Nonprofit Finances: What You Need to Know to Wrap-Up 2015
On Thursday, December 10th, Goldin Group, CPAs hosted a Nonprofit Finances Tweet Chat and Conference Call with Maryland Nonprofits. If you were unable to attend the tweet chat, don’t worry! Below is a wrap-up of the Q&As from the session…
Maryland Nonprofits’ members can receive CPA services from Goldin Group at a bundle price, learn more…
What is the most prevalent tax consideration issue your nonprofit clients face as the year-end approaches?
Goldin Group: The single greatest tax consideration is to remember that regardless of when the organization’s’ year ends, individual donors make the majority of their donations at their calendar year end – December 31st – when they undertake their final tax planning. Get in front of them. It is not unusual to collect 50% of donations, both from individuals and businesses in the last month of the year.
Why are year-end tax responsibilities difficult for nonprofits to complete? What steps can leaders take to be proactive?
Goldin Group: Nonprofits are held to a high standard because they are given a tax break. Along with the break come demands on reporting and compliance. These demands, if not addressed throughout the year, can become onerous at year-end.
There are two major tax areas that need addressing:
1. Federal Government regulations, and State regulations. Federal Regulations – Form 990 – the tax form that needs filing at year has a multitude of questions – make sure you can answer yes by reviewing policies and procedures, which may include investment policies, conflict of interest policies, employment policies, whistleblower, etc.
2. State Reports & Registrations. Have you filed any required annual or periodic report with your state agency? Many states require annual reports to be filed with the state corporation’s office (Secretary of State). Filing these annual reports are required for the nonprofit to maintain an “active status” with the state. What about state charitable/fundraising requirements? Most states have adopted “charitable solicitation” laws that differ greatly by state, but are mainly designed for nonprofits and charitable organizations that make fundraising appeals in that state.
Frequent issue nonprofits face in complying donor requirements?
Goldin Group: This is one of the most challenging areas for nonprofits, mainly because every donor has a different requirement for giving their money. They may have to comply with a budget and timeline, or a specific service the organization needs to provide, or set benchmarks. The desire to receive the money overwhelms the desire to read the fine print of what needs to be delivered. When it comes time to deliver, we need to go back and ensure we have complied with all requirements.
Many government and non-government grants require the recipient of the funds (you, the nonprofit) to report on financial and program activity. Some require periodic reports; others require year-end reports. Some are narrative in description (what you did with the funds, who you served, progress towards meeting objectives, etc.); others are financial in nature (profit/loss, budget to actuals, etc.). The donor wants to know how the funds were used.
The most challenging seems to be complying to a budget, either because we haven’t carefully allocated the resources within the given time limit, don’t have the money spent in the right categories, or haven’t complied with service requirements. For example, we work with a company that delivers electricity to underserved areas. The donor measures this in kilowatts, which is hard to measure in real time. Understand donor requirements before year’s end.
What NP Best Practices do you share with nonprofits challenged with complying with donor requirements?
Goldin Group: Once a donor is interested in your mission, they want to give. Be proactive. If you find yourself in a bind because of constraints, the best thing to do is go to the donor and explain what you have done with the funds. Do not get overly preoccupied with delivering exact results, go back to the donor and see how much flexibility there is.
Thank your donors – Everyone likes to be thanked. In your ask’s, don’t forget to thank and acknowledge your donors. We believe that all donations – regardless of size – deserve a quick and heart-felt recognition of thanks. Nothing makes donors happier (and ready to give again!) than receiving a prompt thank-you from a charity just supported. Thank you’s are intangibles that pay back great dividends.