Professional Accounting Blog

    Accounting For Your Prosperity

    Changes are Coming for Not-For-Profit Financial Reporting

    Posted by Lynn Koster on Sep 8, 2016 8:00:00 AM

    Topics: Not For Profit

    For the past several years, changes have been in the works for the not-for-profit financial reports. The Financial Accounting Standard Board (FASB) believe that the changes will improve the financial statements and provide more useful information to the users of these statements.

    The changes are effective for the year end beginning after December 15, 2017 – which means the effective year of an organization with a fiscal year ended June 30th – will be June 30, 2019 (the year beginning July 1, 2018, ending June 30, 2019).

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    Good Meeting, Bad Meeting

    Posted by Lynn Koster on Sep 30, 2014 9:00:00 AM

    Topics: Small Business, Not For Profit

    A simple list for a good meeting. Start on time, prepare, follow an expected protocol and participate.

    Certainly you have experienced both good and not so good meetings. And effective meetings are becoming even more challenging today with the opportunity for attendees to participate using the latest technology - skyping in your pj's anyone? Maybe you have seen the hysterical YouTube illustration "A Conference Call in Real Life" with Tripp and Tyler (if not, check it out). Regardless of the venue or the topic of your meeting, in order for it to be an effective one - if you are in charge of it - you should take charge of it!

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    Have You Reviewed Your Policies Recently?

    Posted by Meaden & Moore on Aug 28, 2014 11:08:48 AM

    Topics: Not For Profit

    It is good policy to review your policies annually.  They more than likely won’t change each year but factors can change that would cause you to update the policies you have in place.  For example, the economy and investment performance or future goals of the organization may change the way you allocate your investments.  You may want to re-evaluate your capitalization policy.  As your organization grows, and the cost of items decreases, it may be more practical to expense new computers, for example.  Re-evaluating your capitalization policy to increase the threshold of capitalizing versus expensing a purchase could be considered.

    As new standards are introduced, you may want to consider the effect on your endowment spending policy or conflict of interest policy.  As the IRS Form 990 changes, you may want to consider implementing some of the policies the 990 inquires about.  Included in the 2013 IRS Form 990, Part VI Governance, Management and Disclosure on page 6, Section B on Policies inquires about the conflict of interest, whistleblower, and document retention policies.  The gift acceptance policy is inquired about in the Schedule M of the IRS Form 990.   

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    Program Related Investments: Gaining Momentum

    Posted by Lynn Koster on Jul 22, 2014 8:00:00 AM

    Topics: Not For Profit

    Once considered underutilized (Forbes, “Why Program-Related Investments are Not Risky Business”, February 21, 2013), Program Related Investments (PRIs) are more often being considered as an option for foundations to financially support the mission of their favorite not-for-profit organizations. Instead of or in addition to a direct contribution or a grant, a not-for-profit may make a low interest, long term loan which is referred to as a PRI. This type of transaction offers both financial as well as programmic returns. There are both initial and established considerations for the accounting of these transactions. 

    Initial considerations for accounting and reporting:

    • Determine the character of the contribution as a PRI at the time of the transaction. Is the contribution part investment and part donation? There may be a split in how the transaction is recorded. One test to help in this determination is whether the loan has a market interest rate. If it does not, then the loan may be considered to have a contribution element.
    • The main goal of the investment is not to generate market returns or appreciate, but to help advance the mission of the not-for-profit. The pay back of the loan provides the opportunity for the not-for-profit to make future gifts.
    • The investment is considered a financial instrument and should be accounted for accordingly.
    • Determination of the relative significant of the PRI for disclosures and presentation in the financial statements specific to the user.
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    3 Internal Control Basics for Small Not-for-Profit Organizations

    Posted by Lynn Koster on Jun 19, 2014 1:05:00 PM

    Topics: Not For Profit

    With almost 1 million tax exempt organizations classified as public charities and almost 1.6 trillion in revenue reported (source: National Center for Charitable Statistics), there appear to be many opportunities and resources to provide excellent and meaningful services through the not-for-profit sector. However, how do we know that the revenue as reported is accurate - and it should not be 1.7 trillion? As auditors, Meaden & Moore understands the importance of internal controls over the financial reporting as required by auditing standards. But what if your organization does not need a financial statement audit, what if your organization has a limited purpose and is small on purpose? Should you consider internal controls? Absolutely! And even more so. Too many times in local communities, there are reports of a trusted individual absconding with the receipts that were collected for kids sports uniforms, band travel funds, membership dues or to provide assistance to a struggling neighbor. Even a small organization with no employees, run by volunteers can take steps to add safeguards over cash.

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    When Should a Not-for-Profit Organization Make a Profit?

    Posted by Lynn Koster on May 20, 2014 9:18:00 AM

    Topics: Not For Profit

    non-profit-make-profitHave you heard that a not-for-profit should not make a profit? Crazy, right? What happens if an organization ends every year without a profit? One obvious answer is that the organization will begin the next year with no available cash to operate, because there have been no profits to provide for the opportunity to build cash reserves for unforeseen events. And one thing we are all learning, there are always unforeseen events!  So when should a not-for-profit organization make a profit? Answer: Always!

    Now that might sound like a lofty goal to some organizations. It is a struggle to break even! It might also sound confusing to some board members and donors. Why are they asking for financial support when they have resources that are not being used? Yet, this type of thinking is very short sighted - especially when considering the future long term goals and sustainability of an organization. At Meaden & Moore, we view our not-for-profit clients as businesses and a healthy business operates effectively, efficiently and profitably. In the case of profitable not-for-profits, surplus cash helps to create reserves, enables the payment of timely expenses, and most importantly helps to avoid the panic and desperation that accompanies financial stress. It is more difficult to focus on mission goals, client service, and community outreach effectively when there are impending financial worries.

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    4 Considerations for Non Profit Transparency

    Posted by Lynn Koster on Mar 27, 2014 1:09:00 PM

    Topics: Not For Profit

    4-considerations-non-profit-transparencyTransparency. In the non profit community, transparency is one of the critical requirements if an organization wants to maximize their success and potential to achieve their mission goals. As a public charity, donors will demand it, employees will expect it and in some instances, the law may require it. There are many opportunities for a non profit organization to take advantage of the opportunity to be transparent. Consider these suggestions:

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    5 Things to Consider Before Joining a Board of Directors

    Posted by Lynn Koster on Feb 25, 2014 1:35:00 PM

    Topics: Not For Profit

    board-of-directorsThe success of a nonprofit organization depends on public support and confidence – and on volunteers, specifically in the role as a member of the governing body. Maybe you have a special skill that, when combined with a passion for helping others, you could find yourself being asked to participate as a member of the board of directors of a nonprofit. There are many things to consider before you accept. Consider these five:

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    Who’s Looking at Your Financial Information?

    Posted by Meaden & Moore on Jan 28, 2014 9:02:00 AM

    Topics: Not For Profit

    With all the electronic devices, websites, apps and social media, your organization’s financial information is only a click away. Do you ever wonder who’s looking at your financial information? Not-for-profits are heavily scrutinized for having too much cash, not having enough cash, declining revenue streams, increasing expenses, management and general expenses being too high, not enough money being spent directly on the program, management’s salary being too high, and the list goes on and on. 

    There are many watch dog groups out there accessing your information and scrutinizing not-for-profits based on a standard set of criteria and metrics. Is this really a fair way to rate a not-for-profit entity? Aren’t they all unique in their own way? Don’t they need excess cash reserves, just as a for-profit, to be prepared for an unpredictable future and achieve sustainability? Don’t they need well educated, experienced leadership to guide the organization through uncertain times, manage tight cash flows, and grow the organization? And why shouldn’t employees be paid for this leadership and expertise, just as in a for-profit?

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    Difference Between Deferred & Temporarily Restricted Revenues

    Posted by Kendra Williams on Dec 30, 2013 8:30:00 AM

    Topics: Not For Profit

    It’s the end of the year and the auditors are in the conference room auditing away on your year-end financials. You feel confident because you know you accrued for all open invoices in accounts payable. You even setup a new account for deferred revenue for the grant money you received that is to be used for your next fiscal year. All of a sudden, the Senior Auditor knocks on your door and says “Can we discuss this new deferred income account?” You’re happy to explain but then you’re not so happy to hear him say what you’ve done isn’t right. 

    The first principle we all learned is the matching principle; revenues and their related expenses should be recognized in the same period. The rules surrounding deferred revenue are different for not-for-profit organizations. The guidance states any money received and/or granted during the year should be recognized as revenue in that same year. Per ASC 958-605-25, contributions received shall be recognized as revenues or gains in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received.  If there is a restriction on when the money can be used (time restriction) or how the money can be used (specific purpose), the funds should be reported as temporarily restricted revenue until the restriction is met. 

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