Adding it up: The roles and responsibilities of a nonprofit treasurer “We made it. Now what?”
Nonprofits can face maturity with strength and relevance
Donor acknowledgments and filing IRS Forms 8282 and 8283 News for Nonprofits
NONPROFIT AGENDAS YEAR END 2017
Sechler CPA, P.C. Carolyn Sechler
carolyn@azcpa.com 921 East Orange Drive, Phoenix, AZ 85014 Tel: 602.230.2700/Fax: 602.230.2705 www.azcpa.com
Adding it up: The roles and responsibilities of a nonprofit treasurer
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hen you think about it, it’s a bit inaccurate to refer to your organization as “nonprofit.” In fact, money is rarely far from the minds of your organization’s leaders. At least, it shouldn’t be. Like your for-profit counterparts, you can’t succeed without maintaining sound fiscal health. That’s why the title of “treasurer” is so much more than an honorific. By watching over your organization’s “treasure,” the person holding that position facilitates the accomplishment of the nonprofit’s greater goals.
The role in a nutshell The treasurer generally is charged with overseeing the management and reporting of the organization’s finances. In a large nonprofit with accounting staff and a chief financial officer, the treasurer will usually head a finance committee that reports to the board of directors. He or she focuses mainly on reviewing internally prepared financial reports and evaluating financial policies and procedures. By contrast, in a smaller organization with no internal accounting staff, the treasurer may need to get down in the trenches — writing checks and making deposits, managing and safeguarding funds and maintaining financial integrity. Where applicable, he or she also might oversee outside bookkeepers, tax preparers, fundraisers and investment advisors. Regardless of the organization’s size, the treasurer typically shepherds the development of the not-for-profit’s financial policies, such as those
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for investing, borrowing and cash reserves. And he or she presents regular treasurer’s reports to the board of directors. These can range from a simple “dashboard” to more detailed information.
Specific areas of concern The treasurer must ride herd over several different areas. Depending on the organization’s resources, the treasurer’s degree of involvement will vary. He or she might take on the following duties personally or just provide the necessary oversight to confirm that staff is handling them appropriately. Budget. The annual budget represents the financial map of the organization’s goals and how it plans to achieve them in the coming year. The treasurer should present the budget for board approval, being realistic about both revenues and expenses. He or she also should review current reports frequently for variances between actual and budgeted figures and determine the reasons for those discrepancies. Financial reports. The board relies on the treasurer to provide timely and accurate financial information to support its decision-making. In addition to financial statements, the treasurer might supply information on financial ratios and trends that describe the organization’s current and projected financial status. Compliance. Complying with relevant laws and tax regulations is a top priority. Among other things, the treasurer should work with your CPA and keep a calendar of reporting and filing deadlines to avoid late fees, penalties and the reputational damage they can bring.
Risk management. The treasurer also should coordinate with your CPA and insurance agent to regularly perform assessments that identify and mitigate risks to the organization’s assets, data and confidential information. You might have risks, for instance, related to the use of volunteers in money-handling positions. Mitigation could include internal controls designed to deter and detect fraud. Audit. Once your nonprofit reaches a certain size, its books should be audited annually by an independent CPA. The treasurer should review the results and recommendations — asking questions where appropriate — and present them to the board.
The right person for the job With so much responsibility, it’s clear that not just anyone can function well in the treasurer position. You need to be very selective about candidates’ qualifications.
For starters, the treasurer must have a demonstrable financial literacy, including a thorough understanding of the particular financial reports and accounting practices used by nonprofits. He or she also should possess an attention to detail, adherence to deadlines, patience, curiosity and recordkeeping skills. A passion for the cause also is valuable, as the treasurer needs the motivation to make, and keep up with, the ample time commitment required for the job. It helps, too, if the treasurer has some people skills — a grumpy introvert may not work well with staff and other board members.
The bottom line Although the specific duties treasurers perform will vary depending on the not-for-profit’s circumstances, the importance of the job does not. Without a qualified treasurer performing proper oversight, your organization’s financial health will be in jeopardy. Investing in a thorough search for the right person will pay off in the long run. n
Communication skills count It might not seem obvious: In addition to fluency with financial matters, the most effective nonprofit treasurers usually boast strong communication and leadership skills. They’re able to translate the numbers into jargon-free, plain English that can be readily understood by the board and finance committee members who may lack nonprofit financial expertise. The treasurer also may need to educate the board on concepts like unrelated business income, prudent investing and excise taxes. One criterion when appointing a treasurer is that he or she have experience presenting financial data and other metrics in understandable formats, such as dashboards, to the “nonfinancial types” on the board. Among other roles, the treasurer frequently acts as a liaison between the board and the internal or external CPAs providing audit, tax and accounting services. For example, while the accounting or finance personnel might do the bulk of the work drafting the annual budget, it’s the treasurer who must explain and potentially defend it to the board. He or she also may need to play a similar role when the board has questions requiring staff input. What seems like quibbling to accounting staff could reflect legitimate mission-driven concerns by the board.
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“We made it. Now what?” Nonprofits can face maturity with strength and relevance
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loat the balloons — your nonprofit is now several years old or older. You’ve gone through growing pains and “lived to tell about it.” In today’s environment, any nonprofit that makes it to maturity has reason to celebrate. But to continue to meet your mission and serve constituents in the best way possible, your organization should think strategically about its future.
Setting sight on the even longer term To begin with, set your sights on sustainability. By now, your organization should have a good handle on its resources and be adept at forecasting its needs. From a financial perspective, that means you should maintain enough cash on hand to support daily operations, and stash enough to keep adequate operating reserves. Additionally, this may be the time to initiate planned giving and endowment efforts to sustain your not-for-profit’s programs into the future. Your organization likely requires more funds than ever. But a nonprofit of this age must be wary of “mission drift.” This happens when an organization begins to make compromises to generate funds or meet other objectives rather than stick to its mission. Although diversifying your funding streams is important, you also should develop a formal process for evaluating new opportunities.
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At the mature stage, not-for-profits often see greater coordination of programs and operations — and more formal planning and communications. Exploring best practices becomes a part of the routine. Your nonprofit also may want to explore alliances with other organizations. Such affiliations can both extend your organization’s impact and boost its financial stability.
Maintaining a valuable board of directors At this time, you may face another hurdle called “Founder’s Syndrome.” If your founder is still serving as executive director or board chair, it may be time to initiate an annual board evaluation to transition your board into a more strategic focus. You can continue the founder’s involvement and investment while bringing in other perspectives. You also may boost financial stability by adding members to your board. A mature nonprofit’s brand identity may enable it to attract more wealthy, prestigious and well-connected members. Ideally, these members will have more to offer than simply money, such as expertise in certain areas or a strong commitment to your mission.
It’s likely that your executive director and staff concentrate more these days on daily operations, which are likely to have expanded over the years. Thus, your board needs to take an even greater leadership role in setting direction and strategic policy.
Surveys can be one good way of keeping up to date on your constituents’ needs and interests. Over the years, your board may have become more conservative. The boards of younger nonprofits are often more entrepreneurial and willing to take risks because less is at stake. Make an effort to add “new blood” to your board of directors — individuals with fresh ideas and strengths, for example, in technological expertise.
Keeping programs vital When it comes to programming, mature nonprofits must take care not to be lulled into complacency.
It’s important to regularly review your programming, including the actual curriculum or content, for relevance and effectiveness. Your strategic plan should focus on the long range and may outline new opportunities. Surveys can be one good way of keeping up to date on your constituents’ needs and interests, which can change over time. The results might lead to dramatic new insights. For example, after polling constituents, an adult literacy organization revisited its volunteer training program. Its program had focused exclusively on educating volunteers to tutor illiterate U.S.-born adults. After a revamping, the training program now includes instruction aimed at teaching students whose first language isn’t English.
A proven track record It takes some effort to preserve the quality of your core programs — and to achieve financial stability — as your organization ages. If you’re already taking the steps described above, your track record is in your favor. n
Donor acknowledgments and filing IRS Forms 8282 and 8283
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our organization probably already has a protocol in place to ensure that every donor gets a show of appreciation and a receipt with the information to claim a charitable contribution deduction on their tax return. But your obligations may go further than that — for a noncash donation, you might also need to consider Forms 8282 and 8283.
Forms for noncash charitable contributions Any donor must attach Section A of Form 8283, “Noncash Charitable Contributions,” to his or her tax return if the amount of the charitable deduction for all of their noncash donations is more than $500. But only when a single noncash contribution
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Your organization will generally need to file Form 8282, “Donee Information Return,” with the IRS if you sell, exchange, or otherwise dispose of a donated item within three years of receiving the donation. You must file the form within 125 days of the disposition unless: u The item was valued at $500 or less at the time
of the original donation, or
u The item was consumed or distributed without
compensation in furtherance of your exempt purpose. For example, a relief organization that distributes donated medical supplies while aiding disaster victims isn’t required to file Form 8282.
is greater than $5,000 does the donor need to complete Section B, which must be signed by an official of your organization. The signer may be an official authorized to sign your organization’s tax returns or another person specifically designated by that official. When you return Schedule B to the donor, they should provide you with a full copy of Form 8283. Certain publicly traded securities for which market quotations are readily available on an established securities market should be included in Section A instead of Section B. If the value of the donated property is over $5,000 the donor must usually get an appraisal. Note: Your official’s signature on Form 8283 doesn’t represent concurrence with the appraised value of the donation. It merely acknowledges receipt of the described property on the date specified on the form. The signature also acknowledges Form 8282 information reporting requirements for dispositions.
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You also must provide a copy of Form 8282 to the donor. When a donated item is transferred from one nonprofit to another within three years, the transferring donee must provide the successor donee with its name, address and tax identification number, a copy of the Form 8283 it received from the original donor, and a copy of the Form 8282 within 15 days after filing with the IRS. Remember to track the Forms 8283 signed and Forms 8282 filed each year, as you must disclose those figures on your Form 990. Keep a copy of signed Forms 8283 for at least three years. You’ll need that information to complete Form 8282 if the donated item is later sold or disposed of.
Avoidable consequences The failure to file required forms can lead to IRS penalties. While your organization may be excused if you show the failure was due to reasonable cause and not simply willful neglect, your donor still stands to lose the deduction — a result neither of you want. n
NEWS FOR NONPROFITS Are “optional” property taxes for NFPs on the way?
Report focuses on LGBTQ employment discrimination
Local governments continue to look for ways to impose property taxes on nonprofits. In one of the latest moves, Yonkers, New York, is considering sending “voluntary” property tax bills to nonprofit organizations such as hospitals, colleges and religious institutions.
A new report suggests that lesbian, gay, bisexual, transgender and queer (LGBTQ) workers in the nonprofit sector face significant bias. Working at the Intersections: LGBTQ Nonprofit Staff and the Racial Leadership Gap is based on a survey by the Building Movement Project, a consultant for nonprofits.
Under the plan, any tax-exempt entity with property worth more than $1 million would receive a bill requesting a payment of 25% of the property’s assessed value. The city claims that one-third of all properties in Yonkers, valued at $2.4 billion, are currently tax-exempt. Taxes on those properties, at rates for-profit businesses are charged, would total $54 million per year, if collected. Syracuse and Boston have pursued similar plans. n
Low interest rates prompt changes The lingering low interest rate environment has led many nonprofits to make financial changes. Research from the Fiduciary Trust Company, an advisor and investment manager for charitable organizations, and associated grant makers demonstrates the extent to which low interest rates have had an impact on endowments and foundations. For example, of the public foundations and other nonprofits polled, 83% indicated that they’ve increased fundraising in the past two years because of low returns. And half have changed their asset allocations in an attempt to draw better returns. n
Of the 847 nonprofit staffers who identified as LGBTQ, many shared stories about being passed over for promotions, ousted or fired. The survey also found that race is the primary barrier to career advancement for LGBTQ people of color. n
“Limited-life” foundations draw donor interest Wealthy donors — particularly the newly wealthy and younger donors — are increasingly interested in limited-life foundations that spend all of their endowments within a certain period of time. According to the Financial Times, these donors “not only want their philanthropic funds to have immediate impact but also want to be actively involved in how those funds are used.” The article points out, though, that giving away money rapidly isn’t necessarily easy. Among other issues, financial management of the endowment can be complicated. Assets must become more liquid toward the end of the foundation’s life so all assets can be donated. Investing for the short term may deliver lower financial returns, which limits the grant making of these foundations. n
This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use. ©2017 NPAye17
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The support you need. The service you’re looking for. Succeeding in the not-for-profit sector today requires more than a strong commitment to your mission. It takes shrewd fiscal management, careful regulatory compliance, skillful use of technology and the assistance of advisors who know the issues nonprofit organizations face and how to address them. This is where Sechler CPA comes in. Our team of experienced professionals cherishes the opportunity to support nonprofit organizations, meet their management challenges and fulfill their missions. We offer a variety of specialized accounting, tax and consulting services including:
k Audit intermediary services
k Tax form preparation (990, etc.)
k Budget and policy design
k Strategic and management consulting
k Financial statement preparation
k Speaking on financial literacy and other topics
k Outsourced accounting/bookkeeping
k Technology and virtual system design
RESPONSIVE QUALITY We are committed to providing responsive, personalized service to the highest quality. We take time to truly understand your Organization so that we can customize our recommendations to your specific situation. Our goal is to make your processes easier, streamline your operations and ensure your success in reaching your goals. We welcome the opportunity to discuss your mission and vision so that we may assist you with our expertise. Please call us at 602-230-2700 or e-mail carolyn@azcpa.com and let us know how we may support you. Be sure to visit our website at www.azcpa.com for additional tools and information, as well as our archive of this newsletter.
Sechler CPA, P.C. 921 East Orange Drive Phoenix, AZ 85014 www.azcpa.com