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What are the ingredients for telecommuting success? In the beginning, there’s a vision

Early-stage nonprofits face pivotal first steps

Pledge receivables: The accounting isn’t as simple as it might seem News for Nonprofits

NONPROFIT AGENDAS APRIL/MAY 2017

Sechler CPA, P.C. Carolyn Sechler

carolyn@azcpa.com 921 East Orange Drive, Phoenix, AZ 85014 Tel: 602.230.2700/Fax: 602.230.2705 www.azcpa.com


What are the ingredients for telecommuting success?

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ike their for-profit counterparts, nonprofits are increasingly allowing employees to telecommute. Done right, work-at-home arrangements, either full time or on an occasional basis, can pay off for both employers and employees, but you’ll need to be proactive to avoid some potential pitfalls.

The bevy of benefits The advantages of telecommuting for you and your employees are plentiful, starting with cost containment. An employee who doesn’t need to go into the office spends less money on things like commuting, work clothes, dry cleaning or going out to lunch. And the organization might be able to downsize its space needs, resulting in rent and other overhead savings. You’ll also likely enjoy reduced recruiting and retention expenses, by landing top candidates regardless of where they might live. And telecommuting tends to boost employee morale and satisfaction, which reduces turnover. You may see productivity climb, too. Some employers worry about telecommuters slacking off, but research suggests the opposite is true. A 2013 Gallup poll found that remote workers log an average of four more work hours every week than their in-office colleagues. The pollster also reports that slightly more telecommuters (32%) are engaged by their work than on-site employees (28%).

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The essential elements Effective telecommuting arrangements require careful planning and management. You’ll need to consider several issues in particular. Policy. Take the time to develop the necessary policy with a team of human resources staff, managers and employees. You’ll need your policy to address — among other things — eligibility, home office requirements and who will provide necessary equipment and supplies, training (for both telecommuters and their supervisors), communication, work hours, performance/evaluation, and technology security. Employees approved for telecommuting should sign an annual agreement acknowledging the policy and expectations, and that the policy will be enforced. Plan on reviewing and updating your policy regularly. It needs to stay current with the demands of your organization, your workforce and relevant industry standards. For instance, IT threats and safeguards evolve rapidly, and your security protocols for telecommuters should keep pace. Communications. It’s generally more challenging to effectively communicate with telecommuters. Both managers and employees must be proactive in their communications. You might find it helpful to establish standards for


Picking the right people and positions Not every employee or job is well suited for telecommuting. Telecommuting opportunities should be restricted to employees with strong communication, organizational and time-management skills. Look, too, for employees who have a proven record of working well independently. Ask them how they maintain their focus, monitor their progress toward goals and keep themselves on track. When designating positions for telecommuting, don’t base your decisions on factors like tenure or performance but on the nature of the job — certain duties are just more appropriate for remote work. Data processing, research and publications-related jobs don’t necessarily require employees to be in the office. But positions that involve extensive interpersonal interaction (for example, case or volunteer managers) make poor candidates for telecommuting. And remember that telecommuting workers often don’t work typical business hours (unless you spell that out in your policy). You can require them to be available during certain hours, but if a position isn’t one where the employee can get it done working flexible hours, it may be a poor choice for telecommuting.

how promptly employees should respond to email or other communications, the times when managers or employees will be available and similar matters. Employees who aren’t in the office can feel isolated and disconnected. Moreover, they miss out on a lot of the information that spreads through the workplace. To help make up for that, managers should have regular one-on-ones, whether by phone or video conference, with telecommuters. Weekly team meetings also might be helpful. Including some time for “water cooler talk” in these sessions can build relationships and rapport. Inclusion. You’ll also probably need to be more proactive about making telecommuters feel like part of the team than would be necessary for on-site employees. You may want to have managers hold regular team meetings with remote workers looped in by video. This can make it easier for co-workers to bond than if they communicate only online or by phone. In addition, telecommuters should be invited to company events, and added to communications such as birthday lists.

Resentment can develop if employees consigned to the office question whether their telecommuting colleagues are truly pulling their weight. It’s not unusual for an “us vs. them” mentality to develop. Managers can keep a lid on ill will by using team meetings to publicly praise telecommuters and explicitly acknowledge when they are contributing to the organization to avoid the perception that they are just “goofing off.” Between meetings, managers can send emails recognizing telecommuters’ work and copy co-workers.

Proceed with caution When first dipping your toes in the telecommuting waters, you’d be wise to seek legal advice. Telecommuting puts a twist on a range of compliance, from confidentiality to wage and hour laws, and raises critical questions related to use (and return) of company property. n

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In the beginning, there’s a vision Early-stage nonprofits face pivotal first steps

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onprofits often begin as an informal group of people who see a real need for a program or service and feel a personal mandate to help provide it. They’re highly motivated, committed and passionate about their vision. Their efforts usually start before they’ve even considered applying for tax-exempt status or mobilizing support from others. But the reality of organizational life eventually kicks in.

Life on the launching pad For brand-new not-for-profits, operations are agile but unstructured. Decision making is typically done on a consensus basis, perhaps driven by a charismatic leader.

In fact, there might be some resistance to such formalization. Founders can be reluctant to relinquish full control. Or they might prefer to focus their energies on their missions of providing programs and services.

Although founders or early volunteers are likely to populate the initially small board, critical decisions should be made by formal, recorded votes rather than by casual consensus. As the nonprofit grows, the board will need to move from reacting to events to acting strategically. It should begin to create a formal governance structure, and add members with more diverse backgrounds. A willingness to pitch in, wisdom and experience, and community connections are good underlying criteria for new and additional board members.

Taking baby steps — and beyond

Crafting a strong foundation

This incubation period can last for months — or longer. But at some point the goals of the founders begin to exceed current resources of time, talent and money. Typically, they realize that, if their organization is to survive and ultimately fulfill its

To maximize effectiveness and efficiency, any earlystage organization needs to determine how best to use volunteer help and hire part-time, full-time or contractor staff. Ideally, you will find staffers who’re attracted to the jobs for mission-driven reasons.

Early-stage nonprofits often don’t have an official board of directors, articles of incorporation or a formal mission statement. Similarly, these organizations generally are without strong internal systems or diverse funding sources.

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mission, certain steps will be needed to formalize governance and develop an infrastructure. This starts with filing articles of incorporation, drafting bylaws, and appointing a board of directors.


Centralized management becomes essential, and the board should appoint an executive director. Then craft job descriptions and personnel policies so they’re ready to go as your staff expands in coming years. As your organization approaches maturity, it also will need official marketing, fundraising and volunteer management functions.

Installing internal systems and controls

Formulating criteria for continuing programs and services can help create a not-for-profit that’s lean and mean, too. As it progresses, your novice organization should begin to track outcomes, with an eye on cutting offerings that aren’t working (as painful as that can be). You also might explore collaborative arrangements with other organizations to better serve client needs.

Also draw up multiyear budgets (including capital budgets) and development plans that provide for diversified funding streams. If you lack the internal staff to handle such tasks, you can — and should — turn to an outside accounting firm for assistance.

Automation is another key to efficiency. When possible, automate your data management and invest in the technology and equipment to facilitate formalized record keeping and reporting.

Great satisfaction comes from creating a vibrant and durable organization with a noble mission. Look to other successful nonprofits — and well-run for-profits — as you create your mold. n

Don’t underestimate the importance of developing accounting and financial systems. This is particularly true where they’re necessary to satisfy compliance requirements. You should institute formal accounting policies and procedures, along with adequate internal controls and guidelines for operating reserves.

A mold for the future

Pledge receivables: The accounting isn’t as simple as it might seem

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t’s welcome news for a nonprofit when a donor promises to make a contribution at a later date. But such pledges can come with complicated accounting issues, including the proper treatment of conditional pledges and the potential requirement to discount a pledge’s value.

When can you recognize a pledge? Let’s say a donor makes a pledge in June 2017 to contribute $10,000 in January 2018. You generally will create a pledge receivable and recognize the

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revenue for the June 2017 financial period. When the payment is received in January 2018, you’ll apply it to the receivable. No new revenue will result in January because the revenue already was recorded. Of course, you can’t recognize the revenue unless the donor has made a firm commitment and the pledge is unconditional — meaning the donor has committed to the pledge without reservations. Several factors might indicate an unconditional pledge, including when: u The promise includes a fixed payment schedule, u The promise includes words such as “promise,”

“pledge,” “binding” and “agree” (as opposed to “plan,” “intend” and “hope”), and

u The amount of the promise can be determined.

What about conditional promises? They could include a requirement that the organization first complete a project before receiving the contribution or that the organization send a representative to an event to receive the check in person. Matching pledges are conditional until the matching requirement is satisfied, and bequests are conditional until after the donor’s death. You generally shouldn’t recognize revenue on conditional promises until the conditions have been met. It could be acceptable to record a conditional pledge if the odds of a condition going unfulfilled are remote (for example, if the condition requires the nonprofit to exist in five years and the 20-year-old organization is in a solid financial position). Your accounting department will require written documentation to support a pledge before recording it. The strongest evidence is a signed agreement with the donor that clearly details all of the terms of the pledge, including the amount and timing. If pledges

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are something that come up often, you might want to develop a standard pledge template to use with all pledge donors. Reluctance to sign such an agreement could be reason to question a donor’s level of commitment to making the contribution and you probably shouldn’t record the pledge.

Should you apply a discount? A pledge must be recognized at its present value, as opposed to the amount you expect to receive in the future to reflect the time value of money. For a pledge that you’ll receive within a year, you can recognize the pledged amount as the present value.

You can’t recognize the revenue unless the donor has made a firm commitment and the pledge is unconditional — meaning the donor has committed to the pledge without reservations.

If the pledge will be received further in the future, though, present value is calculated by applying a discount rate to the amount you expect to receive. The discount rate is usually the market interest rate, or the interest rate a bank would charge you to borrow the amount of the pledge. Additional entries will be required to remove the discount as time elapses.

A word of caution Proper accounting for pledge receivables is critical. In particular, if you don’t record them in the proper financial period, you could run into audit issues that might, in turn, put your funding in jeopardy. n


NEWS FOR NONPROFITS Female execs still earn less than males The 16th annual GuideStar Nonprofit Compensation Report finds that female nonprofit executives continue to earn less than their male counterparts. While the gender pay gap for CEOs has been on the decline at organizations with operating budgets of less than $25 million, it’s grown at organizations with budgets over $25 million. Overall, the gap ranged from 8% at organizations with budgets of $250,000 or less to 23% at nonprofits with budgets of more than $25 million. But women have made strides in their representation as CEOs since 2004 at every size organization, except those with budgets of less than $1 million. The gains have been the most dramatic at nonprofits with budgets of more than $10 million — however, women still make up less than one-third of the CEOs in those organizations. n

Smartphones play revved-up role in working with refugees Nonprofit Quarterly reports that, for many organizations working to support refugees fleeing war-torn countries, smartphones are becoming vital tools as the displaced people adjust to their new environments. Nongovernment and government agencies have initiated programs that help refugees secure a cell phone, easing many challenges around rebuilding their lives in a new country. The refugees can use the devices to connect with loved ones, navigate unfamiliar areas, open bank accounts, send money across borders, and obtain online access to services and job opportunities. n

Report compares “human services” organizations’ fundraising with other charities’ The Growth in Giving (GIG) Initiative — launched by the Association of Fundraising Professionals, the Urban Institute’s Center on Nonprofits and Philanthropy, and DonorPerfect to gather data — has partnered with the Giving USA Foundation to report that human services organizations (HSOs), such as food banks, homeless shelters and sports organizations, have nearly caught up with other types of nonprofits in fundraising productivity. GIG’s report, Benchmarking Giving to Human Services, indicates that giving to HSOs increased at a slightly faster rate than contributions to non-HSOs in the period 2009–2015. You can order the full report at givingusa.org; click on “Order Giving USA” and “Human Services Spotlight.” n

Technology-related nonprofits get priced out of key market A recent article in Fast Company warns that Silicon Valley’s “talent wars” are outpricing the nonprofits in the region that have a technology focus — organizations that “design apps, build websites and design digital tools that help deliver social programs and services to those in need.” Social responsibility initiatives from tech giants only partially fill the gap; financial support can help, but funders are often less interested in donating money for overhead costs and staff, leaving these organizations in a tough spot. n

This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other profes­sional advice or opinions on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use. ©2017 NPAam17

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The support you need. The service you’re looking for. Succeeding in the not-for-profit sector today requires more than a strong commitment to your mission. It takes shrewd fiscal management, careful regulatory compliance, skillful use of technology and the assistance of advisors who know the issues nonprofit organizations face and how to address them. This is where Sechler CPA comes in. Our team of experienced professionals cherishes the opportunity to support nonprofit organizations, meet their management challenges and fulfill their missions. We offer a variety of specialized accounting, tax and consulting services including:

k Audit intermediary services

k Tax form preparation (990, etc.)

k Budget and policy design

k Strategic and management consulting

k Financial statement preparation

k Speaking on financial literacy and other topics

k Outsourced accounting/bookkeeping

k Technology and virtual system design

RESPONSIVE QUALITY We are committed to providing responsive, personalized service to the highest quality. We take time to truly understand your Organization so that we can customize our recommendations to your specific situation. Our goal is to make your processes easier, streamline your operations and ensure your success in reaching your goals. We welcome the opportunity to discuss your mission and vision so that we may assist you with our expertise. Please call us at 602-230-2700 or e-mail carolyn@azcpa.com and let us know how we may support you. Be sure to visit our website at www.azcpa.com for additional tools and information, as well as our archive of this newsletter.

Sechler CPA, P.C. 921 East Orange Drive Phoenix, AZ 85014 www.azcpa.com

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Nonprofit Agendas | April-May 2017  

Nonprofit news, resources and tools from Sechler CPA PC. www.azcpa.com

Nonprofit Agendas | April-May 2017  

Nonprofit news, resources and tools from Sechler CPA PC. www.azcpa.com

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