Small business nonprofit business planning 12-14-11

Financial Accountabilityfor Small Business and NonprofitsCreating Confidence – Minimizing Risk Presenter Miriam Robeson, Attorney December 14, 2011

Why Are We Here? Increased IRS scrutiny for small business and nonprofits More (and more confusing) governmental paperwork Slack economy requires greater efficiency to succeedInformation Level –IntermediateAssumes some familiarity with basics of business

Keeping on the Right (Financial) Path Compliance Accountability Best Practices Risk Management

Common Tax Traps Top 10 Audit Triggers State Tax Traps  Failing to file sales tax returns  Failing to file employment tax returns  Failing to file IN SOS documents Top “Notice Letters”  Failing to file/pay tax  Failing to properly categorize tax What do to if you have trouble making deadline  Memory devices  Hire a professional

Compliance– FederalNonprofit Both Small Biz 990 Income •N - EZ •1040 Employment •1065 •1120/1120S

Compliance – StateNonprofit Both Small Biz IN SOS IN SOS Sales Tax – sales Report Report Sales Tax - IN Income IN E-1 Purchases Tax NP 20 Employment Tax Personal Property

Tax or Consequences! IN-Debt - delinquent taxpayers are posted on a public web site IRS Private Collection – IRS now employees private debt collectors  Look for increased harassment  Expect less assistance with genuine tax disputes once a debt goes to collection

Compliance - Employment Employment Federal -- 941 – taxes and State -- WH-1 – Employer’s Employer’s State reports must Quarterly Federal Tax Return Tax Returnbe timely filed! ONLINE Federal – EFTPS requirement (electronic State – IN-Tax for many federal tax payment system) organizations Employee “Exempt” versus Wages and Hours “non exempt” Classification employees laws

Sales Tax Compliance - purchases Purchase of equipment, inventory, supplies, used in the production of income. Purchase of inventory for resale General purchases for nonprofits Does not apply to (examples)  Meals for members  Lodging for Officers  Social Organizations MUST HAVE RETAIL MERCHANT CERTIFICATE

Sales Tax Compliance - Sales ALL SALES  Sales of inventory or product for sale more than 30 days in a year  30 “Sale Days” do not have to be consecutive to trigger sales tax collection rule NONPROFIT – may be exempt from paying sales tax, but must report sales and exempt sales.

What do you do if you get a tax letter? Tax Notice Letter  Federal  State DO NOT IGNORE!  Frequently – just need updated information  Incorrect designation of tax payment (employment, sales) 1st Letter – Demand Notice 2nd Letter – Tax Warrant – SHORT TIME FRAME!! 3rd Letter – Tax Lien

Handout – 10 Tips for Keeping an Eye on FinancesFinancial OversightWatch the money – Watch the peopleFinancial Oversight is the review of both finances and financialpracticesEnsures safe, ethical financial proceduresProtects the Company and the Directors/StaffProvides integrity and transparency to the publicCatches financial difficulties before they become financialimpossibilities

Handout – Nonprofit Financial Control PolicyAccountability -Financial Governance Policies Policies for –  Handling Money  Recording Money  Reporting Money

Handout – Document Destruction PolicyAccountabilityFinancial ControlsGAAP StandardsFinancial Procedures ManualRestrictions documented and honoredTraining program for Staff and BoardDocument Retention/Destruction Policy

Handout – Conflict of Interest PolicyAccountability - Governance Conflict of Interest Ethical Standards

Accountability - Conflicts of Interest Board Staff Member Conflicts Conflicts Donor Volunteer Conflicts Conflicts

Nonprofit Transparency Credibility to Public Regularly provide information to the PublicRequired disclosures Recommended• Tax returns disclosures• Organizational Documents • Annual report • Articles of Incorporation • Basic Financial Statement • Bylaws • Report of Activities• Funds used for lobbying • Mission/Vision• Application for Exempt Status

Risk Management Practices to Prevent Financial Crisis  Identify Risk  Ranks Risk  Identify Policies to manage risk  Implement protections  Implement procedures in event of crisis

Risk Management Plan Handout – Risk Management PolicyTypes of Risk to Manage • Board members, volunteers, People employees, clients, donors, the public. • Buildings, facilities, equipmen Property t, materials, copyrights, trade marks • Sales, grants, contributions, Income sponsors, fund raising • Reputation, stature in Goodwill community, ability to raise funds and appeal to prospective volunteers

Handouts – 10 Ways to Catch Fraud and Mistakes from Outside Handout – 15 Ways to Minimize Employee Fraud Risk Management - People Poor economy has resulted in an increase in criminal conduct against nonprofits Embezzlement by employees Embezzlement by officers Fraud from “outsiders” Phrase of the Day – “Trust But Verify”

Fraud --What to do when it happens to you! Fraud in the Corporate Sector • Upper management commits 18% of fraud • Accounting Department commits 29% of fraud • (Source: Association of Certified Fraud Examiners) Top mistakes made in response to fraud • Fear-based (or other emotional) response • Letting the perpetrator “off the hook” • Assuming that the bank (or other organization) will “handle it”

Fraud --What to do when it happens to you! If you suspect fraud – act immediately! • Lock-down data • Start a formal audit process with outside auditor • Change procedures and rotate staff responsibilities If you verify fraud • All of the above, PLUS • Confront the perpetrator (employee, officer, outside contractor) • Copy and compile evidence in a separate, protected and confidential file • Contact the police, if appropriate Handout – Someone Stole the Cashbox!

PR for NonprofitsPublic Relations During Fraud CrisisIf Fraud or DO NOT Have a plan ofembezzlement HIDE or action forfinds your Minimize the responseNonprofit, seriousness of •If employee: suspension, termin• How the public the event ation hears about •If board member: • If you are and perceives contacted by the resignation, remova the incident press, answer! - l can drastically •Note appearance of if you don’t get impropriety is affect the your story out, enough to take nonprofit’s no one will, and action for a board ability to move speculation will member, but more replace facts evidence is needed beyond the to take action event. against an employee Handout – Public Relations in Times of Crisis

Preventing Fraud Have and use financial control policies Know who handles the money Remove temptation Review financial information • ALSO - have independent review of finances Be aware that it can happen YOU!

Keeping on the Right (Financial) Path Compliance Accountability Best Practices Risk Management

Any Questions?Thank you for your attention! Miriam Robeson, Attorney Today’s materials are available on Miriam’s Website: http://blog.lawlatte.com/index.php /upcoming-workshops/

Small business nonprofit business planning 12-14-11

by Miriam Robeson on Dec 13, 2011

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Small business nonprofit business planning 12-14-11 — Presentation Transcript