Since the launch of “Giving Tuesday”, nonprofits have another compelling reason to engage in year-end fundraising. Started in 2012 by New York’s 922nd Street Y organization, and supported by the UN Foundation, the “Giving Tuesday” movement has become a nationwide and global phenomenon. In just a few short years, the event has drawn huge interest and participation from individuals, for profit business, nonprofit organizations, schools and other community groups. In 2016, $168M was raised from over 98 countries (source).

As stated by the organizers on their website, “It’s a simple idea. Just find a way for your family, community, your company or your organization to come together to give something more. Then tell everyone you can about how you are giving. Be part of a national celebration of our great tradition of generosity.”

To learn more about “Giving Tuesday” and how you or your organization can participate, go to www.givingtuesday.org. You will also find out about the exciting celebrations and events planned for “Giving Tuesday 2017” which takes place this year on November 28th.

Nonprofit organizations may find the celebration of “Giving Tuesday” an opportune time to kick off their year-end fundraising or awareness campaign, launch a matching gift challenge, start a volunteer campaign in their community or simply share their organization’s story.

At the same time, you or your organization will be participating in an important global movement to bring attention to the charitable sector and the important work they do.

Originally published 2016 – Updated 11/13/17

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But you know it is looming. Out there, in the not too distant future. Waiting.

Here’s the truth – your end of year audit isn’t going to disappear anytime soon. Taking the right steps now in getting prepared will not only save you time and money, but also a great deal of frustration.

And whether or not you think of it as merely a necessary (or unnecessary) evil, be assured that the annual audit does in fact have its benefits.

You see, an audit is a great opportunity for taking stock of your nonprofit organization; to come face to face with its true financial condition, and to gain a better understanding of how well it’s using its resources.

Inquiries will come from your auditor regarding your accounting processes and internal controls. It may not be the easiest of conversations to have, but it is a terrific opportunity to improve upon those processes and controls.

The discussion with your auditor will also help your organization better protect itself against fraud and theft, while your board and your donors will gain confidence in the reliability of your financial reports.

Take Action Now

Here’s a few suggestions that should make this year-end process go more smoothly.

• Have a sit down meeting with your auditor in advance of your fiscal year end. Let’s face it, sometimes there is no replacement for a face to face conversation. This is the ideal time to address any problems that were encountered in the prior year and talk about how they can be avoided during the audit coming up. Also, it’s the time to give your auditor a heads up for any changes or new developments that might have an impact on the audit process.
• Read the engagement letter that you receive from your auditor. That letter will outline what the audit is and isn’t about, and define your responsibilities, as well as those of the auditor.
• Request that your auditor send you, in advance of the start of fieldwork, a list of the documents and information that you will need to assemble for their use and review. Also ask them to specify the items they will need before fieldwork starts to do their pre-audit planning.
• Organize the requested documents for their use and review. Typically the auditors will want to see the following documentation:
  • Bank statements and monthly reconciliations;
  • Investment summary showing year end balances, annual investment activity, and income;
  • Documentation in support of donor pledges, donated securities and property, and grant funds received;
  • Fixed asset and depreciation schedules;
  • Accounts payable and receivable aging statements at year-end; and
  • Copies of lease and debt agreements.

Coordination Is Key

To make sure the audit goes ahead with the least amount of disruption to your nonprofit, coordinate the auditors schedule with yours and that of your staff.

It’s best to schedule the audit fieldwork for a time when it will be the least disturbing to your office routine, and when you and your staff can devote the necessary attention to the audit.

What’s more, it’s crucial that the year end closing of your books has been done properly, and that all cash and balance sheet accounts have been reconciled, fixed asset and depreciation schedules have been updated, and that adjusting entries have been booked to give effect to any required
accruals and deferrals.

And it’s important to remember the more efficient and organized you are in preparing for the audit and assisting with the auditors, the less time they will spend in your office. Since many firms bill on an hourly basis when performing audit services, the less time they spend on the audit, the less they will bill your organization upon its completion.

So keep this simple equation in mind:

Greater preparedness = Greater Efficiency = Reduced Fees.

We’re Here to Help

If you’re feeling a bit overwhelmed with the organization and preparation of your records prior to the end of year audit, we can help.

Simply contact us today to speak with one of our friendly advisers.

The post Year End Audit Preparation for Nonprofit Organizations appeared first on Checkbox Accounting.

In particular, the financial aspects of a growing organization require a great deal of attention. And while you may not be in a position to bring someone on full-time to take care of this for you at the moment, that doesn’t mean that you shouldn’t look to delegate these tasks to a professional.

By outsourcing your financials to a part-time CFO (Chief Financial Officer) you can access “big company” resources without the expense.

In this post, we take a look at the benefits of appointing an outsourced CFO.

What is a CFO?

A CFO is a senior executive who is responsible for the financial affairs of a company or other institution.

These responsibilities often include the past, present, and future financial health of an organization.

Typically this involves presenting and reporting accurate and timely historical financial information; addressing the present financial condition of the organization, taking into account risk and liquidity; and economic forecasting so as to ensure the company’s future financial success.

What are the benefits of hiring an outsourced CFO?

There are a number of benefits to outsourcing a CFO’s duties. These include – but are not limited to – the following:

Save Money

An average CFO salary in 2014 clocked in at around $314,000 per year. For a number of small and growing businesses and organizations, this level of expense is simply not feasible.

However, this does not diminish the need to appoint someone to oversee financial matters, and so rather than hiring a full-time CFO (which comes with the need to pay taxes, health insurance, and other benefits) you can outsource the responsibility to a qualified individual for a flat fee. This represents a significant amount of savings, without compromising on the quality of work your organization receives.

Valuable Insight & Advice

When you delegate your financial responsibilities – including your accounting, bookkeeping, financial statements, income projections, tax, budgets, and cash flow management, among others – to an outsourced CFO, you are tapping into a wealth of experience.

What’s more, you will receive a fresh set of eyes ready to address your organization’s challenges and help solve its problems.

And when you’ve hit that metaphorical brick wall, and you don’t know how to go about improving the financial situation of your company, you’ll have a source of expert advice and guidance ready to step in and steer you in the right direction.

Accuracy, Efficiency and Experience

An outsourced CFO can help you make better, more informed decisions as the leader of your business or nonprofit.

They do this by streamlining your accounting systems, doing away with out-of-date methods and processes, so that you’re looking at only the most accurate and up-to-date financial information.

You’ll also have peace of mind knowing that your company’s finances are being looked after by someone with a high level of experience, built up over many years. Your financial statements will be delivered with accuracy, financial analysis conducted with care and consideration, and your records organized so as to be ready when potential investors come knocking.

Are you ready to hire an outsourced CFO?

If you’re still in startup mode, you will find yourself wearing a number of different hats; from sales executive and HR manager, to bookkeeper and marketing director. But there will come a time in every growing business or nonprofit where your time is better spent on the big picture.

And the big picture should always be underpinned by solid financial information.

So, if you’re ready to embrace the growth of your organization, you should begin removing your many hats. Allow them to be worn by the relevant experts and watch your business or nonprofit prosper.

Checkbox can take the strain, providing the tools and expertise necessary to interpret your financials and help you meet your personal, financial and social goals.

As your strategic financial partner, you’ll wonder why you hadn’t outsourced the CFO role sooner.

Contact us today to discuss a customized plan that meets the needs of your business or nonprofit.

The post The many benefits of an outsourced CFO appeared first on Checkbox Accounting.

In the case of non-profit organizations one of those exceptions to the general rule of tax exemption is something called “Unrelated Business Taxable Income”. Nonprofit boards and management should be aware that it is out there and that it might be applicable to their organization depending on the kind of activities it carries out.

First, let’s get clear on a couple of acronyms that might otherwise be confusing:

UBTI = Unrelated Business Taxable Income
UBIT = Unrelated Business Income Tax

What is Unrelated Business Taxable Income?

If your non-profit is carrying on activities that are not related to the tax-exempt purpose of your organization, any income from that activity might be deemed to be UBTI and subject to income tax.

Unrelated Business Income Tax (UBIT) is applied to any income generated by commercial activities that don’t fall within the scope of your non-profit’s exempt purpose (remember, that purpose you declared you were dedicated to when you applied for your exempt status with the IRS). So if you’re bringing in revenues that don’t directly benefit your charitable cause, it’s likely that you’ll have to pay UBIT on this income.

How UBTI can impact your organization

If your non-profit hasn’t considered the potential impact of UBI, it can come as quite a shock when the IRS comes knocking and you are required to pay over an unbudgeted amount to cover tax costs and possibly penalties and interest.

How does an organization guard against this rude surprise? By finding an advisor who understands not only the exceptions to the exceptions but the exceptions to the exceptions to the exceptions.

With proper planning UBTI can be avoided or at least properly planned for. For instance:

• By restructuring an activity so that at least 85% of the labor involved in the activity was provided by unpaid volunteers, we were able to allow a client to avoid UBTI characterization even though the activity was otherwise unrelated.
• Another client involved in a profit splitting agreement with an insurance company had been reporting UBTI and paying tax for number of years. As the revenue grew, so did the tax. We assisted the client in structuring their contractual relationship with a new insurance company so that the majority of income was in the nature of royalty income, a kind of income that under most circumstances is excluded from UBTI. The result has been a tax savings of thousands of dollars.

Talk to us about your UBTI concerns

If you’re running a non-profit organization and are concerned about the potential impact of UBTI, we can help you to review your activities for UBTI potential and discuss the possible ways you can restructure the activities to place them outside the scope of UBTI or reduce any tax liability.

Contact us at Checkbox and arrange for a chat.

The post The impact of Unrelated Business Taxable Income on your nonprofit appeared first on Checkbox Accounting.

The key element of the TED talk is the concept of ‘The Overhead Myth’ – the ingrained and persistent belief that a non-profit organization’s key aim should always be to limit and reduce its overhead above all other objectives.

There’s a belief that spending money on fundraising efforts, advertising campaigns and talented, experienced personnel is somehow contrary to the aims of a charity – and that causes a problem for the non-profit sector.

If you’re ever going to grow your charity, increase your fundraising income and have a bigger impact on society as a whole, how can you do that without investing donations back into the organization?

It’s an issue that all non-profits face, but it is an issue that can be minimized and reduced by taking a proactive approach to your financial management and planning.

And that starts by getting the correct level of control over that overhead.

What is the overhead myth?

As an entrepreneur, a fundraiser and a human activist, Dan Pallotta knows a lot about the business of raising funds for a non-profit organization. And it’s this knowledge and experience of the problems that the non-profit sector faces that allowed him to crystallize the problem into his theory of ‘The Overhead Myth’.

Pallotta’s theory states that there are two rule books: one for the non-profit world and one for the rest of the world.

And he goes on to add that the existence of these two separate rule books discriminates heavily against the non-profit world, in five very distinct ways:

1. Compensation – In the for-profit sector, the more value you deliver for your organization, the more money you’ll receive as remuneration. But, on the flipside, we don’t like non-profits to use money to incentivize people to produce more social care. We don’t like people being paid well to deliver social value.
2. Advertising and marketing – We accept that for-profit businesses must spend a big chunk of their revenues on large advertising campaigns to bring in more customers and more profits. But we don’t like to see our money spent on advertising by charitable organizations – even though doing so would dramatically increase donations.
3. Taking risk on new revenue ideas – We expect for-profit businesses to take calculated risks to improve profits. But the same isn’t true of non-profits. Charities become reluctant to take a risk and that kills innovation. If you can’t innovate, you can’t bring in bigger revenues, grow the organization or increase your social impact.
4. Time – For-profit businesses have the luxury of time. A long-term plan, where profit gets put back into the organization, is seen as ok, if the goal at the end is big enough. But if a non-profit tried to plow its funds back into growth and attain the tools to cure a social problem, we wouldn’t stand for it.
5. Profit to attract risk capital – For-profits can pay people profits to attract them to invest their capital in their ideas. But you can’t look to make profits in the non-profit sector, by definition.

Why a focus on overhead is such a huge issue

This immovable focus on reducing overhead at all costs creates five very defined problems for the non-profit sector:

1.  You can’t use money to lure people away from the for-profit sector to the non-profit sector.
2.  You can’t advertise on the same scale as the for-profit sector.
3.  You can’t take the same kind of risks in pursuit of new customers that a for-profit can.
4.  You have less time to find these customers than the for-profit business.
5.  You don’t have a ‘non-profit stock market’ to fund any of this, even if you could

And the net result of these problems is one even bigger problem:

The non-profit sector can’t GROW and SCALE.

Charity giving is only 2% of US GDP, and has been since it started to be measured in the 1940s. Whatever the not-profit sector does, it can’t lure away money from the grip of the for-profit sector.

So, as a non-profit organization, how can you improve your fundraising, increase your growth and help change that seemingly static 2% figure?

How do you overcome the overhead problem?

Your overhead is how the public judge your charity and its effectiveness. So how do you overcome the conflict between effectiveness and being measured on your overhead expenses?

The key starting point is to get real control over your overhead.

As the CEO or management team in charge of your organization, you make the decisions that result in your overhead.

You decide:

•  How much you pay your employees.
•  How many people are hired for your team.
•  How much money is spent on advertising.
•  How big the scale of your fundraising efforts will be.

So the initial impetus behind your overhead is largely in the control of you and your organization’s management team.

And when your financial management is organized, up to date and proactive, you can also work with your professional advisers to get detailed budgets, reporting and performance tracking of the spending that goes to form this critical overhead number.

But the really important thing to understand is the link between this reported overhead and your social impact on the communities around you.

Learning to aim for scale and impact

It’s not about just cutting your overhead, of course.

It’s about learning that investment in your fundraising is key to growth, and that growth and increased revenue brings about a more effective impact on the social problems you’re attempting to tackle.

What you need is a plan – a plan that sets key goals for your fundraising, your advertising and marketing and the overall growth of your resources.

We can help you write that strategic plan, set up the budgets that are needed and create the metrics and key performance indicators (KPIs) needed to track your non-profits performance and keep you on track for achieving greatness.

With the right ambition, the right control and the right planning, your non-profit really can overcome the overhead problem.

Contact us to discuss how Checkbox can help your non-profit increase its fundraising efforts and start making a difference for your core community.

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