May has been a very busy month for NFP Partners. Many of our clients are preparing for audits and there are three new MIP software clients going live on July 1st. It’s also the season for professional education, which means that three of our consulting team members are attending training classes for re-certification on Abila software products. This is a rigorous, never-ending, but necessary process, requiring at least 40 hours of training every year. To maintain a license to practice and carry the title, CPAs have to fulfill 80 hours of CPE (Continuing Professional Education) over a two-year period.
As part of the continuing education requirement, I attended a webinar presented by BDO that reviewed significant accounting requirements for nonprofit organizations. The subject matter is covered in an article we added to our list of recommended reading, “FASB Announces Tentative New Decisions on Not-For-Profit Accounting.” I smile at the terminology, “tentative new decisions,” since change comes very slowly in the accounting profession and even more slowly to nonprofit organizations, since this sector tends to be something of a stepchild within the accounting rule-making bodies. Over the next one to five years, expect some changes in the net asset section in the reporting of restrictions, reporting expenses using both their natural and functional or program character, and moving toward a cash flow statement requiring the direct method of compilation.
I also recently attended the annual Colorado Society of CPAs’ annual Not-for-Profit Conference. These are usually boring with the major value in re-connecting and networking with your peers who have chosen to focus on the not-for-profit sector. For the most part, the conference was pretty unexciting with the exception of two presentations that were clearly informative and entertaining.
Bruce DeBoskey of the DeBoskey Group consults with high net worth individuals, foundations and businesses on designing and implementing thoughtful philanthropic strategies. Bruce is local but practices internationally. He writes monthly column, “On Philanthropy.” in the Sunday Denver Post.
The main takeaway from Bruce’s talk is that donors must ask “So What?” in evaluating charities as giving recipients. Too often, quantitative measures obscure the focus when the real question is what difference it makes.
Bruce shared his checklist of what to look for in evaluating a charity from the donor’s perspective:
- Current annual report showing expense and revenue breakdown and a list of major donors
- Recent 990
- Audit financials
- Board member names and bios
Critically reading the 990
- Identity and tax status
- Mission statement
- How much income has been received, from what sources and the trends over time
- Expense breakdown between program, management and fund raising
- Types of key programs and associated expenses
- Who are the Board members and are they paid
- Who are the key staff members and how much are they paid
- If a private foundation, what grant has it paid
Bruce concluded with a list of ten top tips for strategic philanthropy:
- Examine your reason for giving.
- Involve your family.
- Determine the impact you’d like to have.
- Research nonprofits.
- Ask the “So What?” question.
- Don’t donate over the phone or at the front door.
- Give boldly while you live.
- Go deep, not wide.
- Contribute your time and talent?
- Start now!
John Hall, CPA, a nationally known expert and speaker on fraud, discussed making internal controls not working. The main takeaway was that most organizations design and document internal controls but still fail mainly because of human behavior. His top ten list of reasons that control break down:
- Don’t understand the control implications of policies, procedures and reports
- Don’t have the information they need to assure transactions are proper
- Not enough time to do the control
- Blind trust
- Willful blindness
- The process mentality
- Not questioning the strange, odd and curious
- Not enforcing documentation requirements
- Inadequate risk mitigation, prevention and detection skills
- Those in charge override
That all being said, as some of these issues are not in the resource capacity of smaller nonprofits – and I’m sure John would agree – I highly recommend another article on our list, “Five Realistic Control Measures for Smaller Nonprofits to Avoid Fraud.” Implement these controls or pay the consequences.