Nonprofit Accounting Blog

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.

Home Owners Associations Nonprofit Financial Management, Part I

In this two-part series of nonprofit financial management tips, we’ll take a look at Home Owners Associations (HOAs) and their governance, financial responsibilities, accounting and tax requirements. When people think of HOAs, they rarely consider that these organizations, established for the maintenance and governance of a cooperative building, are typically registered as nonprofit, tax exempt organizations. As such, although they behave like a corporation rather than a charity, they must follow the accounting and tax guidelines established by the state in which they are incorporated.

Here, in this first of a two-part series on HOAs and nonprofit financial management, we’ll take a look at the financial responsibilities as well as the duties of the HOA board when it comes to financial management and accounting. In our next article, we’ll look at accounting and tax needs of HOAs and how your HOA might benefit from professional accounting and tax service for nonprofits.

What Is a Home Owners Association?

A Home Owners Association (HOA) is a legal entity established for the maintenance of a housing development, property, apartment building or condominium. The HOA’s purpose is plan, build, and maintain the property.

Most HOAs are incorporated as nonprofit organizations. As such, they are bound to state laws governing corporations and nonprofits. Members typically pay dues, or assessments, which are used for the maintenance of the HOA. The HOA develops rules and guidelines for members that govern how their property may be maintained.

For example, an HOA governing a housing development may enact rules about when people put their trash out on the curb for pickup. Residents in the housing development may need to call for special pickup of large items such as couches, furniture, or appliances. To put such items out on the curb before without calling for special pickup may incur fines or warnings to the homeowner. The reason for this is that the housing development residents have all agreed, through their HOA board representation, that to view large discarded furniture or appliances at the curb detracts from the appearance of the development. The HOA board, consisting of representatives from the residents living in the HOA, agrees upon the rules governing the property.

Financial Responsibilities of HOAs

As with any other nonprofit board, officers and directors of the HOA are legally obligated to act in the best interests of the members. This is a fiduciary obligation, or the obligation of someone entrusted with the care of money or property.

There are two broad duties that go along with fiduciary obligation:

  1. Upon their election to the board of a common interest development, directors become fiduciaries with powers to act on behalf of the association.
  2. As fiduciaries, directors are held to a higher standard of conduct and have two primary duties: (i) duty of care, and (ii) duty of loyalty.

Duty of care refers to the obligation of someone to act in a responsible manner, with the watchfulness, care and prudence that a normal person would make under similar circumstances. Duty of loyalty means that officers and directors in a company must be free from a conflict of interest.

Insurance Coverage

The HOA should provide Officers and Directors Insurance for their Board. As with a corporate for-profit board, this is a courtesy that should be extended to protect the members when they act in their capacity as directors of the HOA board.

Financial Review and Analysis

Part of the HOA’s job is to provide financial oversight. This nonprofit financial management means that the HOA board:

  1. Creates and budgets their income evenly over a 12-month period. Budgets are essential to ensuring adequate cash flow to meet the HOA expenses.
  2. Keep receivables less than 3%, which is a sign of a healthy cooperative board.
  3. Review and pay accounts payables promptly to avoid debt or late fees
  4. Make other nonprofit financial management decisions as they pertain to the charter of the HOA

Additionally, HOA boards should fund studies for the development and future of the cooperative. Such studies may include planning, renewal, and major repairs.

The financial management and duties of a Home Owners Association board are very similar to that of a typical nonprofit board. In Part II of this two-part series, we’ll take a closer look at accounting and tax needs for nonprofit HOAs.

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.

The Secret to Obtaining Grants for Nonprofit Financial Management Success

Many professionals in the world of nonprofit financial management rely upon grant funds to maintain their operating budgets (and other budgets, too.) If your organization depends heavily on grants, it’s time to find out what funders REALLY look for in a nonprofit. The better you can align your grant application to what they are looking for, the more you increase your chance of a successful award.

A report entitled Social Solutions: Foundation Report Study examined the metrics by which foundations and granting organizations determine which nonprofit organizations to awards funds. The results offer insights into what foundations and granting organizations really look for when they review your applications. Get ready for a few surprises; their responses are eye-opening.

Three Surprising Considerations for Funding

Those responding to the survey agreed almost unanimously on the main consideration for granting an award: IMPACT.

98% of those responding to the survey picked “impact” – as in the award they gave would make an impact on the project or people – as the most important consideration for funding.

In second place is MISSION. How well does the nonprofit state its case that its mission aligns with the foundation or granting organization’s objectives?

Lastly, nonprofit legal status is cited as the third most important consideration. This may be surprising to many but foundations are inundated with applications from organizations who either lack legal status as nonprofit organizations or who fail to provide the requisite proof of their status. In that case, their application may be immediately discarded, putting them out of consideration for any grant funds.

How Can You Evaluate Impact?

Impact wasn’t even questioned as THE most important thing the granting organizations looked for in the applications from nonprofits. But how do they measure impact? Impact is measured against the following criteria:

  • Outcomes
  • Detailed data
  • Consistency to mission
  • Outputs
  • Community
  • Financials
  • And other criteria

Other things that can demonstrate the impact that your nonprofit makes are clear reporting and strong community outreach. Both are seen as a sign of commitment and higher impact.

Communications around both project and organizational goals are also important. Funders want to be sure that nonprofits are utilizing their grants in ways that help them achieve their state mission. Public-facing communications, good annual reports and other marketing materials help the granting organizations see that communications are important to your nonprofit.

The Importance of Detailed Reports

Nonprofit financial management includes the preparation of the annual report and other documents These reports are deemed very important by foundations and granting organizations, so taking the time to ensure that yours are error-free and clearly written is vital.

Reports from your nonprofit to the foundation after a grant is received are equally as important. The foundation is comparing your reports to your application to see how well you’ve matched your stated objectives to what has actually occurred. And of course, they want to know how their money has been spent, and what potential impact it has made.

Donors Prefer Stories

No matter what the size of the foundation or granting organization, all preferred to see stories (82%) over other forms of reports. Stories paint a great picture of how funds have made a difference A variety of documents ranging from spreadsheets to narratives can all tell the story of how the funds were used, but it’s up to you to frame the narrative.

Start Early to Prepare Your Report

Nonprofit financial management professionals understand the importance of early and thorough preparation. It’s never too early to think about how you are going to prepare a grant report.

Consider all of your options when you receive grant funds. You may want to photograph or videotape events, record individual stories of who was impacted by the foundation’s gift and more. This information can fill out the report so that your organization is well-prepared to respond to a foundation’s request for information.

Get Your Paperwork Ready

Lastly, about that nonprofit status – have copies of your incorporation papers and nonprofit status ready to add to the grant application. Don’t leave them out. Foundations must have them to verify that your organization can make a legitimate claim to nonprofit status. Keep several photocopies on file for occasions when foundations want hard copies and add a scan to a shared drive so that others in the company can add it to their foundation applications when needed.

Takeaways for Nonprofit Financial Management

In sum, granting organizations and foundations respond best to:

  1. Nonprofits who have their paperwork in order – including proof of nonprofit status and incorporation
  2. IMPACT statements and tracking so that you can prove how their gift is making a difference
  3. Clear, concise reports that demonstrate 1) communication to the public and 2) communication back to the foundation on how money is spent
  4. Stories to show how the funds are fulfilling your mission
  5. Thoroughness

All of this is within your power to provide to the foundation offering grants. With additional work and preparation, you’re well on your way to improving your ability to secure more funds.

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.

Measuring Outcomes in Nonprofit Financial Management

For-profit organizations have shareholders and others who demand to see the return on investment, but how can you measure outcomes in nonprofit financial management? The key is to broaden the definition of measurement and the scope of what you can measure to include the impacts that matter most to your nonprofit’s stated mission.

Measure the Good

Yes, financial metrics are important. Where would nonprofit financial management be without measuring income versus expenses and other financial measures of success?

Yet that’s not all there is to it when it comes to the nonprofit world. Nonprofits are also judged by how well they fulfill their mission. GuideStar and Impact Genome Project are two organization that are helping to measure such an impact.

GuideStar recently launched GuideStar Platinum. This is a platform in which nonprofits can self-report on metrics. About 20 percent of the more than 12,000 metrics shared on the GuideStar platform represent impact-based outcomes. The rest are other metrics that each individual nonprofits deem important.

Mission Measurement curates the Impact Genome Project, which offers a unique window into research on nonprofits.  Impact Genome aggregates over 10,000 research items. It seeks to identify patterns of what is working in the world of nonprofit financial management, nonprofit management and more. If it can identify what works, the thinking goes, nonprofits can also avoid what does not work.

Data, Data Everywhere – Is It Really Important to Nonprofits?

Why bother with data?

Data represent facts. It’s easy to measure certain outcomes. You can quantify how many donations were entered into last year’s books, how many dogs were saved from the animal shelter, how many meals were given out at the soup kitchen.

Outcomes data is now entering the world of nonprofit financial management. It’s currently used in medicine where many hospitals now chart both quantitative data (the number of patients who attended a seminar on smoking cessation) and the outcomes (how many patients returned for follow up a year later and had quit smoking). Both measures offer useful information, but together, they help hospitals understand how effective their programs are within the local community.

Nonprofits can also measure outcomes data. A nonprofit animal rescue can measure both how many dogs were adopted out to loving homes as well as how many spay/neuter vouchers were actually used by the local community. Both measures can help them gauge how well they’ve moved towards their goal of reducing the number of unwanted pets locally.

As a nonprofit financial management professional, your organization may turn to you for leadership tracking both quantitative data and progress towards achieving the mission or outcomes measurement. Think about how to accomplish this with the resources available and work on a plan to start measuring both activities and outcomes.

Data Reassures Donors

Donors need to see that their gifts are going towards the fulfillment of the mission. Without such clarity and insight, donors may feel suspicious about the nonprofit. Nonprofit financial managers would be wise to provide as much transparency as possible to donors.

One organization, GuideStar, helps provide this information to the general public. GuideStar data enables donors to:

  • Research potential nonprofits
  • Read their financial reports
  • Understand how well their money is spent to support and sustain the nonprofit mission
  • Review leaders, salaries, money spent on overhead and more
  • Read answers from the nonprofit on specific initiatives
  • Contact the organization

Nonprofits that provide quantitative, as well as qualitative answers to these questions to groups like GuideStar, provide transparency to their potential donors. Donors look for metrics they can understand before giving money. They want to see not just quantity, but quality.

Data Needed Now

Both GuideStar and Impact Genome Project rely upon data. Now is the time to talk to your team about the systems you have in place to collect data. If these systems are antiquated, poorly maintained, or collecting dust, find out why. It may be time to buy new software to track important data and outcomes. Your donors and constituents depend on it.

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.

Are You Feeling Overwhelmed Performing Accounting and Tax Service for Nonprofits?

Are you feeling just a little overwhelmed performing your own accounting and tax services for your nonprofit?

A Forbes survey found that 14% of nearly 3,000 people surveyed worldwide feel chronically overwhelmed. If you are, you’re not alone. Feeling overwhelmed is common today.

Oh, and by the way – the age bracket feeling the most overwhelm? Those 41-50 years old, or roughly, the age bracket for most senior nonprofit financial management types.

But it doesn’t have to be that way. We’re guessing you went into nonprofit financial management because you love finance, accounting, and the mission-driven culture of a nonprofit organization. You can rekindle that passion for your work again and manage that feeling of overwhelm with a few simple steps.

The Myth of Multi-Tasking

In the book “Scrum: The Art of Doing Twice the Work in Half the Time”, authors Jeff and J.J. Sutherland provide insight into why many people feel overwhelmed. They are trying to multi-task, thinking it boosts productivity. Their studies indicate the opposite.

A chart on page 91 provides statistics that indicate that as one’s attention is divided, productivity decreases. Working on two projects at once means a 20% loss in productivity due to switching gears; three projects at once, and you lose about 40% due to context switching. Context switching leads to feeling overwhelmed because the mind is never at rest, confident it can finish a project. It’s always jumping to the next open action item – which in turn makes you jumpy!

Accounting and tax service for nonprofit providers and nonprofit financial management professionals aren’t immune to this lost productivity. They may actually be at greater risk for lost productivity due to context switching due to the amount of concentration required to process accounting and financial data.

In addition to the focus needed to do your job, something is always clamoring for your attention. Messenger apps, emails, phone calls, colleagues dropping by your office – it’s a never-ending barrage of items competing for your attention.

Focus on One Thing at a Time

Multi-tasking doesn’t work. It’s a lie. So why do we buy into it?

We think it should work because, after all, if you’re busy working on seven tasks, that’s seven projects underway. However, time and time again, studies demonstrate that it is better to have one open task, complete it, then turn your attention to the next one.

Commit to single-tasking rather than multi-tasking. Turn off the television or music while you work. Shut down the instant messenger apps and sounds that ping and bong when emails arrive. Focus on one thing at a time.

Build a Set of Rules

Do you have an open-door policy? That’s a useful and common management technique. However, it can lead to people interrupting you and breaking your concentration. It is helpful to build out a set of rules and guidelines for your team so they know when they can interrupt you.

Some managers choose to post ‘office hours’ or leave their door open as a signal to their staff that they may interrupt them. Another technique is to use a shared calendar such as Google Calendar or an Office calendar and post your office hours there while blocking out time for work requiring deep concentration. Experiment to find the method that works the best for you.

Yes, You Can Turn Off Your Phone

Nearly everyone carries a cell phone today. It makes it convenient to call someone for a quick answer, dial AAA when your car breaks down, or find your coworker after hours. It can quickly turn into an invisible umbilical cord connecting you to the office 24/7. Cut the cord. Tell your coworkers you plan to switch your phone off at night and follow through. Make the hours after 7 p.m. or whatever time you choose “off limits” so you get some downtime.

You Have Permission to Take Vacation, Weekends Off, and Holidays 

Nonprofit accounting and tax professionals often work long hours right before tax season. That may be inevitable. At other times of the year, those extra hours may be unnecessary. Take a vacation, weekends off, and holidays.

Workaholics are lauded in American culture, but they also get sicker faster and burn out. Don’t be a statistic. Close the office door, turn off your phone, and head to the beach or the mountains so you give your mind and body a rest. You’ll be better off for it, as will your nonprofit organization if you return refreshed.

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.

Nonprofit Financial Management and Millennials – Can You Manage Both?

Nonprofit financial management positions are starting to be filled by Millennials, and whether you love or hate them, they are the largest demographic to enter the workforce. They even surpass the notorious ‘Baby Boomers’ for the sheer volume of people in the workforce. Chances are good you’ll either meet or manage a Millennial – or be managed by one – very soon.

Defined as the demographic born between 1977 and 1995, these are the young people who came of age at the turn of the last century. They can’t remember a time before cable television, the internet, or cell phones. And although a lot of myths surround them in the workforce, painting them as alternatively lazy and creative, they are neither. Like all demographic groups, these are generalizations.

The specifics for nonprofit financial management is that Millennials offer a lot to your workforce. If you can learn to manage them wisely and in ways they respect, you’ll add terrific talent to your nonprofit organization.

Millennials Need Coaching – But They Might Not Ask for It

Like other young people entering the nonprofit financial management work, Millennials may need coaching on the job. But unlike other demographics, the independent-minded Millennial is unlikely to ask for it.

Many of these young people never worked while going to school. They went straight from high school to college and then they end up at your nonprofit organization. This changes their attitude and behavior in the workforce. They may have an accounting or marketing degree and have the book learning to do their jobs, but they lack the professional mindset, attitude and behaviors that many young people in generations past acquired through part-time jobs flipping burgers, ringing a cash register at the mall, or waiting tables.

Even such simple things as showing up on time and how to answer a telephone professionally may need to be taught to this group. That may sound like a stretch but think about it. Those minimum wage jobs many of us held while going to high school taught us simple things like how to show up for work on time, wear professional attire or a uniform, answer the phones, and greet customers. Without that work experience, there’s a gap in simple knowledge that many among the older generations take for granted.

Here’s how to deal with it, simply and kindly: set expectations, never assume that Millennials are making mistakes out of ill will, and teach, coach and mentor. Be prepared to offer basic workforce training, if needed, and have the young worker shadow an experienced person to pick up on the attitude and behaviors that you want to see at your nonprofit organization.

Millennials are used to group projects and gladly accept group-related coaching, so pairing up a mentor with Millennials can work well. Don’t take anything for granted with your Millennial staff members. Spell out clear expectations and gently guide them toward success.

Loyal Employees

You’ve probably heard that Millennials job hop frequently and worry that this means they won’t stay with nonprofit financial management work for a long time. The truth is that Millennials aren’t disloyal; their loyalty is average or above average. What they loathe is boredom.

Boredom drives many Millennials to switch jobs frequently. To prevent this, make sure you provide your younger employees with challenging tasks. Switch up their work and let them come up with projects that benefit your nonprofit.

Technology, Anyone?

Millennials are often rumored to be tech-dependent, but they aren’t necessarily dependent. It’s more accurate to say they are aware of technology and comfortable with its use. They may turn to instant messenger apps or their cell phones before they think of sending an email or a fax (which can seem archaic to them!).

If your nonprofit handles sensitive materials, be sure to review procedures with Millennials to ensure HIPAA compliance, for example or other necessary legal compliance. They may not know they can’t share information on social media or that instant messengers are a poor replacement for phone communications.

Millennials aren’t an exotic species. Rather, they reflect the times in which they grew up, just as you do and the generations before you did. Respect their point of view and working style and you’ll find them an asset 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.

Nonprofit Financial Management Topics: Choosing Retirement Plans for Your Employees

As the CFO of a nonprofit organization, you may be tasked with choosing the right retirement plan for your employees. Nonprofit financial management may also take into consideration helping employees plan for their financial future through sound investment strategies that capitalize on the time of the investment to grow their nest egg.

There are many solutions available today to help people plan and prepare for retirement. Let’s take a look at the pros and cons of several solutions to help you choose the right one for your workforce.

Nonprofit Financial Management Tips: Examining Retirement Planning

According to Time magazine, 1 in 3 Americans has nothing saved for retirement. Let that sink in for a minute: fully one-third of our workforce hasn’t saved anything for their retirement years!

This is a brewing crisis that, when it finally erupts, will have ramifications throughout the workforce. All of those who are entering retirement age need food, clothing, shelter, and medical care. Without savings or a retirement plan, these people will end up spending their golden years poorer than when they were working without hope of relief.

Types of Savings Plans: Simplified Employer Plans (SEP)

SEP plans can be used by an organization of any size. Employers can contribute up to the lesser of 25% of each qualified employee’s compensation or $55,000 for 2018. These contributions are tax-deductible as a business expense.

SEP plans are simple for companies to administer. There are no formal IRS forms needed after adopting such a plan, and administrative costs are minimal. To begin a SEP Plan, you must:

  1. Provide a written agreement to provide benefits to all eligible employees;
  2. Offer employees specific information about the agreement;
  3. Establish an IRA account for each employee.

The IRS has a model SEP plan document, Form 5305-SEPSimplified Employee Pension  Individual Retirement Accounts Contribution Agreement. However, not all employers can use Form 5305-SEP, and instead, some must use a prototype document. Speak with a nonprofit financial advisor if you are interested in starting a SEP for your organization.

Simplified IRAS

Another retirement plan you can offer your organization’s employees is an IRA. A SIMPLE (Savings Incentive Matching Plan for Employees) IRA requires that organizations choose a financial institution to manage and maintain their plan. Alternatively, you can let your employees choose the financial institution they wish to manage their account, but a third party, an accredited financial institution must be part of the account management strategy.

With a simple IRA, employees can defer a portion of their income into the IRA to save for retirement. These plans also require a smaller contribution on the part of the employer. By reducing their pre-taxable income, employees may receive additional benefits too from saving in a simple IRA.

IRS form 5304-SIMPLE and its accompanying instructions can guide you through this process.

403B Plans

403B plans offer several other additional methods of saving for retirement. Employees of schools, ministers, and certain tax-exempt institutions can offer 403 plans. These plans are tax-sheltered annuities (TSAs). Employee salary contributions are made pre-tax, so there are additional tax benefits from 403B plans analogous to some 401K plans in the for-profit sector. Income is taxed when it is withdrawn from the plan. Matching programs, in which an organization matches a percent of the money paid into the 403B plan by the employer, enables employees to grow their nest eggs faster towards retirement goals.

As you can see from this very brief nonprofit financial management guide to retirement plans, there’s no one size fits all solution to help your employees plan and save for retirement. Once you’ve chosen a plan and set it up to adhere with all pertinent IRS regulations, you’ll need to have a strong internal communications plan in place to help spread the word about the new retirement programs. The more publicity you can give to your organization’s retirement benefits, the greater the buy-in will be from the employees and the participation, too. You’ll help your organization attract and retain better employees by offering a valuable benefit while simultaneously helping more people prepare for their retirement. It’s a worthy endeavor and a worthwhile goal for any nonprofit organization.

Beck & Company

At Beck & Company, we work with many nonprofits to help them improve their operations, accounting, and overall management. We are Washington DC nonprofit advisors with 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.

Washington DC Nonprofit Advisors Recommend Workforce Diversity

As Washington DC nonprofit advisors, we work with many nonprofit organizations to address questions, concerns, and issues. One issue we’re seeing frequently is diversity in the workplace.

Now, you may think that you know what diversity means. It means ensuring equal opportunity in the employment to men and women, people of different races, religions, and nationalities, and treating people with different sexual preferences equally. But there’s one area of equality that many people forget to mention when speaking with Washington DC nonprofit advisors about workforce issues: age diversity.

A Workforce Like No Other in History

Only a few times has the United States and indeed the world has seen such an interesting shift in age-related demographics. The famous Baby Boom post-World War II led to a surge in population that was unmatched until recent years with the Millennials. Currently, Millennials, or those who came of age around the turn of the millennium, are the largest demographic in the history of the workforce.

By 2020, nearly all Baby Boomer-generation workers at your nonprofit will have retired. Following in their footsteps are many Generation X employees, those who are entering their 50s, who have the seniority, experience, and institutional history to do a good job leading the organization.

Millennials make up the majority of the current workforce and are likely the new, upcoming people in your company. Much has been written about managing Millennials; some if it makes them sound like an exotic species rather than simply a demographic with a unique shared set of values and ideals.

Understanding how each generation interacts with the workplace, their approach to work, and their values as leaders and coworkers can help you ensure that age diversity works for, rather than against, your nonprofit. Age diversity can help you:

  1. Understand, respect, and address the different needs of your constituents.
  2. Discover creative solutions.
  3. Reach new demographics through renewed efforts.
  4. Develop additional donor and member cohorts.
  5. Build a stronger, more stable nonprofit organization.

Different generations view and interact with the world differently. Each brings with it their own strengths and weaknesses. Understanding this and parlaying it into an effective workforce development strategy is challenging but part of running an effective nonprofit in the 21st century.

Reject Biases

Just as you know that you should reject biases around certain attributes such as nationality, skin color, or religious affiliation, so too must you reject age-based biases. It’s one thing to be aware of what a certain age-related demographic values in the workplace; it’s quite another to be biased against it, eschewing hiring people from a certain demographic because of fears they won’t perform as well as others.

The Age Discrimination Act of 1975 prohibits discrimination based on age to all organizations receiving federal aid. Nonprofit organizations would be well advised to enact policies and mindsets to prevent age discrimination in the workforce.

As Washington DC nonprofit advisors, we caution all against anything that smacks of discrimination. However, there is a place for managing around age-related expectations and norms so that your nonprofit flourishes. Finding that happy medium is tricky but worthwhile. A diverse workforce, including age diversity, builds stronger nonprofits.

Beck & Company

At Beck & Company, we work with many nonprofits to help them improve their operations, accounting, and overall management. We are Washington DC nonprofit advisors with 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.

Find Me the Money: Nonprofit Financial Management and Technology Projects

Part of nonprofit financial management is managing existing resources to accomplish more work on behalf of members, donors, and the constituents you serve. When it comes to technology, it can be challenging to leverage existing resources when you’re looking to expand. Hiring a new employee? She’ll need a computer, access to software, and much more. Where are you going to find the resources?

There are several ways you can leverage existing resources or find the cash needed for vital technology upgrades. Whether you need new equipment to replace aging technology or you’re hiring and need to add hardware, these ideas can help you obtain the technology you need.

Ask Large Local Companies for Donated Equipment

Even if you prefer not to receive donated hardware from the general public, asking large, local companies to donate their old equipment may be worthwhile. Some nonprofits choose not to accept donated hardware because of issues pertaining to security, viruses, and the amount of work needed to refurbish used equipment. However, many of these concerns are mitigated with donations from large companies.

Many companies replace their existing equipment on a rotating schedule and so their donated equipment may be great compared to used equipment you can afford on your own. Because large companies have dedicated IT resources, chances are good that the machines and other equipment will be scrubbed clean of software and data before handed over to you, another plus.

If you don’t mind equipment that’s a little out of date, try forming alliances with large local companies to obtain their used equipment.

Hold a Special Donation Campaign

Often donors will give more money when they know where their money is being spent. By running a special computer equipment campaign and asking for specific donation amounts, you stand a better chance of achieving donation goals.

Consider a special email blast to your donors requesting $5 from each for new computer equipment or letting them know about a special need. Allocate donations so that they do not fall into the general donation category but are instead earmarked for a special campaign.

Ask Current Donors

In addition to a general fundraising campaign, you may wish to identify large donors from your current list of all donors and send a personal appeal to them for donations to support computer equipment campaigns. If you can tie in the need for new computers with how the equipment supports your organization’s mission, the appeal to your large donors will be stronger.

Look for Specials and Discounts

We know it sounds corny and trite: look for specials and discounts. Coupons? Really? Yes, really. They can make even the costly software more affordable.

Sign up for specials at office supply stores and websites. Comparison shop among both large retailers and small, local stores. Look for discounts on items if purchased in bulk, for example, if you buy several computers together from one vendor.

Nonprofit Financial Management Tips from Beck & Company

Where there’s a will, there’s a way, and when it comes to finding affordable computer equipment and software, nonprofits find many creative ways to provide their employees with the technology they need to get the job done.

Capital campaigns, special purchase campaigns, large donors, and even coupons and discounts can help you provide your workers with better hardware and software. Most people recognize that with the right tools, you can do so much more. That includes the right hardware and software, which can help your nonprofit serve its constituents and achieve its mission.

At Beck & Company, we work with many nonprofits to help them achieve their goals. We offer support and advice to nonprofits including nonprofit financial management, nonprofit accounting audits, and much more.  Contact us today or call 703-834-0776.

Nonprofit Financial Management Resources: 10 Things You Must Know about Internal Controls

No one likes to think about internal controls, but an important component of nonprofit financial management is developing and implementing a strong set of such controls to mitigate risk and prevent fraud.

Make internal control processes easier with Beck & Company’s client accounting services. Contact Beck and Company online or by phone at (703) 834-0776 to learn how quickly you can improve your internal controls.

Nonprofit theft is shockingly common, according to the Boston Globe. Over 1,100 charities reported theft, embezzlement, or another major diversion of assets, according to an IRS report cited in the Globe article. At one nonprofit serving the homeless, the COO brazenly added funds to his own paycheck. These and other examples of nonprofit fraud and theft are unfortunately common.

Why so many problems in the nonprofit world? After all, one would think that people dedicated to serving a particular mission or vision would be scrupulously honest. Every dollar embezzled by the COO previously cited could have been spent to feed, clothe and house homeless families. So why the embezzlement?

People can be tempted to steal no matter where they work. And, unfortunately, nonprofits can be more trusting than other organizations.

The answer for good nonprofit financial management lies in having strong internal controls. Internal controls are the measures you take to ensure rigorous honestly in all your financial dealings. With good internal controls in place, you’ll have a series of checks and balances to protect financial assets.

The 10 Things Nonprofits Should Know About Internal Controls

1. Why are internal controls necessary? Internal controls are more than rules and regulations. They are guidelines for how funds are handled throughout your organization. By establishing a set of clear, unambiguous internal controls, nonprofit financial management is easier for all.
2. Assess your current internal controls and update as necessary. There’s no one-size-fits-all set of internal controls you can put in place that will answer all of your organization’s needs. Instead, assess your current internal controls and note any gaps. Compare them to the three COSO objectives (below) and see how yours measure up. Adjust as necessary.
3. Review internal controls against the three COSO objectives. There are actually five COSO objectives, but three stand out and apply directly to our discussion of internal controls. These include:
1. Risk assessment, especially risk identification and challenges.
2. Control activities, including policies and procedures as well as outsourcing risks, backups and more.
3. Monitoring, which includes both ongoing and periodic monitoring and assessment of internal controls.
4. Evaluate organization level controls. Organization or entity-level controls refer to the most basic level of controls in place to safeguard financial assets. Many organizations have internal controls in place, but are they being followed? An example of an internal control at the organizational level may be a blanket policy that all expense reimbursement requests must be accompanied by an original receipt. This may seem like a simple control, but it can prevent a great deal of fraud across the organization if the policy is carried out.
5. Determine information technology controls. Another area of potential fraud is through information technology resources. The IT department collects and maintains a great deal of valuable data at a typical nonprofit. Donor and member credit card information, for example, can be used to perpetuate fraud. Controls over who can access data are important to safeguard it.
6. Build controls around segregation of duties. It’s unhealthy to have all of the access to financial information in the hands of one or two people. Make sure your internal controls include segregation of duties. For example, the person who reconciles the bank statement isn’t the same person who deposits the money.
7. Put in place fraud prevention controls – and follow them. Fraud prevention controls include things like internal audits, a good component of any nonprofit financial management plan. Other fraud prevention controls include simple things like having someone double-count the cash, ensuring that the bank statements are reconciled promptly and similar actions. But perhaps more important than even having fraud prevention controls is actually following them. Don’t just pay lip service to fraud prevention, but make sure that fraud prevention controls are documented in writing, the staff is taught how to adhere to them, and there’s follow up and accountability to ensure compliance.
8. Document all policies and procedures. It’s easy to talk about fraud prevention and internal controls and then forget about them when you get busy. It’s harder to forget about them when you have everything documented in writing. Write down the policies and ensures the entire team, not just accounting and finance, attends training sessions to understand and follow them.
9. Recognize common procedural gaps. Be sure to look across all areas of your organization so that best practices cover both people at the top and those at the entry-level positions. It’s obvious that controls need to be in place within the finance and accounting department, but often companies forget that other workers have access to sensitive information or financial documents. Annual reviews of existing processes, external audits, and working with a nonprofit accounting audit services can help you recognize and close any gaps in your processes.
10. Address gaps immediately. There are always going to be gaps in any policy – that’s human nature. But don’t let those gaps in your policies remain open. Instead, update policies to ensure gaps are closed as soon as possible.

Need more details on implementing Internal Controls for your nonprofit? Download our whitepaper, “A Nonprofit’s Guide to Internal Controls.”
Nonprofit financial management includes strong internal controls that prevent theft, fraud, and embezzlement. With these best practices and diligent training on procedures, you’ll be in a much better position to safeguard your organization against problems.

Beck & Company

At Beck & Company, we work with many nonprofits to help them improve their internal controls. 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.