Make fundraising a year-round commitment | quickbooks consulting in baltimore md | Weyrich, Cronin & Sorra

Make fundraising a year-round commitment

If your not-for-profit focuses all of its fundraising energy on the holiday season and end of the year, it’s not misguided. After all, 26% of charitable giving to nonprofits occurs in December, according to the 2023 M+R Benchmarks Study. But that means almost three quarters of annual donations need to be obtained during the rest of the year. Even if your December haul is much greater, you still risk experiencing cash shortfalls.

The best way to make fundraising an ongoing process with strategies you can use any time of the year is to build a fundraising plan.

It takes a team

The first step to a solid fundraising plan is to form a fundraising committee. This should consist of board members, your executive director and other key staffers. You may also want to include major donors and active community members.

Committee members need to start by reviewing past fundraising sources and approaches and weighing the advantages and disadvantages of each. Even if your overall fundraising efforts have been less than successful, some sources and approaches may still be worth keeping. Next, brainstorm new donation sources and methods and select those with the greatest fundraising potential.

As part of your plan, outline the roles you expect board members to play in fundraising efforts. For example, in addition to making their own donations, they can be crucial links to corporate and individual supporters.

A flexible plan

Once the committee has developed a plan for where to seek funds and how to ask for them, it’s time to create a fundraising budget that includes operating expenses, staff costs and volunteer projections. After the plan and budget have board approval, develop an action plan for achieving each objective and assign tasks to specific individuals.

Most important, once you’ve set your plan in motion, don’t let it sit on the shelf. Regularly evaluate the plan and be ready to adapt it to organizational changes and unexpected situations. Although you’ll want to give new fundraising initiatives time to succeed, don’t be afraid to cut your losses if it’s obvious an approach isn’t working.

Get going now

Perhaps you’re gearing up for your year-end campaign (most nonprofits start planning in September or October). That doesn’t mean you should wait until the new year to build a more comprehensive fundraising plan. Your organization’s cash flow depends on steady income, so the sooner you put a plan in place, the better. Contact us for more information.

© 2023

 

Cut taxes by reimbursing expenses with an accountable plan | quickbooks consultant in baltimore county md | Weyrich, Cronin & Sorra

Cut taxes by reimbursing expenses with an accountable plan

If you’re looking for another way to attract and retain staffers that won’t bust your nonprofit’s budget, consider offering an accountable plan. It’s an easy and low-cost way to reimburse employees for out-of-pocket expenses free from income and employment taxes. Let’s take a look.

Reasonable reimbursements

Accountable plan reimbursement payments aren’t subject to income or employment taxes. That’s a big bonus for employees who, for example, travel frequently for work or often pay for work-related supplies out of their own pocket. Your organization can also benefit because 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 are “reasonable.” In addition:

  • You can’t reimburse employees more than they paid for any business expense,
  • Employees must account for their expenses, and
  • If an expense allowance was provided, employees must return any excess allowance within a reasonable time period.

Examples of expenses that might qualify for tax-free reimbursements through an accountable plan include tools and equipment, home office supplies, dues and subscriptions. Certain meal, travel and transportation expenses also qualify.

Establishing a plan

How do you establish an accountable plan? Although your plan isn’t required to be in writing, formally documenting it will make proving its validity to the IRS easier if it’s ever challenged.

When administering your plan, you’re responsible for keeping reimbursement or expense payments 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. This includes documentation of the amount of the expense and the date; place of the travel, meal or transportation; the business purpose; and the relationship of the participants to your organization. You also should require employees to submit receipts for expenses of $75 or more and for all lodging unless your nonprofit uses a per diem plan.

Potential drawbacks

There are potential drawbacks to offering an accountable plan — for instance, increased administration time and costs. Contact us to discuss the pros and cons.

© 2023

 

Why nonprofits should be transparent about compensation | quickbooks consultant in baltimore md | Weyrich, Cronin & Sorra

Why nonprofits should be transparent about compensation

More and more U.S. workers are calling for “pay transparency,” and not-for-profit employers need to listen — and act. Pay transparency is the idea that employers should openly share their compensation policies and practices with job candidates, current employees and the public. Many states and cities have already passed pay transparency laws. But even if you aren’t subject to such laws, consider disclosing pay ranges for specific positions and explaining how your organization calculates wages, raises and bonuses.

Employers and employees are on board

In its 2023 Compensation Best Practices Report, software and data company Payscale reported that 45% of employers now include pay ranges in their job postings. What’s more, 48% of organizations said that legislation is driving them to change compensation policies. In a different Payscale report, a majority of employers stated that compensation transparency, when analyzed in isolation, “decreases [worker] intent to quit by 30%.”

Surveys of employees, particularly younger workers, underline how important transparency is today. In a 2023 report, technology services company Symplicity revealed that 87% of Generation Z respondents thought that pay transparency was “important” or “very important,” and over half said they’d be discouraged from applying for a position if a salary range wasn’t publicized.

Providing rationalizations

But simply divulging compensation ranges in job listings isn’t enough. Your nonprofit also needs to clearly explain to job candidates how you determine pay and why the compensation you provide is competitive with that of other nonprofits (and, possibly, with what similar for-profit employers are offering).

Also explain what staffers need to do to receive raises — and what kinds of raises are realistic. Be as specific as possible and make sure you discuss the possibility of salary increases and job promotions with employees during their performance evaluations.

Comply or adopt voluntarily

If your state or municipality has passed laws regarding pay transparency, review your employment policies to ensure they’re in compliance. If no law applies, consider adopting these practices voluntarily. Pay policy disclosure can help you recruit serious job candidates in what remains a tight labor market. It can also help foster the kind of trusting and equitable work culture that most nonprofits strive to achieve.

If you’re unsure about how to set salary ranges, contact us. We can analyze internal and external data to determine your nonprofit’s ideal compensation targets.

© 2023

 

Nonprofits: Outsourcing HR could save time and money | business consulting services in elkton md | Weyrich Cronin & Sorra

Nonprofits: Outsourcing HR could save time and money

Employers that outsource HR are no longer outliers. Approximately one-third of U.S. employers outsource at least one HR function, according to software company ZipDo. And for good reason: Many HR responsibilities, such as benefits administration and recruiting, have recently become more complex and specialized. If your nonprofit’s HR staff is still trying to do everything in-house, you may want to consider handing over some duties to outside professionals.

Potential savings and other benefits

First, decide which HR functions you would farm out — for example payroll; benefits planning and administration; leave management; recruiting; worker training; performance reviews; and diversity, equity and inclusion (DEI). These are all labor-intensive responsibilities where expertise counts. Transferring all or some of them to the right outside party could vault your organization to a higher level of professionalism and efficiency.

Next, gauge potential savings and other benefits. Even if the cost to outsource is more, you may decide that the extra dollars are worth freeing up staff hours for other initiatives. Also assess the drawbacks to outsourcing. Certain tasks may require an understanding of your organization’s culture and history to be effective. Plus, you need think about the impact of terminating HR people currently on staff.

Vetting vendors

Be sure you get buy-in from your management team and board of directors before you decide to vet HR vendors. When you start screening providers, ask questions about the scope of their service, how long they’ve been in business and how many nonprofit clients they have in your sector and of a comparable size.

Before choosing a vendor, make sure you understand what and how it charges — for example, by the hour or on retainer. And be clear about whether services will be provided on-site, off-site or in a combination of the two. It’s also important to set mutual expectations, including what the provider will depend on your staff and board to do. Once you’ve selected a vendor, ask your attorney to review the contract before you sign it.

Stretched too thin?

If you’re still undecided, here’s a sobering statistic that you might consider: The Society for Human Resource Management has found that nearly 75% of HR professionals feel their department is stretched too thin. Even if you don’t think outsourcing is the right choice for now, be sure to talk to your HR manager about workload issues. Unhappy HR staffers can affect your entire organization’s morale and your nonprofit’s ability to serve clients.

© 2023

 

Nonprofits: Special events call for tax planning | quickbooks consultant in harford county md | Weyrich, Cronin & Sorra

Nonprofits: Special events call for tax planning

Tax reporting may be the last thing on your mind when planning a special fundraising event. But your not-for-profit should carefully track revenues and expenses and retain related documentation now to facilitate the reporting process later. Pay attention to the following issues.

What to report

Tax reporting for an event may require different — and more — information than financial statement reporting does. If your organization adheres to Generally Accepted Accounting Principles (GAAP), you usually must report revenue and expenses related to special events on your financial statements as special event revenue. For tax purposes, though, your organization may be able to report some of the event ticket revenue as contributions. For example, if attendees pay more for a ticket to a dinner than the dinner’s fair market value (FMV), the excess would be a contribution.

Tax reporting can require more granular information, too. You report special event data on IRS Form 990, “Return of Organization Exempt from Income Tax.” If you’re reporting more than $15,000 in fundraising event gross income and contributions, you also need to complete Schedule G, “Supplemental Information Regarding Fundraising or Gaming Activities.”

Schedule G requires you to report amounts for cash prizes, noncash prizes, facilities rental, food and beverages, and entertainment. If your event includes gaming, you’ll have to answer a series of multi-part questions on Schedule G, too. In addition, you’ll need to allocate income and expenses between the gaming and fundraising event on Form 990.

How to handle donations and donors

Nonprofits often rely on donated services or facilities, as well as the work of volunteers. Although GAAP generally requires nonprofits to record such in-kind contributions and sometimes the value of volunteer time, the IRS doesn’t include them in contributions or expenses. Goods donated for an event, on the other hand, are reported as contribution revenue and, when used, as expenses.

Be sure to provide donors with information about the tax benefits they receive from participating in a special event. They might not be aware that their deductible contributions are reduced by the FMV of the benefit they receive. It’s generally up to you to report the value donors receive in a written statement, reminding them to deduct only the excess of their payment over the FMV. Specifically, you must provide the disclosure for payments of more than $75. Note that it’s the initial payment amount that triggers the obligation — not the amount of the deductible portion. Failure to make the disclosure can result in a penalty of $10 per contribution, up to $5,000 per fundraising event.

Even if it’s not legally required, you should routinely provide special event participants with a statement of the benefits they receive. You’ll make it easier for them at tax time, which could result in the kind of goodwill that leads to future support.

When to start organizing

Although it may seem like more work, planning for tax reporting while you’re still in the early stages of your event preparation will pay dividends later. If you need help collecting data or complying with IRS rules, contact us.

© 2023

 

How to get the attention of high-net-worth philanthropists | tax preparation in baltimore md | Weyrich, Cronin & Sorra

How to get the attention of high-net-worth philanthropists

Even if your not-for-profit’s fundraising results have been lackluster recently, one high-net-worth donor can turn your year around and make it a fundraising success. The question is: How do you find ultra-wealthy individuals with philanthropic intentions?

Who they are

A 2022 BNY Mellon study found that most individuals with at least $5 million in assets under professional management work with wealth management advisors on their charitable giving strategy. But 32% of these individuals have worked directly with charities. Ultra-high-net-worth (UHNW) individuals (defined as those with at least $30 million in assets) were responsible for making $85 billion in charitable donations in 2020 alone, according to a 2022 report by data analytics company Wealth-X.

Most UHNW donors are men, but the rate of women making large gifts is increasing as more women found successful businesses and benefit from intergenerational wealth transfers. In North America, the average UHNW philanthropist is age 68, and almost 75% of these donors are “self-made,” or haven’t inherited their wealth, according to the Wealth-X study.

The study also found that educational institutions receive the greatest percentage of gifts from UHNW donors, but arts and culture, social services, and healthcare and medical research organizations are also popular with this demographic. Some UHNW philanthropists helm private foundations (which must spend at least 5% of their net investment assets annually), but many, particularly younger, self-made donors, don’t.

Building relationships

One of your nonprofit’s best ways to reach wealthy donors is to build relationships with their financial advisors. These include estate planners as well as advisors to donor-advised funds (DAFs), family offices and private foundations. Work to customize your communications to this audience — for example, provide them with financially sophisticated materials and deploy your charity’s most knowledgeable staffers to meet with them.

DAFs are the fastest growing charitable giving vehicles in the United States. Due to a lack of regulatory rules about minimum payouts, many are sitting on hefty cash cushions. But public pressure and potential legislation might force DAF owners to step up their charitable donations in the near future.

To attract the attention of DAFs, include in your marketing and fundraising materials ways they can support your organization. If you know the names of DAF owners (Fidelity Charitable says 97% of its DAF grants release the donor’s name), try to engage them directly. Many big donors want to be personally involved in the charities they support. You might invite them to tour your facility, meet with board members or observe one of your programs in action.

Don’t neglect them

Although small donors are likely critical to your continued success, you simply can’t afford to ignore high-net-worth philanthropists. Make sure your collateral addresses these potential donors and that your development team is capable of making a case to them and their advisors. Contact us for more information.

© 2023

 

Commit to continually improve your nonprofit’s accounting processes | tax preparation in harford county md | Weyrich, Cronin & Sorra

Commit to continually improve your nonprofit’s accounting processes

Do your not-for-profit’s accounting processes work perfectly — with no errors, delays or other inefficiencies? If yours is like most organizations, probably not. But if your nonprofit is committed to improvement, you have an edge over those that accept the status quo. Whether it’s building budgets, paying invoices or preparing financial statements, there’s almost always something that can work better, faster and less expensively.

Prioritize certain functions

Certain financial functions deserve greater attention than others. For example, it’s essential that individuals or groups responsible for your organization’s financial oversight (such as your CEO or board finance committee) promptly review monthly bank statements and financial statements. They should look for obvious errors or unexpected amounts. If your nonprofit doesn’t handle this task efficiently, ascertain the reason and find a solution. It could be one person who doesn’t understand his or her role or a systemic problem with multiple points of failure.

Another important area is paying invoices. Make sure your policies and procedures prioritize a monthly cutoff. For instance, require all invoices to be submitted to the accounting department within one week after the end of each month. Too many adjustments — or waiting for employees or departments to weigh in — can waste time and delay the completion of your financial statements.

You also may be able to save days at the end of the year by reconciling your balance sheet accounts each month. It’s a lot easier to correct errors when you catch them early. Also, be sure your organization is reconciling accounts payable and accounts receivable subsidiary ledgers to your statements of financial position.

Let software work for you

Many organizations underuse the accounting software package they’ve purchased because they haven’t invested the time to learn its full functionality. If needed, hire a trainer to review the software’s basic functions and teach time-saving tricks and shortcuts to staffers. If you find your software is outdated or simply doesn’t meet your nonprofit’s needs, prioritize its replacement.

With the right software, you should be able to standardize financial reports with no modification. This not only will reduce input errors but also provide helpful financial information at any point, not just at month end. And consider performing standard journal entries and payroll allocations automatically within your accounting software. Many systems have the ability to automate, for example, payroll allocations to various programs or vacation accrual reports. But review any estimates against actual figures periodically, and always adjust to actual amounts before closing your books at year end.

Find inefficiencies — and fix them

This is only the tip of the iceberg. Depending on your nonprofit’s size, programming and other characteristics, you may have other accounting functions that don’t work as well as they could. We can advise on specific problems or even conduct an organization-wide audit to find — and fix — multiple inefficiencies.

© 2023

 

Are your nonprofit’s interim and year-end financial statements at odds? | accounting firm in elkton md | Weyrich, Cronin & Sorra

Are your nonprofit’s interim and year-end financial statements at odds?

Using the cash basis of accounting may make sense for your not-for-profit organization — at least at this stage. Many smaller nonprofits use the cash basis to prepare their financial statements because it’s generally quick, easy and intuitive and can alert them to current cash flow challenges. However, there’s a potential problem with cash basis accounting: It can require year-end adjustments. Let’s look at the issue.

Easy and intuitive method

Under cash basis accounting, income is recognized when you receive payments and expenses are recognized when you pay them. The cash “ins” and “outs” are totaled, generally by accounting software, to produce the internal financial statements and trial balance you use to prepare periodic statements.

The simplicity of this accounting method comes at a price, however: Accounts receivable (income you’re owed but haven’t yet received, such as pledges) and accounts payable and accrued expenses (expenses you’ve incurred but haven’t yet paid) don’t exist.

The result is that if your nonprofit periodically prepares internal financial statements for your board, your auditors may propose adjustments to these interim statements at year end. Why do auditors do this? Generally, it’s to reflect differences due to cash basis vs. accrual basis financial statements.

A truer picture

With accrual accounting, accounts receivable, accounts payable and other accrued expenses are recognized when they occur, allowing your financial statements to be a truer picture of your organization at any point in time. If a donor pledges money, you recognize it when it’s pledged rather than waiting until you receive the money — which could be next month or even next year.

Generally Accepted Accounting Principles (GAAP) require the use of accrual accounting and recognition of contributions as income when promised. Often, year-end audited financial statements are prepared on a GAAP basis. Larger nonprofits and charities with diverse funding sources typically use accrual accounting. Also, some charities are required by their funders to use it.

Note that internal and year-end statements can differ for reasons other than accounting method. For example, auditors may propose adjusting certain entries if, for example, your organization is party to a lawsuit for which there’s a reasonable estimate of the amount to be received or paid.

Minimize disparities

Disparities between monthly or quarterly and year-end financial statements can be confusing and inconvenient. Regardless of your accounting method, you can reduce such occurrences by using software suited to your nonprofit’s specific needs. Contact us for software recommendations and help with accounting estimates.

© 2023

 

Should you reassess your nonprofit’s office space? | cpa in cecil county md | Weyrich, Cronin & Sorra

Should you reassess your nonprofit’s office space?

Since the original COVID-19 lockdowns, many not-for-profits have allowed their staffers to work from home — or work a hybrid schedule that puts them onsite only part time. This can leave a lot of office space unused. Depending on your nonprofit’s current lease, it may be more cost-effective to downsize or seriously consider other options.

Relocate work

As many organizations learned during the pandemic, when equipped with reliable Wi-Fi, quality devices and necessary software, employees in a variety of roles can perform their jobs from home. If many of your employees are working at least part-time from home, a smaller office space could be to your advantage.

A move to a more desirable location, might make sense. Consider where your clients, staffers and volunteers live. Do those who spend time in your office have long commutes? Does your current space offer the amenities you need and want? Is it cheaper to relocate to a less expensive building or geographic area? In many regions, high vacancy rates are driving down commercial rents, and you may now be able to afford a better space — particularly if you’re looking for an office with a smaller footprint.

But you may wonder how downsizing would affect productivity if all or most of your employees and volunteers ever need to use the office at the same time. For example, a natural disaster could lead to a sudden surge in demand for your nonprofit’s services. Even if a surge is a possibility, it’s a good idea to at least look at how your organization is using the space it leases and how it might use it better.

Renegotiate your current lease

One of your best opportunities in today’s environment may be to strike a better deal with your current building’s owner. Read your lease carefully and find out whether any of the owner’s other tenants have successfully negotiated better lease terms. Also check out the occupancy rate for similar properties in your area to get a feel for how eager the owner might be to keep you as a tenant.

If property owners in your area are struggling to keep tenants, consider requesting an amended lease with a reduced rent and no strings attached. Or you might agree to extend your lease, but with reduced rent. Another option is to pay the contracted rent if the owner agrees to foot some or all of the bill for improvements to the space. Finally, the owner may allow you to sublease some of your space (if this isn’t already an option).

Reduce expenses

Leasing office (or other facility) space is likely one of the biggest line items in your nonprofit’s budget. Now is a great time to see if you can reduce this expense, or at least get more for your money. Contact us for help finding other rental cost efficiencies.

© 2023

 

Nonprofits and insurance: Getting it just right | accounting firm in cecil county md | Weyrich, Cronin & Sorra

Nonprofits and insurance: Getting it just right

Whether you’re starting up a not-for-profit organization or your nonprofit has existed for years, you may have questions about insurance. For starters: What kind do you need? How much? Are you required by your state or by grantmakers to carry certain coverage?

Much depends on your organization’s size, scope and programming. But your goal should be to carry what’s required to meet any regulatory or funding mandates and to address legitimate risks. Although there are many types of insurance available to nonprofits, it’s unlikely you need all of them.

The essentials

One type of insurance you do need is a general liability policy for accidents and injuries suffered on your property by clients, volunteers, suppliers, visitors and anyone other than employees. Your state also likely mandates unemployment insurance as well as workers’ compensation coverage.

Property insurance that covers theft and damage to your buildings, furniture, fixtures, supplies and other physical assets is essential, too. When buying a property insurance policy, make sure it covers the replacement cost of assets, rather than their current market value (which is likely to be much lower).

Depending on your nonprofit’s operations and assets, you might want to consider such optional policies as automobile, product liability, fraud/employee dishonesty, business interruption, umbrella coverage, and directors and officers liability. Insurance also is available to cover risks associated with special events. Before purchasing a separate policy, however, check whether your nonprofit’s general liability insurance extends to special events.

Biggest threats

Because you’re likely to be working with a limited budget, prioritize the risks that pose the greatest threats. Then discuss with your financial and insurance advisors the kinds — and amounts — of coverage that will mitigate those risks.

Be careful you don’t assume insurance alone will address your nonprofit’s exposure. Your objective should be to never actually need insurance benefits. To that end, put in place internal controls and other risk-avoidance policies such as new employee orientations and ongoing training.

Don’t go overboard

Some organizations buy more insurance coverage than they need, which can be costly. So make sure you’ve thoroughly analyzed your nonprofit’s risks and buy only what’s necessary to protect people and assets. We can help you decide what insurance you need — and what you probably don’t.

© 2023