The NonProfit Times - December 1, 2008 - (Page 21)

signed or purchased these detailed accounting systems, this allocation method may make completing Form 990 more complicated. You may have salary accounts in various places on your trial balance.To complete the appropriate lines on Form 990, you will have to aggregate all of them on one line and use the separate categories to allocate the expenses among the three columns. If categories are broken down into sub-categories (e.g., various grants or programs), you may have even more cost centers to consider. TIPS FOR ALLOCATING FUNCTIONAL EXPENSES If you do not allocate expenses as you progress through the year, you will have to do it after year-end. First, you should determine all of the expense types that are not directly allocable.Then you need to determine an appropriate allocation factor for each type. In general, salaries and related costs (payroll taxes, benefits, etc.) are usually allocated based on the time spent by each individual.Time sheets are often helpful in calculating this allocation. Occupancy costs are usually allocated based on the square footage used by various departments and individuals. Supplies may be allocated based on the number of employees in each department.These are merely suggestions of commonly used methods; any method you choose that results in a reasonable result for your organization will be acceptable. Direct expenses should go in the appropriate columns in Part IX. You can handle indirect expense allocations in one of two ways: (1) You can allocate each line in Part IX among the categories after doing the allocations; or (2) You can also report the total expenses in the appropriate column (usually management and general) and then use a separate sub-line of line 24 to allocate them by reducing the management column and increasing the others. The “total” column will be zero in most cases. We are often asked what the “optimal” expense ratios are.This question is often driven by the arbitrary percentages used by watchdog groups in rating charities for efficiency. However, there is no “right” answer. Your ratios may be affected by numerous factors that might tilt the appearance of how your contributions are spent. For example, if you begin a capital campaign during the year, your fundraising expenses will be unusually high. If you start new programs, you may have to incur more administrative costs in order to get it started. If you use a reasonable method to allocate costs, these anomalies should be relatively easy to explain. At the present time, many organizations are revising their governance procedures due to the expanded questions on Form 990. Consequently, their manage- ment and general costs may be higher than usual. From a donor standpoint, this may not be a bad thing, as the new procedures will ensure better use of charitable dollars in the future. If your ratios appear abnormal, you can attach an explanation on Schedule O of Form 990.You might also want to address the abnormality in your annual report to donors. However you handle it, you should be sure that your methods are reasonable and defendable if you are asked about them. In any case, while you are getting ready to file the new 990, you might want to review your methods for allocating expenses.Your returns this year are likely to receive more scrutiny than ever, and you should present the most accurate picture possible of your organization. NPT Harvey Berger is a retired tax partner with Grant Thornton and currently serves as a consultant on nonprofit tax issues. His email is harvey.berger@gt.com. Greg Goller is Grant Thornton’s national partner-incharge of Not-for-Profit Tax Services and is based in the Washington, D.C. area office. His email is greg.goller@gt.com. Mary Torretta is a senior associate in Grant Thornton’s corporate tax practice in McLean, Va. Her email is mary.torretta@gt.com ON VOLUNTEERS Continued from page 16 which the invitation to serve is offered, there is often no real interviewing or screening process, and only rudimentary if any orientation and training. During the past 20 years or so, as nonprofit boardsmanship has evolved a mini-industry of books, seminars and technical assistance, such poor practice has been universally discredited – yet the evidence is clear that such advice is too often ignored. Ironically, while many nonprofit board members are enlisted haphazardly, on the front lines of the organization’s work, volunteer management has become more and more risk management driven. Consider the case of volunteers serving in hospitals, one of the bulwarks of volunteering in the United States. Currently, your typical hospital volunteer applicant goes through an intense screening process, including background checks for criminal records, a full health history, training on health safety and hospital practices, and required immunization for possible communicable diseases. On the premise that hospital board volunteers will not have direct patient contact, they are exempt from any of the screening or training requirements of other volunteers. Steve McCurley, co-publisher of e-Volunteerism, notes: “Ever try asking a Director of Volunteer Services in a hospital what the reaction of their new board members were to being offered the required training on HIPPA regulations? Chances are good that s/he won’t even understand the question.”Yet, patient confidentiality is equally important for the board to practice. Make a list of any screening procedures and background checks required for service volunteers and query whether it is legal or appropriate to exempt board members from such requirements. It can’t hurt to get people thinking. If you are in a small nonprofit where board members also perform direct service roles, you might have some who have already undergone background checks, orientation and training, and other requirements.These individuals can help you present the concept to the entire board. Examine the orientation program you’ve created for direct service volunteers and whether this might be offered to new board members, too, or adapted to their needs. Invite service volunteers to give a tour of the facility to new board members. Even veteran board members might welcome a tour. If there are any handouts or other informative materials used with frontline volunteers, make those available to board members, too. MORE OPPORTUNITIES Occasional direct service volunteering can be great experiential learning for board members. How can a board govern an organization they have never seen operate? Ask the volunteer program manager to find tasks that a board member can do a few hours once or twice a year to observe and participate in the work of the agency. Include board members in informal and formal volunteer recognition activities, because they deserve appreciation for their donated time. Make sure they receive whatever annual volunteer recognition gift or certificate any other time donor gets. Of course, invite members of the board to attend formal recognition events, but do not allow them to be treated like visiting royalty, “above” the other volunteers. Mingle board members at tables with other volunteers. Do interactive things that allow them to hear the stories of why service volunteers care so much -- and to have a chance to share why they care, too. Design a time/activity report for board work and collect the data on what board members do, especially service on committees and tasks completed in-between meetings. Include this information in reports on community contributions to the agency. None of these ideas can happen unless the volunteer program manager is allowed to communicate with board members directly or meets regularly with the executive director. Volunteer managers have the potential to help their organizations dramatically improve the capacity of the most important volunteers they have: the board members who provide the vision, leadership, and skills required to guide and support the future. NPT Susan J. Ellis is president of Energize, a Philadelphia-based training, publishing and consulting firm specializing in volunteerism. She can be reached via email at susan@energizeinc.com. Her Web site is www.energizeinc.com Advance Your Career in the Nonprofit Sector Full tuition scholarships are available for Fall 2009. Visit us online for more information: www.case.edu/mandelcenter Cleveland, Ohio www.nptimes.com 21 DECEMBER 1, 2008 THE NONPROFIT TIMES http://www.energizeinc.com http://www.case.edu/mandelcenter http://www.case.edu/mandelcenter http://www.nptimes.com

Table of Contents Feed for the Digital Edition of The NonProfit Times - December 1, 2008

The NonProfit Times - December 1, 2008 Contents A Nation of Volunteers Nonprofits Start Franchising Page 4 Tidings Of Good Cheer Donor-Restricted Endowments Membership Revenue Isn’t Free Divining A Skills Set Special Report: 2008 The Year in Review The Revised 990 Giving And The Economy Annual Buyers Guide Advertiser Index NPT Jobs Resource Directory

The NonProfit Times - December 1, 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.