The latest view on not-for-profit accounting issues

What is the Difference Between Donor-Advised Funds and Restricted Donations?

Donors advising on the use of their donation sounds relatively the same as donors restricting the use of their donation, doesn’t it? These are actually very different concepts. Donor advised funds are separately identified accounts that are maintained by a public charity. After the donor makes an unrestricted donation to the donor advised fund/account, the …

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IRS Creates1023-EZ Streamlined Application for Tax Exempt Status

For an organization to be recognized as a 501(c)(3) tax exempt organization, it is generally required to submit Form 1023 to the IRS. Form 1023 is a 28 page, time intensive form that may be difficult to complete for many smaller nonprofits. As a result the IRS is currently in the process of creating Form …

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Properly Identifying and Reporting Federal Funding

If your entity utilizes grant funding, it is important to identify if that funding is obtained from the federal government, whether by direct funding or a pass-through agency. Per Circular A-133 section 300, the grantee is responsible for identifying federal awards that must be reported on a supplementary statement to the financial statements: the Schedule …

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Determining Unrelated Business Income

In order to address cash flow problems, many not-for-profit organizations seek additional revenue streams in order to continue to carry out their missions.  But not-for-profit organizations should be aware of whether or not their activities are related to their organization’s exempt purpose. When activities are considered unrelated to the organization’s exempt purpose, the revenue earned …

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Self Dealing in Private Foundations

Those involved in governance of private foundations need to be careful about certain types of transactions, or they can find themselves facing substantial excise taxes that are required to be paid directly by the individuals involved. The IRS defines certain types of transactions as “self-dealing” when they are carried out between the foundation and “disqualified …

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Tips for Good Governance of a Not-for-Profit Organization

I was recently reading an article in the September issue of the Journal of Accountancy that highlighted tips for good not-for-profit governance that were presented at this year’s AICPA Not-for-profit Industry Conference.  It was such a concise, solid list that I thought I’d share it with our blog readers: 1. State the organization’s values in a …

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10 Things to Know When You Have a PAC (Political Organization)

Here are ten important things to know when you have a political organization (PAC): (1) The IRS requires that a PAC have its own taxpayer ID # which can easily be obtained at the IRS website by completing form SS-4. (2) When a political organization is first formed, it must give notice electronically to the IRS that …

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Allocating Expenses – Make the Process Easier

Expenses are reported in two different ways on the 990 return: by their natural classification (salaries, depreciation, travel, etc.) and by their functional classification (program, administrative, fundraising).  Correct functional allocation of expenses is important because some donors may scrutinize the percentage of program costs vs. administrative and fundraising costs while making a decision to donate …

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The Importance of A Conflict of Interest Policy

Conflict of Interest policies for board members are a much needed piece for any not-for-profit organization.  A conflict of interest policy will help board members recognize when their activities are related party transactions and should have different treatment.  These treatments include processes for decision making and disclosures to the financial statements.  When a board member …

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