Volume 2 – 2015
In Volume 2 of our 2015 Newsletter, we highlight:
- Nonprofit Budgeting Essentials
- Estate Planning
- Employee Fraud and Theft
- Retirement Plan Distributions
Hochschild, Bloom & Company LLP – Announcements
Hochschild, Bloom & Company LLP has promoted Victoria Dailey, CPA and has had several new employees join the Firm. We are very excited to introduce these individuals to you and congratulate them on their tremendous accomplishments.
We know our clients will welcome them and be as impressed with them as we are.
Victoria Dailey, CPA was recently promoted to manager. She started with the Firm in 2012 as a staff accountant, was promoted to supervisor, and most recently to manager. Prior to joining the Firm, she had almost four years’ experience in public accounting. Victoria graduated from Missouri State University with a Master’s degree in Accountancy and received her CPA license in 2009. She is a member of the Missouri Society of Certified Public Accountants. Victoria and her husband, Charlie, live in Creve Coeur, Missouri.
Abby Sowatsky, CPA recently completed her first year at the Firm, fulfilling her final requirement for certification with the Missouri State Board of Accountancy to earn her license as a CPA. She passed the AICPA Uniform CPA Examination in the summer of 2013 after she graduated from Truman State University with a Master’s degree in Accountancy. She passed all four parts and the ethics exam on the first attempt, which is a tremendous accomplishment. Abby lives in St. Louis, Missouri.
Michelle Barefield, CPA joined the Firm in October 2014 as a supervisor. She graduated from Penn State University in 1990 with a Bachelor of Accountancy and obtained her CPA license in 1992. Michelle is a member of the American Institute of Certified Public Accountants and the Missouri Society of Certified Public Accountants. Michelle brings a wide range of knowledge and thirteen years of public accounting experience to the Firm. She has three children and resides in Wildwood, Missouri.
Megan Hooks joined the Firm in October 2014 as a staff accountant. She graduated from Southeast Missouri State University with a Bachelor of Science degree in Accounting in 2013. Megan recently received notice that she passed the AICPA Uniform CPA Examination and the certification is in process to earn her license as a CPA. She resides in St. Clair, Missouri.
Kristie Buck joined the Firm in January 2015 as a staff accountant. Kristie graduated in 2011 from Southeast Missouri State University with Bachelor of Science degrees in Accounting and Finance and received a Master of Science degree in Forensic Accounting from Webster University in 2012. She is currently pursuing her CPA license and is a member of the Missouri Society of Certified Public Accountants. Kristie and her husband, Zack, live in Ballwin, Missouri.
Each of these individuals work in our Chesterfield office and they work in all aspects of accounting and taxes and are definitely great assets to the Firm.
Nonprofit Budgeting Essentials By Angela Dorn
Nonprofit organizations are often faced with a balancing act – striving to reach ambitious goals for their mission while dealing with the constraints of limited funding. In an effort to attract donors and achieve positive financial results, transparency is not only important, but it is imperative. One of the best ways to accomplish this task is to prepare an annual budget that is approved by the organization’s board of directors. But the process does not stop there; following the plan is the key to success.
Anticipation of available resources can be difficult even in the best of times. Many dynamics beyond the control of the organization weigh into the outcome. A conservative approach is often the best method for budgeting available resources. Several factors play into determining accurate revenue numbers. Expected donations from donors, grant opportunities, and capital campaign goals all play a role in developing the plan for funding. An additional consideration can be given to whether the organization has a fund balance or reserves that are accessible that can be used in the current year.
By this time, fundraisers for the year should already be planned. The receipts the organization expects to raise need to be compared to the costs of the events. These type of activities should support the nonprofit function rather than serve as a distraction. Projected funds should include donations to be received at the event, as well as the amounts anticipated from ticket sales, raffles, auction items, etc. Then the amount these type of activities are expected to cost the organization should be examined to insure the fundraising event will be beneficial to the organization. Direct costs as well as indirect costs should be estimated at this point.
Once the available resources can be determined, the focus should switch to the expected use of the funds. Start with the bare minimums, such as the fixed costs. Many times this consists of payroll expenses to key employees, occupancy expenses, utilities, and insurance.
Then step back and take a look at the available funds left to directly support the mission. This is the amount to be expended on the program activities. Is there a goal to increase the reserves or are there projects that will require the use of reserves this year? What can be done to stretch the dollars for meeting the needs of the organization? The goal is to have the ability to adequately support the mission of the organization.
The next piece of the budget process would be to examine the expenses on a functional basis. The organization should have a written plan to define how it allocates shared expenses across program, management and general, and fundraising. Many donors look for this when making the decision to support the organization and they like to see their funds being used for the benefit of the mission.
After the budget is approved, the monitoring begins. Regular assessment of the organization’s actual results in comparison to the budget is as important as the preparation of the original budget. Throughout the year, if results are not lining up with the expectation, the plan should be reviewed and revised. Proposed amendments, if necessary, should be presented to the board of directors for approval. Knowing the financial goal and working to attain it will go far in making the organization a success.
* * * * * * * * Unless you are prepared to give up something valuable you will never be able to truly change at all, because you’ll be forever in the control of things you can’t give up. Andy Law * * * * * * * *
Many feel that estate planning is just for the wealthy. Estate planning includes making arrangements to manage and distribute your property in an orderly fashion while you are still alive and upon your death.
If you have a small estate, you still need to do some planning. You need a financial power of attorney and a health care directive. If you become incapacitated you need someone to be able to pay your bills and make financial decisions for you while you are still alive. Joint ownership, pay on death (POD), or transfer on death (TOD) are a great way to title assets. Remember, the POD and TOD titling only allows the heir to take possession of the asset after the individual is deceased. Making sure the beneficiaries on your retirement plans and life insurance policies are up to date is very important.
It is recommended that larger estates setup a trust. This allows you to have one document that manages all of your property. It will designate a trustee to take over your affairs when you become incapacitated or die. You, of course, must retitle your assets into the trust name or they will not be considered legally in the trust.
If the estate is above the estate exemption level, currently $5,340,000 for 2015, more aggressive tax planning tools need to be used. Some tax saving ideas include family partnerships and charitable giving. Annual gifting to family members is always a quick and easy way to transfer assets. The current annual limit is $14,000 for 2015. It is even advisable to gift assets over the annual limit if it is an asset that will appreciate significantly between now and your death. This gets an asset out of your estate while the value is low.
Everyone should do some planning before it is too late.
Employee Fraud and Theft By Mike Williams
Fraud and theft are very common these days especially in the workplace. It is often the long-term or nicest employee who is guilty. The culprit is often caught either from a tip from another employee or on accident. The following are a few ways to help prevent or spot this problem.
Establish a code of conduct and live by it as the owner or manager of the organization. Have a written policy that sets what is acceptable and what is not. Be sure to make employees aware of the policy and show them by your personal actions what is the proper behavior.
Set up checks and balances. Having one person perform a multitude of related functions can be dangerous. Do not have one person prepare invoices, open the mail, reconcile the bank and credit card statements, and make postings to the general ledger. Have someone else perform at least one of these functions.
Keep everything locked and secured. Keep keys and computer system access tightly controlled including from former employees. Change locks and passwords to secure your information.
Finally, be aware of your employee’s behavior. Are they acting different, not taking vacation, working extra or irregular hours? Make employees aware that there is a zero tolerance for employee fraud and theft. No one knows your organization better than you. If something does not seem right, it probably is not.
Retirement Plan Distributions
Your retirement plans and IRAs may be among the largest, if not the largest, asset that you have. Therefore, one of the most important planning areas for you is taking distributions from your IRAs and qualified retirement plans. Understanding the basic tax rules and then planning your distributions to meet your personal financial and estate planning objectives is essential. We can explain those rules and provide some strategies for you to consider as part of your overall tax plan.
Some taxpayers may consider early retirement as a viable option. However, generally, a distribution made before you are 59½ years of age is subject to a 10% penalty in addition to the tax otherwise payable on the distribution. There are some exceptions. The penalty may not apply for certain hardship cases, for first-time home buyers, or to pay certain medical or education expenses. Many distributions may be received tax free if they are transferred to an IRA or another eligible plan within 60 days of the distribution.
Though there is a penalty for premature distributions, there is also a 50% penalty for failure to commence distributions by a certain age. Minimum distribution rules are imposed to prevent participants from unreasonably deferring the tax on their retirement savings. Under these rules, distributions are required to begin, for a participant other than a 5% owner, no later than April 1 of the calendar year following the later of:
- The calendar year in which the participant reaches age 70½, or
- The calendar year in which the participants retires.
The minimum distribution rules do not apply to Roth IRAs while the account owner is alive, but do apply to traditional IRAs, deferred compensation plans, tax sheltered annuities, and qualified retirement plans.
Navigating the rules of when and how retirement distributions are taxed can be intimidating. However, we can help you make the right choices that will minimize your tax burden, meet your financial needs, and comply with tax regulations. Please give our office a call to discuss your retirement plan options.