financial considerations for lake associations: meeting ... · more 990 tips •copies publicly...
TRANSCRIPT
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Financial Considerations for Lake
Associations: Meeting Organizational
and Legal Requirements
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Financial Considerations
Discussion Outline
• Goals and Planning
• Financial Reporting
• Legal Requirements
• Fiscal Sponsorships
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Establish Goals and a
Planning Process
• It is hard to accomplish anything
without goals and plans laying out
how to achieve them
• Define what success means to
your organization
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Identify Stakeholders
• Members
• Local residents
• Lake users
• Lake environment
• Local government
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Establish Basic Plans
• Mission statement
• Long-term goals
• Budget process
• Immediate financial goals
• Long-term financial goals
• Establish reserves
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Financial Reporting
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Identify Reporting
Requirements
• Who will get reports?
• Staff
• Board
• Members
• State association
• IRS
• WI Dept of Regulation & Licensing
(DRL)
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Identify Useful Information
For Different Users
• Staff
• Board
• Members
• State association
• IRS
• DRL
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Basic Financial Statement
Decisions
• Year-end of organization
• What is the natural cycle of the organization?
• State-wide group has December year-end
• Cash or accrual basis accounting
• Accounting software
• QuickBooks is most common
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Agency Audit?
• Audit establishes credibility for
grant applications
• Provides assurance to Board and
members
• Required by Wisconsin statute if
fundraising exceeds $400,000
(review if exceeds $200,000)
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Identify Legal Requirements
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Incorporation
• Limits personal liability of Board and
members
• Papers filed with Department of
Financial Institutions
• Non-stock corporation, Chapter 184
• State grants non-profit status
• Articles of incorporation must have
appropriate IRS wording
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Apply to IRS for 501(c)(3)
Status
• IRS grants tax-exempt status
• Exempt from application if annualgross revenues will be under $5,000
• Creates some doubts about deductibility of donations and limits receiving grants
• File form 1023 within 15 months offorming organization
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Register with DRL for
Fundraising License
• Must have a license to fundraise with
general public in Wisconsin
• Includes businesses and foundations
• Exempt if under $5,000 and only
volunteers
• File “Charitable Organization
Registration Statement” (form #296)
within 30 days of starting to fundraise
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Sales Tax Exemption
• WI Dept of Revenue form S-103
• Need IRS determination letter for
application
• May still need to pay sales taxes if
sell over $25,000 per year in sales
taxable items or have professional
entertainment at event (WDOR
Pub. 206)
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Insurance
• Liability
• Theft/fraud
• Equipment
• Workers compensation
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Employees
• Review worker versus
independent contractor rules
• Use an outside payroll company
to reduce chances of a mistake
• Issue 1099s to all contractors paid
at least $600 (unless incorporated)
• New IRS compliance initiative
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Filing Requirements
• IRS form 990, 990-EZ or 990-N
• File annually if gross revenues arenormally over $25,000
• Due 4 1/2 months after year end. Canextend three months (twice). Form8868
• Late penalties are large ($20 per dayfor small organizations)
• IRS is less willing to waive penaltiesthan in the past
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Filing Requirements
• IRS form 990-EZ
• Under $500,000 for 2009 returns
• Under $200,000 for 2010 returns
• Over $25,000 (3 year average) for
2009 returns
• Over $50,000 (3 year average) for
2010 returns
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Filing Requirements
• IRS form 990-N
• File if too small to file 990-EZ
• Same due dates
• Filed electronically directly on IRS
website, www.irs.treas.gov
• Can lose recognition of exempt
status if not filed for 3 years.
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Form 990 Tips
• Form is combination of financial andcompliance disclosures
• IRS does not review forms beyondmissing pages and a few boxes
• Check IRS website
• Includes topics such as: donor acknowledgements, valuing special events, requirements for public inspections, and a discussion of intermediate sanctions
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More 990 Tips
• Copies publicly available at:
www.guidestar.org
• Assume that donors will look at it
• Treat it as marketing tool
• Possibility of filing 990-T and WI 4-T
if have unrelated business activity
• Example: Running a concession stand
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Form 308 or 1952 for DRL
• File annually
• Due six months after year-end
• Can file affidavit instead if
fundraising is under $5,000 for
year. Or if under $50,000 and all
fundraising is in one county
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State of Wisconsin
• File annual corporate report to
maintain corporate status
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Fiscal Sponsorships
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Fiscal Sponsorships are
Very Common
• Many small organizations start
out being sponsored
• A group with charitable status
may be asked to sponsor another
group
• Greg Colvin, Fiscal Sponsorship:
Six Ways to Do It Right
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…And are Commonly
Done Wrong• Fiscal Agency is not allowed
• A group that is using its status to helpanother group is responsible for howthe money is used
• Best structure is to award a grant to thesponsored group.
• Written agreement
• Progress reports on grant
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Tax Reporting for Fiscal
Sponsorships
• The grant passed through the groupmust be reported as revenue andexpense of the sponsor. It must fityour exempt purposes and mission.
• The recipient entity must also reportincome and expense as some type ofentity – partnership or sole proprietorare common. Send a 1099-MISC torecipient.
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Contact Information
Bruce Mayer, MBA, CPA, CFP®
Wegner, LLP, CPAs & Consultants
2110 Luann Lane
Madison 53713(also offices in Baraboo and Pewaukee)
608-274-4020 (general)
608-442-1939 (direct)