DMAI Fundamentals - Chapter 10 - Financial Management

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Chapter by chapter slides based on "Fundamentals of Destination Management and Marketing," provided by Destination Marketing Association International in cooperation with American Hotel & Lodging Association Education Institute.

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DMAI Fundamentals - Chapter 10 - Financial Management

  1. 1. © 2005, Educational InstituteChapter 10Financial ManagementFundamentals of Destination Management and Marketing(323TXT)
  2. 2. © 2005, Educational InstituteFour Critical Areas• Nondistribution of earnings• IRS classifications• Disclosure of information issues• IRS filing requirements and forms
  3. 3. © 2005, Educational InstituteNondistribution of Earnings• Commercial organizations typically distributeearnings to investors.• Not-for-profits can operate profitably, but mustnot share earnings with board members or otherinfluential parties.• Profits should be put in reserves to strengthenfuture operations.• Staff members may receive incentives, bonuses,and/or compensation increases.
  4. 4. © 2005, Educational InstituteIRS Classification of CVBs• 501(c)(6)o No restrictions on lobbyingo Contributions made by the CVB may be deductible asbusiness expenseso Donors cannot deduct contributions to the CVBo Less favorable postal rateso Fewer state advantageso Often ineligible for grants• 501(c)(3)o Donor tax deductionso Favorable postal rateso Exemption from the Federal Unemployment Tax Acto Possible exemption from state sales tax and other local taxeso Increased eligibility for grantso Lobbying restrictions
  5. 5. © 2005, Educational InstituteDisclosure of Information• CVBs are required to make certain documents available forpublic inspection because of their tax-exempt status.o Forms 990 and 990-EZo Form 1023o All correspondence related to Forms 990, 990-EZ, and1023• CVBs are not required to disclose tax returns (Forms 990-T or1120-POL) or the names and addresses of their contributors.• Requested documents must be produced on the day of requestor on the next day if extenuating circumstances exist.o Written requests must be fulfilled within 30 days.o Documents may be made available on the Internet.• Organizations can be fined for noncompliance.
  6. 6. © 2005, Educational InstituteIRS Filing Requirements and Forms• Forms 990 and 990-EZo Information returno Open for public inspectiono Required if an organization’s gross receipts arenormally more than $25,000o Due on the fifteenth day of the fifth month afterthe close of the fiscal or calendar yearo $10 per day late filing penalty(continued)
  7. 7. © 2005, Educational InstituteIRS Filing Requirements and Forms(continued)• Form 990-To Tax return for unrelated business incomeo Income from a regularly carried on trade orbusiness not substantially related to carryingout the organization’s purposeo Proprietary; no disclosure requiremento Taxed at prevailing corporate rateso Required estimated tax payments
  8. 8. © 2005, Educational InstituteIRS Filing Requirements and FormsRevenue excluded from tax• Dues• Dividends or interest• Annuities• Royalties• Contributions• Income from activity involving volunteers• Sale of donated items
  9. 9. © 2005, Educational InstituteCost Allocation Procedures• Natural reporting: allows CVBs to presentrevenues and expenses as consolidated figures onfinancial statements• Functional reporting: breaks down revenues andexpenses by department• Direct costs: costs associated directly with anorganization’s purpose
  10. 10. © 2005, Educational InstituteCVB Financial Statements• Internal financial statementso Can be designed to meet an individualbureau’s needso Should use industry standards andterminology• Audited financial statementso Can be prepared only by licensed CPAso Must follow standards set by the FinancialAccounting Standards Board

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