The Clarence Chamber of Commerce’s monthly business roundtable featured a presentation on nonprofit procedures to 25 members at the library Monday night. Rich Pfentner and Jay McWatters from Dopkins & Company, LLP and Alayne Donner from P&C Solutions provided an excellent three-tiered, one-hour primer on the regulations, forms and nuances that go with running a nonprofit organization and what is required to effectively serve on a board.
Below are 12 highlights from the presentation:
- For a start-up nonprofit, the first key steps should be filing as a 501(c)3 status with the IRS (form 1023), filing with New York State, submitting articles of corporation and bylaws and setting forth the mission and purpose of the organization.
- It is imperative to have D&O (directors and officers) insurance, regardless of the size of your nonprofit organization. Average annual premiums for a comprehensive policy are around $1,000.
- It doesn’t matter if you use a cash-based or accrual-based system of accounting, but just be consistent in adopting the appropriate method and its accompanying GAAP principles for your transactions and operations.
- Even with a good finance officer on board, organizations should still contract with a certified accountant to prepare annual reports, review statements or conduct audits. Board members have the same fiduciary duties and responsibilities as corporate board members.
- As an organization, you should always provide an acknowledgment letter and receipt for all donations received that are more than $75. When an event ticket is concerned for reporting purposes, the fair market value of the ticket ($40) must be deducted from the face value ($100) to determine the true charitable contribution ($60) for an individual. The same applies to any gift a donor receives (i.e. Bills tickets). The key words that should be included in a receipt letter for a donation are “no goods or services were provided in exchange for your generous financial donation.”
- Individuals itemizing deductible contributions and preparing annual tax returns should always obtain a letter of substantiation for any donation more than $250.
- As long as board members adhere to their duty and obligations in service to the organization and within the capacity of their role, they are indemnified by the organization’s bylaws but still need the necessary financial coverage that is provided by D&O insurance from litigation against their personal assets. Just as with corporations and limited liability corporations, this cloak of protection exists as long as there hasn’t been any unethical conduct, fraud or embezzlement activities.
- Organizations that solicit outside funding must file Form Char 500 with the New York State Department of Law Charities Bureau. NPOs that engage in private rental services must claim this taxable revenue as “unrelated business income.” NPO tax returns are public information and available at Guidestar.com.
- Form 990 is for NPOs with gross receipts more than $200,000 and assets more than $500,000 (otherwise Form 990N is for less than $50,000 and Form 990 EZ is for less than $200,000). Returns must be filed to the IRS by the 15th day of the fifth month after the organization’s fiscal year end.
- Returns to New York State (less than $100,000 revenue – no accountant’s report needed; greater than $100,000 and up to $250,000 – an accountant’s review report is required; and more than $250,000 requires an audit report). The state filings are due within six months after the agency’s year end.
- When looking to serve on an NPO board, do you research and consider the following: Can you make the commitment? What do you know about the board, management and reputation? Is it financially stable and compliant with its regulations?
- Board members have the obligations to uphold duty of care, due diligence, loyalty, confidentiality and obedience. You need to review materials and prepare for the agenda and not just attend meetings to vote. Board members should read the 990 form and all financial statements in serving the best interests of the organization and its mission.