ACC325 7-1 Final Project AMR Rescue
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ACC325 Accounting for Non-Profit Organizations
7-1 Final Project: AMR Rescue
By Ashley Robinson
Establishing your Nonprofit
The name of the nonprofit organization I want to establish is called AMR Animal Rescue Center. It is a no kill shelter, animal rescue and rehabilitation center. The mission statement is to Rescue, Rehabilitate, and Rehome pets through trustworthy care, education, and affordable services. Programs offered will be grooming services, adoption programs, affordable veterinarian
services and training services. Funding will be needed for the programs offered, such as, food, crates, grooming supplies, staff and staff salaries, rental of building, vehicle expenses and so on. The Board of Directors will include a Board President and Vice President, Board Secretary, and Board Treasurer. The Board President will ideally have at least 5-10 years’ experience with nonprofit organizations. The same goes for Vice President, as the VP is expected
to assume the role of the President if necessary, so I would like for their qualifications to be aligned. The Board Secretary can have less experience as they will work closely with the CEO and be able to acquire more knowledge about what could help the organization. The Board Treasurer will be the head of finance, so it is important that the person has over six years’ experience in accounting and finance. A CPA would be preferred but not mandatory. The Treasurer oversees the CFO. Conflicts of interest that may arise could vary depending on the situation. If a board member would like a family member of theirs to work for the organization to
some capacity, there could be a conflict of interest depending on that position and their expectations. The role of the finance committee is to review the organization’s financial statements regularly, review annual budget prep, ensure proper financial record- keeping, notify board leadership of significant financial concerns, and meet quarterly with the audit committee. The role of the audit committee is to engage the auditor and oversee the audit process, review, and
approve edits in the accounting manual, meet with staff leadership to review organizational strategies, and meet with the treasurer to review the activities of the finance committee, (Company 2022). By utilizing the non-profit portal for NJ and the NJ Treasury portal there are step by step instructions on the steps required for starting a non-profit. The forms needed to establish the non-
profit are the articles of incorporation, the application for federal employee ID number, and the application for recognition of exemption (Form 1023). The agency needed to file the articles of incorporation is the Division of Revenue department. There is a $75 fee to file the articles of incorporation. The application for the federal employee ID number (EIN) can be done online on the IRS website via an online application. The Division of Revenue on NJ website will be a main
focal point for getting these applications completed and processed. Financial Reporting
There are three types of financial statements needed for non-profit organizations which are the statement of financial position, the statement of activities, and the statement of cash flows. The statement of financial position shows total assets, total liabilities, and total net assets for an organization at a point in time, usually at the end of the fiscal year. The statement of activities is an operating statement that presents all changes in net assets without donor restrictions, net assets with donor restrictions, and total net assets for the reporting period. Federal legal filling requirements
The forms needed to establish the non-profit are the articles of incorporation, the application for federal employee ID number, and the application for recognition of exemption
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(Form 1023). The agency needed to file the articles of incorporation is the Division of Revenue department. There is a $75 fee to file the articles of incorporation. The application for the federal employee ID number (EIN) can be done online on the IRS website via an online application. The
Division of Revenue on NJ website will be a main focal point for getting these applications completed and processed. Federal Tax Requirements
Annually, Form 990 must be completed with the IRS and apply for tax exempt status under section 501 (c) ( 3).
State Legal Filing Requirements & State Tax Requirements: New Jersey
Register the non-profit organization with the state of New Jersey. To obtain tax exemptions, Form REG-1E, Application for Exempt Organization Certificate, and attach a copy of the certificate of incorporation or other documents, bylaws, and an IRS 501 (c) (3) determination letter.
Financial Analysis: Summary
The budget projections are not unreasonable overall. Increases in contributions are a good
sign that the organization is in a solid position to develop a rapport with contributors. Also, it shows that the organization has the potential to garner more contributions over the next few years
if this momentum is capitalized. Over the next three years, an incremental increase in the contributions can truly impact AMR Rescue in a positive way. Financially, the organization is not
in bad shape. The income from investments coming in at 7% is fair, as investments usually take longer to produce income. I think it would be beneficial to monitor this account over the next couple of years and decide whether it would be a good option to investigate other investment
options to increase that income later down the line. An increase in salaries is to be expected and must be adjusted accordingly. You don’t want an organization to pay too low of salaries otherwise there will be high turnover. All other expenses increasing by 5% isn’t a huge hit right now but if there is a 5% increase each year over the next couple of years it would start to impact on the organization’s bottom line. If possible, keeping the increase in expenses capped at 5% for the next few years would be more reasonable. We could work around the increase and find other ways to increase revenue. We should maintain momentum with the contributions, a combined 25% increase is excellent, and each year there should be a goal to increase contributions by at minimum, 10% each year. By keeping that pace, contributions could flourish into the millions and there would be more bandwidth as an organization to satisfy other potentially costly obligations. We can apply for grants from the state and host fundraising events to raise capital. When funding these events, it would be nice to cut costs as it pertains to program expenses. Promotion via social media and securing the organization’s website is key. Social media promotion can garner donations and take the organization to the next level. We can cut costs initially by purchasing refurbished supplies where needed. For example, refurbished fax machines, copiers, and printers in the office. That way the extra funds saved can go towards something else. Cutting back on expenses in smaller areas can save more funding in the long run.
Three ratios that can be used to inform any future changes are the current ratio (liquidity),
going concern ratio, and fund-raising efficiency. The current ratio, a liquidity ratio, is important to investors and creditors because it assesses whether an organization can satisfy its short-term financial obligations. If an organization does not have a favorable current ratio, there is not much
else an investor or contributor would want to see that would convince them the organization is worthy of investing or contributing to. The current ratio for AMR Rescue is a 9.5 which is highly
favorable and indicates that the organization can meet its short-term debt. The going concern ratio indicates if an organization’s revenues are sufficient to cover expenses. The ratio for our organization is 1.4. The total revenues are significantly higher than the total expenses and is evident the organization has enough revenue to cover expenses. The fund-raising efficiency ratio asks if the costs of raising contributions is an appropriately small percentage of contributions received. As it pertains to AMR Rescue, this ratio is 0.5 indicating that the percentage of fund-
raising costs as compared to contributions is not significant. In conclusion, based on these three ratios, the changes that would need to be implemented
would be to investigate using other ratios that assess other aspects of the organization. For example, assessing program expense efficiency can clarify what amount is being spent on program expenses versus total expenses of the organization. The ratio for AMR Rescue is 0.7 meaning 70% of the expenses are related to the programs. For a nonprofit organization, this is completely normal and expected. I would say that the right amount is being spent on accomplishing the organization’s goals and investing in the programs.
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References
Copley, P. A. (2022). Essentials of accounting for governmental and not-for-profit organizations
(14th ed.). McGraw Hill. Company, C. &. (2022, August 2). The difference between a finance and Audit Committee, and why you need both
. Nonprofit Hub. https://nonprofithub.org/the-difference-between-a-
finance-and-audit-committee-and-why-you-need-both/ Conflicts of interest
. National Council of Nonprofits. (n.d.). https://www.councilofnonprofits.org/running-nonprofit/governance-leadership/conflicts-
interest Digital Media Law Project
. Forming a Nonprofit Corporation in New Jersey | Digital Media Law
Project. (n.d.). Official site of the State of New Jersey
. State of NJ - NJ Treasury - DORES. (n.d.). https://www.nj.gov/treasury/revenue/ Reck, J. L., Lowensohn, S. L., & Neely, D. G. (2022). Accounting For Governmental & Nonprofit Entities
(19th ed.). McGraw Hill.
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