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Re: [Nonprofit Networking Group] Seeking advice regarding "technology refresh" line item in our budget

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  • Gretchen Frankenstein
    Alex, as far as I know, you can add a line item wherever you want for new technology. Normally, I have seen it under technology. in budgets. You can always
    Message 1 of 7 , Apr 23 1:41 PM
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      Alex, as far as I know, you can add a line item wherever you want for new technology. Normally, I have seen it under "technology." in budgets. You can always change the name and move it in your chart of accounts.

      I think you can depreciate it over five years, the first depreciation coming with the tax return for the year you bought the equipment--check with your accountant on this. It does not have to be under "depreciation" in the budget for your accountant to depreciate it for the tax return. The accountant will pick it up when  he/she does the return.

      As for how much to budget, it's often a guess.  If you have an IT contractor, it would be their monthly bill, then if you are planning add positions for a fiscal year, the computers and software needed for the new positions, any monthly fees you pay for online or other technology or software or computer services (online storage, conferencing, etc.), the cost any computers you may need to replace (I have done this usually on a five-year cycle) in the current year, then add about 10% over that to cover unanticipated expenses.

      Gretchen


      On Mon, Apr 22, 2013 at 11:04 PM, Vishnu13 <vishnu_13@...> wrote:
       

      I am hoping that someone can assist us in creating a line item on our budget for "technology refreshing."

      We have a $715K budget this year and will probably grow that to almost $800K next year. We have about 25 computers on site - some used by staff some used by clients (kids, ages 6-18) and all in various stages of newness or disrepair.

      Next year we'd like to add a line item in our budget to purchase new technology, software and peripherals (mice, keyboards etc.)or more accurately, add to our depreciation line item to sufficiently address the depreciation of new technology.

      First question: is there an IRS recommendation as to when to depreciate new equipment? The beginning of the next fiscal year or the end of the fiscal year in which the items were purchased?

      Second question: We are wondering what other non profits use as their calculation for how much to spend on new technology each year. Is it based on budget? Number of computers? Something else?

      Any advice is very welcome.

      Thanks!

      -Alex Allred
      826 Seattle


    • j2greene
      Hi Alex, To respond to your second question about how much to spend on new technology each year, it really does depend. One consideration is if your
      Message 2 of 7 , Apr 24 2:29 PM
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        Hi Alex,

        To respond to your second question about how much to spend on new technology each year, it really does depend.

        One consideration is if your organization has not invested in the past, the current outlays could be front loaded as you need to catch up. For example, if there are lots of Windows XP machines that can't run Windows 7, you'll need to expedite those upgrades as XP goes out of support in a year. Once you assume that everything is up to date, I would say budget planning needs to incorporate replacement costs for workstation, network devices and servers, and then add on for future growth. You also may need to consider factors such as whether you'll be moving any significant pieces of infrastructure to the cloud, such as e-mail services, though it would be invalid to presume that the cloud can replace all server infrastructure (at least right now).

        The variables are wide-ranging and the formula for one organization may not be the right fit for another organization. It's hard to give a general recommendation without digging deeper into your specific circumstances and needs. We'd definitely recommend working with an IT professional to get a more accurate recommendation for your organization. We'd be happy to work with you on that or there are many other good technology providers out there.

        Thanks,
        Jade

        Jade Greene
        Client Engagement Manager
        Technology Services at 501 Commons
        206-957-7740 | jade@... | www.501commons.org


        --- In NonprofitNetworking@yahoogroups.com, "Dee Thierry" <dtheories@...> wrote:
        >
        > Concerning the 2nd question, NPower used to hold classes on Tech
        > Strategic Planning. Now that they're 501Commons, might want to check in
        > with them for advice about arriving at a budget.
        >
        > I'm jealous over what you do have! Good luck,
        > dee
        >
        > Legal Foundation of Washington
        > www.legalfoundation.org
        > It's Not Justice If It's Not Equal
        >
        > -----Original Message-----
        > From: NonprofitNetworking@yahoogroups.com
        > [mailto:NonprofitNetworking@yahoogroups.com] On Behalf Of Vishnu13
        > Sent: Monday, April 22, 2013 11:05 PM
        > To: NonprofitNetworking@yahoogroups.com
        > Subject: [Nonprofit Networking Group] Seeking advice regarding
        > "technology refresh" line item in our budget
        >
        > I am hoping that someone can assist us in creating a line item on our
        > budget for "technology refreshing."
        >
        > We have a $715K budget this year and will probably grow that to almost
        > $800K next year. We have about 25 computers on site - some used by
        > staff some used by clients (kids, ages 6-18) and all in various stages
        > of newness or disrepair.
        >
        > Next year we'd like to add a line item in our budget to purchase new
        > technology, software and peripherals (mice, keyboards etc.)or more
        > accurately, add to our depreciation line item to sufficiently address
        > the depreciation of new technology.
        >
        >
        > First question: is there an IRS recommendation as to when to depreciate
        > new equipment? The beginning of the next fiscal year or the end of the
        > fiscal year in which the items were purchased?
        >
        > Second question: We are wondering what other non profits use as their
        > calculation for how much to spend on new technology each year. Is it
        > based on budget? Number of computers? Something else?
        >
        > Any advice is very welcome.
        >
        > Thanks!
        >
        > -Alex Allred
        > 826 Seattle
        >
        >
        >
        >
        > ------------------------------------
        >
        > Yahoo! Groups Links
        >
      • mf501c
        Hi Alex, I shared your questions with staff here, both on the accounting and technology sides of the org., and our tech group replied yesterday. Now, here s
        Message 3 of 7 , Apr 25 2:25 PM
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          Hi Alex,

          I shared your questions with staff here, both on the accounting and technology sides of the org., and our tech group replied yesterday.  Now, here's our Finance Services Manager Duane Landon's more technical answer.  Hope it helps.

          Matt

          Matt Fikejs, Information & Referral Program Manager

          501 Commons

          206-682-6704 x105

          A resource for nonprofits. A partner for philanthropy.

          501commons.org, your first stop for nonprofit tools, best practices, service providers, and more!

           

           

          "There are multiple facets to your question and I will attempt to address all of them and probably even some you didn't ask.

          "To capitalize or not to capitalize; that is the question? With an annual budget nearing $800K, I'm hoping you have a full set of financial policies and procedures, a section of which should state a capitalization threshold. Such a statement indicates under what circumstances a cost is capitalized as fixed assets on the balance sheet as opposed to immediately expensed on the income statement. I suggest choosing a dollar threshold reasonably high so as to minimize the extra work needed to depreciate relatively small purchases. For example, any single item costing over $1,500 is capitalized.

          "What depreciation is and isn't? Depreciation is an accounting term used in the application of the matching principal which states that an expense should generally be recorded in the time period the object created/produced a benefit. Depreciation, therefore, is more or less a product of generally accepted accounting principal. Depreciation is not a representation of any reduction in fair value of an asset nor is it a portrayal of how long something is expected to last. The message here is that budgeting for depreciation is different than planning for purchasing technology.

          "What is budgeting for computers? When one says "we need to budget for computers" that can mean a few different things. It could mean cash planning or it could mean your approved budget. Depending on how you maintain your finances, these could be different things. If you maintain your financials including budget on an accrual basis, you may want to prepare a special capital asset budget assuming you capitalize significant purchases (see prior section). If this is the case, you may want to additionally prepare a simple cash-based budget.

          "What does the IRS say? Well they actually don't care. You see, because of your tax-exempt status, there is no tax implication. So, unlike a for-profit business, which generally must capitalize and slowly depreciate fixed assets, a tax-exempt organization isn't required to do so. If however you choose to capitalize major purchases, you could choose to apply the IRS method commonly referred to as MACRS. The Modified Accelerated Cost Recovery System is a detailed listing of virtually every asset, its useful life, and how much to depreciate each year. Although it is more complicated than the traditional straight-line depreciation method, I am a fan of it precisely because it defines how many years each asset is to be depreciated. It even specifies when to"begin" depreciating a given asset.

          "So how much should I budget? In determining how much to budget for technology, you should start first with your strategic plan, which hopefully covers a multi-year period. A good strategic plan will roughly outline what the organization wants to accomplish in the coming years both programmatically and internally. Using this plan as a guide, you can derive an estimate for when additional technology will need to be purchased and when outdated ones should be replaced. Related to this is how you approach technology in general. Is the organization an early adopter or late adopter of new technology? Do you tend to replace everything all at once or one-at-a-time? If you upgrade in large swaths and tend to go with the latest and greatest, you will want to budget for large amounts of cash but less frequently."

          Duane Landon

          Financial Services Manager | Director of Finance, MBA, MPA,CPA, EA

           

          --- In NonprofitNetworking@yahoogroups.com, "j2greene" wrote:
          >
          > Hi Alex,
          >
          > To respond to your second question about how much to spend on new technology each year, it really does depend.
          >
          > One consideration is if your organization has not invested in the past, the current outlays could be front loaded as you need to catch up. For example, if there are lots of Windows XP machines that can't run Windows 7, you'll need to expedite those upgrades as XP goes out of support in a year. Once you assume that everything is up to date, I would say budget planning needs to incorporate replacement costs for workstation, network devices and servers, and then add on for future growth. You also may need to consider factors such as whether you'll be moving any significant pieces of infrastructure to the cloud, such as e-mail services, though it would be invalid to presume that the cloud can replace all server infrastructure (at least right now).
          >
          > The variables are wide-ranging and the formula for one organization may not be the right fit for another organization. It's hard to give a general recommendation without digging deeper into your specific circumstances and needs. We'd definitely recommend working with an IT professional to get a more accurate recommendation for your organization. We'd be happy to work with you on that or there are many other good technology providers out there.
          >
          > Thanks,
          > Jade
          >
          > Jade Greene
          > Client Engagement Manager
          > Technology Services at 501 Commons
          > 206-957-7740 | jade@... | www.501commons.org
          >
          >
          > --- In NonprofitNetworking@yahoogroups.com, "Dee Thierry" dtheories@ wrote:
          > >
          > > Concerning the 2nd question, NPower used to hold classes on Tech
          > > Strategic Planning. Now that they're 501Commons, might want to check in
          > > with them for advice about arriving at a budget.
          > >
          > > I'm jealous over what you do have! Good luck,
          > > dee
          > >
          > > Legal Foundation of Washington
          > > www.legalfoundation.org
          > > It's Not Justice If It's Not Equal
          > >
          > > -----Original Message-----
          > > From: NonprofitNetworking@yahoogroups.com
          > > [mailto:NonprofitNetworking@yahoogroups.com] On Behalf Of Vishnu13
          > > Sent: Monday, April 22, 2013 11:05 PM
          > > To: NonprofitNetworking@yahoogroups.com
          > > Subject: [Nonprofit Networking Group] Seeking advice regarding
          > > "technology refresh" line item in our budget
          > >
          > > I am hoping that someone can assist us in creating a line item on our
          > > budget for "technology refreshing."
          > >
          > > We have a $715K budget this year and will probably grow that to almost
          > > $800K next year. We have about 25 computers on site - some used by
          > > staff some used by clients (kids, ages 6-18) and all in various stages
          > > of newness or disrepair.
          > >
          > > Next year we'd like to add a line item in our budget to purchase new
          > > technology, software and peripherals (mice, keyboards etc.)or more
          > > accurately, add to our depreciation line item to sufficiently address
          > > the depreciation of new technology.
          > >
          > >
          > > First question: is there an IRS recommendation as to when to depreciate
          > > new equipment? The beginning of the next fiscal year or the end of the
          > > fiscal year in which the items were purchased?
          > >
          > > Second question: We are wondering what other non profits use as their
          > > calculation for how much to spend on new technology each year. Is it
          > > based on budget? Number of computers? Something else?
          > >
          > > Any advice is very welcome.
          > >
          > > Thanks!
          > >
          > > -Alex Allred
          > > 826 Seattle
          > >
          > >
          > >
          > >
          > > ------------------------------------
          > >
          > > Yahoo! Groups Links
          > >
          >
        • andrea_johnsmith
          Dear friends -- I have not done this in a while. I would like to hear how your organization recognized (acknowledges) and credits (in your database and
          Message 4 of 7 , Apr 26 1:58 PM
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            Dear friends --
            I have not done this in a while.  I would like to hear how your organization recognized (acknowledges) and credits (in your database and quickbooks) designated gifts from United Way that have matching corporate gifts.

            Scenario:  John Smith pledges $500 to be given in monthly installments.  United Way collects and pays the designee (my organization) for that pledge -- on a quarterly basis.  John Smith's company sends a .50 on the dollar match check.

            I want to recognize John and make sure our database reflects who gets credit for what.  Hence, I can:
            • Send John a thank you letter for each installment as it comes in, and then recognize the full amount at year end. OR
            • Leave it to email to recognize each installment and recognize pledge fulfillment at year end.
            As for the corporate match, I would:
            • Recognize John with a soft credit for the amount of the match received from his employer and also send his employer a letter of thanks.
            In Quickbooks:
            • John's pledge is recorded and each payment as it is booked.  He is given a soft credit for the corporate match by his employer.  His employer is credited with the match payment.
            How am I doing?  Thanks for your help/opinions.  I don't do much gift processing so I need to be schooled.

            Andrea John-Smith
            206-851-2408




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