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The pandemic, ongoing economic insecurity and uncertainty about the future have prompted some not-for-profits to make board designations of unrestricted assets. What are board designations, why are they worth considering and how does the process work?

Self-imposed limits

“Board-designated assets” refers to funds that haven’t been restricted by donors but are subject to self-imposed limits on their use. They’re typically intended to ensure that funding is available when needed. Board-designated funds also can play a role in fundraising by demonstrating an organization’s commitment to a specific plan or program.

They may be designated for a special, one-off purpose or set aside on an as-needed basis for a specified period of time (for example, covering contingent liabilities that may or may not arise). Unlike restricted funds, where only the original donor may remove the restrictions, designated funds can be undesignated at the discretion of the board of directors.

In most cases, funds are designated by the board, but, in some cases, the board assigns the responsibility to management — ideally, to specific positions (such as chief financial officer) that possess the requisite knowledge and judgment. In such circumstances, these delegations should be formally recorded, and your board should regularly review the actual designations.

Financial reporting obligations

One benefit of taking the time to properly document board designations is that the practice can make it easier to comply with the financial reporting requirements. Financial Accounting Standards Board Accounting Standards Update (ASU) 2016-14 requires nonprofits that follow U.S. Generally Accepted Accounting Principles to disclose board-designated net assets on their financial statements or in the statement’s notes.

Bear in mind that designating assets can affect the amounts in the mandatory disclosures related to liquidity and the availability of financial assets. Allocating a large chunk of cash to a capital project, for example, could reduce liquidity.

Policies and procedures

If your board decides to designate assets, it should adopt formal policies and procedures for managing them. For example, the policy should require your board to establish objectives for designated assets. These might include providing an internal line of credit to better manage cash flow; funding future programs or projects; maintaining operational or liquidity reserves; or funding an endowment.

The policy should clearly delineate who can designate and undesignate funds. Under what circumstances would exceptions be allowed? In addition, it should describe procedures for monitoring designated assets, including stating whether funds will be segregated. Procedures are needed to track expenditures and collect data to comply with reporting requirements.

Advantages and responsibilities

Designating assets isn’t a decision to make lightly. Discuss with your financial advisor the advantages and responsibilities of designations and whether they make sense for your organization. Contact our parent company, Patrick & Raines CPAs, for further assistance. You can reach the P&R team by calling (904) 396-5400 or emailing Lynn@onlinestewardship.com or office@CPAsite.com.

© 2022

Filed under: General by OSA&C Tuesday, June 28th, 2022
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There are thousands of grants and millions of dollars available to nonprofits from the federal government, states, foundations and other sources. Unfortunately, you can’t just ask nicely and expect to receive them. Qualifying for the funding your organization needs generally requires you to submit thorough, professional and compelling grant proposals. Here are a few tips.

Know your grantmaker

Just as you’d research potential employers before applying for a job, you should get to know grantmaking organizations before asking for their support. Familiarize yourself with the grantmaker’s primary goals and objectives, the types of projects it has funded in the past, and its grantmaking processes and procedures.

Performing research enables you to determine whether your programs are a good fit with the grantmaker’s mission. If they aren’t, you’ll save yourself time and effort in preparing a proposal. If they are, you’ll be better able to tailor your proposal to your audience.

Support your case

Every grant proposal has several essential elements, starting with a single-page executive summary. Your summary should be succinct, using only the number of words necessary to define your organization and its needs. You also should include a short statement of need that provides an overview of the program you’re seeking to fund and explains why you need the money for your program. Other pieces include a detailed project description and budget, an explanation of your organization’s unique ability to run this program, and a conclusion that briefly restates your case.

Support your proposal with facts and figures but don’t forget to include a human touch by telling the story behind the numbers. Augment statistics with a glimpse of the population you serve, including descriptions of typical clients or community testimonials.

Follow the rules

Review the grantmaker’s guidelines as soon as you receive them so that if you have any questions you can contact the organization in advance of the submission deadline. Then, be sure to follow application instructions to the letter. This includes submitting all required documentation on time and error-free.

Double-check your proposal for common mistakes such as excessive length, math errors and missing signatures. Also watch out for overuse of industry jargon.

Effective submission

Don’t wait until the last minute to write a grant proposal. Occasionally, you might hear about a grant just days before the deadline. But in general, it takes time to craft an effective proposal.

Contact our parent company Patrick & Raines if you’re having trouble getting the funding you need. We can review your financial situation and recommend potential solutions. You can reach the P&R team by calling (904) 396-5400 or emailing Lynn@onlinestewardship.com or office@CPAsite.com.

© 2022

Filed under: General by OSA&C Tuesday, June 14th, 2022
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According to nonprofit consultant Double the Donation, almost 65% of U.S. companies offer matching gift programs to help boost their employees’ charitable giving power. Sadly, billions of dollars in corporate matching gift funds go unclaimed every year. If your not-for-profit isn’t actively pursuing these gifts, you may be leaving them on the table.

Participating employers

Most matching programs are managed by HR departments, which provide employees with matching gift forms. Typically, the employer sends the completed forms, along with the matched donations, to the charity the employee has chosen. Dollar-for-dollar matching is most common among participating businesses, but some companies offer more, others less. Many employers match donations to any nonprofit, but some are more restrictive.

To encourage increased matching gifts, draw up a list of employers in your area that offer matching. Typically, you can find this information in annual reports, on company websites or by calling companies’ HR, PR or community relations departments. If a company operates a foundation, its matching program may run through that entity.

Once you have a comprehensive and accurate list, post it on your website’s donation page. Also use the list to reach out to existing donors you know work for those companies. All of your nonprofit’s solicitations should encourage supporters to check with their employers about the availability of matching.

Solution for unclaimed gifts

If, despite your nonprofit’s best efforts, matching gifts only occasionally trickle in, consider creating your own matching pool. Ask board members and major supporters to match donations during a certain time period, for certain populations or for a minimum donation amount. For instance, your board might match all donations from new contributors in February or a major donor might commit to match gifts made at your annual gala.

Also keep in mind that some charitable foundations will match gifts to jump-start a fundraising effort or major campaign. Such an arrangement might be easier to set up than securing a large employer to donate to your organization.

Easy ways to encourage donors

Classy, a cloud fundraising company, has found that fundraising campaigns that leverage matching gifts raise three to five times more money than those that don’t. Encouraging donors to take advantage of such matches doesn’t have to mean a lot more time and effort on your part. You might, for example, use short social media posts to remind donors. For more ideas on bolstering donations and funding, contact us by calling (904) 396-5400 or emailing Lynn@onlinestewardship.com.

© 2022

Filed under: General by OSA&C Tuesday, May 31st, 2022
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If your not-for-profit is trying to fulfill its mission with less volunteer help these days, you’re not alone. A December 2021 Gallop poll found that although donating to charity has largely returned to pre-pandemic levels, volunteering was still down. Only 56% of survey respondents said they’d volunteered in the past year, compared with 64% in 2017.

Given this shortage of helping hands, you may want to appeal to companies in your community. Many employees are returning to the office, and those who aren’t may welcome opportunities to volunteer in person with their colleagues. This can be a one-day volunteer event or an ongoing program. An added bonus is that some employees likely will continue supporting your organization beyond their employer-sponsored volunteer work. Here are some considerations for setting up a corporate volunteer arrangement.

Correlation between mission and business

The best volunteer partnerships generally are those where the nonprofit’s mission and the company’s core business correlate. For example, an athletic clothing manufacturer is a perfect match for an afterschool soccer league. A pet food company’s employees are likely to be enthusiastic about staffing an adopt-a-pet event.

Many businesses seek one-day volunteer opportunities that can accommodate all of their employees. If your organization is painting the walls of schools, serving free meals to the needy or setting up for a fundraising event, short-term assistance from an army of volunteers can be a lifesaver.

However, you shouldn’t create work where it doesn’t exist, particularly if coming up with activities or managing volunteers will put a strain on staff resources. Also be wary when companies offer volunteers on short notice. To be successful, corporate volunteer days take planning. For example, you may need to arrange such logistical details as meals or prepare training instructions and educational materials.

Getting what you really need

If you must turn down an eager corporate volunteer, do so carefully. Explain how the offer may, in fact, cost your nonprofit time and money. For example, you may be concerned about volunteer risk and your nonprofit’s insurance coverage.

Remember that group volunteer days aren’t the only way to take advantage of employees who want to help. Many companies provide paid time for staff to volunteer for the charity of their choice. Other companies make financial contributions to organizations where employees volunteer.

To find companies with volunteer programs, check with the Points of Light Foundation, VolunteerMatch or regional groups. Once you have a corporate partner, make sure you dedicate time to building the relationship. Think beyond a one-day volunteer event and try to gain an ongoing commitment, such as quarterly.

Try again later

The pandemic has eased considerably, but it’s not over yet. So don’t be surprised if some companies are wary of group activities. Let them know that you’ll contact them again in six months. And if you’re still worried about achieving all of your nonprofit’s objectives, consider cutting back. Contact us to discuss this by emailing Lynn@onlinestewardship.com.

© 2022

Filed under: General by OSA&C Tuesday, May 17th, 2022
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It’s been a long two years. But many not-for-profits are starting to plan in-person galas and other special events for this coming summer and autumn. If your organization is trying to get back to “normal” with a face-to-face fundraiser, understand that it’s likely to be more challenging to plan than in the past.

Some of your usual supporters may no longer be able to help financially — or may have relocated and, thus, be unable to attend your fundraiser. Some goods are still in short supply, and almost everything costs more than it did two years ago. More than ever, you need to pay close attention to the numbers to help ensure your event is profitable.

Ambitious but realistic goals

Start planning your event with a total fundraising goal. This should include funds received from event attendees, sponsors and any pre-gala appeals. Your financial objective should be realistic, based on your nonprofit’s experience with previous fundraising events and accounting for new factors, such as high inflation. But consider a stretch goal — say from 5% to 20% more than your last event.

Then, estimate expenses for such items as facility rental, food and beverages, prizes, invitations and decorations, and speaker and entertainment fees. You may also need to pay for permits (for example, to charge sales tax or host a raffle) and might want to buy special event insurance coverage.

A chance to try new things

Look closely at your list for expenses that can either be eliminated or cut back. If in the past, you held your annual event at a luxury hotel, you might want to try a new venue that will discount the space for the opportunity to host your community’s movers and shakers. Even if you receive sponsorships and discounts, be sure to include the original expenses in your budget should you need to pay the full amount for a future event.

And don’t be afraid to try something different. If you used to hold a black-tie affair, consider planning a more casual event this year. Some attendees may feel more comfortable attending an after-work cocktail party with a silent auction. As long as the event is well planned and publicized, attendees will probably be just as generous.

Importance of sponsors

Good sponsors are critical. Not only can they help defray expenses with donations of goods and services, but they can also raise your nonprofit’s profile by introducing your name to a new audience. Be careful, however, not to promise too much in sponsor benefits, such as free advertising — it could lead to unrelated business income tax problems.

It’s possible that a former sponsor or two went out of business during the pandemic. As you look for new sponsors, target well-known names with a connection to your nonprofit. For example, a children’s apparel company makes an ideal sponsor for a K-12 education nonprofit.

Be careful

Don’t be surprised if you encounter a few obstacles in planning this year’s event — especially if you’re trying to organize it with a diminished staff or fewer volunteers. Above all, watch your expenses. The last thing you want is to spend hours of effort on your fundraiser, only to come out even, or even lose money. Contact our parent company, Patrick & Raines CPAs, for further assistance. You can reach the P&R team by calling (904) 396-5400 or emailing Lynn@onlinestewardship.com or office@CPAsite.com.

© 2022

Filed under: General by OSA&C Tuesday, May 3rd, 2022
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According to a 2021 Independent Sector survey, 57% of Americans trust not-for-profits to “do what is right.” Although that’s a majority, being trusted by just over half of respondents is hardly worth celebrating. Well-publicized scandals involving nonprofit principals and a general decline in the population’s faith in institutions (particularly among conservatives and rural dwellers) have taken their toll.

To ensure your organization remains well-regarded by the public and donors, you need to closely monitor its ethical standards. This includes writing — and actively adhering to — a strong conflict-of-interest policy.

How to avoid trouble

Nonprofit “insiders” — board officers, directors, trustees and key employees — must avoid conflicts of interest because it’s their duty to do so. Any transaction or arrangement that might benefit one of these individuals personally could result in bad publicity and the loss of donor and public support. It could even mean the revocation of an organization’s tax-exempt status.

The IRS doesn’t mandate a specific policy, but it does require 501(c)(3) groups to answer questions about conflict-of-interest policies they might have and any conflicts that have arisen. This filing becomes public, so you probably don’t want to answer “no” when asked if your organization has implemented this best practice.

What to include

In general, your organization’s conflict-of-interest policy should define all potential conflicts and provide procedures for avoiding or dealing with them. For example, to prevent a board member from steering a contract to his or her own company, you might mandate that all projects are to be put out for bid, with identical specifications, to multiple vendors.

It’s critical to outline the steps you’ll take if conflicts of interest arise. For instance, board members with potential conflicts might be asked to present facts to the rest of the board, and then remove themselves from any further discussion of the issue. Your board should keep minutes of the meetings where the conflict is discussed and note the members present, as well as how they vote, and the final decision reached by the full board.

As with any policy, conflict-of-interest policies are effective only if they’re properly communicated and understood. Require board officers, directors, trustees and key employees to annually pledge to disclose interests, relationships and financial holdings that could result in a conflict of interest. Also make sure they know that they’re obliged to speak up if issues arise that could pose a possible conflict.

Why you need one

You may not think you’ll ever need a conflict-of-interest policy, but most nonprofits wrestle with these issues from time-to-time. Be prepared so that your leaders don’t make reputation-busting errors. Contact our parent company, Patrick & Raines CPAs, to discuss your policy and other governance issues. You can reach the assurance team at P&R by calling (904) 396-5400 or emailing Lynn@onlinestewardship.com or office@CPAsite.com.

© 2022

Filed under: General by OSA&C Tuesday, April 19th, 2022
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Many not-for-profits are understaffed in 2022, thanks to a labor shortage and pandemic-related budget shortfalls. Some organizations are filling the gaps with freelancers and contractors. However, such decisions can lead to trouble if these workers should really be classified as employees according to the Department of Labor (DOL) or the IRS. To ensure your workers are correctly classified, review the rules.

The DOL and FLSA

The Fair Labor Standards Act (FLSA) doesn’t define the term “independent contractor.” But courts generally have focused on several factors related to the “economic reality” of relationships between employers and workers.

The DOL leans on U.S. Supreme Court rulings for guidance. The Court has repeatedly stated that no single rule or test applies to determine employment status under the FLSA. Rather, the totality of circumstances determines a worker’s status, including how integral the worker’s services are to your operations, the permanency of the relationship and the nature and degree of control you have over the worker. The DOL has identified other factors it deems relevant, including:

• Where the work is performed (remotely or on-site),
• The absence or existence of a formal written employment contract, and
• Whether the work is licensed by the state or local government.

Some states have even more restrictive tests. Moreover, the fact that workers qualify as independent contractors under another federal law doesn’t guarantee they qualify under the FLSA. For example, the IRS applies a different test.

The IRS

Providing your workers with IRS Form 1099, “Miscellaneous Information” instead of Form W-2, “Wage and Tax Statement,” won’t automatically make them independent contractors. When assessing worker classification, the IRS typically looks at a variety of factors, as well as the totality of facts and circumstances. But in general, these factors are important:

Level of behavioral control. The more control you exercise over the worker, the more likely the worker is an employee. The IRS might look at the extent to which you instruct a worker on when, where and how to work, what tools or equipment to use and where to purchase supplies.

Extent of financial control. Contractors are more likely to invest in their own equipment or facilities, incur unreimbursed business expenses, market their services to other clients and be paid with a flat fee. Employees are more likely to be paid hourly, weekly or bimonthly.

Relationship of the parties. Contractors are often engaged for a specific project while employees are typically hired permanently (or for an indefinite period). Also, workers who serve a key business function are more likely to be classified as employees.

Difference in pay, benefits and taxes

If your workers don’t qualify as independent contractors, you must properly treat them as employees:

Pay and benefits. You generally must pay covered, nonexempt employees at least the federal minimum wage of $7.25 an hour. When an employee’s hours within a workweek exceed 40, you must pay at least 1½ times the employee’s regular pay rate. If the DOL reclassifies an independent contractor as an employee, in addition to having to make up the unpaid wages, you may owe workers’ compensation premiums and unpaid leave and other benefits. Fines and penalties are also possible.

Taxes. For employees, you must withhold federal income and payroll taxes, and pay the employer’s share of FICA taxes on the wages, plus FUTA tax. If the IRS reclassifies one of your independent contractors, you may be liable for back taxes that you should have paid and payroll and income taxes you should have withheld. In some cases, interest and penalties are levied.

Resolving issues

Many not-for-profits are understaffed in 2022, thanks to a labor shortage and pandemic-related budget shortfalls. Some organizations are filling the gaps with freelancers and contractors. However, such decisions can lead to trouble if these workers should really be classified as employees according to the Department of Labor (DOL) or the IRS. To ensure your workers are correctly classified, review the rules.

The DOL and FLSA

The Fair Labor Standards Act (FLSA) doesn’t define the term “independent contractor.” But courts generally have focused on several factors related to the “economic reality” of relationships between employers and workers.

The DOL leans on U.S. Supreme Court rulings for guidance. The Court has repeatedly stated that no single rule or test applies to determine employment status under the FLSA. Rather, the totality of circumstances determines a worker’s status, including how integral the worker’s services are to your operations, the permanency of the relationship and the nature and degree of control you have over the worker. The DOL has identified other factors it deems relevant, including:

• Where the work is performed (remotely or on-site),
• The absence or existence of a formal written employment contract, and
• Whether the work is licensed by the state or local government.

Some states have even more restrictive tests. Moreover, the fact that workers qualify as independent contractors under another federal law doesn’t guarantee they qualify under the FLSA. For example, the IRS applies a different test.

The IRS

Providing your workers with IRS Form 1099, “Miscellaneous Information” instead of Form W-2, “Wage and Tax Statement,” won’t automatically make them independent contractors. When assessing worker classification, the IRS typically looks at a variety of factors, as well as the totality of facts and circumstances. But in general, these factors are important:

Level of behavioral control. The more control you exercise over the worker, the more likely the worker is an employee. The IRS might look at the extent to which you instruct a worker on when, where and how to work, what tools or equipment to use and where to purchase supplies.

Extent of financial control. Contractors are more likely to invest in their own equipment or facilities, incur unreimbursed business expenses, market their services to other clients and be paid with a flat fee. Employees are more likely to be paid hourly, weekly or bimonthly.

Relationship of the parties. Contractors are often engaged for a specific project while employees are typically hired permanently (or for an indefinite period). Also, workers who serve a key business function are more likely to be classified as employees.

Difference in pay, benefits and taxes

If your workers don’t qualify as independent contractors, you must properly treat them as employees:

Pay and benefits. You generally must pay covered, nonexempt employees at least the federal minimum wage of $7.25 an hour. When an employee’s hours within a workweek exceed 40, you must pay at least 1½ times the employee’s regular pay rate. If the DOL reclassifies an independent contractor as an employee, in addition to having to make up the unpaid wages, you may owe workers’ compensation premiums and unpaid leave and other benefits. Fines and penalties are also possible.

Taxes. For employees, you must withhold federal income and payroll taxes, and pay the employer’s share of FICA taxes on the wages, plus FUTA tax. If the IRS reclassifies one of your independent contractors, you may be liable for back taxes that you should have paid and payroll and income taxes you should have withheld. In some cases, interest and penalties are levied.

Resolving issues

If budget shortfalls are preventing you from hiring the staffers you need or you aren’t sure if you’re accurately classifying the workers you have, contact us. We can help your nonprofit resolve financial and compliance issues. You can reach us by calling (904) 396-5400 or emailing Lynn@onlinestewardship.com. 

© 2022

Filed under: General by OSA&C Tuesday, April 5th, 2022
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Many employees have embraced the opportunity to work from home during the pandemic — but not all of them. Some workers have experienced feelings of disconnection and isolation. So if your not-for-profit plans to make remote working a longer-term proposition, you should look for ways to make everyone feel connected to the job and their colleagues.

Make regular contact

Perhaps the most important step is to maintain regular contact through both formal meetings and informal check-ins. Managers should tailor these check-ins to the staffers’ particular needs. Some employees are more comfortable working independently, while others require more coaching and encouragement.

Of course, not all office interaction is business-related. “Watercooler talk” can help cultivate cohesion and teamwork. To provide such opportunities, plan virtual coffee breaks, birthday celebrations or trivia contests. Another idea is to schedule group wellness activities, such as yoga or guided meditation.

Also remember that recognition and rewards can help build a loyal and enthusiastic staff. Some of these programs may have fallen by the wayside when your organization moved to remote work. If so, return to acknowledging and rewarding employee efforts publicly.

Accommodate schedules

Managers and employees need to respect one another’s schedules. For example, meeting times should consider whether attendees are in different time zones. Remember, too, that employees working from home often must juggle family responsibilities such as child or elder care. While it’s reasonable to expect attendance at scheduled meetings, be prepared that people may not be able to drop everything to make themselves available for impromptu meetings.

To avoid burnout, discourage employees from becoming 24/7 workers. Cloud computing and mobile devices make that all too easy. Tell employees that they aren’t expected to work outside regular hours or respond to off-hours emails.

Be a leader

As always, you and your managers must remember that the staff takes cues from those in leadership positions. Their behavior and attitudes reinforce and propel your organizational culture. So set an inspiring example: Demonstrate compassion and empathy in your interactions, communicate clearly, and show flexibility and an openness to ongoing change.

To ensure you know how staffers are feeling and whether they believe their needs are being met while working remotely, conduct occasional surveys. Also communicate often that your (virtual) door is always open should a staffer want to discuss any issues or recommend ideas.

© 2022

Filed under: General by OSA&C Tuesday, March 22nd, 2022
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Your not-for-profit may not be required to undergo regular audits. But an audit can reassure donors and other stakeholders that you take seriously your responsibility. An audit can also help you identify risks before they become intractable problems. Here’s how to initiate and prepare for an audit.

Find and meet with an auditor

Start by drafting a request for proposal (RFP) for prospective auditors. The RFP should describe your organization, its programs, major funding sources and the type of service you need. Once you select an auditor, the firm will provide an engagement letter outlining the scope of services to be performed and assign responsibility for various tasks to your staff or the auditors.

The preaudit meeting with your auditors comes next. Finance staff and management should attend, as well as representatives from your board of directors or audit committee. Those involved will draw up a timeline for the work, and the auditors can answer any questions about the information they’ll need.

During this meeting, inform the auditors of any changes in your nonprofit’s activities since you first met. Also communicate new or eliminated programs, new grant reporting requirements, and changes to internal controls and staff.

Do your part

Collecting and organizing the documentation auditors need before they arrive saves them time and saves you money. Usually auditors will provide a list of documents — such as financial statements, accounting records, physical inventories and investment-related documents — and the date when each item is needed. Auditors also generally need organizational records such as:

• Articles of incorporation,
• Financial policies,
• Exemption letters,
• Board meeting minutes,
• Grant agreements,
• Pledges and other funding documents,
• Contracts, and
• Insurance policies.

You should gather support for footnote disclosures, as well. This includes documentation of significant estimates, pending litigation, restricted contributions and related-party transactions.

Head off issues

Don’t wait for auditors to find problems and ask questions. You can expedite the audit process and reduce costs when you identify and address issues before they’re raised by auditors.

For example, after making year-end closing entries, reconcile all your schedules and workpapers to the trial balance and review for obvious anomalies. Double-check manual journal entries, accrual calculations, entries that require estimates and in-kind donation valuations. Compare actual figures with budgeted ones and be ready to explain any significant variances.

No mandate?

Some nonprofits are required to conduct audits due to their large size (generally if they expend more than $750,000 a year). Grantmakers, banks and some states and municipalities may also require audited financial statements. But consider conducting regular audits, even if no mandate applies. Contact our parent company, Patrick & Raines CPAs, for more information. You can reach the assurance team at P&R by calling (904) 396-5400 or emailing Lynn@onlinestewardship.com or office@CPAsite.com.

© 2022

Filed under: General by OSA&C Tuesday, March 8th, 2022
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Most not-for-profits encourage donors to make unrestricted contributions that will give the organization flexibility to use the money where it’s needed most. But there will always be some donors who place restrictions on their gifts — and these require a higher level of responsibility.

If your nonprofit fails to use a restricted donation as intended, it’s possible the donor will request its return, potentially resorting to legal means. Even worse, other donors may hear about the situation and decide your organization doesn’t deserve their support. So you need to handle restricted gifts with kid gloves.

Accountability is key

Proper tracking of restricted donations is a vital part of the accountability and transparency your supporters expect. There’s no one-size-fits-all approach for tracking restricted contributions. You need to develop and consistently apply well-defined procedures that suit your circumstances.

However, in general, nonprofits should train employees to properly identify and label incoming restricted contributions. They need to understand how to deliver paperwork to the appropriate staffers to document the restriction and how it will be fulfilled.

Tracking expenditures and outcomes

Your nonprofit should also record all expenditures allocated to a restricted contribution. Do this in a simple spreadsheet or track restricted contributions as individual funds in the general ledger. To minimize the risk of errors, implement a process for regular review to confirm the proper use of restricted funds and — in the event of inadvertent misuse — prompt remediation. Additionally, put in place a “tickler” system to remind you of any donor-imposed reporting requirements.

Finally, track the outcomes of such spending. The ability to demonstrate everything that a contribution accomplished can prove powerful in soliciting more contributions from the original donor and others concerned about the outcomes of their gift-giving.

When it makes sense to refuse an offer

If a donor wishes to make a gift with particularly onerous restrictions — such as retaining control of an asset or preventing you from selling it — you might consider refusing it. Simply put: Some gifts are more trouble than they’re worth. Contact our parent company, Patrick & Raines CPAs, for help weighing the potential risks of a restricted gift and for tips on tracking those you do accept. You can reach the assurance team at P&R by calling (904) 396-5400 or emailing Lynn@onlinestewardship.com or office@CPAsite.com.

© 2022

Filed under: General by OSA&C Tuesday, February 15th, 2022
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