A chorus manager's financial role includes establishing a bookkeeping system that supports the needs of the organization for budgeting and financial control. Most of our member choruses utilize Quickbooks for this purpose. Some handle accounting in-house while others utilize an outside accounting service. The financial role also includes annual reporting requirements to the IRS and any state regulatory agencies. Payroll functions are typically outsourced but the organization retains responsibility for the designation of individuals as employees or independent contractors. This designation can have serious financial consequences and should be well understood and documented. Financial management also includes risk management which is typically addressed through insurance policies. Each of these areas are addressed below.
A well designed chart of accounts and class system are critical to efficient financial reporting and budgeting. All too often the chart of accounts evolves haphazardly as various volunteers handle the accounting function. Class systems can be used to aggregate transactions by category (holiday concert, spring concert, fundraiser, administration) making pulling reports on various activities quick and easy.
Sample Chart of Accounts
A detailed chart of accounts. It may be more extensive than your chorus requires but it is an excellent list of possibilities.
Sample Class Listing
Classes can be used to organize activity by function and can make pulling reports from QuickBooks on particular activities a breeze.
The chorus annual budget should be built using exactly the same account titles that are used in the chart of accounts in order to facilitate comparisons between budget and actual results. Once the annual budget is approved it should be broken down by month and entered into the budget function in Quickbooks (look under Company, Planning & Budgeting).
Reports should be generated monthly that compare actual results to budget. Such reports can be generated with just a few keystrokes within Quickbooks using the Profit & Loss Budget Performance reports available under the Reports, Budget tab. To communicate more effectively with the non-financial members of your board you may wish to consider reformatting the budget reports into a document which is more informative such as that shown below.
Board Financial Report
This report is broken out by class and includes explanations for significant deviations from budget along with some graphics to make the presentation more interesting.
Most organizations exempt from income tax under section 501 of the Internal Revenue Code must file an annual information return (Form 990 or 990-EZ) or submit an annual electronic notice (Form 990-N), depending upon the organization's gross receipts and total assets. Form 990 must be filed by an organization exempt from income tax under section 501 if it has either (1) gross receipts greater than or equal to $200,000 or (2) total assets greater than or equal to $500,000 at the end of the tax year. If an organization has gross receipts less than $200,000 and total assets at the end of the tax year less than $500,000, it can choose to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, instead of Form 990. If an organization normally has gross receipts of $50,000 or less, it must submit Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required To File Form 990 or 990-EZ. Failure to file the required annual returns can result in the loss of your exempt status.
Compliance Guide for 501(c)(3) Charities
This IRS publication discusses activities that may jeopardize a charity's exempt status, required tax returns and recordkeeping, governance considerations and required public disclosures.
Tax on Unrelated Business Income of Exempt Organizations
Even when an organization is exempt, certain types of income deemed not to be substantially related to the organization's exempt purpose, can be taxable. This IRS publication discusses unrelated business income.
When a person is paid as an employee with the income reported on a W-2 the employer withholds and pays employee income taxes. When a person is paid as an independent contractor with the income reported on a 1099, all money earned by the individual is paid on an untaxed basis and it is the responsibility of the contractor to file and pay the appropriate taxes. Distinguishing whether an individual is an employee or an independent contractor can be difficult.
IRS W-2 vs. 1099
This document from the IRS discusses the three main factors to be considered in making the determination and provides a set of 20 questions that can be used as guidelines.
Most choruses carry general liability insurance which covers liability for any injuries to an attendee at a chorus event and property insurance which covers damage to chorus property and damage to any property the chorus rents. Be aware that these types of policies generally do not cover injury to a chorus member participating in a chorus activity – if the chorus wishes to have that type of coverage you will need to work with your insurance agent.
Many choruses with outside Board members also carry directors and officers liability insurance (D&O). It has become more readily available and at more reasonable prices over the past few years. If your chorus does not carry D&O insurance you may want to get a quote from your insurance agent – it may be more affordable than you think.
Choruses with employees will also need to carry workers compensation and unemployment compensation insurance. These policies are generally required by the state and are provided through the state.
This excerpt from about.com describes each of the types of insurance that a chorus is likely to be interested in.
Getting the Most from Your GALA Membership?
Are you taking advantage of all that your GALA membership entitles you to? Review our presentation on Getting the Most from Your GALA Membership to make sure.