Financial Viability

Financial Viability Being fine tuned in today’s business world

Understanding what you are • 501 c 3…501 c 6…etc • Non-profit vs. for profit • Motivations • Money making vs. Stewardship and Service • Profits are OK—just can’t enrich members, directors and staff • What is your purpose---design your systems to meet those goals

TODAY’S POINTS TO REMEMBER >>> • Determine your Tax Reporting Requirements • File Your Tax Returns; Pay all taxes • Carry Basic Insurance • Protect Critical Documents • Implement/Maintain Internal Controls • Have a sound accounting system • Do financial planning

Taxes – Federal • 990 Return • Req’d if annual gross receipts > $25K • Alternative to 990---short form 990EZ • Receipts < $100K; Assets < $250K • 990T Exempt Org Business Income Return • Rental or advertising income can make you liable • 1120-POL Tax Return (PAC) + other PAC reports • W-2’s and 1099s (W-9--get SSN or FEIN up front) • Handy web site: www.irs.gov

Taxes - Payroll • Form 8109 Federal Tax Deposit Coupons • 941 Employer’s Qtly Federal Tax Return • Can do electronically • NEW!—Form 944—report annually if have under $1,000 annual employment tax liability • State Income Tax withholding • Workers’ Comp and Other local issues

Taxes – State and Local • Sales and Use Tax • Non-profit does not necessarily mean exempt from all taxes • Liability to collect and pay • Seek advice if you make any sales to other than those in your home state • Local sales and property tax requirements

Insurance • Use a reputable agent • Maintain directors and officers coverage • Maintain basic general liability coverage • Consider property (bldg, equip, car) insurance depending on what you own • Don’t forget Work Comp--Check local laws • If you use small companies for work---get W/C certificates for those that work on your property • Fidelity bonds • AARC does NOT provide any coverage • Check out local market and companies that specialize in non-profits

Protect Your Critical Documents • Articles of incorporation • Bylaws and any amendments • IRS Tax Exemption letter • Past Financial reports and tax returns • Board minutes • Insurance policies • Major acquisitions (i.e. building) • Banking Resolution and Check Signer Docs

ACCOUNTING SYSTEM BASICS • Must meet three objectives • Aid in organization management • Accountability to those of interest • Tax reporting • Must be organized • Checkbook; C/Rec, A/Rec and A/Pay books of entry • Double entry system • Do it yourself or get competent aid who knows • NFP concepts • Cash vs. accrual (accrual preferred)--Cash basis is OK unless you • Want to analyze financial statements • Have a lender to report to • Have an audit

Basic Internal Control • Segregation of Duties—checks & balances • It all revolves around CASH>>examples: • Check signer and check preparer different • Person depositing receipts does not handle receivable records • Check preparer & receipt depositor do not reconcile bank account • SOX – Sarbanes – Oxley Requirements

Basic Control Processes • Two check signers; Copy contribution checks • Petty cash activity—small & emergency use only • Document all expenditures of money • Receipts, invoices esp. for T & E, large amts + • Payroll—Reviews all inputs and salary changes • Supervisor reviews approves all AR write-offs • Implement and compare actual activity to a annual budget. Board should approve annually • Understand financial reports—get help, if needed • Monitor financial fluctuations • BE ALERT AND ASK QUESTIONS

Audits • If Revenue > $500,000, Get an Audit • If Revenue > $100,000, Strongly Consider • An audit can be costly—if needed, get several bids from reputable local firms • Create an audit committee

Financial Viability • Cash Management • Look at receipt & spending patterns • Project needs over 3, 6, 9, 12 months • Use the Budget as a tool to monitor performance • Budget is guideline NOT a mandate to spend • Don’t be an ostrich---if there’s a problem, analyze it and take action. It won’t go away. • DON’T DELAY-PLAN Ahead

Most common NFP errors >> • Failing to report changes in operation to IRS • Failing to handle Independent contractors correctly • Filing incomplete / inaccurate tax returns • Inadequate records • Not following public disclosure rules (i.e. 990 availability)

PRESENTATION SUMMARYIT ALL COMES DOWN TO STEWARDSHIP • TAXES--Determine tax requirements; file timely returns and pay all taxes • INSURANCE---Carry adequate liability and property coverage • RECORDKEEPING—Protect all documents • FINANCIAL REPORTING— • Sound financial practices • Strong Internal Controls • Good budgeting and financial planning

Financial Viability