May 07 2014

The Nondiscrimination Form

Written by Cynthia A. Cox, CPA

The IRS deadline for filing the document commonly known as “The Nondiscrimination Form” is fast approaching. It is always due five months after the organization’s fiscal year end. So for organizations that have a calendar fiscal year your form is due May 15!

The official name of the document is the “Annual Certification of Racial Nondiscrimination for a Private School Exempt From Federal Income Tax” (Form 5578). So if you are a tax-exempt organization (church or other religious organization) that operates, controls or supervises a private school, you are required to file this document every year. Form 5578 requires your organization to adhere to several requirements assuring compliance. Let me explain more fully.

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Apr 29 2014

The Big 3 Accounting Services--Part One: Compilations

Written by Cynthia A. Cox, CPA

There are three major types of assurance services that accounting firms can offer churches and non-profit organizations: compilations, reviews and audits. The best type of engagement for your nonprofit depends on your need for the financial statements, expectations of third parties such as granting agencies or creditors, the volume of your financial activity or the complexity of the your organization itself. Each engagement requires a different amount of work by the accounting firm resulting

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Apr 15 2014

Clergy Housing Exclusion - An Update

Written by Cynthia A. Cox, CPA

It was a deafening gavel that banged tremors throughout the religious communities in the United States. Last November, a federal judge in Wisconsin sided with an organization called the Freedom From Religion Foundation (FFRF) that filed a lawsuit against the IRS code that excludes clergy from taxes on housing costs received from the church she or he serves. The atheist leaders of FFRF claimed in the lawsuit that the practice violates the freedom from religion clause.

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Mar 31 2014

An Internal Audit of Social Media

Written by Cynthia A. Cox CPA

Upon reading the title of this blog you might have thought, “What does social media have to do with accounting principles or financial management?” I thought the same thing—until I began expanding into the use of social media marketing for my company. I just want to share these thoughts so that you can take action to make sure social media does not compromise the fiduciary integrity of your non-profit or church.

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Mar 31 2014

Safeguarding Church Donations

Written by Cynthia A. Cox CPA

“It’s hard to believe that someone would steal from a church.”

That thought is not uncommon and it’s probably one of the reasons that theft actually happens. When church leaders, ordained and lay, can’t imagine someone stealing from the church, they are likely not to implement financial safeguards and processes that remove the opportunities for theft.

Last month, an employee of Lakewood Church in Houston, Texas reported to police that the offering for one weekend’s services was missing. More than $600,000, donations collected during Saturday and Sunday services in an early March weekend, was stolen from a safe. In 2004, the Episcopal Diocese of Texas discovered that its treasurer had embezzled more than $600,000 from its coffers. A few years before that the treasurer of national office of The Episcopal Church of the United States made off with $2 million before getting caught. So, do you think that there might a $20 bill here or 10-spot there that occasionally does not get counted and used for ministry?

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Feb 22 2014

Self-Dealing Transactions

Written by Cynthia A. Cox CPA

Here’s an all-too-frequent scenario in nonprofit organizations that places the organization at risk to be assessed excise tax payments by the IRS. A board member of an Organization purchases land adjacent to the nonprofit knowing that the it is looking to either purchase or lease adjacent properties. The board member then leases the property to the Organization for fair market value. The lease is voted on by the full board and everyone is aware of the lease cost. The board would have paid any other potential owner the same amount because it was reasonable. The board was also fully aware that the property was owned by one of its own members. By entering into this lease agreement the board has just compromised its tax-free status and could be assessed an excise tax for this arrangement.

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Jul 25 2013

The IRS Scandal What It Means to You

Written by Cynthia A. Cox CPA

Many non-profit organizations are understandably shaken and disturbed by the revelations coming out of the current scandal at the Internal Revenue Service. The IRS has been accused of using its power to prevent or delay ideologically conservative non-profit organizations from securing their tax-exempt status. Whether the reason for the delay is politically motivated or not, what lessons can we learn from the alleged abuse of power by the IRS?

First, it is critical that all non-profits stay current with the required governmental filings. These filings include everything from Form 1023 filed at inception to payroll tax reports and Forms 990 that are filed annually. Not all non-profits have the same filing requirements, but all of them have at least one filing requirement. Consult with a CPA experienced in non-profit taxation to ensure your organization knows exactly what it is required to file. If you are a church, you do not have to file a 990.

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Jul 25 2013

Who Commits Financial Fraud?

Written by Christopher Russell

As someone charged with the management or governance of a non-profit organization, you have a responsibility to your supporters to be a good steward of the monies you receive. While this responsibility includes the obvious, such as making and using a good budget and keeping administrative costs low, it also includes a responsibility to beware of fraud within your organization.

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Apr 07 2013

Bank Reconciliations as a Tool for Internal Controls

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Is it Really Important to Reconcile the Bank Statements Before Issuing the Monthly Financials?

The very first step I always take toward preparing monthly financial statements is to reconcile the bank statements. Without this process, you cannot know if the information you are presenting is accurate. Two important benefits can be gleaned from the reconciliation process.

First, it helps ensure that all transactions have been recorded in the general ledger. By comparing the transactions that cleared the bank with the transactions recorded in your general ledger, you know if everything has been included. You will also want to verify the numerical sequence of all checks written during the month, including the voided checks, to be sure that they have all been recorded. If you receive copies of the deposit slips, remember to verify that the cash portion of each deposit agrees with the cash received as shown in your count sheets.

Secondly, bank reconciliations help safeguard your assets by making sure that there is no unauthorized use of company funds. All cancelled checks should be examined to make sure the payee is a vendor of your organization and that the signer is an authorized check signer. Don’t forget about those bank drafts and electronic withdrawals; it is too easy today for someone to make a withdrawal from a bank account with minimal confidential information. To prevent this, we recommend that you compare the withdrawals on the bank statement with the invoices that support the disbursement. Fraud sometimes occurs when the bookkeeper decides to pay her personal bills out of her employer's bank account!

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Jan 25 2012

Are You Doing The Math?

You have completed the 4th quarter 941 and you have mailed out the W-2's, but did you compare the numbers? The IRS will compare them and send you one of their tacky letters if there are differences. So before you send that W-3 to the IRS, check the following calculations...

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