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Overview For New Board Members

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An overview to educate on basic financial reporting and presenting of NFPs including financial statements and 990s.

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Overview For New Board Members

  1. 1. NOT FOR PROFIT ACCOUNTING<br />1<br />Presented to: Arts and Business Council<br />Saturday, March 26, 2011<br />
  2. 2. Agenda<br />What is the role of a not for profit board member?<br />How is a not for profit different financially from for profit businesses?<br />What do we need to file with the IRS and other entities?<br />What occurs during an audit?<br />2<br />
  3. 3. What is a Board Member’s Role?<br />Fundraising<br />Strategic planning<br />Oversight of programs<br />The IRS believes that a well-governed organization is more likely to be compliant.<br />3<br />
  4. 4. Oversight of Programs<br />General Oversight<br />Be aware of how the organization is run<br />Be aware of processes potential areas of fraud<br />Have an active role in helping to mitigate risks<br />Fiduciary Oversight<br />Help set financial policies<br />Be familiar with the financial statements<br />Be able to review and understand the form 990<br />4<br />
  5. 5. Policies of a Not For Profit<br />Conflict of interest policy<br />Policy regarding reimbursement of travel and entertainment expenses<br />Executive compensation policy<br />Investment policy<br />5<br />
  6. 6. Agenda<br />What is the role of a not for profit board member?<br />How is a not for profit different financially from for profit businesses?<br />What do we need to file with the IRS and other entities?<br />What occurs during an audit?<br />6<br />
  7. 7. Financial Differences<br />Financial statements<br />Statement of Financial Position<br />Statement of Activities<br />Statement of Functional Expenses<br />Endowments<br />7<br />
  8. 8. Statement of Financial Position<br />Short-term investments<br />Long-term investments<br />Accrued income taxes<br />Net assets<br />Unrestricted<br />Board Designated<br />Undesignated<br />Temporarily Restricted<br />Permanently Restricted<br />8<br />
  9. 9. Statement of Activities<br />Allocations into restricted classes<br />Realized and unrealized gains/losses on investments<br />Assets released from restrictions<br />Expense allocations<br />9<br />
  10. 10. Statement of Functional Expenses<br />Classification<br />Actual vs. allocation<br />10<br />
  11. 11. Endowments<br />Protecting the original contribution<br />Contributions and expenditures<br />Investment income<br />Requirements<br />Policies and standards<br />11<br />
  12. 12. Agenda<br />What is the role of a not for profit board member?<br />How is a not for profit different financially from for profit businesses?<br />What do we need to file with the IRS and other entities?<br />What occurs during an audit?<br />12<br />
  13. 13. What is Required to be Filed?<br />Internal Revenue Service<br />Illinois Attorney General<br />Other states<br />13<br />
  14. 14. The Form 990<br />Full 990 or 990-EZ<br />12-page core form & 16 schedules<br />Additional questions on governance, policies, and procedures<br />14<br />
  15. 15. AG-990-IL<br />Any 501(c)(3) organization that collects contributions from anyone in Illinois<br />Audited financial statements required if gross receipts is greater than $300,000<br />15<br />
  16. 16. Unrelated Business Income Tax<br />Certain activities by not for profits may be subject to taxes<br />Advertising in publications<br />Rental income<br />Sales of merchandise not directly related to program activities<br />16<br />
  17. 17. Agenda<br />What is the role of a not for profit board member?<br />How is a not for profit different financially from for profit businesses?<br />What do we need to file with the IRS and other entities?<br />What occurs during an audit?<br />17<br />
  18. 18. What Occurs During an Audit?<br />Understanding of entity controls<br />Examination and testing of statement of financial position and statement of activities<br />Fraud inquiries<br />Communication with board of directors<br />18<br />
  19. 19. Communication with the Auditor<br />Review financial statements and footnotes and inquire if additional understanding is necessary<br />Discuss the audit process<br />Ask about areas of possible improvement<br />19<br />
  20. 20. Specializing in Financial Statement Audits, Reviews and Compilations<br />Income Tax Planning, Research and Preparation <br />Pension and Profit Sharing Plans<br />Monthly Accounting, QuickBooks and Accounting Software Setup and Training<br />20<br />

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