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Team Welter

Oct 08
0

True Fund Accounting Serves the Needs of Nonprofits the Best

By | Accounting Software | No Comments

Charities worldwide struggle to gain donors’ trust. In the United States, while 73% of donors say that it is essential to trust a nonprofit to which they donate, only 19% would give their charities a trust-score of 9 or 10 on a scale of 1 to 10.

Nonprofits must work harder than ever to build trust between their organizations and the public. The news media is quick to run stories of charities that waste money but rarely if ever, showcases responsible charities and the good work that they do. You must be your own best advocate and show the public exactly how their donations are being used, so there is no question about your organization’s integrity.

True Fund Accounting: A Trust Builder for Nonprofits

Which program(s) do you use to track your nonprofit finances and accounting? Many nonprofits rely on spreadsheets and off-the-shelf commercial accounting software programs to track expenses, income, and payroll.

While such methods may be acceptable during your startup and early growth phases, if you’re serious about shoring up trust between your organization and the public, it’s time to switch to true fund accounting.

What Is True Fund Accounting?

There are two main types of accounting software on the market: commercial and fund.

Commercial accounting packages assume that the business sells goods or provides services. It doesn’t have the flexibility needed to manage accounting by specific funds. Fund accounting software enables a nonprofit to track how funds are used. For example, if a donation of $10,000 is received with the specification that it is used only for a specific program, fund accounting enables you to track how those particular dollars are spent.

10 Reasons Why Your Nonprofit Needs True Fund Accounting

Many nonprofits begin their work using spreadsheets or commercial accounting packages. But as your organization grows, true fund accounting is the best way to manage the complex accounting needs of your nonprofit.

If you’re still deciding whether to switch from your current accounting software to true fund software, consider the following 10 reasons why your nonprofit may benefit from true fund accounting:

  1. You receive funds with restrictions: Large donations, grants, and other funds given to your organization with restrictions require sophisticated tracking and reporting. Only true fund accounting software offers the level of sophisticated tracking nonprofits need.
  2. Measuring the performance of a program or an activity is essential to you: Nonprofits who value measuring the performance of specific programs find that true fund accounting offers the detail-level tracking needed to understand the financial benefits of a specific program.
  3. You need to report for different periods or fiscal years: While your nonprofit may run on a specific fiscal year, that timeframe may not align with those of your grantors and foundations. They may require reports based on different time periods. True fund accounting provides a flexible approach to reporting that enables you to run reports on varying time periods rather than a set fiscal year.
  4. Does your organization need to record encumbered funds? If you must record receipt of gifts as encumbered, true fund accounting supports recording encumbered funds. Commercial accounting software does not.
  5. We need to record allocations of indirect costs by grantors. The allocation of elaborate indirect costs can be a headache in a commercial program, but true fund accounting enables you to enter it with ease.
  6. Reports must be generated and submitted to each funding source: Foundations, grantors, and private donors often require detailed reports to be submitted at agreed-upon milestones. True fund accounting makes it easier to run such reports based on milestones, time periods, or events.
  7. Nonprofit-specific accounting rules must be applied to your financials: Not only are you required to utilize nonprofit accounting rules for your organization, but when these rules are changed or updated, your software must update too. Cloud-based true fund accounting updates when changes are made so you continually use the latest software version.
  8. Your organization must manage and report multiple budgets: A typical business using commercial accounting software uses budgets for planning purposes. Nonprofits utilize budgets for compliance and monitoring.
  9. Transparency in how funds are used is vital to your organization: Processing multiple balance sheets within a nonprofit isn’t uncommon. Funds are often treated as separate entities with their own general ledger. Commercial software can be cumbersome to set up for this, but true fund accounting accommodates such setup easily.
  10. Your accounting software must work across multiple platforms: Nonprofits often set up private gateways or access points into their accounting for auditors and others to review their information. It’s essential that such software functions smoothly across multiple platforms and integrates other business applications.

Trust takes time to build and is earned with each interaction between an organization and the public. When you demonstrate thorough, clear, concise reports, applying nonprofit accounting rules and best practices to your financials, and share these clearly with donors, granting organizations, auditors, and others, you build trust. It’s time to embrace true fund accounting for the future of your organization.

Welter Consulting, Inc.

Welter Consulting, Inc is your bridge to technology solutions for nonprofit organizations. Welter Consulting offers software support, implementation, training, and audit preparation assistance for nonprofit organizations. We can help you select a true fund accounting program such as Abila MIP Cloud, our recommended package for many nonprofit organizations. Let’s talk about your needs – contact us at 206-605-3113.

Sep 17
0

Cryptocurrency Donations: Unraveling the Mystery

By | Cryptocurrency | No Comments

Cryptocurrency made headlines over the past several years as bitcoin jumped in price then plummeted. Now on the rebound, the ubiquitous altcoin (short for “alternative coin”) is just one of hundreds of cryptocurrencies listed on exchanges such as Bitifinex, Binance, and Kraken.

Are cryptocurrencies “money”? Do they have intrinsic value? Can you accept them as gifts to your nonprofit? Here’s our guide to accepting the new money as gifts to your organization.

What Is Cryptocurrency?

Cryptocurrency is a term for digital money. This money isn’t backed by a government. Instead, the coinage occurs on a digital transaction called the blockchain. Each coin has its own blockchain, which is a permanent, public, and immutable ledger of transactions.

Any company, individual, or entity can launch a cryptocurrency. The field is currently unregulated, with no global standard, so it is ‘buyer beware’ when purchasing cryptocurrencies. Typically, each coin launches with a lengthy white paper which details the purpose of the coin, the blockchain it is based on, and the plans the company has for its future. Most companies launching cryptocurrency also produce a website which links to the exchanges the coin is listed on and where you can buy or sell it. The exchange also contains the current trading volume and value for any coin.

When a new coin arrives on the trading scene, its value is set by the number of coins minted on the blockchain. As trading demand rises and falls, value increases and decreases similar to stocks or traded commodities like gold or silver.

Can Nonprofit Accept Cryptocurrency as Gifts?

Yes, but it is essential to research any coins offered as gifts and designate the gift appropriately in your accounting system. The U.S. Treasury classifies altcoins as intangible property or a commodity. Don’t let the term “coin” or “cryptocurrency” confuse you – these are not legal tender like dollars, euros, or pounds, but intangible property, more akin to patents, trademarks or similar intangible assets.

To accept cryptocurrencies as gifts, you will need to update your nonprofit’s policies to state your position on digital money. Then, the nonprofit will need a digital wallet. Because cryptocurrency is a digital asset, it must be transmitted electronically into a virtual ‘wallet’ which stores the coins securely. Then, after the transfer is confirmed on the blockchain (which may take up to several days), you can exchange the coin for the currency of your choice or hold it in the digital wallet to see if it increases in value.

Security

Each wallet includes a private “key” and a public key which unlocks the wallet for transfers. Setting up two-factor authentication is a smart move for any online transaction requiring high security, but especially crucial for cryptocurrency. There is nothing backing your altcoins; if they are stolen, and they can be, then you have no recourse as you would if a bank failed. There is no such thing as FDIC insurance on cryptocurrency.

Like any digital asset, cryptocurrencies and related secure information, such as keys to unlock the wallet, can be compromised, especially if the computer where the data is kept is linked to the web. You may wish to upgrade security or store everything in a cold computer (one not connected to the internet) to prevent hackers from breaking in to steal the information.

Banking Concerns

Banks sometimes freeze accounts that accept cryptocurrency. To prevent your accounts from being temporarily frozen, you may wish to establish separate bank accounts for cryptocurrency gifts and another for your organization’s general needs.

It’s a cliché to say that young people are more open to using cryptocurrency than other demographics, but it is true. If your organization serves the 20-something crowd, consider adding crypto to the list of assets you can accept as gifts. Although it may seem strange to accept alt currencies, it’s no stranger than people donating funds with credit cards. It’s just a new way of thinking about money and donations.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Sep 11
0

MIP Fund Accounting 2019.3 Releases on September 19, 2019

By | MIP Fund Accounting | No Comments

Here’s what you need to know about the MIP Fund Accounting update, v2019.3.

This release contains high-quality updates, expanded reporting capabilities, more flexibility and usability and a number of improvements within the Payroll module.
Improvements in the release:
  • Reports:
    • Financial Statements – Statement of Cash Flows – added the default format for the indirect method
    • Financial Statements – Statement of Activities – added option ‘Include Unposted Transactions’ in the report
    • Accounts Payable – Vendor Activity – added filter ‘Zero Activity’ to get vendors with no activity
  • Payroll:
    • Added additional columns for more flexibility in reporting within payroll module
  • Organization:
    • Data Integrity Checks – Removed exclusive access requirement and replaced with a system lock search (disallowed when posting or close-year is in progress)
  • Improved Help experience:
    • Changed Help to be accessible via the web, enabling us to provide documentation updates between releases
  • Enhanced audit trail:
    • Activities – Reconcile Cash Accounts - added logging to the Summary Organization Audit when an existing Reconciliation ID is deleted
  • Quality improvements across MIP
Microsoft Support Changes

Please note the MIP v19.3 workstation installation will take additional time due to Microsoft .Net 4.8 framework being required. If your machine already has .Net 4.8 installed or your IT professional installs .Net 4.8 prior to the MIP workstation installation, please disregard this message.

Windows Versions of MIP released after January 31, 2020 will no longer be supported on Windows 7 SP1.

Support trending topics:

Ready to move your MIP to the cloud?

Even if you haven’t joined the group of cloud adopters, you’ve probably considered it, researched it, or discussed it with your peers. If your organization is ready for a deep dive, now is a good time to check out the benefits of MIP Cloud. Or, request a custom demo with us now.
Sep 10
0

Five Tips for Accurate Form 990 Reporting and Filing

By | Tax | No Comments

One of the most important financial filings nonprofit organizations must complete annually is IRS Form 990. For smaller nonprofits, this form may be the only action it takes each year to provide comprehensive financial information to the public and other organizations, such as grantors or charity watchdogs.

According to the Journal of Accountancy, Form 990 is one of the more challenging IRS forms. It’s complex, lengthy, and intimidating. The following tips may make reporting on 990 easier for your organization.

Which Version Should You File?

As with the personal income tax form 1040, there is an “EZ” version and a standard version. Nonprofits with gross receipts of less than $50,000 may wish to consider completing the EZ version. It’s always a good idea to meet with your accountant or with Welter Consulting to discuss which form may suit your nonprofit better and the advantages and disadvantages of each.

If your organization earns gross receipts between $50,000 and $200,000, you can choose between 990 EZ and 990. Any organization earning more than $200,000 should complete the standard 990. Private foundations, regardless of income status, must complete 990-PF.

Prepare for Filing

Gather your financial information, calculator, pens, paper, and records before sitting down to work on your 990. Some like to print a paper copy of the form and use it as a draft version. Once they are satisfied they have completed the form, they can then transfer it to the online filing system.

If you are using a not-for-profit accounting system such as Abila MIP Fund Accounting, it is easy to review the financial information needed for form 990. Others still using spreadsheets or general small business accounting software may need more time to review the numbers, find all the information, and prepare their report.

5 Tips for IRS Form 990

As you work on form 990, keep the following in mind:

  1. Do not include unnecessary personal information: Form 990 is made public and often shared with other organizations. Including personally-identifying information should be avoided as much as possible. In today’s world, with rampant identity theft, thieves find information through many sources, including published data. Don’t make their job any easier than it already is – do not disclose anything other than what is required.
  2. Complete parts I through XII: You can’t skip any parts between I and XII if you are filling out form 990 standard. Some mistakenly believe sections do not apply to their organization, but the IRS requires completion of the entire form.
  3. Include required schedules: After completing Part IV, you will have a list of all required schedules for your form. The IRS recommends double-checking the schedules to ensure they are complete. Be sure to include “0” on lines without an entry and answer “yes” or “no” to each question as required.
  4. Complete Schedule A: Speaking of Schedules, all 501(c) 3 organizations should complete Schedule A. Organizations with a designation of 4947(a) should also complete Schedule A. Failing to complete this schedule can result in penalties.
  5. Sign the return: You’d be surprised at how often people forget this simple step. Sign, date, and file the return!

Although no one enjoys completing IRS forms, they are necessary to ensure all financial information is reported accurately and promptly to the government.  Nonprofits must adhere to IRS reporting guidelines or run the risk of losing their tax-exempt status. By completing Form 990 promptly and thoroughly, you’ll rest easy knowing it’s done for the year and have a valuable document demonstrating your organization’s financial status.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.