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Supporting Your Faith with Fiscal Accountability

Wishing you a healthy, happy, and prosperous 2020!

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Wishing you peace and joy!

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How to protect your nonprofit’s credit cards from misuse

A hypothetical not-for-profit staffer named Britney had maxed out her personal credit cards. So when her car needed repairs, she reached for her employer’s card. She reasoned that she would come up with the money to pay the bill before her boss ever saw a statement. Britney didn’t come up with the money. But lucky for her, her boss didn’t review the card statement that month. When Britney needed to buy holiday gifts, she reached for her work card again — and again. By the time her boss finally noticed the illicit charges, Britney had spent more than $5,000.

This kind of credit card misuse or fraud is more common in nonprofits than you may think. But if you write and enforce a strong card use policy at your organization, you can help prevent Britney’s and her boss’s mistakes.

Who needs one?

Your policy should start with who has the right to a card. Nonprofits commonly issue cards to their executive directors, program directors and office managers (or other employees responsible for buying supplies). Before issuing a card to other staffers, consider whether they really need it. Most can pay out of pocket and submit reimbursement requests. However, if employees travel or entertain donors regularly on your nonprofit’s behalf, it may make sense to give them cards.

Just ensure that cardholders understand the rules. Explicitly say (even if it seems obvious) that they can’t use the card for personal expenses, and list prohibited uses such as cash advances and electronic cash transfers, as well as charges over a specified amount. State that reimbursement for returns of goods or services must be credited directly to the card account. Employees should never accept cash or refunds directly.

What’s management’s role?

Manager involvement is essential to helping prevent credit card abuse. Require employees to seek preapproval prior to incurring any credit card charge. Stress that unauthorized purchases (and related late fees and interest) will become the employee’s responsibility. Employees should be required to provide documentation (such as itemized receipts) to their authorizing supervisor for review.

Supervisors need to indicate their approval of the charges by a signature and date on the receipts or on a standardized expense form. Your accounting department should reconcile monthly credit card statements, and the statements should be reviewed by an executive or board member.

How do you enforce it?

Make sure staffers understand the possible consequences of violating your credit card policy, including employment termination and criminal prosecution. To ensure there’s no misunderstanding, require employees to acknowledge that they’ve read the policy and agree to follow it in writing before they receive a card. Need help? Contact the Online Stewardship team at Lynn@onlinestewardship.com. 

© 2019



Be good to your favorite charitable organizations!

Engage supporters with your nonprofit’s annual report

Some of your not-for-profit’s communications are of interest only to a select group of your supporters. But your organization’s annual report is for all stakeholders — donors, grantmakers, clients, volunteers, watchdog groups and the government.

Some report elements are nonnegotiable, such as financial statements. But you also have plenty of creative license to make your report engaging and memorable for its wide-ranging audience.

First things first

Most nonprofit annual reports consist of several standard sections, starting with the Chairman of the Board’s letter. This executive summary should provide an overview of your nonprofit’s activities, accomplishments and anything else worth highlighting. Next is the directors and officers list. The biggest task here is to make sure all names, professional affiliations and designations are accurate and spelled correctly.

Then there’s the financial information section, which generally is subdivided into three sections:

  1. Independent auditor’s report. This is a professional auditor’s opinion about whether your nonprofit’s financial statements have been prepared in accordance with Generally Accepted Accounting Principles.
  2. Financial statements.You’ll want to include a Statement of Financial Position (assets, liabilities and net asset categories as of the last day of the fiscal year), Statement of Activities (revenues earned and expenses incurred during the year) and Statement of Cash Flows (changes, sources and uses of cash for the year).
  3. Footnotes. Use these to expand on financial statement items regarding such subjects as leasing arrangements and debt.

You can make your financial statements easier to understand by creating an abbreviated version with a synopsis that quickly gets to the heart of the matter. Where applicable, use simple graphs, diagrams and other visual aids to highlight specific points.

Meat of the matter

A “Description” is the other major section in a typical annual report, and it’s where you can — and should — get creative. First, explain your organization’s mission, goals and strategies for reaching those goals. Then, describe who benefits from your organization’s services and how they contribute to the community.

So that your report does justice to this work, include client testimonials where those you’ve helped tell their own story in a personal way. Or create a timeline that enables readers to see the progress you’ve made toward a long-term goal.

Your annual report should be as visually exciting as it is interesting to read, with engaging photos, arresting graphics and innovative layouts. Make sure your graphic designer has experience with annual reports — preferably those of nonprofits — and understands the brand, values and image your organization wants to convey.

Continuous improvement

Even if you’re proud of the finished product, make sure you survey stakeholders. Or convene a small focus group to find out what your report’s readers liked — and what they didn’t find as effective. Then apply these insights to next year’s effort.

© 2019


Protecting youth sports leagues from fraud

Who would defraud a kids’ organization? The answer, unfortunately, is that trusted adults sometimes steal from not-for-profits benefiting children. Youth sports leagues and teams, for example, are ripe for fraud. Cash transactions are common, and coaches and board members usually are volunteers with little accountability.

If you or your children are involved in a youth sports league, here’s what you can do to ensure that its funds support the kids, not thieves.

Segregate duties

By far the most important step leagues can take is to segregate duties. This means that no single individual receives, records and deposits funds coming in, pays bills and reconciles bank statements.

So one person might handle deposits and payments, another would receive and reconcile bank statements and a third would monitor the budget. Also, every payment (or at least payments over a certain threshold) should be signed by two individuals. If your league has credit or debit cards, someone who isn’t an authorized card user should be assigned to review the statements.

Some simple steps

Other procedures can help prevent fraud. For example, if your league still uses paper registrations and accepts payment by cash or check, look into electronic payment options. Cash can be pocketed in the blink of an eye, and checks can be diverted to thieves’ own accounts. But with online registration, payments are deposited directly into the league’s account.

Also, monitor your league’s treasurer. People in this position are the most likely youth sports league officials to commit fraud because they have the easiest access to funds and the ability to cover their tracks. No one person should stay in the treasurer position for more than a couple of years. If funds are available, your league might consider hiring a part-time bookkeeper who will report directly to the board.

The treasurer should submit a report to the board of directors for every board meeting, with bank statements attached. And your board should receive and review financial reports at least quarterly — including when the league isn’t in season.

What fraud perpetrators hope

You may have a hard time believing that anyone in your community would steal from a youth organization. But that’s just what fraud perpetrators hope you’ll think. So put some basic fraud controls in place; then sit back and enjoy the game! If you need assistance setting up some internal controls, the staff at Online Stewardship have experience in this area.  Contact Lynn@onlinestewardship.com for an appointment.

© 2019


Fight fundraising obstacles with personal appeals

It’s no secret that this is a challenging time for charitable fundraising. In its annual Giving USA 2019 report, the Giving USA Foundation noted a decrease in individual and household giving, blaming such impersonal factors as tax law changes and a wobbly stock market.

So why not fight back by making personal appeals to supporters? Requests from friends or family members have traditionally been significant donation drivers. Even in the age of social media “influencers,” prospective donors are more likely to contribute to the causes championed by people they actually know and trust.

Success strategies

The dedicated members of your board can be particularly effective fundraisers. But make sure they have the information and training necessary to be successful when reaching out to their networks.

When making a personal appeal to prospective donors, your board members should:

Meet in person. Letters and email can help save time, but face-to-face appeals are more effective. This is especially true if your nonprofit offers donors something in exchange for their attention. For instance, they’re more likely to be swayed at an informal coffee hour or after-work cocktail gathering hosted by a board member.

Humanize the cause. Say that your charity raises money for cancer treatment. If board members have been impacted by the disease, they might want to relate their personal experiences as a means of illustrating why they support the organization’s work.

Highlight benefits. Even when appealing to potential donors’ philanthropic instincts, it’s important to mention other possible benefits. For example, if your organization is trying to encourage local business owners to attend a charity event, board members should promote the event’s networking opportunities and public recognition (if applicable).

Wish list

Consider equipping board members with a wish list of specific items or services your nonprofit needs. Some of their friends or family members may not be able to support your cause with a monetary donation but can contribute goods (such as auction items) or in-kind services (such as technology expertise).

If you’re concerned about declining donations and need help finding new revenue streams, contact us for ideas: Lynn@onlinestewardship.com. 

© 2019


A policy can help nonprofits look “gift horses” in the mouth

When you receive a personal gift from a friend or family member — even if it’s not something you particularly want — you accept the gift and thank the person. The same isn’t always true of gifts given to your not-for-profit. Gifts should be examined, and, possibly, refused.

Why? There are many reasons, from space limitations to unsuitability to your mission. It’s never easy to say “no” to a generous donor. But a gift acceptance policy can make the decision and process easier.

Nothing personal

A gift acceptance policy provides an objective way to decline a gift but still maintain a good relationship with the contributor. Your nonprofit’s staffers can explain to donors that a previously set policy prohibits you from accepting certain gifts — in other words, “it’s nothing personal.”

For example, if a donor offers tangible personal property such as an art collection, it may need insurance, special display cases or offsite storage. This could require your organization to incur substantial out-of-pocket costs. You can simply explain to the donor that your policy doesn’t allow you to accept gifts that cost money to maintain.

Getting it down

Before drafting your policy, think about the types of gifts you want to accept and which ones you should refuse. In general, gifts that conflict with your organization’s mission fall in the latter category. And gifts with certain donor restrictions (such as how they can be used) may simply be unmanageable given your mission’s scope or staffing resources.

Most organizations welcome publicly traded securities because they’re easy to convert to cash. But closely held stock can be hard to value and sell. Split interest gifts, where the donor transfers an asset to your organization but draws income from the asset or receives a remainder interest at some point in the future, can also be difficult to manage. These gifts usually require financial expertise and involve obligations to the donor or the donor’s family.

Your policy should not only describe the kinds of gifts that are acceptable, but also how they’ll be valued, managed and, if necessary, disposed of. Be sure to indicate which types of gifts need to be reviewed by your attorney — for example, real estate, because it could have property liens and other encumbrances.

Times change

Ask your attorney and financial advisor to review your policy before giving it to your board for approval. Then review it annually. Over time, your capacity to accept certain gifts may change and require revisions to your policy.

If you need help with accounting services contact us at Lynn@onlinestewardship.com

© 2019


Accountable plans save taxes for staffers and their nonprofit employers

Have staffers complained because their expense reimbursements are taxed? An accountable plan can address the issue. Here’s how accountable plans work and how they benefit employers and employees.

Be reasonable

Under an accountable plan, reimbursement payments to employees will be free from federal income and employment taxes and aren’t subject to withholding from workers’ paychecks. Additionally, your organization benefits because the reimbursements aren’t subject to the employer’s portion of federal employment taxes.

The IRS stipulates that all expenses covered in an accountable plan have a business connection and be “reasonable.” Additionally, employers can’t reimburse employees more than what they paid for any business expense. Employees must account to you for their expenses and, if an expense allowance was provided, return any excess allowance within a reasonable time period.

An expense generally qualifies as a tax-free reimbursement if it could otherwise qualify as a business deduction for the employee. For meals and entertainment, a plan may reimburse expenses at 100% that would be deductible by the employee at only 50%.

Keep good records

An accountable plan isn’t required to be in writing. But formally establishing one makes it easier for your nonprofit to prove its validity to the IRS if it is challenged.

When administering your plan, your nonprofit is responsible for identifying the reimbursement or expense payment and keeping these amounts separate from other amounts, such as wages. The accountable plan must reimburse expenses in addition to an employee’s regular compensation. No matter how informal your nonprofit, you can’t substitute tax-free reimbursements for compensation that employees otherwise would have received.

The IRS also requires employers with accountable plans to keep good records for expenses that are reimbursed. This includes documentation of the amount of the expense and the date; place of the travel, meal or transportation; business purpose of the expense; and business relationship of the people fed. You also should require employees to submit receipts for any expenses of $75 or more and for all lodging, unless your nonprofit uses a per diem plan.

Inexpensive retention tool

Accountable plans are relatively easy and inexpensive to set up and can help retain staffers who frequently submit reimbursement requests. Contact us at Lynn@onlinestewardship.com for more information.

© 2019


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