Subsidiary Transitions

SCA SUBSIDIARY TRANSITIONS


Agenda
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Welcome and Introductions

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Background

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Transition Process

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Opening New Bank Accounts

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Reporting

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Frequently Asked Questions

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Wrap Up and Conclusion

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Welcome and Introductions
SCA Corporate Treasurer
Baroness Alysia Gabrielle de Fougeres, OL, OP
Mazelle Attiya
901-833-4263
Email:

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Welcome and Introductions
Society Chancellor of the Exchequer
Mistress Katherine Angelique d’Artois de Berry
Kathy Palmer
813-334-7201
email:

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Background
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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.

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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.

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Background
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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 1 kingdom account at start of
process.
– 1 kingdom account moved out of state; 1 group dissolved; 17 groups
created new bank accounts.

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Background – SCA-Illinois Milestones

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Background
The following states have
already been transitioned
to subsidiaries.

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Wisconsin
West Virginia
Michigan
New Jersey
Maryland
Rhode Island
New York
Mississippi
Gulf Wars
Illinois
New Hampshire
Maine
Tennessee

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Why PA?
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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.

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Pennsic War – separate subsidiary

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Transition Process
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Lessons learned from SCA-Illinois, Inc. Transition
– Preparation at SCA Corporate level
– Preparation at Kingdom and Regional levels
– Converting or moving kingdom bank accounts
– Transitioning regional bank accounts
– Transitioning local branch bank accounts

Communication is crucial!

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Transition Process
• What do we need to do?

– Form subsidiary as a wholly owned subsidiary of SCA, Inc.
per Federal and State laws – SCA Board of Directors.
– Complete Articles of Incorporation – SCA attorneys.
– Complete By-Laws – SCA attorneys.
– Apply for and receive Federal Taxpayer ID Number – SCA
Corporate Office after attorneys finish above documents.
– Make documents available to local branch, regional and
kingdom exchequers – Society Exchequer.
– Close out existing bank accounts under SCA, Inc. – local
exchequers.
– Open new bank accounts – local exchequers.

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Transition Process
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New banking requirements due to “Patriot Act” subsequent to 09/11/01
– Banks conduct more due diligence on new bank accounts, especially,
not-for-profit accounts.
– Bank accounts opened prior to Patriot Act banking requirements
implemented will require more documentation than banks have for
current accounts.

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Opening New Bank Accounts
• SCA Corporate Documents:
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Articles of Incorporation for the subsidiary (created by SCA attorneys)
By-Laws for the subsidiary (created by the SCA attorneys).
Tax Payer Identification Letter (created by the US IRS).
Resolution of the Board of Directors to open bank account (created
by the SCA, Inc. Corporate Secretary (Vice President of the Corporate
Office in Milpitas, California). Must be faxed or mailed directly from
the Corporate office directly to the individual bank’s representative for
the bank/checking account.
– Letter of Authorization specifies signatories on bank account of
authorized named, specific individuals to a bank account. (created by
the SCA, Inc. Corporate Secretary - Vice President of the Corporate

Office in Milpitas, California). Must be faxed or mailed directly from
the Corporate office directly to the individual bank’s representative for
the bank/checking account.

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Opening New Bank Accounts
• In order to get a Resolution of the Board of Directors to open bank
account, local branches must send the following information to
their Kingdom Exchequer who then forwards it to the Society
Exchequer who verifies accuracy and completeness and send
request to SCA Corporate:
– Name of the local SCA group
– Modern names of the signatories (This must include kingdom and/or
regional exchequer as a signatory on the account)
– Bank name
– Bank address
– Name of bank contact/to whom the paperwork should be sent
– Bank's fax number
– Contact phone number and/or e-mail address with the Modern name
of the Group Exchequer in case of bank communication problems

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Opening New Bank Accounts
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Exchequer and all bank account signatories fill out bank required forms and
present following to the bank (Faxed from our corporate office):
– Articles of Incorporation
– By-Laws
– Federal Taxpayer ID letter from IRS

SCA VP of the Corporate Office, Renee Signorotti, will fax both the Letter of
Authorization and the Resolution of the Board of Directors to open bank
account to bank point of contact
Exchequers and co-signatories:
– Transfer funds from old bank account to new bank account – suggest that local
branches use same bank for old and new accounts and change banks later if
they want to change banks
– Close out old bank account with bank manager after all checks have cleared
– Deposit all funds from old bank account into new bank account
– Retain bank statements for both old and new accounts

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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!
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Exchequer Reporting
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New State specific exchequer workbooks are available on the Society
Exchequer’s website

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Kingdom exchequer will prepare consolidated Kingdom Domesday report
including, subsidiary and prepare a separate Domesday for subsidiary.

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Frequently Asked Questions
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What is the procedure for transitioning to subsidiary corporations?
– Standard Operating Procedure for the Formation Of and Transition To
Subsidiary Corporations Of SCA, Inc.

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FAQ’s
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Why is this necessary?
To reduce the need for audited Financial Statements when filing annual
Charitable Solicitation Registrations.

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FAQ’s
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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.

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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.

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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 do not have a specific SCA-IL,
Inc. version.

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FAQ’s
• Why do 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 do 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.

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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 do 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.
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