Staying Out of Hot Water: What You Need to Know as a Leader

1. Staying Out of Hot Water: What You Need to Know as a Leader Test Your Knowledge Press Enter to Start

2. Question #1: Which tax is an exempt organization not required to pay? Federal unemployment taxes B. Property taxes C. Sales tax D. Unrelated business income taxes E. All of the above Upon recognition, exempt organizations are not required to pay federal or state income taxes as well as federal unemployment taxes. While exemptions from other taxes may exist in some states, the requirements are very narrowly defined. Press enter for the next question.

3. Question #2: True or False - A branch division who maintains a separate board and bank accounts is allowed to share their tax identification number and tax exempt status? FALSE An organization who operates as a separate entity is required to obtain its own tax identification number and tax exemption status. Group exemptions exist but the subordinate organizations must be under the general supervision and control of the parent organization. Press enter for the next question.

4. Question #3: When is an exempt organization required to file its annual information return(s)? March 15th of each year B. 3 months following the end of the fiscal year C. 5 ½ months following the end of the fiscal year D. Upon completion of the annual audit E. Within one year of the end of the fiscal year Unless an extension of time has been requested, an exemption organization must file its annual information returns 5 ½ months after the end of its fiscal year. If an extension is being requested, it must be filed prior to this deadline. Press enter for the next question.

5. Question #4: True or False – A Board member who does not vote, is free of any liability resulting from that vote? False A Board member of a tax exempt organization cannot abdicate their responsibility. Whether they participate in the vote or are even present at a Board meeting, a Board member is held responsible for the decisions of the Board. Press enter for the next question.

6. Question #5: True or False – A volunteer leader can be held personally liable for the decisions, actions, omissions, and/or errors? True Any volunteer leader who does not conduct themselves in a fiduciary manner can be held personally liable for their decisions, actions, omissions, and/or errors. Press enter for the next question.

7. Question #6: Which source of revenue is subject to unrelated business income tax (UBIT)? Advertising Income B. Mailing List Sales C. Royalties D. Sponsorships E. All of the above To the extent advertising income exceeds advertising expenses it is subject to unrelated business income tax and must be reported on form 990-T. A $1,000 threshold must be met before an organization is required to file a 990-T. Press enter for the next question.

8. Question #7: Which documents are not required to be available for public inspection? Application for tax exemption B. Compensation paid to officers and key employees C. Annual tax filings • An organization’s bylaws E. All of the above Exempt organizations are required to provide copies of their application for tax exemption and/or copies of their annual information returns to any member of the public who request those documents. A reasonable fee can be charged for providing these documents. There are not any legal requirements to provide bylaws to any individual who is not a member of the organization. Press enter for the next question.

9. Question #8: True or False – Once approved by the Board of Directors a budget can not be changed? False A budget is simply a tool for leaders and staff to monitor the financial performance of an organization. Budgets are typically based on some level of assumption which may prove to be false. Consequently, budgets must be reviewed and adjusted periodically to remain an effective tool. Press enter for the next question.

10. Question #9: True or False: Conference cancellation insurance is prudent regardless of the location and timing of your annual conference? True Because of the financial impact and commitment of an organization's annual conference, conference cancellation insurance should always be pursued. Recent history has demonstrated a natural disaster can occur when and where least expected. Press enter for the next question.

11. Question #10: Which financial statements should be provided and reviewed by the Board of Directors at each meeting? Balance Sheet • Income Statement • Actual to budget comparisons • Current year verses last year comparisons E. All of the above The listed financial statement represent the minimum that should be presented at each Board meeting. While formal reports are not necessary, the information conveyed in these reports should be communicated and discussed among the leadership to effectively monitor the financial health of an organization. Press enter for the next question.

12. Question 11: Contracts must be signed to be valid? False Oral contracts are just as valid as signed agreements as long as a “meeting of the minds” and other necessary elements of an agreement can proven; a signed contract, more easily proves the intent of the parties to enter the agreement. Without a signed contract proving this intent could be very difficult. Press enter for the next question.

13. Question #12 Which of these documents or practices do not carry the weight of law? Articles of Incorporation B. Bylaws C. Policies and Procedures • Past Practices E. All of the above carry the weight of law Each of items listed carry the weight of law and are in the order of legal priority. Consequently, it is imperative that policies, procedures and past practices be reviewed, modified, deleted, and followed. Press enter for the next question.

14. Question #13: What is the least important factor when considering the difference between professional and student member rates? Cost of providing services B. The annual conversion rate of student to professional C. How much the student can afford D. Ratio of student to professional members E. Profitability of non dues revenues While how much the market will bear is important, the other issues noted are far more critical when establishing. Without this information there is no way to determine if pricing structure is financially viable. Press enter for the next question.

15. Question #14: What is the best method to balance a proposed budget? Reduce expenses B. Use a transfer from reserves to offset the difference C. Increase revenues by raising rates D. Increase your expectations from investment revenues E. All of the above Reducing expenses represents the best solution as it is the only choice completely within the control of the organization. Transferring from reserves is effectively deficit budgeting and, while at times it may be appropriate it should be avoided. Press enter for the next question.

16. Question #15: What is wrong with this picture? ASSETS Cash–non interest bearing $ 268,421 Investments 21,646 Furniture & Equipment 442,621 Total Assets $ 734,068 LIABILITIES AND FUND BALANCE Accounts Payable 50,132 Deferred Revenue 395,209 Total Liabilities 445,341 Unrestricted Fund Balances (61,373) Designated Fund Balances 256,298 Retained Earnings ( 6,198) Total Fund Balance (Deficit) 188,727 Total Liabilities & Fund Balance (Deficit) $ 634,068 The balance sheet does not balance Cash is not being properly invested Asset allocation may indicate that value of the assets are overstated. An unrestricted fund deficit exists. Press enter for the next question.

17. Question #16: True or False – The distinction between an independent contractor and an employee has little effect on an exempt organization? False Failing to recognize and properly file the appropriate annual reports is one of the most significant challenges facing exempt organizations. Because of the potential risk associated with these two distinct groups, a thorough understanding of the difference is strongly recommended. Press enter for the next question.

18. Question #17: True or False – Exempt organizations are prohibited from making money. False Exempt organizations are free to make as much money as they can as long as they stay within their exempt purpose. However, unlike for-profit companies, the assets of an exempt organization can not be used to inure an individual. Consequently, excess revenues are expected to be rolled into the organization’s exempt purpose. Press enter for the next question.

19. Scoring • 17-16 Correct • Congratulations you’re qualified to be ACA’s treasurer  • 15-13 correct • Good job, you’re fairly well prepared to serve your organization • 12-10 correct • Respectable but a refresher wouldn’t hurt you • 09-01 correct • See you at the session later this month 