TREASURER/SECRETARY S DUTIES

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1 Updated: October, 2009 TREASURER/SECRETARY S DUTIES Ref: DEYC By-Laws Article IV, Section 1 and Article V, Section 6 The Treasurer/Secretary is elected at the Annual Meeting of the Club. As an officer he is also a member of the Board of Directors. All Officers are expected to attend the Board of Directors meetings and to notify the Commodore ahead of time if they are unable to attend. The primary duties are in the By-Law Section 6. These are repeated here for convenience. The Treasurer is the Fiscal Officer of the Club and should have access to all accounts of the Club for purpose of satisfying financial obligations of the Club approved by the Board of Directors. The Treasurer must assist in budget preparation, make periodic reports on income and expenditures and provide control information to permit those responsible to keep within the budget limitations. If a significant financial reserve has developed, he/she may, with concurrence of the Board of Directors, deposit a portion of that reserve in a liquid high interest generating account. The Treasurer shall oversee the collection of dues from members and the prompt deposit to the Club s account(s) at the designated club bank. The Secretary position may be merged with the Treasurer s position. Acting as the Secretary, he/she will file the necessary corporate papers with the State of Maine. The Secretary will oversee the following; a record of the proceedings of all meetings of the Club s Board of Directors and all other matters of record as may be desirable, a written role call of members in attendance at business meetings, shall maintain an up-to-date roster of names and addresses of all members together with the names of their boats and notify members of all meetings of the Club, both business and social. The specific operational procedures for the Treasurer and Secretary follow: DEYC background information: Treasurer DEYC is a not-for-profit corporation exempt from income tax under Internal Revenue Code section 501(c) (7). That IRS code section applies to Social and Recreational Clubs. Generally under the IRS code all income is taxable unless there is a provision in the code, which qualifies the income as not taxable. With respect to a social or recreational club the exemption is granted under the theory that the members are simply using their own money to fund the social or recreational activity and it should not be taxed. However, we also occasionally have non-members attend our events and the net 1

2 income from them, if any, is subject to taxation as well as income we derive from our Fidelity investments and interest on our bank accounts. We also sell a variety of articles at the Ship Store, which under certain circumstances could be considered to be subject to taxation. Taxation could be applied if we made the sales in competition with other businesses, which were subject to taxation. The underlying theory would be to take away our unfair advantage over a commercial competitor. There are exceptions to taxation of these articles when they are used in conjunction with our exempt activity yachting. We have substantially all of our articles displaying the DEYC burgee, which has not been licensed to other commercial businesses. In addition we do not allow public access to the Ship Store. Accordingly, Ship Store income is not considered to be business income subject to taxation. Tax filing requirements: The Club files two federal income tax forms Form 990-EZ Return of Organization Exempt From Income Tax and Form 990-T Exempt Organization Business Income Tax Return. The returns are due January 15 following our year-end of August 31. There is a $1,000 annual exemption for income reported on Form 990-T and there will generally be no tax due unless there is significant income from our investments. Care should be taken when selling investments to take this exemption into consideration and possible split the sale between two years to derive benefit from this exemption. Because we have to report as business income the amount of event income collected from non-members we must keep track of guests attending our events. The pro-rata cost of the event is also allocated to the non-member income, generally resulting in no net business income to the club. In the event that a tax is due it must be deposited at a bank with a completed Federal Tax Deposit Coupon Form There are no exceptions to this procedure. The tax due cannot be sent in with the tax return as a failure to pay penalty will be assessed against the club by the IRS. Although the IRS will generally waive this penalty after we have proven that the tax has been remitted there will be a great deal of threatening paperwork to deal with before the matter is resolved. Form 8109 is not generic these forms are specific to the club with our taxpayer ID number on them and the Club Treasurer and Administrative Assistant will have a booklet of them. In the event that an extension of time to complete the tax return is required a Form 8868 is due. In the event that a tax is due it must be deposited on Form 8109 and not sent in with the extension. A federal Form 1099 and the accompanying transmittal Form 1096 must be filed annually before January 31 to report payments made to certain vendors and subcontractors, including but not necessarily limited to the Administrative Assistant. QuickBooks has a feature that allows a vendor to be coded for a

3 A Maine tax Form 1120A-ME is also due at the same time the federal tax returns are due. The Club currently uses the CPA firm of Kangas & Kangas, 32 Washington Street, Suite 300, Camden, ME 04843, contact Eric Kangas The firm s office manager Pam Brodis CPA is the individual who does the actual tax return preparation. Maine sales tax has never been collected and paid by the Club nor has the Club registered with the state as a business and obtained a seller s registration certificate. The Club does not consider the sales of its ships store articles to be a business. The Club has historically considered the casual sale exception under Maine law as applicable. Maine law defines casual sale as follows: a casual sale is an isolated transaction in which tangible personal property or a taxable service is sold other than in the ordinary course of repeated and successive transactions of a like character. A further section of Maine Instructional Bulletin No. 9 gives examples of casual sales: g. Sales, including sales of meals, by a civic, religious or fraternal organization at bazaars, fairs, rummage sales, picnics, or similar events, provided that the organization is not required to have a seller s registration certificate. Club member Bill Bagdoyan reviewed the Maine Law regarding sales tax in 2009 to determine if the Club s interpretation was appropriate. He concluded that the club falls into the casual sales exception to tax, because we sell so little and we are a fraternal type of organization. Therefore we don t need to register for sales tax or collect it and remit it to the State. However, this also means that we should be paying sales tax when we buy the goods from the supplier, because when we buy them, even though they are for re-sale, we are not collecting the tax. Books and records: Maine Statutes, Title 13-B, Chapter 7, Section 715 describes the books and records the Club is required to maintain under Maine law. Books and records are also defined under the IRS code. These provisions generally require that the books and records be adequate to accurately reflect the financial activity of the club. DEYC uses QuickBooks (QB) accounting software to record its financial activity. QB is packaged accounting software designed specifically for the small business using a Windows operating system. The software is easy to use, well documented and is a double entry balances accounting system with a good audit trail. The Club uses only portions of the package, specifically general ledger, cash receipts and cash disbursements. The software produces an income statement and balance sheet and can produce other reports on request using only a few mouse clicks. General ledger: The general ledger is the summation of all accounting activity categorized by account. There are separate accounts for assets and the fund balance as presented in the balance 3

4 sheet and separate accounts for income and expense activity as presented in the income and expense statement. Accounts may be added as necessary. Financial reporting: The QB system produces an income statement and balance sheet and has the ability to add budget information to the income statement. Accounts can be formatted to change the financial statement presentation. This feature is fairly limited in its flexibility. An Excel income statement, has also been set up to use for the income statement presentation. The numbers are the same as the QB system but are in a slightly different format allowing for easier readability. The AA is not expected to be a trained accountant. However, the AA should review the financial statements on a monthly basis for obvious misclassifications and errors and consult with the Treasurer as necessary. A QB file should be sent to the Treasurer at meaningful intervals by mail or for review. The preparation of the Club s financial statements is currently delegated to the Administrative Assistant. I do not believe the AA should have the authority to send any financial statement to anyone Officer, Director, Member or non-member until it has been reviewed by the Treasurer and any necessary corrections made. Annual Budget: An annual budget should be prepared for review and approval by the Board of Directors at the fall directors meeting. I currently prepare the budget based on the approach that Club dues, initiation fees, late fees, etc. should support the core Club operating expenses. Those expenses include the dock and moorings, purchase of beverages, administrative expenses and the annual launching and haul out parties. The other Club social events should be budgeted as break even. I believe that is the only practical approach since the hosts plan the events to be break even and from a budgeting standpoint any additional information is not meaningful. Income from the Fidelity investments is not considered available to support Club operations for budget purposes. Cash disbursements: In a given year the Club writes out approximately 150 checks. These are all written out manually either by the Administrative Assistant (AA) or various club officers. QB provides an automatic check-writing feature so that the checks are produced by the software and recorded at the same time. Given the number of checks written in total and the number written manually by club officers the automatic feature is not considered a meaningful feature. Once the checks are written they are recorded in the QB system under the checkbook section and are posted as a cash disbursement and coded to the proper account simultaneously. QB is a fully integrated accounting system and setup with a database for commonly used vendors to minimize duplication of accounting data 4

5 entry. If a payment is being recorded for the telephone bill, for example a mouse click on the drop down window allows coding to Fair Point with a simple click and then entering the amount. It is automatically deducted form the cash account and coded to telephone expense. Most check writing takes place during the busy summer months. The QB checkbook section takes the place of a manual checkbook and maintains a current cash balance. Checks over $500 will need approval, approval preferable to provide an audit trail, from the Commodore prior to being issued. If for any reason the Commodore is unavailable, the treasurer may be contacted for such approval. Any contract payments, such as wharfage, insurance or other major purchases, must be signed and authorized for payment by the originator to show that they did in fact authorize the purchase/payment. The $500 policy approval also by the Commodore will apply to the writing and issuance of the check. Cash receipts: Recording cash receipts is the most time consuming part of the Club s accounting. During the fiscal year the Club receives approximately checks from members attending events, etc. Of that total approximately 250 were for annual dues. QB is a fully integrated accounting system and setup with a database for members treating them as customers. This helps to minimize duplication of accounting data entry. When a member sends in their dues check, for example, the AA simply has to go to the section called make deposit and the screen provides a drop down menu for the customers and you scroll down to the member name and click the mouse. You then scroll down the next column for the account number to post the deposit to, in this case dues and click the mouse. In adjacent columns you note the check number, any comments, such as guest, and the amount. QB provides that you can split the check between several accounts. In an instance where a new member paid their dues and initiation fee and the Christmas party with the same check, the check can be posted to the various accounts easily. Once you have entered all the checks for that deposit you are done. The deposit amount shows up in the cash account and the QB system provides a bank reconciliation feature to use at month end. A deposit report is available listing detail of checks entered for each deposit. It is not necessary to physically fill out a detailed deposit slip since that information is available in the QB system. It is only necessary to write the total deposit amount n the deposit slip and include an adding machine tape with the checks. Using QB it is simple to export any report or account detail to an Excel spread sheet. Two simple mouse clicks. Once all checks are received for the Commodore s lunch, for example, the income account detail is exported to Excel two mouse clicks. The AA can then modify the Excel sheet by deleting unnecessary columns and sorting the sheet alphabetically and produce a check in sheet which is in alphabetic order, containing no 5

6 unnecessary member names, with check numbers and amounts paid, should there be any question when the member arrives at the door. This all sounds fairly easy but exceptions arise which require additional attention. There are members who believe they paid but didn t or paid for themselves but not their guest. They try to sign up late and pay at the door. If they don t remember if they paid, they should call the AA. There are also some net transactions that require analysis in order that they can be reflected accurately in the accounting system. For example during the cruise some members decide to attend an event at the time of the event and if they can be accommodated may pay in cash. The cash may then be used to pay out for tips or other cruise related expenses and when reported to the AA with a check for the balance or a request for reimbursement some work is required to get it right. The largest problem, I believe, is that most Club events take place during a rather compressed time frame. This requires that the member checks be recorded currently to keep the list of attendees current and be able to provide a complete check in list to the Host. Bank reconciliation: Bank reconciliations should be done monthly upon receipt of the bank statement. QuickBooks has a bank reconciliation feature to assist in that process. Investment income: Twice a year our Fidelity investments pay dividends, which are reinvested in additional shares. The cost basis of these reinvestments has to be tracked in order to reflect the proper gain or loss when the shares are later sold. Fidelity performs this record keeping but as a cross check I currently am tracking the share basis on Excel. That file could be maintained by the AA. Investments are recorded on the Club s records at cost rather than fair market value. Recording the investments at fair market value would, in my opinion, result in monthly adjustments to the Club records and further adjustments when the investments were sold to record a gain or loss which would be necessarily different that reflected by Fidelity. Fair market value is currently reported to the Club membership by the investment committee and I believe incorporating that information in the Club accounting records would provide little additional meaningful information considering the additional accounting work it would entail. Maintain QuickBooks database: Because QuickBooks uses a customer and vendor database as an integral part of its dropdown menu feature it is periodically necessary to add new members, delete old members and add and delete vendors. 6

7 NOTE! The Admin. Asst. MUST have all fiscal year invoices paid by August 31. Also any expenses you have paid for must have had receipts submitted and reimbursements made by August 31. Follow up and ensure that all vendors from which you have made purchases, if any, have provided bills early enough that you have sent them to the Admin. Asst. for payment by that time. DEYC background information: Secretary DEYC is an organization governed by Title 13-B the Maine Nonprofit Corporation Act. The Club is a Mutual Benefit Corporation as defined by Maine Statutes, Title 13-B, Chapter 14, Section Reporting requirements: Annual Report: Annually the Club must file an Annual Report with the Maine Secretary of State, which is signed by the Club Secretary. The report is as of December 31 and the form requests that it be filed by April 1 of each year. The legal filing deadline is June 1 of each year so there is plenty of time to file if the Secretary is away for the winter. The form may be completed and filed over the internet ( and the filing fee paid using a credit card. To file on line it is necessary to know our Charter Number, which is ND. The form asks for the names and addresses of our Registered Agent, President, Treasurer, Secretary and three Directors. The addresses must be their physical addresses not post office box addresses. The Registered Agent (RA), if a natural person, must be a resident of Maine. The purpose of the RA is so that should someone file a legal action against the Club, the legal notice would go the RA. Furthermore, the Secretary of State sends an annual notice to the RA at their designated address reminding them that the annual report is due. In order to change the RA it is necessary to file a form and pay a filing fee. In order to save on filing fees the RA should not be changed frequently. Celeste Brown is currently the RA. Recording of minutes: 7

8 Maine Statutes, Title 13-B, Chapter 7, Section 715 describes the books and records the Club is required to maintain under law. That section states in part Each corporation shall keep minutes of the proceedings of its members, board of directors and committees having any of the authority of the board of directors No further guidance is provided as to the form, content or recording medium for the minutes. The By-Laws require the Secretary to oversee keeping a record of the proceedings of all meetings of the Club s Board of Directors and all other matters of record as may be desirable. The recording and preparation of the minutes is currently delegated to the Administrative Assistant. Roll call: The By-Laws require the Secretary to maintain a written roll call of members in attendance at business meetings. The roll call of members is currently delegated to the Administrative Assistant. Membership roster: The By-Laws require the Secretary to oversee the maintenance of an up-to-date roster of names and addresses of all members together with the names of their boats. The preparation of the roster is currently delegated to the Administrative Assistant. Notice of meetings: The By-Laws require the Secretary to notify members of all meetings of the Club, both business and social. The notification of meetings and events is currently delegated to the Administrative Assistant. NOTE! The Admin. Asst. MUST have all fiscal year invoices paid by August 31. Also any expenses you have paid for must have had receipts submitted and reimbursements made by August 31. Follow up and ensure that all vendors from which you have made purchases, if any, have provided bills early enough that you have sent them to the Admin. Asst. for payment by that time. 8