Fiscal Questions & Answers; Pg. 1
BOARD DEVELOPMENT AND ORGANIZATION
PLANNING
LEGAL COMPLIANCE
EMPLOYMENT LAW
What are the requirements to be followed when we use volunteers? Are we required to pay L&I? Do we need to track their hours?
Are there any special rules (from DOL or L&I) which apply when employees also work for us as volunteers?
What are "hours worked?"
What are the overtime rules?
How do we distinguish between independent contractors and employees?
What benefits should we be giving to our employees?
What is a benefit and what isn't?
Should we have a pension plan? If so, how do we set one up?
How do we set up medical and dental benefit plans?
How do we set up a cafeteria plan?
What is a Cafeteria Plan?
Are we required to give the same benefits to all employees?
Can we self-insure our unemployment liability? If so, how?
What are the overtime pay rules?
What other employee law issues should we be aware of?
What are the state and federal rules concerning lobbying?
Return to Top
BOARD DEVELOPMENT AND ORGANIZATION
How do we develop and maintain a strong board?
All non profit organizations are governed by a group of individuals. Boards require care and feeding just as employees do. Many of them have, over time, become "rubber stamp" boards which approve everything brought to them. Others become have become obstructionist and object to every initiative. Click here for a good list of FAQs about boards..
Return to Top
PLANNING
How do we make our annual planning efforts drive our budgeting and financial statement review processes?
The first step is to make sure that goal planning precedes budgeting. Oftentimes, organizations are pressed to produce their annual budgets prior to the beginning of the new fiscal year and goal planning gets pushed to the "downtime." This, unfortunately, puts the cart before the horse.
Secondly, budgeting needs to be driven by the goals of the organization. Quite often a strategic plan is devised, goals are written and the document is put on the shelf. All of this hard work should be used. Referring to the document to write the budget helps managers plan expenses to perform activities in pursuit of organization goals.
The third step is to make sure that the monthly financial statement review process is done from the perspective of the goals of the organization. While looking at the expenses of the organization, reviewers can make sure that expenses were made in pursuit of corporate goals in addition to making sure that there will be enough money for next month's expected disbursements.
What are the specific steps required to produce a budget?
- Determine programs and activities contemplated for the period being budgeted (month, quarter, year)
- List expenses required to carryout the programs and activities
- List revenue sources available (this might be the first step depending on the type of funding available)
- Assemble draft budget
- Review draft budget
- Present budget to Finance Committee and/or Board of Trustees
- Enter budget into accounting software after approval by Board
How do we prepare a contingency plan?
Financial contingency plans are prepared by carefully considering needs, resources, and scenarios. The goal is to come up with plans to meet organization needs when usual resources are unavailable. Discussions should occur with bankers, insurance agents, grantors, and others that may have resources available to give or loan.
How do we budget for state and federal contracts when our budget is on a calendar year?
It is often helpful to draw parallel lines representing different fiscal years. This usually makes overlapping years more apparent. It is also usually necessary to estimate revenue and expenses beyond the current organization calendar year to fill in the first two quarters of the next state or the first three quarters of the next federal fiscal year. The state fiscal year runs from July 1 to June 30 and the federal fiscal year is from October 1 to September 30. Fiscal years are referred to by the ending year. For example, if the last month of the state fiscal year is June 1999 then that month falls in the 1999 fiscal year.
Return to Top
LEGAL COMPLIANCE
What are the laws in Washington governing not-for-profit organizations?
Click here for the laws governing not-for-profit organizations.
How is a non-profit corporation established?
A group of people decides that they want to create a new legal entity which will serve as the vehicle for performing some service. They prepare and vote on articles of incorporation and by-laws. They submit these to the state along with the application form to the Secretary of State. After acceptance by the Secretary of State the members and officers of the corporation may begin to transact business in the name of the corporation.
How do we maintain our non-profit corporation status?
RCW for renewing a non-profit corporation status.
How do we amend our articles of incorporation?
Amending articles of incorporation.
What are the charitable solicitation laws and rules in Washington?
Click on these links for the following:
How do we apply for tax exempt status from the IRS?
Most non-profit charitable organizations choose to apply for what is known as 501(c)(3) status from the IRS. The first step is to submit to the IRS. Obtaining tax exemption under the (c)(3) section of the Internal Revenue Code allows an organization to solicit contributions which the contributor can, in most cases, deduct from their taxable income.
What are the federal grant programs available to non-profits?
The CFDA can be found at CFDA Information - fully searchable.
Return to Top
EMPLOYMENT LAW
What are the requirements to be followed when we use volunteers? Are we required to pay L&I? Do we need to track their hours?
Labor & Industries does not require that you pay premiums to cover volunteers. They do offer medical coverage if you wish to avail yourselves of it. It is not mandatory. This is enacted under RCW 51.12.035 and the rules are at WAC 296-17-930. Use Form "Application for Optional Coverage" to apply for coverage. If you are not paying for medical coverage you need not track hours formally. You might want to do so for other reasons however.
Are there any special rules (from DOL or L&I) which apply when employees also work for us as volunteers?
Employees generally cannot volunteer the same services they provide as employees. They are free to volunteer any other services. Some guidance is to be found at 40 USC Sec. 276d-1 which waives the requirements of the "Davis-Bacon" act with regard to volunteers. The DOL publication discusses the phrase "suffer or permit to work" and the exemption for volunteers.
What are "hours worked?"
This question is answered in DOL publication 1312 which reprints part 785 of Title 29 of the Code of Federal Regulations. The issues are waiting time; rest and meal periods; sleeping time; preparatory and concluding activities; lectures, meeting, and training programs; travel time; and miscellaneous activities.
What are the overtime rules?
Overtime can be a complicated and contentious issue. Oftentimes employers want to categorize an employee as exempt to avoid paying "time and a half" for overtime. In some organizations employees want to be categorized as exempt because the pay is higher and the attendance rules are more lax. The Department of Labor has rather precise rules which must be followed to legally categorize an employee as exempt or non-exempt. There are three broad categories of exempt employees: Administrative, Professional and Managerial. If the employee does not fit in to one or more of these categories then they can not be exempt from the FLSA overtime rules.
How do we distinguish between independent contractors and employees?
You can file a form SS-8 with the District Director of the IRS. The IRS will issue an opinion as to whether or not the worker(s) described on the form are employees or independent contractors for tax purposes. You can also answer the questions and come to your own conclusion.
What benefits should we be giving to our employees?
Generally the local labor market dictates the answer to this question. There are no legally mandated benefits. There are also organizations which track pay and benefits for various kinds of non-profits.
What is a benefit and what isn't?
A benefit is something of value given voluntarily to an employee. In other words, taxes and other mandatory payments such as social security and unemployment coverage are not generally considered to be benefits.
Should we have a pension plan? If so, how do we set one up?
The older and more established an organization is the more benefit to the organization there is to be obtained by enticing employees to stay with the organization until retirement. Retirement plans can be complex, burdensome and expensive. They can also be the reason why a senior employee stays around.
How do we set up medical and dental benefit plans?
Issue a RFP or a RFQ to insurance companies
How do we set up a cafeteria plan?
An attorney, CPA, or insurance agent familiar with these plans can help you set one up.
What is a Cafeteria Plan?
A Cafeteria Plan is a creation of the tax code, specifically Code Section 125. It allows employees to have amounts deducted from their pay before taxes are calculated. These amounts can usually be used to purchase a variety of different benefits. Hence, the name Cafeteria, as in a menu of choices.
Are we required to give the same benefits to all employees? The simple answer is no and the complex answer is maybe. This can be a very complicated question to answer. You should consult a CPA or attorney familiar with employment law.
Can we self-insure our unemployment liability? If so, how?
Yes, not-for-profit organizations have the option in Washington to pay the actual dollars of each claim rather than paying a monthly unemployment insurance premium. Contact the Employment Security Department (ESD) to get more information.
What are the overtime pay rules?
The U.S. Department of Labor enforces the Fair Labor Standards Act which requires certain "non-exempt" employees to be paid one and one half times their standard rate of pay for each hour they actually work over 40 in the course of a standard workweek. In Washington there is no legal requirement to pay double time or for time in excess of 8 hours per day or work on weekends or holidays. These payments are offered by an employer or negotiated with a union and are required by state law in some states.
What other employee law issues should we be aware of?
Sexual harassment
Affirmative Action
Prevailing wage
Wrongful discharge claims
What are the state and federal rules concerning lobbying?
In Washington, the Public Disclosure Commission (PDC) enforces state lobbying laws. The IRS also has rules concerning the lobbying activities of organizations exempt from federal income tax as 501(c)(3).) Generally, a 501(c)(3) organization is prohibited from engaging in political activity (defined as direct or indirect participation or intervention in the political campaign of a candidate for public office.) These organizations are, on the other hand, allowed to engage in a certain amount of lobbying activity. This lobbying can be direct or indirect. Direct lobbying is defined as communication with a public official or employee and indirect lobbying is defined as communication with the general public known as "grassroots lobbying." Contributions will not be tax deductible to the donor if the lobbying related to matters of financial interest to the donor's business and the primary purpose of the donation was to avoid federal income tax.
Return to Top