Download - Financial Best Practices
Financial Best PracticesFinancial Best Practices
2009 Leadership Conference
October 30, 2009
Harrisburg, PA
Financial Best Practices 2008 2
Not-for-Profit vs. Tax Not-for-Profit vs. Tax ExemptExempt
• 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 2008 3
Incorporate or Not?Incorporate or Not?
• Limited liability
• Incorporation governed by State Law
• Unincorporated professional association
Financial Best Practices 2008 4
Employer Identification Employer Identification Number (EIN)Number (EIN)
• Tax Identification Number for non-persons (associations, corporations, etc.)– 25-1542364
• File Form SS-4 with IRS to obtain
• Form W-9
Financial Best Practices 2008 5
Form W-9Form W-9
Financial Best Practices 2008 6
Liability InsuranceLiability Insurance
• Errors & Omissions (E&O) liability insurance – protects volunteer leaders
• Incorporation is a prerequisite to obtaining E&O insurance
• SHRM endorses
Financial Best Practices 2008 7
Accounting & FinanceAccounting & Finance
• Cash basis or Accrual basis– Cash basis is most common
• Fiscal year = Calendar year?
• Document, Document, Document
Financial Best Practices 2008 8
Financial StatementsFinancial 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 2008 9
Accounting SystemsAccounting Systems
• Quicken
• Microsoft Money
• Several on-line systems available for small non-profits
Financial Best Practices 2008 10
ControlsControls
• Approval of disbursements
• One or two signatures on checks?
• Reconcile bank statements regularly
• Audit annually
Financial Best Practices 2008 11
Tax FilingTax 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 2008 12
Tax FilingTax Filing
• www.Efile.form990.org– 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 (www.irs.gov) for a list
Financial Best Practices 2008 13
Tax FilingTax 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