Please note: This blog is current to the date of its publication, Friday, Aug. 7. For additional updates or assistance navigating these uncertain times, please contact us or visit our SST COVID-19 resource page.
With current economic hardships resulting in job loss across industries, some associations are creating programs through which members can donate money to help other members pay their annual dues. While this is a great way to help each other stay connected, it’s important that these assistance programs are created and managed accurately.
Here are some tips to ensure your association’s membership assistance program is established without any compliance issues:
- If the association is a 501(c)(6), contributions are not tax deductible to the donor.
- The donations are considered donor-restricted, so the association can only use them for the stated purpose. They cannot be used for anything else at any point without permission from the donors.
- The association should establish a consistent process to determine the recipients, and donations should only be accepted if they are given to the association rather than earmarked for a specific individual.
- Associations should track these contributions, as well as the payment to the recipients, separately.
- If your association uses classes, projects or something similar in your accounting application, you could create a new class or project. If not, you may want to create a new revenue and new expense account.
- You will want to have visibility to the contribution and distribution amounts at any point in time.
- The balance of contributions received that are less than the distributions made should be shown on the Statement of Financial Position as Net Assets with Donor Restrictions.
- This will show your board and staff the amount that cannot be used for general operations.
- As distributions are made, the Net Assets with Donor Restrictions will decrease until all the contributions have been used for their purpose.
Association professionals are generous, and following these tips will help ensure this generosity can be shared without any issues. For any questions regarding your association’s finances, contact us today.
Special thanks to Leslie Shannon, SST Manager of Client Accounting and Advisory Services (CAAS), for the content of this post.