Where Most Needed

A brief report in the Dayton Daily News tells us that the Centerville Baseball League (EIN 31-6050195 Form 990) is suing former volunteer Charles D. Malloy for failing to maintain accurate books and records. 

The organization is not large: its 2004  revenue is a little under $100,000 and its biggest expense is umpire fees.  But it was not always so.  Looking back to the period 1999-2001 (like this Form 990 from 2001), the organization was then reporting annually an additional half million dollars of event-related income that yielded a few tens of thousands additional income for the league.  From the news story, we gather that the additional income was from bingo and instant lottery tickets. 

Most of the time, gaming is not considered charitable work and any gaming proceeds would be subject to unrelated business income tax (UBIT).  The IRS has a helpful "Gaming Publication for Tax Exempt Organizations" that explains the rules.  There is a very limited exception for bingo, but that exception does not extend to instant lottery tickets, as explained in the 1999 continued education text put out by the IRS.  There are also rules about issueing Form W-2G to winners. 

One lesson here for charities is to be wary of volunteers that have great fundraising ideas.

But where does the organization go from here?  Is a lawsuit a good idea?  The current Form 990 shows that the organization has $72,000 in cash and savings, so perhaps the group should just pay up and chalk it up as a lesson learned.  Trying to manage a lawsuit may end up costing more in terms of volunteer time, bad feelings, and lawyer's fees.