2.1. The chapter complies with federal and state reporting requirements.
According to the National Center for Nonprofit Boards, one of the 10 basic responsibilities of nonprofit boards is to manage the nonprofit organization’s resources effectively. Complying with federal and state financial reporting requirements protects the chapter from costly penalties and safeguards its tax exempt status. Thus, this is an important component of the board’s fiduciary responsibility. Compliance includes filing federal and/or state tax forms. State requirements for nonprofit organizations vary.
Recommendations on how to accomplish:
Apply for and obtain a 501(c)(3) tax exempt classification if your chapter is not already designated as one. It will exempt the chapter from most federal income taxes, and contributions made to the chapter will be tax deductible by the donor. An easy way to do this is to check with ATD whether the chapter is included in ATD's group exemption, which automatically grants 501(c)(3) status to participating chapters.
Apply for a unique Federal Identification Number, also known as an Employee Identification Number (EIN), if your chapter does not already have one. Your chapter relations manager can provide details on the application procedure.
Consult with your state’s department of taxation or revenue or a local CPA familiar with nonprofit tax issues to determine any tax filing and reporting requirements. All chapters are required to file either a 990‐N or a 990‐EZ/Form 990 with the IRS for each calendar year. Chapters that fail to file may lose their tax‐exempt status and will be dropped from ATD’s group tax exemption (if the chapter is currently participating in this option), and will be ineligible to be a part of this group in the future. Click here to access the 990-N. The 990-N or 990‐EZ/Form 990 is due every year by the 15th day of the 5th month after the close of the chapter’s tax year (for most chapters, usually May 15). Visit http://www.irs.gov/ for more information.
2.2. The chapter board develops and approves an annual operating budget and makes it available to members.
Preparing and managing a chapter operating budget helps leaders plan for and deliver products and services that meet member needs without exceeding the chapter’s financial resources. In addition to defining the year’s projected revenue and expenses, it provides leaders an ongoing tool to evaluate and redirect chapter efforts when necessary. It is also useful as a historical reference when planning the next year's activities. An annual operating budget should be developed regardless of a chapter’s size or income.
Recommendations on how to accomplish:
Develop a budget:
Assess the chapter's current financial position.
Review the chapter's goals and existing programs and services based on members’ needs.
Estimate revenue for the coming year.
Estimate expenses for the coming year.
Prepare budget worksheets for each program and administrative area.
Compile all program and administrative budgets into an overall annual chapter budget.
Have board approve final budget.
Publish final budget in chapter newsletter, member mailing, or make available to members electronically.
Review the budget at mid-year (recommended) and make adjustments as necessary. Establish a reserve account for unexpected expenses.
Submit a current balance sheet and income statement to ATD chapter services.
2.3. The chapter board ensures an annual internal or external financial review is completed by an individual or group not directly responsible for the management of the chapter’s finances.
Conducting an annual internal/external review verifies that established policies, procedures, and internal controls are being followed in the daily operations of the chapter. Reviews assure that collected monies, such as members’ dues, are accounted for and being used properly. It also confirms that the accounting records and financial statements are accurate and complete. Therefore, this is an important component of the board’s fiduciary responsibility.
Recommendations on how to accomplish:
Conduct internal and external reviews on an alternating basis.
Have an accountant or other financial manager perform the external review.
Have a member-based committee conduct the internal review, provided the members are not directly responsible for the chapter’s financial management.