Financial Best Practices 2009 Leadership Conference October 30, 2009 Harrisburg, PA

Financial Best Practices Not-for-Profit vs. Tax Exempt Not-for-Profit = no net proceeds to individuals in control Tax Exempt designation by IRS –Twenty-five possible classifications 501(c)(3) – Charities 501(c)(6) – Business leagues (professional associations) May still owe some taxes on unrelated business income File IRS Form 1024 to obtain status

Financial Best Practices Incorporate or Not? Limited liability Incorporation governed by State Law Unincorporated professional association

Financial Best Practices Employer Identification Number (EIN) Tax Identification Number for non-persons (associations, corporations, etc.) – File Form SS-4 with IRS to obtain Form W-9

Financial Best Practices Form W-9

Financial Best Practices Liability Insurance Errors & Omissions (E&O) liability insurance – protects volunteer leaders Incorporation is a prerequisite to obtaining E&O insurance SHRM endorses

Financial Best Practices Accounting & Finance Cash basis or Accrual basis –Cash basis is most common Fiscal year = Calendar year? Document, Document, Document

Financial Best Practices Financial Statements Statement of Financial Position (Balance Sheet) Statement of Activity (Income Statement) –SFAS 116 Deals with contributions, particularly restricted funds Example: Scholarship donations –SFAS 117 Deals with presentation, particularly for restricted funds Also requires a functional allocation of expenses Budget

Financial Best Practices Accounting Systems Quicken Microsoft Money Several on-line systems available for small non-profits

Financial Best Practices Controls Approval of disbursements One or two signatures on checks? Reconcile bank statements regularly Audit annually

Financial Best Practices Tax Filing Federal –Gross Receipts < $25K – not required –$25K <= Gross Receipts <$100K – Form 990EZ –$100K <= Gross Receipts – Form 990 Pennsylvania – BCO 10 & BCO 23

Financial Best Practices Tax Filing –On line expert system for filing federal and state forms –Like TaxCut or TurboTax –Free if gross revenue is less than $100,000 There are many other free, on-line systems for filing Form 990. Look on the IRS website ( for a listwww.irs.gov

Financial Best Practices Tax Filing Form 1099 Misc to individuals if –Paid >= $600, and –A person (not a corporation) Payroll (if employees) –FITW –FICA OASDI –FICA HI –SITW –UI –Local Withholding