Anyone familiar with non-profit corporation finance rules?

[kenny]

A friend asked me this and I told her I know a bunch of smart people whom I will ask . . .

She just assumed the position (unpaid but official) of the treasurer of a small non-profit corporation.
Serving this organization is good for her career so she's happy to do it.
She handles all the money, gets the bills and writes the checks for authorized expenses.

The corp president just returned from an industry function and told her she wants a check to reimburse her for flights and hotel bills.
She says she was there as a delegate representing the organization, and this sounds reasonable to my friend, as does the dollar amounts.

Is it my friend's job as treasurer to just obey orders and write the check assuming the expense is legal?
Or should she question the request and ask for proof that this is an authorized use of corporate funds, at the risk of damaging her relationship with the president?
Should she ask for receipts, or just print the emailed request which has the dollar amounts?
Is it her job to look for accuracy of claimed expenses in case things like alcohol or massages were sneaked in?
If it turns out to be inappropriate use of funds how much trouble could my friend get in for not knowing and just writing the check?

 

[Karl_K]

Re: Anyone familiar with non-profit corporation finance rule

Just because it is not for profit does not protect them from the recording and reporting rules corporations have to follow in most states and to the IRS.
In general receipts are needed and any meals covered a record needs to be kept of who was there and what was discussed.
A meal where the person is by themselves is almost always taxable income if the corporation pays the bill according to the IRS.
Frankly they should have an accountant on retainer to answer these types of questions.
Some people in a not for profit seem to think we are small so we don't have to do that.
The IRS regs cover everyone and state reporting usually kicks in at around 25k a year for non church non-profits.

 

[VRBeauty]

Re: Anyone familiar with non-profit corporation finance rule

Kenny - I don't even know enough about this to be dangerous, but this is what I do know:

A tax-exempt non-profit (501(c)(3)) is supposed to have a charter and a governing body. I believe it's also supposed to be audited once a year. So yes, there should be a system in place for ensuring that expenditures made from the organization's funds are appropriate. Your friend might want to start by seeing what the organization's charter (or by-laws) says and take it from there.

ETA Madam President should have receipts anyway, since she might need to prove that the reimbursement is tied to business-related expenditures.

 

[VRBeauty]

Re: Anyone familiar with non-profit corporation finance rule

Kenny - I don't even know enough about this to be dangerous, but this is what I do know:

ETA Madam President should have receipts anyway, since she might need to prove that the reimbursement is tied to business-related expenditures.

...what I meant to say is, Mme. president might need this proof for the purposes of her personal income taxes.

 

[zipzapgirl]

Re: Anyone familiar with non-profit corporation finance rule

Your friend definitely needs to get receipts for anything she disburses. It's not just to protect the organization, but it is to protect HER. Just because it is a volunteer opportunity and a non-profit doesn't make it risk-free for your friend.

Imagine what happens when someone comes in later and takes a look at the books and there are checks written without any backup or receipts. Not only could the president be accused of fraud or misappropriating funds, so could she. People could accuse her of having been in on a scheme and taking some of the money.

Your friend definitely needs to have certain controls in place to protect the organization and herself. She should keep all backup for any disbursements, best case have someone else signing off on the checks (two signatures), present monthly or quarterly reports to the board so that they know where the money is coming from and going to, and there should be tight control on who has access to move money into or out of bank accounts. Document everything. It's not necessarily up to her to "approve" expenditures -- the board or the management should be doing that (hopefully via email or signoff on the invoices) -- but it is necessary to keep proof that someone did.

Please encourage your friend to look into this closely and ask the board to keep a CPA firm on retainer for tax and accounting questions.

 

[zipzapgirl]

Re: Anyone familiar with non-profit corporation finance rule

To be more specific:

Is it my friend's job as treasurer to just obey orders and write the check assuming the expense is legal?
Or should she question the request and ask for proof that this is an authorized use of corporate funds, at the risk of damaging her relationship with the president?
Should she ask for receipts, or just print the emailed request which has the dollar amounts?
Is it her job to look for accuracy of claimed expenses in case things like alcohol or massages were sneaked in?
If it turns out to be inappropriate use of funds how much trouble could my friend get in for not knowing and just writing the check?

She should ask for the receipts. This would include a confirmation from the conference that the president was registered for the conference and the fee. The itemized hotel room invoice (some phone calls may be necessary, but things like movie rentals are not). If there is mileage, taxis or plane fare, then those receipts or an estimate of the miles * the statutory mileage rate (look on irs.gov). For group meals, the receipts for the meal along with attendees and what was discussed (full names and something short like "Discussed joint volunteer opportunities with X Nonprofit"). For individual meals, the receipt. The organization should hopefully have some policy on what types of expenses are reimbursable, like whether gym day passes at the hotel are reimburable or whether meals are limited to a certain amount per meal or per day. Policies regarding alcohol are usually more specific to what type of organization is involved, but aren't necessarily disallowed. Look for real receipts, not credit card slips or credit card statements.

I wouldn't go on a witch hunt looking for unnecessary expenses, but I would try to use due care in evaluating what was being charged to the organization. Is this what a donor would want his or her money to pay for? Does this honor the organization's mission and respect the responsible use of its funds?

This has nothing to do with "trust" or the relationship with the president. If the president questions her asking for the receipts, then she should question herself whether this position is right for her.

 

[kenny]

Re: Anyone familiar with non-profit corporation finance rule

Thanks everyone for the great advice!!!

 

[bluebirrrd]

Re: Anyone familiar with non-profit corporation finance rule

She should ask for the receipts. This would include a confirmation from the conference that the president was registered for the conference and the fee. The itemized hotel room invoice (some phone calls may be necessary, but things like movie rentals are not). If there is mileage, taxis or plane fare, then those receipts or an estimate of the miles * the statutory mileage rate (look on irs.gov). For group meals, the receipts for the meal along with attendees and what was discussed (full names and something short like "Discussed joint volunteer opportunities with X Nonprofit"). For individual meals, the receipt. The organization should hopefully have some policy on what types of expenses are reimbursable, like whether gym day passes at the hotel are reimburable or whether meals are limited to a certain amount per meal or per day. Policies regarding alcohol are usually more specific to what type of organization is involved, but aren't necessarily disallowed. Look for real receipts, not credit card slips or credit card statements.

I wouldn't go on a witch hunt looking for unnecessary expenses, but I would try to use due care in evaluating what was being charged to the organization. Is this what a donor would want his or her money to pay for? Does this honor the organization's mission and respect the responsible use of its funds?

This has nothing to do with "trust" or the relationship with the president. If the president questions her asking for the receipts, then she should question herself whether this position is right for her.

I work for a non-profit, and "what she said."

Including the original itemized receipts, we're also required to provide a conference agenda as backup justification for our travel and documentation of which meals were included with our conference registration and which weren't. For the other meals, we actually follow set limits based on geography, http://www.gsa.gov/portal/category/21287. Using this system, meal receipts aren't needed.

Our accountants are strict about what they'll accept and what they won't. Their jobs and our jobs are on the line if we were to fail an internal audit or a monitoring visit from one of our funding sources.