General Guidelines
Financial Accountability
Tax Exemption Information
Letters of Acknowledgement to Donors
Sample Letter to Acknowledge Donation
Draft Letter to Confirm Tax Exempt Status of Extension District Board  


General Guidelines

  1. Administration of all volunteer-led groups will be in accordance with their organization’s bylaws.     
  2. All groups must link to a Program Council and the Program Councils must link to the County Extension Council and Extension District Board.
  3. Each group must determine the source from which the group will derive tax exempt status as described in “Cooperative Extension Organizations and Tax Exempt Status.”
  4. Each group must determine how they will handle funds as described in “Options for Handling of Funds Locally.” 
  5. Each volunteer group handling funds will have sole responsibility for all funds and assets of the organization and will follow guidelines established by the Kentucky Cooperative Extension Service.
  6. No Extension employee shall have signatory authority over any assets of the volunteer-led group.
  7. An electronic bookkeeping system such as Quicken or QuickBooks should be used to keep financial records for the volunteer-led group, except those clubs or groups with less than $250 in annual income.  (It is appropriate that the treasurer keep these electronic records or electronic records can be maintained in the county Extension office by an Extension employee.
  8. The financial activities and resulting financial statements of all groups should be conducted in accordance with generally accepted accounting principles.  (See “Maintaining Auditable Records”). 
  9. All groups that have an average monthly balance of $100 or more should have their funds in a financial institution.  Check for institutions that allow non-profit groups to maintain an account that has no minimum amount and activity requirement and no monthly service fee. Money not placed in a bank account should be held in a secure location.  Detailed records of the funds are to be maintained. 
  10. The group might consider requiring dual signatures for expenditures over a pre-set amount if the group handles large amounts of money.
  11. When the group’s funds are held in a financial institution, the account should be opened in the name of the group, using their Employer Identification Number (EIN).  Under no circumstances should the account be opened in the name of an individual or using an individual’s Social Security number for the EIN number.
  12. A a) budget, b) periodic financial statements, c) annual financial report and d) “Audit Checklist and Report” should be prepared by the appropriate officer.  (See “Budget and Annual Financial Report”)
  13. The annual financial report with all supporting documentation, should  be audited annually by one of the following methods:
    1. An audit conducted by an independent public accountant (required for District Boards)
    2. An audit conducted by an Audit Committee. (See “Audit Committee Guide” and “Audit Checklist and Report”)
  14. Many groups find it useful to acquire and maintain certain tangible assets in support of the educational goals of the organization.  Maintain an inventory list which includes equipment, tools, etc.  Fiscal responsibility for these tangible assets rests with the individual group.  Groups are to inventory these assets on an annual basis, document the location, and provide a historical summary of both acquisition and location.  (See “Annual Inventory Report”)  Note:  To avoid burdensome record keeping, it is suggested that this inventory report include only assets with a useful life over one year and an initial value of $250 or more)
  15. A volunteer agreeing to serve as a treasurer for any Extension-related group with peak bank account balances over $500 must successfully participate in the Client Protection risk Management approval process.  If practical, a bond or dishonest endorsement should be utilized to protect group assets.

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Financial Accountability

 All groups need to be financially accountable for the funds that they handle.  Groups will need to prepare and file specific financial records based on the tax exempt path they choose (either the government exemption through the Extension district board or as a 501(c)(3) group) and on the options they choose related to handling funds. (See “Options for Handling of Funds Locally”)

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Governmental Tax Exemption through the Extension District Board

  1. Groups choosing Option A: Governmental Exemption/Multiple Checkbooks—The county program councils and their related sub-groups will maintain control and have autonomy over their own funds and individual bank account with general oversight by the county program council and the appropriate county agent.
    1. Each entity (program group) will:
      1. Maintain a bank account using their own EIN.
      2. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.” Submit copies of these to the appropriate county Extension agent, county program council and county CES office.
      3. Follow procedures for money handling, reimbursement and payment of bills as outlined in the “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
    2. Each County Program Council will:
      1. Maintain their own bank account using own EIN.
      2. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.” Submit copies of the financial reports only to the appropriate county Extension agent, county Extension council, Extension district board and county CES office.
      3. Follow procedures for money handling, reimbursement and payment of bills as outlined in the “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
      4. Request that donor letters and documentation affirming tax exempt status be provided by the local Extension district board, with wording that is inclusive of the county program council. Those without an Extension district board may request that the county fiscal court send these documents.
  2. Groups choosing Option B: Governmental Exemption/One Checkbook per Program Council—All  funds related to a program area in the county will be handled centrally by the county program council, with separate accounts established in a Quicken, QuickBooks or similar electronic bookkeeping system for each related entity’s (club/group/etc.) funds.  Oversight for adherence to procedures will be the responsibility of the appropriate agent. 
    1. Each Entity will:
      1. Maintain control, have autonomy over, and make decisions related to the account.
      2. Develop a budget for their account and provide copies to the program council and appropriate county Extension agent.
      3. Submit appropriate documentation including vouchers, receipts, and deposit information to the county program council treasurer following money handling procedures outlined in “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
    2. The County Program Council will
      1. Maintain their own bank account with own EIN.
      2. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.”  Submit copies of the financial reports only to the appropriate county Extension agent, county Extension council, Extension district board and county CES office.
      3. Follow procedures for money handling, reimbursement and payment of bills as outlined in “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
      4. Request that donor letters and documentation affirming tax exempt status be provided by the local Extension district board, with wording that is inclusive of the county program group or county program council. Those without an Extension district board may request that the county fiscal court send these documents.
  3. Groups choosing Option C: Governmental Exemption/Extension District Board Checkbook—All county program council funds and funds of their related sub-groups will be handled centrally by the county Extension district board with a separate account established in a Quicken, QuickBooks or similar electronic bookkeeping system for each county program council and subgroup. Oversight for adherence to procedures will be the responsibility of the appropriate agent.
    1.   Each County Program Council will:
      1. Have control of, have autonomy over, and make decisions related to the account of the program council’s funds.
      2. Will not have a bank account or EIN.
      3. Develop a budget for their account and provide copies to the Extension district board and appropriate county Extension agent. 
      4. Submit appropriate documentation including vouchers, receipts, and deposit information to the Extension district treasurer.
      5. Follow procedures for money handling, reimbursement and payment of bills for expenses as outlined at https://ces-manuals.ca.uky.edu/content/county-extension-district-board.
    2. The Extension District Board will:
      1. Generate and provide financial reports to the County Program Council and related sub-group accounts for oversight and informational purposes at least quarterly or upon written request. 
      2. Audit all of the accounts as a part of the County Extension Board audit requirements.
      3. Provide donor letters and documentation affirming tax exempt status with wording that is inclusive of the County Program Council.
  4. Groups choosing Option D: Form and Operate as a 501(c)(3) Organization—County Program Councils and/or related entities may apply for tax exempt status as a 501(c)(3) organization.  The councils/entities are a program of the Land Grant institution and will function through a Memorandum of Understanding with Kentucky Cooperative Extension Service.
    1. Each entity (program group) choosing a 501(c)(3) will:
      1. Maintain a bank account using own EIN.
      2. Sign a Memorandum of Understanding with the Director of the Kentucky Cooperative Extension Service.
      3. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.”  Provide copies to the appropriate county Extension agent, county program council and county CES office.
      4. Follow procedures for money handling, reimbursement and payment of bills as outlined in “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
      5. Submit the appropriate IRS 990-series form according to IRS requirements annually. Provide copies to the appropriate Extension agent, county program council and county CES office. 
      6. File a copy of the IRS letter of determination of 501 (c)3 status with the program council and county Extension office. 
      7. Submit copies of the IRS determination letter with the signed Memorandum of Understanding to the Director of Kentucky Cooperative Extension Service, appropriate assistant director, district director, and the county Extension office.  
      8. Provide letters to donors acknowledging contributions and/or provide documentation affirming tax exempt status as requested.
    2. Each County Program Council choosing a 501(c)(3)will:
      1. Maintain their own bank account with own EIN.
      2. Sign a Memorandum of Understanding with the Director of the Kentucky Cooperative Extension Service.
      3. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.” Provide copies to the appropriate county Extension agent and county CES office.
      4. Follow procedures for money handling, reimbursement and payment of bills as outlined in “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
      5. Submit the appropriate IRS 990-series form according to IRS requirements annually.  Provide copies to the appropriate Extension agent, county Extension council and county CES office. 
      6. File a copy of the IRS letter of determination with the county Extension council, Extension district board, and the county Extension office.
      7. Submit copies of the IRS determination letter with the signed Memorandum of Understanding to the Director of Kentucky Cooperative Extension Service, appropriate assistant director, district director, and the county Extension office.  
      8. Provide letters to donors acknowledging contributions and/or provide documentation affirming tax exempt status as requested.
    3. Multi-County or District Groups choosing a 501(c)(3)will:
      1. Maintain their own bank account with own EIN.
      2. Sign a Memorandum of Understanding with the Director of the Kentucky Cooperative Extension Service. 
      3. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.” Provide copies to the district director and contact Extension agent for the group.  The financial files of this group need to be passed along as contact agents rotate.
      4. Follow procedures for money handling, reimbursement and payment of bills as outlined in “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
      5. Submit the appropriate IRS 990-series form according to IRS requirements annually.  Provide copies to the district director and contact Extension agent.    
      6. Submit copies of the IRS determination letter with the signed Memorandum of Understanding to the Director of Kentucky Cooperative Extension Service, appropriate assistant director, district director, and the contact Extension agent.  
      7. Provide letters to donors acknowledging contributions and/or provide documentation affirming tax exempt status as requested.
    4. A 501(c)(25) Building Foundation formed for the purpose of Extension building construction will: 
      1. Maintain their own bank account with own EIN.
      2. Sign a Memorandum of Understanding with the Director of the Kentucky Cooperative Extension Service.
      3. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.”  Provide copies to county Extension council, Extension district board, appropriate county Extension agent and the county CES office.
      4. Follow procedures for money handling, reimbursement and payment of bills as outlined in “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
      5. Submit the appropriate IRS form annually.  Provide copies to the appropriate Extension agent, county Extension council, Extension District Board, and county CES office. 
      6. Submit copies of the IRS determination letter with the signed Memorandum of Understanding to the Director of Kentucky Cooperative Extension Service, appropriate assistant director for county operations, district director, and the county Extension office.  
      7. Provide letters to donors acknowledging contributions and/or provide documentation affirming tax exempt status as requested.
      8. Must have approval from the Dean of the College of Agriculture to accept gifts of real estate. 

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Tax Exemption Information

  1. All Extension groups need to determine the tax exemption path they will use.  For detailed information, see “Cooperative Extension Organizations and Tax Exempt Status.” The two  paths recognized by Kentucky Cooperative Extension Service are:
    1. Governmental tax exempt status through the Extension District Board
    2. Group obtains 501(c)3 tax exempt status through the Internal Revenue Service.
  2. Extension groups with 501(c) 3 exempt status are to follow IRS requirements pertaining to tax exempt organizations.
  3. Extension groups with 501(c)3 status are to practice financial accountability as follows:
    1. Each 501(c)(3)entity (program group) will:
      1. Maintain a bank account using own EIN.
      2. Sign a Memorandum of Understanding with the Director of the Kentucky Cooperative Extension Service.
      3. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.”  Provide copies to the appropriate county Extension agent, county program council and county CES office.
      4. Follow procedures for money handling, reimbursement and payment of bills as outlined in “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
      5. Submit the appropriate IRS 990-series form according to IRS requirements annually. Provide copies to the appropriate Extension agent, county program council and county CES office. 
      6. File a copy of the IRS letter of determination of 501 (c)3 status with the program council and county Extension office. 
      7. Submit copies of the IRS determination letter with the signed Memorandum of Understanding to the Director of Kentucky Cooperative Extension Service, appropriate assistant director, district director, and the county Extension office.  
      8. Provide letters to donors acknowledging contributions and/or provide documentation affirming tax exempt status as requested.
    2. Each 501(c)(3)County Program Council will:
      1. Maintain their own bank account with own EIN.
      2. Sign a Memorandum of Understanding with the Director of the Kentucky Cooperative Extension Service.
      3. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.” Provide copies to the appropriate county Extension agent and county CES office.
      4. Follow procedures for money handling, reimbursement and payment of bills as outlined in “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
      5. Submit the appropriate IRS 990-series form according to IRS requirements annually.  Provide copies to the appropriate Extension agent, county Extension council and county CES office. 
      6. File a copy of the IRS letter of determination with the county Extension council, Extension district board, and the county Extension office
      7. Submit copies of the IRS determination letter with the signed Memorandum of Understanding to the Director of Kentucky Cooperative Extension Service, appropriate assistant director, district director, and the county Extension office.  
      8. Provide letters to donors acknowledging contributions and/or provide documentation affirming tax exempt status as requested.
    3. Multi-County or District Groups 501(c)(3)will:
      1. Maintain their own bank account with own EIN.
      2. Sign a Memorandum of Understanding with the Director of the Kentucky Cooperative Extension Service. 
      3. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.” Provide copies to the district director and contact Extension agent for the group.  The financial files of this group need to be passed along as contact agents rotate.
      4. Follow procedures for money handling, reimbursement and payment of bills as outlined in “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
      5. Submit the appropriate IRS 990-series form according to IRS requirements annually.  Provide copies to the district director and contact Extension agent.   
      6. Submit copies of the IRS determination letter with the signed Memorandum of Understanding to the Director of Kentucky Cooperative Extension Service, appropriate assistant director, district director, and the contact Extension agent.  
      7. Provide letters to donors acknowledging contributions and/or provide documentation affirming tax exempt status as requested.
    4. A 501(c)(25) Building Foundation formed for the purpose of Extension building construction will: 
      1. Maintain their own bank account with own EIN.
      2. Sign a Memorandum of Understanding with the Director of the Kentucky Cooperative Extension Service.
      3. Prepare an annual budget, annual financial report, “Audit Committee Report and Checklist” and “Annual Inventory Report.”  Provide copies to county Extension council, Extension district board, appropriate county Extension agent and the county CES office.
      4. Follow procedures for money handling, reimbursement and payment of bills as outlined in “Financial Guidelines for Kentucky Cooperative Extension Service County Groups.”
      5. Submit the appropriate IRS form annually.  Provide copies to the appropriate Extension agent, county Extension council, Extension District Board, and county CES office. 
      6. Submit copies of the IRS determination letter with the signed Memorandum of Understanding to the Director of Kentucky Cooperative Extension Service, appropriate assistant director for county operations, district director, and the county Extension office.  
      7. Provide letters to donors acknowledging contributions and/or provide documentation affirming tax exempt status as requested.
      8. Must have approval from the Dean of the College of Agriculture to accept gifts of real estate.

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Letters of Acknowledgement to Donors

Volunteer groups have specific responsibilities regarding accepting and acknowledging gifts and donations. Since contributions to tax-exempt organizations are deductible, the exempt organization has a responsibility to acknowledge gifts/donations/contributions in the appropriate way.  

While Extension related groups are encouraged to acknowledge every contribution, donations of over $250 must be given a written receipt, letter of thanks, email message, or form created for this purpose.  Include the following in the receipt or letter:

  • Donor’s name
  • Date the gift was received
  • Amount of the monetary gift or a description of the item donated.
    • If the gift is not monetary (such as supplies, equipment or property other than real estate), the group should only verify the receipt of the donation and not assign any value to the gift.  In this situation, it is the responsibility of the donor to determine the fair market value of the gift.
    • Must have approval from the Dean of the College of Agriculture to accept gifts of real estate.
  • Name and address of the organization receiving the gift (this is usually in the letterhead or header)
  • A statement indicating whether or not any goods or services were provided in return for the contribution. 
    • If the donor received something in return, then only the amount over the value of the benefit can be considered a contribution and deducted on tax forms.  For example: If an individual buys a $75 ticket to attend a fundraising dinner, the receipt should disclose the value of the dinner.  The remainder ($75-$40=$35) is the amount of the contribution.

Source of Letter of Acknowledgement:

  • For contributions to Extension groups using the governmental exemption, a letter from the Extension entity receiving the donation is to be sent acknowledging the contribution. (See “Sample letter to Acknowledge Donation” below.)  It is a good idea to enclose a copy of the letter from the Extension District Board that confirms the entity's association with the District Board and their tax exempt status. (See "Draft Letter to Confirm Tax Exempt Status of Extension District Board" below.)  This letter from the District Board can be used for several years or until a donor asks if the letter is still current.
  • For contributions to a 501(c)(3) Extension group, a letter from the tax exempt group is to be sent to the donor acknowledging the donation.

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Sample Letter to Acknowledge Donation

(Use this template to acknowledge monetary gifts; remember that gifts of land/property must be approved in the Director of Extension’s office before they are accepted/acknowledged.)

Date

Name and Address of donor

 

Dear (donor),

On behalf of the ___________________ Club/Council/Group, I would like to thank you for your contribution received on (date).  (Sentences may be added to describe the program or how the gift was/will be used if desired.)

This organization is a subsidiary unit of the _____ County Extension District. Accordingly, charitable contributions are tax-deductible under United States Internal Revenue Code 170(c)(1) if made for a public purpose.  It is not a private foundation within the meaning of Code 509.  While many public charities are tax exempt by virtue of 501(c)(3), this Extension District is a governmental unit of the Commonwealth as established by KRS 164.620 and does not receive a classification from the IRS.  For your tax records, the ________ Extension District’s Federal Identification Number (EIN) is _________ .

Should you have questions regarding the Extension district’s tax status, you may contact ______ at (number).

Sincerely,

 

Agent/volunteer/officer of org

Note to sender: be sure to affix a stamp to the envelope.  It is inappropriate to meter this letter since it includes a signature other than that of the agent.

 

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Draft Letter to Confirm Tax Exempt Status of Extension District Board

(This letter may be photocopied and given to potential donors when requested.)

Date

Name and Address of club, group, council

 

Dear (contact for group),

This letter confirms that the organization named above is a subsidiary unit of the _____ County Extension District.  The Extension District is an agency and instrumentality of the Commonwealth of Kentucky, and is maintained by the Commonwealth pursuant to Kentucky Revised Statutes 164.605—164.675.  According to KRS 164.620, the Extension district is a governmental subdivision of the Commonwealth and a public body corporate.

Accordingly, charitable contributions to this governmental unit are tax-deductible under 170(c)(1) of the United States Internal Revenue Code of 1986.  It is not a private foundation within the meaning of Code 509.  As an agency of the Commonwealth, it does not receive a classification from the IRS.

The ________ Extension district’s federal Employer Identification Number is _________ and state sales tax exemption number is ______.

Should you have questions regarding the Extension district’s tax status, you may contact ______ at (number).

Sincerely,

 

Chairman, _____ County Extension District Board                           

Note to sender: be sure to affix a stamp to the envelope.  It is inappropriate to meter this letter since it includes a signature other than that of the agent.

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