Tuesday, July 20, 2010

Supporting your Mission with Social Media

Tuesday, July 20, 2010 0
With so many different social media outlets available we’re sometimes left wondering, “Where do we even start and what makes sense for our organization?”

Over the past several years, I have seen marketing take a positive shift. The social media wave that we are experiencing has opened up more opportunities for organizations to reach their audience.

In the past, an organization’s reputation often was based around what the public said and thought about them, whether it be their fundraising efforts through the events they hosted, the strength of their boards, public financial information, or the funding they received to help carry out their mission. Now, organizations have the opportunity to regularly communicate with their audience and let their own voices and more importantly, their mission, be heard.

Not sure where to start? Start simple. Before you start any type of marketing initiative, do your homework. What are comparable organizations doing? Have their efforts been successful?

My suggestion would be to begin by creating a “Linked In” account. If you haven’t done this already, take advantage of a free resource that gives you access to over 50 million professionals worldwide. To join, all you need is a valid email address and a password. After you’ve signed in, complete your profile with as much information as possible, by adding a photo of yourself, your work history, and most importantly your organization’s website to the section labeled “Websites”. Adding this information is crucial for making it easy for people to find you. The great thing about Linked In is that it is Google friendly; meaning once you have created one, the more likely you are to show up on the first page of a Google search. After you’ve done this, you can begin doing your research.

Using the “People Search” with the “Advanced” feature on Linked In, select a location. Location may not matter if your primary goal is to learn as much as you can about what non-profit organizations are doing nationwide regarding Social Media. Next under Industry, choose “non-profit organization management”. Then, take time to click through different individual’s profiles that show up through your search results. You’ll see that some profiles have added websites; some even have Facebook pages, and Twitter accounts and blogs- be sure to explore these as well.

Eventually, you will come across a few you like and that will give you ideas for what you’d like to start doing for your organization to become more recognized using social media. In addition to searching for ideas, you’ll also want to take advantage of searching for and connecting with your board members, contributors, co-workers, and other contacts. I’d strongly recommend that all employees in your organization consider joining Linked In as well.

The next step to become more visible in the online community is to start a blog. Think about what you want to say about your mission and what you want your audience to know about you? Blogs are conversational and informative. If you’re not sure how to begin your first blog, why not talk about an upcoming event your organization is hosting, it’s an extra opportunity to get the word out. Once you begin researching other blogs and seeing what they’re communicating, it will become more natural for you to discuss a topic. Encourage your supporters to visit your blog and solicit their feedback. If you know any experts, ask them to guest blog on a topic that would impact your audience.

Use this resource as much as you can to communicate your mission with the public. Set up links from your website to your blog and from your blog to your Linked In. Put these links in any print or electronic communication you distribute. The more traffic you can drive to your organization’s websites, the better.

Once you have decided that your organization is committed to social media, develop a social media policy to be followed by those in your organization. This way, everyone is on the same page about what they want to communicate and how. Just make sure that everyone realizes this is a commitment, and will not happen overnight. Your social media initiative will take time, but if you track your efforts, you will see results.  So break out of your traditional marketing shell and be "social"!

Wednesday, July 7, 2010

Controlling Audit Fees

Wednesday, July 7, 2010 0
In these difficult economic times marked by decreases in donor contributions and public and private funding, non-profits, like other organizations, are looking closely at their expenses to determine ways to cut costs and save money. Accounting and audit fees are no exception.

Accounting firms, like other businesses, operate in a competitive environment, and should work with management to determine a reasonable fee for their services, while at the same time meet their quality control requirements under professional standards. In other words, quality shouldn't be sacrificed for price.

Management should be meeting or having conversations with their auditor at various times throughout the year, discussing their operations, changes in the accounting rules and regulations and their impact on the organization, as well as their financial status and related challenges. In the normal course of these meetings it would be appropriate to bring up the topic of fees and how they relate to the changes in the nature and operations of the entity. This shouldn't necessarily be a difficult conversation if you have a good working relationship with your auditor. Communication is the key to a good working relationship.

Now that you've broken the ice with your service provider, consider the following ideas that satisfy the needs and concerns of both the non-profit and the accounting firm that result in fees that are satisfactory to both sides:

• Have a Planning Meeting - Remember good communication? Meet with your auditor before the audit to establish a time-line for the audit, including timing of the deliverables (i.e. financial statements, tax returns), as well as meetings with the audit/finance committee or full Board of Directors.

A key discussion point at that meeting should be what financial/other information management will be providing, and when that information will be available to the auditor. Consider committing this to writing so everyone is clear on the information that will be "Prepared By Client" (often referred to as the "PBC" list). Some accounting firms include this information/list in their engagement letter.

• Get Audit Ready - Now that you know what you need to provide, do you have the internal resources and do you know what you need to do to get ready for the audit?

Consider an "internal" planning meeting similar to the one noted above to determine "who" in the organization is doing "what" for the audit. Review the trial balance in as much detail as necessary and determine what supporting information is needed and will be provided (and who in the organization is responsible for providing that information).

If you determine you don't have the necessary internal resources to provide the information promised, consider engaging the auditor for a special project, with a separate fee, to assist management in getting "audit ready". However, depending on the scope of services needed, there may be an issue with regard to auditor independence which may put the auditor in a position that prevents him/her from assisting the organization with this special project. For this or other reasons, management may also need to consider engaging the services of another service provider capable of performing these services for a reasonable fee.

• Get it Right - Now that you've determined "who" is doing "what" in the organization, make sure the information provided is complete and accurate. Supporting documentation/account reconciliations should be complete and provide enough detail to allow the auditor to understand what's in the account.

Make sure this information is accurate and that the supporting schedule/account reconciliation agrees with the amount in the trial balance. In situations where the trial balance has been "closed" and given to the auditor without the supporting documentation, you may need to provide the auditor with an accurate account reconciliation along with an adjusting journal entry to adjust the account in the trial balance to the accurate amount. In most cases this "PBC" client journal entry should not be considered an "audit adjustment" by the auditor in determining deficiencies or matters to be communicated to those in the organization charged with governance.

• What's New - Discuss with the auditor the changes in the organization since the last audit to assist the auditor in determining the scope of the audit and their assessment of the risk of material misstatements in the financial statements. While new items may surface that need to be addressed, the auditor may determine that time can be saved in other areas that have not changed or may have been assessed as having low risk based on the results of previous audits, as well as the auditors understanding of the current operations.

As part of the "ongoing communication" throughout the year, you and your auditor should be discussing new accounting and audit rules and regulations and their impact on the audit and related fees. Remember SAS 99 "Consideration of Fraud in a Financial Statement Audit" and the recent suite of "risk based audit standards" and their impact on the audits/fees? If not, you and your auditor are failing the test of good communication.

Working together as a team with frequent and ongoing communication, management and their auditor need to address the timing, scope, responsibilities, and deliverables in connection with the year-end audit. Such communication will provide the forum for discussion to determine reasonable fees for the services to be provided.

Need assistance? Contact us today.

Friday, July 2, 2010


Friday, July 2, 2010 0
The Internal Revenue Code (IRC) exempts from federal income taxation organizations or “clubs” which are organized for pleasure, recreation, and other non-profitable purposes, as long as substantially all of the club’s activities are for such purposes. Examples of such organizations are country clubs, hobby clubs, garden clubs, and amateur hunting, fishing, tennis, swimming and other sports clubs. Therefore, your golf country club or family swim club has applied for and has been granted tax-exempt status under IRC Section 501(c)(7). Hopefully. If not, that’s a discussion for another time.

Over the last few years, we have seen an overall emphasis by the Internal Revenue Service (IRS) on increasing the examination of tax-exempt organizations. Social clubs will not be left out. With an electronic filing requirement for most Form 990’s, it is becoming easier for the IRS to determine which organizations may need a “further review”.

So what could your social club be doing, or not doing, to get it into trouble with the IRS? Well, for starters, and one that all tax-exempt organizations have to deal with, is whether the club is organized and still operating in accordance with the tax-exempt purpose under which it was formed. In other words, is your organization still doing what it is supposed to be doing, and what it told the IRS it was going to be doing, when the IRS granted the organization tax-exempt status? Other areas of IRS interest for clubs are unrelated business income (UBI), carrying on nontraditional activities and record keeping.

Now, with all this being said, please understand that the IRS is not “out to get” clubs and other tax exempt organizations. They just want to make sure that the organizations are following the rules. Another big area of concern for clubs is the amount of business the club does with the general public. A lot of the clubs have found themselves in hot water with the IRS because they exceeded the 15% limit on nonmember business, and the income from the nonmember sources benefited the club’s members.

As with most tax-exempt organizations, a club will still be taxed on, and the IRS will still be looking at, its unrelated business activities and income. Generally for a club, ALL income is considered UBI except for dues, fees, charges, or similar amounts paid by members for services provided them, their dependents, or their guests. Other UBI exceptions include investment income set aside for charitable purposes, and under specific circumstances, gain on the sale of club property.

Due to the nonmember income issue for clubs alluded to above, accurate record keeping is key. Clearly, in order to calculate the correct amount of UBI, a club must be well equipped for proper record keeping. If the club cannot prove that income or receipts are member income, the default position for the IRS is nonmember income. As mentioned above, in order to retain tax-exempt status, no more than 15% of a club’s gross receipts may be from the use of its facilities or services by nonmembers. Going further, to retain tax exempt status, a club must not receive investment and nonmember income exceeding 35% of its gross receipts. A club without good records will have a difficult time in an IRS audit proving that it has not exceeded these thresholds.

Another concern for clubs that could jeopardize their exempt status is engaging in nontraditional activity. The IRS has provided an unofficial 5% safe harbor for clubs in regard to nontraditional activity. An example of a nontraditional activity is the sale of alcoholic beverages by a club for off-premises consumption. The 5% will be included in the 15% mentioned above regardless if the service is provided to members.

In wrapping up, I think you can see that once a club has been granted tax-exempt status by the IRS, it’s not all fun and games after that. Maybe a good bit of fun and games for the members (remember the club was organized for pleasure and recreation), but the organization and the members have to remember that they are organized and operated as a tax exempt organization, and that means there are rules to be followed. So before you take that next lap in the pool or get ready to tee off, make sure someone is paying attention to the rules and what needs to be done to retain that tax exempt status.
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