HomeGeneral InformationSociety Leader ResourcesSectionOfficer/Chair Guides

ISA Section Treasurer

1. Summary of Section Treasurer's Duties

The Section Treasurer shall have general supervision of the funds and financial records of the Section. As Treasurer he/she shall:

• Establish and maintain proper accounting procedures for all Section funds.
• Enter receipts and disbursements in the Section's books.
• Deposit all moneys received in a bank account approved by the Section's governing board.
• Make disbursements authorized by the Section's governing board. The Treasurer will prepare checks and submit them to the authorized co-signer for signature.
• Provide for the custody and safekeeping of investments approved by the Section's governing board.
• Prepare interim financial statements and report the Section's financial status to the governing board and to the membership in such form and frequency (preferably monthly) as they may direct.
• Periodically compare actual revenues and expenses to the Section's budget.
• Close the Section's books at the end of the fiscal year and submit them for audit to an independent accountant or internal audit committee. The audited report must be prepared in time for review by the governing board at their first meeting following the close of the fiscal year. A copy of the annual financial report is to be sent to the Director of Finance & Administration at ISA Headquarters.
• Assist in preparing the Sections's budget. The budget should be approved by the board at its first meeting.
• File all required tax returns on a timely basis.
• At the expiration of the term of office, the Treasurer shall deliver to his successor:
  1. Checkbooks and journals.
  2. Files containing receipts, invoices and bank statements.
  3. Tax returns.
  4. Section tax exemption ruling, certificate of incorporation, Bylaws
  5. Insurance policies.
  6. All other records in his charge.

In the absence of a successor, such records shall be delivered to the Section President.

2. Position Parameters

The following list is the basic parameters for the position of treasurer:

• Term of office - 1 year; can serve successive years
• Resources available - On Line Section Treasurer's Guide; Manual of Organization and Procedures; Former Treasurer; other Section officers; ISA Staff
• Time Committement - Average 2-4 hours each week
• Meeting Obligations - Section Executive Board and regular Section meetings
• Qualifications - Section member in good standing for at least one year. Ability to perform the necessary tasks. Willingness to assume the duties required. Well organized; a detail person
• Method of Appointment - Nominated by committee and elected by the voting members of the Section, or in accordance with Section bylaws.

3. Banking Practices

• Select a bank that is fully insured by a government agency. When Section officers change, notify the bank and file new signature cards.
• Banks require a federal tax ID number (also called Employer Identification Number) before opening an account. The ID number can be obtained by filing an appropriate IRS Form (SS-4).
• Incoming funds should be immediately recorded and deposited the day received.
• Two signatures on checks, drafts, or other documents that disburse funds from bank accounts, is highly recommended.
• Checks should be imprinted with the full, proper, legal Section name and sequentially numbered for control purposes. The use of "ISA" alone is undesirable, since it can be mistaken for other bank accounts with identical abbreviations.
• The bank balance should be reconciled with the books monthly.
• Canceled checks should be held for at least eleven years before being destroyed.

4. Financial Statements

Statements should be prepared by the Treasurer once a month (or as frequently as the governing board considers necessary) and approved by the governing board. Statements should include receipts and expenditures taken from the Summary Ledger.

A copy of the Section's annual financial report is to be forwarded to the Director of Finance & Administration at ISA Headquarters.

5. Budgeting

A budget should be adopted as soon as possible at the beginning of the Section's fiscal year when new officers take office. It should be prepared by the responsible group named in the Section Bylaws, or by the Treasurer before any expenses are incurred. The Section's governing board should review and approve the proposed budget.

Budgets should be reviewed quarterly or sooner, and revised for any new projects that might arise, or if it is obvious that the budget is too far out of line with actual.

A copy of the budget should be sent to your Staff Representative in Section and Division Services at ISA Headquarters.

6. Reserve Funds

Sections have the right to use their funds for all purposes necessary in carrying out their objectives. Section reserves should be adequate, but not excessive. As a general guideline, a reserve fund approximating the Section's annual budget should be adequate and meet IRS approval. The existence of a large reserve may cause the IRS to challenge the Section's tax exempt status. If a large reserve fund is created, it would be advisable to document reasons for the creation of such a reserve.

Since Section reserves generally are small, a savings account or bank certificate of deposit is recommended. All investments should be authorized by the Section's governing board. Each investment account should have at least two signatories or persons authorized to access the account.

7. Security Concerns

Sections can employ a few relatively simple measures that will reduce the risk of embezzlement of its funds, these include:

• Budgeting and approval of all expenditures by the Section's governing board;
• Having more than one person designated with authority to access accounts at all times; and making sure the financial institution holding the account is aware of and has signature cards from those who are authorized and only those who are authorized;
• Requiring co-signatures on all checks or other instruments drawing funds from an account, or requiring co-signatures on all checks above a specified amount;
• Budgeting known sources of revenue;
• Requiring regular financial reporting by the Treasurer;
• Requiring regular reconciliation of accounts; and
• Conducting an annual audit of all accounts by a CPA or an audit committee of the Section.

Sections, especially those with substantial revenue or reserves, are strongly encouraged to purchase fidelity bonds and/or crime insurance covering those who have access to the funds.

If a Section suspects or knows of a problem, it should follow these steps:

1. The Section's governing board should authorize an investigation, appoint a head investigator, and authorize the employment of accountants and attorneys as needed to investigate the matter.
2. The Section's governing board should immediately revoke the authority of the suspect to access accounts and inform all financial institutions of the revocation.
3. The Section should retain local legal counsel to assist in the investigation and the recovery; in complex matters, the Section or legal counsel should engage a CPA as well.
4. The Section should report the problem to the insurance company as a claim.
5. The Section should notify the Society of the problem.

8. Applying for Emergency Financial Aid

A financially distressed Section may apply for aid by submitting a request to the appropriate District Vice President by the Section Treasurer. If the DVP approves the request, it will then be submitted to the Executive Board, or in an emergency, to the Executive Committee for approval.

The Section request should take the form of a letter, and contain the following information:

• Current and projected membership.
• Current President, Vice President, Secretary and Treasurer of the Section.
• Financial statement of the Section at the beginning of the year and a projected statement to year-end.
• Statement on past and future Section programs with respect to: social, technical, educational, symposia, other.
• Statement describing in detail the reasons financial aid is required by the Section.
• Amount of financial aid required and how the aid will be used.
• Statement outlining the proposed course of action to place the Section back on a sound financial basis.
• Previous request(s) for financial aid during the previous five years.

It is important that a request for financial aid not be complicated so that the District Vice President and Executive Board or the Executive Committee can appropriately review and act upon its request.

9. Record Keeping and Retention

Record Keeping

It is essential that good record keeping practices be established.

• All books should be kept current with entries made at the time funds are received and disbursed.
• Books may be kept on the "cash basis" or the accrual basis of accounting.
• Books should be balanced, and financial statements prepared for presentation to the governing board once a month.
• Books should be audited after the close of each fiscal year by an independent auditor or by an audit committee as determined by the governing board.

While manual bookkeeping is acceptable, it is highly recommended that all financial record keeping for the Section be done using one of the many PC-based software packages on the market today. Even if using a computer record keeping system, supporting records must be kept. Files containing supporting records for various accounts can be set up in file folders labeled as follows:

• Receipts. All records accompanying funds received such as remittance, letters, etc., should be filed according to date of receipt.
• Invoices. All disbursements should be supported by a supplier invoice, approved by the designated Section officers, marked "paid", and show the sequential check number. Invoices should be filed in check number sequence.
• Bank Statements and Reconciliation's. Bank statements should be reconciled to the Section's financial records on a monthly basis . The monthly statements and reconciliation's should be filed by month.

Record Retention

State requirements: Certain states require that particular records be made and kept permanently. Check with your individual State Department to determine which records are to be retained indefinitely.

Federal requirements: The Internal Revenue Service specifically requires organizations to maintain financial and tax records, and to make them available for inspection by IRS agents, at the time of an audit. They include a record of receipts and disbursements and financial statements for the fiscal year. Normally, the IRS can audit a tax return within three years from the date it was filed. However, the period for challenge is six years if a major error in stating gross income is made, and it is unlimited if IRS claims that a tax return is false or fraudulent or if no return was filed. Organizations that fail to maintain adequate records to substantiate annual informational returns (IRS Form 990 and 990T) can lose their taxexempt status.

Legal reasons: Section contracts, insurance policies, deeds, leases, trademark or patent registration certificates and similar documents should be maintained while they are in effect and for a period of time after they expire in order to protect the rights of the Section.

If the Section is sued or notified that it is under investigation for any reason, including IRS audits, the custodian of the Section records, normally the Treasurer, should use a high degree of care to preserve all existing records and should not purge or destroy records until the conclusion of the suit or investigation.

Guidelines for retention of records can be categorized as follows:

• Vital Records. These are permanent type records and include the certificate of incorporation, minutes, journals, ledgers and other documents of historical value.
• Important Records. They may have legal value (state laws differ) and include records such as accounting reports, documents involving government agencies, etc. A yearend financial report and annual tax forms should be kept on file for an indefinite period.
• Useful Records. Customer related records, invoices, and other documents that would not seriously affect operation and can be reproduced. Many of these records may be purged and destroyed after their useful life, usually after the end of any statutes of limitation on the activity involved. This period will vary by type of activity and state, but will normally not exceed ten (10) years. A routine policy and schedule should be adopted to purge such records.

Sample of Records to Be Retained Permanently:

1. Annual Financial Reports
2. Articles of Incorporation
3. Canceled checks covering tax payments, property purchased, investments
4. contracts and important transactions
5. Charter
6. Correspondence-Executive, Legal and Tax
7. Deeds
8. Licenses
9. Minutes
10. Tax Returns

10. Obtaining Blanket Federal Tax Exemption for US Sections

Non profit organizations like the Society usually qualify for tax-exemption under federal and state income (and often other) tax laws. Tax-exempt status is highly desirable; otherwise all income, regardless of source, is taxable.

However, tax-exempt status is not automatic; the IRS must confer the status on the organization after application for it. Nonprofit corporate status is not the same as tax-exemption. Nonprofit refers to an organizational structure where there is no distribution of profit to its "owners" (members). Tax-exempt status is a determination by the IRS that the nonprofit organization qualifies under the tax code for exemption from federal income taxes. Only nonprofit organizations may be tax-exempt, but not all nonprofit organizations qualify for tax-exemption.

The two exemption categories Sections can fall under are educational organizations defined by Section 501(c)(3) of the tax code and trade associations defined under 501(c)(6) of the code.

Normally, exemption under section 501(c)(3) is more desirable for organizations like the Society and its Sections. Among other advantages, exemption under this section qualifies an organization to receive gifts that are tax-deductible by the donor and for special reduced postal rate permits.

Because of its educational purposes, the Society has been granted tax-exempt status under section 501(c)(3) of the tax code.

To avoid liability for income taxes, every Section must apply for and be granted tax-exempt status. There are two ways to do this:

• The Section may apply directly to the IRS District Office for its geographical location on a form listing in detail its activities, budget, etc. (IRS Form 1023). The application must be accompanied by a processing fee ranging from $150 to $375.
• The Section may join the group tax-exemption for U.S. Sections, if its Articles of Incorporation and Bylaws provide for proper affiliate status with the Society and its sends the completed questionnaire to the Director of Finance & Administration by July 31 each year. If properly completed, the Section is granted tax-exempt status without directly dealing with the IRS. No fee is charged under this method.

Joining the group tax-exemption is the easiest, least costly method of gaining and maintaining tax-exempt status. In addition, Sections under the group exemption are classified as 501(c)(3) organizations and avoid potential disputes and inconsistent treatment by the IRS with regard to classification.

The Society is required to update its list of qualified sections (3963 Bytes) annually in September. If a Section becomes inactive, it must be removed from the list. This requires a section to send copies of their tax returns or financial statements to the Director of Finance & Administration annually by July 31.

Even if a Section joins the group tax-exemption, the Section is required to file the appropriate tax returns in its geographic district independently of the Society.

The IRS does not issue individual exemption letters or identification numbers for Sections joining the group exemption. Instead, Sections under the group exemption use the group identification number.

Obtaining tax-exempt status is crucial for Sections. If a Section is not tax-exempt, every dollar it receives, regardless of source (including member rebates from the Society), must be reported to the IRS and is subject to tax at rates approaching 40%.

After receiving a federal tax-exemption status, the Section should apply to the state where it is organized for a state level exemption. In some states, tax-exemption applies not only to income taxes, but also on other taxes such as property, franchise and sales and use taxes. For guidance, contact the state department in charge of tax policy of the section's tax advisor.

11. Filing Federal Tax Returns( US Sections Only)

Tax exemption does not mean the Section is relieved of all obligation to file tax returns. Instead, it changes the form to report income from a standard business form (such as an 1120) to Form 990.

Penalty For Failure To File

Sections should note that failure to file the required annual information forms (990 and 990T as described later), or the filing of incomplete returns carries a penalty of $10 a day up to a maximum of $5,000 for each return that is not filed or filed improperly. All Districts of the IRS have been told by the national IRS office to strictly enforce the penalty.

Form 990

Return of Organizations Exempt From Income Tax or Short

Form 990-EZ

Once exempt status has been established, Sections are required to file an annual information return on Form 990. However, if a Section's Gross Receipts are under $25,000, a return is not required, but recommended, except when instructed not to file by the IRS.

Form 990, Schedule A

Sections having gross receipts of $25,000 and over may have to file Schedule A in addition to Form 990.

Form 990-T

Sections having gross receipts (receipts, not surplus or profit) from unrelated business activities (primarily advertising and mailing list sales) in excess of $1,000 in any one year are required to file Form 990T.

State And Local Returns

Each state, or municipality may impose special tax reporting requirements on nonprofit organizations. The Section Treasurer should consult with local authorities or counsel about reporting requirements.

Tax ID Number

Each Section must have a Tax ID Number, commonly referred to as an "Employer Identification Number." To obtain a Tax ID number, file Form SS4 with the IRS. Form SS4 can be obtained by phoning your local IRS office.

Filing Dates

Form 990 or Form 990EZ must be filed on or before the fifteenth day of the fifth month following the close of the Section's fiscal year. Following is an example of due dates:

Fiscal Year Ended - Form 990 Due Date
December 31 - May 15
March 31 - August 15
June 30 - November 15
September 30 - February 15
October 31 - March 15

Schedule A and Form 990-T are to be filed simultaneously with Form 990.

Where To File

Federal returns are to be filed with the local District Director of the IRS. Returns may also be filed with the Internal Revenue Service Center, 11601 Roosevelt Boulevard, Philadelphia, Pennsylvania 19155.

Scholarships

Many sections offer scholarships to students. Because ISA and its sections are classified by the IRS as tax-exempt charitable and educational organization, these scholarships must meet certain rules to avoid violating the federal tax laws. Failure to meet the rules can result in disqualification of the scholarship program and/or loss of tax-exempt status.

12.Tax Exemptions for Sections Outside the US

Sections outside the United States should acquaint themselves with their national and local tax filing requirements. Tax exempt status normally can be obtained by demonstrating that the Section's objectives are educational and scientific. The letter serves only as an introductory document to a governing agency. Copies of the Section's permanent documents that generally must accompany the letter are as follows:

• Articles of Incorporation
• Section Bylaws
• Proposed or actual Statement of Receipts and Expenditures
• Completed application forms required by the governing authority.

Sections generally are required to file periodic information reports with the governing tax authority after tax exempt status has been obtained. Failure to file these reports can result in severe penalties to the Section and/or its officers. Sections are encouraged to obtain local professional counsel regarding tax exemption and reporting requirements.

13. Postal Matters - Preferential Postal Rates- (US Sections Only)

Certain qualified nonprofit organizations are eligible for a reduction in third and second class postage rates. The Post Office usually will consider organizations exempt from federal taxes under Section 501 (c)(3) of the Internal Revenue Code as qualified and entitled to the lower rates. Sections must apply to the local postmaster who will approve or deny the application. In writing the postmaster, emphasis should be placed on the Section's educational activities. Sections should obtain and file Form 3624, Application To Mail At Special Bulk Third Class Rates.

14. Inactive Section

Headquarters will hold in escrow dues rebates for a Section declared inactive by the Executive Board. The accumulated rebates will be returned to the Section once it is restored to active status. An inactive Section will be removed from the blanket tax exemption as well.

15. Revocation of a Section Charter

Should the Executive Board approve a recommendation of the District Vice President for revocation of a Section charter, the following procedures shall apply to disposition of funds:

1. Funds remaining in the Section treasury are turned over to the Society and the amount shall be noted in the Society's financial records. Should the Section be reactivated, Executive Board action authorizing the new charter may also restore these funds to the new Section treasury.
2. Records of the Section, such as minutes, correspondence, paid invoices, etc., may be stored with Society Headquarters.
3. Before any disposition of the treasury, the District Vice President should be assured that there are no unpaid bills or other financial obligations.

16.Section Dissolution

Following is a sample dissolution clause for sections to incorporate into their Bylaws:

The Section shall use its funds only to accomplish the objectives and purposes specified in its Bylaws and no part of its funds shall inure to or be distributed to the Members of the Section. On dissolution of the Section, the net assets remaining after payment of all debts shall revert to the Instrument Society of America within ninety days of dissolution, to be used for charitable and educational purposes under Section 501 (c)(3) of the U.S. Internal Revenue Code as it now exists or as may be amended.