Resources for Affiliates, Mentors, and Students

Financial Management

All ACE Affiliates are responsible for maintaining accurate financial records. As non profit corporations, ACE Affiliates operate in a unique environment where transparency, accountability, and stewardship of resources are essential. Unlike for-profit businesses, nonprofits must demonstrate to donors, grantors, and regulatory bodies that funds are used appropriately and in alignment with their mission. Not-for-profit accounting requires functional expense tracking, i.e., identifying which expenses relate to program, fundraising, and administrative functions.

This section presents financial management best practices and tips relevant to Affiliates, particularly to anyone overseeing financials.

It is highly recommended that each affiliate involve an accounting professional to provide guidance on fiscal matters.

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Fiscal Year: When an affiliate is set up, the fiscal year will need to be determined by the affiliate. National’s fiscal year runs from January 1 to December 31. It is recommended that affiliates choose the same fiscal year.

Accrual Method of Accounting: ACE National uses an accrual basis of accounting, and affiliates are encouraged to follow the same practice. Under accrual accounting, revenue is recorded when it is earned or pledged—not when cash is actually received. Expenses are recorded when they occur, not when they are paid.

Accrual accounting provides a more accurate picture of an organization’s financial health by matching revenues and expenses to the appropriate period. It also prevents budget distortions caused by large advance payments and helps affiliates better compare actual expenses to budgeted amounts.

Examples include:

  • Recording a pledged donation the date it was pledged rather than when received (i.e. when the sponsor registers for an event vs. When the check is received)
  • Recording annual insurance costs in the appropriate program year vs when the affiliate actually pays them (which could occur in another program year)
  • Accruing expenses into the month they are incurred

A multiyear pledge is recorded in its entirety in the current year and then set up as a long-term receivable.

Affiliates should close their books each month no later than the 15th of the following month whenever possible. Year-end books should be closed no later than 90 days after the end of the fiscal year.

More on Accural Method of Accounting: LINK
Financial Tracking Sample: LINK

Functional Expenses: A nonprofit’s expenses must be allocated across several operational areas, know as functional expenses.

  • Management (general and administrative)
  • Fundraising
  • Programming

It is important for affiliates to reliably track functional expenses for IRS reporting purposes. When expenses are reported, they should align with the appropriate allocation. LINK TO EXAMPLE

Reserves: Cash reserves (that is, cash on hand or, more formally, operating reserves) are critical for an affiliate’s long-term financial stability. Most experts recommend maintaining enough reserves to cover six months of operating expenses. All affiliates should have an absolute bare minimum of one month’s reserves.

As a target, affiliates should set a goal of a reserve fund minimum equal to three months of average operating expenses. The calculation of average monthly operating costs includes all recurring, predictable expenses as discussed in the budgeting chapter. At the end of the fiscal year, any surplus unrestricted operating funds should be allocated to the operating reserve.

Revenue from Contributions (AKA Donations or income received): It is important for affiliates to properly track and record the different types of revenue they receive from contributions (donations). Accounting standards established by the Financial Accounting Standards Board (FASB) provide guidance on how and when revenue/donations should be recognized and reported. This includes the following:

  • Unrestricted donations: Contributions that can be used for any organizational need or operating expense at the affiliate’s discretion.
  • Restricted donations: Contributions designated by the donor for a specific purpose, usually for ACE scholarships must be tracked and used accordingly. CLICK HERE for more information
  • Pledges: Commitments from donors to give funds in the future, which are typically recorded when promised under accrual accounting.
  • Grants: Funds awarded by foundations, corporations, or government entities, often with specific requirements, reporting obligations, or restricted purposes.
  • Donated goods: Physical items donated to the affiliate, such as supplies, equipment, or event materials.
  • In-kind contributions: Non-cash donations of goods or professional services that provide value to the affiliate, such as printing, design, or legal services.
  • Sponsorships: Financial or in-kind support from a company or organization, sometimes provided in exchange for recognition, branding, or event benefits.

Proper tracking helps ensure accurate financial reporting, compliance, and transparency with donors and stakeholders. SAMPLE TRACKING

For more resources:
Glossary of Nonprofit Terms

Annual IRS return: All tax-exempt organizations are required to file an annual IRS information return (Form 990, 990-EZ, 990-N, etc.) on the 15th day of the fifth month following the end of their fiscal year. For example, if the end of the fiscal year is December 31, the tax return is due by May 15. Affiliates are required to share their annual filing with the national office for insurance and IRS requirements.

NOTE: Tax exempt status will be revoked if there is a failure to file in 3 consecutive years.

State Corporate Filings: Each state has its own rules and requirements for nonprofit corporations. Many states require the nonprofit to do an initial filing (when the affiliate is formed) may require annual or biannual corporate statements or filings throughout the life of the corporation. Failure to timely file updates can lead to fines and revocation of corporate standing. Affiliates are responsible for understanding the state laws on corporate compliance and maintaining good standing.

Charitable Solicitation Registration: Most states also require the nonprofit organization to register as a charitable organization that will be soliciting funds in that state. If an affiliate requesting donations from people in more than one state, they may have to register in multiple states. The state may also require an annual renewal of registrations. Failure to comply with state regulations can have serious consequences on the Affiliate’s non-profit status. Affiliates are responsible for being aware of their state’s requirements for soliciting charitable funds.

Proof of the above filings must be sent to ACE National within 30 days of filing or at minimum by June 30th or December 31, whichever is nearer your legal filing date. Please save your filing in the affiliate profile in the database.

FILINGS | ADDITIONAL INFORMATION

Affiliates are responsible for maintaining accurate financial records and tracking all income and expenses. This may be managed by the Treasurer, a volunteer bookkeeper, or an outside accounting service using tools such as QuickBooks or Excel. The most important goal is to have a consistent system that clearly tracks where money is coming from and how it is being spent.

Income and expenses should be organized into categories, often called a “chart of accounts.” These categories help affiliates understand their financial activity and prepare required reports and tax filings. Common categories include:

  • assets (what the affiliate owns)
  • liabilities (what it owes)
  • revenue (money coming in)
  • expenses (money being spent)
  • fund balances or net assets.

Affiliates are also required to track expenses by purpose. Program expenses are costs directly related to serving students and running ACE activities, while supporting expenses include administrative and operational costs such as bookkeeping, insurance, or general management. Organizing finances this way helps affiliates build accurate budgets, complete filings, and better understand the financial health of their organization.

Resource Links

SAMPLE CHART OF ACCOUNTS

EXPENSE TRACKING TEMPLATE

QUICKBOOKS OVERVIEW

SAMPLE BALANCE SHEET

OVERVIEW OF NATIONAL EXPENSES

Each affiliate should develop and follow meaningful financial policies and procedures that include strong internal controls. Whenever possible, financial responsibilities should be separated among multiple individuals to reduce risk and improve accountability. At a minimum, Affiliates should do the following:

  • Checks
    There should be a written process for requesting checks.
  • Outgoing checks must be supported by an invoice or receipt approved by the Treasurer or whomever the Board designates. If a receipt or invoice is not available, a voucher prepared by an affiliate administrator or other person and approved by the Treasurer can support an outgoing check.
  • If possible, one person should approve and write the check, and a separate person should sign the checks.
  • An affiliate may also opt to require two signatures on checks as protection against fraud and error.

Deposits

  • Deposits should be recorded. Copies and/or scans should be made of all incoming checks and attached to the deposit receipt and included with the monthly reports for documentation purposes.
  • For deposits, a bank stamp, or handwritten “For deposit only, ABC Bank, Account # 123445”) should be used. The deposit should be made within a week, with no cashback.

Bank Accounts

  • Account should have more than one person has an authorized signature.
  • Bank statements need to be reviewed and reconciled each month.
  • Reconciliation of the bank statement, along with all documentation, should be part of monthly reporting.
  • A designated Board officer should review reconciliation report.

Resource and sample policies

  • Sample Financial Policy
  • Sample Reimbursement Policy
  • Sample Deposit Policy
  • Sample Credit Card Policy
  • Sample PayPal/Venmo Policy

For more information on recommended financial policies, visit:
Financial Management | National Council of Nonprofits

SAMPLE OF NATIONAL’S FINANCIAL POLICY

An Affiliate must have a budget that is prepared annually and reviewed regularly. The Board should review the budget upon initial preparation and approve it by a vote. At each board meeting, the budget should be reviewed and verified.

A budget estimates expected income and expenses. It is usually divided into two parts. The first part tracks expected revenue and the second part tracks expected expenses. At all times, the affiliate should be aware of whether it is operating in a surplus or deficit. The following categories are usually tracked:

  • Anticipated Revenue
  • Program expenses
  • Administrative expenses
  • Scholarships
  • Income and expenses related to events
  • Fundraising activity (income and expenses)

Resources

  • Overview of National Expenses (.pdf) [LINK]
  • Budget Planning Tool (.pdf) [LINK]
  • Budget Template Sample (.pdf) [LINK]
  • Budget Report Sample (.pdf) [LINK]

Click below for more information regarding budgeting.

Financial reports are essential tools that help affiliates and their boards understand financial health, support decision-making, and meet compliance requirements. Key reports include:

  • balance sheet (statement of financial position): which provides a snapshot of assets, liabilities, and net assets at a specific point in time SAMPLE
  • profit and loss statement (statement of activity): which shows income and expenses over a period SAMPLE
  • cash flow statement: tracks how money moves in and out of the organization. SAMPLE

Note: Affiliates are required to submit year-end balance sheet and profit and loss statements to National For more information on understanding and using financial reports, see LINK

Strong management of contributions, donations, and sponsorships is essential to maintaining donor trust, ensuring compliance, and producing accurate financial records. Nonprofits must establish clear, consistent processes for tracking, recording, and reporting all incoming funds.

Proper Classification of Revenue
Not all funding is the same, and how it is classified affects both reporting and compliance:

  • Contributions/Donations: Typically voluntary, non-exchange transactions (individual gifts, grants).
  • Sponsorships: May be partially or fully exchange transactions if the sponsor receives advertising, branding, or other tangible benefits.
  • In-kind donations: Non-cash contributions such as goods or professional services.

Each type must be recorded correctly to align with accounting standards and regulatory expectations. For more INFORMATION

It is also important to acknowledge the various donations received-
Thank You Template

Revenue should be recorded in accordance with accrual accounting principles, meaning revenue is tracked based on when it is earned or committed, not just when cash is received. Donations and pledges are typically recorded when they are received or formally promised. Grants should only be recorded once any required conditions have been met.

Sponsorships can sometimes include both a charitable contribution and payment for benefits received by the sponsor. For example, if a company provides funding for an ACE event and, in return, receives advertising, logo placement, event tickets, or promotional recognition, a portion of the sponsorship may be considered payment for those benefits rather than a fully charitable donation. Affiliates should clearly document what benefits are being provided and, when necessary, separate the charitable portion from the exchange portion for accurate financial reporting and donor acknowledgement purposes.

Establishing clear procedures for recording revenue helps ensure accurate financial reporting and consistency from year to year.

(SAMPLE POLICY)

Scholarship funds should be managed as restricted funds, meaning they must be used only for their designated purpose and tracked separately from general operating funds. Affiliates are responsible for maintaining clear records of scholarship awards, disbursements, and remaining balances to ensure transparency and proper use. There should be clear guidelines for eligibility, timelines, and disbursement processes to avoid confusion. In cases where funds are not used within the designated timeframe or a recipient is no longer eligible, affiliates should have a defined forfeiture policy outlining how unused funds are reclaimed and reallocated in alignment with the original intent of the scholarship. SEE SCHOLARSHIP PAGE

Sample terms of scholarship

Sample disbursement, etc.

A financial audit is different from an IRS audit. A financial audit is an examination of your accounting records and financial statements by an independent auditor—normally, a certified professional accountant (CPA). The auditor is an independent professional hired and paid by your nonprofit.

AUDITS | ADDITIONAL INFORMATION

Sample audit?

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