VOLUNTEER LEADERS’ SUMMIT 2015 NOVEMBER 19-21, 2015 | WASHINGTON, DC WEBCAST – MARCH 20, 2015 Megan Smith, CPA SHRM Controller Co-facilitated by Tammy Finnell, CMP Shelly Trent, SHRM-SCP, CAE SHRM Member Relations Staff SHOW ME THE MONEY! Financial Fundamentals for Non-Profits November 20, 2015 2:15 p.m. - 3:30 p.m. 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

Agenda What else do you want to learn? Financial side of a non-profit and regulatory requirements Making wise investments Increasing non-dues revenue Income through sponsorships Financial support from SHRM Chapter Guide to Financial Management What else do you want to learn? 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Financial Essentials Regulatory Filings Financial Management Fiduciary Responsibility Making Wise Investments 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Financial Essentials The Power of the Charter Charter provisions overview Signed by chapter/council and SHRM several years ago Autonomous Self-controlled, not SHRM (headquarters) controlled Independent Responsible for own information and tax returns Responsible for accounting, banking, etc. 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Financial Essentials Non-Profit / Not-for-Profit Status Organized under and according to the provisions of state statutes Primarily operated to serve the needs of the members May make a profit Profit dedicated to the chapter/council’s non-profit purpose Profit not distributed to members Phrase coined because it best characterizes intent 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Financial Essentials Tax-Exempt Status IRS classification Exempt from federal income tax under certain code provisions Non-profit not automatically tax-exempt Must apply for tax-exempt status May still have to pay state and local taxes 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Financial Essentials Tax-Exempt Status 501(c)(6) Trade associations, professional societies, business leagues Form 1024 Charitable contributions are not tax deductible 501(c)(3) Educational, charitable, and religious organizations Form 1023 Charitable contributions may be tax deductible 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Financial Essentials Tax-Exempt Status/Lobbying 501(c)(6) No restriction on amount of lobbying activities Business expense deduction for dues except that portion used to support lobbying activities Amount of dues spent on lobbying must be disclosed to members 501(c)(3) Permitted to lobby – do not devote substantial part to lobbying activities Less than 5% of activities to lobbying Safe harbor – 501(h) election 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Tax-Exempt Status NOT exempt from other taxes such as UBI – Unrelated Business Income: Most states will require a business license Federal Payroll (Social Security, Medicare and Unemployment) Reportable Income State Taxes Sales Tax: A chapter must collect sales tax when they make a sale in a state where they have a presence, which for most chapters will be only the state where they reside. State Real Estate and Personal Property Tax State Gross Receipt Tax State Unemployment Tax Be cognizant of State regulations May need to register to solicit charitable contributions May need to file unclaimed property reports Go to https://www.irs.gov/Charities-&-Non-Profits to check status 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Financial Essentials Tax-Exempt Status Chapters/State Councils are responsible for filing for their own status; may not use SHRM’s status or federal Taxpayer Identification Number IRS classifications based on nature of chapter’s/council’s activities IRS makes final determination Letter of Determination File original in a safe place A scan can be sent to SHRM Member Relations Department as a back up 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

Federal Tax Identification Number Nine-digit number Needed to open a bank account Needed to file tax returns Form SS-4 Quick and easy to file online Confirmation letter from IRS 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Federal Tax Reporting Form 990 Gross receipts > $200,000 or total assets > $500,000 Form 990EZ Gross receipts < $200,000 and total assets < $500,000 Form 990-N Gross receipts of $50,000 or less 15th day of the 5th month after the end of the chapter’s/council’s fiscal year with extension provisions up to 6 months Penalties for late filings Open to Public Inspection 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

Federal Tax Reporting - Unrelated Business Income a.k.a. UBI 990-T UBI > $1,000 Typically includes Income from sale of merchandise Income from advertising sales Typically excludes Conferences and trade shows Sales of books Affinity programs Qualified sponsorship payments Potential for state tax filing 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

Federal Tax Reporting - Employee or Independent Contractor W-2 Employee 1099-MISC W9 - Used to obtain name, address, taxpayer ID/SS# Independent Contractor paid $600 or more Program speakers Web designer Professional services Chapter or Council paid staff (CMPs) 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Policies Expenditure Policy What will you pay for Records Retention/Disposal Policy Requirements may vary by state Reserve Policy Standard is 50% to 200% of annual operating expenses Spending Policy How much of your investment income can you spend Investments Policy How money can be invested 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Handling Funds Bank Accounts Open a separate bank account Someone other than a check signer should receive the bank statement Reconcile it every month Cash Receipts Direct deposit of Chapter/State Council Financial Support Payments Need to send acknowledgement if a contribution is greater than $250 Cash Disbursements Have a reasonable number of check signers Set dollar amount limits for check signers Use a positive pay service Written policies and procedures on expenditures Formal documentation for reimbursement No checks made out to “Cash” 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Financial Reporting Needed for both regulatory filings and management of operations Cash vs. Accrual Cash is the checkbook approach Accrual recognizes transactions when they occur Statement of Financial Position (Balance Sheet) Statement of Activities (Income and Expenses) Statement of Cash Flows 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Financial Reporting Chart of accounts Include descriptions Annual budget Compare to actual Cash flow projections Create a regular reporting period 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Making the Job Easier Association Management Company Software programs – popular Windows-based programs Quicken Cash-basis accounting Quick Books Accrual-basis accounting Microsoft Money, Microsoft Money Plus… Four products: essentials (personal finance) to small business Peachtree Complete Accounting A full accounting package Local CPA Firm 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

Independent Audits and Alternatives Best interests of chapter/council Compilation Review Agreed-upon Procedures Member’s Audit Form 990 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Investing Long- Term Investments Have a Committee Shouldn’t be just one person for internal controls and to manage risk Determine how much you can invest Hold a percentage of operations in short-term cash & investments Use a financial advisor Investment Policy Outlines roles & responsibilities Defines operating vs. reserves Risk levels Expected rate of return Acceptable & unacceptable investments Provides consistency Monitor results 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Insurance General Liability Directors’ and Officers’ Insurance Exclusions Event Interruption/Cancellation Insurance Investigate competitive pricing Compare “apples to apples” SHRM does not provide insurance to affiliates Available from ASAE/AON: www.asae-aon.com/Pages/Directors-and-Officers-Liability-Insurance.aspx 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT In conclusion . . . Your chapter/council is a business Need to employ sound business practices 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

Increasing non-dues revenue Invest Make a profit on chapter meetings Establish relationships with law firms, other associations, universities, etc. Sponsors and advertisers for meetings Earn more CFSP through member drives / LMO recruitment / renewals/ SHRM Certifications Some states offer profit sharing for conference attendance Wage & benefit surveys Sell logo items (UBIT!) More info on this topic in the Volunteer Leaders’ Resource Center at www.shrm.org/communities/volunteerresources/resourcesforchapters/pages/chaprfin.aspx 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

Income through Sponsorships and Advertisements For a fee, sponsors could receive: A banner with their logo and the ability to introduce a speaker Five minutes to discuss their product/service at the meeting (UBI) A table at the meeting to have materials available for your members (UBI) Their logo in the newsletter or on the website as a sponsorship A free registration to the chapter meeting An email sent to your members about the sponsor (UBI) You could also . . . Create an HR Service Provider Online Directory (UBI) Hold an HR Service Provider Fair Some sponsorships a taxable while others are not. More info on this topic in the Volunteer Leaders’ Resource Center at www.shrm.org/communities/volunteerresources/pages/workingwith.aspx 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

Qualified Sponsorships Advertising is generally taxable as UBI But “Qualified Sponsorships Payments” are exempt from UBI Tax ( a so-called “513(i) sponsorship”) To qualify as such a sponsorship the payer must receive nothing in return for the sponsorship payment other than: Acknowledgment of sponsorship Display of sponsor name and logo with chapter event or activities Listing of sponsor products and services (but not prices or advertising or comparative statements) Link to sponsor home page If additional benefits such as placement of ad are received, value of ad should be identified and is taxable (unless less than 2% of sponsor payment); rest of sponsor payment is still exempt from tax. The right to “pitch” company services for 5 minutes would be taxable advertising; the right to speak at event on a topic, but not “sell from the podium,” should not be taxable.” 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

Financial Support from SHRM The Chapter Financial Support Payment (CFSP) Program returns a portion of each SHRM national member's dues to the chapter via a quarterly payment for 100% chapters or a twice-a-year payment for non-100% chapters. $6.25 per quarter ($25.00 annually) per member for 100% chapters $5.00 twice per year ($10.00 annually) per member for non-100% chapters Net Gain Payment Paid in the first quarter of each calendar year Calculated by subtracting the 12/31 national membership total for last year from the 12/31 national membership total for the current year and multiplying the difference by $25.00 More at www.shrm.org/communities/volunteerresources/resourcesforchapters/pages/cfsp.aspx 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

Financial Support from SHRM SHRM will provide an annual payment of $20 to each chapter for every primary chapter member who holds a SHRM certification at the conclusion of 2015 and 2016, and $10 to state councils for all SHRM members in the state who do so. This payment will be made for individuals who obtain the SHRM-CP or SHRM-SCP through the Pathway process or who earn the SHRM certification by passing the exam.  2015 SHRM VOLUNTEER LEADERS’ SUMMIT

SHRM’s Online Guide to Financial Management This comprehensive guide is available online in the Volunteer Leaders’ Resource Center at www.shrm.org/Communities/VolunteerResources/ResourcesforChapters/Documents/Financial_Mgmt_Guide.doc and includes sections covering: Operating Considerations Methods of Accounting and Financial Reporting Checklist of Internal Controls Over a Chapter’s Cash Transactions Auditing Financial Maintenance Questionnaire Investments Tax Filings Unrelated Business Income Taxes Lobbying Activities Travel and Meal Reimbursement Record Retention Guidelines Also, see articles on D&O insurance at www.shrm.org/communities/volunteerresources/resourcesforchapters/pages/chaprfin.aspx 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT Open discussion | Q & A 2015 SHRM VOLUNTEER LEADERS’ SUMMIT

2015 SHRM VOLUNTEER LEADERS’ SUMMIT THANKS! 2015 SHRM VOLUNTEER LEADERS’ SUMMIT