NonProfit Finance 101

1
Non-Profit Finance 101

• Staying in the Black

2
Special Considerations

• In general, non-profit organizations may not
• Generate profit but may hold funds in reserve to
  reinvest in the organization.
• Provide dividends to individual shareholders.
• Engage in activities deemed anti-competitive.

3
Special Considerations

• In general, non-profit organizations may not
• Provide any pecuniary gain, incentives or
  compensation to its officers, directors or
  members for their service or membership.
• Hold funds under the name or identification
  number of an individual, or blend funds from an
  organizational account with those of an
  individual account.

4
Non-Profit Directors Duties

• Care
• Loyalty
• Obedience
• Integrity

5
Financial Executives Responsibilities

• Maintain financial accounts with due diligence.
• Record financial transactions with appropriate
  documentation.
• Provide regular written/oral reports on the
  organizations financial status to the board and
  membership.
• Prepare annual tax filings, if applicable.

6
Financial Executives Responsibilities

• Seek expert counsel when needed.
• Develop policies and procedures for managing the
  organizations finances.
• Control organizational bank and other accounts.
• Oversee periodic audits of the organizations
  finances.
• Maintain all organizational financial records.

7
Important Information the Financial Executive
Should Have

• Bank account information
• Bank statements (past/current)
• Annual financial statements (past/current)

• Audited financial statements (past/current)
• Financial policies and procedures
• Financial records and forms

8
Financial Policies/Procedures

• Financial Executives
• Who is generally responsible for handling
  financial transactions and accounts?
• Who has a support role and what is the extent of
  each role?

9
Financial Policies/Procedures

• Accounts and Record Maintenance
• Receipts, disbursements and forms
• General ledger and chart of accounts
• Membership roster
• Property, investment and inventory records
• Bank statements and reconciliations

10
Financial Policies/Procedures

• Bank Accounts
• Type(s) of accounts to maintain
• Signatories on account(s)
• Authority to borrow funds
• Insurance/bonding
• Employer Identification Number or other account
  identifier

11
Financial Policies/Procedures

• Financial Reports
• Who receives reports?
• How often are reports provided?
• What type of verification process or internal
  audit is done of financial reports?

12
Financial Policies/Procedures

• Investments
• Type(s) of investments
• Person(s) authorized to invest funds
• Investment policies

13
Financial Policies/Procedures

• Transactions
• Membership dues
• Special assessments
• Fees
• Loans/grants
• Interest/dividends

14
Financial Policies/Procedures

• Expense Reimbursement
• What activities are covered?
• What limits apply (e.g., per diem, coach airfare,
  etc.)?
• What is the authorization process?
• Who authorizes pre- and post-activity?

15
Budgeting

• Pointers
• Identify goals/objectives for coming year.
• Review current year revenue and expenses as
  baseline.
• Identify revenue/expenses that will not recur.
• Obtain input from organizational leaders.

16
Budgeting

• Pointers
• Estimate income and expense for coming year.
• Review proposed budget with leadership.
• Approve budget.
• Communicate budget to members.
• Monitor budget.

17
Tax Exemptions

• Federal (US)
• There are 23 exempt classifications under the
  Internal Revenue Service code.
• As a business league, NADL and its Components
  can qualify for exemption under Section 501(c)(6)
  of the IRS code.
• As 501(c)(6) organizations, NADL and its
  Components may not receive charitable
  contributions.

18
Tax Exemptions

• State (US)
• Federal tax exemptions do not necessarily apply
  at the state level.
• Some states grant their own exemptions for
  nonprofit organizations.
• The process for obtaining an exemption varies
  from state to state.

19
Tax Exemptions

• International
• The laws vary significantly from country to
  country.
• Component leaders will need to investigate the
  requirements and process in each country.

20
Obtaining Exempt Status

• Federal (US)
• Individual exemption.
• Group exemption.
• Filing requirements.

21
Tax Filing Requirements

• Federal (US)
• Tax filings.
• Taxes for unrelated business income.
• Taxes related to employees.
• State (US)
• Requirements will vary from state to state.