1. 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

2. 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

3. 2015 SHRM VOLUNTEER LEADERS’ SUMMIT
Financial Essentials
Regulatory Filings
Financial Management
Fiduciary Responsibility
Making Wise Investments
2015 SHRM VOLUNTEER LEADERS’ SUMMIT

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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 to check status
2015 SHRM VOLUNTEER LEADERS’ SUMMIT

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

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

21. 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

22. 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:
2015 SHRM VOLUNTEER LEADERS’ SUMMIT

23. 2015 SHRM VOLUNTEER LEADERS’ SUMMIT
In conclusion . . .
Your chapter/council is a business
Need to employ sound business practices
2015 SHRM VOLUNTEER LEADERS’ SUMMIT

24. 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
2015 SHRM VOLUNTEER LEADERS’ SUMMIT

25. 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 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
2015 SHRM VOLUNTEER LEADERS’ SUMMIT

26. 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

27. 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
2015 SHRM VOLUNTEER LEADERS’ SUMMIT

28. 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

29. SHRM’s Online Guide to Financial Management
This comprehensive guide is available online in the Volunteer Leaders’ Resource Center at 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
2015 SHRM VOLUNTEER LEADERS’ SUMMIT

30. 2015 SHRM VOLUNTEER LEADERS’ SUMMIT
Open discussion | Q & A
2015 SHRM VOLUNTEER LEADERS’ SUMMIT

31. 2015 SHRM VOLUNTEER LEADERS’ SUMMIT
THANKS!
2015 SHRM VOLUNTEER LEADERS’ SUMMIT