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System Management
Financial Guidelines
County Financial Operations: 4-H Foundations, Clubs, and Groups
Policy Number: C.E.S.P. 15-4
Date Revised: 7-1-2006
Supersedes: 2-11-2004 |
Volunteer Groups
There are several
volunteer organizations and groups that are organized by and support the
educational mission of the University of Arkansas Cooperative Extension Service.
These groups function under the advisory leadership of one or more of the
professional staff and work within the parameters assigned to assist in carrying
out this educational mission.
Although this process has
been in place for many years, and certain financial guidelines have been
communicated to each organization, this document will outline general guidelines
for fiduciary responsibility in volunteer groups, and give specific information
needed by each individual group.
The University of Arkansas
Cooperative Extension Service has a responsibility to:
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(1) |
conduct its programs in such a way to maintain
the public trust and safeguard the positive image of the organization; |
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(2) |
provide training opportunities for volunteer
groups to conduct their financial affairs using sound accounting principles,
with understanding of the tax laws governing tax-exempt organizations; and |
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(3) |
accept certain fiduciary oversight
responsibilities for these volunteer groups, including reviewing audit
reports and providing a place where certain financial records can be kept. |
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The Volunteer Group has a
responsibility to: |
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(1) |
conduct its organization in a professional
manner consistent with the educational mission of the University of Arkansas
Cooperative Extension Service; |
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(2) |
accept compliance responsibility for all
federal and state laws and regulations pertaining to volunteer
organizations; |
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(3) |
adhere to all civil rights laws, including open
access to membership and programs; and |
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(4) |
obtain funding from various sources and
dispense the funds in support of Extension’s educational mission. |
The many volunteer groups
across the state are recognized as essential elements to the success of
Extension’s programs. The University of Arkansas Cooperative Extension Service
has had a long positive history with volunteer groups, and it is the
University’s intent to continue these very important associations. All volunteer
groups associated with the University of Arkansas Cooperative Extension Service
are expected to adhere to the above terms and to the guidelines found in this
document.
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A. |
General Guidelines |
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1. |
The administration of all volunteer
units will be in accordance with their organization’s constitution, bylaws
or other enabling documents and will be administered by a duly constituted
governing body. |
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2. |
Each volunteer unit will have sole
responsibility for all funds and assets of the organization. No Extension
employee shall have signatory authority over any assets of the volunteer
unit. |
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3. |
The financial activities and the
resulting financial statements of all volunteer units should be conducted in
accordance with generally accepted accounting principles. (See Appendix I:
Maintaining Auditable Records.) |
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4. |
All volunteer units that have an
average monthly balance of $100 or more should have their funds in a
financial institution. Most financial institutions will allow non-profit
groups to maintain an account that has minimum activity with no monthly
service charge. Money not placed in an account should be held in a secure
location and detailed records of fund use should be maintained. |
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5. |
It is advisable to have at least
two authorized signatures for the bank account. This allows access to the
account even if one person is unavailable for an extended time. The group
also might consider requiring dual signatures for expenditures over a
pre-set amount. |
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6. |
Volunteer funds held in a financial
institution should be in the name of the club or group, using the
appropriate Employer Identification Number. Under no circumstances should
the account be held in an individual’s name, or use an individual’s Social
Security number for the ID number. |
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7. |
A year-end financial statement,
inventory and audit report should be prepared by the appropriate officer.
(See Appendix II: Annual Financial Report.) |
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8. |
This financial statement, along
with all supporting documentation, should be audited annually by one of the
following methods: |
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(a) |
an audit conducted by an
independent certified public accountant; or |
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(b) |
organizations with annual income
less than $25,000 may choose to conduct a Peer Review Audit (See Appendix
III: Peer Review Audit Guide.) |
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9. |
Many clubs and groups find it
useful to acquire and maintain certain tangible assets in support of the
educational goals of the organization. This inventory list would include
real property (land and buildings), equipment, tools, vehicles, etc. |
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10. |
Fiscal responsibility for these
tangible assets rests with the individual club or group, and these assets
are not a part of the University of Arkansas inventory. |
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11. |
Groups are encouraged to inventory
these assets on an annual basis: (1) to document their location; and (2) to
provide a historical summary for both acquisition and disposal. (See
Appendix IV: Annual Inventory Report.) (Note:
To avoid burdensome recordkeeping, it is suggested that this inventory
report include only assets with a useful life over one year and an initial
value of $250 or more.) |
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12. |
The Annual Financial Statement,
with Audit Report and Annual Inventory Report attached, should be filed in
the County Extension Office at the end of each fiscal/calendar year
depending upon what year end the group uses. The County Extension
Agent-Staff Chair will review the report when it is received, and the file
will also be reviewed by the Extension District team or their designees at
the annual County Program Review or any other time subject to prior
notification to the officers of the volunteer group. Note: All county-wide
clubs, individual community clubs and groups should file their financial
statement, audit report and inventory report in the County Extension Office. |
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13. |
No political contributions or
candidate endorsements shall be allowed. |
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B. |
IRS
Requirements |
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Listed below is a partial summary
of selected Internal Revenue Service requirements pertaining to
organizations seeking recognition of tax-exempt status. These requirements
are not listed in any order of importance, and the provision of this
information should not be construed as tax advice relative to the IRS.
Organizations that desire such advice or assistance should contact an
independent professional. |
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1. |
Exempt organizations are generally
required to obtain an Employer Identification Number (EIN). This number may
be obtained by filing IRS Form SS-4 “Application for Employer Identification
Number.” This number is required to establish a bank account. |
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2. |
If annual gross receipts of an
exempt organization total $5,000 or more (see gross receipts test
explanation in IRS Pub. 557), an application for exemption should be made on
one of IRS Forms 1023 through 1028 (Application for Recognition of
Exemption) depending on the nature of the organization. 4-H Clubs and groups
and Extension Homemaker Clubs in Arkansas have already been granted a group
exemption and no further action is needed. However, each group will need to
obtain an EIN as stated above. |
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3. |
Exempt organizations having annual
gross receipts of $5,000 or less are not required to file on IRS Forms
1023-1028. However, if the organization wants to establish its exemption
with the IRS and receive a ruling or determination letter recognizing its
exempt status, it should file on one of the forms 1023-1028. |
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4. |
An exempt organization having
annual gross receipts normally more than $25,000 will be required to file an
annual IRS Form 990 – Return of Organization Exempt From Income Tax. |
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5. |
An exempt organization that is
required to file an annual return on Form 990 must keep such permanent books
of account or records, including inventories, as is sufficient to show
specifically the items of gross income, receipts, disbursements, name and
addresses of all substantial contributors and any other information
required. |
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6. |
Volunteer groups also have certain
responsibilities regarding accepting and acknowledging gifts and donations.
Since donors may deduct contributions to tax-exempt non-profit groups, the
non-profit group has a responsibility to acknowledge that gift/donation in
the appropriate way. This may involve either a receipt and/or a letter of
thanks for the gift or donation. It is the responsibility of the donor to
determine the fair market value. The volunteer group should only verify the
receipt of the donation and not assign any value. |
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7. |
When any merchandise is purchased
from a group, or a non-cash contribution is made, only the amount paid in
excess of the fair market value of the item may be deducted as a charitable
contribution. Again, it is the responsibility of the purchaser, not the
volunteer group, to determine the fair market value of a product. |
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8. |
Organizational by-laws should
provide guidance for the distribution of funds upon dissolution of the
group. (If not, refer to #9.) Since generally all funds accumulated by
volunteer groups described here are subject to 501(c)(3) regulations, these
funds should normally be dispensed to the University of Arkansas Cooperative
Extension Service or other exempt volunteer organizations operated
exclusively for educational, scientific, charitable or religious purposes
under Section 501(c)(3) of the Internal Revenue Code. |
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(a) |
Examples of acceptable distribution
of funds: |
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Donation to another community group or the
county-wide group, (i.e., another 4-H or EHC Club, County 4-H Foundation or
County EH Council.) |
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(b) |
Examples of unacceptable
distribution of funds: |
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Dividing the leftover funds among the members. |
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Sponsoring a trip or party for the members for
the purpose of using the funds. |
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Cash gifts to members, county agents or other
non-qualifying entities. |
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9. |
Upon the dissolution of the 4-H
club or 4-H foundation, unless contrary instructions are specified in the
bylaws or the incorporation documents, the board of directors or officers
shall dispose of all of the assets of the entity exclusively for the
purposes of the 4-H program. If a 4-H club ceases to exist, the 4-H club
will transfer cash and equipment to another 4-H club or to the county 4-H
foundation in the same county and of good standing as determined by the
University of Arkansas Cooperative Extension Service Assistant Director for 4-H.
If a county 4-H foundation ceases to exist and does not have a dissolution
clause in its bylaws or incorporation documents, the assets shall be
transferred to the Arkansas 4-H Foundation, Inc., and the assets would be
used to conduct 4-H programs in the county for which the foundation ceased
to exist. Any such assets not so disposed of shall be disposed of by the
University of Arkansas Cooperative Extension Service, exclusively for such
purposes or to such organization or organizations as the Assistant Director for
4-H shall determine which are organized and operated exclusively for the 4-H
program. |
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10. |
If a club or group becomes inactive
or ceases to exist, the appropriate County Extension Agent has the
obligation and authority to ensure the appropriate disposition of any
remaining assets. |
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1. |
Teaching children and youth the proper way to
handle funds is an important component of the 4-H experience. Youth should
be involved as much as possible in all phases of fundraising under the
supervision of an adult: setting goals, choosing projects, collection,
accounting and distribution of funds. Each club should elect a
secretary-treasurer and follow the accounting guidelines listed in the
Arkansas 4-H Treasurer’s Record Book. Adults should teach their 4-H members
how to use committees to develop plans and how to use parliamentary
procedure to make decisions. |
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2. |
All funds raised in the name of 4-H belong to
4-H, and not an individual or group of individuals. Because donors are
allowed a tax deduction for their gifts, it is imperative that the funds be
used only for appropriate and authorized purposes. |
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3. |
The 4-H Club program in the United States, by
definition of the Extension Committee on Organization and Policy (ECOP),
operates under the 501(c)(3) status of the Internal Revenue Code. This means
that 4-H clubs and foundations are tax exempt in both state and federal.
This does not mean that the clubs are exempt from paying sales tax unless
authorized by State law. Currently the Arkansas 4-H Foundation does have a
sales tax exemption. |
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4. |
4-H funds should be kept in a financial
institution in the name of the 4-H club or Foundation. When opening the
account, the club or organization will be required to provide an Employer
Identification Number (EIN). Application For Employer Identification Number
(IRS Form SS-4) may be obtained at the IRS web site –
Volunteers should not
use a social security number when opening the account, and funds should not
be kept in any individual’s personal account. |
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5. |
Each County 4-H Foundation and each individual
4-H club or unit should request their own EIN. The Arkansas 4-H Foundation
Federal ID# should never be used by a county or club to establish a bank
account. |
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6. |
The Internal Revenue Service has assigned a
Federal Income Tax group exemption number to 4-H, which should be used by
all 4-H organizations and affiliated groups when requesting an EIN number
and when filing the Annual Information Return (IRS Form 990) if required.
The group exemption number is 2704. |
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7. |
It is not essential that a 4-H organization be
incorporated or have any type of formal organization to be eligible for
inclusion under the group ruling. Many 4-H Clubs, 4-H special interest
groups and county 4-H leader councils function on a rather informal basis.
However, there are certain advantages to a legally incorporated County 4-H
Foundation, and many County 4-H Foundations in Arkansas are incorporated.
For more information see Arkansas 4-H State Policy on line at
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8. |
If you are not sure if your 4-H Foundation is
legally incorporated, you may check at the Arkansas Secretary of State’s web
site |
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9. |
The National 4-H emblem, the four-leaf clover
with the letter H on each leaf, was recognized by an Act of Congress on June
25, 1948 and “Regulations Governing Use and Authorization of the Name and
Emblem of 4-H Club Work” were published in the Federal Register on August 2,
1985, and amended in the Federal Register on March 17, 1987. (For more
information on use of the 4-H clover see
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10. |
These regulations stress use of the 4-H Clover
is a privilege, not a right. Each 4-H Club in Arkansas must receive
authorization from the University of Arkansas Associate Vice President for
Agriculture-Extension or his designee to use the 4-H Clover. This approval
must be granted annually, and may be requested on AFFACT-662 “Annual Request
for Official Approval of a 4-H Unit, Certification of Nondiscrimination and
Permission to use 4-H Name and Emblem.” The form is available on line at
http://intranet.uaex.edu/policy/Templates/mswordtemplates/AFFACT/AFFACT-662.dot. |
County 4-H Foundations receive significant numbers of private contributions
for exclusive local use. These gifts include cash, as well as gifts-in-kind of
equipment, supplies, free use of facilities, etc. Letters of appreciation are
sent to donors by county foundation representatives and/or the county Extension
staff.
For cash gifts of $250 or more, the Internal Revenue Service (IRS) requires
donors to have official receipts. This requirement applies to donors who itemize
contributions on their tax returns, but it is highly recommended that county 4-H
Foundations or the county Extension offices provide official receipts for all
gifts of $250 or more, regardless of the donors’ tax filing intentions.
The IRS requires that copies of these receipts must be maintained by the
county 4-H Foundations or the county Extension offices for seven (7) years. In
addition, county 4-H Foundations or county Extension personnel are asked to send
copies of these documents to Cooperative Extension’s Office of Development, 2301
S. University Avenue, Little Rock, AR 72203, as soon as possible after the donor
acknowledgment has been sent.
IRS regulations governing the donors’ responsibilities when making
gifts-in-kind are more complex. The county Extension agents have general
information about the requirements for acknowledging gifts-in-kind. Donors
should obtain specific tax requirement information from their personal financial
advisors. Extension’s Development Office staff in Little Rock can, however,
outline the requirements involved for county 4-H Foundation representatives.
I.
Record Keeping Requirements:
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Auditable records should be maintained for all
transactions. Auditable records are those that describe the nature and
condition of a transaction and provide support that the transaction occurred
as stated. A record system should be maintained which classifies and
accumulates financial information in a logical manner. Either a software
package such as Quicken or a ledger system is generally necessary to
accomplish this goal. For small organizations the ledger system would
include: (1) cash receipts journal, 2) cash disbursements journal, and 3)
general ledger. |
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A. |
Recording Income |
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1. |
Acknowledge all money received with a written
pre-numbered receipt. The receipt should include the date, amount received,
source of funds, whether cash or a check and who collected the money. |
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2. |
The receipt should be prepared in duplicate
with the original given to the customer. The copy should be maintained, in
sequence, in the receipt book as the official record of that transaction. |
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3. |
If any receipt is voided, the original receipt
should be maintained with the official copy of that receipt. |
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If a member/representative turns in money
collected from several people, one receipt may be written directly to that
member if documentation is attached to the receipt listing: (1) individuals
from whom the money was collected; and (2) the amount collected from each. |
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In some cases, such as a fundraising event, it
may not be practical to issue an individual receipt for each cash
transaction. In these situations, record several transactions on one
receipt. Example: (Received from: Mary Smith; Amount: $256.00; For: Proceeds
from Chili Supper on Oct. 30.) |
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All receipt books should be kept for the
current year and three prior years. |
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7. |
All income/receipts should be identified by
source and restrictions, if any. While this information is recorded on the
receipt, it is advisable to also record it on the check register beside the
deposit entry. Any correspondence, check stubs, etc., should be placed in a
file set up for that purpose. |
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8. |
Each bank deposit slip should contain a listing
of the receipt numbers contained in the bank deposit. An explanation should
be recorded on the official copy of the deposit slip in any situation in
which the receipt numbers are not reported in sequence. |
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9. |
Funds should be deposited on a regular basis,
with cash on hand held to a minimum. |
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B. |
Recording Expenses |
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1. |
Financial commitments and expenses should be in
accordance with the policies established by the organization and the
approved budget. |
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2. |
Payments should be made in response to a formal
written bill or invoice. The itemized invoice will become a permanent part
of the treasurer’s records. This documentation should be filed in a manner
allowing easy retrieval and should be maintained for the current year and
three prior years. |
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3. |
Expenses should be made from established
checking accounts, with rare exceptions for petty cash accounts: (see #8).
Holding cash back from deposits and then using the cash to pay bills is not
a good practice because it does not leave a record or provide proof of
payment. |
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4. |
All checks should contain the signature of the
appropriate club officer(s). An individual should not sign a check until
sufficient documentation and funds are available and the check has been
completed. No one should sign a blank check. The organization should
consider having dual signature requirements for checks written over a
certain amount. No Extension employee should sign checks for volunteer
groups or have signatory authority over any assets of the volunteer unit. |
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5. |
When a check is voided, the check should be
marked “void” and attached to the check stub, and the signature section of
the check should be removed. |
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All checking account transactions should be
recorded in the check register at the time the transaction occurs. Entries
should be dated and be as detailed as possible showing name of payee or
deposit source and purpose of expense. |
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7. |
All check registers should be reconciled
monthly with the bank statement at the time it is received. These
reconciliations should be documented. (Normally the back of the bank
statement provides a reconciliation form that is sufficient). These
reconciliations, along with the corresponding bank statement, should be kept
for the current year and three prior years. |
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8. |
On rare occasions, a petty cash fund may be
needed for miscellaneous items. However, the use of petty cash is not
encouraged and should not be used as a substitute for sound planning and
budgeting. Petty cash should be reconciled on a regular basis. In petty cash
allotments, the cash, plus the cash receipts for expenses, should equal the
initial authorized amount. All petty cash allotments should be entered in
the general ledger as petty cash along with the person’s name to whom the
small amount of cash is issued. |
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C. |
Year-End Financial Reports |
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1. |
An Annual Financial Report summarizes all
ledger transactions for the year and provides a summary of the
organization’s revenue and expenses, assets, liabilities and equity. This
report should be compiled at the end of each fiscal/calendar year by the
treasurer. One copy should be retained by the group, and a duplicate copy
should be filed with the County Extension Office. (See Appendix II for
suggested form.) |
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D. |
Audit Reports |
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1. |
Another responsibility in sound financial
management for groups is a system for examination and audit of financial
statement balances, assets, and the established accounting system. Each
club/group should have its financial statements and related books and
records audited at the end of each fiscal/calendar year. |
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2. |
If the club/group is required to file IRS Form
990, (i.e., has revenue in excess of $25,000 per tax year) then the audit
should be done by an independent certified public accountant. |
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3. |
If the group has revenue of less than $25,000
per tax year, they may choose to conduct a Peer Review Audit using an
appropriate Audit Committee. (See Appendix III: Peer Review Audit
Guide.) |
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E. |
Managing Tangible Assets |
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1. |
Many clubs and groups find it useful to acquire
and maintain certain tangible assets in support of the educational goals of
the organization. This would include real property (land and buildings),
equipment, tools, vehicles, etc. |
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2. |
Fiscal responsibility for these tangible assets
rests with the individual club or group, and these assets are not a part of
the University of Arkansas inventory. |
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3. |
Groups are encouraged to inventory these assets
on an annual basis: (1) to document their location; and (2) to provide a
historical summary for both acquisition and disposal. (See Appendix IV:
Annual Inventory Report). (Note: To avoid burdensome recordkeeping, it is
suggested that this inventory report include only assets with a useful life
over one year and an initial value of $250 or more.) |
The peer review audit committee should be composed of at least three members
and its purpose is to review the accounting records and financial statements
prepared by the Treasurer for accuracy and reasonableness. Committee members
should not include the treasurer, anyone related to the treasurer, or anyone
involved in the financial affairs of the group. Audit committees for youth
groups should include two adult leaders and two youth members.
Annual procedures for peer review audit committee at end of fiscal year:
| 1. |
Check each month’s reconciled bank statement
and canceled checks. Make sure the ledger postings are current and complete. |
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Examine all voided checks. If a voided check is
not on file, verify that the check has not cleared the bank. |
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Total all funds received. Verify that cash
receipts were written and that funds received were listed on the ledger
reports. |
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Total all deposits made to the bank account.
This total should equal the total of all funds received, unless treasurer’s
ledger reports show that some funds were retained as petty cash. |
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| 5. |
Total all expenditures. Verify that a written
bill is on file for each expenditure. Verify that all expenditures were paid
by check, not in cash. |
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Examine the Annual Financial Report. Verify
that the amounts listed agree with the amounts in the treasurer’s ledger
reports, the total in the check register, and the bank statements. |
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| 7. |
The treasurer’s total balance at the beginning
of the year (bank balance plus petty cash), plus all funds received, minus
all expenses, must equal the treasurer’s total balance at the end of the
year (bank balance plus petty cash.) |
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| 8. |
Examine the club inventory sheet and make sure
that all property/equipment has been properly accounted for and documented.
A letter or receipt should be on file for each gift received, documenting
donor, date, value and any restrictions placed on the donation by the donor. |
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•
Peer Review Audit Report |
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•
Audit
Committee Checklist |
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Return to Financial Guidelines Index
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