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The Nonprofit FAQ
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Management
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Background on Accounting
Some useful links that offer information about accounting questions, organizations, and practices.
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How to read a nonprofit's financial statement.
Some advice from the founder of the Internet Nonprofit Center.
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Policies for Financial Accountability
Here is a sample of a detailed list of policies governing how the board of a larger nonprofit might deal with financial oversight and controls.
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Does an NPO really need a Treasurer?
In a volunteer-based organization, the treasurer may actually keep the books. In larger organizations, the responsibilities of the role change.
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What's involved in financial management?
Online resources for assisting nonprofits achieve sound financial management.
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How can I determine my program costs easily?
A number of factors need to be considered when determining program costs.
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How can I figure out how our organization should divide its expenses?
Oversight organizations suggest standards for the proportions spent on program services, administration, fundraising, etc.
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Is there some legal requirement to spend a certain percentage of funds
Foundations: yes. Public charities: no.
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Guidance on accounting for equity investments by nonprofits
The approaches are different depending on whether the investment has an easy to measure value (like publicly traded stock) or not.
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Can Members Review the Books & Financial Records?
An organization's by-laws should state the rights of its membership.
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What do you actually get in an audit?
This page from the Canadian firm AssociationXpertise explains: http://www.axi.ca/tca/Sep2002/tca04d.htm
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What is Unrelated Business Income? How is it reported? Taxed?
Unrelated Business Income exists under US tax law when an exempt organization receives regular revenues from activities that are not related to its exempt purpose (unless certain further exemptions apply). A separate form (the 990-T) is used to report UBI and to calculate whether tax (UBIT) is due.
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How is Unrelated Business Income Tax (UBIT) Calculated?
UBIT is based on the corporate income tax rates. The IRS and NPOs have struggled with figuring out what is 'related' and what is not.
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AICPA SOP 98-2 and its Impact on Financial Reporting
Rules that took effect 12/15/98 require organizations to screen activities carefully if they include a fund-raising appeal and are not classified as fund-raising in the accounts; three writers explain the background.
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What is the deal with FASB 116 and FASB 117 anyway?
A pointer to an accountant's discussion of the issues
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What Is the Sarbanes-Oxley Act and Why Should Nonprofits Care?
Enacted in the wake of corporate scandals, 'SOX' sets new standards of accountability and board behavior. Strictly speaking, most apply only to publicly-traded corporations, but there's more to it than that.
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Summary of federal rules about lobbying for 501(c)(3) organizations
Extensive discussions of the definition of and limits on lobbying by nonprofits.
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What is a Donation?
A 'donation' is the gift of property to a NPO.
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Who should process incoming donations?
Organizations often tussle over which department should open the envelopes that might contain donations. Strong arguments can be advanced to support the differing views.
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How to value donated goods.
A gift acknowledgement, or receipt, must accurately describe the gift in kind but no monetary amount should be mentioned.
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How should we acknowledge in-kind gifts?
Enthusiastically, of course. But there are some errors that must be avoided in this specialized area. Auctions require further attention.
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Should fundraising revenue be reported 'gross' or 'net'?
'Gross' is the right answer here.
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Is grantwriting a fundraising expense
It depends how the resulting revenue will be treated.
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Are fees charged by federated campaigns fundraising expenses? For whom?
It depends. What the donor says matters.
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How does the IRS treat nonprofits' gambling revenues?
Many nonprofits rely on gambling activities to bring in much-needed revenue. IRS publication 3079 covers related taxes and other issues in detail.
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What about calculating fund raising ratios?
These calculations are more difficult to interpret than they might appear.
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Are Ratios Useful? For Donors? For the Community? (Added 2/24/96)
When should donors be concerned about average costs (ratios) in evaluating the performance of organizations which seek donations as one of the ways they raise the money they need to operate?
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Can we sell donated equipment and use the proceeds?
The feelings of the donor as well as federal regulations must be considered when determining the use of a donation.
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How should we dispose of outmoded computer equipment?
You need to keep records and make sure there are no grounds for concluding that insiders took advantage of the situation for personal gain.
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Fundraising Productivity Series
These "Collected Essays by Bill Levis" are now online at the Urban Institute
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We can't afford a full office and staff. Where can we turn?
You may want to consider fiscal sponsorship. Here are a couple of organizations that may be able to help.
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Can we raise money with $0 fundraising expense?
Maybe. But the accounting rules make clear that it only happens in very special cases.
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How do I find a volunteer accountant?
There are some organizations that offer help in making connections.
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Should we use accrual accounting?
The accrual method is generally regarded as the standard.
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What's the best kind of accounting software?
Fund accounting software is used by larger organizations and those with more complicated accounting situations. Some organizations can use software designed for households or small businesses.
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Choosing Accounting Software: Questions to ask
An early entry in the FAQ that still provides some useful advice.
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What about Quicken or Quickbooks?
Recent editions have features suited to many nonprofits. It does not appear that it's advantageous to buy the special 'nonprofit' edition.
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What's a good Mac accounting program?
Comments from an early post on this question.
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Can a nonprofit declare bankruptcy?
Yes. This item includes references to several discussions of the question from a variety of sources.
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