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Financial Basics for Chapters
Your chapter doesn’t need to make a big deal about accounting – unless you have a big bank account. Then things shift slightly – but only slightly. To be smart, have all of your officers, and especially anyone with the authority to sign checks, bonded and indemnified.
Whether you choose a cash or accrual system of accounting, there are some rules of thumb that apply to not-for-profit associations. (Your chapter is not-for-profit if it has applied for 501(c)-3 tax-exempt status.) As a not-for-profit association, certain parts of the chapter’s income (e.g., dues, educational revenue, and income directly related to the chapter’s purpose) are likely to be tax exempt.
Learn more about the I.R.S. requirements for tax-exempt status
But other income the chapter produces, termed unrelated business income, is subject to taxation. Generally income from advertising, sales, insurance programs, and booth rentals from trade shows falls into unrelated business income status and, as such, is subject to taxation.
Chapters can maintain more money in their accounts, either cash or investments, than it costs them to operate each year, but there are regulations that limit how much surplus is acceptable. The Internal Revenue Service tends to view more than 6 to 12 months of operating expenses as excessive, and when they deem something excessive, they also view it as fair game.
If you don’t have people in your chapter who are comfortable handling money, balancing books or dispensing funds, consider hiring a small CPA firm or local bookkeeper to maintain books for the association. Use of a CPA firm or local bookkeeper doesn’t relieve chapter officers of their fiduciary responsibility to ensure sound fiscal practices, but it does result in financial planning and control.
Annual Budgeting
Association financial management consists of two basic elements – planning and controlling. Planning and controlling are perhaps equally important to the long-term success of a business. Nevertheless, most business or association failures appear to result from inadequate planning.
The plan for the business or association should be formally organized and preserved through the budget, which is a formal statement of future plans. Budget periods normally coincide with accounting periods and are usually one year in length.
The annual budget, however, is commonly broken down into quarterly or monthly budgets to allow for evaluation and monitoring.
Click here for a sample annual budget
Financial statements, including a treasurer’s report and balance sheet should be prepared and reviewed at each board meeting and the general membership meeting. The association president should review these reports in detail with the association treasurer. Reports should provide a monthly or quarterly accounting of the association’s revenues and expenses.
The association should have an independent Certified Public Account (CPA) complete an annual audit the association’s finances. Financial statements and association books should be made available to the CPA for this audit.
Click here for a sample treasurer's report
Budgeting & Contracts for Programs
The most effective way to ensure that you present a program that stays within a reasonable budget is to plan the entire program year as early as possible. You are better assured of finding a suitable location, desirable dates, adequate attendance, and sponsorship.
A useful tool is the program planner, which can be customized for each program. It assists in keeping your Program Committee in line with deadlines and in making important decisions. Many of the program planning decisions directly impact budgeting and contracting.
Click here for a sample program planner
Location
When determining where you will hold the program, consider all of your options – hotel, conference center, local hospital, law firm, insurance company, insurance broker, libraries, colleges and universities, community centers, local organizations/clubs.
If you are in a metropolitan area, do you alternate program locations between city and suburbs? Will the program be easily accessible to public transportation or major roadways? Accessibility and travel distance may directly impact your attendance and registration income.
Look to your members for possible meeting locales. Some of these sites will provide meeting space to not for profit organizations at no charge. Some may require proof of general liability insurance before they will allow you to hold a meeting on their property. If necessary, include the cost of insurance in your program budget. Call several locations to obtain estimates for food, audiovisual equipment rentals, room fees, applicable taxes, etc.
Contracts
When working with hotels or any other site that will require a contract, endeavor to work with one person (usually a catering manager) only at that site. You may get multiple answers to your questions if you are working with multiple people. When speaking with the contact, take detailed notes to be compared with the contract later.
You should receive the contract within a few days of negotiation. When reviewing meeting space contracts, make sure the date, time, room, setup, number of expected attendees, fees are accurate. There is usually a required deposit to hold the room. Be wary of hefty “minimum” charges for room and food services. Know when you will have to give the final attendee count to your hotel contact; usually 72 hours before the program start. Some sites may charge additional fees when the guaranteed number changes less than 72 hours before the program.
It is advisable to have more than one chapter member review the contract before it is signed. Some chapters require the president and the treasurer to review the contract.
Click here for a sample hotel contract
Many hotels, by contract, may require credit card payment. Most chapters do not have chapter credit cards. In that case, request a Direct Bill Application which will allow the hotel to send the chapter a bill that is usually payable within 30 days.
Click here for a sample direct bill application
If your chapter has tax-exempt status with your state, be sure to provide the hotel/conference center with a copy of your tax exempt letter or certificate so that you can avoid paying unnecessary taxes. You may also find that if you repeatedly use a particular hotel or conference center for your chapter’s programs that negotiating contracts and fees may become easier and some fees may be waived, e.g., room rental.
Co-hosting
You may want to consider co-hosting a program with another chapter. The costs of conducting the program would be borne by both organizations. Using a program planner will ensure that all involved chapters are on the same page throughout the process.
Publications
Including a publication with your program cost can be an added value for attendees. Determine the proper mechanism for providing the publication and be cognizant of copyright laws. Work with your sponsors, if that's an option, on providing funds to bring the publication to your attendees. Be sure to include the publication costs into the program registration fee. For example, a chapter sponsor may agree to pay for books on apologies in health care, to be provided to program attendees at no extra cost. Another option would be for the chapter to purchase the books and include that cost in the registration fee for the program.
Drawings
In an effort to attract more attendees, some chapters hold drawings at their meetings. The drawing prize is usually a book or useful item such as the ASHRM Risk Management Handbook or ASHRM briefcase. The winner is drawn from the list of attendees, and the cost of the prize is totally borne by the chapter. Be sure to check your state laws on this subject and be aware of the differences between a sweepstakes, contests, and raffles. In general, drawings as described here are exempt from state raffle laws.
All of these costs mentioned above must be incorporated into a program budget. Once the expense budget is complete then compute the appropriate program fee keeping affordability in mind.
Click here for a sample program budget
Click here for sample program fee guidelines
For more on educational program planning, see the Education section.
D&O Insurance
Directors & Officers (D&O) insurance extends protection against legal claims for wrongful acts to directors and officers of an organization in the course of performing their duties.
Wrongful acts include omissions, errors, neglect and breach of duty, among other things. Policy beneficiaries are directors, officers or the entity itself. Parties who might sue include employees, suppliers, competitors or creditors; directors and officers can be personally liable for damages. Three levels of coverage are available:
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A-side coverage: directly covers directors and officers
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B-side coverage: indirectly covers directors and officers by covering claims paid by the entity on their behalf
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C-side coverage: covers entity for claims arising from claims not covered by general liability policies
D&O policies cover claims made during the policy period. It doesn't matter when the wrongful acts occurred. A claim filed in the current year will be covered by the current policy, even if the wrongful act happened in the past.
Some organizations augment D&O policies with employment practices liability coverage (EPL coverage), which safeguards against claims for wrongful dismissal, sexual harassment and other violations of employment or anti-discrimination laws. EPL coverage can be purchased as part of a D&O or general liability policy or as a stand-alone policy.
ASHRM does not require chapters to have D&O insurance but recommends that each chapter evaluate the costs and benefits based on its individual situation. Chapters with extensive eductional programming and other activities may find it a necessity, while smaller chapters may decide the cost for the insurance is not merited by the extent of their activities. Chapters may find that some volunteers are reluctant to serve as directors or officers without protection from lawsuits. Chapters interested in securing D&O insurance can contact local brokers for information on rates and specific coverage.
Download a presentation on chapters and D&O insurance
Paid Administrative Assistance
To assist with governance and routine operations, some chapters opt for paid administrative assistance. This can range from a full-time employee to part-time or hourly contractors.
Tasks for this position can include membership dues and billing, program mailings, registration processing, sponsor solicitations and web site updates. Having the same person handle these tasks from year to year provides continuity of information and keeps each new officer from having to get up to speed on these everyday tasks.
It is best to identify in advance the tasks that a contractor or executive assistant will be responsble for, how they should manage their time, and how they will be compensated. This can be laid out in a position description.
Several chapters have shared their sample job descriptions for chapter assistants:
North Carolina | Virginia | Massachusetts
In addition, you may want to draw up a contract for the position.
Click here for a sample contract for chapter assistant position
