Nonprofit Financial Reporting. What Every Lake Association Needs to Know

Transcription

1 Nonprofit Financial Reporting What Every Lake Association Needs to Know

2 Today! Review the fundamental concepts and structure of nonprofit financial statements. What reports are required for my association and which are just a good idea. Should my association be a 501(c)(3)? Accounting Software?

3 Tomorrow! If I don t answer your question today, Martha Lovejoy mlovejoy@nhlakes.org Call Me!

4 Statement of Financial Position (Balance Sheet) Statement of Activities (Income Statement) Financial Statements Other statements required by the Financial Accounting Standards Board (FASB) for all nonprofit audits: Statement of Cash Flows Statement of Functional Expenses

5 Cash Accounting Similar to balancing your checkbook Measures cash in and cash out Common for small organizations Accounting Methods Accrual Accounting A more comprehensive look at your financial situation Measures revenue earned and expenses incurred Revenue Cash Accrual Includes Accounts Receivables: What people owe (before received) Accounts Payable: What you owe others (before it is paid)

6 Statement of Financial Position Financial Statements are Connected Statement of Cash Flows Assets Cash Liabilities Net Assets Surplus / Deficit Statement of Activities Revenue minus Expense = Surplus / Deficit Statement of Functional Expenses

7 Statement of Activities: Surplus/Deficit Statement of Activities reflects the annual results of a grantee s core business Statement of Financial Position: Net Assets The Two Bottom Lines Statement of Financial Position provides a picture of overall financial health S tatement Of Activities Statement of Financial Position Revenue - Expense Surplus/ Deficit A surplus builds net assets; A deficit depletes net assets Assets = Liabilities + Net Assets

8 What can we learn from the Statement of Financial Activities Revenue Dynamics Where does the organization s money come from? Is it reasonably diversified or at risk? Do revenue streams appear reliable/consistent? Cost Dynamics What does the organization spend on operating activities? Are expenses adjusted in line with revenue changes? Note: Income statement will not present expenditures on capital items or debt principal repayments. Profitability and Savings Does the organization cover its costs? Are surpluses sufficient to meet balance sheet obligations? Is the organizations saving money? If so, is it enough?

9 Beautiful Lake Association Budget v. Actual Report For Year Ending June 30, 2016 Sample Statement of Activities Operating Revenue Actual Budget Over/ (Under) % Contributed Membership Dues 1,230 1, % Special Contributions for Lake Host (5) 101% Special Contributions for Water Testing (25) 104% Earned - T-shirt Sales % Event Fees % Total Revenue 4,000 3, Expenses Printing (Newsletter) (80) 136% Postage % Supplies (25) 111% T-shirt Inventory % Dues NH LAKES and LPC % Event Expenses (200) 300% Lake Host Payroll % Water Testing Fees (100) 125% Total Expenses 3,050 3,400 (350) Net Surplus/(Deficit) 950 -

10 Restricted Revenue FAQs What are they? Who implements them? Difference between restriction and designation? What types of restrictions are there? How do we liberate? What are the implications? Restrictions enable donors to specify exactly how their funds are to be spent. Only donors (Foundations, government agencies, individuals, etc.) can implement restrictions Only donors can restrict funds; a board of directors can designate funds. OLD: Temporarily restricted and permanently restricted. New rules Now only donor restricted. Meet donor-imposed criteria. Knowing the restriction level of your resources is critical for decision-making.

11 Statement of Financial Position Financial Statements are Connected Statement of Cash Flows Assets Cash Liabilities Net Assets Surplus / Deficit Statement of Activities Revenue minus Expense = Surplus / Deficit Statement of Functional Expenses

12 Statement of Financial Position What does it tell us? What you own vs. what you owe and the net result Snapshot of everything that has happened to your organization up and until that point It indicates your ability to manage risk or pursue new opportunities.

13 Beautiful Lake Association Statement of Financial Position June 30, 2016 Statement of Financial Position Assets Liabilities Cash Accounts Payable 57 Checking 637 Unearned Revenues Money Market 2,500 Lake Host Donations - Total Cash Water Testing Donations 175 Accounts Receivablies 65 Total Unearned Rev 175 Prepaid Expenses - Total Liabilities 232 Property & Equipment 450 Total Assets 3,652 Net Assets (Equity) Unrestricted 775 Restricted Emergency Fund 2,500 Total Restricted 2,500 Total Net Assets 3,420 Total Liabilities & Total Assets 3,652 Net Assets 3,652

14 Beautiful Lake Association Budget v. Actual Report For Year Ending June 30, FINAL Sample Statement of Activities Operating Revenue Actual Budget Over/ (Under) % Contributed Membership Dues 1,230 1, % Special Contributions for Lake Host (5) 101% Special Contributions for Water Testing (25) 104% Deferred Rev - Water Testing (175) Earned - T-shirt Sales % Event Fees % Total Revenue 3,825 3, Expenses Printing (Newsletter) (80) 136% Postage % Supplies (25) 111% T-shirt Inventory % Dues NH LAKES and LPC % Event Expenses (200) 300% Lake Host Payroll % Water Testing Fees (100) 125% Total Expenses 3,050 3,400 (350) Net Surplus/(Deficit) 775 -

15 Financial Statements Summary Reliable, accurate, and timely financial data is a first step to owning your numbers and telling your story. Even with good data, it is important to know what to look for. Key stakeholders need to have a common understanding of your financial story.

16 What does New Hampshire expect from us? Not a 501(c)(3) You must be registered with the Secretary of State in order to conduct business in the state. To check the status of your group, go to the (New: You need to set up a NH QuickStart login.) Every 5 years, on those calendar years that end in 0 or 5 you must file a status report of your organization. 501(c)(3) Groups You must file an Annual Report with the Charitable/Trust Division of the Attorney General s Office. With this, you will need to provide a copy of your IRS Form 990 and a current list of your Board of Directors and their contact information.

17 What does the IRS expect from us? Not a 501(c)(3) Nothing 501(c)(3) Groups You must file a Form 990 annually. If your gross receipts are under $50,000, you can file a Form 990-N (e-postcard). This assumes you do not have employees or pay contractors!

18 Should our organization become a 501(c)(3) Charitable Tax-Exempt Organization? Advantage: Donations are tax-exempt to the fullest extent allowed by law. It has gotten easier in recent years to apply for charitable taxexempt status. If your group is a member of NH LAKES and you are interested in learning more about this, please call. We have a board member who is able to assist your group with this discussion and process.

19 Should we use accounting software? Deciding to use accounting software is really a personal preference. If you are not comfortable using computers, accounting software is not recommended. Should you decide to use accounting software, there are a few low cost accounting solutions (Check out for other options): Zoho Books Accounting by Wave If you are a 501(c)(3), check you can get QuickBooks ($50 per license) and other software affordably through Tech Soup.