All ACM chapters collect and disburse their own funds. ACM Bylaw 8 [Financial Safeguards], Sections 4 and 5, and ACM Bylaw 5, Section 6 [Finance] (see appendix) provide the most complete information regarding the rights and responsibilities of ACM chapters regarding financial matters. A summary of those rights and responsibilities are as follows:
1. Any chapter that collects, holds or disburses funds on behalf of the Association or any of its branches must submit an annual accounting of such funds. 2. Chapter funds will be accounted for in the Association's IRS return unless the chapter specifically desires to file a separate return with the IRS. If a chapter Secretary/Treasurer chooses to file its own return, it must provide a copy of the return to the ACM Finance Director. 3. Failure to submit financial reports is grounds for revocation of charter as provided in the Constitution and Bylaws of the Association. 4. Any chapter desiring to solicit funds of more than $5,000 cash or equivalent goods or services from a single source must obtain must obtain in advance the approval of the ACM Chief Operating Officer. Solicitations of donations of small magnitude for a specific goal of a specified time do not require presidential approval. 5. Disbursements of funds for those expenditures necessary for the normal operation of the chapter do not require approval. Any chapter desiring to disburse funds beyond those necessary for normal operations must obtain advance approval of the ACM Chief Operating Officer. 6. Upon dissolution of a chapter or revocation of a chapter's charter, all assets of the chapter become the property of the Association. The only exception to this rule is in the case of certain student chapters, whose educational institutions require that such assets be transferred to them for a purpose within the contemplation of section 501 (c) of the Internal Revenue Code of 1954.
STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS
The Statement of Cash Receipts and Disbursements must be prepared annually by each chapter. A copy can be found on the web at: http://www.acm.org/chapters/prof/chap_admin_info.html
As shown on this form, the chapter's name, address and federal employer identification number is requested, along with an accounting of all cash receipts and cash disbursements for the fiscal year (from July 1 to June 30).
It is required that each chapter maintain its detailed financial records to conform to the classifications of cash receipts and cash disbursements shown on the form.
The purpose of the Statement of Cash Receipts and Disbursements is twofold; to make ACM aware of the financial activity of each chapter on an annual basis, and to enable ACM Headquarters to file the Group Form 990 Return with the IRS. The specific authorization for including a particular chapter in the ACM Group Return is made on the authorization form along with the Statement of Cash Receipts and Disbursements. On the authorization form, the treasurer and chairperson of the chapter either authorize ACM to include the chapter with the Group Return, or state that the chapter will be filing a Form 990 Return with the IRS independently of ACM. ACM encourages all chapters to file with the ACM Group Return to avoid potential problems.
CHAPTER'S RELATIONSHIP TO THE IRS
ACM is exempt from federal income taxes under Section 501 (c) (3) of the Internal Revenue Code of 1954 since the Association is organized and operates exclusively for scientific and educational purposes. This exemption was granted the ACM on March 21, 1957. Although ACM is not required to file income tax returns, the Association is required to file an annual informational return (Form 990). The Association also files Group Form 990 Returns (for chapters). ACM is also required to file an annual Form 990-T Return with the IRS for any unrelated business income.
The IRS returns are due on or before November 15 of each year, covering information for the prior fiscal year ended June 30. The financial data reported to ACM Headquarters by each chapter on the Statement of Cash Receipts and Disbursements must be compiled and summarized. An organization which fails to file a Form 990 Return with the IRS by the due date can be charged with a penalty. It is therefore essential that chapters respond to ACM Headquarters by August 30 to enable ACM to file the Group 990 Return by November 15th.
ACM has a Group Exemption Number (number 1931) which recognizes the ACM chapters as sharing in our 501 (c) (3) exemption status, and thus recognizing them as exempt from all federal income taxes. To maintain this group exemption, ACM Headquarters is required to send an annual update to the IRS with information regarding changes in chapter addresses and chairpersons, and a list of newly chartered or unchartered chapters.
ACM has been granted an exemption from New York State and local sales tax. ACM chapters have the same right to be exempt from State and local sales taxes in those states and localities which grant such exemptions; however, each chapter must apply to the authorities in the state in which they operate, for the exemption. Chapters should contact their state department of revenue for the necessary forms, and should contact the Finance Director at ACM Headquarters with any questions.
Federal Employer Identification Number [For U.S. Chapters Only]
ACM has a Federal Employer Identification Number (EIN), which is similar to an individual's social security number. This number is required by the IRS for purposes of filing informational or any other type of return with the IRS. Each ACM chapter is required to have an EIN as well (this is necessary even though chapters generally do not have employees). Each year, ACM Headquarters applies for EINs on behalf of the newly chartered chapters and chapters which have not been assigned EINs. Headquarters will notify the chapters of their EINs when they are received. The chapter's EIN should be used when opening bank accounts, etc., and should be noted on the annual financial report filed with ACM Headquarters.
In addition to the regular Form 990 Return and Group Form 990 Return filed annually with the IRS, ACM is also required to file an annual Form 990-T Return for income derived from "unrelated trade or business." For example, the IRS considers advertising income and income from the sale of the ACM member mailing list as unrelated business income. It is therefore subject to the payment of manual income taxes.
Advertising income and income from the sale of mailing lists by ACM chapters would also fall under the classification of "unrelated business income" and could also be subject to a tax by the IRS. In the case of the Form 990-T Return, the Association can only file on its own, and cannot file a Group 990-T return similar to the Group Form 990 Return. Therefore, chapters with unrelated business income may be required to file a separate Form 990-T Return with the IRS.
It should be noted that the income from newsletter sponsors (who donate funds, and are recognized in the chapter newsletter) falls into a grey area in this regard. The recognition may be considered advertising by the IRS and potentially as income subject to an "unrelated business income" tax, especially in those cases where the newsletter recognition appears to resemble an advertisement. If chapters follow the ACM policy and procedures on advertising and newsletter sponsorship recognition at http://www.acm.org/pubs/cacm/careeropps/about_advertising.html, however, these misunderstandings should be avoided.
Reporting of Income Paid To Third Parties
The following types of payment must be reported to the IRS if the calendar year total is $600.00 or greater: awards, prizes, all types of grants, honoraria, fees for professional services, temporary employment, and if the recipient is a permanent resident of the United States. This does not affect reimbursements of actual expenses, which are not reportable (such as travel reimbursements.)
It is the responsibility of the chapter chair or other person as officially designated by the chair to complete the attached form (http://ftp.fedworld.gov/pub/irs-pdf/fw9.pdf) in duplicate when payment is made. This could apply to any amount, even though less that $600.00
These forms, along with the amounts paid, must be emailed to ACM Headquarters (Attention: Local Activities Coordinator) by January 15th for the previous calendar year. Please provide the honorarium amount separately for all other payments.
It may be possible for the recipient to exclude some or all of these payments under certain circumstances from their tax returns, but ACM is not in a position to give tax advice.
The IRS may send your chapter blank tax returns each year. Since most chapters choose to be included in the ACM Group 990 Return, these forms should not be prepared. The IRS may also send chapters reminder notices, and in some cases, delinquent notices. If your chapter receives such a notice, send it to the chapter coordinator at ACM Headquarters at: ACM Local Activities, 1515 Broadway 17th Floor, New York, NY 10036, who will have the ACM Finance Director respond to the IRS. Chapters should not respond directly to any IRS request, either in writing or by telephone, but instead should direct the request to the chapter manager.
BASIC CHAPTER ACCOUNTING & MAINTENANCE OF CHAPTER FINANCIAL RECORDS
ACM operates on a fiscal year which begins July 1st and ends June 30th. All financial books and records are kept, and all IRS returns reported, on this fiscal calendar. To facilitate the chapter's preparation of the annual Statement of Cash Receipts and Disbursements, and ACM's preparation of the Group Form 990 Return, it is helpful for all ACM chapters to use the July 1 to June 30 fiscal year schedule.
The first step in setting up a proper accounting system is organizing a chart of accounts. A chart of accounts represents a listing of the various categories of assets, liabilities, income and expenses of an organization. Each particular account within these 4 specific categories are referred to as "natural accounts". The numbering of such account numbers should be consecutive; e.g., asset accounts could be numbered 1-20, liability accounts 21-40, income accounts 41-60, and expense accounts 61-80. This consecutive numbering eases the control and use of the chart of accounts.
Asset accounts are used for checking and savings accounts, other investments, inventory, and accounts receivable, equipment, etc. Liability accounts would include items such as bills and invoices due to be paid, loans, or any other payables due from the chapter.
Income accounts would include any major item of cash receipts received by the chapter; e.g., registration fees for PD seminars, regular meeting fees, chapter dues, sale of publications, interest from savings accounts and other investments, and other classes of income such as from sponsorship of the chapter newsletters, and other forms of miscellaneous chapter income. The income classifications used for the income section of the chart of accounts should conform closely to the categories of cash receipts shown on the annual Statement of Cash Receipts and Disbursements and accompanying instructions from headquarters to each chapter.
The expense section of the chart of accounts should include expense categories to conform to the cash disbursements section of the annual Statement of Cash Receipts and Disbursements. These expenses include meeting, conference and seminar expenses, publication expenses (i.e., printing and mailing of all newsletters and publications), postage and supplies, and any other miscellaneous types of chapter expenses.
Cost Centers - Project or Fund Accounting
A chapter may wish to set up a form of cost center reporting for tracking the income and expenses related to a particular activity or fund within the chapter. This is accomplished by assigning a separate cost center number for each project or activity to be tracked, (i.e., a particular committee, meeting, or PD seminar). The income and expenses (based upon the chapter chart of accounts) would be accumulated by the cost center. All cost centers would then be combined to obtained the total financial status of the chapter.
Accounting Systems
There are two ways of recording accounting transactions; the cash basis, and the accrual basis. The cash basis records income when received and expenses when paid. The accrual basis records income when earned 9 i.e., in the month or period in which it relates), and records expenses when incurred (i.e., after some service has been rendered to the chapter).
For example, under the cash basis, a chapter would record registration fees as income for a particular PD seminar when collected; under the accrual basis, all registration fees for that seminar would be recorded as income in the month of the seminar. Under the cash basis, newsletter printing costs would be recorded as an expense by the chapter when paid; under accrual accounting, the expense would be recorded in the month of the newsletter issue.
ACM operates under the accrual basis of accounting, which is preferable from a formal accounting standpoint. Most chapters, however, it find it easier to follow the cash method of accounting. An important concept here is consistency; for ease of comparison from one year to another, the years being compared should be based on the same method of accounting.
Required Documentation and RetentionAll books and records, original documentation, and any other pertinent financial information, is maintained by the chapter for a minimum of 4 years in order to meet federal record retention requirements. Each chapter should contact the state authorities where they operate in order to comply with state requirements since they may differ from one state to another.
Although the New York State requirement is 3 years, ACM maintains all records for 4 years in order to meet federal requirements. Certain financial records, to be determined by the chapter involved, may be retained indefinitely; e.g., financial statements for past years.
Budgeting
The following is an exert from a book written by Malvern J. Gross, Jr., and William Warshauer, Jr., partners of Price Waterhouse & Co.:
"A budget...represents the organization's blueprint for the coming months, or years, expressed in monetary terms. This means the organization must know what its goals are before it can prepare a budget...the first function of a budget is to record, in monetary terms, what the realistic goals or objectives of the organization are for the coming year...The budget is the financial plan of action which results from the board's decisions as to the program for the future. The second function of a budget is to provide a tool to monitor the financial activities throughout the year. Properly used, the budget can provide a benchmark or comparison point which will alert the board to the first indication that their financial goals won't be met. For a budget to provide this type of information and control, four elements must be present:
1. The budget must be well conceived, and have been prepared or approved by the board; 2. The budget must be broken down into periods corresponding or approved by the board 3. Financial statements must be prepared on a timely basis throughout the year and a comparison made to the budget, right on the statements; 4. The board must be prepared to take action where the comparison with the budget indicates a significant deviation." (Source of information: Malvern J. Gross, Waterhouse & Co., Financial and Accounting Guide For Nonprofit Organizations, 3rd edition, 1979, Ronald Press Publisher.)
The chapter budget should be prepared under the direction of the chapter treasurer. The budget should be prepared using the same cost center and natural account structure that is used for the chapter's financial statements. The chapter may also choose to prepare its budget on a programmatic basis to enable tracking of individual programs.
It is important for a chapter to have at least one bank account. When opening a checking (or savings) account, signature cards must be prepared indicating the individuals who have authority to sign checks or deposit or withdraw funds. The signature cards are fairly straightforward. It is mandatory that, in addition to the chapter chairperson and treasurer, the Chief Operating Officer of ACM be given signature authority as well, as a safety precaution in the event of dissolution of a chapter. The chapter may send a signature card to the Local Activities Coordinator at 1515 Broadway 17th Floor, New York, NY 10036, who will get the Chief Operating Officer's signature and return the card to the chapter treasurer.
Chapters may wish to consider investing chapter funds, in excess of normal checking account and operational requirements, in the "low risk" type of investments; (i.e., savings accounts, certificates of deposit, or U.S. Treasury Securities). Before making any such investment, the chapter should read carefully ACM Policy regarding such investment of ACM funds, and consult with the ACM Director of Finance.
Any interest received by a chapter from any investment is considered income and should be recorded on the chapter's regular financial statements and the annual Statement of Cash Receipts and Disbursements (mailed by ACM Headquarters) where indicated on the form.
