Friday, November 4, 2016

IRS Issues Reminder That Forms W-2 and 1099 Are Due Earlier for Employers

Under a new law, the Protecting Americans from Tax Hikes (PATH) Act, enacted last December, the new filing deadline for employers to submit forms W-2 to the Social Security Administration, is January 31. The new January 31 filing deadline also applies to certain forms 1099-MISC reporting non-employee compensation such as payments to independent contractors.

In the past, employers typically had until the end of February, if filing on paper, or the end of March, if filing electronically, to submit these forms. However, the gap between that due date and the beginning of the filing season made it difficult for the Internal Revenue Service (IRS) to match up forms W-2 with tax returns requesting refunds. The result? Room for fraud. The new deadline, which has long been on the wish list for the IRS, will make it easier to verify the legitimacy of tax returns and properly issue refunds to taxpayers. The IRS says that, in many instances, this will enable them to release tax refunds more quickly than in the past.

Monday, May 2, 2016

Nonprofit Accounting Software Review

Nonprofit Accounting Software Review

Accounting Software for Nonprofits

We have taken several hundred clients through the nonprofit accounting
software evaluation process.

Our solutions focus on finding the best nonprofit accounting software to meet
your specific software needs.

We help our clients by providing software advisory services to include
planning, implementation and training services.

We are providing the following 2016 Review of Nonprofit Accounting Systems
from CPA Practice Advisor to let you know the current nonprofit accounting
systems that are available.   We suggest you contact us first to help you through
this important and complicated process.  Generally, we provide our software
evaluation for free and as an investment in our clients to help plan and insure
a successful software implementation.

Here is the link from CPA Practice Advisor's 2016 Review of Nonprofit
Accounting Systems and hope you find it helpful.

Thursday, March 10, 2016

Do you know your full costs and recover them?

Do you know your full costs and recover them?
By Jim Simpson, CPA and director, Financial Technologies & Management

Last year, the Nonprofit Finance Fund in its State of the Nonprofit Sector reported that only seven percent of nonprofits received full project costs from foundations.
Let’s make sure we have the same definition for defining full costs because it is not just expenses.  Using the following formula helps to define what denotes full costs: day-to-day operating expenses + reserves + fixed asset additions + debt reduction.
Nonprofits that recover full costs prevent financial crises and interrupted services and enable leaders to stay focused on mission and related outcomes.

Many nonprofit organizations don’t know their full costs and settle for less recovery than full costs.

This practice has resulted in too few nonprofits generating financial surpluses and reserves to ensure they remain financially viable.  As a result, many nonprofits are just getting by without making important investments in their organizations’ futures.

So how does your organization start to recover its full costs?

A start is for financial leaders to review and update the current financial reporting systems and then do the following:

1.    Know your organization’s full costs, which include working capital needed to pay bills on time and reduce debt, fixed-asset investments to maintain and improve facilities, equipment, technologies and systems and cash reserves to protect against risks and invest in new opportunities and capacity.
2.    Have conversations with government, foundations, intermediaries, and donors to move towards an understanding of full cost recovery. Organizations’ leaders must ensure that they have sufficient funding sources before they accept grants and contracts to recover full costs.  For example, a program may only recover $50,000 from a program that truly cost the organization $75,000. So that leader needs to identify other revenue sources or find a way to reduce full costs to fill this financial gap or not accept the $50,000.
3.    Banish the overhead ratio as a measurement of organizational efficiency or effectiveness.  Each organization is unique and a lower overhead ratio or high overhead ratio does not indicate if an organization is more or less efficient or effective.
4.    Have conversations with government, foundations, intermediaries and donors to explain that full costs include overhead costs. Explain that overhead dollars help the organization to run smoother and allows more clients to be served.

While funding sources have limited resources, it is important that they understand that their nonprofit clients have these same financial challenges. Grantors need to encourage and allow nonprofit grantees to report full costs, including all overhead costs.  Most nonprofits underprice programs so it’s important that grantors encourage full cost reporting.

Funders should focus on what the organization achieved with the grant dollars and allow nonprofits to keep unspent funds as a contribution towards full cost recovery.
Nonprofit financial leaders and funders need to work together to embrace the concept of full costs, which is much greater than just direct-program expenses and overhead recovery.

Jim Simpson, CPA and director of Financial Technologies & Management, is a nonprofit financial leader and trainer, CFO, controller, forensic consultant and software advisor, including Abila MIP Fund Accounting since 1999.  He has served CFO, controller and software advisor for over 25 years to over 350 nonprofit organizations.

Contact Financial Technologies & Management to see how we can help your nonprofit with accounting solutions.  You can schedule an appointment directly from the website at WWW.FTMLLC.COM, email or phone at 317-819-0780.

Why funding overhead is not the real issue: the case to cover Full Costs by Claire Knowlton of the Nonprofit Finance Fund, The Nonprofit Quarterly, Winter 2015

California Association of Nonprofits Overhead Project at

Wednesday, February 17, 2016

Financial tools help board and management decisions

Nonprofits, like some for-profit companies, have two sets of leaders. The organization’s executive director and its staff have the responsibility for ensuring that the nonprofit operates effectively on a day-to-day basis. At the same time, the organization’s board of directors must ensure that the nonprofit remains relevant and financially sustainable.

Two components that are critical to maintaining healthy relationships between the two factions are shared expectations and the board understanding the organization’s business model, specifically where revenue comes from and how the money is used.
The problem with financial health and sustainability indicators is that many leaders, staff and boards, do not have strong financial management skills. In our work with nonprofits, we have found that providing leadership with visual information, through charts and graphs, is most useful.

One way to share the organization’s financial picture is using a dashboard. Much like a car’s dashboard, it provides decision-makers information quickly and identifies problem areas. Areas to review regularly might include: program impact and outcomes, financial health and sustainability, operational excellence, staff and board development and development of external relationships.

Another tool to use is a mission and matrix map ( This map or a similar illustration explains how each program is funded. It also shows whether programs are self-supporting or draw funds from other programs or fundraising activities. The map equips board members with the financial knowledge and understanding needed.
The matrix exercise can be transformational in helping board members really understand how an organization works. First developed in 1968 by Boston Consulting Group’s Growth-Share Matrix, in “Nonprofit Sustainability: Making Strategic Decisions for Financial Viability,” the authors develop a framework to help integrate financial and social impact considerations into strategic decision-making. 

(Review: reviews/entry/nonprofit sustainability jeanne bell jan masaoka steve zi  mmerman )
Contact Jim Simpson at Financial Technologies Management Group in Indianapolis for assistance in developing your organization’s key performance and financial indicators.
Jim Simpson, CPA and president of Financial Technologies & Management, is a financial leader and trainer, CFO advisor, and forensic accountant to nonprofit organizations since 1999, serving over 350 nonprofit clients. He has worked as a CFO, Controller and software advisor for over 20 years.

What’s your nonprofit tax IQ?

By Jim Simpson, CPA and president of Financial Technologies & Management

Aren't nonprofit organizations exempt from nonprofit tax issues except employment related taxes?    

The answer is no, but many organization's make this assumption.  With limited accounting and finance staff, there is a tendency to rely too much on other professionals for this knowledge.   It is also important to develop internal capacity to deal with nonprofit tax issues as the board and management are ultimately responsible.  If these nonprofit tax issues aren't dealt with proactively, they can take significant effort and resources to resolve later, reducing your ability to serve others.

The following is some basic nonprofit tax knowledge:

  •  Form 990 - The Internal Revenue Service has updated the Form 990 for 2012 after the major over haul in 2008. 
  •  Health Care Tax Credit - There has been a health care tax credit available for smaller nonprofits with 25 or fewer employees starting in 2010. 
  • Property and Utility Taxes - If your organization owns a building,  Are you sure you are exempt from property and utility taxes? 
  •  Sales and Innkeeper Taxes - If your organization purchases items, are you sure you are exempt from sales and innkeeper taxes.
  • Unemployment Taxes - In Indiana, an nonprofit employer of 3 employees are less should be exempt from State Unemployment and most are exempt from Federal Unemployment taxes. 
  • Other - For Charitable Gaming, do you follow these laws and have systems to be in compliance.  For fundraising events, what steps are you taking to minimize facility fees?  For merchandise or publication sales, what are you doing to minimize any fees or taxes?
More Information - At the end of the article will go into more detail about how to stay in compliance and avoid taxes and penalties.  What are you doing to make sure you are paying no penalties and taxes and staying in compliance.   If this nonprofit tax issues aren't dealt with proactively, they can take significant effort to resolve with significant resources allocated to compliance.  Additionally, these taxes and penalties increase your cost and ability to serve others.

The Internal Revenue Service 2012 Form 990 major updates include the following:  A reminder to not include SS#'s as the IRS and filing organization are required to publicly disclose return upon request.  Schedule F instructions are clarified to let an organization know when they are required to disclose grants and assistance for foreign organizations or individuals.  Part XI, Reconciliation of Net Assets includes new lines for unrealized gains and losses, donated services and use of facilities, investment expenses, and prior period adjustments  that were previously included on Schedule D.  Part IV, List of Officers and Directors no longer requires addresses.  Schedule G, Fundraising Activities is revised to clarify that all contributions, not just charitable contributions, should be reported with the fundraising event.  Schedule L, Transactions with Interested Persons requires the reporting relationship between disqualified person and filing organization.  Schedule O, Supplemental Information requires a filer to list the type and amount of each other expense when it exceeds 10% of the total functional expenses.  Keep in mind the different filing thresholds which include Form 990-N Electronic Notice (e-Postcard) for organization's with gross receipts of $50,000 or less.  Form 990-EZ threshold is gross receipts of $200,000 or less and Total Assets at the end of the tax year less than $500,000.  Form 8868 (extension) may be filed electronically or in paper form.  The IRS Annual Report noted the following common issues:  private benefit and inurement, no filers, political activities, employment tax issues, and organization's not operating as required by exempt status.

The health care tax credit is a great contribution to smaller nonprofit to offset increasing health insurance costs.  It maybe difficult to qualify if the employer contributions to health insurance are not enough or the average salary of your employees exceeds $50,000.

For property, utility, innkeeper, and sales tax exemptions, you need to make sure that you meet the proper filing requirements.     A nonprofit organization must register for a sales tax exemption by filing Form NP-20A, available online at  Form ST-105 is used by nonprofits for sales tax exemptions including the 10 digit state tax ID.   The Sales Tax Information Bulletin #10 lists out the nonprofit sales tax exemption.  Form ST-200 is used for each account to exempt sales taxes from utilities.  GA-110L can be filed to claim a sales tax refund relating to utilities for the current and prior 3 years.  For property exemptions, you need to file Form 136 on the even years along with Form 103 and Form 104.

For IN state unemployment, You are no longer exempt once you employ four or more individuals for a day for 20 weeks during the calendar year. There is no minimum dollar amount associated with this qualification.  You may opt to become a reimbursable employer, as opposed to an employer paying premiums.

Since 1999, Financial Technologies & Management (FTM) is a full service CPA firm providing financial and accounting management and software technology solutions exclusively to over 350 nonprofit and religious organizations.  We work with our clients to provide them with this nonprofit tax expertise along with other financial and accounting management solutions along with software technology solutions.  We have extensive nonprofit experience to meet our clients needs regardless of size.  Our Controller and CFO services insure we provide a full and comprehensive services approach to meet our clients needs.   Contact us today to see how our firm's approach, philosophy, and benefits can help your nonprofit organization.