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I. Purpose
The purpose of special committees (also referred to as “committees”) is to address specific issues or projects within Esperanto-USA that need focused attention. Unlike standing committees, these committees are not listed in organization’s bylaws. These committees are formed to support the organization’s strategic and operational goals.

II. Formation of Special Committees

1. Establishment: Special committees may be formed either by the president of Esperanto-USA, with approval from the Board of Directors, or directly by the Board of Directors, to address specific needs or projects. 
2. Duration: Committees will be created with a specific, time-limited charge. The duration will be defined when the committee is formed, no longer than one year, unless otherwise decided.

III. Delegation of Authority

1. The chair of the board of Esperanto-USA will delegate the authority and scope of action to the committee, specifying the special committee’s goals, tasks, and expected deliverables.
2. The special committee may collaborate with the executive director; however, any requests for paid personnel time must be approved by the executive director. Paid personnel will report solely to and be supervised by the executive director.
3. Each committee must have a written charter that outlines its purpose, goals, and scope of work which is approved by the Board.
4. Special committees are expected to work within the scope of their charge, and any decisions or actions that fall outside of that scope must be approved by the president or Board.

IV. Committee Chair

1. Nomination and Election: The chair of a special committee is nominated by the president and must be approved by the Board of Directors or Executive Committee.
2. Term: The committee chair serves a term of one year, with the possibility of reappointment for an additional term. Reappointments must be approved by the president and Board.
3. Responsibilities: The chair of the special committee is responsible for leading meetings, guiding committee members to achieve the committee’s goals, and providing regular progress updates to the president and Board. The chair may request funding for committee activities and projects from the Board. 
4. Vice-Chair: The chair of the special committee may appoint a vice-chair to assist with committee functions and assume responsibilities if the chair is unavailable for an extended period. The chair also has the authority to create additional roles within the committee to ensure its effective operation. If the chair is unable or unavailable to serve, the president may appoint a vice-chair to fulfill the role.

V. Charges

1. Charge Creation: The president will provide a clear charge for each special committee, outlining its purpose, objectives, and expected deliverables.
2. Annual Review: All charges are subject to review and potential revision annually, or when the committee’s term is renewed. The president may adjust the charge as necessary based on evolving priorities.

VI. Membership

1. Eligibility: Any current member of Esperanto-USA is eligible to join a special committee. Membership is voluntary. Current members must be included in the charter document, which must be approved by the Board. The chair of the special committee may dismiss a member after providing a written notice which details their decision to the president. All members must adhere to Esperanto-USA’s code of conduct policy.
2. Commitment: Members of the committee are expected to fully engage in the committee’s activities, attend meetings, and contribute to achieving the committee’s charge.
3. Committee Size: The size of each committee will be determined based on the scope of its charge and the need for diverse input. The committee should consist of a manageable number of members.
4. Expert Opinion: Committees may invite external experts—individuals who are not members of Esperanto-USA—to serve as advisors. While external experts may participate in discussions and offer recommendations, they will not have voting rights within the committee or organization.

VII. Reporting and Accountability

1. Committees are required to submit regular reports to the Board, summarizing their progress, challenges, and outcomes.
2. Upon completion of their charge, committees must submit a final report, including recommendations for future actions if applicable.

VIII. Dissolution

1. A special committee is dissolved once its charge is completed, and a final report has been submitted to the President and Board. Alternatively, a committee may be dissolved earlier if the president and Board deem the committee’s work unnecessary or if there is a significant change in Esperanto-USA’s priorities.

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Purpose: 

The purpose of this Whistleblower Policy is to encourage and enable employees, volunteers, board members, and other stakeholders of Esperanto-USA to report any violations or suspected violations of laws, regulations, or policies without fear of retaliation.

Scope: 

This policy applies to all employees, officers, directors, volunteers, and consultants.

Policy:

1. Reporting Violations:
   1. Any individual who becomes aware of illegal or unethical behavior within the organization is encouraged to report the matter to the Executive Director, President, or another board member.
   2. Reports can be made anonymously if desired, and confidentiality will be maintained to the extent possible.
2. No Retaliation:
   1. Esperanto-USA will not tolerate retaliation against anyone who in good faith reports a violation or assists in the investigation of a reported violation. Retaliation includes termination, demotion, harassment, or any adverse action against the whistleblower.
3. Investigation:
   1. All reports will be investigated promptly and thoroughly. The findings will be communicated to the Board of Directors, and appropriate action will be taken based on the findings.
4. False Allegations:
   1. Deliberately false or malicious reports will not be tolerated and may result in disciplinary action.

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Purpose: 

This Document Retention and Destruction Policy is designed to ensure that Esperanto-USA properly maintains important records and documents in compliance with legal requirements and to promote the timely destruction of obsolete records.

Policy:

1. Retention Periods:
   1. Financial Records (e.g., budgets, financial statements, tax returns): Retain for at least 7 years.
   2. Governance Documents (e.g., board minutes, by-laws, policies): Retain permanently.
   3. Contracts and Legal Agreements: Retain for at least 7 years after the contract expires.
   4. Employee and Payroll Records: Retain for at least 7 years after termination.
   5. Donor Records: Retain for at least 7 years. 
   6. Restricted donation and bequest instructions/conditions: Retained for at least the lifetime of the endowment or term of the instructions/conditions. May be retained longer for historical reasons.
   7. Correspondence (emails, letters): Casual correspondences not related to official business and email notifications from systems, can be retained (or deleted/destroyed) at the will of the recipient. Correspondences containing an official decision or discussion about the above categories should be retained per their guidelines.
      1. Example of items that can be deleted: emails discussing a project that don’t contain a financial approval or decision; emails of a personal nature; emails from Google Docs summarizing document changes so long as the document itself is retained per the above guidelines.
2. Electronic Records:
   1. Electronic documents, including emails, should be retained and destroyed in accordance with this policy.
3. Document Destruction:
   1. Documents should be destroyed after the expiration of the relevant retention period. Paper documents will be shredded, and electronic documents will be permanently deleted.
4. Litigation Holds:
   1. In the event of litigation or governmental investigation, all relevant documents must be retained and may not be destroyed until the matter is resolved.
5. Compliance:
   1. Failure to comply with this policy may result in disciplinary action. The Board of Directors will review compliance annually.

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Purpose: 

The Conflict of Interest Policy is designed to help board members, officers, and employees of Esperanto-USA identify situations that present potential conflicts of interest and to provide a process for addressing such conflicts.

Policy:

1. Definition of Conflict of Interest:
   1. A conflict of interest arises when an individual’s personal interests interfere, or appear to interfere, with the interests of Esperanto-USA. This includes financial interests or affiliations with vendors, donors, or other non-profits.
2. Duty to Disclose:
   1. Board members, officers, and employees must disclose any personal (friends, acquaintances, non-legal “family”), financial (stake or ownership in a business), or familial (in any way considered part of one’s legal family) interest in a transaction, contract, or other decision involving Esperanto-USA.
      1. Example: if board member A is recommending that her friend, relative, acquaintance, or own business be used to perform printing services for “Usona Esperantisto”, the board member would need to disclose that there is a relationship between them and the 3rd party and they would have to recuse themselves from voting on using the service. 
      2. Example: the CO of E-USA needs an accountant to perform tax services. Her niece just graduated from college with an accounting degree and would like to perform the service. The CO should remit the decision to the Board, explain that there is a familial relationship between the CO and the niece, and defer to the Board’s decision on whether or not to allow the niece to perform that service.
3. Recusal from Decision-Making:
   1. Individuals with a conflict of interest shall not participate in discussions or votes related to the matter in which they have an interest.
4. Annual Statements:
   1. All board members, officers, and key employees will annually complete a disclosure form identifying any potential conflicts of interest.
5. Violations of the Policy:
   1. If the board of Esperanto-USA determines that a conflict of interest was not disclosed or handled appropriately, it may take disciplinary action, including removal from the Board or termination of employment.

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Purpose: 

The purpose of this document is to establish clear and effective protocols for the use of Google Workspace for Nonprofits and Slack accounts provided by Esperanto-USA. These accounts are made available to officers, staff, committee chairs, and other individuals performing work on behalf of the organization. By setting these guidelines, Esperanto-USA aims to ensure that these digital tools are utilized in a manner that maximizes their benefits while maintaining security, efficiency, and respect for all users. The Executive Director is responsible for the creation and allocation of these accounts, ensuring they are used strictly for organizational purposes to support the mission and operations of Esperanto-USA.

Requirements: 

To ensure that everyone can fully benefit from these resources, all users are required to adhere to the following guidelines for appropriate account use:

• Accounts must be used exclusively for Esperanto-USA purposes and not for personal or commercial activities.
• Accounts must be kept secure, with passwords kept confidential, unique, and not shared.
• Users must respect the privacy of others and comply with the Social Media Code of Conduct.
• Account holders are prohibited from using Google for Nonprofits or Slack accounts to engage in any illegal or unethical activities.

Accounts will be reviewed at least annually and may be deactivated if it is determined that Esperanto-USA has no need for them. Esperanto-USA reserves the right to review any content created, stored, or used on these services. If you have any questions about these guidelines, please contact the Executive Director at eusa@esperanto-usa.org.

Scope: 

These accounts provide access to a variety of tools and services which can help members of a nonprofit to be more effective in their work. Specifically, Esperanto-USA has access to the following services:

• Slack: A messaging and collaboration platform that allows teams to communicate in real-time through channels, direct messages, and group chats. It also supports voice and video calls, enhancing remote communication and teamwork.
• Gmail: An email service with large storage capacity and integration with other Google services.
• Google Drive: A cloud storage service that allows users to store, access, and share files, including documents, photos, and videos.
• Google Docs: A word processing application for creating and editing documents collaboratively in real-time, similar to Microsoft Word.
• Google Sheets: A spreadsheet application for creating and editing spreadsheets, similar to Microsoft Excel.
• Google Slides: A presentation application for creating and editing slideshows, similar to Microsoft PowerPoint.
• Google Forms: A tool for creating online forms and surveys, with automated response collection and analysis.
• Google Calendar: A calendar tool for scheduling and managing events, meetings, and appointments.
• Google Meet: A video conferencing and online meeting platform for virtual meetings, webinars, and screen sharing.
• Google Chat: A messaging and collaboration platform for team communication and real-time chat.
• Google Contacts: A contact management tool to store and organize contact information.
• Google Sites: A website builder to create simple websites and intranet sites, without coding.
• Google Keep: A note-taking app for creating, organizing, and sharing notes, lists, and reminders.
• Google Jamboard: A virtual whiteboard for visual collaboration and brainstorming.
• Google Vault: An archiving and eDiscovery tool for retaining and searching email and chat messages.

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Purpose:

Esperanto-USA values constructive dialogue where all are able to discuss themes related to the international language Esperanto. This code of conduct is established in order to maintain a respectful and safe environment on Esperanto-USA’s social media platforms, ensuring that all members can engage in constructive and respectful discussions. 

Scope:

This policy applies to all members of the organization and visitors to our social media platforms, including but not limited to email, Facebook, Twitter, Instagram, Slack, Telegram, and others.

Definitions:

• Harassment: Includes but is not limited to inflammatory comments, threats, hate speech, spam, intimidation, ridicule, insults, and unreasonable demands. 
• Blocking: Restricting an individual from interacting with the organization’s social media platform(s).
• Spam: Irrelevant and/or duplicated content, such that discussion is disrupted.

Policy:

1. Code of Conduct:
   1. All members are expected to engage respectfully, refraining from making inflammatory or derogatory comments.
   2. Harassment in any form is strictly prohibited.
2. Reporting:
   1. Members and visitors can report harassing behavior to the Board of Esperanto-USA or their delegate.
   2. Reports must include specific examples and, if possible, screenshots of the offending behavior.
3. Assessment and Warnings:
   1. The Board’s delegate will promptly review reported incidents in conjunction with the account manager.
   2. If the behavior is deemed to be harassing, the account manager will issue a formal warning to the individual, explaining the nature of the violation and requesting immediate cessation of the behavior. When appropriate, the offending post or message may be deleted.
4. Blocking Criteria:
   1. If an individual continues harassing behavior after a warning, they may be blocked from the organization’s social media platform(s).
   2. In severe cases, such as threats of violence, hate speech, immediate blocking without prior warning may be warranted at the discretion of the Board of Esperanto-USA or their delegate.
5. Communication of Action:
   1. The individual will be informed of the action taken, detailing the reasons for the decision and any steps they can take to appeal the decision.
6. Review and Adjustment:
   1. This policy will be reviewed at least yearly by the Board of Esperanto-USA and adjusted as necessary to ensure it remains effective and fair.

Procedures:

1. Documenting Incidents: The organization must keep detailed records of all reports, warnings, and actions taken, including dates, descriptions, and screenshots.
2. Awareness: The organization must ensure that all account managers are aware of this policy and understand the importance of fairness and confidentiality. 
3. Transparency: The organization must publish the policy on the organization’s relevant platforms to ensure members are aware of expectations and procedures.

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This report is intended to provide a detailed and comprehensive overview of our organization’s financial picture.¹ This is important so that the entire membership can have a clear understanding of the challenges that we have been facing, as well as the solutions we are proposing for the organization’s long-term financial health.

While there are some long-standing issues with how Esperanto-USA has documented or understood its financial responsibilities, no individual is responsible, and this document is not intended to cast blame. However, as an organization which now manages around $1 million in assets, the Board has recognized a need to bring the Esperanto-USA’s accounting in line with best practices and ensure that the Board is being the best possible steward of the organization’s resources. The Board deeply appreciates all of the volunteers and staff members who have worked to make Esperanto-USA successful over the years with the resources and knowledge that they had at the time, often with little support or guidance. Looking forward, the Board wishes to find solutions to put the organization on the best footing for future success.

Table 1: Current Account Balances (May 31, 2024)

Although there have been accounting mistakes and other issues, these appear to have have occurred primarily due to a lack of detailed knowledge about appropriate financial and accounting principles for non-profit organizations. There is no evidence whatsoever of intentional wrongdoing, nor of any diversion of funds for uses unrelated to the stated goals of Esperanto-USA.

Section 2: Terms

Before getting started, it would be helpful to define the terminology used throughout this document to reduce confusion. The Board has worked with a Certified Public Accountant (CPA) to ensure the terminology used is accurate and in alignment with best practices.

2.1 “Fund”

This term has been used very broadly to represent a named sum of money, often but not always designated to be used for a specific purpose, regardless of whether the fund included donor-restricted gifts. This also includes the General Fund, which is used to track all day-to-day expenses.

2.2 “Fund Manager”

A committee or a member of the organization (who may or may not be on the Board) who is responsible for approving and ensuring that fund expenditures meet the designated intentions of that fund (e.g. so that money intended for one thing isn’t spent on something else).

2.3 “Board-Designated Fund”

According to financial management best practices, the Board may set up “accounts” (also known as board-designated funds/assets) that are intended to be used for a specific purpose (e.g. scholarships for the Landa Kongreso or support for regional groups to host weekend retreats).² These funds are created at the will of the Board with input from the Central Office and the membership, but are not legally restricted according to the IRS or Generally Accepted Accounting Principles (GAAP). A designation set by one Board can be modified or removed by a future Board. No Board resolution to ‘designate’ a fund has any more power than a future Board resolution to redesignate or de-designate it. This is important, to make sure that one Board does not lock up all of an organization’s money and make it impossible for an organization to function down the road.

2.4 “Restricted Donation/Gift”

Any gift that comes with specific restrictions from the donor on how that gift should be used. This may or may not align directly to a “fund”, but normally is intended to align to a need of the organization. In the event that a donor makes a gift intended for a purpose which is not feasible or aligned with the mission of the organization, and the Board wants to redesignate or de-designate the gift so that it can be used in a different manner, the Board would need to solicit written instructions from the donor.³ For this reason, it is incumbent on the Board to document the donor’s instructions for any donation made so that it can be spent appropriately.

2.5 “Endowment Fund”

Endowment funds provide stable income streams to the organization over a long-term period, since the principal amounts are not withdrawn. An endowment fund’s interest and other investment income (if applicable) is withdrawn, typically at a fixed rate, to support either the operations of the organization or a specific cause (e.g. annual scholarships or programs). Often a bequest (estate-planned, post-mortem gift), major gifts, and other financial-vehicle gifts (e.g. stocks) are made to ensure a long-term impact. Although in the past Esperanto-USA has not set such minimums, endowments often have a minimum donation amount due to their long-term nature.

2.6 “Charitable Trust”

A charitable trust (trust for short) is a legal and financial agreement that is set up by one or more donors and is managed as a financial vehicle independent of the organization. Often trusts are a collection of assets (e.g. stocks, mutual funds, etc). Esperanto-USA is the sole trustee (manager) as well as beneficiary of the Reed Trust, which is a charitable trust that provides the organization with an income stream according to specific terms and purposes. A trust is different from an endowment because the trust itself is a separate legal entity. One important difference is that any investment income that a trust generates is taxable, unless the trust makes a tax-deductible donation of that income to a qualified non-profit organization. Upon the death of the donor, or completion of a pre-designated term, the trust’s assets are transferred to the organization which (typically) liquidates the trust and absorbs the funds into accounts, endowments, or its own financial portfolio (if applicable).

2.7 “Program / Administrative Expenses”

In this document we refer to “program expenses” or “administrative expenses” (also sometimes called “operational expenses”). This is a common distinction in nonprofits to differentiate between the expenses required simply to run the organization (paying administrative staff, paying for a website, phone, mailbox, etc), as opposed to expenses which directly support the mission of the organization (in our case, anything that directly supports promoting awareness of, eduction in, or use of Esperanto within the US). In general, it is recommended for a nonprofit to try to have administrative expenses at 30-35% or less of total expenses, and program expenses at 65-70% or more.⁴

Section 3: Background of Esperanto-USA’s Financial Situation

At the close of the 2023 Landa Kongreso, the organization had approximately $400,000 in directly-owned assets.⁵ These assets were held across two accounts: a checking account to be used for day-to-day expenses as well as a brokerage investment account intended to provide income. Our General Fund, which is where day-to-day expenses are logged, was at approximately negative $72,000.⁶ This was possible because the other funds all had positive balances and the total came to approximately $400,000, but it is not a recommended accounting practice. In the past, the Board has sometimes understood this as “borrowing” from the other funds. (Note: These are board-designated funds, as distinct from donor-restricted gifts. See section 4.2 for more about this distinction.)

The various funds were being periodically updated to receive a proportional amount of the total income from the brokerage account. For example, if a fund represented 5% of our total assets, it would receive 5% of the income. This meant that larger funds would continue to grow, while smaller funds would grow very little, and the negative General Fund would not be allotted any of the income from the brokerage fund.

The brokerage investment account was managed by an individual Esperanto-USA member with professional investment experience who had been entrusted with the task many years prior. The quarterly statements of the account were also reviewed by a former treasurer, who prepared quarterly reports for the Board. There was also a Financial Committee which, in practice, had been informally composed of several non-officers, although the bylaws specify that the Financial Committee consists of “the President, the Treasurer, and the Director of the Central Office”.⁷ There is no documentation regarding how often the Financial Committee met, its goals, or outcomes. At some point in the past, the organization had adopted a policy of investing in very low-risk assets, which indicates that the organization has likely received below-average returns.

Esperanto-USA was also acting as sole trustee of an entity called the Reed Trust (see section 2.6), which made occasional donations to Esperanto-USA, which were put into an unrestricted fund and used for general operating expenses.⁸ The Reed Trust is an independent entity with assets of $395,485.69 (as of May 7, 2024), which Esperanto-USA has been the sole trustee of since 2002. Most members, including members of the Board, were not aware of the Reed Trust. This may have been due in part to the fact that the Reed Trust is a separate legal entity, and its balances were therefore not included in Esperanto-USA’s financial reports. The Reed Trust will be discussed further in section 3.2.

Operationally, the organization was running a deficit. The biggest operational expense is the salary and other expenses of the Director of the Central Office. The salary is fixed at $30,000 for a half-time position, and with other payroll expenses comes to about $35,000.⁹ This deficit has been a known issue among the Board for years.¹⁰

Meanwhile, total membership dues hovered around $16,000 per year for the years 2017-2022. Even in 2019, when we had our highest income from dues in recent years ($17,700), this only covered about half of the payroll costs of the Central Office.¹¹ The remainder of expenses were offset by donations (including sizable but intermittent ones from the Reed Trust) and income from investments.¹² However, it seems that these sources were not enough to prevent an overall deficit. The difference between Central Office administrative expenses and dues income seems to be the primary reason why the General Fund was at negative $72,000 as of June 30, 2023.

Table 2: Dues Income and Number of Dues Payments by Year

Includes Year to Date (January-May) Comparisons, 2017-2024. (Full Year figures include life memberships; Year to Date figures do not.)

While the table above shows a continuous decline in memberships from 2017-2023, there is a strong increase in year-to-date (January-May) annual memberships for 2024 compared to previous years. When compared with 2023, there is a 36% increase in memberships for the same period. The organization is at the same level of paid membership dues and income for January-May as it was in 2019.¹³

Despite this recent upward trend in memberships and dues income, projected total dues income from annual memberships are projected to only bring in around $17-18,000.¹⁴ Esperanto-USA would need to have about twice as many members as we project to have by the end of the year to ‘break even’ with the expense of the Central Office. This topic will be discussed further in section 5.4.2.

Regarding the annual budget, the organization has a custom of only preparing and approving an ‘operational’ budget. This has been expressed as “the cost to keep the lights on”. Theoretically, this was intended to balance income and administrative expenses, while leaving program expenses out of the annual budget. For example, during discussion about adding a line item for promotional activities to the budget at the 2022 and 2023 congresses, it was expressed that this does not need to be in the ‘operational’ budget as there is a fund for it. As a result, many sorts of expenditures were not being budgeted for; some funds were rarely or never used, while others would suddenly have very sizable expenses. See section 5.1 for recommendations regarding the annual budget.

Lastly, the accounting for the organization has been done through the Central Office for years, as well as the yearly reporting to the IRS (form 990). This has been done on an older version of QuickBooks which is only accessible on the computer at the Central Office, and attempts to convert to QuickBooks Online have been unsuccessful.¹⁵ See section 4.1 for more information regarding these attempts.

It is important to note that the IRS, which determines the organization’s 501(c)(3) status, holds the Board and the Director of the Central Office of Esperanto-USA responsible for all financial assets entrusted to the organization. No individual person or other entity within the organization is considered to be responsible for the organization’s financial assets.¹⁶ While the Board may delegate the strategic and tactical management of various assets to committees or individuals, those committees or individuals are not fiduciarily responsible and their management is ultimately under the supervision and control of the Board.

3.1 Swenson Bequest

In August of 2023, following the Raleigh Congress and election of new Board officers and members, the Board received notice that Esperanto-USA had been named as a beneficiary in the estate of Robert Swenson, a long-time member of Esperanto-USA.¹⁷ The Board was informed that the estate was worth approximately $1.6 million, and that Esperanto-USA would receive 15% of this total, approximately $235,000 in assets. There were no restrictions placed on this money by the donor.

The Board immediately took steps to ensure that Esperanto-USA received the money in the quickest and most appropriate way possible, while avoiding any possible tax liabilities or other possible issues. The Financial Committee met on August 26 to discuss how best to proceed in receiving the assets.

Regarding the Swenson Bequest, the Financial Committee determined that the best way to receive the money was to simply have the assets transferred directly into Esperanto-USA’s brokerage account at Morgan Stanley. Thus, the account at Morgan Stanley grew by about 67% over the course of a few months, as these assets were transferred in different installments. The table below shows the brokerage account balance with Morgan Stanley prior to the transfers, and after they were all received, as well as the current balance.¹⁸

Table 3: Brokerage Account Balances Before and After Swenson Bequest

At this time the Board determined that it would be advisable to engage a Certified Public Accountant (CPA) to review our financial practices and provide recommendations. We also decided that the Board should in general take a more hands-on approach to reviewing and understanding our finances than had been done in prior years. See section 3.3 for more about the findings of the CPA.

The Board decided to temporarily ‘set aside’ the money received from the Swenson Bequest, in a separate unrestricted Swenson Fund, which would not be touched until a decision was made otherwise.¹⁹

3.2 Reed Trust

During the Financial Committee meeting to discuss the Swenson Bequest on August 26, the Board also learned more about the history of the Reed Trust, in particular that it had originally been intended for educational purposes. The Board began researching the history of this trust to find out everything we could. The Board also took the immediate step at its next meeting to stop allocating all donations from the Reed Trust to the General Fund as had been the practice.²⁰ Below is a summary of what we found:

The Reed Trust is an entity which is legally separate from Esperanto-USA. It was established in California in 1989 to support scholarships for students of Esperanto or to subsidize the salaries of professors or teachers of Esperanto. According to the founding paperwork, 90% of the income should be used for this purpose, or else reinvested into the capital, which should not be touched. 10% of the income can be used by Esperanto-USA for other purposes at its discretion.²¹

The Reed Trust was originally established by Hiram Elwin Reed and a friend of his, Thomas Oliver Brace. Upon Mr. Brace’s death in 2002, Esperanto-USA became the sole trustee and beneficiary of the trust.²² That meant that we were solely responsible for administering the trust, and would also be able to direct the use of the income according to the purpose specified. At the time that Esperanto-USA became the sole trustee in 2002, the value of the trust was $344,274.28.

There are some areas where the Board has not been able to put together the full history. In June of 2002, Bill Harmon, who was then “Commissioner of Wills and Gifting”, sent a memo to the Board which stated that “so long as ELNA does its best to find ways to comply with these specific provisions, if they turn out to be infeasible, the income should be expended in accordance with the primary purpose, i.e., ‘to further the teaching and use of … Esperanto.’”²³

At some point in the intervening 20 years, this income began to be taken as ‘unrestricted’ donations, meaning that it has largely been used for general administrative purposes. It seems that this decision may have been justified by the logic that since Esperanto-USA supports education, then the administrative costs of running the organization are also legitimate uses for this money.²⁴ However, we have not found any record of this decision being made, whether it was a decision by the Board or by the Annual Congress. We have not been able to locate minutes from the 2002 Annual Congress, and nobody seems to remember clearly if this decision was discussed during that or any other Annual Congress.

The Board also became aware that the Reed Trust was responsible for filing Form 990 every year with the IRS, and that the last time this had been filed was 2002. Our CPA recommended an accounting firm which could help us to file for multiple years. The firm advised us that, in their professional opinion, it would be sufficient to file for the years 2016-2022. The table below shows the list of what they determined that the Reed Trust owed for these years, alongside the donations which the trust made to Esperanto-USA. The Reed Trust only owed taxes during years when no donations were made.²⁵ The accounting firm advised that Esperanto-USA pay this amount from Esperanto-USA’s funds, and then be reimbursed by the Reed Trust, in order to reduce the Reed Trust’s tax liability for 2024. ²⁶

Table 4: Reed Trust Donations and Taxes Due, 2016-2023

3.3 CPA

As a result of the analysis of our finances that we undertook after receiving notice of the Swenson Bequest, and as we were beginning to look closer at the details around the Reed Trust, we decided that we should engage an outside financial professional to review our financial situation and make recommendations. We engaged a Certified Public Accountant (CPA) who is licensed in California and has experience working with nonprofits.²⁷ This CPA met with Bill Harris (the current Director of the Central Office) extensively during the fall, and made many recommendations to us. We will summarize them below, and explain the steps we have taken so far based on this advice as well as the steps we are planning to take.²⁸

Summary of CPA recommendations:

1. Switch to QuickBooks Online.
2. Engage an external, professional bookkeeper.
3. Simplify our balance sheets, such as removing an old liability for written-off inventory, clearing out old/unused ‘store credit’ in the online store, and folding the life membership fund and other unused/unrestricted donations into the General Fund to bring it to a positive balance.
4. Find evidence of donor restriction for any assets currently listed as restricted, or else recognize those assets as ‘board designated’.
5. Simplify the bylaws language on finances to bring it into alignment with IRS/GAAP recommendations and requirements.

Section 4: Challenges

4.1 QuickBooks and Accounting

Our accounting is currently being done in an old version of QuickBooks Desktop which is close to becoming unsupported. As the Desktop version, it is only accessible on the work computer of Bill Harris, our current Director of the Central Office, who will be retiring in July of 2024.

There is a separate product called QuickBooks Online (QBO).²⁹ If we were using this, our accounting system would be easily accessible to the incoming Director of the Central Office, Amanda Schmidt, as well as an external professional bookkeeper and officers such as the Treasurer and President.

There are tools for converting from QuickBooks Desktop to QuickBooks Online. For around one year, the Central Office has been attempting to manage this conversion, but has run into a variety of issues.

When Amanda Schmidt began her position as the Transitional Director of the Central Office in January 2024, the accounting software was identified as a focus area, and this conversion to QBO was prioritized.

There is an option through TechSoup to receive outside tech support for this conversion at a reasonable rate. However, even these professionals were unable to successfully convert our records from QuickBooks Desktop to QBO, or even to identify the specific issues; all they could do was offer a refund.

Amanda has been training extensively on QuickBooks (Desktop and Online) during this transition period so that she will be able to understand Esperanto-USA’s accounting as well as possible, and have a sense for what needs to be done. In May she completed an online training course on QB Desktop from a company that specializes in this work.³⁰ Now she is working with tech help from the same company to identify and fix the problems in our QB bookkeeping practices that had made the conversion to QBO impossible. Since Bill Harris did not have guidance or training from professionals in how to do the bookkeeping correctly in QuickBooks, he did the best he could to figure it out, and did remarkably well for a non-professional. However, there are many accounts that need to be restructured, transactions that were entered in inconsistent ways, duplicate accounts, etc. These mistakes are very common among nonprofits. Fortunately, Esperanto-USA now has excellent support from professionals to reorganize our bookkeeping correctly before we make the conversion to QB Online.³¹ This process is slow, but essential. Progress is steadily being made, and the conversion is estimated to be complete by the end of June.

4.2 Organizational Funds (Accounts) vs Restricted Donations

One of the things which the CPA made clear to us is that the way we think of ‘restricted funds’ does not exist in Generally Accepted Accounting Principles (GAAP). A “fund” (e.g. account for a purpose) cannot be “restricted” by the Board for reasons described in the Introduction section above. Funds represent accounts that the organization creates to align dollars to specific purposes or goals which can change over time.

Donations, however, can be restricted by the donor at the time the donation is made via written instructions. It’s important to note that historically on our website, we’ve listed a menu of funds to support with descriptions of the fund and its purpose. By definition, anyone making a donation using one of those options (as opposed to the General Fund or simply writing a check to Esperanto-USA as a donation) automatically placed a restriction on the usage of that donation.³²

According to the IRS, the Board can repurpose money that the Board placed into a fund without concern (example: any funds distributed from the brokerage account proceeds). However, donations that were made for any purpose specified by the donor at the time of the donation cannot be placed somewhere else or spent for a different purpose without written permission from the donor.

Example scenario: The Board deposits $50 into an education-based fund/account from an unrestricted donation or another funding source (e.g. the income from the brokerage account). Later, a donor makes a $50 donation with instructions for it to be used for educational purposes and that donation is deposited into the same account. The total account balance is $100. Later, the Board may decide that for whatever reason, they need the $50 that they deposited moved to another account/purpose. They are within their rights to move that money since in effect they were the ones who decided to put it there. The donor’s $50, however, must remain in the account, which is why maintaining a written history of the donor’s instructions is critical.

In every case, clear written documentation of this restriction is required, and the accounting system should clearly separate these restricted donations from unrestricted donations. We are also required to separate restricted from unrestricted donations during our annual 990 report to the IRS.

The language which was added to the bylaws last year on funds unfortunately doesn’t appear to align with the IRS and GAAP requirements.

One of the CPA’s recommendations was to go through each of the funds which has been described as restricted, and look for clear documentation showing when and whether donor-restricted gifts were placed into it. In cases where we find such documentation, we need to treat the donor-restricted portion as restricted according to the IRS. (This means that for any fund which contains donor-restricted gifts, the Board could not legally vote to change the purpose of the entire fund, even though the current bylaws allow this.)³³ Balances in excess of the donor-restricted donations, however, should be able to be repurposed by the Board. The current fund, then, may be “closed” for future donations while the balance is spent down. If the fund balance is very low, the Board may consider a plan to consolidate the fund balance with another fund with a similar purpose to the spirit of the restricted-donation. This is to avoid a fund balance that is unusable from being in limbo, while still maintaining the purpose put forth by the donor.

The CPA also recommended that for funds where we find no documentation of a donor restriction, that these be closed and the balances be transferred to the General Fund. Several of the funds have not been used in years, and with no documentation of the specific purpose, the purpose has in many cases become vague. The CPA noted that in general we have many more specific funds than a nonprofit of our size generally has, and that we should simplify and reduce the number of these funds. The CPA pointed out that donors donate to the organization in order for it to be able to use funds to further its purpose, and that if most of its funds are locked away, the organization is hamstrung and not able to fulfill the purpose that donors are intending to support.

As a result of the CPA’s recommendation, the Board has been looking extensively for documentation of possible donor restrictions for any of our funds. We started with the records of the Central Office, but there are no records there indicating any donor restrictions (aside from donations into specific funds through the website). We have also searched extensively in the archives of the newsletter and have found many interesting details about the history of the funds there, which we have collected; but little to indicate specific donor restrictions.

The Board is proceeding cautiously, and for the time being if there is any reason to think that a fund may include donor-restricted gifts, we are not taking any action with it. Similarly, if a fund has been actively used in recent years or seems likely to be used in the near future, we are not planning to take any action to redesignate it. We have begun to slowly redesignate some of the funds which clearly do not contain donor-restricted gifts and which had not been used in recent years or showed any promise for upcoming use, per the recommendation from the CPA.³⁴

4.3 Lack of a Comprehensive Budget

A budget is how an organization sets its priorities. For a non-profit, a budget should include administrative expenses, but the most important part of the budget covers the program expenses – what will the organization do in the upcoming year to further its mission? In the case of Esperanto-USA, what will the organization do to promote awareness of, education in, and use of Esperanto within the United States?

This is what donors want and expect to see. They also want to know what proportion of expenses are administrative versus actual programming aligned with the organization’s mission. And in a membership non-profit such as ours, in which the budget is brought to the membership for approval, a comprehensive budget allows for membership input on the relative importance of different areas of expenditure.

As detailed above, Esperanto-USA in recent years has only prepared an ‘operational budget’. Our program expenses are not planned for in the budget and are handled as unbudgeted expenses from their specific funds.³⁵ This leads to a couple of problems:

1. The Board is the only body which was elected and holds legally-recognized, fiduciary positions – we are responsible for overseeing the organization’s finances.
2. There are often situations which arise where it makes sense to spend money for something which supports our mission, but this is not accounted for in the budget, which covers only administrative expenses.
3. If all income is balanced against only administrative expenses, then all program expenses create an overall deficit.
4. As an organization, we have not been setting explicit expectations for use of our funds, and have not been tracking whether any fund usage was above or below what we expected. To give two specific examples:
   1. The “Don Harlow Literatura Fund” was set up to archive all of the content from Don Harlow’s old website.³⁶ This has never been used, and that website has disappeared. Independently, one person has saved as much as they could from that website, but that is not a sustainable solution. One example of a long-term solution would be to hire a company to scrape the internet archive and rebuild Don’s site using modern tools which could be easily managed. If the Board approves a project like this, we could budget for it, and then we could report whether the project was completed, did it stick to the budget, etc.
   2. The “NASK-E” fund was originally set up to support scholarships to the Esperanto courses at San Francisco State University. For many years it has been used for scholarships to NASK. During 2023, full scholarships were given to 4 international students from the same country, at a significant expense, and arguably very little benefit to the use of Esperanto in the United States; when the Board asked about this, the fund administrators explained that they originally approved one request, and when the other requests came, they did not feel they had any reason to deny the other three. If this were included in the budget (perhaps with one line item for students from the US and a separate line item for international students), that would make it very clear how to respond to multiple requests – first by checking whether they are budgeted for.

We understand that there are historical reasons why program expenditures from the various funds have been separated from the budgetary planning process, but we believe that transitioning to a comprehensive budget which plans for all categories of income and expenses will put the organization on a much stronger footing for the future, as we will detail in section 5.1.

Section 5: Proposed Solutions

5.1 Comprehensive Budget

The Board believes that the solution for these issues above is for Esperanto-USA to move toward having a comprehensive budget which attempts to plan for all income and expenses for the year.³⁷ At its June 2024 meeting, the Board voted to switch towards having a comprehensive budget.³⁸ This will allow all members to clearly understand how the organization did over the previous year, and to express their preferences about what the organization should focus on for the year to come. This will also make it much easier to make sure that we have a well-balanced financial situation (see section 5.4.) This will be a participatory process in which the various committees of the organization or individuals which are entrusted with strategic management of assets will be able to highlight their vision and plans for their areas of responsibility, and how they intend to drive the mission of Esperanto-USA forward.

5.2 Clear articulation of donor-restricted contributions vs. board-designated assets

Following the advice of the CPA, we intend to move towards having a clear distinction between donations which have donor restrictions and those which do not. We will also work with new and refreshed software tools such as QuickBooks Online to create reports that show the amounts carried in each of the endowment funds, restricted funds, and board-designated funds. All donor-restricted donations will have clear documentation showing the restriction, and will be accounted for separately, as required by the IRS and GAAP.

5.3 Professional bookkeeping

Following the advice of the CPA, we intend to engage a professional bookkeeper outside of the organization, who would work closely with the Treasurer and Director of the Central Office. The Board and the Central Office are currently seeking and evaluating professional bookkeepers who may be a good fit for our organization.

We intend to convert our accounting history to QuickBooks Online as part of the Central Office transition, in conjunction with engaging a professional bookkeeper.³⁹

5.4 Balancing Income vs. Expenditures

Our biggest expenses for a long time have been related to the Central Office. When we compare this to our predictable income, if we do not include the intermittent donations from the Reed Trust (90% of which will no longer be available for general expenses), we have been operating at a significant deficit. We should find ways to balance this. There are a couple of factors which we can try to change: we can reduce Central Office costs, we can increase dues, we can increase our membership numbers (through recruitment, retention, and regaining old members), and we can look for ways to increase donations or returns on investments. It is likely that we will need to find ways to accomplish all of these things.⁴⁰

5.4.1 Central Office Costs

For many years, the salary of the Director of the Central Office has been fixed at $30,000 per year for a 20 hour per week position. When the Board hired Amanda, she suggested that she be paid a comparable hourly rate, so that if there is less than 20 hours of work for her to do in a given week, the organization will save money.

We are looking for ways to reduce the amount of administrative work that Amanda will have to do on tasks such as bookkeeping, updating the online store, and maintaining the membership database. This will allow her to either reduce the number of hours, or to spend time on other tasks which could lead to higher donations and membership numbers (thereby increasing the organization’s income).

To be clear, we are not currently proposing reducing the budget for labor at the Central Office; rather, we want to automate as many administrative tasks as possible so that the work being done by the Director will have the greatest possible impact on membership and donations, thereby increasing total income. However, it is important that we as an organization recognize that this is a major expense, one which we should be constantly evaluating the value of. It is even possible that we might increase the amount budgeted for this in the future, if we see significant positive impacts on income from memberships and donations.

5.4.2 Membership Levels

We have already seen a very strong start to 2024 in terms of membership. We believe this is a result of many factors including the printed bulletin, excitement about the upcoming Congress in L.A., and general confidence in the direction of the organization.

This is a good sign, but it is a trend we would like to see continue and accelerate. We want to make it as easy as possible to sign up for membership, and to encourage recurring auto-payments. We also want to make sure that the organization is developing in a way that is exciting and attractive to potential members, and that we clearly invite them to join the organization and take part in our work.

However, even with the positive trend we are seeing this year, income from dues alone will not be enough to break even. We would need to double our membership to approximately cover the current payroll costs of the Central Office.⁴¹

5.4.3 Dues

Income from membership dues is a result of two factors: the number of people paying dues, and the dues rate itself. While we are working on increasing the number of members, we believe that it may be time to review the dues rates. These were last raised over 10 years ago. Our Membership Committee has proposed a dues increase that would have our basic yearly dues rise from $45 to $60, along with other adjustments, as Table 4 below shows.⁴² Combined with the positive trend in membership numbers, this could make a significant difference. Our dues income last year was $12,200 from 348 payments. If we returned to the membership numbers of 2017, when we had approximately 500 dues payments for a total income of approximately $16,000, at the new rates we could expect to have an income of approximately $21-22,000.⁴³ We believe this is a feasible achievement within the next 2-3 years based on the growth we have seen so far this year. Increasing the dues would help ensure the long-term financial health of the organization, and ensure that we are able to use donations and bequests to support our mission, rather than drawing from occasional and unpredictable windfalls such as the Swenson Bequest just to bridge the deficit.⁴⁴

Table 5: Proposed Dues Rates⁴⁵

Dues Category	Current Rate	Proposed Rate
Intro	$5	$15
Youth (Under 25)	$20	$30
Youth + UEA/TEJO46	N/A	$50
Limited Income	$20	$30
Individual	$45	$60
Individual + UEA	N/A	$100
Family	$60	$100
Patron	$120	$120
Life Member	$800	$1,000

5.4.4 Returns on Investments

Our investment strategy was set many years ago to be as low-risk as possible, which generally produces lower returns. We believe that the organization can and should have a mix of investments, including some that are extremely safe and some which anticipate higher average returns, even if there is some additional risk. There might be some years where the return would be lower, but in general this would lead to higher average returns. This is something we will be taking steps to implement over the coming year, with the no-fee help of professional investment advisors associated with our brokerage firm.

5.4.5 Donations and Grants

Esperanto-USA has never had a comprehensive fundraising strategy, nor has it generally applied for external grants. When we receive donations, this is essentially because some people feel like making them. Historically, we have not actively solicited major gifts and bequests, although the Swenson Bequest has taught us that a large gift can make a big difference to our financial outlook.

Over the coming year, we intend to lay the groundwork for Esperanto-USA to develop a comprehensive fundraising strategy, and to solicit donations much more effectively. We will also be exploring the possibility of applying for grants. One factor which will help significantly is the recent adoption of Salesforce⁴⁷, which many nonprofits use to track their relationships with constituents, including in fundraising efforts. We also have discounted access (through TechSoup) to software which supports grant applications.

Section 6: Conclusion

Esperanto-USA achieved the 70th anniversary of its founding in 2022. Since it was founded in 1952, the organization has been mostly run by volunteers. Previous officers did their best to run the organization in ways that supported the mission, but often with little financial or technical support. We have crossed the threshold of managing $1 million in assets, a milestone and testament to the support for Esperanto in the United States.

Recognizing that Esperanto-USA manages approximately $1 million dollars in assets, the Board believes that it is important to take steps to manage and account for our funds in as professional a manner as possible. We have outlined above the initial steps that we believe are crucial for this, which we will summarize:

1. Use of an external, professional bookkeeper & modern accounting tools such as QuickBooks Online.
2. Adoption of the definition of a “restricted donation” as used by IRS & GAAP, and making clear the difference from “board designated funds”, which may contain restricted donations. Ceasing to use the confusing term of “restricted funds”.
3. Documentation of all donor-restricted gifts; separation from unrestricted gifts which are currently co-mingled in board-designated funds.
4. Overall simplification of funds in the balance sheet.
5. Adoption of a comprehensive budget which plans for all income and expenses, as a participatory process involving input of committees and individuals who are entrusted with fund management.
6. Planning for the relationship between income and expenses, especially with regard to labor costs, membership numbers and dues levels, investment returns, and donations.
7. Creation of a comprehensive outline of our income streams, how we utilize them and how we plan to grow them.

The Board believes that these steps will bring our accounting and financial practices up to a much higher professional standard, in order to make sure we’re meeting IRS and GAAP requirements and standards while driving forward our mission in a sustainable way. This will ensure the organization is in the best possible position to promote knowledge of, education in, and use of Esperanto within the US for the next 70 years and beyond.

Notes

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Summary

It is important for members of Esperanto-USA’s board of directors to be present at the annual convention (‘Kongreso’), and to not have an undue financial burden placed on them by their attendance. 

This policy will determine the reimbursement policy for travel to Esperanto-USA’s annual convention for members of the board. This shall be effective starting for the 2024 annual convention and remain effective until amended.

If any board members have questions about this policy or whether something might be covered by it, they should ask the President and/or Treasurer.

If any board member prefers not to be reimbursed, or to receive only partial reimbursement (for example, to be reimbursed for travel but not for convention fees or housing costs), they can communicate this to the President, Treasurer, or Director of the Central Office. 

All costs are expected to be justified with receipts.

Convention Fees

For each board member, convention registration fees should be transferred from the general fund to the convention budget equivalent to the lowest rate which was available to members. Board members should not be expected to pay their own convention registration fees. 

(Example: If the lowest convention fee available to members is $160, and ten board members attend, then $1600 will be transferred from the general fund to the convention budget.)

Lodging

If the Convention has an officially arranged lodging program, board members will be eligible to register for the most economical option that provides a private room, and have this be paid for from the general fund. If they choose another option, they will be eligible for reimbursement up to the equivalent amount. If the Convention does not have an officially arranged lodging program, board members will be eligible for reimbursement for up to $150 per night, for up to three nights.

(Example: If the Convention has arranged housing where a private room will cost $275 for three nights, but an individual covered under this policy chooses an option which costs $300, they will be eligible for reimbursement of only $275; if they choose an option which costs $250, they will only be eligible for reimbursement of $250.)

Travel costs

Board members are eligible for reimbursement of travel costs up to $500. This can be used to cover air, rail, or bus travel, a rental car as well as the cost of gas or electricity, or the cost of gas or electricity for a personal vehicle. If needed, an individual covered under this policy can request that the Central Office purchase a ticket for them. (Example: If a plane ticket costs $450, it can be reimbursed for $450; if it costs $550, it will only be reimbursed for $500.)

If a board member is not able to find travel options for under $500, and their portion of the travel expense would place a financial burden on them, they should discuss this with the President and/or Treasurer, who are authorized to increase this limit in individual cases.

Food

If there is an officially arranged food program as part of the Convention, the cost for this shall be transferred from the general fund to the convention budget for each board member who will be attending. (Example: If food is available during the Convention for $80, and ten board members attend, $800 will be transferred from the general fund to the Convention budget.)

If there is no officially arranged food program, board members will be eligible for reimbursement of up to $50 per day of the Convention for food.

Board members will be eligible for reimbursement of up to $100 total for food purchased during their travel to and from the Convention.

Alcoholic beverages will not be reimbursed.

Unexpected circumstances

If there is a circumstance which arises which leads to some reasonable expense not covered by this policy, this should be brought up to the President and/or Treasurer, ahead of time if possible, who will consult and decide whether it will be treated as a reimbursable expense.

Shared costs

If a board member is traveling with another individual to the Convention, any shared costs will still be reimbursed up to the limits listed above. The board member should not ask for the other individual to pay them for any costs for which they expect to be reimbursed. 
(Example: a board member and another individual travel to the Convention together. They drive a personal vehicle and spend a total of $120 on gas or electricity, which they request reimbursement for. They share a hotel room at a total cost of $400, and request reimbursement of $275. They should not ask the other individual to pay for any part of the gas, and not more than $125 of the shared hotel room.)

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