Road Runners Club of America

Growing the Sport of Running Since 1958

Managing Club Finances

An important step in successfully managing a club or event’s finances is ensuring that every board member understands their fiduciary obligations as part of serving on a board. Board members are ultimately responsible for the financial well-being of an organization which includes ensuring adequate income, control over spending, safeguarding assets, and reporting financial status to appropriate internal and external audiences. Individuals that serve on the board of a nonprofit running club or event do not need to be experts in financial management, but they do need to take a general interest in the financial status of the organization they are serving. This means paying close attention during a treasurer’s report, reviewing financial statements as provided and asking questions if information is unclear or seems in conflict with the organizations policies or budget.

The board should ensure that there are policies in place to protect the organization from fraud or theft. These policies are often referred to as internal controls. An important aspect of internal controls is segregation of duties. In the all volunteer run organization, often times full financial management is delegated to the treasurer by the board or in stipulated in the bylaws. However, this is not the best practice to ensure against theft or fraud. For the most part people are honest and respect their duty of loyalty to an organization, however it only takes one dishonest person to de-fraud an organization and it is this fact that boards must create policies to safeguard against.

The Role of the Treasurer

The treasurer of an organization is typically an elected or appointed member of a board. In an all volunteer run organization, the treasurer is responsible for keeping full and accurate accounts of all income (receipts) and expenses (disbursements or checks). If an organization has paid staff, this function may be delegated or an organization with no staff may at least outsource this function to a paid bookkeeper. The treasurer should, however maintain oversight of the accounting functions and provide periodic financial reports to the full board. There is no hard and fast rule how often financial reports should be shared, but a general rule of thumb is the reports should be no less than quarterly. Reports presented monthly or every other month will aid in better decision making for an organization. A board should establish a financial reporting policy to clarify the expected frequency of reporting.

The treasurer should regularly remind members of a board that they have an obligation to pay attention to the financial status of the organization. At times, board members or even a treasurer may remark that they received a printed financial report and time should not be wasted in reviewing it during a meeting. Resist this temptation to limit verbal review of financial statements. It is the diligence of oral review and discussion that can often bring financial concerns to light.

A sample job description of a board treasurer:

  • Oversee the budget planning process
  • Ensure adequate income available to achieve the budgeted expenses
  • Safeguard the organizations assets
  • Draft financial policies for board approval
  • Anticipate and report financial problems
  • Ensure the board receives regular and accurate financial statements and that the board members understand the information presented
  • Ensure federal, state, and local reporting takes place

These duties may be assigned to an individual or to a committee chaired by a treasurer and often referred to as a finance committee.

Internal Controls

Internal controls should be established for an organization that clearly outlines divisions of duties, which means who is going to be responsible and held accountable for what aspects of the financial management process.  The financial management process in a running club or event typically involves at least five steps:

  • Receive income (dues, sponsorship, donations, etc)
  • Deposit these items into a board approved bank account
  • Write checks drawn from the board approved bank account
  • Reconcile the statements from the board approved bank account
  • Report the financial status of the organization to the board

One individual, typically the treasurer, should not be expected to handle every aspect of the financial management process. Instead the treasurer, in agreement with the president or chair of a board, may appoint one or more individuals to assist with the process. A finance committee may also serve to fulfill this role if there is no staff support. By engaging more than one individual in the process important division of duties are created.

Clubs and events should maintain a checking account or bank account in a board approved financial institution. Incorporating your club or event may be required to open a bank account. Members of the board or individual members of a club should never be allowed to co-mingle the club’s finances in their personal checking accounts.

Signers on a bank account should be reviewed at least annually and individuals no longer allowed to sign on an account should be removed immediately. Boards should also consider approving a check signing policy. These policies typically dictate how many individuals are needed to sign a check on behalf of an organization. Some organizations always require two signatures while others may have a dollar amount threshold. For example, two signatures are needed for checks over $500 or some agreed up amount.

To assist with divisions of duties, clubs and events should consider the following if they don’t have paid financial staff:

  • Require all checks to be co-signed
  • Have an individual other than the treasurer receive a copy of the bank statement, ideally the president or board chair. The statements should include at least images of the cancelled checks. This individual should be free to question any check drawn from the club/event checking account or question any deposit made into the account.
  • Ensure documentation of income received—photocopy or scan checks
  • Ensure documentation of expenses paid -maintain copies of invoices and note the check number and date paid on the invoice.
  • Ensure bank statements are reconciled. If the treasurer reconciles the bank statements have another individual review the reconciliation report. Failure to reconcile bank accounts in a timely manner can mask serious cash flow problems.

The full board of an organization is responsible for the overall financial success of an organization. Developing sound policies and procedures that safeguard an organization’s assets is not only good practice, but it can also helps shield the treasurer from undue suspicion as this individual carries out the responsibilities of the position on behalf of the organization and its members. We encourage our members to take time at their next board meeting to discuss there financial management procedures, internal controls and division of duties and consider policies to address areas of concern or deficiency.

What kind of financial filings are nonprofits required to provide?

  • 501(c)(3) organizations with gross revenue of over $25,000 a year are required to file a Form 990 (or Form 990-EZ) with the IRS each year. Organizations with gross revenue less than $25,000 are required to file the 990-n online.
  • If an organization has unrelated business income from items like t-shirt sales you should pay the unrelated business income tax (UBIT) and local sales tax
  • State or local income or business property taxes
  • Payroll taxes for staff
  • Form 1099 for independent contractors earning more than $500 per year

Consult with a local auditor or accountant for questions. The RRCA does not file any tax forms, especially form 990, on behalf of our affiliates. Tax filings are the responsibility of each member club and event

Important Questions Your Board Should Be Able to Answer:

  • Is your organization showing a profit or loss this month/quarter?
  • Is there a projected profit or loss for the end of the year?
  • What do you need to do to address a loss?
  • Are your revenue sources (dues, race registration, sponsorship) increasing or decreasing?
  • Do you have a diverse source of revenue or are you dependant on a single source?
  • Are key expenses under control?
  • Does your organization have sufficient reserves?
  • Is your cash flow projection adequate?
  • Are your revenue and expenses on track with your budget?
  • Is your budget consistent with your mission, strategic plan, or vision statement?

Before any organization can answer these questions, they must first have a financial plan or a budget. Second, they must have a systems for recording income and expenses. This system is known as an accounting system. Third, the organization must generate reports based on the data input in the accounting system and discuss the reports. Without these three steps, a Board will not be able to answer the important questions outlined above.

The Budget

The budget is the annual financial plan for an organization. While drafting and managing a budget can be a bit of a look into the crystal ball exercise, a few important planning steps can help improve budget accuracy.

The first step in drafting a budget is to look at the prior year’s income and expenses to help establish an operating baseline. If your organization ran a deficit, learn from the loss. Was your organization over ambitious on revenue planning? Did you have an unexpected expense? Will this be a re-occurring issue in the future? If so, plan for it, don’t avoid it. Do you have new goals for the coming year? It is important to outline new goals in writing; then determine an associated cost or revenue projection. For example, if your goal is to increase membership or race entrants by 25% then you will increase your membership income budget, but at the same time, you may need to increase the budget for your marketing expenses. When drafting your budget, be realistic about the revenue your organization can generate. Inflating the revenue budget to simply exceed the budgeted expenses can lead to an actual deficit at the end of the year. Be sure to have a contingency plan if revenue falls short of expectations to minimize the likelihood of a deficit at year’s end.

When drafting your budget, it is also important to review your accounting system. Your budget categories should match your chart of accounts or accounting categories. It is also important to account for income and expenses how they are outlined in a budget. If the two systems do not match, then you will not be able to generate financial statements that match your budget. The result is that your board may not get an accurate picture of the income and expenses compared to the budget.
The actual budget should consist of three important elements:

  • The budget period i.e. January 1–December 31, 2008
  • Two-year income and expense comparison (You may need to use projections for the immediate previous year)
  • The budget for the coming year which includes income, expenses, and budgeted profit or loss with notes outlining significant variances compared to previous years

Nonprofit does not mean no profit. A nonprofit club or event may budget a profit, but board members may not distribute the profit amongst themselves. This is what defines them as a nonprofit. A nonprofit may also elect to budget a loss if there are adequate cash reserves to support the loss. For example the budget may include spending reserves for a special project that annual income may not fully support. If a board elects to budget a loss, this fact should be clearly recorded in the organization’s minutes.

Accounting for Income and Expenses

Many small nonprofits use a simple cash basis for accounting, meaning they simply record cash in and expenses out of a checking account. This is adequate for very small organizations with simple operations, as long as the treasurer reports to the board the income received, the expenses paid, and the balance of the checking account and if there is an adequate cash balance in the account to cover future expenses.
In organizations with more sophisticated operations, multiple events, multiple programs, independent contractors, employees, etc. an accrual and fund accounting system is recommended. An accrual system matches income and expenses within the same time period. To be in conformity with generally accepted accounting principles, financial statements should be prepared on the accrual basis. Fund accounting is a concept most often related to nonprofit organizations. Financial records should be maintained for each program, race, or activity that receives income designated for that specific purpose. Each set of records is called a “fund” and is considered a separate accounting category and may have sub-categories. There should also be corresponding expense lines. For example an accounting system or chart of accounts and your corresponding budget may look similar to the following:

Income

  • Membership Dues
  • Individual
  • Family
  • Club Sponsorship
  • Program Fees
  • Beginning Running Program
  • Marathon Training Program
  • Youth Running Program
  • Contributions
  • Race Income (Create a category for each race as opposed to lumping them all together)
  • Race Entry Fees
  • Sponsorship
  • Donations collected
  • Misc. Income

Expenses

  • Program Expenses
  • Beginning Running Program
  • Marathon Training Program
  • Youth Running Program
  • Race Expenses (Create a category for each race as opposed to lumping them all together)
  • Permit Fees
  • Contractors
    • Finisher Items
    • Contributions or grants given
    • Prize Money
    • Create additional line items as needed
  • Club Management
    • RRCA Membership—Dues & Insurance
    • Board meeting expenses
    • Membership Recruitment & Retention
    • Staff (as needed)
    • Depreciation of assets (timing systems, clocks, etc.)
  • Create additional line items as needed

There are many great accounting systems on the market to help organizations account for income and expenses and generate reports. If the organization utilizes an accounting system such as Quicken or QuickBooks or another product, then the club should own the software and not “borrow it” from a club member. The board may authorize for the software to be installed on a volunteer’s computer, but the club should own the software, so there is no question of data and software ownership if the volunteer chooses to relinquish their responsibility. This will also ensure accounting system continuity from treasurer to treasurer. If the club does not have paid staff, the club’s board should ensure that regular back-ups are made of the club’s accounting software and another member of the club should get a copy of the back-up data. Back-ups should be made at least monthly if not more often.

Funding the club

Beyond membership dues, try to seek out sponsors in your community. First approach those with ties to sports and health, i.e. sports stores, fitness centers, and hospitals. Then approach those with more general appeal, i.e. banks, groceries, drink companies and the well known, good corporate citizens. Your best approach will be to solicit cash and/or services from two or more of these organizations. That way if you lose one sponsor your club is not completely out in the cold and you do not have to start all over again in your sponsor search. Finding good sponsors, pleasing and keeping them is hard work, but a good sponsor base can help your club and races flourish.

Other sources of revenue that can fund a club include: entry fees from races, participant fees for specialized training groups, sales of club clothing, and contributions from individual donors.

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