Club Finances
Money mistakes are the fastest way to lose a club's good name — and its tax-exempt status. A short, interactive tour of the treasurer's job, the board's fiduciary duties, the two funds that must never mix, and the reports that keep your club in good standing.
Under no circumstances may the net income of club activities raised from the public be used for administrative purposes.
What you'll be able to do
By the end of this lesson you will be able to:
- Explain the responsibilities of the club treasurer and the board of directors.
- Describe how club funds can be raised, used, and kept properly separated.
- Identify which reports must be filed, and when.
- Understand how sound club finances impact the club's success — and its members'.
The treasurer's duties — mind map
Six duties define the job. Tap any branch to reveal what it actually involves.
Try to keep the treasurer's term to one year. Turning the records over regularly prevents complacency and keeps the books straight — even experienced treasurers benefit from a fresh set of eyes.
Two budgets, two purposes
Administrative budget
Determines the periodic collection of dues — monthly, quarterly, however the club decides — sized to cover district, multiple-district and international dues, plus meals, postage and awards.
Activities budget
Anticipates the income and expenses of every planned project for the year — the fundraisers the club will run to accomplish what it does in the community.
Complete the budget no later than May of the coming year. Once the board approves it, it takes effect on July 1 — the start of the new Lions year.
The two funds — where money flows
Every Lions club keeps two funds. Tap any box to see what belongs where.
The golden rule: net income from public fundraising can never be used, in any manner whatsoever, for administrative purposes. You can't use it to renovate the clubhouse — that has to come from the Lions themselves.
The board of directors' fiduciary duties
Serving on the board is not an honorary title — there are real legal duties, and real consequences for breaching them. Tap a duty to see what it means.
There can be severe consequences for breach of fiduciary duty — board members can be held individually responsible for not living up to these standards.
Authorizing payments
The board authorizes every payment the treasurer makes. Recurring payments — district and international dues, the heating bill — can be pre-approved for the whole year in a board meeting, as long as that approval is recorded in the minutes. Anything outside the budget or outside the norm still needs approval before the check is written.
The annual budget & member dues
The board approves the annual budget and sets how much club member dues will be for the year.
The banking institution
The board approves where club funds are maintained. It's worth shopping around — a credit union can sometimes be more economical, and pay a bit more interest, than a bank.
Petty cash limits
The board sets the limit on petty cash. Keep it to a minimum — cash on hand is cash that's hard to account for — though a small float can be useful for making change at a fundraiser.
Good accounting practices & due diligence
Good accounting practices
- All monies received are deposited — none held out
- Payments are made by check, not from cash on hand
- Disbursements are made only on the authority of the board
- Receipts are itemized
- Financial reports, bank statements, tax returns and government filings are retained
- The treasurer is bonded, and audits are performed annually
- The club creates no indebtedness beyond the current fiscal year
- Carried-over funds are kept to a minimum — large surpluses can threaten tax-exempt status
Due diligence — limiting exposure
Due diligence is the conduct a reasonable person exercises to look out for the organization's well-being. Steps to limit exposure:
- Require dual signatures
- Reconcile bank statements
- Limit the use of cash
- Establish check-handling procedures and expense-reimbursement policies
- Set and follow budgets
- Encourage rotation of duties or term limits
- Consider insurance coverage
Tax-exempt status — and how to lose it
All clubs chartered under Lions Clubs International in the US and Canada are exempt from federal income tax. In the US this is under IRS code section 501(c)(4) — for civic leagues and social welfare organizations — not 501(c)(3), which is for charities. In Canada, Lions clubs are nonprofit organizations, not charities. Donations to a Lions club or its projects are therefore not deductible as charitable contributions.
It's proper to call a Lions club tax-exempt or not-for-profit. It's improper to call it a charity — and be careful not to print the word "donation" on admission or raffle tickets when no deductibility is actually warranted; the IRS views that as a disclosure violation.
Private benefit / inurement
Engaging in any activity that lets the organization's income or assets unduly benefit someone with a close relationship to it — you cannot donate money to help out one of your own members, however tempting that feels.
Employment issues
Compensating volunteers with gift cards, or waiving membership dues in exchange for work, is not allowed. Reimbursing members for actual expenses with proper receipts is fine.
Political campaign activity
Stay away from endorsing candidates or issues. Clubs can be nonpartisan and encourage members to get out and vote.
Non-compliance with filing requirements
If a club hasn't filed a tax return for three consecutive years, it loses its tax-exempt status automatically. Getting it back is a major undertaking — you'll need to produce years of records and may owe fines and back taxes.
Which tax return do you file?
Based on total income across both the administrative and activities accounts combined.
Form 990-N
The "e-Postcard." For clubs under $50,000 in total income. File it online in a few minutes.
Form 990-EZ
For clubs with total income between $50,000 and $200,000.
Form 990
For clubs with total income of $200,000 or more.
Own property?
If the club owns property — land, a building, even a vehicle — it must file the 990-EZ or 990 regardless of income.
Incorporation is recommended to protect club members from personal liability — an unincorporated club leaves the club and every member individually exposed if someone sues. Before filing articles of incorporation with your state, you must get approval from the legal department at Lions Clubs International.
On sales tax: the club pays sales tax on taxable items it purchases for its own use, and must collect and submit sales tax from the public when selling taxable items — rules vary by state, so check yours.
On gaming, bingo and raffles: these are usually regulated by the state attorney general's office, and in most cases only 501(c)(3) charities may conduct games of chance. If your club is a 501(c)(4), 100% of the profit from a bingo event must be donated to a 501(c)(3) charity.
Liability insurance — what's covered
Lions Clubs International provides a $200,000–$2 million general liability policy for individual club Lions — but it doesn't cover everything.
- General liability for individual club Lions
- A certificate of insurance, printable online any time
- Supplemental policies are available through LCI for extra activities
- Accident insurance — this is a liability policy, not accident coverage
- Property damage, or a co-sponsor on a joint project with another club
- Medical payments for athletic events, such as flag football games
- Alcohol sale/distribution liabilities, or automobile operation such as poker runs and car rallies
Trademark protection: the Lions name and emblem may be printed on club stationery and materials reasonably necessary for club operation — but no item bearing the association's trademarks may be sold or distributed without express written permission.
Closing out the fiscal year
The Lions fiscal year ends June 30 — not December 31.
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Have the records audited
After June 30, have someone with no connection to the club's finances audit the books — a fellow club member, or a Lion from another club. You don't have to pay a professional to do this.
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File the appropriate tax return
File the 990-N, 990-EZ or 990 based on the club's total income (see above), promptly after the fiscal year ends.
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Transfer the records
Hand the new treasurer the budgets, bank statements, audit reports, tax returns and check registers. Bank statements, audit reports and tax returns should be kept for a minimum of seven years — the IRS's general guideline.
Check yourself
Eight quick questions. Pick an answer to see instant feedback.
Bring it home
- Are your club's administrative and activities funds kept in clearly separate accounting — with dual signatures, itemized receipts, and board authorization for every disbursement?
- Do you know which tax form your club must file this year, and has the annual audit already been scheduled for after June 30?
- If the treasurer changed today, could the new treasurer find every budget, statement, audit and tax return from the past seven years?