Hughey's Debits & Credits: Bookkeeping. Payroll. Taxes.

All posts tagged memphis nonprofit

Chicken LittleIn smaller nonprofit organizations, outsourced accounting functions are normal because of fund restrictions. Did you hire Chicken Little as your accountant? Keep reading to find out if you did.

A nonprofit organization decided it was time to outsource their accounting and fiscal duties. Once they chose their accountant, a system was created. The director, John, would deliver the organization’s documents monthly to the accountant’s office and in return the accountant would prepare financial statements. One day, John received a letter from the Internal Revenue Service (IRS) stating that the nonprofit had not paid payroll taxes in several quarters. John contacted his accountant immediately to ask about the letter. The accountant said not to worry about it and that he would take care of it. Soon after, an IRS agent arrived to the nonprofit organization’s office asking why the payroll taxes had not been paid. Again, John called the accountant. Once the accountant heard John say that the IRS was at the agency, the accountant became Chicken Little and declined to speak to the IRS on behalf of John’s organization. John later found out that the accountant had not looked at the agency’s documents in months! The documents were in boxes in a corner! Sadly, the organization had been paying the accountant for over 2 years for a job that was not being performed which cost them thousands of dollars in penalties and interest! Read more

Church CollectionIn smaller faith based organizations such as churches, there are usually more volunteers than paid workers. Consequently, there is high turnover in the treasurer position. After working with churches weekly, we have noticed three common mistakes that happen when trying to replace that person.

  1. Unqualified personnel – Most of the time, you just want the tasks to be completed. How hard could it be to collect money, count it, deposit and record it? So when someone volunteers or is volun-told (when someone else nominates you but you really didn’t have a choice) to become the new treasurer and is unqualified, things tend to get complicated. Instead of appointing the first person who volunteers, conduct simple background tests and provide proper training.
  2. No separation of duties – Indicative of being a small church, prior to becoming our client, the same person who opened the mail was allowed to make the deposits, pay the bills, and have full access to the bank account and debit/credit cards. This vulnerability created opportunities to do a lot of harm. Thankfully, no harm was done! Ensure that there are proper checkpoints and separation of duties to reduce the window of opportunity of theft and other illegalities.
  3. Too much trust – Here’s an example of too much trust that we witnessed upon being hired at a church. The secretary was in charge of purchasing supplies that the church needed. When items were needed, the secretary would tell the treasurer that a check was needed to buy the supplies. The treasurer would proceed to sign a blank check and provide it to the secretary. The secretary would endorse the check to herself and purchase supplies. The secretary was not required to bring a receipt after supplies were purchased. In addition, the treasurer did not reconcile the bank account monthly to see what was being spent. In every organization (yes even churches!), there should be fiscal policies in place to ensure that the accounting portion of the church does not go unattended.

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Form 990You did it!  You’ve sent out your W-2s to employees and ready to relax, right? Not so fast!  Have you completed Form 990?  Not sure what that is? Keep reading.

Form 990 “Do I have to do this?”

Yes! Even though you aren’t required to file income tax returns, the IRS still wants to know about your organization. Form 990 gives the IRS access to information about your organization’s revenue and expenses, including program versus administrative expenses. All nonprofit organizations are required to submit a version of Form 990. It is also important to know that the year listed on the top right corner is the year that your fiscal year began not ended. For example, if you are reporting for July 1, 2014 – June 30, 2015, the Form 990 will say 2014. This is because the timeframe you are reporting begins in 2014. Read more