What is a fiscal year, in a nutshell?
A fiscal year defines the start and end dates for an organization’s accounting. Annual and quarterly reports to donors, as well as tax filings, all flow from the fiscal year. So do budgeting and revenue goals. While the majority of U.S. companies’ fiscal year perfectly overlaps the calendar year (Jan. 1st to Dec. 31st), deviating from those dates is more common than you’d think. For example, check out the fiscal years for these organizations:
- Feb. 1st to Jan. 31st: Walmart, Kmart
- July 1st to June 30th: American Red Cross, University of California Berkeley:
- Oct. 1st to Sept. 30th: U.S. Federal Government
- Sept. 1st to August 31st: Ikea, University of Texas
Looks pretty random, right? Big American retail stores close business at the end of January, when most of the holiday sales numbers are in and unwanted Christmas presents have been returned. Ikea, another big retailer, has a totally different fiscal year. Is that because they sell furniture or because they’re based outside of the U.S.? We don’t know. (Fun fact, governments around the world have different fiscal years as well. In the U.K., it starts April 1st.) The reason we share this is to stress that there’s no one official, sacred fiscal year that everyone has to adopt.
What dates should your booster club select for its fiscal year?
We initially thought that we could give a “right answer” to this question. Basically we thought that booster clubs would want the same fiscal years as schools. However, as you might have guessed from our list above, not even state school systems have standardized fiscal years across the country. In California, both universities and high schools start the fiscal year on July 1st. The University of Texas starts the year on September 1st, but Texas high schools can choose either July 1st or September 1st. (We imagine this drives Texas Education Agency accountants crazy.) To complicate things further, booster clubs sometime only operate in one season. So, there’s not one-size-fits all fiscal year.
The bottom line is that your booster club has the freedom to select a fiscal year range. The dates should accommodate the booster activity’s season, its board member terms of office, its school district’s fiscal year, tax filings, volunteer availability, and other factors. (More detail on this below.) First though, it’s helpful to know the terms used in relation to the fiscal year.
Fiscal calendar vocabulary:
- Fiscal year 2014: We’ve seen that the fiscal year can span two calendar years. Still, they’re usually referred to by the year that they end. For example, this article was written during University of Texas fiscal year 2014, which started Sept 1st 2013 and will end on August 31st 2014.
- FY stands for Fiscal Year: right now the University of Texas is in FY2014
Quarters divide FYs: These four three-month segments are often abbreviated as Q1, Q2, etc. If you see something like “Q1/FY2010,” don’t panic, it’s just the first quarter (the first three months) of the 2010 fiscal year. At the University of Texas, Q1/FY2010 would include September 2009, October 2009, and November 2009.
Chances are your booster club has already established a fiscal year. (Ideally it’s listed in the club’s bylaws.) However, you don’t have to stick with your current fiscal year if you don’t like it. If it doesn’t fit the flow of your club’s fundraising and budgeting schedule, the board can work within the rules of its bylaws to change the fiscal year. For example, if your fiscal year ends December 31st, volunteers have to hammer out a budget right before Christmas, when everyone is managing fundraisers, preparing for the holidays, and actively avoiding spreadsheets. When setting the dates for a fiscal year, consider the following factors.
Activities season: For single-activity booster clubs, business revolves around performances, tournaments, and other major events involving the club’s participants. For example, a fall sport like soccer may want to close business right after the first semester, while a theater troupe with a major end-of-school-year performance may want to close business after the second semester. For multiple-activity and other umbrella booster clubs, the school year will be a more important factor.
Board member terms: Should board members serve over the course of one fiscal year, or part of two? There are advantages to both. Consider, for example, the position of treasurer. If a treasurer holds the reins for one fiscal year, they’re responsible for the financials from start to finish. It’s simpler. However, starting closer to the end of the year (when finance reports are due), they’ll better understand what items they need to keep track of for the following year. It could be more efficient, because the outgoing officer will still be around to look things over. (As we wrote in 5 Tips for Booster Club Continuity, these transitions help.)
School district’s fiscal year: If your club works closely with a school district on financial issues, it might be a big help to your treasurer to sync the booster club’s FY with the school’s FY. Have them check with the principal or school accountant to see what their FY is. For example, does your booster club direct cash to the school through a purchase order (PO) system? If so, are POs not allowed after the fiscal year ends? Or, does your booster club buy items and then give them to the school, in kind?
Taxes and the IRS: As we’ve noted elsewhere, booster clubs must file taxes, even if they are nonprofits. When do they have to file? For individuals, the federal tax filing deadline in 2014 is April 15th. As noted above, the government has it’s own official fiscal year. Do booster clubs have to file around those dates? Not at all. Booster clubs can choose to report taxes over a fiscal year range that, in the words of the IRS “coincide with the natural operating cycle of the organization.”
How to change your tax filing date: You can find more information about how to do that in the instructions page for form 990 on the IRS website (under the heading “accounting periods”).
Volunteer availability: While it’s tempting to push financial accounting and other work into the holidays, it might not be realistic. Volunteers have their own cycles of busy and more busy. Crunching a yearly report in December might be more than your treasurer can stand. You can’t accommodate everyone, but board member schedules are an understandable factor in setting the fiscal year.
Other factors: There may be other factors that we haven’t considered here. For example, in the corporate world, reports must be issued to the Securities and Exchange Commission during the first three quarters of the company’s fiscal year. Like a tax filing deadline, it’s important to factor in the humanpower required to produce those statements. Booster clubs might consider their own regulatory bodies. Do they have to submit financial statements to an oversight agency such as the school board? Lastly, they should take into account any local laws governing schools and charity organizations.
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