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Handling 4-H Finances Responsibly

Handling 4-H Finances Responsibly. 4-H Lunch ‘n Learn Tuesday, January 11, 2011 Carl Broady & Steve McKinley. Key Points. Funds that are generated using the 4-H name and emblem are the property of the 4-H program…they do NOT belong to an individual club or entity, volunteer, or member.

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Handling 4-H Finances Responsibly

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  1. Handling 4-H Finances Responsibly 4-H Lunch ‘n Learn Tuesday, January 11, 2011 Carl Broady & Steve McKinley

  2. Key Points • Funds that are generated using the 4-H name and emblem are the property of the 4-H program…they do NOT belong to an individual club or entity, volunteer, or member. • There are specific guidelines that individuals working with 4-H funds must follow.

  3. 4-H Finances Q&A

  4. 4-H Financial Policy Trivia #1 • TRUE or FALSE? It is recommended that volunteers list their personal social security numbers on a 4-H Club’s bank account. • FALSE! A unique Employer Identification Number (EIN) should be obtained to use with a bank account.

  5. NOTE: with the passing of the Patriot Act, some financial institutions are now asking for individuals to reveal their SSN to transact business. • This is still NOT a recommended procedure.

  6. At the least, be sure that the SSN is NOT attached to the bank account. • Check with other financial institutions to see if they have similar requirements (see Scenario #3 for further information).

  7. 4-H Financial Policy Trivia #2 • How would you correct the following statement to make it true? “Two signatures of related persons are recommended on all bank accounts.” • The signatures should be of unrelated persons.

  8. 4-H Financial Policy Trivia #3 • Which of the following reports is not required of most 4-H Units annually? • IRS filing • Financial report • Report of unit’s activities • All of the above are required of most units annually • ALL of these are annual requirements.

  9. 4-H Financial Policy Trivia #4 • What financial records should 4-H units keep? • All of the following are recommended to be kept in an organized file: • Treasurer’s reports • Bank statements continued…

  10. 4-H Financial Policy Trivia #4 • Check register with duplicate check system • Savings account register • List of receipts • List of expenses • Receipts, invoices, bills • BONUS: Financial records should be kept on file for a minimum of 7 years (or longer, if there have been any questions or issues raised).

  11. NOTE: a 4-H Club/Unit Financial Checklist is included in 4-H Policies & Procedures. • The “Review of a Successful 4-H Club” checklist also includes financial recommendations. A copy of this checklist is available at http://www.four-h.purdue.edu/volunteer/index.cfm#

  12. 4-H Financial Policy Trivia #5 • TRUE or FALSE? It is a good idea to keep all 4-H Club financial responsibilities in adult hands and away from the 4-H members. • FALSE! 4-H is a great way to provide members with a guided experience in handling a financial account!

  13. 4-H Financial Policy Trivia #6 • TRUE or FALSE? Notice of a financial review or audit indicates that someone in the 4-H program thinks there is a problem with the 4-H unit’s finances. • FALSE! A review/audit is a fiscally responsible step to take for all units and protects both the volunteer and the 4-H program.

  14. NOTE: Financial reviews or audits should be conducted on 1/5 of 4-H units annually and when the leadership of the unit changes. See Policies & Procedures for a recommended audit/review form and request letter. • Audits/financial reviews can be conducted by a committee from the 4-H Council.

  15. If formal audits are conducted for larger 4-H units (e.g. a 4-H Council), seek the services of a licensed CPA. • It is NOT the responsibility of the Extension Educator to personally conduct the audit.

  16. It IS the Educator’s responsibility to be certain the audits/reviews are conducted and provide feedback (positive & negative) to the volunteers – this is an educational opportunity! • Financial reports for each 4-H unit are submitted on an annual basis, whether or not the unit has been selected for financial review.

  17. 4-H Financial Policy Trivia #7 • Which of the following is an accepted method to raise funds for a 4-H unit? • Raffle • Bingo • Car Wash • Poker Tournament • A car washis acceptable; all others would be considered games of chance.

  18. 4-H Financial Policy Trivia #8 • Name other acceptable 4-H fundraisers. • These are acceptable: • Plant sale • Pre-packaged food sales • T-shirt sales • Auctions • Craft sales • Walk-a-thon • Festivals • Grants

  19. All 4-H funds must be raised within the guidelines of the use of the 4-H Name & Emblem: http://www.national4-hheadquarters.gov/emblem/4h_name.htm • Visit 4-H National Headquarters for fact sheets related to 4-H fundraising at: http://www.national4-hheadquarters.gov/library/4h_polregs.htm#factsheets

  20. 4-H Financial Policy Trivia #9 • Should 4-H Clubs prepare and follow an annual financial budget? • In general, yes! Preparing a budget is another excellent life skill to teach youth. 4-H Councils and Jr. Leader organizations should definitely have a budget; a budget is optional for other clubs.

  21. Tips: review financial reports from the past 2-3 years to more accurately gauge the income and expense categories and amounts. • Be sure to include any new programs under consideration. • Slightly over budget expenses and under budget income to protect organization from overspending.

  22. Periodically compare the expenses and income to date against the budgeted amounts. • A sample 4-H Council budget is found in the Appendix of the 4-H Youth Development Council Handbook (4-H 585). • A sample Jr. Leader budget is included in the Jr. Leader Advisor Resource Guide (4-H 916).

  23. 4-H Financial Policy Trivia #10 • What precautions should be taken for volunteers who are handling funds? • Have volunteers annually sign the Adult Behavioral Expectations Form. • Share basic financial guidelines with volunteers. • Bond the treasurer of the organization. • All of the above are appropriate precautions to take!

  24. Bonding a treasurer of a 4-H Fair Board or 4-H Council (entities with multiple thousands of dollars) is strongly advised for both the treasurer’s and the entity’s protection. Bonding questions may be answered through the group’s insurance company. Typically, bonding is not recommended for small 4-H Club accounts.

  25. 4-H Financial Policy Trivia #11 • A business purchases an animal at a 4-H livestock auction and writes the check to the 4-H Council, which in turns writes a check to the 4-H member. Has the business made a charitable contribution to 4-H? • No. In general this would not be a charitable contribution.

  26. The payment has gone to the 4-H member, with the Council serving only as a pass-through account. No funds are kept by the Council for the 4-H program. • If there is an additional amount charged by the Council to the business, then the business may claim this additional amount as a charitable contribution.

  27. A receipt may be provided to the business indicating the amount of the charitable contribution. For a receipt master, visit http://www.four-h.purdue.edu/ext_ed/policyprocedure.cfm# • Businesses may request a W-9 form to be completed; the Treasurer of the 4-H organization should be the one to complete and return this form to the business.

  28. The 4-H member is responsible for filing with the IRS the income that was received from the sale of the animal at the auction. The premium (the amount received above the market price) would be considered taxable income. • If an individual family has tax-related questions, they should be referred to a tax professional.

  29. 4-H Financial Policy Trivia #12 • TRUE or FALSE? The Extension office may serve as a collection point for monies collected for 4-H-related activities. • TRUE. Here are the details… • All funds collected for 4-H activities must be carefully accounted for using a separate general ledger account.

  30. If the checks have been made payable to the CES Education Fund, then they may be deposited into the CES Education Fund. A check may then be written to the organization for the total proceeds gathered. • However, if the checks received are made payable to the related organization, the checks cannot be deposited into the Education Fund account.

  31. These checks should be receipted as any other money, but notations should be made on the receipt (or mail log) indicating the checks were made payable to the related organization. • The treasurer of the related organization needs to collect funds along with a copy of the mail log on a weekly basis. The treasurer will sign a copy of the log indicating receipt of the income.

  32. Additional guidelines for CES ED Funds are available in Section IX of the CES Handbook at: https://www.extension.purdue.edu/anr/field/ceshandbook/. For further clarification of these policies, please contact Jane Richardson, janerichardson@purdue.edu.

  33. Why all of these policies?

  34. Part of these policies come with the privilege of 4-H’s designation as a federally-authorized youth program. • The other part is based on today’s society…we need to take reasonable steps to protect the program and the people who are a part of it! • The following scenarios illustrate these needs…

  35. Scenario #1 • Evidence has been presented to you, the 4-H Extension Educator, that a 4-H Volunteer has paid for personal expenses (e.g. utility bills) with 4-H Club funds. • What is your response?

  36. Scenario #1 Response • Remember that an individual is innocent until proven guilty. • If the allegation is true, this would be a criminal offense. • Attempt to verify the information. • Is the person making the claim someone you consider to be credible? • What information can the volunteer provide to support or deny the claim?

  37. Scenario #1 Response • Ask the volunteer to submit all financial records for review within a given time frame. • Identify a qualified person to review the financial records provided. • If no information is provided or if the claim is substantiated, contact local law enforcement (e.g., Prosecutor, Sheriff) for advice on how to proceed.

  38. Scenario #1 Response • Share basic information about the situation and the steps that have been taken to date. • Help the law enforcement officials understand that you are making this inquiry as a part of your official duty as a Purdue representative (which administers the 4-H program in Indiana).

  39. Scenario #1 Response • The local prosecuting attorney will likely end up with this case. • If an offer is made by the volunteer to repay funds to keep things quiet, do not accept. A criminal offense has still been committed. • Maintain confidentiality of this situation…do NOT discuss it with others!

  40. Scenario #2 • A 4-H Leader’s residence is broken into and cash belonging to the 4-H program was stolen. The volunteer would like to use funds from a recent fundraiser to cover the loss. • What is your response?

  41. Scenario #2 Response • This is a teachable moment for the volunteer…NEVER keep cash belonging to the 4-H program somewhere other than a financial institution. • The loss is the individual’s responsibility, NOT the 4-H members’; thus, the funds should not be taken from a future fundraiser.

  42. Scenario #2 Response • The volunteer should submit a claim to his/her homeowners’ insurance policy (although it is highly unlikely to be covered). • A police report should also be filed with a copy provided to you to be kept in the volunteer’s file. • Bottom line: the volunteer needs to be held responsible for the return of the funds to the 4-H Club treasury.

  43. Scenario #3 • A legal judgment has been made against a volunteer (for an issue unrelated to 4-H). As a part of the judgment, the volunteer’s assets are seized. Since the volunteer’s SSN was tied to the 4-H Club account, all funds in this account were seized to pay the judgment. • What is your response?

  44. Scenario #3 Response • Contact the State 4-H Program Leader, who will contact the University attorney for assistance. • Possible outcomes: • The volunteer may choose to repay the funds to the Club account. • The judge could reverse the order and restore the funds to the 4-H Club.

  45. Scenario #3 Response • Bottom line: the Social Security Number (SSN) belongs to an individual. Therefore, including an SSN on a financial account identifies an individual as the owner of that account. Using an EIN on a financial account identifies the organization as the owner of the account.

  46. IRS/EIN Update

  47. History/Timeline • 4-H entities have been included under a federally-recognized Group Exemption Number (GEN) – 2704 since 1946. • Recent tax law changes led the IRS to ask USDA to certify that each of the 90,000 clubs in the U.S. was under their supervision and control. USDA legal counsel considered this request not to be reasonable or attainable.

  48. History/Timeline • Thus, NIFA/4-H National Headquarters and IRS began to take steps to “sunset” the 2704 GEN for 4-H entities by May 2011. • Each state’s Land Grant University (LGU) is now responsible for verifying the tax-exempt status of all of its 4-H Clubs and Affiliates.

  49. History/Timeline • State progress report due to 4-H National Headquarters 1/14/11. • Final report identifying how tax-exempt status will be handled by LGU due 3/1/11. • 4-H Clubs and Affiliates will file with the IRS by 5/16/11 under the new guidelines.

  50. What are the new guidelines? • Guidelines are being discussed among Purdue University legal counsel, risk management, internal audit, tax and investments, and State 4-H Staff. • Communication continues with NIFA/IRS. • Details will be provided to 4-H Educators and Volunteers as they become available.

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