Writing a Charter for a Nonprofit

Nonprofits play an integral role in your local community, state level, and worldwide organizations. Providing a broad spectrum of services, nonprofit organizations include charities, churches, hospitals, universities and other foundations. Writing a charter for a newly formed nonprofit is vital, as the charter explains the main purpose of forming your nonprofit organization.

The Basics of Writing a Charter for Your Nonprofit

The formation of the charter is critical for gaining tax exempt status. Using an exemption status allows your organization to save money. Failing to incorporate the necessary information into the charter may result in a delay or rejection for tax exemption status at both the state and federal level.

When forming your nonprofit’s charter, you may want to consult or hire a reputable accounting firm to ensure the proper document development. Remember the charter document outlines the structure of your organization.

  • Name of the Nonprofit: The charter document must include the legal name of your organization. The legal name should stand out among similar organizations. Using strong descriptive words will help draw members, clients, and others to your nonprofit. Generally, the nonprofit’s legal name is at the top of the charter document.
  • Location: The next step is naming the location of the nonprofit organization. You want to ensure interested parties are able to find your nonprofit organization. The location information will include the nonprofit’s business address and the county. In addition to the address, the location information should state the name and phone number for the primary contact of the nonprofit.
  • Nonprofit’s Purpose: In the charter document, you need to state the reason for forming the nonprofit organization. Inform the readers of the charter how the nonprofit organization will serve the community, members or group. For example, the nonprofit organization may be a charitable organization working with the area’s homeless or a church serving the local community. By stating the reason for the nonprofit’s formation, the readers of the charter will understand your purpose in the community.
  • Board of Directors: The charter document must include the full names and addresses of the board of directors or the initial trustees in the nonprofit organization. Along with contact information, you need to inform the readers of the nonprofit charter the position of the members of the board.
  • Statement of Earnings Clause: The charter needs to ensure any monetary earnings are not for profitable use. Trustees, the board of directors, officers, members and other interested parties will not benefit from the formation of the nonprofit organization. Employees will receive reasonable compensation. Paying invoices, distributors, vendors and other needed services are justifiable from the earnings.
  • Dissolution Statement: The last portion of the nonprofit charter should include a statement informing the readers the process for the dissolution of assets.

Upon writing the charter for your nonprofit organization, the document requires the signature of a witness. The nonprofit charter is an important document for your organization. Forming the nonprofit charter to meet specific criteria may require the assistance from a tax professional to ensure exemption status.

At Ernst Wintter & Associates, our professional staff can assist your nonprofit in making sure it has the appropriate documentation in place, specifically when it comes to a charter and declaring nonprofit status.  Call or email us today to schedule a meeting with our Certified Public Accountants and ensure your nonprofit is on the right track.

How Addressing Open Audit Issues Can Help Increase Your Audit Rating

Increasing your audit rating by addressing open audit issues is an effective strategy for your organization. An open audit allows the audit committee to focus on the various aspects of the business and set priorities to ensure continuous success. As a manager or preparer of the audit process, you will need to show the audit committee the rationale behind your choices.

Increasing Your Audit Rating by Focusing on Open Audit Issues

Businesses have different ways to record and document daily performance. Increasing your audit rating requires an effective audit management system. Begin by addressing open audit issues. When meeting with you audit committee, provide them with all the necessary materials. If you leave out information, the findings will not be accurate.

Exact Representation of the Issues

Provide accurate findings in an audit report. An exact representation helps to calculate risks. If you provide the wrong or overstated details, the full business picture is not accurate. Overrated or understated audit ratings may greatly affect the business in the upcoming fiscal cycle.

  • Provide detailed information on current risk assessments
  • Show current trends affecting your business
  • Use automated software to help develop accurate report documents

If an audit committee spends more time going over suspected issues, the committee may decrease your rating or continue to debate the existing rating. Providing clear findings of the audit issues will help the committee to track trends. Basing appropriate actions to address the open issues from the trends will help move the company forward.

Provide Documentation

Showing and providing the committee with accurate documentation for your findings ensures the credability of your organization. By focusing on your records, reports and generated findings, you may increase your audit rating.

  • Always provide reports with up to date information
  • Provide graphs and statistics for the visual use during the meeting
  • Provide links to other materials that support your findings and trends

Failing to provide the right documentation at the audit meeting will decrease your internal audit quality. The result may negatively affect your audit rating.

Resolutions

With any form of issue or problem within a business, the focus must be on finding an effective solution. Addressing open issues will move the audit committee away from the problem to the resolution. Understanding all aspects of the audit report will allow the committee to move away from a rating debate.

  • Reassess your current audit rating system. Is the type of system still a recommended choice for your organization? Has your company outgrown the current method?
  • Focus on current issues. How are the current issues affecting the daily running of the business?
  • Develop effective communication methods to convince the audit committee the nature of your findings. Are the results being represented correctly in the meeting?
  • Assess risk factors and implement control options. What are the next available moves to increase the current audit rating?

Audit management is an effective strategy for increasing your audit rating. You will need to provide quality audit findings to ensure your organization is operating at the desired level of performance.  At Ernst Wintter & Associates, we are committed to offering businesses accurate and detailed audits.  If you are looking for tips on how to gather the appropriate documentation or finding an effective solution to a problem that has arisen, contact us today at  info@winttercpa.com.