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New Medical Executives Institute

New Medical Executives Institute. Finance & Legal: The Essentials What You Didn’t Know About Medical Association Finances Donald R. Wall, Deputy Executive Vice President, North Carolina Medical Society. “What You Didn’t Know About Medical Association Finances”. Your Financial Responsibility.

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New Medical Executives Institute

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  1. New Medical Executives Institute Finance & Legal: The Essentials What You Didn’t Know About Medical Association Finances Donald R. Wall, Deputy Executive Vice President, North Carolina Medical Society

  2. “What You Didn’t Know About Medical Association Finances” NMEI 2010

  3. Your Financial Responsibility • Your Responsibility – Cannot Expect Others to Do it For You • Basic skills in Financial Management • Basic understanding of Financial Statements & Analysis NMEI 2010

  4. Nonprofit Organizations • Realization of a social mission - meet a social, health & welfare need • Crucial part of our society • Represent a specific profession • Tax Favored NMEI 2010

  5. Nonprofit Organizations • Organized to pursue nonprofit goals • Must have board or trustee members • Owe the organization a fiduciary duty of loyalty and trust • Incorporate in the state in which the organization operates NMEI 2010

  6. Nonprofit Organizations • Organizational structure to allow for representation of members • Nonprofit versus making a profit • IRS Inurement rules – no part of the organizations net revenue/assets can benefit any member NMEI 2010

  7. Organizational Tax Structure 501 (c) (3) Tax Exempt NonProfit 501 (c) (6) Tax Exempt NonProfit NMEI 2010

  8. 501 (c)(3) Tax Exempt NonProfit Organizations • Organizations serving charitable, religious, scientific or educational purposes • Tax Deductible donations • IRS Form 1023 NMEI 2010

  9. 501 (c)(6) Tax Exempt NonProfit Organizations • Professional Associations, Business Leagues • Improvement of business conditions in a particular business professions • IRS Form 1024 NMEI 2010

  10. Recording of Financial Activities • Cash Basis Accounting System • Accrual Basis Accounting System NMEI 2010

  11. Reporting of Financial Activities • Periodic Financial Statements • Periodic Budget Reports • IRS Informational Returns • Form 990 • Form 990-T NMEI 2010

  12. IRS Informational Returns IRS Informational Returns Form 990 Form 990-T UBIT (Unrelated Business Income Tax) NMEI 2010

  13. Financial Statements • Statement of Financial Position • (Balance Sheet) • Statement of Financial Activity • (Income Statement) NMEI 2010

  14. Financial Audits • Unqualified • Qualified • Disclaimed • Adverse NMEI 2010

  15. Operating Budget • Annual Budget • Program Budgets • Strategic Plan • Process for preparation & approval • Monitoring & Adjustment of Activities and Budgets NMEI 2010

  16. Non Dues Revenue • Minimizes negative impact from Competition for Member $’s • Provides Additional Sources of Revenue for Programs • Provides Financial Stability for Your Association • Adds More Member Benefits & Association Value NMEI 2010

  17. Non Dues Revenue Examples • Investment Revenue • Grants & Sponsorships • Preferred Vendor Programs (UBIT) • Management Services • Advertising (UBIT) • Rental Income (No UBIT is No Debt Service) • CME/Education Services • Meetings & Conferences NMEI 2010

  18. Organizational Financial Strength • Cost Effectiveness • Internal Controls • Policies • Education of Board, staff & committees • IRS Rules & Sarbanes Oxley • Review & Analysis of periodic financials • Annual Audits NMEI 2010

  19. Financial Benchmarking (AAMSE Benchmarking Tool) Dues Revenue % Total Dues: $ 628,392 Total Revenue: $1,469,137 Dues Revenue %: 42% Non-Dues %: 58% NMEI 2010

  20. Financial Benchmarking (AAMSE Benchmarking Tool) • Months of Operating Expenses Covered By Reserves • Total Expenses: $1,274,272 • Total Net Assets • (Reserves): $1,785,621 • # Months Covered By Reserves: 16.8 NMEI 2010

  21. Financial Benchmarking (AAMSE Benchmarking Tool) Salaries, Wages & Benefits: Total Salaries, Wages & Benefits $611,728 % Total Salaries, Wages & Benefits of Total Expenses 48% NMEI 2010

  22. Resources • AAMSE, Peers, Other Medical Societies • AAMSE Benchmarking Tool • Salaries (AAMSE CEO Salary Reports) • Center for Nonprofits • ASAE NMEI 2010

  23. Resources • IRS.Gov • Guidestar.com • Board Source • Accountants/CPA’s NMEI 2010

  24. Handouts/Reference Material • IRS Form 990 • IRS Form 990-T • Sample Audited Financial Statement • Sample Internal Financial Statement • AAMSE Benchmarking Project NMEI 2010

  25. Any Questions? NMEI 2010

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