IRS Releases Final 2008 Form 990

Contrary to what was reported by the IRS (and me) last week the IRS has released the new form 990. From the press release:

The final form released today retains the redesigned draft’s format of a core form and a series of schedules. In response to public comments, the new core form allows an organization to describe its exempt accomplishments and mission up-front and provides more opportunities throughout the form for the organization to explain its activities. Other major changes were made to the form’s summary page, governance section, and various schedules, including those relating to executive compensation, related organizations, foreign activities, hospitals, non-cash contributions and tax exempt bonds. A checklist of schedules was also added.

The new form will be for tax year 2008. There will also be a phase in process for those to file based on budget size:

Organizations with gross receipts over $1.0 million or total assets over $2.5 million will be required to file the Form 990. For the 2009 tax year (returns filed in 2010), organizations with gross receipts over $500,000 or total assets over $1.25 million will be required to file the Form 990. The filing thresholds will be set permanently at $200,000 gross receipts and $500,000 total assets beginning with the 2010 tax year. Also, starting with the 2010 tax year, the IRS will increase the filing threshold for organizations required to file Form 990-N (the e-postcard) from $25,000 to $50,000.

You can down load the new forms here. The IRS plans to release the related instructions for them in early 2008.

Earned Income Tax Credit Notification

California Employers will have a many new laws come January 1st, 2008, but here is one in particular worth noting. Starting in 2008 employers are required to let employees know about the Earned Income Tax Credit. You must provide notification to your employees by either handing it directly to your employee or mailing it to your employee's last known address. Posting of this information on an employee bulletin board will not satisfy the notification requirement.

IRS 2008 Implementation Guidelines

The IRS has just released a PDF of its FY 2008 Implementation Guidelines. It contains the program guidance for implementing the Exempt Organizations portion the IRS's Strategic and Program Plan for the coming fiscal year.

Among the highlights:

1. Details of the updated form 990 will not be released until the first quarter of 2008 rather than the end of 2007 as previously reported by the IRS.
2. More attention to executive compensation.
3. Further looking into charitable trusts.

Download a copy to find out what the IRS has in store for us in 2008, I'll also try to keep updates here as soon as they happen.

FASB 116 & 117

Since we talk about them so much in the boot camps, and the govern so much of what we do in keeping our nonprofits books, I thought I would link to the sources and list a quick summary of them. Enjoy!

Statement No. 116 Accounting for Contributions Received and Contributions Made

This Statement establishes accounting standards for contributions and applies to all entities that receive or make contributions. Generally, contributions received, including unconditional promises to give, are recognized as revenues in the period received at their fair values. Contributions made, including unconditional promises to give, are recognized as expenses in the period made at their fair values. Conditional promises to give, whether received or made, are recognized when they become unconditional, that is, when the conditions are substantially met.

This Statement requires not-for-profit organizations to distinguish between contributions received that increase permanently restricted net assets, temporarily restricted net assets, and unrestricted net assets. It also requires recognition of the expiration of donor-imposed restrictions in the period in which the restrictions expire.

Statement No. 117 Financial Statements of Not-for-Profit Organizations

This Statement requires that all not-for-profit organizations provide a statement of financial position, a statement of activities, and a statement of cash flows. It requires reporting amounts for the organization's total assets, liabilities, and net assets in a statement of financial position; reporting the change in an organization's net assets in a statement of activities; and reporting the change in its cash and cash equivalents in a statement of cash flows.

This Statement also requires classification of an organization's net assets and its revenues, expenses, gains, and losses based on the existence or absence of donor-imposed restrictions. It requires that the amounts for each of three classes of net assets-permanently restricted, temporarily restricted, and unrestricted-be displayed in a statement of financial position and that the amounts of change in each of those classes of net assets be displayed in a statement of activities.

This Statement amends FASB Statement No. 95, Statement of Cash Flows, to extend its provisions to not-for-profit organizations and to expand its description of cash flows from financing activities to include certain donor-restricted cash that must be used for long-term purposes. It also requires that voluntary health and welfare organizations provide a statement of functional expenses that reports expenses by both functional and natural classifications.

New Law Restricts Use of Employees' Social Security Numbers

HRCalifornia.com reports about a new law that goes into effect on January 1, 2008 restricting employers' use of employees' Social Security numbers.

Employers are prohibited from the following:

• Public posting or displaying of an individual's Social Security number.
• Printing an individual's Social Security number on any card required for the individual to access products or services provided by the person or entity.
• Requiring an individual to transmit his/her Social Security number on the Internet unless the connection is secure or the Social Security number is encrypted .
• Requiring an individual to use his/her Social Security number to access a Web site, unless a password, unique identification device or unique personal identification number also is required to access the site. This may require a change in systems used to access or transmit personal, business, human resources or payroll information on the Internet.
• Printing an individual's Social Security number on any materials that are mailed to the individual, unless state or federal law requires the Social Security number to be on the document mailed.

Go to www.HRCalifornia.com for more info about this issue and all other employment issues that affect California employers

An IRS Phish

I think I wrote about this in earlier this year. The IRS doesn't contact you about rebates by email, please do pass these warnings on to the more trusting friends or relations of yours.

New stats and trivia

Well, kinda new. The IRS release its Fall 2007 Statistics of Income Bulletin. The "new" info is from tax year 2005, here is a taste:

• A look at private foundations: The number of private foundations that filed Form 990-PF remained nearly the same between tax years 2003 and 2004,while the number of nonexempt charitable trusts treated as private foundations that filed the return increased by 12 percent. In tax year 2004, private foundations distributed $27.6 billion in contributions, gifts, and grants and other outlays for charitable purposes, while nonexempt charitable trusts distributed $314 million.
• Recent data on charities: For tax year 2004, nonprofit charitable organizations exempt from income tax under Internal Revenue Code Section 501(c)(3) filed more than 276,000 information returns, an increase of 5 percent from 2003. These organizations held more than $2.0 trillion in assets, a real increase of 5 percent from the previous year and 52 percent over the past decade.

2008 Mileage Rates

Heads up for 2008, the changes have been announced:

Beginning Jan. 1, 2008, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:

• 50.5 cents per mile for business miles driven;
• 19 cents per mile driven for medical or moving purposes; and
• 14 cents per mile driven in service of charitable organizations.

More info on the whys and hows can be found here.

5th Annual "Stop Spam Today!" Campaign

Do you like Spam? No? Then the following from TechSoup may be for you:

Join the 5th Annual "Stop Spam Today!" Campaign at TechSoup Stock. Sign up for free anti-spam software from Mailshell.

For just 24 hours on December 5, nonprofit organizations and public libraries can request free anti-spam desktop software, donated by Mailshell, at TechSoup Stock. This special offer is part of the 5th annual "Stop Spam Today!" campaign.

You will need to register with TechSoup to get the free software. Sometimes that can take awhile so get it done in advance to be ready.

Boot Camp Q & A - Gifts-in-kind Valuation

Several questions from the last book camps have been about non-cash donations and how to value them. The PPC Guide to Contributions has the best guidance out there on the subject and I still highly recommend them, a worthy investment for your nonprofits financial well being.

Q: How do we value food donations for our, "Taste Of..." event?

A: Fair value must be determined. According to SFAS 157, Fair Value Measurements, the fair value is, "the price that would be received to sell an asset or paid transfer of liability in an orderly transaction between market participants at the measurement date. The quoted price for identical assets in an active market is the most reliable evidence."

For this question, if a restaurant is providing you with 300 deserts, what do they sell the deserts for? If they are catering at your event, what do they normally charge for catering? Those quoted prices (or better yet and invoice) would be what you would use to value the donations.

Q: Can the suggested starting bid on an item to be sold at auction be used as the fair value?

A: Yes, with exceptions. If a vendor gives you something to auction for your charity event and places a "suggested starting bid" sticker on it, that can be used. But if you have sold similar items before and what they suggest doesn't match what you have used in the past that suggestion won't work. Checking other resources on how the item might be valued would also be a good idea.

Q: We have a golf tournament where everything is donated. Donors then buy tickets for the event. Is the whole ticket deductible to the those donors?

A: From what I can tell it is not. The non-deductible portion of the ticket represents the estimated fair market value of the goods or services received by the donor in return for the contribution. How much would the donor normally have had to pay to play golf at the location? The fact that the nonprofit did not incur any costs for the facility is irrelevant to the benefit received by the donor.

Q: What are some resources for valuing donations?

• Association of Evangelical Relief and Development Organizations

• Determining the Value of Donated Property (IRS pub. 561)
  
  
• eBay.com
  

• Salvation Army's Donation Valuation Guide

• SFAS 157, Fair Value Measurements

• TurboTax ItsDeductible

Financial Risk Management

CAN has been a satellite office of the Nonprofit Risk Management Center for years. They are a great organization and know how to take something that many would consider boring and make it interesting, captivating and relevant to nonprofits.

They have a new book coming out, Financial Risk Management: A Guide for Nonprofit Organizations:

This brand-new book explores the topic of financial risk management in the nonprofit world. Subjects covered in this practical, how-to guide include financial accountability, fraud prevention and board-staff communication on financial management issues.

It is available for pre-order now, I can't wait to get my copy!

e-Postcard - Proposed Regulations

From the IRS website:

"The IRS and Treasury Department propose to adopt temporary regulations on the electronic notice requirement for certain small tax-exempt organizations as final regulations. The temporary regulations describe the time and manner in which certain small organizations not currently required to file annual returns are required to provide an annual electronic notice."

To find out about the regulations and to comment on them should you so desire go here. Please feel free to share your comments here in our comments section as well.

Boot Camp Questions & Answers

Some questions from the latest boot camps. More to come!

Q: What is the pay rate for comp time?

A: According to HRCalifornia.com you must pay at the rate the time is used, not when it was accrued. Compensatory time off is a very tricky issue and any employer currently offering it or thinking of offering it needs to be aware of all the issues surrounding it. HRCalifornia.com recommends you not offer it for the most part, and be sure never to give comp time to exempt employees.

Q: Do internal transfers count as income under SB 1262 rules for determining when we need to get an audit?

A: No, not according to the text. Only "gross revenue." But be careful how you are booking and describing the transfers to be sure that you are not calling it income, if indeed it is not.

Q: Do we have to pay California state sales tax on auction items?

A: Check out this earlier post.

Employment Eligibility Verification (I-9 form)

Assuming that the person keeping the books at your nonprofit is also doing some or all of the HR work I give you this: The I-9 Employment Eligibility Verification form was updated in June of this year. It includes changes to what documents are consider OK to prove eligibility to work.

All employers are required to fill these out for new employees and after November 7th 2007 you have to use the new form, not any old ones you have laying about.

So take heed and get the new form here.

Thanks Kim!

Updated Form 990 Update

So word from the Independent Sector Conference in Los Angeles last month is that the IRS has listened to some of the requests for changes that you, me and others made.

Two changes I am happiest about are that the summary ratios will be dropped from the front page and that the program service explanations will be moved to the front. The above link will also take you to a PDF of the speech that Steve Miller, Commissioner of the Tax-Exempt and Governmental Entities Division of the IRS made.

They are still set to roll it out for fiscal years ending 12-31-08 and we should get final word about what is happening by the end of the year.

Three New Technical Practice Aids for Nonprofits

From the Thompson Tax and Accounting e-newsletter comes the news of three new technical practice aids for nonprofits. You can download a PDF of them here. The highlights:

• TIS section 6140.20 discusses circumstances in which not-for-profit organizations with contribution revenue could have minimal or no fund-raising expense. It describes situations in which this would occur, thereby expanding the relevant guidance in the AICPA's Audit and Accounting Guide, Not-for-Profit Organizations.
• TIS section 6140.21 addresses the accounting treatment of professional fund-raiser charges. It states that these charges should be reported "gross," i.e., as fund-raising expenses, and should not be netted with contribution revenue.
• TIS section 6140.22 describes how an NPO may act as an agent or intermediary for a donor that has stipulated that certain resources be transferred to another NPO. It states that any compensation (including administrative fees) retained by the agent/intermediary NPO should be reported as fund-raising expense by the NPO that receives the contribution. The receiving NPO also reports the original amount contributed by the donor as contribution revenue.

Free Nonprofit Accounting Workshops

I'm doing three more Nonprofit Accounting Boot Camps this year in November. Though they are not called "boot camps" the content is the same. You can see the where and whats here. Thanks to the Nonprofit resource Center in Sacramento for setting these up.

New IRS Publications and Resources

Please note: all links in this post download PDF documents.

Publication 4630, The Exempt Organizations Products and Services Navigator lists all the resources available from the IRS to nonprofits. This is a nice, consolidated reference for everything they have for us.

Two other updated pieces are publications 4221pc (for charities) and 4221pf (for private foundations) provide an overview of activities that could jeopardize exempt status as well as information on record keeping, reporting and disclosure compliance requirements.

Both publications seem easy to follow and are further example of how (I think at least) the IRS is trying to make compliance info easier to access and grasp. As nonprofits we have A LOT to keep track of and rules to follow, so I appreciate the efforts the IRS is making to help.

How much will an audit cost?

I get asked every once in a while how much an audit costs, and I never have an answer that is $xx,xxx. It really varies on how big you are, the complexity of your funding, the state your books are in to begin with.

But I started think about costs because there are several new audit standards coming, including this one, which will have a dramatic impact on how the audit is done and how much it will cost. I asked a few friends of CAN, folks I look up to a lot and turn to for help on many an occasion how they cost an audit. Here are some of their responses:

"It is not how much total revenue they have but how many different sources of funding that complicates an audit (for instance multiple government contracts versus one or none), also how complicated their balance sheet is (do they have split interest agreements, many notes or capital leases, deferred comp plans etc)."

"We need to know if they have affiliated organizations, a subsidiary or member of a parent organization. We need to know what the nonprofit is looking for in requesting an audit. Do their grants require special reporting even though they do not meet the threshold for a Yellow Book (compliance) audit."

"Some times there are covenants from banks or grants that must be tested. When determining whether to take on an audit, we need to know if they have books and records that are able to be audited. For example if they are a new organization, their internal controls may be lacking or their accounting staff may not have the books computerized and on an accrual basis. Not that they can’t have an audit, but they will require additional work to get ready for the audit."

"Are they in an industry that requires special reporting such as health care industry or schools?"

Some of these answers came form larger firms who can't charge much less than $20,000.00 an audit. Other larger firms can sometimes offer you a deal because they do so many audits and rely on a high volume to keep costs low. Of course you could substitute "larger firm" with "smaller firm" for the above statement, it all depends on the firm.

Those new auditing standards coming will also have an impact on price. According to the folks I have spoken with it could be anywhere from 20 to 40 percent more than prices are now.

Other bits of info I have picked up:

• Many firms will bid on your job assuming you have clean books. If it turns out you don't then additional time (for the auditor) and money (for you) will be spent to get them into shape.
• Initial engagements always cost more than subsequent engagements.
• Reviews cost about half as much as audits. They cover less ground than an audit but CAN has never had anyone say, "you need to give us an audit." when we have submitted an review. Audits are they best way to go, they tell us the most about an organization, but maybe you don't need to do one every year. Unless you are subject to SB 1262, the Nonprofit Integrity Act.
  
• Preparation is the key to a good audit. You will get a list of things to do, documents to fill out, reports to have ready before anyone sets foot in your office to get to work. Get it all done, and stay in contact with the firm to make sure you understand what they are asking.
• Got a weird transaction you don't know how to handle? Got an auditor? Ask them. It will be cheaper to get guidance up front than having to fix any possible errors later on.

Finally, here is a link to CPA and Accounting referrals. Any questions / comments?

Strategic Planning

As part of the Nonprofit Blog Exchange Virtual Event I’m writing about Marion Conway’s blog (she was kind enough to write about this one, thanks!)

As I was reading hers and the many great articles she has on strategic planning and board development I started thinking how a lot of what finance people do, or at least what I do, is analyze the past via the numbers and make sure we have enough money right now to pay the bills and meet our short term commitments. Much of what I have talked about in this forum doesn’t cover looking ahead or planning for the future. Sure we have budgets, but does your organization have a plan? Has your organization been through a strategic planning process yet? If your organization does have a strategic plan what financial impacts are in it for the organization?

If you have not been through a planning process, do you know where to look for information to get started? I would recommend reading Marion’s information, it is concise and well written and shows us that the process is not something to be afraid of, that any organization can, and should have a plan for itself.

Nonprofit Compensation Report

GuideStar has published highlights of their 2007 Nonprofit Compensation Report. Info was taken from over 55,000 990's filed in 2005. Highlights of the highlights:

• Median compensation of females continued to lag behind that of males when considering comparable positions at similar organizations.
• Females held 50 percent of CEO positions at organizations with expenses of $1 million or less but only 34 percent at organizations with expenses of greater than $1 million. Overall, women held 41 percent of the positions reported upon but received only 32 percent of the total compensation.
• Health and science organizations had the highest overall median salaries. Food, religion, and housing organizations brought up the rear.
• Washington, D.C., had the highest overall median salaries of the 20 largest metropolitan statistical areas; Riverside-San Bernardino, CA, had the lowest.

The linked-to article has a lot more information.

Upcoming IRS Events in CA

Two events are coming up. Info on both are here.

The first is a one day event in Sacramento and there are three dates in December, the 18th through the 20th. "This introductory workshop is designed for administrators or volunteers who are responsible for an organization's tax compliance."

The second is in Los Angeles and is the Western Conference on Tax Exempt Organizations, a big two day event for "attorneys, accountants, and executives of tax-exempt organizations, co-sponsored by Loyola Law School and IRS Exempt Organizations; early bird registration rate available until October 15."

Comments on Draft Redesigned Form 990

September 14th was the deadline for submitting comments on the update for the form 990. Want to read them all? Here is the link.

CPA & Accounting Referrals

I'm frequently asked to give recommendations for CPA's who know nonprofits. I'm happy to do so and with changing regulations changing how CPA and client will be interacting the need to shop around for services may be greater than ever.

The first recommendations I give or those folks listed on the CAN website. For referrals to QuickBooks specialists I refer them here. The California CPA Society also has a robust tool for looking up CPA's, check it out too.

Protecting Your Good Name

This link goes to an article from the Nonprofit Times' enewsletter article about domain names (www.yourcharity.org/com/net) and what happens when they expire. It illustrates the importance of making sure they DON'T expire so some other group doesn't grab the registration and take advantage of your nonprofit's good name.

How does this relate to accounting? Well, two ways, one is that in a smaller organization one person may be doing all the admin stuff, finance, HR and IT so this is important info to them. But another way it affects accounting directly is reminding us to keep track of bills that do not come monthly or even annually. Domain name registration invoices, like other bills you may have, are cheaper if you buy multiple years at a time. "Great," you think, "I'll save us some money and register us for three years." But in three years when the renewal emails come, and they are almost always emails and not paper bills, will they get paid? Do you have somewhere where you track annual or irregular payments, maybe a vendor list that is easily accessible? Some thing to think about.

e-Postcard: 990-N Questions and Answers

The IRS has updated its 990-N FAQ, click this link to read them all or download a PDF of them. Included it the FAQ's:
When will the e-Postcard (Form 990-N) be due? How often do I need to file?
How do I file Form 990-N (e-Postcard)?
Will the IRS notify affected organizations about the filing requirement?
Why do I need to provide this information?

Car Donations

A question from a recent boot camp had to do with vehicle donations:

"When providing the donor with a thank you letter for a donated car, what amount do we list?"

From the IRS website:

"If the claimed value of the donated motor vehicle, boat or plane exceeds $500 and the item is sold by the charitable organization, the taxpayer is limited to the gross proceeds from the sale.

Under the new [2004] rules, the charitable organization must provide an acknowledgment to the donor within 30 days of the sale stating the amount of gross proceeds.

Alternatively, if the charity significantly uses or materially improves the vehicles, the charity must certify this intended use and duration and provide an acknowledgment to the donor within 30 days of the contribution. If the charity significantly uses or materially improves the vehicle, generally, the donor may deduct the vehicle’s market value."

Also check below in the IRS Guides section for Publication 526, it tells all about vehicle donations. It states that if the claimed value of the donated vehicle is more than $500.00 you can deduct what the charity sells it for OR the fair market value, which ever is LOWER.

Keyboard short cut directory

In an bid for ever increasing productivity keyboard short cuts keep us from wasting all that time we spend reaching for the mouse. From the website AppScout I found out about KeyXL, a database of (reportedly) ALL keyboard short cuts for almost every program and operating system. Here is a link to the QuickBooks short cuts.

Alan

QuickBooks Help

I frequently get emails about folks who need help with QuickBooks; new installations, re-tooling their existing set-up, user questions, you name it. I'm happy to give advice and CAN is able sometimes to get out and help folks. But there are other options two that are supported by Intuit and QuickBooks:

1. Check out the Other Resources Section below for links to books and forums to ask questions and get answers.
2. Look for a Certified QuickBooks ProAdvisor. You can select by zip code and area of expertise and then get a list of folks to interview.

Hope that helps,
Alan

Image Source

Selecting Accounting Software

Another nice piece on selecting accounting software from a GuideStar Newsletter article by Nancy Church. No new or different brands of software listed but lots of good questions to consider.

Donated Advertising

A reader emailed me a question about donated advertising. They wanted to know how to book the advertising, they are a small group and the value of the donated advertising was over three times their annual budget.

The way it is supposed to work is that if you are the recipient of any kind of donated advertising you must book it as a contribution and then as an offsetting expense as well.

But the value of the donated advertising must be equivalent to what someone would normally pay for that advertising. For example say your organization gets donated PSAs every night at 3:00 am for a week on a local radio station. The value of that donation should be based on the advertising rates at 3:00 am, not for prime time advertising rates which would be higher.

Email scams and security

Two interesting pieces from PC Magazine's security e-newsletter. Both deal with $$ scams so I think they fit in this blog, so spread the word.

1. Ransomeware - what is it? Read the article and find out.
2. The Nigerian Prisoner - Do you know someone held in a Nigerian Jail? Maybe, maybe not. One has to think that if anybody hears the phrase "Nigerian" and "email" in the same sentence they would be wary, but I guess enough people still fall for them.

8-7-07 Boot Camp Questions

From the August 7 Boot Camp in Eureka:

Q: How many years do we keep donation records?
A: I have not found any official record keeping guidelines but looking at samples of other organizations in seem to range from 5 years to permanently, the latter for donated works of art, etc. My guess is that as long as you maintain a donor database of any kind you will want to maintain a record of anything that person has given you.

Q: Are the administrative charges from a fiscal sponsor an admin expense or program?
A: From what I have been able to find it is an admin expense. Lots of great info on fiscal sponsorships can be found here.

Q: Are donations to churches subject to the $250.00 threshold?
A: Yes. If a person donated $250.00 or more to a church, or any nonprofit for that matter, they must get proof of that donation from the church or charity. But Separate contributions are not aggregated for purposes of measuring the $250 threshold. For more information on churches, religious organizations and the IRS download this nice document. For others get the donation publication from the IRS is this blogs resources section.

Q: Should we list the building a nonprofit owns at its assessed value or its market value?
A: From what I can find out now and what I remember from my accounting classes you would use the assessed value as it is documented and verifiable.

Anybody have different answers to these questions? Post them in the comments below. Did I forget anyones questions? Post them below too.

Boot Camp Questions - Donations

Question: For a dinner-dance type fundraiser ticket, what is the portion of the ticket price is a donation?

Answer: Everything beyond what is a direct benefit to the donor. Those items are the actual cost of the items and services furnished to the attendees as inducements to attend the event: The food and beverages, the ballroom, the band, the decor.

Question: When do you value donations of stock?

Answer: The date the shares are transferred to your organization, the date of the gift. If a donor wishes to give your organization a gift of stock and take advantage of any tax deductions for tax year 200X they must make sure the transfer takes place before December 31 200X.

If they ask their broker to make the transaction in December but the broker doesn’t post the transfer until January 2nd, then the donation will have in fact taken place in January, not December.

Recognizing Contributed Services

Contributed services are professional services that have been donated by someone outside of your organization with specialized skills — such as those provided by doctors, nurses, lawyers or accountants. A rule of thumb I like to apply is that if the person has letters after their name (CPA, JD, etc.) or requires some kind of licensing to do their job (architect, etc.) they can probably provide you contributed services that you (and they) can recognize.

The service:

• Must create or enhance a non-financial asset. For example, the organization acquires a graphic designer to create collateral materials to describe fund-raising and development programs. Although the services are provided on a pro bono basis, certain technical expertise is necessary to produce the materials, which would otherwise have been purchased.
  

Or the service:

• Must require specialized skills. General volunteer services, such as working a booth at a fundraising event, are typically not recognized as contributed services
• Must be provided by persons possessing those specialized skills, and
• Is of the type that typically would be purchased by the nonprofit organization if the service or skills were not donated.

An example of a recognized service would be a lawyer providing necessary legal advice. What would not be recognized is:

• A non-lawyer providing legal advice.
• A lawyer providing un-asked for legal advice.
• That same lawyer stuffing envelopes for a fundraiser.
  

Assuming the criteria above have been met, the nonprofit would record contribution revenue for the fair market value (based and invoice from the service provider) of the donated services and also as an expense in the appropriate category.

What would you ask the IRS?

On August 9th there will be a call hosted by the National Council of Nonprofit Associations to bring together statewide nonprofit agencies and their constituents with a representative from the IRS to discuss the new draft form 990.

NCNA has called for questions in advance that they can give to the IRS in advance so we can make the most of our time on the call. If you would like to pose a question about the form please email it to astrand @ CAnonprofits.org by 1:30 pm on Friday August 3rd. Sorry this is such a tight turn around but NCNA wants some time to organize the questions before submitting them.

If you are going to be on the call or not, please do feel free to pose your questions. The conversation will be recorded and I will post questions raised and answers given.

Here is a question posed by some of us working on advisory committees: Should the threshold for filing the 990 be raised? Currently you need to file if you have $25,000.00 in gross receipts. You can file a simplified 990EZ if gross receipts during the year are less than $100,000 and its total assets at the end of the year are less than $250,000. Proposals include:

• Eliminate the 990EZ (there is no proposal to change this form by the way, just the 990), raise the filing level to $50,000.00 and have organizations that don’t hit that mark file the new 990N
• $50,000 or less - new 990N, $50,000-$100,000 – Form 990EZ, $100,000 and over – New Form 990
• Keeping things as they are

What do you think?

More on Nonprofit Accounting Software

Thanks again to a CAN Board Member for sharing this with me. The AICPA's Journal of Accountancy recently had an article comparing different nonprofit accounting software packages. It is not a complete list but it is one of the broadest evaluations of current offerings I have seen in some time.

OMB Revises Circular A-133

From The PPC Guides' Newsletter

OMB Revises Circular A-133 and AICPA Issues Related Auditing Interpretation. This has to do with the new updated terminology of internal controls, among other things, based upon the AICPA's guidance for a stricter look at an organizations internal controls.

August 9th Call with IRS

A national organization that CAN is a member of, the National Council of Nonprofit Associations, is hosting a call with the IRS abut the new form 990. CAN members can participate on this call in two ways:

1. Join in on the call! It is only $10.00 (to cover the costs of the call) and will be an invaluable opportunity to express your questions, concerns and / or praise for the redesigned form.
   
   
2. Post your questions below about the form so that I can submit them to the IRS rep and ask them on the call for you. Please post any questions in the comments section below and I'll make sure they get the attention they deserve.

Thanks!

Finance and Governance

More updates from the Smithsonian scandal, another big nonprofit in the news with stories about how much the top two people were paid and how little they did to earn the $$.

The Nonprofit Times has an article here on it. The Nonprfit Quarterly talks about the story as well and the editor in chief, Ruth McCambridge makes a good point:

With the changes to the 990 reflecting the efforts of the Senate and the IRS to get better governance out of nonprofits, shouldn't they hold the Smithsonian Board, and the other big nonprofits who have been in the news for the wrong reasons, to the same standards? That board includes the Chief Justice of the United States and half a dozen members of Congress.

Shall they be exempt from being taken to task for what all who look at the case cite as a failure of governance? It will be interesting to see how this moves forward.

CAN's Employment Center

Not an accounting post but a heads up out there for people looking for work. CAN has created a new Career Center on its website. So check it out and let me know what you think.

More on the New 990

Well some of the first criticisms of the new IRS form 990 are up. I'm interested to know what you think about what the president of Charity Navigator has to say.

I have some initial thoughts on the core form. I like the summary section of part 1. It lays out the more important aspects of the form in a fairly straight forward way, what the casual reader of a 990 really will want to see. We do still need a way to educate readers on what the information means, maybe a new Peter Swords book?

Overall the form feels easier to understand and grasp. The Parts have an ordered feel to their layout, every part is a complete section. The form is longer by page count but it goes faster.

Some questions that came up during the first go through:

• Part I number 8b, what is it trying to show? What is a “good” metric? I don’t think that benchmark needs to be on the form.
• Part I number 9, if there is no other explanation a person who doesn’t understand how a NP operates numbers here may make them think the NP is doing something wrong. I don’t see a reason for listing 9 on the summary page, don’t see what it serves in the big picture.
• Part I number 15, if this is a larger number it could at first glance be a bit misleading.
• Part IV number 1f, “gifts grants,” what does that mean? Typo?
• Part V number 23, great! I like the added criteria, forces people to not be lazy.

I’ll list more as I come across them upon more in depth reading.

Draft Redesigned Form 990

It is finally out. The idea is to use this form for the 2008 tax year, so one would be filling this out in 2009.

You can check out all the information here, you will be able to download a copy of the new form, read about the changes and send in comments. All the forms and info is in PDF format.

[EDIT] I have assembled the most pertinent forms into one file to download, the IRS site lists all 20 plus informational sheets, forms and schedules as individual downloads. New stuff and info about the new stuff is all put together here. Its about two megabytes, about a minute and a half to download with a good connection.

This is a big redo, and YOU have the opportunity to comment on it! I'll post my thought about the new form soon.

Alan

Another Accounting Boot Camp...

On July 13th in Orange County, click the links for more details about all the offerings including an accounting boot camp!

Non Profit Summer School

Update Your QuickBooks Database Server Manager

If anybody reading this is using QuickBooks 2007 it looks like you need to do an update for its database. All versions of QuickBooks has an auto update feature (that you all are using, right?) but this update is NOT included in that for some reason

From what I can tell only QuickBooks 2007 is affected, not other versions as this is a new database system for the 2007 product. This affects data sharing (for multiple users or if you have the data stored on another computer than the one you are using) so its a good idea to grab this update ASAP.

This article from PC Magazine gives you the low down on how to update it. I subscribe to their security watch email updates, full of useful stuff if you have to work with technology.

Operations Manual

Heather has posted a nice piece about creating a manual.

CAN's financial policies manual is available for those who want to email me.

Alan

990-T Disclosure Rules

I have mentioned this before but it looks like there is new guidence out there for how it will work.

The Internal Revenue Service recently issued interim guidance (Notice 2007-45) regarding the public disclosure of Form 990-T by tax-exempt organizations. The new disclosure requirements were initially set forth in the Pension Protection Act of 2006; Notice 2007-45 now provides the following additional specifics:

• The new Form 990-T public disclosure rules apply to all Forms 990-T filed after August 17, 2006
• The public disclosure rules for Form 990-T are the same as they are for Form 990
• Any religious or governmental entities not currently required to file a Form 990, but who file a Form 990-T, are required to publicly disclose their Form 990-T
• The Internal Revenue Service will not be making copies of the Form 990-T available to Guidestar
• The tax-exempt organization is not required to put a copy of the Form 990-T on their web site
• Tax-exempt organizations preparing a Form 990-T solely for purposes of claiming the telephone excise tax refund are not required to make such Form 990-T available for public inspection

Thanks Brian for the heads up!

New Postage Rates Effective May 14

Just and FYI that postage rates go up today. Check the link in the title for more information on the first class rate increase as well as other increases.

The post office will also be doing more shape based mailing rates, so stay informed.

New Electronic Filing Requirement for Small Organizations

e-Postcard (Form 990-N)
Beginning in 2008, small tax-exempt organizations that previously were not required to file returns may be required to file an annual electronic notice. With the enactment of the Pension Protection Act of 2006 (PPA), these small tax-exempt organizations will now be required to file electronically Form 990-N, also known as the e-Postcard, with the IRS annually for tax periods beginning after December 2006.

Cal CPA Nonprofit Courses

Most of you probably already know about our nonprofit accounting boot camps, and our annual Money Matters finance conferences. But the California CPA Society's Education Foundations has a couple of good programs as well. The have a day long conference on nonprofit issues in LA and San Francisco and two day long classes. The first is a nonprofit accounting and auditing update that spends a day talking about the latest doings and the second is a tax update covering both CA and federal issues.

This link will take you two a listing of their nonprofit events. They also have classes that are primarily designed for auditors that focus on A-133 audits and other government programs that folks out there my find useful, do check them out.

Updated Nonprofit Accounting Boot Camp Schedule

Nonprofit Accounting Boot Camp
Three new boot camps have been added for 2007 in Los Angeles, Oakland and Palm Desert. Click the link for details and prices.

WebCPA | Regulatory spotlight shines on NFPs

WebCPA | Regulatory spotlight shines on NFPs

Thanks to a board member for sending me this link. The article is another good round up of what is going on out there.

Something New

To go along with the new website I have set up a news feed display that searches Google news for various topics. Go to the link in the title to see it or you can click on the link in the CAN Resources section below. Post any comments here (or there) and let me know what you think.

Alan

New website, new tools

Hey everybody, CAN has a brand new website! with an area dedicated just to us finance folks! There is a listserv so we can further the dialog and get questions answered by our peers and a growing list of resources beyond what we have here.

So check it out and let us know what you think, if you find any bugs, whatever.

Thanks!

Support Schedule for Advance Ruling Period

For those nonprofits that have been around a few years, have you filed your form 8734? Instructions to the form are here and the form is here (both links take you to pdf's). This form needs to be sent in at the end of your advance ruling period in order to prove that you are in fact a charity and not a private foundation.

Once submitted you will get your final determination letter from the IRS, keep them in a safe place and remember where you put them! CAN has had several calls recently from nonprofits that have been around for a while and can't find the letters. One then has to call the IRS and see if they can get you a copy, probably a lengthy and tedious process.

What Accounting Software Should I use?

I don't know, it depends on the organization. QuickBooks works well enough for CAN but may not be for everybody. The article from Idealware gives a pretty good round up of the type of packages out there at various price points and the pros and cons of each. Helpful, Idealware: A Few Good Accounting Packages

Accountability and Transparency, Part 2

CAN also has an Ensuring Nonprofit Integrity Initiative, what we consider a "thoughtful response to the nationwide increase of nonprofit watchdogging and accelerating calls for accountability by donors, policy makers, and the general public." Please do check it out, there are tool kits and workshops to help you along the way.

Plus you should stop by and check out our new website! Very new and improved...

Accountability and Transparency, Part 1

Guidestar has another good piece on accountability and transparency. The top piece of information people listed as how they show they are accountable are the audited financial statements. All most all the things people listed come from the admin and finance side and to me show once again how important these roles are in any size nonprofit.

It also reminds me to remind you that if you have not done so please do go on to GuideStar.org and find your 990. If you have filed one they have it listed. But the nice folks there allow us to add to the information up there, describe our programs in more detail, add accomplishments and goals and even explain things if you think your organizations numbers are a bit off. As one of the first place someone may go to research your organization it behooves us all to keep our info current.

More on the IRS's compensation report

Guidestar has a nice summary of the recent report from the IRS’s Exempt Organizations Executive Compensation Compliance Project. It includes a link to a PDF of the actual report and has a bit of analysis on why this should matter to nonprofits.

New Volunteer Time Value Estimate

Four posts today? And all from checking out IS's site? They do have good stuff there.

Alan

Tid Bit On Nonprofit Compensation

Reminiscent of the Getty's troubles: Have you heard the news about the head of the Smithsonian Institution?

"The Senate passed a non-binding amendment to the budget resolution that would freeze a $17-million increase for the Smithsonian until it undergoes a series of ethics and accountability reforms, including requirements that no Smithsonian employee be paid more than the President of the United States, and that all travel expenditures conform with federal government guidelines.

While the amendment may be dropped in the final version, it provides an indication of some lawmakers’ thinking on nonprofit executives’ compensation."

Again, thanks Independent Sector

Penalties for Nonprofits who don't eFile?

The Senate has adopted an amendment that would raise several penalties on tax-exempt organizations and establish a new penalty for failure to comply with electronic filing requirements.

The proposal, offered by Senator Charles Grassley (R-IA), would double the excise tax on political and excess lobbying activities; increase the excise tax on organizations with revenues of more than $25 million for failing to file a Form 990; and, for organizations that are already required to file their Form 990 electronically, impose new penalties for failure to do so.

The link in the heading will take you to the IRS's FAQ on eFiling.

Postage Rates Increase

Among other news from Independent Sector:

Postal rates will go up across the board on May 14. While the average increase for nonprofits was less than anticipated, certain types of mailings with enclosures will have a higher rate. Of particular concern to charities that send premiums, such as note cards or other gifts, with their fundraising letters is the new higher rate for large envelopes that are not uniform in thickness. The higher rate is intended to reflect the additional cost of handling such mailings.

Other changes include a 41-cent first-class stamp, up from 39 cents, and a new Forever Stamp that can be purchased for 41 cents now and used at any time in the future, even if rates increase.

Excessive Compensation

From the The NonProfitTimes - eNewsletter

Some of the examples of what is being done by some nonprofits are just ridiculous, you wonder who filled out their 990's and what were they thinking. It is news like this that makes some people think ALL nonprofit personnel get paid to much.

Accounting Boot Camp in Monterey

Here is the latest info on the Monterey Boot Camp to be held on April 18th.

Alan

Latest Cost Of Living Adjustment Percentage

Click here to go to the Social Security Administration's website to get the latest number.

In the December of 2008 it was adjusted to 5.8%.

For the QuickBooks users out there

Two good book resources. The first I have, the second I have heard good things about.

Sleeter's Book

Ivan's book

Alan

SOP 98-2

I've posted on this before, but here is a *bump* for the topic as I've had some questions on it lately.

SOP 98-2 covers joint costs, costs that have both a fundraising component and a program component. An example would be sending out an informational mailer about a nonprofit’s program and also including a request for a donation. Is that mailing a program expense or is it fundraising? Some of each?

This article covers how to allocate that expense and the three criteria you have to meet in order to have any of the costs considered program costs. Don’t meet the criteria? It is all fundraising.

Alan

Nonprofit Executive Compensation

This is from GuideStar's newsletter, a good resource. The IRS is upping its scutiney of nonprofit executive compensdation. Do you know what a rebuttable presumption of reasonableness is? click the link in the headline to find out why it could be important to you.

Alan

Sales Tax on Auction Items?

Boot Camp Question: Do we have to pay sales tax on auction items?

Yes. The link on the title has some good info and you can also get good tips here from the California State Board of Equalization. Don't be caught in noncompliance!

Alan

Raffles

More Questions form the boot camps: Is there a $ limit registering your raffle with the state of CA?

All raffles must be registered with the state attroney generals office unless your are not charging or soliciting donations for the tickets. Click on the title link to this post to see all the FAQ's about raffles in CA.

Are CD's Restricted?

In our ongoing series of Questions From the Boot Camps:

Q:
I was wondering if you would classify Certificates of Deposit as permanently restricted funds or if that is placed in a different category?

A:
CD's are a means of holding the money, like a checking account or a savings account. They are usually for a fixed amount of time, from 30 days on up to years I think. As a vehicle for holding money they would not fall not the category of restricted or unrestricted.

Now the money in the CD is a different story: as an example say you $100,000.00 to do a specific project over two years and you know that you won’t need $60,000.00 of that for the next 12 months. You could take that 60,000.00 and put it into a CD for 12 months and earn a higher rate of interest that it would typically accumulate just sitting in a checking account.

So the CD is not restricted but the money in it might be permanently restricted, unrestricted or temporarily restricted.

SAS 61 & 114, Communication with Audit Committees

I have mentioned the PPC guides (this one and this one especially) as valuable resources for any nonprofit's finance and accounting personnel. Their e-newsletters are also very good and I picked up this tid bit about a replacement SAS (Statement of Accounting Standards) that governs communication between the auditor and "those charged with governance" of the organization. The link in the title will take you too the article, here is an excerpt:

SAS No. 114, The Auditor's Communication With Those Charged With Governance, was recently issued by the ASB. The new SAS supersedes SAS No. 61, Communication with Audit Committees, and is effective for audits of financial statements for periods beginning on or after December 15, 2006 (generally, 2007 calendar year-end audits.)

The new SAS establishes standards for the matters required to be communicated by the auditor, the form and timing of that communication, and to whom the matters should be communicated. These new standards apply to all entities regardless of size, ownership, or organizational structure.

2007 Nonprofit Accounting Boot Camps

Some of our 2007 dates have been announced and you can register for them now. Sorry I was slow in getting the word out.

If a location near you is not announced yet, stay tuned for more boot camps to be announced this year.

Here are the two up now:

• Thursday, February 15 in Pasadena. Sponsored by the Flintridge Foundation. To register click here and look under the links for Brown Bag Discussions.
• Wednesday, April 18 in Monterey/Santa Cruz. Presented in association with the Community Foundation for Monterey County, the Community Foundation of Santa Cruz County and CAN Insurance Services: www.RegOnline.com/accountingbootcamp

See you there,
Alan

IRS Launches On-Line Workshop for Exempt Organizations

Have I mentioned the Nonprofit Risk Management Center before? I am remiss then, as I have found them to be an invaluable resource over the years. They have too many resources to list here so check them out.

In their e-newsletter I was tipped off to this handy site, http://www.stayexempt.org/. From the Center's email:

The Internal Revenue Service has launched a new Web-based version of its popular Exempt Organizations Workshop covering tax compliance issues confronted by small and mid-sized tax exempt organizations.

The free online workshop — Stay Exempt — Tax Basics for 501(c)(3)s — consists of five interactive modules on tax compliance topics for exempt organizations.

You can complete the modules in any order and repeat them as many times as you like. The online-training Web site doesn’t require registration and visitors will remain anonymous.

Neat! I will be sure to check it out to see how it works.

New Tax Law Changes: The Pension Protection Act of 2006 (H.R. 4)

Here is the latest information from CAN's Public Policy Update, which you can subscribe to here if you are so inclined, From our Public Policy Director Ken Larsen. There are some big changes that will affect our reporting.

The Pension Protection Act of 2006 (H.R. 4) contains numerous changes to the federal laws affecting tax-exempt organizations. To help nonprofits and donors to be in compliance, the IRS has posted guidances on its web site (http://www.irs.gov/charities/article/0,,id=161145,00.html).

Key provisions of the legislation include the following:

• Section 501(c)(3) organizations that file unrelated business income tax returns (Forms 990-T) must now make them available for public inspection.
• Private foundation and excess benefit penalty excise taxes are doubled.
• Beginning in 2008, exempt organizations with gross receipts under $25,000 must file an annual notice with the IRS.
• Controlling organizations must report income from and loans to controlled organizations as well as transfers between controlled and controlling organizations. This provision is effective for returns due (without regard to extensions) after the date of enactment.
• Donor advised funds, supporting organizations, and credit counseling organizations are subject to new requirements.
• Supporting organizations that want to change their public charity classification should follow the procedures outlined in Announcement 2006-93.
  
• Notice 2006-109 provides interim guidance on issues affecting supporting organizations and sponsoring organizations of donor advised funds.
• Individual Retirement Account (IRA) owners age 70 ½ or older are permitted to directly transfer tax-free, up to $100,000 per year to an eligible charity. Notice 2007-7 clarifies several issues related to this provision.
• Charitable contribution deductions for food, book, and certain conservation property are increased.
• Charitable contribution deductions for monetary donations, certain easements, taxidermy property, clothing and household goods, and certain other items are limited.
• Notice 2006-96 provides guidance regarding appraisal requirements for non-cash charitable contributions, including transitional guidance relating to the definitions of qualified appraisals and qualified appraiser.
• Notice 2006-110 provides guidance on new recordkeeping requirements for charitable contributions made through payroll deductions.
• The IRS highlighted changes that may affect charitable giving in News Release IR-2006-92.

QuickBooks User Forums

Thanks to blog reader Angela for spotting the bad link to the QuickBooks users forums for nonprofits.

Intuit had changed the forums early in 2006 and they were not very freindly to use any more so I stopped looking at them. But I went back today and they are back the way they used to be and seem to have allot of people asking questions and responding so it is once again a good resource for us users.

Both this post title and the link in Other Links will take you there.