Volunteer Board Treasurer
1. Handle the money with high standards and set a tone of integrity.
In an AVO, close treasurer oversight of cash, checks, and deposits is vital. If you can’t always be present when money is changing hands, be visible enough that others know that you’re engaged. Be especially scrupulous about keeping personal funds (yours and others’) completely separate from organizational funds.
Given the limited personnel resources in most AVOs, it may not be possible to divide up financial duties as part of an internal control system, particularly since you can’t always exert the same degree of control with volunteers as paid staff. However, a few essential rules should be followed:
- The Treasurer should receive and reconcile the bank statements, OR write checks, but not both.
- Incoming checks should receive immediate restrictive endorsement (preferably a bank stamp, or handwritten “For deposit only, ABC Bank, Account # 123445”) and be deposited within a week, with no cash back.
- Outgoing checks must be supported by an approved invoice, receipt, or a voucher prepared by the volunteer if a receipt or invoice isn’t available. If a fellow volunteer asks for a reimbursement but doesn’t have a receipt, respond “I wouldn’t be doing my job as Treasurer if I didn’t insist on receipts from everyone.”
- Checks should require two signatures and never be signed in advance. Alternatively, the board might set a policy that permits one signature for small checks below a certain amount, say $50, in order to help discourage checks from being signed in advance.
2. Manage the filings
- Keep a calendar of filing requirements and assign responsibility. Late fees and penalties can be very costly and diminish stakeholder confidence.
- File Form 990 – Except for churches and certain religious organizations, all nonprofits must file an IRS Form 990 annually. For fiscal years beginning in 2010, organizations with income less than $50,000 ($25,000 for 2009) need only file the online “e-Postcard,” Form 990-N.
- File Form 1099 – Obtain an IRS Form W-9 from those providing paid services who are not your employees.
- File Form 1099-MISC to report payments totaling more than $600 per calendar year to such persons. Forms and related instructions are available at the IRS website. Otherwise, if the individual is an employee be sure to contact an accountant or other person experienced in employment matters and take all steps required for a new hire. See “Downsizing from Employees to Independent Contractors?” for more on these issues.
- Register with charitable solicitation agencies – Register, when required, with the charitable solicitation office in your home state as well as any state in which you regularly fundraise, including by email. Go to the Unified Registration Statement (URS) website for a summary of state by state requirements to determine if you must register as a charity, provide a copy of IRS Form 990, have a CPA audit or review, and whether the state accepts the streamlined URS application.
- Obtain permits and Licenses – Check on regulatory requirements before undertaking activities such as serving liquor at a special event, conducting a raffle, or starting a bingo night. Such laws vary from state to state. It may be helpful as a starting point to talk to another nonprofit leader whose organization is engaged in the same activity. Most state nonprofit associations have helplines or publish FAQs and other guides covering these types of issues. If you’re uncomfortable asking for help, get over it quickly!
3. Identify and manage risk
Take the lead in safeguarding your organization’s assets, data, and personal information. Risks associated with volunteer screening, vehicle use, and special events are often of particular concern to AVOs. The Nonprofit Insurance Alliance Groupand the Nonprofit Risk Management Center provide free introductory articles on ways to manage these and other risks.
4. 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:
“Name and address of nonprofit
“Donor name and address
“We wish to thank you for your 2010 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.
5. Track volunteer time
In many AVOs volunteer effort represents the majority of resource inflow. Tracking volunteers can help protect volunteers and the nonprofit from certain forms of liability and provide helpful data for planning future programs and events. And if you intend to seek grants you’ll want to reflect the value of your volunteers in your budget and grant proposals. Otherwise, your board and other stakeholders may not know if you have the people in place to get the job done well. See “Tracking Volunteers to Boost Your Bottom Line” for more information along with sample volunteer tracking forms.
6. Plan and evaluate with a budget
Expressed in financial terms, a budget is a map that shows what you plan to do and how you plan to get there. It’s a key tool for getting everyone to agree on what your group will and won’t do in the coming year. And in informal AVOs where internal controls are often lacking, the budget is your canary in the coal mine. An unexplained variance between a budgeted and actual line item of revenue or expense, for example, may be the first red flag signaling a more serious problem.
Preparing an effective budget starts with asking leaders to estimate what they’ll need and to provide specific proposals for financing it. Reviewing last year’s budget is a key part of the process. Cost and revenue estimates need to be reasonable and attainable. Avoid the temptation to ‘wing’ estimates or to be overly optimistic about contribution increases. At the same time, don’t act like a watchdog at the gate of the treasury, opposing all new funding proposals with knee-jerk resistance.
7. Prepare timely financial reports
Timely and reliable financial information is the underpinning of good stewardship and sound financial decision making. Without this information there’s no way to track budget performance.
For AVOs with minimal cash flow or whose finances revolve around a single event, paper-based record keeping may be acceptable. A template treasurer’s report with blanks for handwritten amounts can be just as effective as a computer-based system if the figures can be easily traced to supporting documents and are presented clearly. For such organizations, a simple monthly reconciliation of bank account activity classifying receipts and disbursements and reconciling beginning to ending cash balances may be enough to form the basis for a summarized quarterly financial report to the board.
As the organization grows, a switch to commercial accounting software such as QuickBooks(r) may be the best next step. It is vital at this juncture that you get set up with a proper chart of accounts and get the necessary training from someone with nonprofit accounting experience.
8. Recruit the next treasurer
Like other volunteers, the treasurer will not serve indefinitely. Unfortunately, some AVO treasurers entrench themselves and resist transfer of control. Throughout their term of service, effective treasurers encourage and equip fellow volunteers to participate in financial management duties. When it’s time for the treasurer to pass the baton, these AVOs will enjoy the least disruption.