Nonprofit Accounting Blog

Nonprofit Financial Management – Encouraging Positive Changes

Nonprofit financial management folks tend to be leaders. These are the ones who ensure that the bills get paid, the lights stay on, and the mission gets funded, all the while keeping the beans counted and clean so that the public places its jaded trust into the organization’s mission and vision. All well and good.

But what if it’s not just the public who’s jaded? What if your organization faces changes, albeit positive changes and everyone within is feeling a tad bit jaded?

Numb to Change

The CEO called everyone in the organization down to the conference room. He brandished a book. “We’re going to follow this model, and we’re going to transform the organization!” he shouted.

He waited for the applause, the enthusiasm. Instead, he received silence. A few yawns. A few people are glancing at their watches.

What happened? It’s change fatigue or an organization that’s been through the “next greatest leadership thing” cycle too many times.

Many organizations find themselves fatigued from too many changes happening too quickly. High turnover rates, problems that create a turbulent environment, a new marketing plan, a consultant brought in to fix things are all positive steps in the right direction, but if they happen too frequently, skepticism leads to shrugs. Employees may not believe that this time, things will change for the better.

They become numb to change, fatigued by newness, and ready to ignore it all until the dust settles down.

Re-Ignite the Excitement

As part of your role in nonprofit financial management and as a leader in your organization, part of your job is to support change. It can be difficult, especially if an organization has just passed through troubled waters.

But re-igniting the fire of excitement starts at the top. It begins with you. It starts with your CEO and spreads to you in your role in nonprofit financial management and to others in communications, donor relations, and more.

Here’s how you can help others get behind changes, embrace excitement, and say an enthusiastic YES to new plans and directions facing your nonprofit.

  1. Acknowledge the past. Whether it’s an old board stepping aside for fresh members, a new CEO unrolling marketing plans, or donor relations unveiling a campaign to court gifts and grants, it’s okay to acknowledge that things may not have worked out in the past. Don’t sugar coat or feel you have to be Pollyanna. Everyone makes mistakes. Recognizing the cause of the staff’s apathy goes a long way to fixing it.
  2. Share the information widely within the organization. Make sure that everyone knows the plan and understands their part in it, no matter how small.
  3. Secure buy-in for organization-wide plans from all senior leads. Nonprofit financial management leaders should be on board as should communications, donor relations, human resources, operations, and all other team leaders.
  4. Remind everyone of the need for change and that the status quo is no longer an option. Change only occurs when people are motivated to move beyond their comfort zone. People can get comfortable even when things aren’t going well; they get comfortable complaining but remaining mired in what’s holding them back. Change can be uncomfortable. Reinforcing the need for change and the positive benefits of change from the top down in the organization is a vital step for successfully re-igniting your nonprofit.

Change isn’t easy. When employees have a ‘been there, we’ve done that’ attitude, it’s important to be the leader they need and inject your energy and enthusiasm into the plans and programs. If doing what you’ve always done keeps getting you the same results, it’s time for a change. Nonprofit financial management personnel can be the leaders for positive change.

Beck & Company

Beck & Company is an independent certified accounting firm specializing in nonprofit organizations. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.

Accounting for Nonprofits: Are Donor Advised Funds Right for Your Nonprofit?

When it comes to accounting for nonprofits, keeping up to date with all the changes, advances, and newcomers to the field of finance and accounting can be challenging. We spotted this information about donor advised funds and wondered how many of our nonprofit colleagues were aware of this opportunity for charitable giving. Today we’ll take a look at donor advised funds and what they might mean to your nonprofit organization.

According to GuideStar, donor advised funds managed $85 billion in assets by 2016. Here’s how donor advised funds work, the pros and cons, and next steps if you would like to investigate them further.

What Is a Donor Advised Fund?

A donor advised fund is a mutual fund created for the purpose of donating assets to a 501c3 organization. Donors with considerable assets may give to a donor advised fund instead of establishing a foundation or philanthropic charity to ensure their money is allocated to specific nonprofits. Donor advised funds are often maintained and managed by well-known fund companies such as Schwab, T. Rowe Price, and other financial companies. For example, T. Rowe Price created their Program for Charitable Giving in 2000 to enable individuals to give through the vehicle of an established fund.

How Does a Donor Advised Fund Work?

Donor-advised funds are managed by sponsoring organizations. The organizations must be 501(c)(3) tax-exempt organizations. Sponsoring organizations generally fall into three categories: community foundations, single-issue organizations, or national organizations, such as the previously mentioned T. Rowe Price Program for Charitable Giving. Companies like Price often create national organizations, Vanguard, and Schwab to give their customer base an effective way to manage giving programs.

Donor advised funds work as follows:

  1. Individual or corporate donors contribute to a donor advised fund. They may take an immediate tax deduction.
  2. Assets now belong exclusively to the DAF.
  3. Often (but not always) the original donor is now listed as an ‘advisor’ to the DAF.
  4. The donating “advisor” can now recommend how the DAF assets are used and invested.
  5. The fund proceeds grow tax-free.
  6. The DAF advisor (the original donor) may request that donations be given to charitable organizations.
  7. The DAF fund management team conducts due diligence and, if the organization the DAF advisor wishes to give money to is a legitimate and eligible to receive tax-free donations, grants are issued to the charities.

Thus, donors may use a DAF to pass money tax-free to a nonprofit entity. The DAF acts as an intermediary between donors and charitable organizations. This is similar, but not identical, to how private foundations act. In the case of the DAF, many individuals may contribute to the DAF, instead of one person establishing a private foundation to pass grants along to their favorite charity.

Accounting for Nonprofits: Pros and Cons of DAFs

There are numerous pros and some cons to utilizing DAFs for charitable contributions.

Pros:

  • Donors can take an immediate tax deduction regardless of when the money is actually given to the charitable organization. By placing money into the DAF, donors receive immediate tax benefits.
  • Large financial firms managing DAFs are experienced at handling non-cash assets such as donations of stock, reducing headaches for accounting for nonprofits on how to categorize and value such donations.
  • Ease of donating non-cash assets enables people to give more generously than they might otherwise.
  • An experienced financial manager also handles daily money management decisions for the fund.

Cons:

  • Nonprofits may wait a considerable amount of time before receiving the aforementioned donation. There is no payout deadline.
  • It can be difficult for investors to ascertain management or transaction fees.
  • Some donors treat these funds as places to stash cash; they have no intention of giving more.

For nonprofits interested in participating as recipients in donor advised funds, it’s important to take a few steps to establish your credibility and appeal as a recipient of their largesse. In general, you can solicit gifts directly from DAFs. Be sure to set up a profile on GuideStar or another charity watchdog site and be thorough and transparent with your nonprofit financials. Familiarize yourself with IRS rules regarding DAFs, and enact training to ensure everyone in your organization knows about DAFSs and can process gifts efficiently.

DAFs aren’t for everyone, but they do provide nonprofit organizations with another powerful way to solicit funds and help donors view their organization as a potential recipient of gifts.

Beck & Company

Beck & Company is an independent certified accounting firm specializing in nonprofit organizations. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.

Nonprofit Financial Management Topics: Is the Overhead Ratio Model Obsolete?

Nonprofit financial management courses and books often lean on the old standby of the overhead ratio model to judge the efficiency of the nonprofit.

But what if we told you that new research indicates that the overhead ratio model may be outdated? It may actually be a weak measurement of nonprofit efficiency.

Here’s why.

Are We Basing Nonprofit Work on Outdated Notions?

Much of the way our modern business culture functions is based on fairly outdated notions stemming from the industrial revolution. For example, the factory model of mass production may be outdated in an era in which computers can offer mass customization, and the internet provides nearly limitless choices for consumers.

This notion transfers to the world of nonprofit financial management, too. In the business world, the old idea of managerial efficiency stems from the definition of “turning inputs into outputs.”  To measure efficiency, many nonprofit analysts use the overhead ratio. The overhead ratio compares the ratio of overhead expenditures to total expenditures.

New research published in the journal Nonprofit Management and Leadership points out that this is actually a poor judge of efficiency for nonprofits.

Researchers from the University of North Carolina’s Public Administration program examined the literature of efficiency in the nonprofit world and realized that this is a flawed model. Unlike a factory, in which efficiency may indeed be judged by the ratio of inputs to outputs, nonprofits must measure their spending differently.

The overhead approach largely ignores the mission of nonprofits, how they utilize their expenditures, as well as inputs other than typically quantifiable inputs. Nonprofits can also increase their overhead ratio without decreasing efficiency. For example, buying grant management software may significantly improve efficiency if it allows the nonprofit to produce more (obtain more grants) even if the overhead expense increases from the software purchase.

The old overhead model just doesn’t cut it anymore for the modern nonprofit.

Don’t Get Rid of the Overhead Model Yet, But Evaluate It Differently

It’s still too early to get rid of the overhead model entirely. Even the IRS cites the overhead model in many of its documents for nonprofits.

However, instead of relying solely on overhead ratios as a judge of efficiency, consider using a different model. Financial ratios, when taken into account with program completion and success ratios, may be a better metric by which nonprofits should be judged.

Let’s take as an example a nonprofit whose purpose is to provide medical services for the homeless. Their inputs are donations, but how do you measure their outputs? By the number of projects they conduct or complete?

You can’t put a price on human lives or health. The number of people screened for diabetes may be one metric of “output” but the greater the “outputs,” the lower the efficiency, according to the old scale. Meanwhile, donors judge the nonprofit not by how tightly they cling to their money but by how many people they help.

A much better method by which to judge such a nonprofit is how well they used their funds to accomplish their mission. If their funds went towards clinics, medicine, and care for the homeless, for example, then their expenses will be high, but their efficiency may also be high if they use their personnel and resources wisely. The purchase of a new mobile health clinic may be a significant expense, but if it enables them to reach 20 times more people, it is indeed a sign of improved efficiency.

Nonprofit Financial Management Always Changing

It just goes to show that the world of nonprofit financial management is always changing. What we once took for granted as an established fact – the method of measuring nonprofit efficiency – may require rethinking. Nothing, it seems, is ever written in stone, especially when it comes to nonprofit financial management.

Beck & Company

Beck & Company is an independent certified accounting firm specializing in nonprofit organizations. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.

Washington DC Nonprofit Advisors Ask, “Does Everyone On Your Board Raise Funds?”

As Washington DC nonprofit advisors, we work with a lot of nonprofits in many areas of charitable and philanthropic work. One question we often ask is simple but often evokes sarcastic laughter when we ask it when meeting with clients.

“Does everyone on your board help raise funds?”

If you laughed out loud at that, it’s time to rethink your position on Boards and fundraising.

The role of a Board of Directors isn’t just to guide and manage the operations of the nonprofit organization. Nonprofits often struggle with fundraising (surprise, surprise). It starts at the top when the Board doesn’t do its share of the heavy lifting and turns away from fundraising tasks.

There’s an old saying that “many hands make light work.” If you want to make light work out of fundraising, it’s time to get your Board’s hands into the mix. Ready? Let’s talk about fundraising!

Five Steps to Engaging Your Board in Fundraising

Professional fundraisers tell us that there are five steps to raising money for a nonprofit. As Washington DC nonprofit advisors we’ve also seen these steps in action and can recommend them to your nonprofit.

The steps to successful fundraising, which you can teach to your Board of Directors, include:

  1. Identify prospects: Often the Board of Directors are professionals and high-level executives from the surrounding community. They may be well-connected to wealthy individuals, corporations, and others who might be interested in donating to the organization. Ask and follow up with your Board on their ability to crack open their address books and identify top prospects.
  2. Educate, cultivate and involve: This is where a little help from your marketing and communications folks comes in handy. Help your Board members learn to educate, cultivate, and involve their prospects in the work of the organization. Create events in which potential donors can see the work at hand that supports the missions. Utilize video, photography, and a mixture of media to engage donors and prospects at every step of the process. Involve potential donors in the work of the organization to see if there’s a fit. Help your Board do this by providing them with the tools that they need to educate, cultivate and involve.
  3. Ask: This is the step at which many people get tongue-tied. Teach people how to ask gracefully and graciously for the donation.
  4. Thank: After the ask, thank people. Thank them through written letters, notes, and public speeches. Thank them early and often. Acknowledgment goes a long way towards making donors feel valued and honored to contribute to supporting the mission of the organization.
  5. Involve: Continue the cycle by involving donors even further in the activities of the charity. Keep them on your mailing list and share stories and updates of what the organization has been doing to further its mission. Board members should have many opportunities to invite their prospects to events and other engagements where they can get involved in the activities of the nonprofit.

All Board members and Trustees can – and should – participate in the fundraising activities.

But what happens if you have someone on the Board who absolutely refuses to help out?

A little peer pressure can alleviate the situation. Talk privately to several Board members who are the best at fundraising. Perhaps the holdout needs coaching or encouragement to get on the fundraising bandwagon. With a little help from your friends and theirs, i.e., the Board members and Trustees who are comfortable with fundraising, you may be able to convince them to at least give it a try. Once they are successful, they’ll feel a sense of purpose and accomplishment that inspires them to continue with the fundraising work.

Fundraising isn’t as onerous as it sounds. With a little coaching and encouragement, everyone on the Board can become a fundraising ally for your organization.

Beck & Company

Beck & Company is an independent certified accounting firm offering accounting and tax service for nonprofits, nonprofit financial management, auditing services and more. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.

Avoiding Issues of Fraud (or Perceived Fraud)

Among the many issues covered in discussions of nonprofit financial management, the issue of fraud, or avoiding the appearance of fraud, can be distressing. No one likes to think of their nonprofit falling into the ‘fraudulent’ category.

Yet GuideStar recently announced that they have rescinded their Seal of Approval for five charities that violated their policies for transparency.

The FTC investigated complaints against charities purporting to use donations to help veterans. Among these charities investigated, 100 received notice of legal action. GuideStar took it a step further and examined the 100 under legal notice and found that five had earned their Seal of Approval. They published a list of the charities for which the Seal has been rescinded along with the reasons for the change.

Among the many reasons stated are nonprofit financial management issues related to fraud or incidents that give the appearance of fraud even if the charity isn’t doing anything wrong per se. According to GuideStar’s report, charities were cited and censured for the following reasons:

  1. State regulators found that the charity had misrepresented its financials.
  2. The organization had dissolved but had not notified GuideStar.
  3. State regulators ordered the organization to cease activities.

Charities obtain a Seal of Transparency after adding information to the GuideStar site. Charities are required to disclose with honesty and integrity their financial information and other information that adds to their public profile. The concept is simple: honest, complete information informs the public and helps the public make an intelligent decision about where and how to donate their money.

What the GuideStar and FTC Findings Tell Us About Nonprofit Fraud

Nonprofit financial management includes the prevention of fraud. The information obtained from the FTC review and the subsequent GuideStar article tells us a lot about issues pertaining to nonprofit fraud.

First, most of the fraud discovered wasn’t necessarily someone stealing money from the nonprofit, although that could be happening too. Instead, it was all around disclosure and failure to either disclose where and how the funds were being used or the activities of the organization.

Another problem was taking in money for an activity but then spending it elsewhere. Nonprofits who receive restricted funds, for example, that are earmarked for a specific project or program by the donor cannot spend them on anything other than what they were apportioned for in the first place. You can’t receive money for a scholarship for athletes and spend it to build a tennis court on campus, for example.

Nonprofits Have a Duty to the Public

Nonprofits have a duty and responsibility to the public, to their donors and constituents to be open, honest and transparent about their financials. It is then up to the public whether or not they choose to continue donations.

Some of the nonprofits receiving scrutiny from the FTC may be doing nothing wrong, but the perception of wrongdoing lingers. Why? It’s all in the financials. If the financials are poorly presented, if money isn’t categorized properly and if there is insufficient details included in the financial statements and annual report it can seem as if the nonprofit is trying to hide something.

This is where hiring a nonprofit accounting audit service can help. Professional nonprofit accounting audit services understand the changes to the FASB rules, for example, and can help you streamline net asset categories as well as assign the proper “nature” to expense items. The right amount of detail, the proper categorization and similar nonprofit financial management tasks undertaken during an audit can help clarify and communicate information in ways that help rather than hurt your nonprofit’s status.

If you’re ready to examine your nonprofit’s financials or you need nonprofit accounting audit services, contact Beck & Company today. We’re an independent certified accounting firm offering accounting and tax services for nonprofits, nonprofit financial management, auditing services and more. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting services that address all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.

Year End Accounting Tips and Advice

Year-end arrives faster than the Christmas decorations in the local big box store, and as part of your nonprofit financial management duties, you should start thinking about auditing services and year-end close now.

Some nonprofits end their fiscal years on June 30th, particularly nonprofits in the education sector; those in healthcare and other industries may be on a typical corporate calendar with the year-end December 31. For those whose bell will toll the close of the books as the ball drops in Times Square, now is the time for you to start thinking about nonprofit accounting audit services and all the things you need to tidy up the financials for year-end close.

Are You Ready for FASB Compliance?

Remember that new FASB guidelines affect asset categories, liquidity reporting, and expense reporting. Have you chosen where to move items that are in the third category of net asset classifications that’s going away? Now is a great time to start those discussions.

Liquidity is an area often confused by folks in the nonprofit world. Nonprofit financial management includes cash management; liquidity refers to having enough cash on hand to satisfy outstanding debts and obligations that may arise within a short period of time. Many nonprofits have a positive net balance but lack liquidity because their assets are tied up in restricted funds or grants. Be sure you have enough cash on hand to pay those bills that arise at year end.

Lastly, expense reporting is changing with the nature of the expense, like a line item, appended to your expenses. Take a look at typical expense categories and develop your own line items as needed.

This isn’t an exercise simply to satisfy FASB. The way that you depict your finances through the end of year report can tell a powerful story that encourages donations and support for your mission. With the right message, you’ll have an easier time courting donors and securing funds.

Plan for End of Year Nonprofit Financial Management

Take time now to plan for your end of year close and reporting needs.

  1. Relay key dates such as the last date to submit year-end invoices to accounting to everyone in your organization.
  2. Request that reimbursement receipts and reports are turned in with plenty of time for processing. Set a date now and circulate it among your staff to ensure everyone is aware of it.
  3. Catch up on data entry tasks to ensure payables and receivables are up to date.
  4. Review where your organization will present year-end financial results. Will it be at the typical board meeting or published on a site such as Charity Navigator or GuideStar? Consider their deadlines and requirements as well.
  5. Leave adequate time in the schedule for printing and mailing. Publishing an annual report requires several weeks for writing the reports, graphic design, and printing if you send it to a commercial printer. Mailing at 3rd class nonprofit rates also takes two to three weeks depending upon mail volume. With increased mail volumes around the holidays, leave plenty of time for mailing out reports.

If you are feeling overwhelmed by end of year nonprofit financial management requirements, consider nonprofit accounting auditing services. Some nonprofits are required by federal, state, or local jurisdictions to provide fully audited financial statements. Others reach a specific financial threshold that triggers an audit requirement. Regardless, all nonprofits benefit from a thoroughly audited financial statement.

Professional nonprofit accounting audit services can help your organization tell its story through financial statements in ways that are easily understandable to the public and donors. A strong, clear, and compelling story goes a long way in supporting the achievement of your mission and vision.

Beck & Company

Beck & Company is an independent certified accounting firm offering accounting and tax services for nonprofits, nonprofit financial management, auditing services and more. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting services that address all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.

A Look at the Changing FASB Nonprofit Accounting Principles

Whether or not your organization needs nonprofit accounting audit services depends on several factors. Funding sources may require audits to continue providing capital. Other requirements may come from local, state, and federal offices guiding your nonprofit’s activities.  The National Council of Nonprofit’s Audit Guide offers helpful guidelines to nonprofits considering audit services.

Nonprofit audits aren’t just an item on your to-do list. They can provide an important service to an organization and help it tell it mission and story through financial analysis to the public and funding organizations. Properly prepared nonprofit audits satisfy both regulators and the public by offering insight into how a nonprofit obtains its funds and allocates them throughout the year.

It’s important to take a look at nonprofit accounting audit services now in light of the coming FASB changes to nonprofit accounting principles. These changes impact restricted and unrestricted net assets, liquidity disclosures, and functional expenses. Understanding the changes and using them to tell your nonprofit story can benefit your organization in many ways.

Restricted and Unrestricted Net Assets

Terminology around net asset categories has been changed. There are now two categories rather than three. The two categories are net assets “without donor restriction” and net assets “with donor restriction.”

One of the reasons why you might wish to hire Beck for nonprofit accounting audit services is this change in net asset categories and ensuring clarity around how monies are accounted for in your organization. Nonprofit accounting can be complicated, especially with restricted and unrestricted net assets. As you know, a donor can place any type of restriction they wish around their donation, making it challenging to categorize them.

For example, you might operate three programs with specific goals. Donors can give to one, two or all three programs with the stipulation that funds are used only to achieve the goals of each program. Another donor may give money that can be used for the operating budget but under the condition that the goals of program one are met. Do you see how this can get complicated very quickly?

Ensuring clarity around determining whether net assets are restricted or unrestricted is vital for telling the financial ‘story’ in your audit. Those interested in supporting your nonprofit want to know how, where and why they should give their hard-earned cash. By understanding where there are needs and how those needs are met through viewing the net asset categories, potential donors can get a better idea of how funds are being used and accounted for at your nonprofit.

Liquidity Disclosures

Liquidity is a term frequently misunderstood by those outside of the accounting and finance professions. Liquidity refers to cash on hand. Your organization may show a positive bottom line and positive net assets but lack liquidity because its assets are tied up in restricted categories, tangible assets, or other obligations.

Nonprofits often show when they accrue revenues but this doesn’t necessarily mean that the money is in the bank. Grants, for example, may be logged into your accounting system when notification is received that you have been given the grant. The actual check for the amount of the grant may not arrive for weeks or months and may push the grant funds into the next fiscal year. This is an example of how discrepancies arise between cash flow and assets.

This is why tracking actual liquidity is so important. The new FASB standards request that nonprofits list both quantitative and qualitative measures of liquidity. This encompasses both the financial resources available for the next year and methods by which the nonprofit manages and monitors liquidity. To satisfy the new FASB standards, you’ll need to disclose the resources on hand that can be used to cover all expenses and obligations in the next year.

Presentation of Expenses

The changes to the presentation of expenses aren’t extensive. Nonprofits must now break out their expenses into three functional areas. This isn’t news to those nonprofits who have always been subject to audits, but others may find the change a bit of a surprise. Nonprofit accounting audit services can help you figure this part of expense presentation out or you can follow the guidelines developed by FASB regarding expense presentation. Think of the nature of expenses as if they were line items and you’ve got the gist of it.

Nonprofit Accounting Audit Services from Beck & Company

These are the basics of the FASB changes and how they may impact many nonprofits. For specific information on how your nonprofit may be affected, consider a call to Beck & Company. Beck & Company offers nonprofit accounting audit services. We are Washington DC nonprofit advisors serving the eastern seaboard with advice and guidance for nonprofits. Contact us or call 703-834-0776 x8001.

Tax Cuts and Jobs Act: What It Means for Your Nonprofit

Accounting for nonprofits will be impacted by the new Tax Cuts and Jobs Act signed into law by President Donald Trump on December 22, 2017. The act went into effect January 1, 2018.  Although the new law impacts corporations, individuals, and nonprofits, the impact on nonprofit organizations is minimal. If you handle accounting for nonprofits, you’ll want to pay particular attention to the new provisions in the Tax Cuts and Jobs Act to ensure compliance with the law as well as utilizing every possible advantage.

A Summary of Major Changes.

A detailed analysis of the full law isn’t possible within this article. However, if you’d like more information, you can:

Let’s take a look at the major changes impacting all, and especially nonprofits, from the Tax Cuts and Jobs Act.

  1. Changings affecting individuals expire in 2025.
  2. New tax tables and rates are in effect from 2018 through 2025.
  3. The system for taxing capital gains and qualified dividends did not change under the act, except that the income levels at which the 15% and 20% rates apply were altered (and will be adjusted for inflation after 2018).
  4. During 2018 the 15% rate will start at $77,200 for married taxpayers filing jointly, $51,700 for heads of household, and $38,600 for other individuals. The 20% rate will start at $479,000 for married taxpayers filing jointly, $452,400 for heads of household, and $425,800 for other
  5. The standard deduction increased through 2025 for individual taxpayers to $24,000 for married taxpayers filing jointly, $18,000 for heads of household, and $12,000 for all other individuals. The additional standard deduction for elderly and blind taxpayers was not changed by the
  6. The act repealed all personal exemptionsthrough 2025. The withholding rules will be modified to reflect the fact that individuals can no longer claim personal

Changes to Charitable Contributions of Note for Accounting for Nonprofits

The biggest change for those handling accounting for nonprofits is the changes to income-based percentage limits for charitable contributions. The income-based limit is now 60%.

The act also repealed provisions that provide an exception to the written acknowledgment requirement for certain contributions that are reported on the done organization’s return — a prior-law provision that had never been put in effect because regulations were never issued. That’s good news for those doing accounting for nonprofits.

The news that income-based percentage limits for contributions of cash might inspire donors to give more. This might be an excellent time to increase donor outreach, marketing efforts, and donor relations programs.

Mention the new income-based percentage limits in your outreach communications. Although the tax savings may not be the big reason why people give your nonprofit, all points, including your organization’s mission, vision, tax exempt status and effectiveness in its given area contribute to the overall impression it makes on donors. It can either encourage them to give more or turn to another charity.

Another thing to keep in mind is that changes to the laws also change the disposable income available to consumers. In other words, potential donors have a little more cash to spend or give as they see fit. Although some certainly want to spend or save it, others will give, and give generously. You may want to tie in your marketing programs to the changes and remind people to give now, before the end of the fiscal year, so they can claim charitable deductions on this year’s taxes.

The President hasn’t said if more changes are expected, so if you handle accounting for nonprofits, it’s fairly safe to assume that the tax laws now in effect will remain stable, at least through the end of the current administration’s term in office. Most of the changes found in the Tax Cuts and Jobs At will remain in effect until 2025, giving you plenty of time to adjust to them. You can move ahead with certainty on your plans to maximize the new law’s impacts for potential donors.

Beck & Company

At Beck & Company, we have extensive experience and a tradition of creative thinking, technical expertise, and a collaborative spirit that can help your nonprofit achieve its goals. Whether you want to increase donor confidence and support through transparent accounting practices or find a partner for your annual audit, we can help. Contact us today or call 703-834-0776.

5 Steps Nonprofits Can Take to Prepare for Giving Tuesday

Among the many nonprofit financial management tips Beck & Company has shared over the years, perhaps none can make such an impact as preparing now for Giving Tuesday.

What is Giving Tuesday? It’s the Tuesday immediately after Thanksgiving. Started in 2012 by the 92nd Street Y and the United Nations Foundation, the event began as “hashtag activism” or the use of hashtags to spur people to action. It’s often abbreviated as #GivingTuesday.

The purpose of Giving Tuesday is to encourage people to give to their favorite charities. After the lavish Thanksgiving meal and the debauchery of Black Friday shopping, consumers are encouraged to focus on something meaningful in their lives: giving to their favorite nonprofits.

That might mean your organization…if you prepare now.

As nonprofit financial management tips go, this is an important one: take steps now to make  #GivingTuesday successful.

Five Steps to Prepare for Giving Tuesday

If you were throwing a party, you’d take time to clean your home, polish the silverware, set out the best food and drink you could afford, and generally prepare the entire place from top to bottom to receive your guests in style.

Well, the same goes for GivingTuesday. Now is the time to polish your website, social media channels and more to attract donors and encourage generosity on this important day for nonprofits.

Last year, nonprofits raised $274 million thanks to Giving Tuesday. Smart nonprofits didn’t just sit back and hope for the best – they took action steps to prep for the big day. You can, too.

  1. Update your website and donor page: Make sure that your website is spic and span. Update text, keywords, calendars, and photos. Pay particular attention to your homepage and your donor page. Add a hot button or large, attractive button on the home page that enables people to donate quickly. Test your donor page and make sure that it is working properly.
  2. Improve your social media presence: Giving Tuesday began as so-called hashtag activism. A hashtag is a symbol (#) followed by a word or phrase without space (#GivingTuesday) that enables quick searched on a topic on social media. Take time now to update the header, about, and donation links on your social media pages.
  3. Plan your campaign: Create memes, social media messages and posts now for Giving Tuesday. Get them ready now so that when November arrives you won’t spend the Thanksgiving holiday working but enjoying time with family and friends.
  4. Cue up the posts: Begin three to four weeks before Giving Tuesday to alert your follows and donors that you will be participating in Giving Tuesday. Many may not be aware of the date or aware that you plan to participate in the event. Include updates in your social media posts, on your website, newsletter and in other places. Get stories ready too that share your mission and vision in photos and text; these motivate people to give and help them to understand how their donation impacts your constituents.
  5. Begin posting: The weekend before Giving Tuesday, start increasing the number and frequency of posts mentioning the charitable event. Include the hashtag #GivingTuesday and links to your donor page. On the day itself, increase the frequency of posts and share stories, tips and information about your charity’s mission, vision and purpose.

 #GivingTuesday is just one aspect of nonprofit financial management to pay attention to but an important one during the holiday season. Many people donate to charities as part of their annual gift-giving. Ensure that your charity is front and center by getting everything ready now for Giving Tuesday.

Beck & Company

At Beck & Company, we help nonprofits thrive. We have extensive experience and a tradition of creative thinking, technical expertise, and a collaborative spirit that can help your nonprofit achieve its goals. Whether you want to increase donations for #givingtuesday or support through transparent accounting practices, we can help. Contact us today or call 703-834-0776.

Home Owners Associations Nonprofit Financial Management, Part 2

Welcome to Part II of our series on nonprofit financial management tips. Today we’ll take a look at accounting and tax service for nonprofits with a view towards the overall needs for both at a Home Owners Association.

In Part I, we defined an HOA and discussed the definition of duty of care and duty of loyalty. Next, we talked about the nonprofit financial management needs of an HOA, including financial responsibilities and insurance needs.

In Part II, we’ll look into the accounting and tax service needs for HOAs.

Accounting Requirements

The Board of a Home Owners Association is required to keep accurate accounts of the financials of the organization. This includes income from membership fees or assessments, expenditures, accounts receivable and accounts payable. The board must report these financial facts to its members. It is required by law to follow all corporate law within the state in which it is incorporated, and to follow the tax requirements for nonprofit associations if it is incorporated as a nonprofit entity.

Tax Deductions and Requirements

In a cooperative setting, tenants are actually shareholders in the cooperative housing corporation. As such, they do not actually own their residences. Rather, they own shares of stock in the cooperative cooperation, which entitles them the exclusive use of a particular residence in the cooperative.

Because they don’t own their residences, rules regarding tax deductions are a little different than if they owned their home or the actual residence. The cooperative’s tenant-shareholders receive certain tax benefits allowed to homeowners, including the ability to deduct their proportionate share of the real estate taxes and interest allowable as a deduction by the cooperative if the cooperative qualifies as a cooperative housing corporation under IRC Section 216 .

The housing group or cooperative housing cooperation must qualify annually for IRC Section 216; it is not a permanent designation. To qualify, the cooperative must meet the following criteria each year:

  1. The cooperative must be taxable as a corporation.
  2. There must be only one class of stock outstanding.
  3. Tenant-shareholders must have the right to occupy their units for dwelling purposes.
  4. At least 80% of the cooperative’s gross income must be received from tenant-shareholders; 80% or more of the total square footage of the corporation’s property is used or available for use by the tenant-shareholders for residential purposes or purposes ancillary to such residential use; or 90% or more of the expenditures of the corporation during the taxable year are for the acquisition, construction, management, maintenance, or care of the corporation’s property for the benefit of the tenant-shareholders. (Only one of the three requirements must be met.)
  5. No tenant-shareholder is entitled to receive a non-liquidating distribution that is not out of earnings and profits.

Capitalization Policy

We recommend that a Cooperative develops a capitalization policy. Such a policy sets forth expenditures for improvements, such as replacing roofs, windows, carpeting, doors, etc. for the building. It may also budget for alterations to an existing building. This may include enlarging the parking area, adding new bathrooms to the lobby or other improvements.

A capitalization policy for a Cooperative or HOA is similar to any capitalization policy a nonprofit would create. It’s budgeting for the future and for improvements to your organization.

By taking a smart look at the accounting and tax service for nonprofit needs of your cooperative and HOA, you’ll be in a better position to manage it responsibly. That translates into positive benefits for everyone who enjoys living within the HOA.

Beck and Company: Nonprofit Financial Management Expert

At Beck & Company, we have extensive experience and a tradition of creative thinking, technical expertise, and a collaborative spirit that can help your nonprofit achieve its goals. From accounting and tax service for nonprofits to consulting on issues impacting nonprofits today, Beck & Company can help. Contact us today or call 703-834-0776.