Legacy Partners Rose Doherty, CPA, MBA, and Paul Doetsch, CPA, CMA, attended the AICPA Not-For-Profit Industry Conference June 15-17, 2015 in Washington, DC. Nonprofit CPAs from around the country were in attendance to get the latest news and updates from industry experts.

Of interest at this year’s conference was the one year deferral of the implementation of the new revenue recognition standard accounting standards update (ASU 2014-09) for public and nonpublic entities reporting under U.S. generally accepted accounting principles. The effective date for public entities is for annual reporting periods beginning after December 15, 2017. The effective date for non-public entities is for annual reporting periods after December 15, 2018. Early adoption is permitted one year prior to the dates noted above. Nonpublic entities will need to consider the nature of their membership dues, tuition and fees, license and royalties, governmental grants and contracts and other revenue sources for their potential impact.   Contact your Legacy representative for practical guidance on addressing this issue.

The Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) on April 22, 2015 which intends to improve the current financial statement presentation standards used by not-for-profit organizations (NFPs). The proposed standard will substantially change the current NFP financial statement model. Key changes include:

  • Net assets classifications changed from three classes to two: Without donor restrictions and with donor restrictions,
  • Present two measures of operating activities: (before and after internal transfers) both of which are within the changes in net assets without donor restrictions,
  • Present the statement of cash flows using the direct method, and
  • Enhanced liquidity disclosures would be required.

Fraud cases in the not-for-profit industry were reviewed again this year. The cases were studied in depth to identify internal control weaknesses within the transaction cycle that allowed the fraud to occur and various tools and processes were discussed to assist in fraud mitigation and detection. This is always a hot topic and we are always here to discuss specifics with our clients.

New changes are here for those who receive federal funding. This new guidance eliminates duplicate and conflicting information and is entitled Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and can be found here.

Guidance highlights include:

  • All OMB guidance such as A-102, A-89, A-87, A-133, A-50, A-110, A-21, and A-122 have been streamlined and codified in 2 CFR (Code of Federal Regulations) 200. Not-for-profit entities will need to implement the new administrative requirements and cost principles for all new federal awards made after December 26, 2014. These requirements will apply for any additional funding to existing awards (referred to as funding increments) made after that date.
  • Of special note is that the dollar threshold for entities subject to an audit under the guidance has been increased from $500,000 to $750,000. For smaller entities, this new threshold may exclude them from the audit requirement all together.
  • The requirements are effective for fiscal years beginning on or after December 26, 2014. This translates into entities with fiscal year ending dates of December 31, 2015 and beyond being subject to the new requirements. No early implementation is permitted.

Other interesting topics included:

  • Benchmarking Financial Data – organizations should consider benchmarking the following data on an annual basis:
  1. Percentage of philanthropic vs. nonphilanthropic
  2. Portion of planned gifts allocated to reserves/quasi endowments
  3. Endowments as a percentage of expenses
  4. Organizational reserves as a percentage of annual operational expenses
  5. Operational surplus/deficit excluding investment income

Of note, Legacy now offers benchmarking as part of our service to our nonprofit clients. Ask us for more information if you have yet to receive your report.

  • Strategies to Control Health Benefit Costs – It was noted that 60% to 75% of all health care costs directly related to lifestyle/behavior risks which can be mitigated or eliminated through personal decisions. It was noted that some form of self-insurance may be a viable option using wellness programs as a cost containment strategy and using private exchanges.

Let us know if you have any questions.