Financial Responsibilities and Reporting Requirements - Chapter's Relationship to the IRS
Financial Responsibilities of ACM Chapters
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] provide detailed information regarding the rights and responsibilities of ACM chapters regarding financial matters. The following is a summary of these responsibilities:
- 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.
- 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.
- Failure to submit financial reports is grounds for revocation of charter as provided in the Constitution and Bylaws of the Association.
- Disbursements of funds for 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.
- 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.
- An acknowledgement of support should be given to anyone who has donated $250 or more. Please see an example acknowledgement of support letter here
- Any chapter that receives an in-kind donation is responsible for determining the fair market value of the donation and sending out an acknowledge letter to the donor. The chapter must also report the transaction on their annual report filing with ACM.
Chapter's Relationship to the IRS
501 (c) (3) Status
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. ACM has a Group Exemption Number (number 1931) which recognizes that ACM chapters share this 501 (c) (3) exemption status. To maintain this group exemption, ACM 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 un-chartered chapters.
Group Form 990: The Statement of Cash Receipts and Disbursements
Although ACM is not required to file income tax returns, the Association must complete the annual informational return, Form 990, and the Group Form 990 for its chapters. Every chapter must submit a Statement of Cash Receipts and Disbursements, an account of the financial activity of the chapter for the fiscal year, to headquarters. A chapter's treasurer and chairperson provide the authorization for ACM to include its chapter in the group filing. 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 submit the Statement to Headquarters by August 30 so that ACM can file the Group 990 Return by November 15th.
Sales Tax Exemption
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; 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]
An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. ACM chapters that conduct financial business or need to open a bank account will require an EIN number. Chapters will have to designate one of their officers as the responsible party and have their information be submitted within the EIN application. That information, which includes a social security number, can be provided to ACM via phone. If a chapter would like an EIN, they should contact email@example.com. Chapters should not create their own EIN as it needs to be submitted by ACM to ensure the chapter is confirmed as a subordinate organization under ACM and therefore included in our returns.
Reporting of Income Paid To Third Parties
The following disbursements must be reported to the IRS if they amount to more than $600 per calendar year: 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. Reimbursements of actual expenses, such as travel reimbursements, need not be reported.
Responding to IRS Requests
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 Local Activities Coordinator at ACM Headquarters, 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 Local Activities Coordinator.
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 maintained, 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.
Chart of Accounts
To establish a proper accounting system, chapters should organize a chart of accounts. The Chart is a listing of the various categories of assets, liabilities, income and expenses of an organization.
Asset accounts are used for checking and savings accounts, other investments, inventory, and accounts receivable.
Liability accounts include bills and invoices to be paid, loans, or any other payables due from the chapter.
Income accounts include any major item of cash receipts received by the chapter, like 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. The income classifications in the chart of accounts should conform 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 categories that 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, postage and supplies, and any other miscellaneous types of chapter expenses.
Required Documentation and Retention
All books and records, original documentation, and any other pertinent financial information, should be 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. ACM maintains all records for 4 years in order to meet federal and state requirements.
- The chapter's budget must be well conceived, and have been prepared or approved by the board;
- The budget must be broken down into periods corresponding or approved by the board;
- Financial statements must be prepared on a timely basis throughout the year and a comparison made to the budget on the statements;
- The board must be prepared to take action when there is significant deviation from the budget.
If needed, a chapter can open a bank account. When opening a checking or savings account, signature cards must be prepared indicating the individuals who have authority to sign checks, deposit, or withdraw funds. This is usually limited to the chapter chairperson and treasurer.
Chapters may wish to consider investing chapter funds, in excess of normal checking account and operational requirements, in low risk investments, like savings accounts, certificates of deposit, or U.S. Treasury Securities. Before making any such investment, the chapter should read ACM's policy regarding investment of ACM funds, and consult with the ACM Director of Finance.
Accounting for Interest
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.
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