Taking the Fear Out of Numbers: The Dollars and Sense of your Donations. Agenda 08/11/2013. Heather Young and Samantha Zimmerman

Transcription

1 Taking the Fear Out of Numbers: The Dollars and Sense of your Donations Heather Young and Samantha Zimmerman Agenda The Sitch Defining Terms financial and fundraising Tax Receipting Processes Accounting Processes Hands-on Exercises: Reconciling donor and accounting records Discussion Q&A The Sitch 1

2 The Sitch Situation #1: Two silos The Development Director and the CFO each prepare reports for the auditor The Development Director runs a list of tax receipts; the CFO prints out the detail in the donations accounts The figures are different unpleasant surprise! The fix: compare records throughout the year to identify differences while the problems are fresh The Sitch Situation #2: Weak procedures The Executive Director of a small org prepared some tax receipts by hand and others on the fundraising software At year-end, it proves impossible to verify her tax receipt total against the donations total in the books Donors called to say they hadn t received receipts, and it was impossible to verify whether one had been issued The fix: consistency, standardization, procedures! The Sitch Situation #3: Insufficient training For the gala, the Executive Director issued split receipts (based on cost rather than FMV ) However, she didn t explain this to the bookkeeper, who posted 100% of gala ticket sales revenue to a gala account without separating the receipted portion At year-end, total charitable donation receipts did not issue the bookkeeping total for receipted gifts The fix: good communication, key staff must all know CRA rules 2

3 The Sitch Situation #4: Conflicting reports The Marketing Manager and the CFO each present at the Board meeting Both include the value of subscriptions sold The figures come from the same software but the financial reports are based on bank deposits, and the subscription reports are based on reserved seats Why a difference? Has to do with how ticketing software holds orders prior to seats being assigned The fix: know your software! The Sitch What s your situation? Any comments, observations, cautionary tales you d like to share? Concepts to Know - Accounting 3

4 Concepts to Know - Accounting The Accounting Year Accounting works on cycles Weekly / monthly routines Paying bills, processing deposits, issuing reports Annual routines Finalizing statements, being audited, filing T3010 Concepts to Know - Accounting Accounting Process Compile many transactions into meaningful statements A series of steps that summarize the details methodically Verification to ensure accuracy and reliability Examples of accounting verification Journal entries match documentation Figures match outside sources (e.g. bank statement) External professional scrutiny through audit Concepts to Know - Accounting Audits Assurance engagement Verify accounting records, processes Presents fairly, in all material respects Not a guarantee Required by many government and private funders (although not the Charities Directorate) 4

5 Concepts to Know - Accounting GAAP (Generally Accepted Accounting Principles) Everyone follows the same rules / guidelines / standards Tougher scrutiny for financial records than any other aspect of an organization's reporting Accounting records provide the benchmark for testing fundraising records Concepts to Know Tax Receipting Concepts to Know Tax Receipting Record Combination of data fields within your database which combine to make meaningful information Donor Record: contains individual donation records E.g. Susan Jones February 2, 2010 $100 January 29, 2011 $100 January 31, 2012 $125 February 15, 2013 $100 5

6 Concepts to Know Tax Receipting Receiptable Donation (Gift) a voluntary transfer of property without valuable consideration to the donor Non-Receiptable Donation an advantage is received or receivable as a result of a gift Advantage the total value, at the time the gift is made, of a benefit that a person is entitle to receive in relation to the gift. Concepts to Know Tax Receipting Gifts-in-kind Non-cash gifts, or gifts of property Contribution of service does not qualify as a gift for purposes of issuing official donation receipts. E.g. Joe s painting supplies gives 10 boxes of modeling clay to the community arts council for the after school art classes. The value of 1 box of clay without HST is $15. the community arts council issued an in-kind tax receipt to Joe s painting supplies for $150 (10 boxes x $15). Concepts to Know Tax Receipting Split Receipting Method used to calculate eligible amount of gift for receipt Donor has received an advantage in return for donation Value of advantage must be subtracted from amount given Criteria for split receipting Where a donor receives an advantage in exchange for a gift the charity must determine the fair market value of the advantage The gift, minus advantage, must still constitute voluntary transfer of property and meet the intention to make a gift threshold 6

7 Concepts to Know Tax Receipting Sponsorship When a business makes a donation to a charity in return for advertising or promotion of its brand, products or services. If a business receives same level of recognition as all other donors, no special treatment, nominal recognition, a receipt may be issued If a fair market value cannot be determined, a receipt cannot be issued. Concepts to Know Tax Receipting Fair Market Value Highest dollar value you can get for property in open and unrestricted market, between willing buyer and seller Determining Fair Market Value If fair market value is less than $1000, a member of the charity, or another individual with sufficient knowledge of the property, may determine its value If FMV is greater than $1000, it is recommended that the property be professionally appraised by a third party. Concepts to Know Tax Receipting Donation Date Date on which donation was received Tax Receipt Date Date on which the tax receipt was issued It is important to remember to difference between these dates in the reconciliation process when pulling reports 7

8 Tax Receipting Best Practices Does my charity have to issue tax receipts? NO! The CRA does not require charities to issue tax receipts Some charities set minimum donation thresholds for receipting Others do not provide receipts for certain fundraising events Donors cannot claim a charitable tax credit without an official donation receipt Therefore, charities use tax receipts as incentive to increase charitable giving 8

9 When does a charity have to issue tax receipts? There are no formal guidelines for issuing tax receipts Recommended times: February 28th this date is a benchmark for ensuring that all tax receipts from the previous calendar year have been issued to donors for income tax purposes Fiscal Year-End Ensures that all donations received in the fiscal year have been receipted and reconciliation can be done in preparation for completing the Charity Return (T3010) What information needs to appear on a tax receipt? 9

10 All official donation receipts for income tax purposes must contain: a statement that it is an official receipt for income tax purposes the name and address of the charity as on file with the Canada Revenue Agency the charity's registration number the serial number of the receipt the place or locality where the receipt was issued; the day or year donation was received the day on which the receipt was issued if it differs from the day of donation All official donation receipts for income tax purposes must contain: the full name, including middle initial, and address of the donor the amount of the gift the value and description of any advantage received by the donor the eligible amount of the gift the signature of an individual authorized by the charity to acknowledge donations the name and Web site address of the Canada Revenue Agency ( For non-cash gifts (gifts in kind) the day on which the donation was received (if not already indicated) a brief description of the property transferred to the charity the name and address of the appraiser (if property was appraised) the deemed fair market value of the property in place of amount of gift above 10

11 Receipt Sample Receipt Sample Does a charity have to issue paper receipts? 11

12 NO! Charities may issue computer generated receipts if these conditions are met: The computer system used to store the receipts is password protected and restricts entry to and modification of donor contribution records Donor records are stored on non-erasable media with copies kept off-site for recovery purposes Hard copies of issued tax receipts can be printed on request Can official tax receipts be sent by ? YES! Recommended precautions for electronic receipts: Receipts should be read-only or non-editable Receipts should be protected from hackers through the use of appropriate software The document should be encrypted and signed with an electronic signature The use of a secure electronic signature should be kept under the control of a responsible individual authorized by the charity Copies of -issued receipts must be retained by the charity 12

13 Who is responsible for issuing tax receipts? Tax receipts should be issued on a regular basis by an authorized person within the organization (staff member, volunteer, etc.) It is important to select someone who will ensure that all information is accurate and reported properly The authorized person should be alert to CRA regulations Who is authorized to sign a tax receipt? An individual who has been authorized by the charity to acknowledge donations Not necessarily same individual(s) with signing authority on bank account. What are the consequences for improper tax receipting? A charity that issues a donation receipt that includes incorrect or incomplete information is liable to a penalty equal to 5% of the eligible amount stated on the receipt. The penalty increases to 10% for a repeat offence within 5 years A charity that issues a donation receipt that includes deliberately false information is liable to a penalty equal to 125% of the eligible amount stated on the receipt. Accounting Best Practices 13

14 Classification as a core accounting function Classifying, recording, reporting, interpreting Classifying allows you to describe activity Categories capture the financial records of actions Revenue sources; expenditures Greater or lesser detail (subdividing) Accounts are the unit of classification An account is a category of information Transactions are entered into accounts and added to/subtracted from account balance Chart of accounts: a table listing all accounts in your books Financial statements: an organized, totalled list of account balances Exercise: How do you classify donations? Work in groups of at least 3 (find people you don t know!) Tell each other how your organization classifies donations EG Individuals, corporate, foundations but what else? Do you all do it the same way? Any surprises? 14

15 Management s Discretion Revenue (and expense) categories are defined by management There s no right way! Approaches to donations might recognize type of donor (individual vs. business); campaigns; events; donation type, soft credit Creating Consistency Financial Accounts = Database Categories Database software allows you to classify gifts Accounting software also classifies gifts The wrong way: conflicting categories between accounting and donations software Data Relationships One to one Donor dbase and accounts use the same categories One to many EG One account for Individual donations corresponds to a number of dbase categories (campaigns, events, board, major gifts, etc.) 15

16 Data Relationships Many to many could be a nightmare! Equivalent detail, or Detail in one software package and summary in the other But how can you tell things are correct? Reconciliation = Comparison + Analysis Casual definition: to bring together Compare two sets of records Identify the differences Are the differences errors? Correct them Are the differences ok? Reconciling items Creating Reconcilable Data Donations per accounting records = Donations per dbase If that was always true, no problem! Skillful classification yields a way of identifying errors 16

17 A Reconciliation Example: Bank Reconciliation Our books contain an account for the bank Payments & deposits in the order in which they re issued The bank s books contain an account for our organization Payments & deposits in the order received Normal: at month-end, different balances! Timing differences, errors, bank charges A Reconciliation Example: Bank Reconciliation Reconciliation document: Bank balance Plus o/s deposits Minus o/s cheques Equals balance in our books Don t stop till you re done! A Reconciliation Example: Bank Reconciliation Let s try one together! Discussion, Q&A 17

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