On May 23rd I sat through eight hours of mostly interesting presentations about what nonprofit accounts need to know in regards to current and future developments in accounting technology. This year’s conference covered much of the same material as last year’s, but there seems to be more of a sense of urgency as some impending deadline dates for action for nonprofit accountants become closer. Here are the main takeaways from my perspective.
Nonprofit Financial Reporting – Presenter: Tim McCutcheon Eide Bailly
The new standard for nonprofit financial reporting (ASU 2016-14) will become mandatory with the fiscal year beginning after December 15, 2017. This is not just an auditor’s “thing” but a responsibility of management. All NPOs will be affected and some more deeply than others. Here again, are the main changes:
- Net asset classes reduced from three to two, either restricted or non-restricted, no more permanently or temporarily restricted.
- More disclosures required concerning liquidity and availability of funds
- All organizations must prepare a statement of functional expenses. The format is consistent with what’s required in the 990, along with disclosure of expense allocation methodology.
- Net investment returns are reported net of all expenses, including direct internal expenses.
- Additional disclosures are required for underwater endowments (when the current value of an endowment is less than the original funding).
- Use of direct method for the statement of cash flows eliminates the reconciliation of net assets to cash flows used for operating activities. The indirect method is acceptable but still requires the reconciliation.
My take: In its totality this is a pretty big deal but very doable with some advance knowledge and planning. Don’t wait until the beginning of the implementation fiscal year to worry about it. On the plus side, there are tons of information and resources to get you there. Most accounting software, including QuickBooks and Abila MIP Fund Accounting™, will accommodate the changes. Stay tuned to our newsletter and blog on informative articles and downloads.
Fraud Risk Management for Not-for-Profit Organizations – Presenter: John Hall, Hall Consulting
John is a fraud expert who gets his points across with a fine-tuned sense of humor drawing on actual cases in the nonprofit world. The main takeaways:
- Lesson 1 – Greatest Threat is from inside the ‘Circle of Trust’- Management must be proactive in recognizing the threat from inside by implementing real oversight, true variance analysis, true performances analysis, and monitor related parties and spend activity.
- Lesson 2 – Someone Knew or Strongly Suspected but Remained Silent – John’s suggested measures are to actively recruit everyone, engage the leadership at all levels, and that the CEO must personally lead the charge by constant communication while instituting meaningful controls, policies, and explicit employee expectations.
My Take: Right on!
Cyber Security Risk & Remedies for Nonprofits – Presenter: Don Domagala, EKS&H
This is a hot topic and Don did a great job of covering the sources of threats and practical deterrence measures. There was actually too much information to summarize here, but I will try to cover this topic more adequately in a future article or invite Don to write a guest blog.
There were other presentations of interest on the new revenue recognition rules coming in the fiscal year starting after December 15, 2018 and lease accounting. The first does not have universal impact on nonprofits and the second is further off and not a radical change from current practice. So for now, I defer further comment on these.
Lee Bengston, CPA