1. Financial Viability Being fine tuned in today’s business world

2. Understanding what you are 501 c 3…501 c 6…etc 501 c 3…501 c 6…etc Non-profit vs. for profit 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 What is your purpose---design your systems to meet those goals

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

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

5. Taxes - Payroll Form 8109 Federal Tax Deposit Coupons Form 8109 Federal Tax Deposit Coupons 941 Employer’s Qtly Federal Tax Return 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 State Income Tax withholding Workers’ Comp and Other local issues Workers’ Comp and Other local issues

6. Taxes – State and Local Sales and Use Tax 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 Local sales and property tax requirements

7. Insurance Use a reputable agent Use a reputable agent Maintain directors and officers coverage Maintain directors and officers coverage Maintain basic general liability coverage Maintain basic general liability coverage Consider property (bldg, equip, car) insurance depending on what you own Consider property (bldg, equip, car) insurance depending on what you own Don’t forget Work Comp--Check local laws 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 Fidelity bonds  AARC does NOT provide any coverage  Check out local market and companies that specialize in non-profits

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

9. ACCOUNTING SYSTEM BASICS Must meet three objectives Must meet three objectives  Aid in organization management  Accountability to those of interest  Tax reporting Must be organized Must be organized  Checkbook; C/Rec, A/Rec and A/Pay books of entry Double entry system 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 statementsWant to analyze financial statements Have a lender to report toHave a lender to report to Have an auditHave an audit

10. Basic Internal Control Segregation of Duties—checks & balances Segregation of Duties—checks & balances It all revolves around CASH>>examples: 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 SOX – Sarbanes – Oxley Requirements

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

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

13. Financial Viability Cash Management Cash Management  Look at receipt & spending patterns  Project needs over 3, 6, 9, 12 months Use the Budget as a tool to monitor performance 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 be an ostrich---if there’s a problem, analyze it and take action. It won’t go away. DON’T DELAY-PLAN A h e a d DON’T DELAY-PLAN A h e a d

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

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