Monday, January 6, 2014

The 6 Most Important Documents You Need at Your Fingertips

In the world of public accounting one of our best practices is the client “Permanent File”.  CPAs often represent clients throughout their business life cycle.  The permanent file is the place we keep documents we need at our fingertips. Your organization needs access to your important documents as well.


Unlike business receipts, bank statements and even tax returns that may be shredded after some predetermined statutory time, the Permanent File is just that, a permanent location for documents we can not afford to lose...ever!


Some of my clients have been with me for 30 years.  CPAs, if they are fortunate, maintain a relationship with their clients for extended periods of time.  The same can’t be said for small nonprofits. Boards change from year to year.  Specifically Treasurers change from year to year, and in fact a great safeguard against fraud is to require the Treasurer be replaced at least every two years.

Who will safeguard these important documents?


In my volunteering experience I have found most small “all volunteer” nonprofits have a history of losing documents.  They are in someone's basement, office, or worse end up in a dumpster.  In fact this problem was the seed that started Treasurer's Briefcase, a cloud based solution for small nonprofits.


Whether you are using Treasurer’s Briefcase which allows cloud based storage of these documents or a manual system you must gather these documents so they can safely be transferred from treasurer to treasurer.


Here’s my list of the 6 most important documents you should have available at all times.

1. IRS Determination letter - This letter may be needed to provide proof to banks, vendors or the general public of your tax exempt status, and if a 501(c)(3) organization, of your charitable status.

2. IRS Form CP 575 - This is the letter sent by the IRS informing you of the Federal Identification Number (EIN) they have assigned to your organization.  This is the number you use when filing your tax returns with the IRS.  Additionally banks and vendors will need this number.

3. Your Group's By-laws - You should always keep copies of your current ratified by-laws.

4. Organizational Group Exemption Letter - If your organization is covered by a Group Exemption this letter should be kept on file.       

5. Organizational Certificate of Formation - If your organization has incorporated, a copy of your states formation document should always be available.  Most banks require this to open an account.

6. Sales Tax Exemption Certificate - If your state allows your nonprofit to purchase goods and service free of sales tax due to your tax-exempt status, this document will routinely be required by vendors.

Other Important Documents

Licenses and Permits - If your nonprofit group has any special licenses they must be safeguarded.  Games of chance licenses are a typical example.

Deeds, Titles, Leases, Contracts - all legal documents should be stored for presentation when the need arises.  


Planning ahead now for easy transition of documents can save hours upon hours of unnecessary time and in some cases costs.  Start your “Permanent File” so future treasurers can easily move into their crucial role.


David A. Lauer, CPA is a partner with Lauer & Millen, CPAs in central New Jersey.  Their firm caters to small businesses and nonprofits.  He is also one of the creators of Treasurer’s Briefcase. www.treasurersbriefcase.com

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