Week 5: My Voice Sounds Funny

Gianna F -

Hello everyone. Welcome to our week 5 recap! We are officially halfway through our senior projects! This week was pretty exciting because I just published my first podcast! If you would like to give it a quick listen here is the link:

APPLE

SPOTIFY

This week I interviewed Courtney, the Executive Director of The Launch Pad Teens Center. A mission I have with my podcasts is to share local organizations’ journeys/missions, so it was such a great opportunity to be able to explore The Launch Pad’s story. Along with this, I learned a lot about the extensive process that is required of nonprofit organizations. The Launch Pad has officially been recognized by the IRS as a nonprofit for ten years. In order to receive this recognition, you have to file for a 501(c)3  and Form 990s. To be a 501(c)3 organization means your donors can write off their donations, which is definitely going to increase the amount of donations you will receive. Courteny referred to applying for a 501(c)3 as something similar to “writing a short novel.” Once you plan out every detail of your organization, you have to file form 990s. These tax forms ensure your tax-exemption, but of course it is more complicated than just filing out your name and social security number. In fact, Courtney reflected on her experiences with those who sought out running a nonprofit over a business for the above reason, “they are in it for the wrong reason because it is NOT easy.” When filing these forms, her current CPA, sends over an expected packet with lots and lots of questions that takes The Launch Pad’s team a month or more to answer. The reason why it takes so long is because they have to track EVERY PENNY to make sure they are justly spending their donors’ money. Attached below is the recommended basic categories a nonprofit should be charting their accounts under…

 

1010: Checking (Bank Account)

1030: Savings (Bank Account)

1110: Investments

1210: Accounts Receivable

1310: Inventory

1410: Prepaid Expenses

1510: Property

1530: Equipment

1590: Accumulated Depreciation

1690: Accumulated Amortization

2010: Accounts Payable

2100: Accrued Salaries

2110: Accrued Payroll Taxes

2115: Accrued Employee Benefits

2150: Accrued Property Taxes

2200: Deferred Revenue

2300: Credit Card Payable

3100: Unrestricted Net Assets

3200: Temporarily Restricted Net Assets

3300: Permanently Restricted Net Assets

4010: Donations and Grants – Individuals

4020: Donations and Grants – Government

4030: Donations and Grants – Foundations

3300: Permanently Restricted Net Assets

4010: Donations and Grants – Individuals

4020: Donations and Grants – Government

4030: Donations and Grants – Foundations

4110: Special Events – Sponsorships

4120: Special Events – Auction

4130: Special Events – Ticket Sales

4200: Program Revenue

4300: Sales of Merchandise

4500: Membership Dues

4600: In-Kind Contributions

4700: Temporarily Restricted Income

4800: Permanently Restricted Income

4900: Interest Income

4910: Dividend Income

5000: Salaries and Wages

5010: Payroll Taxes

5030: Health Insurance

5040: Dental Insurance

5050: Retirement Benefits

5060: Workers Compensation

5070: HSA Contributions

6000: Depreciation Expense

6100: Amortization Expense

7000: Cost of Goods Sold

8000: Fundraising Expenses

8100: Special Event Expenses

8200: Program Expenses

8300: Marketing and Branding

8310: Advertising

8410: Contract Services

8420: Accounting Services

8430: Legal Services

8510: Rent Expense

8520: Utilities

8525: Telecommunications

8530: Maintenance and Repairs

8540: Office Supplies

8550: Printing and Copying

8560: Postage and Shipping

8570: Licenses and Permits

8610: Bank Fees

8620: Merchant Service Fees

8810: Board Expenses

8820: D&O Insurance

8890: Miscellaneous Expenses

This is A LOT, but sometimes CPAs can make this process easier. Courtney was fortunate to have a CPA the entire way. She had a CPA volunteer at the beginning of her journey, but she admitted that without a CPA she probably would not have successfully made it because managing every number is not easy especially when she was already volunteering 40 hours a week to her organization. And if managing these numbers was not already enough pressure the matter of restricted and unrestricted donations come into play.

  • Restricted donations: the money given by a donor HAS TO be used based on the guidelines laid out by the donor or will be taken back. 
  • Unrestricted donations: the donor is trusting the nonprofit to choose how their money is spent. 

This was a big issue for Courtney because most donations are restricted which can occasionally minimize the money’s benefit. For example, if someone donated $2,000 to their seasonal “Trek for Teens” trip, but their sink just broke in their Moon Cafe, the repair costs have to be pulled from a smaller unrestricted pool of money. Especially for start up organizations, this can result in more out-of-pocket expenses. In essence, a lot of the financial team’s time goes to proving how each fund was spent to ensure they remain tax-exempt. However, they do get a grace period because their taxes are not due until May 15th. This is an interesting topic to compare… 

  • For hospitals, they are obviously also tax-exempt, but they do not have to prove the specific places where their money is going they just have to have a general description. 
  • For private clinics, they have to present to their investors where each penny will be going to maintain funding. This parallels nonprofits.

I suppose, the main difference is federal funding. However, it can beg the question: why do these private organizations have to jump through hoops to prove how they are spending their sought out funds while federally funded places also use our tax dollars but do not have to be as meticulous? 

 

Anyways, next week I am interviewing another nonprofit and soon I will interview a CPA that works with The Launch Pad’s taxes and other nonprofits. I am also playing with the idea of having an Instagram account dedicated to explanation videos for the podcast. Thank you for reading!

Podcast #1
My first podcast! Go check it out!

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Comments:

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    Taylor Phelan
    Hey, Gianna! I loved listening to your podcast—I am impressed! Based on what you learned this week, do you think nonprofit/private businesses are doomed without a CPA? Or will they be just as successful with lots of work?
    zoey_c
    Hi Gianna! I really liked tuning in to your podcast and I am excited to hear more! How many people are you planning on interviewing? Is there a certain schedule you are doing for releasing podcast episodes or just whenever you plan an interview?
    madeline_s
    Wow Gianna! Your podcast is so amazing. I really appreciate that you are exploring the nuances of different financial processes across business models! Does each CPA generally work with specific businesses, such as only nonprofits, or do they have a wide array of clients?
    gianna_f
    Hi Taylor! While I do not think they are doomed, I think they need to have a connection in finance because it is super complicated. I think taxes and financial guidelines are pretty big barriers for nonprofits and if they aren't familiar with finance it will take a lot of their time to figure it out.
    gianna_f
    Hi Zoey! My goal is nonprofits, medical administrators, business owners, and then CPAs. I hope to increase the quantity of interviews with the upcoming categories, but nonprofit directors are a little bit hard to connect with so I only had two for that group.
    gianna_f
    Hi Maddie! They do have a wide variety of clients, but certain CPAs prefer/choose to work with certain groups. For example, the firm I am interning with do not have to many nonprofit clients because they are so difficult! I plan on interviewing a CPA that works frequently with nonprofits!

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