201282achievingnonprofitfinancialhealth-120802100325-phpapp02

7/30/2019 201282achievingnonprofitfinancialhealth-120802100325-phpapp02

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WELCOME!

Achieving Nonprofit Financial Health,featuring Cheryl Black


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Our Speaker

Cheryl Black

Chief Financial Officer

Texas Association of Nonprofits

Cheryl has 29 years of experience working within

nonprofit organizations as a volunteer, boardmember, fund-raiser, donor, independent auditor,consultant, seminar speaker, controller andexecutive director.

In addition to working at TANO Cheryl serves on the

Audit Review Committee for United Way CapitalArea and as grant reviewer for the AmeriCorps StateGrant Competition.

Cheryl has a B. S. in Business Administration fromthe University of Nebraska - Kearney and a State of

Nebraska CPA certificate.


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Agenda

Differences between non-profit and for-profitorganizations FASB requirements

Setting up systems and getting started

Chart of accounts

Accounting software

Basic financial statements Establishing good internal controls


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Annual Operating Cycle

Budget preparation

Monthly Activities Closing the books

Working with the Board and other departments Investment and Cash Management

Year end closing Audit, Review or Compilation

Management Letter

Reporting requirements Form 990 Tax return

Single Audit A-133

Payroll reports


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Differences Between

Non-profit&

For-profit Organizations


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FASB 117 - Financial Statement of Non-Profit Organization

Statement of Financial Position

Statement of Activities

Statement of Functional Expenses

Statement of Cash Flows Financial Statement Disclosures

Accrual Basis of Accounting


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Disclose

In Statement of Activities or In the footnotes

Functional Classifications

Program services

Management and general

Fundraising


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Definitions

Accrual

Cash

Modified Cash

Factors to consider when choosing

Few payables or receivables Expertise and time constraints on bookkeeping staff

Budget size


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FASB 116 - Accounting for Contributions

Received and Contributions Made Recognized as revenues in period received

Recorded as either restricted or unrestricted revenue(donor imposed conditions)


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In-Kind Contributions

Donor sets value, not non-profit Shows true cost to operate the organization

IRS does not allow in-kind services or facility rentalto be deducted from Form 990 tax return


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Special Events and Membership Dues

Fund-raiser attendees often receive a tangible benefit in

return Membership dues may entitle individuals to benefits

The portion of ticket or dues which represents the fairmarket value of the benefit received is NOT tax deductible

Minimal benefits are excluded Non-profit required to send letters to donors re: amount

that may be taken as tax deduction


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IRS Publication 1771 - CharitableContributions - Substantiation andDisclosure Requirements


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FASB 124 - Accounting for Certain InvestmentsHeld by Not-for-Profit Organizations

Investments be reported at fair market value

Gains and losses be included in a statement ofactivities


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FASB 93 - Recognition of Depreciation by Not-

for-Profit Organizations Recognize the cost of using up long-lived tangibleassets (depreciation)

Exceptions

Certain works for art Certain historical treasures


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Setting up Systemsand

Getting Started


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Chart of Accounts - Design Planning

A tool used to code all the transactions that will be

recorded in the accounting records. The accounts set up here are then consolidated

into the financial statement presentation.

If not well thought out, the financial statements will

be less effective as a management tool in makingdecisions about the future of the organization.


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Chart of Accounts - Design Planning Decisions to make

Unified Chart of Accounts (UCOA)

Numbered accounts

Usually follow standard industry practice

100 Assets

200 Liabilities

300 Net Assets (Fund Balance)

400 Revenue

500+ Expenses


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Overall Considerations Most important features

Cost Off the shelf or customized

Number of modules

Training of accounting staff

Maintenance contract

Specialized non-profit packages vs. general accountingpackages

Compatible with rest of applications


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Statement of Activities

Commonly known as the Income Statement

Is the cumulative total of revenue and expenseactivity for the current annual operating cycle

Calendar year

Fiscal year

Management focuses on this statement more thanthe Statement of Financial Position (Balance Sheet)

Basic Financial Statements


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Statement of Functional Expenses

Is the breakdown of natural expenses into

functional categories. Admin and general (or overhead)

Programming

Fundraising

Is closely linked to the Statement of Activities(Income Statement)

Can be a supplement report or an audit footnote


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Statement of Financial Position

Commonly known as the Balance Sheet

Is a snapshot of the financial position of the organization on acertain day

Consists of three main categories Assets (what you own)

Liabilities (what you owe)

Net Assets (what the organization is worth)

Independent auditors focus on this statement more than theStatement of Activities (Income Statement)


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Statement of Cash Flows Commonly known as the Change in Financial Position

Breaks down the use of cash into three different activities Operations

Investing

Financing

Lets the reader know exactly where the organizationreceived and spent cash during the period


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Internal Controls Overview

Main objectives include -

Safeguarding assets

Promoting efficiency in operations

Enhancing reliability and completeness offinancial reporting

Minimizing the risk of misuse or abuse of theorganizations resources


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Internal Controls Overview (contd.) Nonprofits at greater risk for fraud?

An atmosphere of trust

Many cash donations (difficult to control)

Limited availability of qualified staffing resources(salary constraints)

Mixture of volunteers and employees with lack ofbusiness/financial experience involved in

operations Volunteer Board of Directors (decision makers)


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Segregation of Duties No financial transaction is handled by onlyone person


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Policies and Procedures

Established way of doing business that ensures public

confidence Maintains integrity of your organization and its assets

But does not inhibit your ability to get your daily workdone

Assists with training new employees

Prevents fraud


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Annual Operating Cycle


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Overall significance

Used to monitor success of goals

Used to show strength of plan

Detailed Plan

Choose format and tool (how)

Choose level of staff/Board participation (who) Commit to a time line for completion (when)


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Detailed Process

Begin with upcoming year goals

Translate those into resources needed andexpense outlays to carry them out

Balanced budget - yes or no

Board policy in place to be followed

Deficit Surplus

Review during the operating year


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Generating monthly financial statements

Policy for month-end closing Working with others

Board and committees

Other departments within organization


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Investment management

Investment policy Investment spending policy

Cash management

Cash flow shortage policy Cash flow surplus policy


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Compilation

Information just compiled by outside accounting firm

Uses standard form of financial statementpresentation

Provides no opinion or assurance that the informationis reliable

Cost is minimal


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Review

Limited examination of the organizations financialstatements

Limited testing

Provides limited assurance on the reliability of the

information presented Cost is much less than audit


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Audit

Process for testing the accuracy and completenessof information presented in the organizations

financial statements

Completed by independent CPAs

An opinion issued on how fairly the financial

position has been presented

If financial statements comply with GAAP


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Audit report - consists of

Auditors opinion letter (qualified or unqualified)

Required Financial Statements Required Notes to the Financial Statements

Management letter

Informs organization of ways to improve theirinternal control processes and day to daymanagement


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Form 990 Reporting Overview

Purpose for filing with IRS Required information for statistics and tracking not a

tax return

Have information available for public inspection

May be primary or only source of information available tothe public

IRS cleaning up their database

When to file 15th day of 5th month after close of fiscal year


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Form 990 Reporting OverviewWho Must File

Old Rules Organizations with gross

receipts


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Changes Since 2007

Form 990-N Filing

Log in to www.irs.gov/eo Click on Annual Electronic Filing Requirement

for Small Exempt Organizations Form 990-N(e-Postcard)

Failure to file for three consecutive years will

result in revocation of tax exempt status
http://www.irs.gov/eohttp://www.irs.gov/eo


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Old Rules

Organizations with

Gross receipts between $25Kand $100K

Total assets $25K but


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Changes Since 2007 (contd.)

Form 990-EZ Has not been redesigned, but changes have

been made

Review Schedules A, B, C, E, G and L anddetermine if they apply to your organization


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Old Rules Organizations with

Gross receipts > $100K

Total assets >$250K at yearend

Required to file Form 990

2008 Rules

Organizations with Gross receipts >$l M

Total assets >$2.5 M



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Old Rules

Organizations with

Gross receipts > $100K

Total assets >$250K at year end


2009 Rules

Organizations with

Gross receipts >$500K

Total assets >$1.25 M


2010 Rules

Organizations with

Gross receipts >$200K

Total assets >$500K



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Changes Since 2007 (contd.)

Form 990 Revised for fiscal years beginning in 2008

Last revision was in 1979 More questions about governance

Instructions include Sequencing List

Format

Core form with eleven parts Part IV Checklist of Required Schedules

Sixteen schedules


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Form 990 List of Schedules A-Public Charity Status and

Public Support

B-Schedule of Contributors

C-Political Campaign and

Lobbying Activities

D-Supplemental FinancialStatements

E-Schools

F-Statement of Activities

Outside the US G-Supplemental Info Regarding

Fundraising or GamingActivities

H-Hospitals

I-Grants and Other Assistance to Orgs,Govt., and Individuals

J-Compensation Info

K-Supplemental Information for Tax-Exempt Bonds

L-Transactions with Interested Persons

M-Non-Cash Contributions

N-Liquidation, Termination, Dissolution

O-supplemental Information to Form 990

R-Related Organizations and UnrelatedPartnerships


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Circular A-133 single audit report

$500,000 or more in federal awards expended in

any fiscal year Audited annually

Available for public inspection

Auditee duties

Schedule of Expenditures of Federal Awards

Maintain internal controls


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Payroll reporting

Quarterly (941) reports

Annual (940) reports

W-2s

1099s


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Unrelated Business Income Tax (UBIT)

Regularly carries on a trade or business Not substantially related to its exempt

purpose

IRS Publication 598 - Tax on UnrelatedBusiness Income of ExemptOrganizations


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Please type in chat window online.


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Contact Information Connect with the Texas Association of Nonprofit Organizations

at www.tano.org . You can also contact Cheryl via email atcheryltano com.

Connect with Sage

Email nps sage com

Download the presentation and handouts fromwww.slideshare.net/sagenonprofit

Read our blog, http://www.SageWords.net.

Like us on Facebook,http://www.facebook.com/sagenonprofit

Follow us on Twitter, http://www.twitter.com/sagenonprofit

Join the discussion in our group on LinkedIn.

Watch and follow on YouTube,http://www.youtube.com/user/SageNonprofit
http://www.tano.org/http://www.slideshare.net/sagenonprofithttp://www.sagewords.net/http://www.facebook.com/sagenonprofithttp://www.twitter.com/sagenonprofithttp://www.linkedin.com/groups/Sage-Nonprofit-Solutions-2886140?itemaction=mclk&anetid=2886140&impid=&pgkey=anet_search_results&actpref=anetsrch_name&trk=anetsrch_name&goback=.gdr_1302103634418_1http://www.youtube.com/user/SageNonprofithttp://www.youtube.com/user/SageNonprofithttp://www.linkedin.com/groups/Sage-Nonprofit-Solutions-2886140?itemaction=mclk&anetid=2886140&impid=&pgkey=anet_search_results&actpref=anetsrch_name&trk=anetsrch_name&goback=.gdr_1302103634418_1http://www.twitter.com/sagenonprofithttp://www.facebook.com/sagenonprofithttp://www.sagewords.net/http://www.slideshare.net/sagenonprofithttp://www.tano.org/

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