ASHRAE Chapter Best Practice

1. ASHRAE Chapter Best Practice Chapter Financial Management Training

2. Chapter Financial Management Training OUTLINE OF PRESENTATION • Operate Chapter per the Board of Directors Approved Manual for Chapter Operations. • Chapter Treasurer Duties • Financial Accounting & Banking • Chapter Annual Audits • Revenue and Taxation Reporting • Fiduciary Duties

3. USA CHAPTERS • Must file both federal and state taxes to keep their non-profit status • Should have an annual audit • Should use the services of a CPA NOTABLE NOTES: 1- There are penalties for chapters not filing both federal and state taxes; 2- Society can also be at risk when chapters lose their non-profit status. Chapters should check to see if their state requires separate non-profit filing.

4. Chapter Treasurers • Chapter Presidents to Prepare Balanced Budgets for Approval by BOG. • Treasurer shall make all Deposits and issue all checks as authorized by the BOG. • Treasurer to Balance Monthly Statements & Present to BOG for Review & Approval; Keep Records. • Annual Independent Audit Committee appointed by BOG-Elect Prior to Annual Chapter Meeting. • Chapter Account used for Operations Only. • Use Separate Accounts for Special Events such as CRC Fund or Scholarships. • Responsible to File Tax Returns!!!-ASHRAE WEB SITE. • The Chapter Officers including the Chapter Treasurer and the At-Large Board of Governors, has a fiduciary duty to the chapter.

5. Financial Accounting and Banking • It is recommended that each Chapter have its own copy of a reputable Financial Software. • At least three Chapter officers should have signing authority. • At least two signatures are required on each check. (for sums of $100 and greater.) • Consider separate bank accounts for high dollar special events. • Where possible all Research Donations should be forwarded directly to ASHRAE Research. • All investments should be in safe low risk investments. (I.e. bonds, term deposits), in the ASHRAE Foundation or a Chapter Foundation.

6. Chapter Financial Audits • Set up audit committee made up of Past Presidents and or / Senior ASHRAE Members to perform annual audit. • Larger Chapters may want to consider outside accounting firms to perform financial audits. • Chapter Treasurers should not audit books for their year. • Audit Findings should be presented to Chapter BOG once per year.

7. Revenue and Taxation Reporting • All USA Chapters must complete annual IRS Form 990 tax returns. • There are separate forms for Small and Large Chapters • Who Must File • Most small tax-exempt organizations with gross receipts that are normally $25,000 or less must file the e-Postcard. Exceptions to this requirement include: • Organizations that are included in a GROUP RETURN, and Churches, their integrated auxiliaries, and conventions or associations of churches. • The following organizations cannot file the e-Postcard but must file different forms instead: • Tax-exempt organizations with annual gross receipts that are normally greater than $25,000 must file Form 990 or Form 990-EZ; • Private Foundations must file Form 990-PF; • Section 509(a) supporting organizations that are required to file Form 990or Form 990-EZ.

8. Revenue and Taxation Reporting • 990 Filing thresholds for the year 2010 and later (filed in 2011 and later) have changed for all organizations required to file a 990-series return.

9. Revenue and Taxation Reporting:Small ASHRAE Chapter • Annual Electronic Filing requirements for Small Exempt Organizations- Form 990-N (E-Postcard) • http.epostcard.form990.org

10. Revenue and Taxation Reporting:Small ASHRAE Chapter • Small ASHRAE Chapters whose gross receipts are normally $50,000 and less must complete 990-N form (but may choose to file a complete Form 990 or Form 990-EZ). • In prior years only organizations with gross receipts normally less than $25,000 could file the Form 990-N (e-postcard).

11. Revenue and Taxation Reporting:Large ASHRAE Chapter • Annual Electronic Filing requirements for Large Exempt Organizations - Form 990 or 990-EZ. • Large ASHRAE Chapters whose gross receipts are normally greater than $50,000 and less than $200,000 or total assets are less than $500,000 must complete Form 990 or Form 990-EZ.

12. Revenue and Taxation Reporting:Large ASHRAE Chapter • ASHRAE Chapters with gross receipts that are $200,000 or less or total assets are $500,000 or less must file Form 990. • Private foundations must file Form 990-PF

13. Revenue and Taxation Reporting:Large ASHRAE Chapter • The Board of Governors of the chapter should review the completed 990 form before it is sent to the IRS • Should consider using an outside CPA firm to complete the tax return

14. Revenue and Taxation Reporting:All USA ASHRAE Chapters • Your Tax filing is due every year by the end of the 15th day of the 5th month after the close of your year end. • For most Chapters the year ends on June 30 and the Tax Filing must be completed by November 15th. (Check with IRS if not known) • You cannot file until after your tax year ends.

15. Information Needed To File Tax Statements • Employee Identification Number (EIN) or alternatively Taxpayer Identification Number (TIN). • Tax Year. • Legal name. (ASHRAE Chapter Chartered name) • Mailing address. • Alternative name organization uses. • Name and address of principal officer. (Usually the Chapter President) • Confirmation of annual gross receipts.

16. Late Filing or Failure to File • Chapters who fail to file tax returns risk IRS fines. • They also would jeopardize the Society’s Tax Exempt Status • The Society could dissolve the chapter

17. UNDERSTANDING FIDUCIARY DUTIES • As a Chapter Officer you have a Fiduciary duty to your ASHRAE Chapter. • The Law.com - Dictionary defines a fiduciary as a person who has the power and obligation to act for another…under circumstances which require total trust, good faith and honesty.

18. Fiduciary Primary Duties A fiduciary has three primary duties Duty of Care Duty of Loyalty Duty of Obedience

19. Duty of Care Board members must exercise reasonable care in overseeing the organizations financial and operational activities.

20. Duty of Loyalty Board members must act solely in the best interests of the organization and its constituents, and not for personal gain.

21. Duty of Obedience Board members must act in accordance with the organization’s mission, charter and bylaws, and any applicable state of federal laws. Board members who violate these duties may be held personally liable for any financial harm the organization suffers as a result.

22. Avoiding Conflicts of Interest • One of the most important components of the duty of loyalty is the obligation to avoid conflicts of interests. • Step aside or abstain from voting when ever there is an appearance of a conflict of interest. • Please review the ASHRAE Codes of Ethics. ROS MBO #3 Chapter Treasurer Training.pptx

23. Can a Volunteer be Liable? • A common misconception is that volunteers are shielded from liability. In fact, though they do enjoy some protection from financial responsibility, that protection isn’t absolute. • ASHRAE Security & Privacy Policy does not apply to sites of any ASHRAE chapter, region, student branch, technical committee or other group affiliated or associated with the Society.

24. Separation of Chapter Funds • ASHRAE Chapters must avoid the co-mingling of investment funds and operating accounts. • Research Promotion events are to have separate accounting practices. • Make every effort possible for Chapter Member and others to write checks specifically to “ASHRAE Research” and not simply to ASHRAE or the local Chapter. This allows a complete tax deduction to be taken by the donor. • Scholarship Funds are to be in a separate account within the chapter. (see example next slide) • Operating funds are to accounted for in each of the separate committee accounts. • However the Chapter event is advertised is how the funds are to be allocated. I.e. if it is a RP event then ALL the money goes to RP not just the net amount.

25. Separation of Chapter Funds

26. ASHRAE Chapter Best Practice Enjoy your participation in ASHRAE