1. Financial Management for NFPs
John Olsavsky
Assistant Professor
SUNY Fredonia - School of Business
May 22, 2014

2. Financial Management for NFPs
Welcome
Introductions
Materials In Front Of You
Expectations…
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3. Board Financial Responsibilities
NYS Office of the Attorney General (Appendix 1)
“Right From the Start: Responsibilities of Directors of Not-for-Profit Corporations”
Duties
Care
Loyalty
Obedience
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4. Board Financial Responsibilities
Right From the Start… (Appendix 1)
Duties
Care
Requires a director to be familiar with the organization's finances and activities and to participate regularly in its governance.
Loyalty
Requires a director to act in the interest of the corporation.
Obedience
Requires a board to insure that the organization complies with applicable laws and regulations and its internal governance documents and policies.
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5. Board Financial Responsibilities
NYS Department of Law, Statutes Booklet (Appendix 2)
Solicitation and Collection of Funds for Charitable Purposes (Page 3 & 4)
Registration of charitable organizations
Reports by registered charitable organizations
Prohibited Activities
Registration of Professional Fund Raisers
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6. Financial Reporting Initially IRS Form 1023 (Appendix 3)
Application for Recognition of Exemption
Form 410 (Appendix 4)
Registration Statement for Charitable Organizations
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7. Financial Reporting Annually IRS Form 990 (Appendix 5)
Return of Organization Exempt from Income Tax
Form 1099-MISC (Appendix 6)
Miscellaneous Income
W-2s with W-3 Transmittal
Payroll
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8. Financial Reporting Annually NYS CHAR 500 (Appendix 7) Form 990
Annual Financial Report for Charitable Organizations
Form 990
Return of Organization Exempt from Income Tax
Independent Accountant’s Report
If Total support & revenue over $100,000, REVIEW
If Total support & revenue over $250,000, AUDIT
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9. Financial Reporting Annually Public
U.S. GAAP-based Financial Statements (Appendix 8)
GAAP = Generally Accepted Accounting Principles
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10. Financial Reporting Quarterly (Payroll tax reports) IRS Form 941 NYS
Employer’s Quarterly Federal Tax Return (Appendix 9)
NYS
NYS-45-MN
Quarterly Combined Withholding, Wage Reporting, And Unemployment Insurance Return (Appendix 10)
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11. Financial Reporting Monthly Board Treasurer’s Report (Appendix 11)
At least, a Comparative Statement of Activity
(AKA, Income Statement)
Budget versus Actual
Current month versus Year-to-date
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12. Financial Statements Statement of Financial Position AKA Balance Sheet
Statement of Activities
AKA Income Statement
Statement of Functional Expenses
Statement of Cash Flows
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13. Financial Statements Statement of Financial Position Snapshot
Structure
Definitions/Comments
Rules
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14. Financial Statements Statement of Activities Structure
Definitions/Comments
Key Ideas
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15. Financial Statements Statement of Functional Expenses Structure
Definitions/Comments
Program versus Supporting Services
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16. Financial Statements Statement of Cash Flows Structure
Definitions/Comments
Net cash flows should be positive.
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17. Independent Auditors’ Reports
Types
Compilation
Review
Audit
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18. Independent Auditors’ Reports
Compilation
The accountant assembles the prospective financial information and considers whether the assumptions or presentation are obviously inappropriate without expressing an opinion/conclusion or any other assurance on the financial forecast or projection or the underlying assumptions.
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19. Independent Auditors’ Reports
Review
The accountant performs inquiry and analytical procedures to provide the accountant with a reasonable basis for expressing limited assurance that there are no material modifications that need to be made to the financial statements in order for them to be in conformity with GAAP (negative assurance).
NOTE: Required by NYS if Total Revenue and Support more than $100,000, up to $250,000.
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20. Independent Auditors’ Reports
The accountant evaluates the preparation of the prospective financial information, the supporting underlying assumptions, and the conformity of the presentation with AICPA guidelines, in order to provide the accountant with a reasonable basis for expressing an opinion on the conformity of the financial forecast or projection with AICPA guidelines and on the reasonableness of the assumptions.
NOTE: Required by NYS if Total Revenue and Support more than $250,000.
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21. Sarbanes-Oxley Act of 2002 (SOX)
Areas of Concern
1. Insider Transactions and Conflicts of Interest
2. Independent and Competent Audit Committee
3. Responsibilities of Auditors
4. Certified Financial Statements
5. Disclosure
6. Whistle-Blower Protection
7. Document Destruction
Resources
A Checklist for Nonprofits (Appendix 12)
Internal Controls Checklist (Appendix 13)
Segregation of Duties Staffing Patterns (Appendix 14)
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22. Non-Profit Revitalization Act of 2013
Highlights (Mostly effective, July 1, 2014)
Elimination of Letter Types
Significant Corporate
Real Estate Transactions
Modernization of Board Procedures and Meetings
Required Financial Reporting and Audit Procedures
Mandatory Whistleblower Policy
Mandatory Conflict of Interest Policy
Related-party Transactions
Chair Requirements
Executive Compensation
Privacy
Independent Director
Entire Board
Nonprofits With Educational Purposes.
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23. NYS Non-Profit Revitalization Act of 2013
Required Financial Reporting and Audit Procedures
Effective for filing due dates July 1, 2014, to June 30, 2017:
If Annual Gross Revenue and Support > $250,000,
file annual financial report with an independent CPA’s review report
If Annual Gross Revenue and Support > $500,000,
file annual financial report with an independent CPA’s audit report
Effective for filing due dates July 1, 2017, to June 30, 2021:
If Annual Gross Revenue and Support > $750,000,
Effective for filing due dates on or after July 1, 2021:
If Annual Gross Revenue and Support > $1,000,000,
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24. Budgets What is a budget? Why do we prepare budgets?
When do we prepare budgets?
When and how do we use budgets?
Typical NFP budgets
Operating budget
Cash budget
Capital budget
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25. Budgets Operating budget Prepared annually (or monthly)
Contains expected
Revenues
Expenses
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26. Budgets Cash budget Prepared monthly (or weekly or daily)
Contains expected
Cash receipts from operating, investing and financing activities
Cash payments from operating, investing and financing activities
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27. Budgets Capital budget Prepared annually for the next two to ten years
Contains expected
Purchases of “capital assets”
Sales of “capital assets”
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28. Sources and Resources Books/Pamphlets Web Sites GuideStar.org
Contact Info
Workshop Files
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29. Questions?
Comments?
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30. The End
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