Our next Executive Exchange is scheduled for January 6, 2010. Our non-profit panel of 3 local executive directors will discuss The Economy and Best Operating Practices based on the following:

• Effect of the economy on your operations for 2009
• Operational changes for 2010
• Information regarding your sector and its outlook for 2010

Please join us and register on-line.

Date: January 6, 2010
Time: 11:30 – 1:30
Cost: $20 (covers lunch and fee)
Location: FIC – 329 S. Henderson, Fort Worth, Texas.

For more information, see this link.

According to FIC’s December 9th electronic newsletter there are Ten Things Non-Profit Boards Should Think About (Soon). According to Steve Tatum, an attorney and partner with Cantey Hanger L.L.P., most members of non-profit boards are unaware of the potential for personal liability that became apparent in the recent case of Verret v. U.S.A., 542 F. Supp. 2d 526 (E.D. Tex. 2008) affirmed by the U.S. Court of Appeals for the Fifth Circuit on February 26, 2009. The lower court opinion gave a very detailed account of the reasons why the board chairman of a non-profit hospital was held personally liable for payroll taxes the hospital owed but did not pay. See our previous post regarding this court case. It also provides some good ideas for at least minimizing the risks of board members being personally responsible for a potentially large bill from the IRS.

See full article here.

Need help with governance and regulatory compliance? Contact us.

Purpose of Schedule A
The primary purpose of Schedule A is to assist the IRS in determining if an organization qualifies as tax-exempt.  Public accountability is also promoted by providing certain details of the organization’s finances and operations for public inspection. Only 501(c)(3) organizations and 4947(a)(1) nonexempt charitable trusts complete Schedule A.

Special Issues With Schedule A, Part I
While your IRS determination letter is the first place to look to determine that type of organization you are, your activities may have changed. For your first five tax years as a section 501(c)(3) organization, you must check the box in Part I that corresponds to your public charity status as stated in your exemption determination letter from the IRS. After the first five years, check the box that corresponds to the activity you currently have.

Information You Will Need to Prepare Schedule A, Part I
You will need to gather or prepare the following information:

• IRS exemption determination letter. If you do not have your exemption determination letter, call 1-877-829-5500 to speak to the Exempt Organizations Customer Account Services.
• Information regarding the sources of your income.
• View the IRS Form 990 Filing Tips: Schedule A (Public Support and Public Charity Classification) for additional help.

How to Prepare Schedule A, Part I
Complete Part I by specifying under which part of the Internal Revenue Code (IRC) your organization claims classification as tax-exempt. Look at your determination letter to determine under what section the IRS has determined you fall, then verify that you still meet the qualifications of the section, as detailed on the schedule and shown below. The remainder of this article will only address lines 7, 9, and 11 as they can be a little confusing.

Read the rest of this entry »

Whether your annual audit is approaching or this will be your business’ first audit ever, an audit can seem like a daunting event. But there are ways to make this potentially painful event pass with minimal frustration:

10. Begin working on your schedules weeks before the audit occurs, you might have questions and your auditor is just a phone call or email away.
9. Keep track of issues you struggled with during the year. It will help the auditor key in on important areas at the beginning of the audit.
8. Get the confirmations back to the auditors quickly! The more time there is to send these out the better chance the auditor receives the accurate information. Not getting them back causes more work for all parties involved.
7. Communicate your schedule to the auditors. This helps the auditor work around your normal responsibilities.
6. Make all your adjustments to your trial balance before you provide it to the auditor.
5. Those schedules we talked about earlier make sure they tie to that final trial balance.
4. Make needed documentation easy to access and provide it to the auditors as soon as possible.
3. Be available! Here’s a tip, set aside time on your calendar devoted to auditor questions and audit prepwork.
2. Implement good segregation of duties among your staff. The more checks & balances you have the less likely you are to have errors or issues.
1. Don’t do anything fraudulent or misleading during the year. (Always a plus). Tell the truth.

The key to success is communication and preparedness. If you apply these steps you should see a reduction in the amount of friction an audit can cause.

Preparers of financial statements for nongovernmental entities are rquired to follow the accounting guidance contained in FASB Accounting Standards Codification 855, Subsequent Events (FASB ASC 855) and the accounting guidance contained in AU section 560 would no longer be applicable to audits of nongovernmental or state and local governmental entities. 

FASB ASC 855 requires that the auditor’s report date should not be earlier than the date on which the auditor obtained sufficient appropriate audit evidence to support their opinion (i.e. the date to which subsequent events were evaluated). Therefore, the auditor’s report date cannot be earlier than management’s subsequent event footnote date.

In summation: the specific management representations relating to information concerning subsequent events should be made as of the date of the auditor’s report.

A Chronicle of Philanthropy survey has found that nearly 3 in 10 of the leaders of the nation’s largest charities and foundations have taken pay cuts in the past year due to the recession. The Chronicle studied compensation at 325 large nonprofit organizations. In 2008 nonprofit executives saw a sharp increase in pay as opposed to a sharp drop in pay for for-profit executives. A lot of organizations are not cutting or freezing executive pay for fear that the executive will leave or not considering how the downturn in the economy will impact them. If an organization is struggling in the economic downturn and the executive is receiving pay raises, it could send a mixed message to donors.

The above is a summary of an article titled “Nearly 30% of Nonprofit Leaders Took a Pay Cut This Year; Pay in 2008 Grew Quickly” from The Chronicle of Philanthropy authored by Noelle Barton and Ben Gose, which can be found at the following website: http://philanthropy.com/free/articles/v21/i22/22000107.htm.

It’s year-end and tax-exempt (T-E) organizations are preparing budgets for next year. In fact the budget process relating to expenses has probably been completed, however trying to estimate the revenue stream can be difficult. A number of churches utilize a pledge card to estimate contributions.

During the budget process expenses are reviewed and operations are monitored/analyzed, determining the effectiveness to the mission. Remember, all T-E organizations must continue to be organized and operate in accordance with it’s stated exempt purpose, as approved by the IRS (Form 1023).

Before the end of the fiscal year, department managers are usually asked to submit their budget for next year. Reviewing the current year disbursements, estimated costs for significant capital/program projects, revisions for personnel and related costs are just several of the key factors that must be considered.

To help the finance department and ultimately those charged with governance, churches may ask their congregants to complete a pledge card, indicating their intention to give. During this weekend, First United Methodist Church of Mansfield, accepted the annual “estimates of giving”. An estimate or an “intention to give” allows the church to collect and assess the level of contributions for the next year, without recording an unconditional promise to give. Remember conditional promises to give are recorded when collected (or when the condition has been met). Unconditional promises to give as recorded with the promise has been made by the donor.

So as your church prepares it’s annual budget, it’s o.k. to ask congregants for a giving estimate. This estimate allows management to prioritize capital expenditures and program services.

The Nonprofit Risk management Center’s next webinar will be held December 2, 2009 at 2 p.m. (Eastern) and will address the topic of Conducting a Youth Protection Risk Assessment. If your tax-exempt organization serves or involves young people, then your organization faces potential risk. According to Melanie Herman, organizations need to learn how to conduct a proactive, youth-protection risk assessment. Learn about the fundamental policies and the questions to ask.

To register, click here.