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2013 NCA LEADERSHIP CONFERENCE FACING UNCERTAIN FINANCIAL TIMES

2013 NCA LEADERSHIP CONFERENCE FACING UNCERTAIN FINANCIAL TIMES. Financial Management. Purpose of Financial Reports. Monitor Budgetary Results Prepare Financial Statements Prepare Annual Tax Return Comply with Grant Reporting Evaluate Charitable Programs Accounting Methods –

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2013 NCA LEADERSHIP CONFERENCE FACING UNCERTAIN FINANCIAL TIMES

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  1. 2013 NCA LEADERSHIP CONFERENCEFACING UNCERTAIN FINANCIAL TIMES Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  2. Financial Management Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  3. Purpose of Financial Reports • Monitor Budgetary Results • Prepare Financial Statements • Prepare Annual Tax Return • Comply with Grant Reporting • Evaluate Charitable Programs • Accounting Methods – • Cash and Accrual Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  4. Balance Sheet • Otherwise known as Statement of Financial Position • Informs you what the organization is worth at any given time • Do you have enough assets to cover liabilities? • Restriction of funds – temporarily restricted and permanently restricted • Provides gain or loss in profits for current period. Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  5. Net Assets on Balance Sheet • Divide out net assets on the balance sheet to match your own agency’s restrictions • Board restricted funds are unrestricted net assets • Temporarily restricted - donor imposed limitations that will expire by action or time • Permanently restricted – can never use principal of funds only the interest Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  6. Balance Sheet - Sample

  7. Balance Sheet - Sample

  8. Income Statement • Otherwise known as Statement of Activities or Profit & Loss (P&L) • Provides monthly and yearly information about income and expenses • Let’s you manage expenses • How income and expenses relate to your budget • Assists in future budget planning Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  9. Building Financial Strength Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  10. Internal Controls • Five Internal Controls for Very Small Nonprofits • Set the control environment – policies apply to everyone from top down • Define responsibilities • Physical controls – lock it up • Cash – have two people count the cash together • Reconciling the bank statement – critical step. Reconciling means embezzlement will be discovered sooner than later Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  11. Internal Controls • Financial Policies & Procedures • Segregation of duties is a must – Use Common Sense • Use every staff member available • Use dedicated volunteers and board members • Role of the Board Members • Review written policies and procedures • Make sure there is only one style of financial statements used every month • Treasurer should review financial statements monthly • Eight Key Responsibilities of Treasurers – article on website Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  12. Policies – Suggested & Required • By-Laws (Board should review and update as needed) • (Revised By-Laws must be disclosed on the 990 and provided to your auditor) • Personnel policies • Conflict of Interest policy • Whistleblower policy (required) • Document Retention and Destruction policy (required) • Investment policies • Gift Acceptance policy Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  13. Building Financial Strength Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  14. Developing a Budget • Review – • Mission Statement • Strategic Plan • Support staff needed • Start by setting up salary allocations by program or funding source Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  15. Sample Salary Allocation Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  16. Developing a Budget • First, prepare your income budget • Only record income you are confident you will receive (later you can add a small percentage of grants you have applied for) • Note restricted vs. unrestricted income • Include in-kind income and expenses (same amount) • Divide in-kind into services, product, and volunteer hours Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  17. Sample Budget - Income Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  18. Developing a Budget • Determine expenses based on history, funding sources and restricted income • Allocate expenses based on donor restrictions • Plan for a surplus – not a deficit • Don’t forget to budget for capital expenses • Remember to budget both principal & interest on mortgage payment • Budget for operational and replacement reserves Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  19. Sample Budget - Expenses Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  20. Developing a Budget Prioritize expenses in case of a budget reduction during the year (having an advance plan will minimize stress mid-year if expenses have to be cut) Revise your budget during the year if a significant funding change occurs (either increase or decrease) An accurate budget is critical to your organization – spending time on this in the beginning will make life easier during the year Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  21. Developing a Budget Once your budget is approved - allocate monthly income and expenses as accurately as possible by the month (do not simply divide by 12) Review the budget with staff members Prepare a time line so budget gets approved prior to your year-end Be realistic Don’t spend money you don’t have Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  22. Building Financial Strength Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  23. Safeguard your documents Why Keep Records? Public Charities must maintain books and records to show it complies with tax rules and to document sources of receipts and expenditures reported on Form 990. Permanent records - • Minutes from Board meetings • Year-End Financial Statements/Audits & 990’s • Deeds/Mortgages/Long-term Contracts Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  24. Safeguard your documents Permanent records - • Original organizational documents • 1023 Application for Exemption • IRS Determination Letter • Articles of Incorporation • By-Laws, including all amendments • Computer System Backups • Setup weekly data backups • Create “System Image” backup/keep off site Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  25. Building Financial Strength Crystal Clear Solutions, LLC crystal@CrystalClearSolutionsLLC.net 719-440-4838

  26. Audit Bid Process Send to at least three CPA firms (see sample letter) Include your most current financial statements, copy of your last audit and most current Form 990 Ask for a five year commitment Ask for copies of their peer review (if required by your state) Establish timeline for fieldwork and presentation to the board Reminder – your audit has to be uploaded to NCA within nine (9) months after your year-end Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  27. Helpful Tips for Audit Prep • Keep a yearly folder of documents for auditor – • Legal bills • Grant award letters and contracts • Board minutes and list of Board of Directors • Equipment leases and fixed asset purchases • Approved budget • You will need an A-133 audit if you expend $500,000 or more in Federal funds Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  28. Audit Checklist – Permanent File Items • Articles of Incorporation • By-Laws and any amendments • IRS determination letter • Application for exemption (1023) • All notes payable and related amortization schedules • Any long-term leases • Personnel Policies (if you have employees) • Narrative of your accounting policies & procedures Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  29. Form 990 – Which Form • 2010 Tax Year and later (Filed in 2011 and later) If gross receipts are: If assets are: Form to File >$50,000 and < $200,000 < $500,000 990 EZ or 990 >$200,000 >$500,000 990 A public charity must make available for public inspection its exemption application (Form 1023) and its annual information return (Form 990 series) with schedules, attachments and all supporting documents. However, you do not have to disclose the names and addresses of contributors listed on Schedule B. Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

  30. Resources • www.nca-online.org • I have posted several sample documents on the NCA Leadership Conference website. • www.blueavocado.org • www.irs.gov • Form 4506-A Request for Copy of Exempt IRS Form • On this Form you can request copies of Form 990, Form 1023 (your application for exemption), and Determination Letter • Pub 1779 – Independent Contractor or Employee • Pub 4221-PC – Compliance Guide for 501(c)3 Public Charities • Pub 1771 - Charitable Contribution(Disclosure requirements) Crystal Clear Solutions, LLC crystal@crystalclearsolutionsllc.net 719-440-4838

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