Great question, and never too late to start worrying! First, as a board member, you should make sure that the organization has a written policy regarding reimbursable expenses. The policy should include:
An explanation of what types of expenses will be paid
An explanation of what type of supporting information is required (invoice, etc.)
A statement that expenses not in compliance with policy will not be paid
The organization should have written procedures for the approval and payment of employee expenses. As a board member, you do not need to review every expense report. You should, however, be comfortable that a policy is in place (and followed!) to insure that adequate review is performed. Annual travel should be budgeted, and as a board member you should review periodic comparisons of actual to budgeted expenses. “Periodic” can be monthly, quarterly, semi-annually, or annually. A member of the board should approve the expense reports submitted by the Executive Director. This review should make sure that adequate documents are submitted, and that expenses are reasonable and further the mission of the organization. For an Executive Director’s significant expenses (high dollar travel, club memberships, etc.), prior approval should be obtained by the board (or its executive committee) and documented in the minutes.
So, board member, if you are still uncomfortable, let us know. DDF would be happy to talk with you about how we can help assess the risk your organization may face. Through inquiry, observation, and testwork, we can assess whether you have an adequate policy, AND whether or not it is followed!
The American Jobs Creation Act of 2004 established the Domestic Production Activities Deduction (DPAD). Unlike many deductions and tax breaks, the DPAD is “phased-in,” meaning that the deduction will become larger as years pass until fully implemented. The DPAD began in 2005 as 3% of qualified production activities income (QPAI). It has since increased to 6% of QPAI in 2009, and is scheduled to be increased in 2010 to the maximum 9% of QPAI.
Broadly speaking, businesses that engage in qualifying production activities and that pay domestic wages may be eligible for the deduction. Qualifying production activities include the manufacture, production, growth, or extraction of tangible property within the United States, including commercial and residential construction activities. Qualifying activities also include architectural and engineering services related to U.S. construction projects.
Depending on the nature and size of a business, determining the exact deduction can become complex. QPAI is limited to net income, and the total deduction is limited to 50% of wages allocable to QPAI. Also, both receipts and expenses (including indirect expenses) must be allocated between qualifying and non-qualifying activities. Despite the possible complexity, though, the deduction can provide substantial tax benefits when considering the maximum deduction of 9%. Furthermore, for partnerships and S-corporations, the deduction is taken directly on the partners’ and shareholders’ individual tax returns.
Many businesses eligible for the deduction will need to consider the accuracy of their cost accounting systems, particularly the identification and segregation of expenses associated with QPAI. Dean Dorton Ford, PSC has thirty years experience helping clients apportion their expenses and maximize tax deductions. Our construction team devotes significant time to researching and applying the tax laws for contractors and related services. We would be happy to assess the benefits that this deduction may provide you and your business.
Brian Perry – bperry@ddfky.com
DDF was asked to speak on purchasing fraud at the September 28th meeting of the KY Region of the NAEP, a fact that highlights the increasing focus on fraud in the purchasing function. One improvement in the purchasing cycle has come in the way of purchasing cards, which streamline the purchasing process by eliminating traditional purchase orders when dealing with numerous, smaller transactions. While this mechanism increases efficiency, it also creates more opportunity for fraud, particularly by single employees. Personal use of the card is the most obvious fraud. However, aside from fraud, simply giving employees a “blank check” to make purchases without prior approval can fuel increased spending that renders budgeting useless.
Most organizations recognize the need for tight controls around traditional purchasing processes, but how well does your organization control the use of p-cards? Firstly, care should be taken to ensure that only those employees that truly need the cards receive them. Providing more than necessary opens up the door for fraud and fiscal irresponsibility. Secondly, limits should be established on what, how many and how much – what kinds of items or services can be purchased with the card, how many transactions does your organization think it is reasonable for one employee to initiate, and how much does each individual with a p-card really need to be able to spend? Finally, review of these transactions prior to approval is critical. Some organizations require a sign-off by authorized managers before p-card balances are paid. This allows the organization to review quantitative and qualitative factors associated with the use of each card. There are countless other controls that your organization should consider establishing over the use of the cards, and many financial institutions that provide these services have formulated numerous options that can save you both dollars and concern.
For more information please contact:
Amanda Hall
ahall@ddfky.com
