Have You: Met Your Financial Reporting Obligations?
Generally, when non-profit’s organize they choose a corporate structure. And why wouldn’t they? Directors and officers get the benefit of having a corporate “shield”, most foundations require grant recipients to be incorporated and, depending on the type of corporation, an organization can reap the benefits of special tax structures.
But there are downsides as well. A common example is the formality a corporate structure requires. There’s the meetings, the quorums, and the notices. Oy! But one that many organizations pay little attention to, and arguably the most onerous requirements, are that of financial reporting and record-keeping.
Nowadays, most states have some sort of code governing a non-profit’s financial reporting. And with the number of non-profit audits on the rise, financial reporting is one that many states are starting to look at with more scrutiny; whether its an organization of 5 or 50.
I couldn’t possibly cover the requirements of every state, but did want to touch on what these requirements might look like. For those in Texas (you lucky dogs) here are a few financial obligations your organization should be aware of. You might be required to:
- Maintain current, accurate and complete financial records of each financial transaction in accordance with generally accepted accounting principles.
- Prepare and/or approve an annual report conforming to the accounting standards of the American Institute of Certified Public Accountants. There is certain information required to be included in these reports as well.
- Keep financial records at the corporation’s registered or principal office for at least three years after the fiscal year closes.
- Make the records available to the public for inspection and copying.
As with anything, there are a few exceptions. For example, if your organization only solicits funds from its members, or does not plan on soliciting more than 10,000 dollars from people other than members, then you may not have to adhere to some of those requirements.
But you don’t know what you don’t have to do until you know what you do. So make sure to take a look at the financial reporting and records section of your state’s code (FYI, for Texas non-profits that is Subchapter H of Section 22 in the Business Organizations Code). If your organization gets certain state and federal grants look out for any special reporting/record-keeping requirements they may have. And lest we forget the reporting requirements the IRS has with its 990.
If you need to familiarize yourself with generally accepted accounting principles (GAAP) check out this Wikipedia discussion. The Texas chapter on all this financial accounting business can be found here. Tips on financial record-keeping for non-profits can be found on this management website and. this website has a good discussion of financial regulation of non-profit’s as well.
Also, note I used a corporation for the sake of ease (everyone knows what that is). But other organizing structures, such as an unincorporated association, have financial reporting requirements as well which organizations will be equally responsible for knowing.
Posted by Erin | 1 comments