PENAN & SCOTT, P.C.

Audits and financial reporting are enhanced by strong, independent audit committees. These committees oversee external audits and evaluate the company’s risk management, legal and regulatory compliance, and control environment. It’s important to carefully choose who serves on your committee. Committee members should have the time, commitment and experience to do the job well. Financial literacy and industry knowledge are essential. Ideally, they should be independent with respect to financial and business interests with the company. Contact us for more information about the audit committee’s role in the financial reporting process and best practices for selecting members.

The average cost of a data breach is $4.88 million, up 10% from last year, according to a recent report by IBM. As businesses increasingly rely on technology, cyberattacks are becoming more sophisticated and aggressive, and risks are increasing. It’s critical to implement effective internal controls to identify potential threats, protect systems and information from security events, and detect and respond to possible breaches. We offer varying levels of guidance, both when assessing cyber risks at the start of an audit engagement and when uncovering a breach that happened during the period under audit or during audit fieldwork. Contact us for more information.

In a divorce, dividing certain types of property, such as assets in a qualified retirement plan, can be especially complicated. A qualified domestic relations order (QDRO) may provide for the transfer of assets in a qualified retirement plan to a nonparticipant spouse without incurring dire tax consequences (thus, preserving more for your estate). A court with jurisdiction or another authority issues the QDRO. It will state either a dollar amount or a percentage of assets that belongs to the spouse of the participant, called the “alternate payee.” It also specifies the number of payments to be made (or the length of time for which the terms apply). Contact us for additional details.

At one time, not-for-profit HR departments might have been responsible primarily for recruiting and hiring and occasionally for intervening in disciplinary matters. Today, HR generally also handles employee benefits, regulatory compliance, employee training, policy formulation and possibly payroll. Outsourcing part or all of your HR function can help with workloads and potentially lower costs. Be sure to vet HR providers thoroughly by interviewing and researching them. Look for nonprofit experience, reasonable rates and good rapport. We can help recommend providers and provide other cost-cutting suggestions.

Myths abound about the risks of launching a nonprofit capital campaign. But you can’t let unfounded fears prevent your organization from pursuing its philanthropic goals. Just make sure stakeholders are on board and ready to do what’s needed to raise the funds. Craft a financial goal that’s achievable and a message capable of capturing the imagination of supporters. You’ll need a strong campaign leader with experience, vision and stamina. And you should secure a big chunk of your total goal from large donors before going public with solicitations. Contact us for help analyzing the financial aspects of a capital campaign.

To be financially fruitful, nonprofit events need adequate sponsorship to cover a portion of expenses. Whether you’re planning a gala, a conference or something else, start early to beat out competition for philanthropic dollars. Look for high-quality sponsors whose products and services match your nonprofit’s mission and whose target customers are similar to your event’s likely attendees. Make sure those soliciting sponsors are armed with good data and information about levels of sponsorship. Contact us with financial and tax questions about special event planning.

To understand the need for nonprofits to avoid excess benefit transactions, it helps to also comprehend the concept of private inurement. This refers to payments to “insiders” that are beyond reasonable compensation for goods or services provided. If any net earnings inure to the private benefit of an individual, the IRS won’t view your nonprofit as operating primarily to further its tax-exempt purpose. The prohibition against such benefits doesn’t prevent all payments, such as reasonable salaries. But you must be able to prove transactions were made with your tax-exempt purpose in mind. Contact us for more information.

A board of directors is critical to keeping a not-for-profit focused over the years as it grows. But how do nonprofit boards change over time? In the early stages, they tend to be entrepreneurial and play an active role in day-to-day operations. As organizations mature, they usually add members who are wealthier and more influential, often with specialized expertise. They also typically add committees and shift to setting strategic objectives and dealing with governance issues, such as audits. To help ensure your board remains open to new ideas and perspectives, ask board members to agree to serve limited terms.

If your not-for-profit is recruiting new staffers, it can be difficult to overcome the widely held belief that nonprofits offer lower salaries than for-profit businesses. To entice candidates to give your organization a second look, consider enhancing your benefits menu. It doesn’t have to cost a lot. Wellness benefits, for example, can be an inexpensive add-on to health care plans. And many nonprofit staffers welcome relatively lower-cost benefits such as a dependent care FSA, parental and adoption leave, and short-term disability insurance. Talk to a benefits expert or contact us for more information.

Elite athletes cross-train to promote full-body strength, enhance performance and reduce the risk of injury. Nonprofits that cross-train staffers on one another’s jobs can reap similar results. If your employees understand the basic functions of other positions, they can jump in and help out if someone goes on disability leave or there’s a work surge in a particular department. Cross-training also enables staffers to build skills and explore potential career paths. And it can help prevent occupational fraud by making it harder for thieves to hide schemes. For more information, contact us.