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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3 essential tools for homeschool leaders

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At the Indiana Association of Home Educators 2014 conference, I spoke to homeschool leaders about

Tips and Traps for Homeschool Leaders

In this video I discuss the 3 essential tools that homeschool leaders need.

In the video I mentioned a handout. You can download it here: http://wp.me/aF6pa-1c4

I hope the video is helpful.
For other videos for homeschool leaders visit HomeschoolCPA.com/Videos

 

Carol Topp, CPA

HomeschoolCPA.com

Homeschool group wishes to grant college scholarships

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Carol,

Our 501(c)(3) non-profit homeschool support organization would like to award a $1000 college scholarship to a graduating senior in our chapter of the Eta Sigma Alpha home school national honor society. The criteria for receiving the scholarship is the student must be a member of our homeschool honor society chapter and be a graduating senior that will be attending college in the fall. The students will be judged on their accomplishments in areas of scholarship, character, service, and leadership.

The plan is that I would donate the $1000 to our 501(c)(3)non-profit home school support organization, which would in turn award the scholarship to a student in our honor society chapter. The scholarship winner would be determined by an independent panel of judges. I would not be one of the judges and I have no children involved in the program.

Are there any hoops we need to jump through to accomplish this?

Janis H in Texas

Janice,
You’re to be commended for establishing a scholarship fund and already having good policies in place.

You should look at your organization’s original application for 501c3 status (Form 1023) to see if included Schedule H Scholarships. If your organization included Schedule H, you’re all set. Award away! 🙂

If you did not file a Schedule H, then you’ll need to notify the IRS that you are adding a new activity.

According to this IRS webpage, you report changes and additions in your activities on Form 990 or 990EZ.
http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Reporting-Changes-to-IRS

It would be a very good idea to look at the Form 1023 Schedule H (scroll down to page 28) and it’s instructions. From the questions the IRS asks, you get a very good idea of how they think a scholarship fund should be set up. It sounds as if your organization already has in place many of the IRS’s recommendations. Include a paragraph outlining your policies based on Schedule H questions when fling Form 990 or 990EZ.

If your organization does not typically file Form 990 or 990EZ because you are eligible to file the online e-postcard Form 990N (Annual gross revenues less than $50,000), you should file the longer 990EZ for the year you launch the scholarship program.

I hope that helps.

Carol Topp, CPA

Homeschool co-ops and money!

Homeschool CPA, Carol Topp, was recently interviewed on the podcast Homeschooling Co-op Style by host Pat Wesolowski.

Podcast host Pat Wesolowski

 

 

Carol and Pat discussed the ins and outs of money matters in regard to co-ops and other issues that pertain to homeschoolers (such as fund raising)!

The thought of formalizing your co-op into a non-profit might not have entered your mind.

However, there are benefits to becoming a non-profit and, if you hire teachers you may find it quite beneficial.

Listen to the podcast here

The podcast runs about 30 minutes. Listen in iTunes here!

Got donations? Confirming contributions in a homeschool organization

donation_money_insert_400_clr_5537Is your homeschool group fortunate to have received a donation this year?

It’s important you you to know what your organization needs to do confirming contributions.

Only if your homeschool organization is a 501(c)(3) tax exempt organization, can your donor deduct the donation on their tax return.

If your group does not have 501(c)(3) status, you should thank the donor, but not give them a tax deductible receipt.

(Not sure if your group is a 501(c)(3) tax exempt organization? Read more here…)

 

Here’s some advice from a fellow CPA, Dennis Walsh on confirming contributions.

From http://www.blueavocado.org/content/treasurers-all-volunteer-organizations-eight-key-responsibilities

 

Confirm contributions

A prompt thank you letter that includes what donors need for tax purposes is an effective way to keep your contributors up to date on the great work you’re doing.  The IRS says it’s okay to send this information by email. When different financial duties are assigned to a variety of people, the chances increase that any misappropriated donations will be detected more readily.

Here’s a sample of the essential information to include in your thank you letter:

“Date

“Name and address of nonprofit
“Donor name and address

“We wish to thank you for your 20xx contribution of cash in the amount of $500.00.  We did not provide any goods or services in exchange for this contribution. XYZ Nonprofit is an organization exempt under Section 501(c)(3) of the Internal Revenue Code and contributions are deductible to the extent allowed by law.”

Remember to separately list any single contribution of $250 or more.  If the donation is other than cash, describe the property but do not indicate a value.

If you provided the donor with goods or services as part of the contribution, you could delete the second sentence in the above example and substitute the following:

“We provided you with two theater tickets with a fair market value of $50. Your tax deduction is limited to the amount of cash and value of any property contributed, reduced by the value of any goods or services received in return.  Accordingly, the amount eligible for a federal income tax deduction is $450.”

There are exceptions for items of minimal value such as pens and mugs.  See the discussion regarding “quid pro quo” donations in IRS Publication 1771.

Dennis Walsh, a certified public accountant who lives in Jamestown, North Carolina, is the author of Legal and Tax Issues for North Carolina Nonprofits. Through the Deborah and Dennis Walsh Foundation, he provides volunteer technical assistance to help empower community nonprofits. He can be reached at drwalsh at triad.rr.com

Starting a nonprofit homeschool group correctly! Dollars and Sense Show # 5

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In this episode of the  Dollars and Sense Show host Carol Topp discusses

Starting a nonprofit homeschool group correctly

In this episode,  Carol  discusses how to start a nonprofit homeschool group. She shares her knowledge as the Homeschool CPA on important steps to take when organizing a group such as having a board and a clear mission. She’ll also share tips on how to legally operate your homeschool group.

Listen to the show here

Three steps to launching (or running) a successful homeschool organization:

1. Board: Chose a group of leaders so no one carries the burden of leading alone.

2. Bylaws: Write up bylaws to structure your group. Decide the Who, What, Where, How often and How much issues. In the bylaws mention its purpose (what), its members (who) and its leaders. The Where, how often and how much change frequently and do not belong in the bylaws.

Sample bylaws here

3. Budget: Planning with numbers. Estimate your income and your expenses. Plan a small surplus for emergencies.

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Carol’s new book, Money Management in a Homeschool Organization will help your treasurer create a budget and stick to it!

 

On the show Carol mentioned:

Tune in for the next Dollars and Sense show on December 19, 2013 when Carol will discuss tax exemption and how to get it for your homeschool group.

 

How much money can a homeschool group keep year to year?

Is there a cap to how much we can keep in our checking account from year to year as a homeschool support group?

No, there is not a cap on how much money a homeschool support group can accumulate.

While it is prudent to have a small surplus to meet future needs, most nonprofits do not accumulate a lot of money year after year. If you have plans for a big event in the future, then it is acceptable to accumulate funds for a few years. But without a reason to be accumulating money, the funds should be spent on your current members (but always keeping a small reserve).

Here’s a rough rule of thumb: If you have more than one year’s income as a surplus (and no plans for the future use of the money), then you should probably make plans to spent some of it on your current members. If you have 2-3 years of accumulation, it’s time to readjust your dues or plan a big party with all expenses paid! 🙂

Having a budget should help you manage how much surplus you carry forward.

Sad but true story: My support group leader realized she would end the year with a surplus, so she threw a very nice catered dinner for all the members and their husbands. It was a lovely date night with babysitting provided!

Unfortunately, the leader drained the checking account and didn’t realize that the annual insurance bill was due in the summer before she had collect dues from the members! Ouch! She had to ask several members to loan the group money in order to pay the bills over the summer.  Good planning, a budget, and carrying a surplus would have avoided her embarrassing situation.

Cover Money Mgmt HS OrgDo you have a copy of my ebook Money Management in a Homeschool Organization?

It might be helpful to you.

 

 

Hope that helps,

Carol Topp, CPA

Handling supply fees in a co-op

 

The Facebook group I Am A Homeschool Group Leader recently helped one leader, Particia,  with managing her co-op’s supply fees:

We have the teachers… reimbursed dependent upon how many students they have in that class. This is not working! We must set class fees before the schedule goes out (obviously), but sometimes the teachers may end up with 3 in their class, and sometimes 15. Therefore, sometimes they divide the cost of their curriculum among more students then they receive, and we can only reimburse them the amount that we take in. Please tell me a better way to handle class fees!

 

 

My comment on charging fees: Since I’m a CPA, I think like I was taught in my accounting classes. You have fixed costs (same regardless of number of students such as a teacher’s guide or equipment the entire class uses) and variable costs (increase as number of students increase such as individual books). Some classes have both fixed and variable costs. Most probably have only variable costs.


I recommend in my book “Money Management for Homeschool Organizations” that you charge more than enough to cover your variable costs. IOW, include a buffer for the variability.
http://homeschoolcpa.com/bookstore/managing-a-homeschool-organization/ ($3.99 for the ebook)

Consider this policy: The co-op could reimburse for fixed costs if the co-op remains the owner of the book/equipment. If the teacher wants to keep the book/equipment herself then there is no reimbursement. This assumes the co-op wants to own some supplies and has enough in their budget to purchase them.

 

Patricia replied: Yes Carol, I have read that before! We do pay for certain curriculum that the group itself can then accept ownership of, and loan out to families who may need it in the future.

But, the idea of the teacher paying for the books that she is keeping, is a great idea! That would definitely help with the cost of the class, by focusing mostly on the variables. I have an accounting back ground as well, I think that’s why this stuff drives me crazy!!!

 

Miriam explains how her group manages the money:
We don’t buy any supplies for our teachers because they are considered independent contractors. The teachers set their material fees and those fees are collected in May. On July 15th teachers can deposit them, but they are refundable up through August 7th if a family drops the class. Material fees vary according to subject. Tuition is a set yearly fee and is collected in monthly installments, if parents wish to pay that way. Materiel fees collected in May by registrar, tuition collected by teachers (we have folders for parents to put checks into and teachers collect at the end of the day).

 

If you are a homeschool group leader that would like to join this conversation, please “request to join” with a note stating that you are a homeschool group leader and where you lead.
https://www.facebook.com/groups/72534255742/