2007 Philanthropy Day on Cape Cod November 6, 2007

2. Presented by: Jim Clarkson, Principal Director of Systems Consulting

3. 3 Maximize Your Organization�s Financial Reporting System Internal processes - a reflection of your organization�s and software�s capabilities? A mismatch will create inefficiencies throughout your organization Areas to focus on: Chart of accounts structure � does it reflect your organizations mission and reporting needs? Purchasing � your approval process for requisitions/purchase orders. No surprises at month end. Immediate matching against the budget Allocations of costs

4. 4 Maximize Your Organization�s Financial Reporting System True costs of your programs/departments How often do you allocate your indirect costs or do you wait until the �Statement of Functional Expenses� at year end? Do you journalize the allocation or have a system to perform the allocations for you? Use of distribution tables during the AP process Timely allocations help in understanding true costs of programs Timely allocations help to maximize dollars when writing grants for new programs

5. 5 Maximize Your Organization�s Financial Reporting System Maximizing your reimbursements? Timely month end procedures and closings result in getting your reimbursements faster Efficient organizations have a �leg up� when compared to like organizations with similar �missions� Be �pro-active� not �re-active�

6. 6 Maximize Your Organization�s Financial Reporting System Reporting to your donors and grantors Can you easily provide details of how a donors dollars have been spent? Can you track your Temporarily Restricted funds? How do you �release the restriction� on restricted funds? Your software should be able to track these items

7. 7 Reporting needs, while not using Excel Internal needs: Boards Finance Committees Standard management reports (MTD, YTD vs. PY and Budget) External needs: Annual Audit (Statement of Financial Position, Activities and Functional Expenses) Annual form 990 Grantor�s reporting needs (even if not on your fiscal year) You shouldn�t have to rely on your IT department for accounting reports NFP systems have the tools to generate all of the above and more Maximize Your Organization�s Financial Reporting System

8. 8 Other things to consider: Interaction with Microsoft Word and Excel Integration with other software: Case management software Specialized billing software Payroll provider (ADP, Paychex, other?) Fundraising software (Raiser�s Edge, Kintera Sphere, eTapestry, other?) Support of the product � does your software provider understand the environment you work in? Maximize Your Organization�s Financial Reporting System

9. 9 Maximize Your Organization�s Financial Reporting System

10. 10 Questions? Maximize Your Organization�s Financial Reporting System

11. 11 Maximize Your Organization�s Financial Reporting System

12. Presented by: Traci Pozerski, Tax Manager

13. 13 Nonprofit Tax Issues and Updates Executive Compensation Update The results of the IRS study are as follows: Over 30% of those that received compliance check letters amended their 990s Significant penalties were assessed Although high compensation amounts were found, most were properly substantiated IRS� conclusion � more education and guidance are needed, as well as significant changes to the 990

14. 14 Nonprofit Tax Issues and Updates Telephone Excise Credit The federal government was unjustly charging tax on long distance calls from 2003 mid-way through 2006. Nonprofit entities should claim this refund by filing form 990-T Safe Harbor calculation

15. 15 Nonprofit Tax Issues and Updates Massachusetts Taxation of Unrelated Business Income The Massachusetts Department of Revenue is now taxing the unrelated business income of an organization Federal UBI is the starting point for the MA calculation UBI is calculated on Form M990-T; estimates are paid via form UBIT-ES

16. 16 Nonprofit Tax Issues and Updates E-Postcards for Small Tax Exempt Organizations Required if gross receipts are normally $25,000 or less and are not required to file form 990 or 990-EZ No paper form � it must be filed electronically Same due date as form 990 The information requested will be: Organizations legal name, mailing address, etc. A statement that the organization�s annual gross receipts are still normally $25,000 or less If applicable, indicate if your organization is terminating Purpose is to improve the transparency of the non profit sector If an organization fails to file Form 990-N for 3 consecutive years, their tax exempt status will be revoked

17. 17 Nonprofit Tax Issues and Updates The New Form 990 This is the first redesign since 1979 and it is based on 3 guiding principles: Enhancing transparency to provide the IRS and the public with a realistic picture of the organization Promoting compliance Minimizing the filing burden on filing organizations The new form consists of: 10 page core form to be completed by all 990 filers 15 additional schedules

18. 18 Nonprofit Tax Issues and Updates The New Form 990 (continued) Most organizations will not see a material change in their filing burden. Highlights of the form include: A summary page providing the organizations identifying information and a snapshot of the organizations key financial, compensation, governance and operational information A portion of the form requiring governance information Schedules that will focus reporting on certain areas of interest to the public and IRS The comment period for the draft 990 ended on September 14th.

19. 19 Nonprofit Tax Issues and Updates Other Items of Interest Electronic filing requirements � for years ending on or after 12/31/06, organizations with $10 million or more in total assets are required to file electronically The IRS has initiated an online training program for exempt organizations at www.stayexempt.org Tax-Exempt Status � How can you keep your 501(C)(3) exempt? Unrelated Business Income � Does your organization generate taxable income? Employment Issues � How should you treat your workers for tax purposes? Form 990 � Would you like to file an error free return? Required Disclosures � To whom do you have to show your records? Vehicle donations (1098-C�s) filed after December 31, 2007 should be sent to the Internal Revenue Service Center in Kansas, MO 64999 OR Austin, TZ 73301

20. 20 Questions? Nonprofit Tax Issues and Updates

21. 21 Nonprofit Tax Issues and Updates

22. Presented by: Kevin White, Managing Principal

23. 23 New Auditing Standards Risk Assessment The AICPA's Auditing Standards Board has issued eight Statements (Nos. 104-111) The primary objective of these Statements is to enhance auditors' application of the audit risk model in practice Effective date � for periods beginning after December 15, 2006 Nonprofit organizations should expect to see the following: Earlier planning meetings with the auditors and audit committee and management to discuss these new audit standards Audit Approach - Additional meetings and documentation Increased auditor time to complete the audit

24. 24 New Auditing Standards New Auditing Interpretation � Non-Marketable Investments Simple confirmation would not provide adequate satisfaction as to the valuation assertion Additional information may need to be obtained and tested for non-marketable investments such as venture capital funds, hedge funds, etc. Additional information may be difficult to obtain

25. 25 New Auditing Standards Auditor Communication with Those Charged with Governance Statement on Auditing Standards (SAS) No. 112, Communicating Internal Control Related Matters Identified in an Audit, which replaces SAS No. 60, Communication of Internal Control Related Matters Noted in an Audit. Among other things, the SAS: Requires the auditor to communicate control deficiencies that are significant deficiencies or material weaknesses in internal control The term reportable condition is no longer used

26. 26 Accounting Update FIN 48 � Uncertain Tax Positions and UBIT FIN 48 is effective for fiscal years beginning after December 15, 2006. An overriding tax position for nonprofit organizations is whether they do in fact qualify for tax-exempt status. Circumstances that might raise questions about qualification for tax-exempt status include: Private benefit and repeated flagrant acts of private inurement Excessive lobbying or political activity Failure to meet the �organizational� and �operational� tests (in other words, failure to do what you told the IRS you would do when you applied for exempt status) Having so much unrelated business activities (as a percentage of total activities) that the IRS might assert you are really a business Gross violations of other laws

27. 27 Accounting Update FIN 48 � Uncertain Tax Positions and UBIT (continued) FIN 48 would apply to Tax on Unrelated Business Income (UBI) The following aspects of this tax may give rise to uncertain tax positions: UBI that are especially subject to judgment, and thus to uncertainty, include whether an activity is: �Unrelated� to the organization�s exempt purpose, Considered a �trade or business,� and �Regularly carried on.�

28. 28 Accounting Update FIN 48 � Uncertain Tax Positions and UBIT (continued) Once a source of UBI has been identified, then there may be uncertainty in computing the amount of gross income from this source (i.e., advertising income) There is often some judgment involved in determining amounts of expenses that may be deducted (personnel costs, occupancy, administrative expenses, etc.) Decision not to file form 990T Fin 48 includes criteria for measuring and disclosing these uncertain tax positions.

29. 29 Formation of an Audit Committee

30. 30 Questions? Accounting and Auditing Update

31. 31 Accounting and Auditing Update