EisnerAmper Blog

Not-for-Profit Trends and Tips Blog

EMV Technology and Credit Card Donations

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July 1, 2015

By: Jeff Holt, CPA

There is now a new cost element for nonprofits who accept donations in person via credit card, and it relates to a credit card chip technology called EMV. EMV is an acronym for Europay, MasterCard, and Visa; the U.S. will be migrating to this credit card standard in October 2015. EMV is the global base standard for credit and debit card chip technology, in which a tiny chip on the actual card stores personal data as opposed to a magnetic stripe. So instead of being ‘swiped,’ the card is inserted and the chip is read. 

Not-for-profits need to understand how this change in technology will affect the way they accept and process credit card payments, as this may open themselves up to liability for fraud.

While the October date isn’t a hard date for implementation, the date is firm for a shift of liability from the issuer (MasterCard, Visa, and American Express) to the not-for-profit for non-EMV credit card-present transactions. When an EMV enabled card is presented to a not-for-profit that only has the old “swiping” technology instead of EMV technology, the not-for-profit is likely to be responsible to cover the cost of a fraudulent transaction if they used the old technology to read the card.

By the way, this doesn’t apply to online transactions as there is no terminal to read the chip when making a donation online. This is termed a “card-not-present” type of transaction.

The impact is that the not-for-profit, who receives significant donations via card-present transactions, may need to evaluate whether it is worthwhile to invest the time and dollars to upgrade its equipment to implement the EMV technology.  With regard to the potential for prevention of fraudulent transactions in online transactions, the not-for-profit may want to look into an address verification system or other authentication methods.

Not-for-Profit Fundraising Profiting After Making the Switch to Digital

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June 29, 2015
By Morgan Piscitelli
2015 is looking to be a prosperous year for New York area not-for-profits, according to an annual survey for Crain's by the Association of Fundraising Professionals-New York chapter.  Professional fundraisers in the New York area are in agreement, saying that they are optimistic about this year's fundraising environment. More than half (52%) of these organizations are even taking steps towards hiring development staff to take advantage of this generous climate, compared with just 29% who reported hiring additional hands last year.

This fundraising shift is thanks to the region’s vast wealth of individual and corporate donors in high-paying industries like finance and business services. The Crain’s survey noted that in 2014, charitable giving was up 4.4% in the U.S., the fourth straight year of increased donations since the Great Recession, according to the annual Giving USA report by Indiana University's Lilly Family School of Philanthropy.

Along with the change in attitude toward giving, there’s been a shift in the way individuals and corporations choose to make their donations. Last year, the YMCA received about 13,000 gifts, 11,000 of them from individuals or families whose average donation was $530. Gary Laermer, the YMCA’s senior vice president and chief development officer, noted that social media's immediacy has made fundraising easier.  Now donors can give whenever they want instead of waiting for something in the mail. Utilizing Facebook, Twitter and other social media can also help drive awareness of the cause for both current and potential donors, which can set the stage for increased giving.

Governance Duties of a Not-for-Profit’s Board of Directors - Part 2 of 2

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May 27, 2015

Collins_BrianBy Brian Collins, CPA

In our previous blog, we shared with you the New York State Attorney General’s announcement of a lawsuit against the board of directors of two Brooklyn-based not-for-profits alleging of gross negligence and failed management of their organizations.

Does your board of directors know its governance duties to the not-for-profit in order to avoid negative publicity?

There are three fundamental governance duties that all board members must follow. These are commonly known as fiduciary duties and apply to everything that the board of directors does. If board members fail to follow these guidelines, they could be held liable for any negative consequences of their actions.

  1.  Duty of Care —This is defined as “the amount of care that an ordinarily prudent person would exercise in a like position and under similar circumstances.” In practical application, this means that board members must exercise reasonable care when they make decisions for the organization.
  2.  Duty of Loyalty — This requires that board members keep the best interests of the organization in mind at all times when making decisions (e.g., avoiding conflicts of interest). 
  3.  Duty of Obedience — This requires that board members’ actions be consistent with the organization’s mission statement, articles of incorporation, bylaws and tax-exemption documentation. In other words, the not-for-profit’s central goals must guide all board decisions and, in addition, board members must comply with all applicable laws and regulations.

It is critical to provide thorough orientation training shortly after board members are elected. Have existing board members attend, too, for a refresher. Then provide ongoing training as needed.  Make sure the training covers federal and state laws as they relate to the duties of board members, as well as laws and regulations affecting the organization.

New York State AG Announces Lawsuit against Not-for-Profit Board - Part 1 of 2

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May 14, 2015

Collins_BrianBy Brian Collins, CPA

On April 9, 2015, New York State Attorney General Eric T. Schneiderman announced a lawsuit against the board of directors of two Brooklyn-based not-for-profits. The lawsuit alleges gross negligence and failed management of the not-for-profits. The organizations were intended to provide housing and support services for pregnant women, young mothers and their children. As set forth in the lawsuit, an investigation by the Attorney General’s Charities Bureau found that several board members listed property of the organizations for sale without necessary approval. Supreme Court Justice Genine D. Edwards granted the Attorney General’s Office a temporary restraining order earlier this week that freezes the organizations' assets.

The complaint also details evidence of several other alleged improprieties by the organizations’ board and its officers, including:

  • Unauthorized transfer of $80,000 from a charitable bank account directly into the personal account of the financial manager;
  • taking out two high-fee loans totaling $600,000;
  • forging the signature of the secretary of the board to authorize a high-fee loan, without the board member’s permission;
  • failing to pay the wages of their employees; and
  • neglecting corporate filings, including tax returns.

For the full Attorney General press release on the lawsuit, click here.

Look for part 2 of this blog titled “Governance Duties of a Not-for-Profit’s Board of Directors” for advice to all board members on how to avoid negative allegations against your not-for-profit similar to ones announced by Attorney General Schneiderman.

A Not-for-profit Angle on the Property Tax Assessment Process in New York

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May 11, 2015

Lewis_KristenBy Kristen Lewis

Not-for-profit organizations enter the real estate realm when they own property. While they may be exempt, care must be taken with their records pertaining to property tax assessments. Michael Benison, a member of EisnerAmper’s Real Estate Services Group, recently interviewed New York City Tax Commission President Glenn Newman about property tax assessments. The topic of property tax assessments has been a popular one in the wake of the high volume of applications that the New York City Tax Commission office has been receiving in the recent real estate boom. The interview touches on not-for-profit exemptions and the need to monitor how much rent a not-for-profit organization receives.  Benison and Newman discussed how the application should be filled out in a completely accurate way in order to start the process of reviewing a tax assessment on a good foundation. Details like this are not just critical to the assessment; they can be vital to an organization maintaining its exempt status.  For more information, check out the original blog post here.

What Is Crowdfunding?

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April 30, 2015

Collins_BrianBy Brian Collins, CPA

Crowdfunding is a relatively new phenomenon that is becoming more popular with individuals and not-for-profit organizations looking to raise funds.  Crowdfunding is the practice of soliciting small contributions from a large number of people, especially from the online community, to fund a particular project or cause.  Crowdfunding is raising millions of dollars a year for individuals and organizations; for example, recently funds were raised for an elderly New York City resident who lost her home to a fire and, in another effort, donations to an inner city arts center raised funds for scholarships.

There are many websites dedicated to crowdfunding that are allowing young entrepreneurs, individual fundraisers, and not-for-profit organizations to raise money for projects, events, or charitable causes.  Some websites, such as FirstGiving, are geared to not-for-profit organizations.  However, there are a number of other crowdfunding websites, like Kickstarter and Indiegogo, that may not be not-for-profit specialized but could still be utilized to reach funders.  Be sure to evaluate a handful of crowdfunding websites in order to find the one that best fits your fundraising goals and targets appropriate contributors.

Individuals like to contribute funds via crowdfunding because it allows them to support a specific project or cause and they know that their support is going directly to that project or cause.  So, it is important for not-for-profit organizations to remember that crowdfunding works best for funding individual projects; however, it is not especially well suited for general fundraising or annual giving campaigns.  Your not-for-profit organization should explore crowdfunding to determine if it is a viable fundraising tool for your next project or event.

Essential Financial Benchmarks for a Not-for-Profit

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April 22, 2105

Collins_BrianBy Brian Collins, CPA

Increasingly, not-for-profits are playing a bigger role in our society by delivering vital services, and in our economy by providing needed jobs.  With this increasing role, not-for-profits are facing intensifying scrutiny from the government (e.g., IRS and funding sources) and donors, along with increased competition.  Due to these pressures, management of a not-for-profit needs to be aware of organizational performance in order to make informed financial decisions and identify trends.  A way to know the performance and health of your not-for-profit is to perform analysis with financial benchmarks.

To help you measure your not-for-profit’s performance, consider these financial benchmarks suggested by The Center for Nonprofit Management:

  • Quick Ratio – This ratio indicates your organization’s ability to meet short-term obligations.  As a general rule, a quick ratio of 1 or more is good. Formula:
    Quick Ratio = Current assets – Inventories / Current Liabilities
  • Debt Ratio – This ratio indicates the proportion of debt relative to your assets.  A debt ratio of more than 1 can suggest liquidity problems.  Formula:
    Debt Ratio = Total Debt / Total Assets
  • Defensive Interval Ratio – This is a measure of the number of days your organization can operate without having to tap into long-term (fixed) assets.  Most experts recommend maintaining enough cash to cover three to six months of operating expenses.  Formula:
    Defense Interval Ratio = (Cash / Operational Expenses) / 365

In addition, consider monitoring performance in these three key areas: 

  1. Program Efficiency – Quantify how much your organization is spending on its primary mission vs. administrative costs using this formula: Program Service Expenses / Total Expenses. Ideally, this ratio would be at least 0.8 (80%), which reflects an appropriate level of expenses for infrastructure/administrative and fundraising.
  2. Operating Reliance – Determine whether or not your organization could cover all of its expenses from program revenues alone with this formula: Unrestricted Program Revenue / Total Expenses. A good outcome for this measure is 1 and, in some cases, more than 1.
  3. Fundraising Efficiency – Take a look at how many dollars you are able to collect for every $1 of fundraising expense by using this formula: Unrestricted Contributions / Unrestricted Fundraising Expenses. The higher the ratio, the more efficient the fundraising efforts.

So what’s the condition of your not-for-profit?

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