Simply, a contribution is a gift of funds, typically with no stipulations (though more on that later), frequently given by individuals. A grant is funds awarded as part of an application process, usually given by a foundation that sets specific rules for allocating money. Of course, there’s more to it than first meets the eye--knowing the difference between contributions and grants can be difficult because they share many of the same characteristics.
Functional Expenses Defined Functional expenses are synonymous with a number of accounting terms: class, buckets, cost centers, project codes, etc. Nonprofit organizations rely on functional expenses to identify and allocate organizational departments and programs. This process allows your nonprofit to distinguish the purpose of expenses and revenues in a complex way that accounts just don’t feature. An organization may have as few as three functional expenses, or more than thirty.
If you pay a contractor, and you pay an employee, why aren’t they considered the same thing by the IRS? There is a difference, and the IRS states that “the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” For example, if your organization’s bathroom has a leak and you call a plumber to repair it, you would not issue a 1099 to the plumber (unless his fees are over $600 for the year).
It’s officially 2014, with any luck your nonprofit is revamped from the influx of donations in December, new budgets and goals, and a fresh team of volunteers resolving to dedicate more of their time this year. If you’re experiencing any of this, then you are off to a great year. However, you’re not out of the woods just yet. Remember that year end procedures are just around the corner. Now is the time to focus on the upcoming months and the tax deadlines they hold.
Part 2 of a 2 part series. Read Part 1 Last week we covered the components of an effective budget. To achieve a truly great budget for your nonprofit there a few processes you should focus on during its development. The first includes the human component of team building. To achieve a budget truly suited to your organization, be sure to include the necessary members of your organization. That means the budgeting process should be a team effort involving the board of directors, treasurer, finance committee, executive director, program directors, and fiscal staff.