Financial Viability

1
Financial Viability

• Being fine tuned in todays business world

2
Understanding what you are

• 501 c 3501 c 6etc
• Non-profit vs. for profit
• Motivations
• Money making vs. Stewardship and Service
• Profits are OKjust cant enrich members,
  directors and staff
• What is your purpose---design your systems to
  meet those goals

3
TODAYS POINTS TO REMEMBER gtgtgt

• 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

4
Taxes Federal

• 990 Return
• Reqd if annual gross receipts gt 25K
• Alternative to 990---short form 990EZ
• Receipts lt 100K Assets lt 250K
• 990T Exempt Org Business Income Return
• Rental or advertising income can make you liable
• 1120-POL Tax Return (PAC) other PAC reports
• W-2s and 1099s (W-9--get SSN or FEIN up front)
• Handy web site www.irs.gov

5
Taxes - Payroll

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

6
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

7
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
• Dont 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

8
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

9
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

10
Basic Internal Control

• Segregation of Dutieschecks balances
• It all revolves around CASHgtgtexamples
• 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

11
Basic Control Processes

• Two check signers Copy contribution checks
• Petty cash activitysmall emergency use only
• Document all expenditures of money
• Receipts, invoices esp. for T E, large amts
• PayrollReviews 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 reportsget help, if needed
• Monitor financial fluctuations
• BE ALERT AND ASK QUESTIONS

12
Audits

• If Revenue gt 500,000, Get an Audit
• If Revenue gt 100,000, Strongly Consider
• An audit can be costlyif needed, get several
  bids from reputable local firms
• Create an audit committee

13
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
• Dont be an ostrich---if theres a problem,
  analyze it and take action. It wont go away.
• DONT DELAY-PLAN Ahead

14
Most common NFP errors gtgt

• 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)

15
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
• RECORDKEEPINGProtect all documents
• FINANCIAL REPORTING
• Sound financial practices
• Strong Internal Controls
• Good budgeting and financial planning