Income from endowment funds may be able to help your nonprofit meet operating expenses, ease cash-flow problems and supplement your annual budget. But you need to control your spending policy. Assuming funds aren’t restricted, nonprofits in most states must conform to provisions of the Uniform Prudent Management of Institutional Funds Act. Within those constraints, define […]

Many not-for-profits join forces to better serve their clients and cut costs. But even a simple collaborative arrangement can involve complex financial reporting obligations. Costs incurred and revenues generated from transactions with third parties should be reported, on a gross basis on the statement of activities, by the nonprofit that’s considered the “principal” for that […]

In recent years, the IRS has increased its scrutiny of not-for-profits’ unrelated business income (UBI). Dividends, interest, rents, annuities and other investment income generally are excluded when calculating unrelated business income tax (UBIT). However, there are two exceptions where such income is taxable. Debt-financed property When your nonprofit incurs debt to acquire an income-producing asset, […]

Not-for-profits ignore the IRS’s private benefit and private inurement provisions at their own peril. The rules prohibit individuals inside or outside a nonprofit from reaping an excess benefit from its transactions. Violations can have devastating consequences, including loss of exempt status. And individuals involved may be subject to significant excise tax penalties. To protect your […]

Risks associated with not-for-profit special events run the gamut from accidents and personal injury, to fraud and theft, to cancellation due to inclement weather or nonappearance by a featured performer. It’s possible to buy designated “special events insurance,” but such policies can be expensive. Instead, you may want to find out whether you can extend […]

Information is power. And regularly supplying information to your not-for-profit’s board of directors is the key to the board properly fulfilling its duties. This doesn’t mean you have to share every internal email or phone message. Board members should, however, receive and understand information that will help them work together and better serve your organization. […]

Debt is an integral part of many for-profit companies’ strategic plans, yet it has traditionally carried a stigma in the not-for-profit world. That view is changing, as more organizations borrow money for major capital purchases, new program funding and other reasons. But before your nonprofit borrows, know that it takes prudent financial management and reliable […]

Many not-for-profit youth sports leagues are at risk for fraud and don’t even know it. But you can protect your league by taking a few simple steps. The most important is to segregate duties. This means that no single individual receives, records and deposits funds coming in, pays bills and reconciles bank statements. Every payment […]

Whether you’re planning to raise funds for your not-for-profit with a simple bingo game or raffle, or with a more elaborate casino night, you need to understand and follow the federal rules that govern these kinds of activities. Gaming activities can open the door to unexpected taxes and trigger requirements for specific IRS filings. Filings […]

To err is human, but your not-for-profit’s supporters, not to mention the IRS, may be less than forgiving if errors affect your financial books. Fortunately, if you attend to accounting details, you can avoid these common pitfalls:  1. Failing to follow accounting procedures. Even the smallest nonprofit should set formal, documented and detailed procedures for […]