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Mar 29, 2010

9 Items for House Corporations to Address

House Corporations
9 Items for House Corporations to Address

By David Carico – Omega Financial, Inc.

The chapter house is not just a home; it is a symbol of the values shared by both undergraduates and alumni alike. As co-stewards of those values, one of the vital functions of the House Corporation is to preserve the corporation’s assets and to make certain that there is enough income to maintain the property, both for today’s students and those who will follow. The “business” of brotherhood & sisterhood, then, is extremely important.

Having served hundreds of House Corporations over the years, Omega Financial has been asked to help more than a few out of a fiscal nightmare.  Based on our experience, here are some of the items we’ve seen to be of critical importance:

Chapter Rent – The major source of income for a chapter house corporation is rent.  While undergraduates are tempted to provide inexpensive housing as a selling point during recruitment, the House Corporation should be diligent about setting “market” rent, comparable to local housing options and high enough to ensure that the facility can be adequately maintained and remain competitive with other facilities on campus.

Chapter Lease and House Agreements – Whether the property is leased from a 3rd-party or is owned by the House Corporation, make sure that you have an executed Lease Agreement with the chapter that outlines the expectations and responsibilities of both the chapter and the Corporation.  Though some Corporations have executed agreements directly with each individual member living in the house, we strongly encourage that the relationship be between the Corporation and the chapter (one point of contact for your Accounts Receivable is much easier to manage than 30 individual ones). Then make sure that the chapter has written Housing Agreements with each member living in the house, so that the member is accountable to the chapter.  Check with your Inter/National Headquarters for samples.

IRS Form 990 – Major changes to the IRS Guidelines dictate that all House Corporations must generally file a 990 or 990-EZ.  Failure to file can result in stiff penalties being assessed by the IRS; we know of several organizations levied $10,000 (and up) in such fines for failing to file.  The form you need to file will be based on your income level, and you can find more information at www.irs.gov.  Note, too, that when a return is not filed, the IRS can also impose a $20 per day fine against the person responsible for filing the return.

Payroll taxes – Make sure that all appropriate payroll taxes are withheld and are paid on schedule.   This is another area where Uncle Sam likes to levy fines and penalties that can be onerous to the chapter/House Corporation and its officers.

Corporation Filing – Virtually every state requires a filing to be made by its corporations on a time frame varying from annually to every five years in order to maintain corporate status. The statement name also will vary from state to state and may be called a Corporate Registration Statement, Statement by Domestic Nonprofit Corporation, Annual Report, or other name. The statement function may vary but can be distinguished by one important feature—failure to file it within a required time period can lead to financial penalties or may result in suspension or revocation of the Corporation’s charter.

Budget – The house corporation budget is prepared by estimating the income and the expenses based on previous years’ experience and any expected changes. Budgets can be quite detailed or general, depending on the housing situation. The house corporation budget should be prepared annually before the beginning of the fiscal year and prior to the chapter budget process, so that the chapter has an accurate budget number for their Lease costs.

Itemize – Today’s students (and their parents) are savvy consumers.  Rather than saying, “Your bill is $4,000 this semester,” provide a detailed breakdown of all associated charges.  Also, avoid uncertainty between chapter and House Corporation bills by providing a single bill with all itemized charges; two separate bills leads to confusion.

Build A Reserve Fund – Charging a market rent for live-in students and a Parlor Fee for students not living in the house allows the House Corporation to build a Maintenance Fund to address future capital expenditures (a new roof, a new boiler, etc).  A Reserve Fund might also be augmented with contributions from alumni raised through an Annual Appeal.  Without such a fund, maintenance is continually deferred, leading not only to cosmetic problems, but to health and human safety issues.  While it is difficult for undergraduates to think much past the next social function, the House Corporation must necessarily be concerned with and preparing for the long-term viability of the chapter home.

Alumni Relations – In our work for House Corporations, we all too often hear, “the chapter/House Corporation only contacts me when they need money”  The House Corporation is oftentimes the bridge between the undergraduates and your chapter’s alumni.  Though building alumni relations is certainly not the Corporation’s primary responsibility, it pays to be forward thinking.  Whether for a fundraising effort or for a major event in the life of the chapter, such as a Centennial celebration, someday your Corporation is going to need assistance from a broader range of alumni.  Sending out newsletters on a consistent schedule, making sure invitations reach alumni well in advance, arranging an Annual Fund mailing for smaller gifts each year, which get your alumni in the habit of giving – whether the Corporation does these things internally or hires an outside firm to handle them each year, it pays to be “friend raising” and cultivating your alumni well in advance.  Informed alumni are much more willing to participate when their help is requested.

Fraternity and sorority members who volunteer to help maintain the chapter’s physical home provide a valuable service.  They maintain control of what is cumulatively the largest asset of the organization, the property located at institutions across the country, and they help to maintain the common history and shared ideals of the chapter, its members and the organization as a whole.  Though the many details necessary for their successful operation are impossible to enumerate here, keeping a watchful eye on these items, which we have found to be problem areas for a number of House Corporations engaging Omega’s services, may help keep your Corporation in good standing and on a solid financial footing.


David Carico, CFRE, is Vice President of Omega Financial, Inc.  Omega helps chapters with the billing and on-time collection of member dues, rents and fees, and provides capital campaign fundraising and alumni relations services to House Corporations and National organizations.


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