How do I create a budget for my homeschool group?

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From Marilynn Boyko, of  IHaveMy501c3NowWhat.com (like that URL name?) comes this advice on creating a budget for your nonprofit organization:

Creating a Budget
Budgets should be in place before the beginning of the fiscal year each year, with the past year’s budget closed out.

Each year the board should be the one with the assistance of the Executive Director to create a budget with line-items of expenses and revenues.

Start with Expenses

  • A line item refers to expenses such as facility rental, telephone, program operations, event costs, etc.
  • Each line item has an estimated cost for each quarter which totals up at the end of the year.
    Then each quarter the line-item is examined by the treasurer and the board to compare planned versus actual.
  • Compare what was planned to be spent and what was actually spent. Sometimes what was spent exceeds the allocation and sometimes it doesn’t.
  • When the line item exceeds the amount, money has to be allocated from another line item in order to balance the budget. It is all about balancing the budget and being wise stewards.

Then Plan Your Estimated Revenues

  • Then compare the planned versus actual revenues. Mid-course corrections can be made and adjustments made for each line item.
  • This keeps the board abreast and responsible for the financial health and well-being of the organization, and assists in keeping things real, realistic, and manageable.

 

Cover Money Mgmt HS Org
Need more help with creating a budget for your homeschool organization?

Order a copy of Money Management in a Homeschool Organization. It has sample budgets and tips to make record keeping easy!

 

 

 

Carol Topp, CPA

 

How to use another nonprofit’s tax exempt status (legally!)

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Hi Carol,
I run a support group that encourages homeschoolers to engage in STEM competitions. We have had students win prize money in the past and we would like to have be able to open a checking account to receive that prize money. Some organizations will give directly to students, others require an educational organization with a W-9. We are considering a DBA  or an LLC, where any prize money would be granted to the group and then distributed via an application process to homeschoolers who start STEM groups.

I am willing to personally take on the prize money as income to me if someone wins and deduct then the tax amount. Since we do not collect any dues, we do not want to file for 501 tax exempt. There is no money to pay the fee. If no one wins anything, we have no income to report.

Would you suggest either the DBA or the LLC, or do you have another suggestion?

Thank you for any assistance.
Blessings to you!

Kathryn

Kathryn,

Thank you for contacting me. You are doing a wonderful thing for homeschoolers!

From what you described, I don’t think a DBA (Doing Business As name registration for a business) or an LLC (a for-profit business) would be the best arrangement. My concern would be that grantors of the prize money would not award funds to an LLC/for-profit business.

Additionally,  accepting payments in your name might not qualify as an “educational organization” to the grantors.

Instead, you probably need to establish an official nonprofit organization (I can help with that) or find another nonprofit organization to take your STEM program under their umbrella. They let you use their tax exempt status and it’s easier than setting up a new nonprofit organization. It’s called fiscal sponsorship and it’s legal, if done correctly.

Learn more about Fiscal sponsorship

Carol Topp, CPA

Homeschool groups ripe for embezzlement

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From the Columbus (OH) Dispatch comes this warning:

Small nonprofits ripe for embezzlement

They’re often diligent, caring workers, and yet tempted by seemingly easy cash.

Working on the inside, thieves can hit school groups, athletic leagues and churches, especially when they’re surrounded by trusting colleagues and loose security.

And according to one expert, because of the disgrace and embarrassment that the crime brings an organization, their transgressions often are not reported.

The median loss to fraud for religious, charitable and social-service organizations was $106,000 last year, according to an annual survey by the Association of Certified Fraud Examiners. “We estimate that organizations lose about 7% of their net worth to fraud each year,” said Scott Patterson, the association’s spokesman.

“There are so many people doing the good work that nobody steps back to say, ‘Should we begin looking at ourselves. We’ve grown. We better put some checks and balances in,'” said Gary Zeune, a fraud expert whose speakers bureau, “The Pros and Cons,” travels the country. “The only people who can steal you blind are those you trust and who don’t have controls.”

Smaller organizations, such as school parent-teacher organizations, are often vulnerable because neighbors and friends are reluctant to offend by suggesting that dishonesty is possible.

“This is typically mothers stealing from their own kids,” Shaw said. “The kids are the shills out there selling cookie dough or doing the walk-a-thon, and the mothers are stealing it.

“If the board is too embarrassed to have checks or balances, they need to have a new board,” she added. “But if you’re an honest person, you shouldn’t be insulted by having a second set of eyes.”

It’s so sad to hear about embezzlement taking place in homeschool groups, but I know from homeschool leaders that it can and does happen!

How can you prevent embezzlement?

Money Mgmt Homeschool

Read Money Management in a Homeschool Organization: A Guide for Treasurers. It  has a helpful list of policies and procedures for your group’s treasurer and your entire board.

Keeping you safe,

Carol Topp, CPA

Paying your homeschool graduation speaker

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We provide our homeschool groups members with a graduation ceremony.  The group assists in planning the event and contributes $500 toward their expenses.  Some of the expenses were “love offerings” given to volunteers who sang, played piano, and created slide shows.  This was a challenge when it came to gathering receipts since it was not contract labor or services provided.
How should we handle future “love offerings” or “gifts” and meet requirements of the government for keeping receipts of expenses?  Because our record keeping has been nonexistent in the past, I want to make sure I am setting things up correctly and doing things within the confines of the law.
Thank you,
Trisha in Texas
Tricia,
I was treasurer for my homeschool group’s graduation ceremony for a few years and we did the same thing: gave “gifts” or speaker honorariums. We also did not have a receipt to prove the expense. The check I wrote to the speaker or singer was our only record of the expense.If you pay someone more than $600 in a year for their services such as the speaker, the singer, etc. then you should give them a 1099MISC at the end of the year (and a copy goes to the IRS).

If you are reimbursing a parent for decorations, etc. then you should have receipts from him/her. It’s not a personal service, but a volunteer reimbursement and no 1099MISC is sent to the volunteer.

Carol Topp, CPA

 

Calendar of Board Topics for Homeschool Groups

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This blog post from Nonprofit Law Blog had a great idea: Create a calendar of topics your board should discuss every year.

I modified their ideas a bit for typical homeschool organizations and came up with this list of topics for your board to discuss each month:

  1. Welcome new board members and give them a history of your organization, its purpose, an understanding of their duties and a board binder. Read over the bylaws and review your mission and purpose statement.
  2. Discuss new programs and activities.
  3. Decide on discounts and appreciation gifts for volunteers.
  4. Go over best practices to avoid fraud. Read them here. Implement changes as needed.
  5. Discuss fundraising techniques.
  6. Authorize committees, recruit members and delegate duties to them.
  7. Review your conflict resolution policy. How do you solve conflicts. Read The Peacemaker.
  8. Review your risk areas, safety policies and insurance coverage.
  9. Evaluate any paid workers, independent contractor agreements, and employment practices.
  10. Recruit, nominate and elect new board members.
  11. Set a budget near the end of the year for the next year.
  12. One month after end of fiscal year file IRS form 990/990-EZ or 990-N and any state forms.

As you can see, I have links to articles and blog posts on most of these topics.

And my books,

  • Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out
  • The IRS and Your Homeschool Organization.
  • Money Management in a Homeschool Organization

have many issues for your board to discuss as well.

Carol Topp, CPA

 

 

How to change your nonprofit’s fiscal year

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Carol,

I help run a homeschool co-op that has 501(c)(3) status.

The IRS has our fiscal year end as December 31 because that’s what our original officers put on our SS-4 application to get our employer ID number.  But we’d like to change it to a school year with our year end being June 30.

How can we change our fiscal year?

Tracy in Michigan

 

Tracy,

Changing your fiscal year is pretty easy.

Large nonprofits

If your homeschool organization is large enough that you file a Form 990 or 990-EZ (more than $50,000 in annual gross revenues), then you file a Form 990/990-EZ for the short period resulting from the change.

In Tracy’s case, the short period would be from January 1 until June 30.

Write “Change of Accounting Period” at the top of this short-period return.

 Small nonprofit organizations

But chances are your homeschool organization is small and files the annual information epostcard, Form 990-N. There is no way to write “Change Accounting Period” on the electronic Form 990-N.

In that case you can file the longer Form 990-EZ or file a Form 1128, Application to Adopt, Change, or Retain a Tax Year, to change its accounting period. Form 1128 instructions explain how to complete and submit the form.

User Fee

The Form 1128 may involve a $250 user fee. Ouch!

But, a user fee is not required if requesting an automatic approval (under any of the sections of Part II of the Form 1128). This probably applies to Tracy’s organization because it has not changed its fiscal year in the past 10 years.

Write a letter

Or the IRS says you can write a letter requesting a change in accounting period. Send the letter to:

Internal Revenue Service
1973 N. Rulon White Blvd.
Ogden, Utah 84404

 

Sources: http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Annual-Reporting-Requirements-Filing-Procedures:-Change-in-Accounting-Period
http://www.irs.gov/instructions/i990/ch01.html#d0e814

I hope that helps,

 

Carol Topp, CPA

Frugal homeschooling has drawbacks

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I read Cindy West’s blog post Warnings Against Frugal Homeschooling on Our Journey Westward blog.

It caught my attention. What could possibly be wrong with frugal homeschooling?

Cindy opened my eyes to potential problems in using all free materials (or too many freebies) in homeschooling.

Listen to the podcast here

 

In the podcast Cindy mentioned a few guides she uses to help plan her children’s academic progress. Read about them on her blog post Homeschooling Frugally: A Cautionary Tale

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Cindy West is the author of NaturExplorers nature study guides and Charlotte Mason Homeschooling. Find them at Shining Dawn Books.

Easy to understand financial reports for a homeschool organization

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I see a lot of financial reports from homeschool groups. Some are clear, easy to understand and helpful to the board members.

Others are a confused mess.


Read about the most common record keeping mistakes that homeschool groups make and how to correct them in my book Money Management in a Homeschool Organization


 

Recently, I looked over a financial report from a large homeschool organization. They had two goals:

  • Make the financial statements easy to read and helpful to their board.
  • Make it easy to prepare their annual Information return, IRS Form 990. Because their financial reports were confusing, I spent extra time and money reclassifying their information to fit the IRS annual information return.

I recommended that this homeschool organization create a Chart of Accounts similar to the IRS Form 990 and other nonprofit organizations.

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Organizing the Chart of Accounts by categories and using subcategories and indents will make the financial reports easier to read and understand. This Chart of Accounts clearly separates Program Expenses and Administrative Expenses. Categories and subcategories  can be added as needed, but I encouraged the organization to keep the list short to make it easier to read the financial statements.

This organized report will make preparing the Form 990 easier (and less expensive).

 

Carol Topp, CPA

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Accounting software recommendations for homeschool groups

I am thinking we will need to get QuickBooks to manage our finances.  Do we you recommend the nonprofit version?  I have not looked much into this yet.  Any input is greatly appreciated.

Nancy in CA

 

Nancy,

I don’t think you need the Nonprofit version of QuickBooks. Usually the Pro version is sufficient. The Nonprofit edition is helpful if you receive a grant and need to track grant expenses.

I usually recommend online accounting software instead of purchasing a desktop version. Online accounting means that several people can access your accounting records from their home computers. That’s very important. It also downloads your bank transactions automatically!

I recommend:

QuickBooks Online. You may be eligible for a free version of QuickBooks Online. I wrote about it here: Use QuickBooks Online for free

 Wave Accounting. I set up a small nonprofit on Wave recently. It’s working for them and it’s free!

Aplos Software which is popular with nonprofits and churches.

 

I discuss software options in a chapter in Money Management in a Homeschool Organization,
Cover Money Mgmt HS Org

Carol Topp, CPA

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QuickBooks for free to nonprofits

 

Read on update to this offer here.

I recommend you use online accounting software instead of  a desktop version. QuickBooks Online is available for free to qualified 501c3 nonprofit organizations.


Intuit, the makers of QuickBooks, the grand-daddy of accounting software, is offering its 2015 Premiere Nonprofit software package for free* to qualifying nonprofit organizations.

*A $45 Administration fee will be charged, but that’s pretty cheap. QB nonprofit sells for $250+

If eligible, your organization may receive one accounting product per fiscal year (July 1 to June 30).

Consult the eligibility and restrictions page to review your organization’s eligibility to participate in this program.

  • Donated product will be distributed under this program to qualifying organizations only, not to individuals.
  • Organizations may request one accounting product per fiscal year (July 1 to June 30).
  • Only organizations with an annual operating budget of less than $10 million are eligible to receive this donation.
  • This donation is available only to nonprofits with 501(c)(3) designation and to public libraries.

Get your copy of QuickBooks here: http://www.techsoup.org/intuit

 

Cover Money Mgmt HS OrgThe new year is a great time to start using accounting software.

If you need help with record keeping, consult my book, Money Management in a Homeschool Organization

Also consider QuickBooks training with me, Carol Topp. I can set up your Chart of Accounts and walk you through how to send invoices, enter expenses, make deposits and run reports. Contact Carol

 

Carol Topp, CPA

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