SCA SUBSIDIARY TRANSITIONS Agenda • Welcome and Introductions • Background • Transition Process • Opening New Bank Accounts • Reporting • Frequently Asked Questions • Wrap Up and Conclusion 2/7/2013 Welcome and Introductions SCA Corporate Treasurer Baroness Alysia Gabrielle de Fougeres, OL, OP Mazelle Attiya 901-833-4263 Email: treasurer@sca.org 2/7/2013 Welcome and Introductions Society Chancellor of the Exchequer Mistress Katherine Angelique d’Artois de Berry Kathy Palmer 813-334-7201 email: exchequer@sca.org 2/7/2013 Background • Why is SCA forming Subsidiary Corporations? – SCA was created in 1966 – SCA, Inc was formed in 1969 and has operated successfully ever since – SCA formed affiliate corporations in those countries requiring “in country” corporations for not-for-profit corporations – Forming US subsidiary corporations will reduce, if not eliminate, the cost of complying with new State laws covering not-for-profit organizations 2/7/2013 Background The SCA is required to register in each state to solicit funds as a non-profit corporation Each state is different as to the requirements to maintain yearly registration The threshold varies per state 2/7/2013 Background • Illinois transition was the first state to be completed – $150,000 gross revenues threshold triggers audited financial statements – estimated cost: >$150,000/year for all 700+ branches in US • Applies to all not-for-profits operating in Illinois • Boy Scouts, Girl Scouts, hospitals, etc completed their transitions in 2008 • SCA, Inc had revenues of $4.5 million in 2007 (SCA’s IRS Form 990) • Need to structure corporation to less than $150,000 per year in revenues to avoid audited financial statement requirements – 19 bank accounts in 18 local groups and kingdom account at start of process – kingdom account moved out of state; group dissolved; 17 groups created new bank accounts 2/7/2013 Background – SCA-Illinois Milestones 2/7/2013 Background The following states have already been transitioned to subsidiaries 2/7/2013 • • • • • • • • • • • • • Wisconsin West Virginia Michigan New Jersey Maryland Rhode Island New York Mississippi Gulf Wars Illinois New Hampshire Maine Tennessee Why PA? • In Pennsylvania the threshold for CPA Review of the Books is $100,000 to $300,000 and the threshold limit is $300,000 before audited financial statements are required • Pennsic War – separate subsidiary 2/7/2013 10 Exchequer Reporting • Continue reporting all income and expenses on SCA, Inc until subsidiary formed and transitioned Report “donation to another 501c3” from SCA, Inc to subsidiary to close out old bank account • Begin reporting all income and expenses on subsidiary after initial money is deposited in new account Report “donation from” from SCA, Inc to subsidiary to open new bank account • At end of quarter and year, exchequers prepare quarterly and Domesday reports for both old bank account and new bank account! 2/7/2013 17 Exchequer Reporting • New State specific exchequer workbooks are available on the Society Exchequer’s website • Kingdom exchequer will prepare consolidated Kingdom Domesday report including, subsidiary and prepare a separate Domesday for subsidiary 2/7/2013 18 Frequently Asked Questions • What is the procedure for transitioning to subsidiary corporations? – Standard Operating Procedure for the Formation Of and Transition To Subsidiary Corporations Of SCA, Inc 2/7/2013 19 FAQ’s • Why is this necessary? To reduce the need for audited Financial Statements when filing annual Charitable Solicitation Registrations 2/7/2013 20 FAQ’s • Why isn’t registration with the state sufficient? Registering with a state for Charitable Solicitation is sometimes not as simple as filling out a form and paying a fee every year Some states also have financial auditing requirements, including formal audits of branches where the corporation is sufficiently large Multiple states fall into this category at this time 2/7/2013 21 FAQ’s • Who makes this decision? The SCA, Inc Board of Directors, the SCA President, and the SCA Treasurer make the decision to create subsidiary corporations • Who is responsible for implementing this? The SCA Treasurer, the Society Exchequer, the Kingdom Exchequer and all branch Exchequers within the state are responsible for implementing the transition to subsidiary corporations The Seneschal equivalents at all those levels must assist in this for several reasons Most of the seneschals are also signatories and bank accounts and the seneschals continue to ensure that the SCA meets all of its legal obligations 2/7/2013 22 FAQ’s • How is this different from affiliation like SCA Australia and other affiliates? Affiliated organizations are subject to different civil laws in their countries, and so their corporate documents are not the same Their Boards of Directors are completely different people The only thing affiliate organizations share with the SCA, Inc is Corpora A subsidiary company is one whose controlling interest is owned by another company Subsidiaries use the same corporate documents except for those that specifically apply to the state So SCA, Inc and SCA-IL, Inc share not only Corpora, but the Corporate Policies and any other governing documents that not have a specific SCA-IL, Inc version 2/7/2013 23 FAQ’s • Why this? Several states require that corporations having over different threshold gross income submit to (and pay for) formal audits of all included branches The SCA, Inc is well above that income limit If the SCA, Inc itself was to register in states, we would not have enough money to pay for the formal audits of all US SCA branches even once The branches in individual states together not come close to the annual income amount, so creating a subsidiary and registering that subsidiary sin will allow us to operate within without those costly audits for a while 2/7/2013 24 FAQ’s • Is my state first? No Illinois was the first state in this situation Like Illinois, the local groups in many states all fall under the same Kingdom making it simple to convert Those states with multiple kingdoms will require a little more work for the Society Exchequer but not the local branches • Will other states need to this too? There are other states in similar situations that will need to go through this process States containing more than one kingdom and local groups residing in more than one state will be more difficult to transition to subsidiaries 2/7/2013 25 FAQ’s • What does the new corporation look like? Who is the Board of Directors? When are their Board meetings? The new corporation looks like a small, mirror image of SCA, Inc The Board of Directors of the SCA-Wisconsin, Inc is the same as the Board of Directors of SCA, Inc The SCA-Wisconsin, Inc.’s Articles of Incorporation are almost exactly the same as the SCA, Inc.’s Articles of Incorporation Corpora is the same, Bylaws are the same, Corporate Policies are the same The Board meetings will be at the same time and place – and be similar to a court where the Crown allows a Baronial Court as part of their Court The Board meeting for subsidiary will open, and if there is any business, it is conducted Then that meeting will close, and the meeting for the SCA, Inc will open 2/7/2013 26 FAQ’s • What about SCA members living in subsidiary corporations? Are they members of SCA, Inc anymore? SCA, Inc members in subsidiary corporations are still members of SCA, Inc There won’t be any members in the subsidiary corporations except for the Society for Creative Anachronism, Inc SCA, Inc membership cards are still in effect, and nothing changes about the process of purchasing membership for anyone in subsidiaries 2/7/2013 27 FAQ’s • Are there any changes in events in subsidiary corporations? No and Yes – Events can occur just the same as they today SCA, Inc insurance will still be available for events and practices – The only change is that all ads have to say to make the check out to SCA-[state], Inc - [branch] instead 2/7/2013 28 FAQ’s • Are there any changes to how the branches in subsidiary corporations will business? No, the subsidiary branches shouldn’t notice any change in anything other than the one-time change of bank accounts, and financial reporting going forward Nothing else changes due to this transition 2/7/2013 29 FAQ’s • How we handle Certificates of Deposit that mature? Let the CD’s go to full maturity, close them out of SCA, Inc., donate funds to the subsidiary when they mature Show the CD as an asset on SCA, Inc and as a payable to subsidiary on quarterly and Domesday reports When the CD’s mature, open new CD’s if that is the desire of the local group This avoids incurring early cancelation fees and complies with the contractual requirements of the CD’s 2/7/2013 30 Wrap up and Conclusion Any other questions? Thank you