May 2017
Nonprofit Connection Presented by Hawkins Ash CPAs
In This Edition
Is Accounting Part of Your Capital Campaign Committee?
Save the Date! September Events Planned
How to Win the Inbox
Nonprofit Tax Tidbits: Form 990 Schedule A
Asset Capitalization Guidelines
Client Feature: American Foundation of Counseling Services


Is Accounting Part of Your Capital Campaign Committee?
Your organization has made the decision to raise money with a capital campaign. The feasibility study has been completed, a committee has been formed, and the planning phase has begun. Have you considered including a member of the accounting department as part of your campaign team?  Often times, the accounting department is not consulted until after the campaign is rolled out. However, this department should be included from the beginning to ensure campaign success and avoid any conflicts and misunderstandings in the future with employees, the board, and donors.

The following are some suggestions to consider when planning and beginning your next capital campaign.

Create Campaign Ground Rules for All to Follow
Understand and embrace that the accounting, campaign committee and development departments see things very differently.  For example, the development department is focused on achieving a goal and wishes to include all types of gifts in campaign totals while the accounting department is focused on cash to cover expenses and accurate reporting of financial information. Some gifts may not be able to be recorded in accordance with GAAP (generally accepted accounting principles) until certain criteria are met and, therefore, may not be able to be counted in total campaign dollars during the year. Both parties have a critical role to play, and it is vital to understand each other's perspective before the campaign begins.  Consider creating a gift acceptance policy, if the organization does not currently have one. Setting ground rules, such as defining what types of gifts will count toward the campaign, will prevent miscommunications and incongruities between campaign progress reports and financial information which can lead to mistrust and negative publicity for the campaign and the organization.

Campaign Mechanics and Training
Review campaign materials before they are distributed to make sure they are clear and concise. All team members should understand the materials and how pledges will be tracked. Before the campaign begins, brainstorming potential scenarios and tackling mechanical problems will reduce the number of potential issues and will make sure that resources are used efficiently. Do the pledge cards include all the necessary information that will be required to process the pledge and send reminders? What different types of payment methods will be allowed? Does the organization have the ability to accept and process the pledge payments, or will it be necessary to outsource collections? How will the money get to the bank? How will pledge information be protected?  

Database Management and Reconciliations
Create guidelines for entering pledges. Prohibit the use of nicknames, such as Sue rather than Susan, to avoid entering duplicate pledges. Discuss and decide ahead of time what types of reports are necessary and when these reports should be run to timely track and record campaign information. Test that the information in the reports is accurate. Create several different types of test donors to see if the information flows properly to the reports before the campaign begins. Create and document the procedure that will be followed when a pledge is discontinued or how a current pledge can be increased or decreased as donors' situations often change during a campaign. Segregation of duties in entering and changing pledges should also be considered. Make sure there is a process requiring documentation and approval for all pledge changes. Test the write-off procedure and its effect on the reporting to make sure it is also accurate. The donor database will serve as the subsidiary ledger for the information recorded in the general ledger. Reconciliations between the subsidiary ledger and the general ledger should occur monthly so that errors are caught early. It is important that both the accounting and fundraising departments understand how the database works and what reports each department needs.  

Although this article focused on the importance of communication between the accounting and fundraising departments before and during a capital campaign, it is important that all staff, board members and volunteers involved in the campaign are educated and informed about the campaign. They should understand the purpose, goals and rules of the campaign so that they are equipped to share that information with donors. 

Author: Sandy Jensen, CPA
sjensen@hawkinsashcpas.com
608.793.3126

Save the Date!
On August 18, 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-14, which will change the way financial statements and disclosures are currently presented. The purpose of the standard is to improve the current net asset classification requirement and the information presented in financial statements and notes about a not-for-profit entity's liquidity, financial performance, and cash flows. The change is effective for annual financial statements issued for fiscal years beginning after December 15, 2017.
 
Are you prepared to implement these changes?
 
In September 2017, Hawkins Ash CPAs will host several local seminars covering how the change affects net assets, expenses, footnote disclosures, statement of the cash flows and other crucial aspects of your nonprofit's finances.
 
Details on the events and registration will be announced this summer.
How to Win the Inbox
Adults spend on average 28 percent of their time reading and answering the 204 million emails that are sent each year. In marketing your nonprofit, you have a lot of competition in the inbox.  However, since the average return on investment is $40.56 for every $1.00 spent on email marketing, putting effort into email marketing will be beneficial for your nonprofit.
 
Hawkins Ash CPAs understands the value of email marketing and invests in regularly providing content to help you run a successful nonprofit organization. Constant Contact recently recognized the marketing team at Hawkins Ash CPAs as a 2016 All Star Award winner. The annual award recognizes the most successful 10 percent of the Constant Contact customer base, based on significant achievements using email marketing to engage their customers and drive results for their organization during the prior year.
 
To give your nonprofit the competitive advantage in the inbox, implement these best practices when developing an email marketing campaign.
 
Set Your Goal
Depending on your organization, your goal can take many forms. Email marketing is helpful in generating donations, retaining donors and informing your audience about your cause. Your goal will drive the decisions you make on what content to include in emails and how often to send them.
 
Success indicators of your email activity include email open rate and link click rate. According to MailChimp, on average, nonprofits achieve a 24.98% open rate of their emails and a 2.76% click rate on links in those emails.
 
Know and Grow Your Audience
Breaking apart your contact list into categories of contacts with similar interests or characteristics is called segmentation. This will help you send the right emails to the right people-the individuals who will open the email and click your links. If your current contact list is unsegmented, look through the database to see if you can segment based on demographic information, industry or other characteristics important to your organization. Another way to segment your list is to set up separate mailing lists within your email program like Constant Contact. Base the lists on topics for which you intend to send emails. Send a general email inviting all your contacts to select topics of interest.
 
In order to grow your contact list, you should have the option to sign up for your emails at many points of interaction with your target audience. Have a sign-up form on your website. While they can sometimes be a nuisance, sign-up forms that popup on your website have proven to increase email registration by 400 percent. Offer the option to sign up when people are registering to attend events and on your organization's social media pages.
 
Within your email program, set up an automatic welcome email that will be sent once someone signs up. This process will help you confirm the email addresses and contact information are correct and provides you a chance to reaffirm the content you'll be providing in your emails and the frequency with which you'll be sending them.
 
Your contact list will organically grow if you stay true to your email marketing goal and adjust your tactics and content based on the success indicators described above. You may be tempted to purchase a list. If you do this, you run the risk of being labeled a spammer and in extreme cases, at the behest of the email program, may be required to shut down your email marketing completely or surrender your email list. Only send emails to those who opt-in.
 
Email message
All the elements of the email message should promote the goal of your email marketing campaign and be designed to elicit engagement-get the click!
 
Subject Line:  The subject should consist of no more than 50 characters and should create urgency. Tell the recipient why the email should be read now.
 
Preheader:  The preheader should consist of no more than 75 characters, support the subject line and present a call to action.
 
Body:  It's important to note that emails are not generally read from top to bottom. Rather, they are scanned. Because of this, you should always keep your emails short and concise, using bullets and lists. Use photos as enhancements and not as the principal way to deliver the message. This is because images will not automatically appear in the inbox-they need to be downloaded. The email content should consist of 80 percent informative material and 20 percent selling material.
 
Call to Action:  Don't hyperlink "Click Here" text. Rather use CSS code buttons that fit your brand and describe what the recipient is clicking to receive. Your email program should have these built in, and, if you're unsure, contact your Webmaster. Place your button near the top of the email.
 
Keep Mobile in Mind
It's no surprise that the majority of emails are read via mobile device. Optimize your emails for mobile as much as possible. Use mobile responsive email templates and don't use sidebars. 

Author: Corenne Gutierrez, Marketing Coordinator
cgutierrez@hawkinsashcpas.com
920.337.4544

Nonprofit Tax Tidbits: Form 990 Schedule A
In the next few Nonprofit Connection newsletters, we'll present a series on sections of the IRS Form 990. Various schedules will be highlighted to give a better understanding of what they are used for and how the public could use them as a tool to evaluate the nonprofit when deciding to donate. The first schedule in this series is Schedule A - Public Charity Status and Public Support.

Schedule A is used to describe the reason for public charity status and to compute the percentage of public support received. It is a required schedule if the organization is a 501(c)(3) that receives a substantial part of its support from the general public. If the majority of the support is from a single major source, the organization is classified as a private foundation (example Bill and Melinda Gates Foundation) and required to file Form 990-PF, rather than Form 990 or Form 990-EZ.

There are six parts to the Schedule A. Part 1 is required to be filled out by all 501(c)(3) organizations. Depending on the type of nonprofit, other parts of Schedule A may be required.

Part 1: describes the reason for public charity status.
 
Parts 2 and 3: are used to compute the percentage of public support. Whether part 2 or 3 is used depends on which box is checked in part 1. Both parts test whether public support contributes to at least 33.3 percent of total support, qualifying a nonprofit as a publicly supported organization. The main difference between parts 2 and 3 is that part 3 is used when there are revenues from sources such as admission fees, merchandise sales, or service revenue related to the organization's tax-exempt purpose. Large contributions from single donors that exceed two percent of the total contributions given during the year are excluded from the public support calculation in order to prevent the required percentage from being skewed by a single donor. If the organization dips under the 33.3 percent, there is another test where only 10 percent public support is needed, but certain "facts-and-circumstances" need to be met. If neither of these tests is met, the nonprofit reverts to a private foundation as of the beginning of the year and must instead file a Form 990-PF.
 
Parts 4 and 5: are used by an organization that carries out its exempt purposes by supporting other exempt organizations, usually other public charities.
 
Part 6: is available for supplemental information if further explanation is required from previous parts.

In order to track large donors and excess contributions from the general public percentage, it is important that organizations track donor names and amounts given.

Donors can use Schedule A to gauge how much support an organization is receiving from the general public versus a few large donors. Some donors may be more inclined to give to organizations that have a high percentage of public support and are not relying on a few large donors. After all, a nonprofit can be significantly impacted if even one large donor withdraws support. Schedule A also informs donors about the types of revenue streams on which the nonprofit operates.  

Author: Joe Nurmi, CPA
jnurmi@hawkinsashcpas.com
507.252.6673

Asset Capitalization Guidelines
At some point your nonprofit will likely go through the process of building a new building or remodeling or adding on to an existing facility. During this process, you may question which costs to capitalize and which costs to expense. Below are general guidelines to follow when deciding.

As you acquire an asset and prepare it to be used for its intended purpose, you will incur charges. These costs would be capitalized and include the charges for improving an asset's condition or relocating it, preparing plans, and obtaining the appropriate permits. It is common for contractors to detail the phases of the construction process and the cost for each phase. The detail of these phases can assist in determining if the costs should be capitalized or expensed.

Interest costs may also be capitalized. You may incur interest costs if it takes some time to get the asset in shape for its intended use. These interest costs will also be included in the historical cost of acquiring that asset.

The capitalization policy should be reviewed often to ensure your nonprofit is following it. If your organization does not have a capitalization policy, now is a good time to adopt one.
If you have any questions about capitalization or would like a sample capitalization policy, please contact your Hawkins Ash CPAs representative.

Author: Briana Peters, CPA
bpeters@hawkinsashcpas.com
920.337.4549

 
Client Feature: American Foundation of Counseling Services
This summer, the Green Bay, WI, based American Foundation of Counseling Services (AFCS) will change its name to Foundations and undergo a complete brand transformation. The changes build upon the organization's mission of providing specialty care for children and adults with complex mental health challenges through counseling and foster services. Recently, AFCS publicly announced its $8,200,000 capital campaign that will fund its newly formed advancement plan. It is the organization's goal to become a recognized leader in complex mental health care.
 
The organization's advancement plan includes four parts: advancing specialized treatment, increasing access to care, upgrading its facility and technology and growing capacity through collaboration. AFCS will provide means to increase the development and training of staff to continue building the foundation for quality treatment to a greater number of clients.  It will develop a Resident Training program to assist post-graduate mental health professionals in need of 3,000 direct service hours in order to obtain their state license, while doubling direct service hours to the under-served and providing more community-based care within schools and homeless shelters. Through the Connections for Mental Wellness initiative, AFCS will work with community stakeholders to expand access to mental health care, following the successful template of other communities in the U.S. The agency will also move to a facility reconstructed with clients in mind. The new location provides on-site parking and is being designed with trauma-informed care principles in mind, creating a calming and relaxing environment for clients.
 
For 50 years, AFCS has been a community response to quality mental health treatment. Serving the greater Green Bay area, the agency is guided by its mission to promote health and wholeness by providing services with a focus on community mental health counseling, foster care services and education, consultation and relationship building services.
 
The organization has reached 80 percent of its capital campaign goal. As its new building nears completion, AFCS is planning to host an open house, allowing donors to develop a better understanding of the improvements being made.
 
More information about AFCS can be found at its website: www.afcscounseling.org.