Moving On

Just a quick note to say that I am moving on from the California Association of Nonprofits (CAN). My last day in the office will be this Friday, December 12. After the first of the year, I will continue my work as a consultant and trainer in the area of nonprofit accounting and finance and continue blogging and providing resources as well.

It has been my pleasure to work with CAN for nine years to help the nonprofit sector, to develop and lead the Nonprofit Accounting Boot Camps and other financial trainings (1,300 trainees across the state and nation!) and to speak with thousands of you on our helpline and at our events around the state. I look forward to continuing my relationship with you in the years to come and I want to say thanks to all of you for helping me learn about and grow with this sector over the last nine years. It has been an interesting journey, and I could not have done it without you.

It is hard to believe that this blog has been up and running for over a year and a half, and that we get almost 2,000 readers a month. Thank you for that as well. I'm not sure what the status of this blog will be in the weeks and months ahead but I will continue my interest in the area of nonprofit finance and accounting in another forum for those of you who are interested in reading yet another not-for-profit accounting blog.

I wish you a happy and relaxing holiday season.

Alan J. Strand
Interim Executive Director, California Association of Nonprofits (until 12/31/08)
Principal, Strand Financial Services (starting 1/1/09)
www.notforprofitaccounting.net

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News from the IRS

For those of you who don't subscribe to the IRS's Exempt Organization Update here are some highlights:

1. Nothing revolutionary but they seem to have reorganized some of their existing resources into a new spot. Seems to be a bit better laid out, all in one place.
2. Commissioner Miller's latest remarks about nonprofit governance can be found here, a PDF of his remarks at the Western Conference on Tax Exempt Organizations in November 2008.
3. The IRS's 2009 Exempt Organization Work Plan. Read this PDF to find out what the Internal Revenue Service will be up to in 2009 with regards to nonprofits.

2009 Mileage Rates

Heads up! The IRS has released its 2009 mileage rates. Here is an excerpt from the news release:

The Internal Revenue Service today issued the 2009 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning on Jan. 1, 2009, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) will be:

• 55 cents per mile for business miles driven
• 24 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

For the full press release click here. To learn more about efforts to raise the reimbursement rate for miles driven in service of charitable organizations please click here.

More Resources

Two more resources and links that I remembered I said I would share with all of our workshop participants.

The first is the the organization called BoardSource, a nonprofit dedicated to helping and improving nonprofit governance. They have a nice series of short books on governance, called the New Governance Series that touches on topics such as board organization, structure and financial management.

The other resource asked for was a sample gift acceptance policy which the new form 990 asks us for. It seems like those are pretty unique to the nonprofit but here is a list of ones that can be found on line from the Foundation Center. These could be used to help us get started crafting our own. If anyone has other sample policies they would like to share let me know and I will put them up here too.

Nonprofit Accounting Questions

Here are some more questions and answers from recent nonprofit accounting trainings trainings I have done.

Q: What is the difference between a 501c3 and a trade group?
A: Check out these publications from the CA Attorney General's office and this listing of resources from the IRS.

Q: What is admin? Just what are administrative costs:
A: Please read this from the National Center of Charitable Statistics.

Because of the diverse characteristics and accounting practices of non-profit
organizations, it is not possible to specify the types of cost which may be classified as indirect cost in all situations. However, typical examples of indirect cost for many non-profit organizations may include depreciation or use allowances on buildings and equipment, the costs of operating and maintaining facilities, and general administration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting.

Q: What is the minimum reporting threshold for filing a w2-g?
A: Please read this from the IRS (opens in a PDF).

Q: What is deferred revenue?
A: Check out these search results for the answer.

Q: Where to find compliance questions and answers from the IRS? How do we stay exempt?
A: The IRS has some good information here.

Q: Where can I find more information on the rules governing commercial fundraisers?
A: From the CA Attorney General's office here and here.

Q: Where are some discussions regarding excessive fundraising costs?
A: In the above commercial fundraiser links and here and here.

Again, if you have any other questions please let me know.

New 990 Resources and Links

Thanks to all the people who have come to our recent, "New 990" workshops. Below are a list of questions from them and resources I said I would post. If I miss any or you have other questions please feel free to put them in the comments below.

• Form 8734 - the end of advance ruling form is no longer required for groups who's advance ruling periods expire on or after June 8th 2008. Click here for the details.
• The IRS's recent 990 webinar is still available on line for folks who want to know more.
• Here is a link to SOP 98 2 issues regarding joint costs (costs that have BOTH a fundraising component and a program component. be careful with these, they can get you into trouble if you do not know the rules and the IRS is looking closer at this stuff.
• Here is the complete list of new 990 forms, instructions and schedules including J which list all the types of reportable compensation
• Other websites I referred to:
  www.stayexempt.org - helpful IRS resource
  www.guidestar.org - where our 990's reside
  hrcalifornia - labor and employment issues
• There was a question on schedule G part II. the text reads, "Events. (Complete this part if the organization reported more than $15,000 on Form 990, Part VIII, line 8a or
  Form 990-EZ, line 6a. List events with gross receipts greater than $5,000.)" The questioner asked why the 990 amount was $15,000.00 and the 990-EZ amount is $5,000.00. I had no idea until I looked at it now and realized there is a period that separates the two sentences. The $15,000.00 amount is for both the 990 and 990-EZ.
• Another question was asked about question 6 of part I of the core form, why does the IRS need to know the number of volunteers a nonprofit utilizes? I'm not really sure, maybe someone out there knows? Here is the text from the form 990 instructions:
  

  Line 6. Number of volunteers. Provide the number of volunteers, full-time and part-time, who provided volunteer services to the organization during the reporting year. Organizations that do not keep track of this information in their books and records or report this information elsewhere (such as in annual reports or grant proposals) may provide a reasonable estimate, and may use any reasonable basis for determining this estimate. Organizations may, but are not required to, provide an explanation in Schedule O of how this number was determined, and the types of services or benefits provided by the organization’s volunteers.

If I missed any question please let me know.

Accounting Boot Camp Questions

Below are some questions and answers from recent nonprofit accounting trainings I've led.

• Is there a minimum dollar threshold for registering our nonprofit's raffle with the state of California?
  No but click here for more.
  
• Does the charity report the raffle winners to the state?
  No it does not.
  
• Can a nonprofit accept a donation of the use of a donor's timeshare?
  Yes, but the donor will not get a tax deduction for the donation of the use of the time share. See Publication 526, all about contributions to nonprofits.
  
• Where can I find more information on the new 990?
  At the IRS website stayexempt.org the have a series of mini-courses on various topics including several on the new 990, walking you through the whole form. They are 20 to 30 minutes each and free.

Contact me if you asked a question and I didn't get to it.

CAN Confernece Session Update

For those of you who attended CAN's 17th Annual Conference and my session on Accounting for Non-Accountants, thanks for coming! Here are some additional resources and links:

• The IRS Guide to Good Governance can be found here, sorry I forgot to add it to the handouts.
• Those of you interested in sample Auditor's reports please click here.
• The details on California's Nonprofit Integrity Act as it relates to Commercial Fundraisers (opens a PDF).
• Has the 990 PF Changed? Not yet.
• For those interested in the potential shift from GAAP to IFRS click here.
  
• When do we file the new 990? Read below or click here for a PDF of a general overview of the instructions.
  

  Calendar year - Use the 2008 Form 990 to report on the 2008 calendar year accounting period. A calendar year accounting period begins on January 1 and ends on December 31.
  
  Fiscal year - If the organization has established a fiscal year accounting period, use the 2008 Form 990 to report on the organization’s fiscal year that began in 2008 and ended 12 months later. A fiscal year accounting period should normally coincide with the natural operating cycle of the organization. Be certain to indicate in the heading of Form 990 the date the organization’s fiscal year began in 2008 and the date the fiscal year ended in 2009.

Let me know if you have any other questions.

More 990 Resources

The last post listed an IRS webinar for the new 990 and I put up a to-do list a while back. You think I would be done touting new 990 resources but you would be wrong! In the spirit of making sure there are enough resources noted out there to satisfy as many people as possible I give you one more. A big hat tip to Nancy at Non-profit accounting help for pointing out this resource from avenue2possibilities. It includes samples of many of the policies the new form 990 will be asking about and a workbook and checklist to go through to help make sure you are ready. So now all you have to do is put the policies in place!

And if they ever create a New 990 Comic Book you will hear about it here first thing, promise.

IRS's Tax Talk Focuses on the New 990

Another presentation on the new 990 but from the horses mouth this time:

The Internal Revenue Service’s next Tax Talk Today Web cast on Tuesday, Nov. 4, at 2 p.m. focuses on “Preparing for the New Form 990.”

The IRS has redesigned Form 990 to reflect significant changes that have taken place in the tax law and the tax-exempt sector. Organizations and their preparers will want to tune in to learn about the new form and instructions so that they fully understand how the changes affect the filing process.

The new form will be filed in 2009 for the 2008 tax year. Organizations may also want to reassess if their internal systems need to be updated to reflect the new reporting requirements. The IRS has a special Web page on the Form 990 redesign and background documents .

Moderated by Les Witmer, panelists for November’s program are: Eve Rose Borenstein, Exempt Organizations Tax Attorney, Borenstein and McVeigh Law Offices (BAM!); Stephen Clarke, Tax Law Specialist, Rulings and Agreements, Exempt Organizations, Internal Revenue Service; Julie L. Floch, CPA, Eisner Director of Not-For-Profit Services; and Ronald J. Schultz, Senior Technical Advisor to the Commissioner, Tax Exempt and Government Entities Division, Internal Revenue Service.

Tax Talk Today is a Web cast aimed at educating tax and payroll professionals on the most current and complex tax issues. Tax professionals are encouraged to watch and submit questions. To access the Web cast at no charge, viewers can register online .

Tax professionals in need of continuing education credits are eligible to receive one CPE credit by viewing the Nov. 4 Web cast and purchasing the CE credit. Archived shows are available on the site also at www.taxtalktoday.com.

Looks to be a good presentation.

Retirement Account Changes

Does your nonprofit have a 403(b) retirement plan for its employees? If it does have you heard about all the changes taking effect for 403(b) plans? Do you know what you need to do to get ready for them?

As if getting ready for a new form 990 wasn't enough we also have to make sure our 403(b) plans are in order. The National Council of Nonprofit Associations is holding two webinars about the changes that will be presented by Bob Architect, Senior Tax Law Specialist at the IRS.

The first, a general presentation regarding the changes and how they will affect your organization, is Tuesday, October 28 at 3:00 - 4:15 pm Eastern. The second one, a comprehensive presentation regarding the changes for individuals who handle employee benefits, is Wednesday, November 12 at 3:30 - 4:45 pm Eastern. CAN Members get $10.00 off the $35.00 registration fee.

IRS Update

From the IRS comes this announcement:

IRS Sends Compliance Questionnaires to 400 Colleges and Universities
Approximately four hundred U.S. colleges and universities will begin receiving compliance questionnaires from the Internal Revenue Service in the next few days as part of the agency’s focused effort to study key areas in the tax-exempt community. The college and university questionnaire will focus on unrelated business income, endowments and executive compensation practices. The questionnaires are being sent to a cross-section of small, mid-sized and large private and public four-year colleges and institutions.

Private nonprofit universities are generally exempt from tax under Internal Revenue Code section 501(c)(3) and like state universities are to unrelated business income tax.

Click here to read the rest.

This is part of a new compliance project for colleges and universities by the IRS. Will this effort by the IRS broaden out to other 501(c)3 organizations? Probably. I think they are looking at the biggest fish first but I'll bet it is just a matter of time until more of these types of letters will be sent.
Are there any lessons to be learned here? I think two at least:

• I'd say make sure that if you are doing any activities that might generate unrelated business income you should learn the rules (link opens a PDF) that apply.
• Make sure your salaries are justified.

Probably making sure your ready in general for the new 990 reporting will help as well.

Where did all the money go?

As the Finance Guy I've been asked questions similar to this through the years. Often it comes from a board member or someone who is not too familiar with how nonprofits operate, or maybe just how organizations operate in general, and thinks that I, as my role of Finance Guy, have some ability to make money appear instead of just controlling the spending of it. I'm the first to admit that my strong suit is not fundrasing. I can put together a cash flow report and tell you how fast you will be spending your income but as far as generating contributions? Not so much.

Our sector has other professionals for that and resources out there to them get those donations. One I've read and like is The Raiser's Razor. Written by a CFRE in Dallas, Texas and covers both national and local issues. From the United Way of Dallas to how to ensure a second gift, click through and learn about what goes on in that part of the nonprofit world.

This entry is part of the Nonprofit Blog Exchange's Virtual Event #9. Check it out to see bloggers writing about other blogs.

New 990 To Do List

Even if your nonprofit is lucky enough to have a November 30 year end there is still plenty of stuff you need to be doing right now to get ready for this new reporting form. Thanks to Brian for this great list, it has been something I have been meaning to do for CAN as well as share with everybody. This is a work in progress, some things will be added as we go through this stuff but here is where it is so far:

THE NEW 990:
WHAT DO WE NEED TO DO RIGHT NOW?

Required Policies

• Conflict of interest policy
• Whistle blower policy
• Document retention and destruction policy
• Joint venture policy
• Expense reimbursement policy
• Non-standard gift acceptance policy
• Written debt collection policy (hospitals)

Practices & Procedures

• Need to prepare a written document which sets forth the procedures by which the Board of Directors will review the Form 990 before it is filed
• Document compensation reasonableness processes
• Professional fundraisers agreement
• Documentation regarding eligibility to receive grants

To Do List

• Estimate the total number of volunteers utilized during the year
• Identify any new program service activities conducted during the year
• Identify revenue and expenses for three largest program service activities
• Ensure that filing all 1099s when required to do (non-employee services in excess of $600)
• Prepare documentation to support classification of independent contractors
• Ensure that organization is preparing Form W-2G when required
• Make sure register with California Attorney General if conducting raffles and make sure undertake backup withholding if necessary
• Identify non-cash contributions in excess of $5,000 for which public charity disposed of within 3 years after receiving
• Document meetings of Board of Directors committees with authority to act
• Write-up re how satisfy public disclosure requirements
• Identify all key employees under the expanded definition
• Break out the revenue and expenses from gaming activities from the general fundraising activities
• Update Chart of Accounts (and audited financial statements) to include the expense categories listed on Part IX of the redesigned Form 990

Even if the phrase, "new 990" wants to make you stick your finger in your ears and say, "lalalalalalalalalalala" you can still go through this list and make sure your organization is more prepped than it is right now for the big event.

And please let me know if you think anything is missing from the list!

Nonprofit Leaders

For those of you who have not read Heather Carpenter's blog I do encourage you to. She writes about nonprofit leadership issues and has some great ideas.

Last week she posted a particularly interesting piece, "My NP Times Top 50: The Next Generation of Nonprofit Leaders You Should Know." It is based on the Nonprofit Times' Power and Influence top 50 nonprofit executives but it is made up of those she feels are the up-and-coming folks in the sector.

I'm honored to be on the list but mostly I'm grateful that she created it. This is a fantastic list of people who are doing interesting things to help strengthen the sector and it is great to have this opportunity to get to know them. Thanks Heather and keep up the good work.

Updated Form 990 Instructions

This IRS has announced the release of the updated and presumably final instructions for the redesigned form 990. The link takes you to a page to download the instructions to the various sections in PDF. The IRS has not yet compiled them all into the usual three column format, I think that they are easier to read at the moment. From the press release:

“We were gratified by the amount of help the IRS received from the tax-exempt community through public comments to redesign the Form 990 and revise its instructions,” said Steven T. Miller, Commissioner of the Tax Exempt and Government Entities Division. “This input helped us achieve our goal of improving compliance while minimizing burden. We will now begin working with the tax-exempt sector to help organizations complete the form and prepare for the 2009 filing season."

The IRS expects to release instructions to the 2008 Form 990-EZ, Short Form Return of Organization Exempt from Income Tax, in the next few weeks.

Happy reading! I'm going to start through these this week.

Updates From the Nonprofit Risk Management Center

Need a Refresher on Maintaining Tax-Exempt Status and Other IRS Obligations?

The IRS recently updated Publication 557 (a PDF). The updated publication provides helpful guidance on what information needs to be provided to donors to acknowledge donations, the rules regarding public disclosure of annual returns to the IRS, including the 990-T form, as well as examples of what constitutes the all-important public support needed to maintain tax-exempt status.

Frequently Asked Questions Now Available On the Center’s Web Site

Every day the Center responds to questions about risk, liability and insurance. The Center is pleased to announce that the “Advice” tab of the Center’s Web site now provides an easy link to the Center’s responses to these Frequently Asked Questions.

Why Your Financial Systems Matter

Thanks to the Independent Sector for the heads-up: From the Los Angeles Times comes a story about a local chapter of the Service Employees International Union. This story has everything -- everything that can give the public a reason to think nonprofits are poorly run or are run solely as a scam to make money for the founders: undisclosed payments made to businesses owned by family members, poor financial record keeping, lavish spending and possible misstatements of fundraising expenses.

Even if all the issues mentioned in the story are found to be justified, it is still almost a perfect example of everything you should not do. And just because something is legal doesn't mean it is ethical. Taking the time to think, "How will this look?" to the media, regulators, other nonprofits and especially the community you serve can only help your decision making, financial or otherwise. Having a strong financial system in place and people knowledgeable about those systems, as well as other nonprofit accountability measures, are key for all organizations regardless of mission or size.

990-EZ Update

Thanks to GuideStar for this bit of news. Yesterday I mentioned the 990-EZ and said that is was unchanged. Not so, at least officially. It does not look like the form itself will change but the IRS proposes to allow filers of the 990-EZ to file six of the new schedules developed for the updated 990:

1. Schedule A, Public Charity Status and Public Support
2. Schedule C, Political Campaign and Lobbying Activities
3. Schedule E, Schools
4. Schedule G, Supplemental Information Regarding Fundraising or Gaming Activities
5. Schedule L, Transactions with Interested Persons
6. Schedule N, Liquidation, Termination, Dissolution, or Significant Disposition of Assets

Details on these schedules can be found here.

Got comments about these changes? Here are the details:

Send written comments on or before September 8, 2008, to:

R. Joseph Durbala
Internal Revenue Service, Room 6129
1111 Constitution Avenue, NW
Washington, DC 20224

All comments will become part of the public record and will be
summarized or included in the IRS request for OMB approval of the
changes to the 990-EZ.