Thursday, August 29, 2013

Non-Profits: Make Your Mark By Benchmarking

The word “benchmark” may strike some as organizational lingo, but the practice of benchmarking often proves valuable for non-profits. Non-profit organizations that incorporate financial benchmarks into their operations are better at anticipating negative financial trends and may even see revenues climb, expenses drop and efficiencies improve.

What is Benchmarking?

Benchmarking is an ongoing process of measuring an organization against expectations, past experience or industry norms for productivity and profitability, and then making adjustments to improve performance in relation to those metrics. Ideally, your non-profit will consider both:
  1. Internal benchmarks to monitor and detect trends, based on your organization’s historical results and statistics, as well as expectations.
  2. External benchmarks to ascertain where you’re thriving and where you lag behind, based on data from peers.
Benchmarking provides essential information for effectively developing and implementing strategic plans. It helps an organization keep a watchful eye on its financial health and determine where costs can be cut and revenues increased. Non-profits can use benchmarks to demonstrate their efficiency to stakeholders such as donors and grantors.

Benchmarks for Non-Profits

The first step is to define what your non-profit needs to measure. Focus on the metrics that are most critical to the success of your mission and the key indicators of the organization’s financial health and operational effectiveness. For many nonprofits, those metrics will include:
Program efficiency (program service expenses/total expenses). This ratio identifies the amount you spend on your primary mission, as opposed to administrative and fundraising costs. This ratio is of utmost importance to stakeholders.
Fundraising efficiency (unrestricted contributions/unrestricted fundraising expenses). How many dollars do you collect for every dollar you spend on fundraising? The higher this ratio, the more efficient your fundraising. What qualifies as a good ratio depends on the organization’s size, its types of fundraising activities, and so on.
Operating reliance (program service revenue/total expenses). This ratio indicates whether your nonprofit could pay all of its expenses solely from program revenues.
Organizational liquidity (expendable net assets/total expenses). How much of the year’s total expenses is considered expendable equity or reserves? The higher the ratio, the better the liquidity.
Also consider benchmarks such as average donor contributions, expenses per member and other ratios that measure trends for liquidity, operating yield, revenue, borrowing, assets and similar metrics. No matter which benchmarks you choose, though, you’ll need reliable processes for collecting and reporting the data.

For Comparison’s Sake

Comparing the non-profit’s performance to benchmarks allows you to zero in on areas with the greatest potential for improvement. Armed with this information, you may be able to improve performance without making significant changes in your operations. Further, when comparing against external benchmarks, you might improve performance by simply adopting best practices used by your peers.
You can obtain information on other non-profits’ metrics from websites such as GuideStar and Charity Navigatoror from commercial software. Information also may be available from state government databases and trade associations. Take steps, though, to ensure you’re comparing apples to apples – that the two organizations you are stacking up against each other are truly comparable.

Make it a Team Effort

Some organizations have found it worthwhile to include staff in the benchmarking process. Their involvement in setting aggressive but attainable benchmarks – and measuring progress – can achieve buy-in and help foster teamwork as your non-profit moves toward and surpasses its goals.
Contact Doeren Mayhew for more information. 

Thursday, August 22, 2013

Notices Due Oct. 1 as Part of Health Care Reform

Most employers are required to provide a written notice to employees about the new Health Insurance Marketplace (previously called “the Exchange”) by Oct. 1, 2013, as part of the Affordable Care Act.

If your business is subject to the Fair Labor Standards Act (FLSA), you are required to provide this notice to all existing employees regardless of whether you currently offer a health plan or not. The notice also must be provided to new employees at the time of hiring beginning Oct. 1. Your insurance carrier or third-party health plan administrator is not responsible for providing the notice to employees for you.

According to the Department of Labor, the notice can be provided by either mail, or electronically if electronic disclosure safe harbor requirements are met. The notice to inform employees of coverage options must include:

  • Information about the new Marketplace
  • Contact information and description of the services provided
  • Notice that employees may be eligible for a premium tax credit if they purchase a qualified health plan through the Marketplace
  • Notice that employees may lose the employer portion of their health benefits plan if they purchase a plan through the Marketplace, and that all or a portion of such contribution may be excludable from income for Federal income tax purposes

Employers can view sample notifications in both English and Spanish on the DOL website.

First delayed in March to the new Oct. 1 date, and in light of the recent postponement of key mandates of the ACA to 2015, the requirement could again be delayed. However, employers will want to keep the requirement on their radars and be prepared to send by the Oct. 1 deadline in case it remains intact.

Contact Doeren Mayhew for more information.

Monday, August 19, 2013

Doeren Mayhew Viewpoint: Insight, Oversight and Foresight for Your Business

Doeren Mayhew Viewpoint: Insight, Oversight and Foresight for Your Business

Contact Doeren Mayhew for more information.

Thursday, August 15, 2013

Doeren Mayhew Moves Up on Top 100 CPA Firm List

Doeren Mayhew Moves Up on Top 100 CPA Firm List
Contact Doeren Mayhew for more information.

Wednesday, August 7, 2013

Tax Implications of Renting Out Your Vacation Home

Many people might not know that if you rent out your vacation home for 15 days or more, you must report the income on your tax returns. Determining how this impacts your tax liability and what expenses are eligible to be deducted related to a vacation home can get tricky.
The expenses you can deduct depend on whether the home is classified as a rental property for tax purposes, based on the amount of personal vs. rental use. Adjusting your personal use — or the number of days you rent it out — might allow the home to be classified in a more beneficial way.

Rental Properties

With a rental property, you can deduct rental expenses, including losses, subject to the real estate activity rules. You can’t deduct any interest that’s attributable to your personal use of the home, but you can take the personal portion of property tax as an itemized deduction.

Non-Rental Properties

With a non-rental property, you can deduct rental expenses only to the extent of your rental income. Any excess can be carried forward to offset rental income in future years. You also can take an itemized deduction for the personal portion of both mortgage interest and property taxes.
Contact Doeren Mayhew for more information.

Friday, August 2, 2013

How Business Identity Theft Impacts Your Taxes

Facilitated by the speed, ubiquity and anonymity of the Internet, criminals are able to easily steal valuable information such as Social Security numbers and use it for a variety of nefarious purposes, including filing false tax returns to generate refunds from the IRS. One estimate from the National Taxpayer Advocate Service has calculated that individual identity theft case receipts have increased by more than 666 percent from fiscal year 2008 to 2012.

There’s another dangerous facet of identity theft that costs the government, taxpayers and businesses millions of dollars each year. That is business identity theft, which like its consumer counterpart involves the theft or impersonation of a business’s identity. To add insult to injury, business identity theft can have crippling federal tax consequences. The following article summarizes the problem of business taxpayer identity theft, the methods employed by thieves and the means by which you can protect your business.

Business v. Individual Identity Theft
Businesses generally deal with larger transactions, have larger account balances and credit lines than individual taxpayers, and can set up and accept merchant credit card payments with numerous banks. Business information regarding tax identification numbers, profit margins and revenues, officers, and even officer salaries are often public and easily accessed. Yet, remedies and enforcement tend to focus more on individual identity theft. Thus, business identity theft can be more lucrative and arguably less dangerous to engage in than individual taxpayer identity theft.

Methods Used
Only some of the many business identity theft schemes relate to tax. Nevertheless, such schemes can be devastating for businesses, resulting in massive employment tax liabilities for fictitious wages or huge deficiencies in reported income. Identity thieves can use a business’s employer identification number (EIN) to initiate merchant card payment schemes, file false tax returns and even generate hundreds of fake Form W-2s in furtherance of more individual taxpayer identity theft.

How They Do It
Business identity theft can require less effort than individual identity theft because less information is required to establish a business or open a line of credit than is required of individuals. In general, the thief needs to obtain the business’s EIN, which is easy to acquire. Common sources for an EIN include:
Filings made to the Securities and Exchange Commission (SEC) such as the Form 10-K, which includes the EIN on its first page

Public databases that enable users to search for business entities sometimes also display the employer’s EIN

Websites specifically designed to search for EINs, such as

A business website that openly displays the EIN

Forms W-2, W-9 or 1099
Once a thief has the EIN, he or she may file reports with various state Secretaries of State to change registered business addresses and registered agents’ names, or even appoint new officers. In some cases the thief will apply for a line of credit using this new information. Since the official secretary of state records display the changed information, potential creditors will not be alerted to the fraud. In one case, however, criminals changed the names of a business’s officers by filing with the secretary of state’s office and then sold the whole business to a third party. Once an identity thief has established a business name, EIN and address information, he or she has all the basic tools necessary to perpetrate business identity theft.

Best Practices
Businesses should review their banks’ policies and recommendations regarding fraud protection. They should know what security measures are being offered and, if commercially reasonable, take them. In a recent U.S. district court case from Missouri, the court found that a bank was not liable for a fraudulent $440,000 wire transfer because it had offered the business a commercially reasonable security procedure, and the business had rejected it. The decision cited Uniform Commercial Code Article 4A-202(b), as adopted by the Missouri Code. Many other states have also adopted the UCC, meaning victimized businesses might find themselves without recourse against their banks in the event of a large fraudulent wire transfer.

Other easy preventative measures that businesses can take include monitoring their financial accounts on a daily basis. They should follow up immediately on any suspicious activity. Businesses should also enroll in email alerts so that they would immediately be apprised of any change in your account name, address or other information.

A business should also monitor the information on its business registration frequently, whether or not the business is active or inactive. Often businesses that close do not go through the formal dissolution process, which terminates all of the corporate authority. They instead let the charter be forfeited by the secretary of state. These forfeited charters may be easily reinstated and hijacked by identity thieves.

After Fraud Occurs
If it is too late, and a fraudulent transaction has occurred in your business’s name, take immediate action by contacting your bank, creditors, check verification companies and credit reporting companies. Report the crime to your local law enforcement authorities and your state’s secretary of state business division. Finally, whenever possible, memorialize all correspondence in writing and keep it in your records.

Contact Doeren Mayhew for more information.