you know you can only get this donation um of 100 000 grand if you will go and you'll purchase um food from absolute pets itself so there's a there's a direct and indirect benefit to the donor and that's not allowed the size is very very clear so where there's a donation that's got a direct or indirect benefit that goes back to the donor you cannot issue them with a section 18 a receipt and that actually that threatens your vanilla pbo status as well and another interesting ethical question as well which um i'll change the facts a bit so it's not so obvious but where um a supplier came along and said to to the organization i know of a donor who wants to make a big donation but i'm only really going to tell you about that donor if you use me as a supplier so it's not the donor getting any kind of direct or indirect benefit it's the supplier and it's sort of the ethical dilemmas of of you know what what is right there you know what is what is right in that circumstance is not very nice of the supplier because hopefully they would want the organization to benefit from it anyway and then lastly what are the consequences of non-compliance and i don't want you to walk out of your room at home today or wherever you are at the office saying oh my word we're in such trouble we haven't doing been doing x y and z um what are the consequences um there are some severe consequences you can't have your approvals taken away whatever is not compliant can be treated as taxable income and therefore they can be some tax payable um sars you know it might be that they nullify your section 18a receipts as well that's also a harsh possibility but the truth of that is ignorance of the law is no excuse this is a complex complex area of of tax and of the law and one's not expected to know at all but i think you when one cannot avoid knowing the bare minimum about this there'll be a minimum that allows you to ask the right questions and to know when you need to seek help um sars in the legislation as well does say that um they give you a period in most instances for corrective steps to be taken before they would take any of the drastic action that i've mentioned there but if there is intentional non-compliance then sars has actually got powers to to go against those people are who um have the fiduciary responsibility for the money of the organization effectively and there are there is the potential for a jail sentence or a fine but that's for intentional non-compliance so i think where there's been inadvertent non-compliance i think just seek to remedy it as soon as possible make sure that you know you've got all the structures and things in place for the future that those mistakes aren't known again liaise with sars they're not looking to come down overly hard they do usually give a period for the ability to correct anything that hasn't been done correctly in the past so thank you that's that's my talk section i'm very open to answering any questions i don't know if any have come in in the meantime you