Managing Your Chapter’s Finances
Adequate record-keeping reflecting chapter history, policy decisions and financial health should be maintained. The chapter leadership has a responsibility to the members to maintain the fiscal integrity of the organization. To assist your chapter in organizing its records and maintaining financial information, the following procedures are recommended:
- Maintain a permanent file with the following information:
– Chapter bylaws
– EIN number (Employer’s Identification Number)
– Chapter minutes in chronological order
– Record of chapter’s financial transactions
– Quarterly financial reports
- Chapter financial records should be maintained for at least 7 years. This is the same length of time that your personal financial records should be kept in case there are any questions from the IRS.
NANN is organized as a non-profit, tax-exempt professional organization under section 501(c)(6) of the Internal Revenue Code and section 23701e of the California Revenue and Taxation Code. For the benefit of its chapters, NANN also has a Group Exemption. The exemption recognizes chapters as subordinate groups of the national organization and gives them tax-exempt status as well. Some states require a tax return to be filed even if the chapter is included in the Group Exemption. Each chapter should check with their local IRS office. The most common misunderstanding about a tax-exemption is that it exempts the Association and its chapters from all taxes. However, this is not the case. Tax-exempt status means only that the Association and its chapters do not pay federal tax on income from activities that are directly related to the organization’s purpose; education. However, if income is generated by an activity unrelated to the organization’s purpose, the chapter MUST pay tax on that income. Such “unrelated income” includes money received from garage or yard sales, bake sales, raffles, and the sale of promotional items, even if no profit was realized. In order to conduct such sales, Chapters must:
- (1) Obtain a certificate of registration from the Sales & Use Tax Division of their State Department of Revenue
- (2) File Sales and Use Tax Reports and pay the tax due. If the unrelated business income is more than $1,000, the chapter must also file a federal tax form 990-T. Chapters who receive “unrelated income” but fail to report and pay sales tax in an appropriate and timely manner may not only be required to pay penalty and interest on that sales income, but risk having their tax-exempt status revoked.
Receipts UNDER $50,000
If the chapters’ gross receipts are $50,000 or less, an annual electronic notice, Form 990-N, must be submitted to the IRS by the chapter. The submission of the 990-N is free of charge and is submitted online. In order for a chapter to be eligible for the group exemption, they must have gross annual receipts less than $50,000, and the following must be included in their annual
chapter charter renewal to the national office:
- A current copy of bylaws
- Officers list including contact information
- EIN Number
Receipts OVER $50,000
If the chapters’ gross receipts are over $50,000, a paper tax return, Form 990 must be submitted to the IRS. IRS forms can be printed from the IRS website at www.irs.gov. In the unlikely event that a chapter’s gross receipts exceed $50,000 per year, the chapter should file a Form 990EZ (Return of Organization Exempt from Income Tax).
State Tax Return
Generally, the chapter will not need to file a State tax return. However, chapters should check with their individual states, as requirements may vary.
All chapters are required to have an EIN number for tax purposes or bank accounts. If your chapter does not have one, call your local IRS office to get one. Additional information about obtaining an EIN can be found on the following IRS webpage: www.irs.gov/businesses/small/article/0,,id=97860,00.html
In order to maintain financial viability, the chapter can explore all potential sources of income.
As a non-profit organization, you are entitled to open an interest bearing bank account. Establish a reserve account as soon as feasible to begin building a financial nest egg that will help underwrite chapter growth.
Make all meetings, seminars, luncheons, dinners, and educational programs self-supporting so that a budget deficit is avoided.
All chapters should set their dues amount that is charged to members, in order to offset expenses. Dues should be reasonable, but also provide funds necessary to run the chapter. NANN Chapter Dues are collected by the National Office and then directly deposited into the Chapter’s bank account quarterly.
This is an area where you can be creative – have bake sales, solicit sponsorships and grants, sell ad space in your newsletter, charge non-members higher fees, have raffles or auctions.
Many chapters solicit and receive donations from corporations and other sponsors to launch and support their activities. While no restrictions exist to obtaining such funds for the chapter, those donations are not deductible by the donors as charitable contributions as defined in section 170(c) of the Internal Revenue Code.
A number of chapters have sponsored raffles at their meetings as a means of generating income. Since many state laws prohibit gambling, a raffle’s validity will depend on the gambling laws in the state where the raffle is held. Before planning raffles, contact your Representative at the state level.
Preparing a Budget
A budget is a valuable tool to help plan the upcoming year. It provides a structure to forecast and measure the activities of the organization. Once a budget is approved and implemented, it becomes a standard with which to measure the chapter’s performance on a monthly, quarterly, or yearly basis. In addition, a budget can provide an early warning if adjustments in spending or revenue collection are necessary. The work on an upcoming budget begins before the current year is completed. The following steps will guide you through the initial phases of budge development:
- Specify the financial goals of the chapter. The goals might include:
- Long term goals, such as building a reserve equal to one year’s expenses.
- Functional goals, such as making a 10% profit from the annual conference.
- Short term objectives, such as purchasing a computer.
- Select the specific categories of expenses and revenues for the budget.
- Compare and analyze the current year’s budget with actual results to date and an estimate of year-end results.
- Discuss the upcoming year with chapter officers. Additionally, develop the chapter budget with input from the various committee chairs. Will there be any significant changes in the number of meetings, meeting locations, new programs, additional newsletters, etc.
- Review the budget line by line to determine potential additions or deletions.
Once you know which budget items will continue, and which need to be changed, you are ready to prepare your budget for the next year. Various sample budgets are provided for you in the resource section of this handbook, but here are some practical ideas to consider:
- Start with fixed or predictable budget items. Examples: Mailing activity will increase by 3% and the post office will increase the price of stamps by 10%.
- Know your chapter’s history. For example, if membership has decreased by 5% in the last 2 years, you would build that expected decrease into the dues revenue budge.
- Document your efforts. Prepare notes or schedules that explain the rationale behind budgeted numbers when feasible. These explanations will help you review financial performance during the year, as well as develop subsequent budgets. Save your notes for future officers.
- Seek experienced help. For example, vendors can provide estimates for printing, meeting rooms, etc.
- Marshall Support. Involve chapter members who make decisions that carry budget impact. This involvement brings responsibility and accountability to the budget.
- Get budget approval. Once the budget is completed, it’s best to get it approved by the officers before the start of the New Year.
- When the budget is implemented, compare it with actual results on an ongoing basis (monthly or quarterly). If you find variances between actual and budgeted results, determine the underlying reasons. If the variances are significant enough to affect yearend results, inform the officers as soon as possible to afford the opportunity to change plans if necessary. Document variances so the information can be taken into account when planning next year’s budget.
- Budgets should be retained for a 3 year period.