Conflict of Interest Policy: Financial Statements & Form 990

Posted on May 26 2015 by admin

On page 6 of the Form 990, the IRS asks the nonprofit organization if they have a written conflict of interest policy, if annual disclosure is required, and if the organization regularly monitors and enforces compliance with the policy. Often times when I ask the above question of my 990 clients, I get a response along the lines of, “is it required?” The answer is no, it is not required. However, it is a best practice for the organization.

The IRS asks this question to help them determine if the organization has proper oversight of funds that are received from the public. Board members have a duty of loyalty and should put their personal interest aside when making decisions on behalf of the organization. Having and maintaining a written conflict of interest policy and requiring annual disclosure will help protect the organization from any possible hidden motives that board members may have while making decisions on behalf of the organization. It will also help board members recognize when they have a personal interest and should handle any transactions differently.

It is acceptable to have conflicts of interest with a board member, but you must make them transparent so that the organization can handle the situation properly. For example, the organization may need to outsource a printing job and one of the board members may own a printing company. The organization should price shop other vendors to ensure they are making the best decision for the organization, and the owner of the printing company should not be allowed to vote on the decision due to the conflict of interest. Then if the rest of the board decides to use the board member’s printing company for the job, they must disclose the transaction on Schedule L of the Form 990 (and as a related party transaction in the financial statement footnotes if the organization has audited financial statements). As explained in the example above, implementing a conflict of interest policy at one’s organization can help to assist the board and maintain best practices at your organization.

By Michelle Housman

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How to Properly Record Petty Cash

Posted on May 19 2015 by admin

Many companies reserve a small amount of cash in a petty cash fund to cover minute, miscellaneous expenses. The petty cash fund is typically replenished at month end or when the balance drops to a pre-determined level, i.e. $50.

The organization should select one employee to be responsible for the petty cash fund. This person will be required to review and keep track of receipts, maintain the petty cash register, and request reimbursement using a petty cash voucher. To replenish the petty cash fund, the employee should send a petty cash voucher and receipts to accounting for their review and proper approval. Accounting will then issue a check to the employee responsible for the petty cash fund to be cashed and make the corresponding journal entries.

For example, ABC123 Nonprofit decided to create a petty cash fund to cover miscellaneous expenses for the receptionists working at the front desk. Front Office Manager, Marco Polo, has been given the responsibility of maintaining the petty cash fund for the receptionists. To establish a petty cash fund, the company’s accountant made the following entry:

NP 1


During the month of June, Marco used some of the petty cash funds to cover the costs of stationery, business cards, and a farewell card for a receptionist. He kept the receipts and petty cash in a locked box and recorded any transactions made during the month to a petty cash register. The petty cash balance as of June 30, 20xx, was $48.79. Marco completed a petty cash voucher and attached the receipts for accounting’s review. Once the reimbursement was approved, the accountant made the following entry:

NP 2


To replenish the petty cash funds to its stated balance of $150, the accountant issued a check in the amount of $101.21 to “Office Manager, Petty Cash Custodian” and made the following entry on June 30, 20xx:

NP 3

The accountant also signed the request and kept the supporting documentation of how the funds were spent with the check voucher.

By Kristian Haralson

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Touchdown or Fumble? NFL Gives Up Tax Exempt Status

Posted on May 12 2015 by admin

In March, the ownership of the National Football League (NFL) voted to give up their tax exempt status and become a taxable entity. The majority of the income generated by the league is from television rights fees, licensing agreements, sponsorships, and tickets sales, which are generated by the 32 individual teams and already taxed. The move will cost the NFL an estimated $109 million over the next ten years. Keeping the tax exempt status to save $109 million was viewed as a “distraction” by league commissioner Roger Goodell after the league generated $10 billion in revenues in 2013 alone.

Many Congressmen have been pushing recently to remove the tax exempt status of all pro sports leagues. In recent dealing with the NFL, Congress has used the tax exempt status as leverage against the NFL with issues regarding domestic violence and concussion protocol. Many view the move by the league as an effort to separate the NFL from the dealings of Congress and to take away the small amount of ammunition that Congress held. In the past, the NFL would have been required to file a public return that discloses the salary and benefit information for Roger Goodell as well as other officers, key employees, and highly compensated employees. Going forward, this information will not be made public. It should be noted that the NFL is not the first sports organization to give up their tax exempt status. Major League Baseball gave up their tax exempt status in 2007 while the National Basketball League has never held the non-profit distinction. The PGA and LPGA still hold their tax-exempt status.

By David Woods

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Arizona Gives Day Results

Posted on May 5 2015 by admin

Arizona Gives Day, the annual one-day online giving campaign, was hosted by the Alliance of Arizona Nonprofits and the Arizona Grantmakers Forum for the third year on April 7. The first Arizona Gives Day event began in 2013 in order to rekindle the funding that typically slows after the holidays. In 2013, Arizona Gives Day raised over $1M. This increased to about $1.5M in 2014, and a new record was set this month with just over $2M raised for nonprofit organizations across Arizona.

Providing both large and small donors a chance to come together and see the impact of their collaborative giving, the website at shows results by most dollars raised for small, mid-sized, and large nonprofits, as well as by most donors.

By Paul Biggs

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Henry & Horne, LLP Team Members Garden for Community Service at the Growhouse

Posted on April 28 2015 by admin

This past Sunday employees and family members from Henry & Horne, LLP volunteered at the Growhouse in downtown Phoenix. We split into teams to accomplish a few tasks while we were there. One team prepped a garden bed and planted squash. Another team pulled weeds and helped clean up the grounds at the Growhouse. The staff was super friendly and informative! We were given a tour of the grounds and a fascinating story of the history behind the Growhouse.

The Growhouse is a volunteer driven community garden and creative space located on the northwest corner of Garfield and 6th street in downtown Phoenix. Living on what was formerly a blighted, vacant property downtown, the now thriving garden sells veggies every week at the Community Exchange Table at the Downtown Phoenix Public Market and to nearby cafes. It is now part of the Roosevelt Row CDC’s A.R.T.S. (Adaptive Reuse of Temporary Space) Program to activate vacant lots downtown.

If you want to get involved and give back to the community, the Growhouse holds a garden volunteer day every Sunday at 10am. You don’t even have to sign up, just show up, learn about gardening and have fun!

By Michelle Housman


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Contributions Not Reported on the Form 990

Posted on April 21 2015 by admin

There are quite a few differences between GAAP accounting and the rules for reporting on the Form 990. I was recently reviewing the rules on reporting contributions on the 990 and thought I would share a few that are often overlooked.

Contributions that are not reported on the Form 990:

  • Unreimbursed expenses of officers, employees, or volunteers
  • Donation of services
  • Advertising space
  • Broadcasting airtime (including public service announcements)
  • Discounts on services
  • Donations of use of materials, equipment, or facilities

You can however report these donations in the narrative description of the appropriate program service. Although this information is not required to be reported including it in the program description will give a better understanding to a potential or current donor of how a program is being operated and supported.

If you have any of these types of contributions, be sure to let your tax preparer know.

By Kristin Cullen, CPA

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Recognition and Measurement of Debt and Equity Securities

Posted on April 14 2015 by admin

Many not-for-profit organizations receive donations in the form of assets other than cash. Therefore, it’s important to know the proper way to report these donations on your financial statements.

Donated investment assets (such as stock) should initially be recorded at fair value. As long as the securities are an asset of the organization, the value should be adjusted each year based on the change in the market and reported at fair value on your statement of financial position at year end.

Determining the fair value of investments, however, can be tricky if those investments are not traded on an open market. Fair value is defined by the Financial Accounting Standards Board (FASB) as “the price that would be received to sell the asset in an orderly transaction between market participants at the measurement date.” (FASB ASC 958-320-20)

There are situations where it is not simple to determine the price that would be received for an asset. In some cases, it may be necessary to utilize an actuary to determine the value of your investments. In all valuation situations, there are two factors that must be considered: the market and the buyer. Accounting standards clearly define in the factors of determining the value that you must determine the price that would be received in the most advantageous market under current market conditions. In addition, you need to consider the price a market participant would pay acting in their economic best interest.

Having investments is advantageous for any organization because generally, the organization will receive a return not otherwise received when holding cash. In all cases, it’s important to understand how to value your investments to properly report them on your statements.

By Samantha E. Mahlen, CPA

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Conditional vs Unconditional Promises to Give

Posted on April 7 2015 by admin

By definition, conditional promises to give are donor promises to contribute assets to an organization, assuming a specified future or uncertain event occurs. A condition is not the same as donor-imposed restrictions, but should be considered as a barrier that must be overcome to be considered a contribution. Until the condition is met, the organization does not have an unconditional right to the promised assets. Since the donor is not bound to the promise until the future events occur, the organization should not recognize the conditional promise to give unless the condition is met or is explicitly waived by the donor. Should the condition not be met by the organization (or explicitly waived), the donor has the right of return of any transferred assets and is released from any obligation to transfer promised assets.

For example, in February, Dwayne Johnson promises to give $120,000 paid in equal installments over 12 months to a local theatre, assuming the theatre obtains 120,000 likes on Facebook within 3 months. The theatre will not recognize the conditional promise to give unless they reach 120,000 likes on Facebook within the 3 month timeframe. After 2 months, the theatre was able to meet the condition and recognized the promise to give as $120,000 in March (the month that the condition was met). Dwayne accordingly paid $10,000 every month for a year to the local theatre.

Some promises to give can be considered part conditional and part unconditional. If this occurs, the promises should be accounted for and treated separately.

For example, Henry Horne promises a high school basketball team that he will pay $10,000 on October 10th, 2015, and an additional $200 for each basketball game that the team wins during the 2015/2016 season. The high school has received an unconditional promise to give $10,000, which it would recognize at the time the promise was made by Henry, and a conditional promise to give, for which it would recognize a contribution of $200 each time the basketball team won a game during the 2015/2016 season.

The following factors may help an organization determine if the promise to give is considered conditional: (Please note these factors are not conclusive.

  1. The promise has an explicit matching requirement.
  2. The promise states that specific outcomes must be achieved.
  3. The promise requires that amounts not expended by a certain date must be returned to the donor.
  4. The promise includes words such as “if,” “subject to,” “provided that,” or “when.”
  5. Neither the timing nor the amount of the promise is clearly determinable in advance of the payment.

By Kristian Haralson

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Arizona Gives Day is Next Week!

Posted on March 31 2015 by admin

For the third year in a row, Arizona Gives Day is approaching April 7, 2015. AGD, which is a collaboration between the Alliance of Arizona Nonprofits and the Arizona Grantmakers Forum, is a 24-hour online giving campaign meant to unite and connect Arizona residents with the not-for-profit community.

Below are highlights from the inaugural Arizona Gives Day campaign (from

  • 8,584 donors made 11,176 donations on March 20, 2013.
  • The campaign raised more than $1 million in March 2013.
  • 807 nonprofits signed up for the 2013 campaign; 80% of those organizations received one or more donations.
  • Nonprofits raised a median of $395; 25% of nonprofits raised $1,000 or more in one day.
  • In a follow-up survey of nonprofits conducted by Arizona Gives Day, 75% of organizations that raised money said they received donations they would not otherwise have received and 77% said they had attracted new donors.
  • 33% of organizations registered were small nonprofits (budgets under $250,000 per year).
  • Nearly 300 print and broadcast placements statewide, with the Phoenix area alone generating more than 7 million impressions.
  • Tucson donors gave almost as many dollars as Phoenix donors – more than twice per capita.

Nonprofits were required to register to participate in AGD back in February 2015, so now it’s time for individuals to get involved. You can log on to on April 7th to make a donation. Prior to next Tuesday, you can log on to research and learn more about participating nonprofits.

By Jessica Puckett Moulder

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How to Report a Name Change to the IRS

Posted on March 24 2015 by admin

If your nonprofit has changed its name, the name change needs to be reported to the IRS. This can be done on your next Form 990. Here are the requirements for reporting this properly:

  • File your next Form 990 by paper (as opposed to electronically).
  • On page 1 of the Form 990, check the box at the top for “name change”.
  • Attach your amended Articles of Incorporation (amended for the name change) to the Form 990.
  • Also attach a certified copy of proof of filing the amended Articles with the State.

By Colette Kamps, CPA

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