FINANCIAL GUIDELINES FOR SPSF AFFILIATES

• Revenue Controls
  


• Audit
  


• IRS Regulations
  


• Reporting Requirements for Charitable Organizations
  


• Donor Correspondence
  


• Budgeting
  


• Sample Affiliate Accounting Procedures
  


• Sample Budget
  


• Sample Fiscal Sponsorship Memorandum of Understanding
  

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Financial Management Overview
There are standard financial management policies and procedures common to nonprofit organizations that ASPSF affiliates must follow. These policies provide your board of directors with an accurate picture of income and expense. Internal controls agreed upon by the board offer safeguards against any misunderstandings or discrepancies arising from the management of finances.

Certain decisions must be made when an affiliate is established or renewed. One of the most critical decisions is whether the SPSF board of directors will establish itself as an independent, incorporated nonprofit organization with tax exempt 501(c)3 status or seek fiscal sponsorship by such an entity. Without tax exempt status, your organization may not solicit donations in the state of Arkansas, nor may your donors receive any tax benefits from their donations to your organization.

Other important factors to consider are included below. Some of these decisions may depend on fiscal sponsorship agreements:

• defining the SPSF's fiscal year;
  


• establishing a checking account at a local bank and selecting who may sign checks; It is recommended that two people are required to sign all checks.
  


• selecting an independent auditor;
  


• maintaining nonprofit, tax exempt status;
  


• selecting a board treasurer and determining his/her duties;
  


• establishing a repository for all financial materials;
  


• establishing policies that clearly state the limitations on fund management, use and disbursement; and
  


• developing a working budget outlining anticipated income and expenses.
  

Once the above are completed, procedures appropriate to your scholarship fund can be determined. These include:

• the selection of computer software or other recordkeeping systems, with special attention given to safeguarding sensitive student information;
  


• the establishment of procedures concerning petty cash, including strict rules governing its use and a clear and careful system for recording its expenditure;
  


• the selection of a person to open mail and record all monies received in a "cash receipts" journal; additionally, all checks received should be immediately endorsed "for deposit only";
  


• the selection of a trained individual to prepare all accounts payable and receivable;
  


• the selection of an additional individual, other than the one who handles the mail and deposits, to oversee and reconcile the bank account;
  


• the preparation of monthly reports to the board detailing expenses and revenues.
  


• a dedicated mail receptacle, preferably one that does not change when board leadership changes; and
  


• mode(s) of communication that do not change as leadership changes, such as a dedicated SPSF email account, telephone, and/or fax.

Each affiliate should begin planning a budget and organizing fundraising activities prior to the beginning of each fiscal year. While preparing the budget, the board president should maintain a close channel of communication with both the finance and fundraising committees. Input from both is essential.

If an ASPSF affiliate is handling money for the first time and does not have a fiscal recordkeeping system in place, we highly recommend that a qualified, experienced accountant or bookkeeper be engaged to assist in setting up such a system and training members in its use.

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Revenue Controls:
Internal controls help insure the reliability of accounting data and promote operational efficiency. ASPSF recommends segregation of duties, which reduces the chance of loss or theft of money. The following revenue controls are suggested:

• One person (other than the person recording the deposit in the checkbook or accounting program) should be designated to collect and deposit funds;
  


• All checks received should immediately be endorsed "For Deposit Only to the Account of (name of affiliate)". Each donation for deposit should be recorded on a deposit slip, along with the name of the donor or payee. The deposit slip should be prepared in duplicate or photocopied, along with the items being deposited, and delivered in a timely manner to the bank.
  


• One copy of the deposit should be retained by the board treasurer as a control;
  


• Cash collected at events should be counted by a person other than the one who collects the money and deposited immediately, with deposit slips prepared in duplicate; and
  


• No expenses should be paid out of cash collected at an event. A separate petty cash account should be maintained, if necessary, and all payments out of petty cash must be accompanied by a verifying receipt.
  

Click here to view sample SPSF affiliate accounting procedures to further guide you through the delegation of financial tasks within your Affiliate.

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The Audit:
Every nonprofit organization handling money should be audited on an annual basis by an independent auditor. The resulting document should be available to board members, donors, and others requesting proof that your funds are managed well. Audits vary in their complexity so if you are in the beginning stages of developing your scholarship fund, your audit should be fairly simple and brief. The more money you handle and the more varied the sources of the money, the lengthier your audit will be.

Please remember that there are many experienced bookkeepers and accountants who are willing to volunteer with nonprofit organizations and lend their expertise to our fiscal recordkeeping needs. Finding such a volunteer will add much needed human resources to your efforts and reduce or eliminate the cost of paying for expensive services.

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IRS Regulations:
In order to provide tax exemptions for charitable contributions, nonprofits must apply to the Internal Revenue Service for public charity tax-exempt status. This status is also extremely important to donors such as private foundations that can only give to tax-exempt organizations. The ASPSF encourages its affiliates to partner with established nonprofits or public institutions that already have tax-exempt status. These organizations are accustomed to filing documents like the annual Form 990 with the IRS. If such a partnership is not possible and an affiliate does not already have its tax-exempt status in place, it may want to go through the process of applying for tax-exempt 501(c)3 status. This process requires filing fees paid to the local circuit court, the Arkansas Secretary of State, and finally to the IRS, along with the proper documents (articles of incorporation, bylaws, etc.). We encourage affiliates in this situation to contact a local attorney or CPA familiar with the process.

All nonprofits with tax-exempt status are required to annually file Form 990 with the IRS. There is a short form, the Form 990 E-Z, for those organizations handling between $25,000 and $100,000 per year. Beginning in 2008, organizations handling less than $25,000 are required to electronically file a 990-N (commonly known as an e-postcard). Almost all IRS forms can be downloaded from the IRS website at www.irs.ustreas.gov/formspubs/index.html.

IMPORTANT: Because IRS filing rules and regulations change often, the above statements are only guidelines and should be verified by a knowledgable tax professional.

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Reporting Requirements for Charitable Organizations:
All charitable organizations soliciting financial support within Arkansas are required by Arkansas law to annually register with the State Attorney General (ACT 1198). Registration is free and requires a simple form to be completed and mailed. If an organization hires a professional fundraiser who takes a percentage of the proceeds as a fee or if your revenue is over $500,000 per year, the reporting is more complicated. For more information, contact the Arkansas Attorney General's office at (800)482-8982 or http://www.ag.state.ar.us.

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Donor Correspondence:
As of 2007, donors are not able to deduct cash contributions from their taxes without adequate supporting bank records or written correspondence from your organization. Each donor should promptly receive a letter written on your official stationery indicating the following:

• the amount of the cash donation or best-guess estimate of the value of donated goods and services,
• the date the donation was received,
• the fact that the donation is tax deductible by virtue of your tax exempt status, and
• an indication if the goods or services were given as a result of the contribution.

For more information on IRS rules and regulations regarding tax deductible contributions, visit http://www.irs.gov/pub/irs-pdf/p526.pdf.

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Budgeting:
A budget should be viewed as a blueprint for expenditures. It is never exact and is not meant to be. It is, however, your very best guess concerning your financial need for the year, what financial resources you will have available to you, and how you will spend it. ASPSF divides its budget into two distinct sections, income and expenses, in order to have a clear picture of our anticipated sources of income and expenses. As an organization with salaries to pay, an office to maintain, and quite a few expenditures to keep track of, ASPSF may differ from affiliates in the complexity of its budget.

Click here to view a sample budget.

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