I recently attended the all-day Government and Nonprofit Update course, sponsored by the Colorado Society of Public Accountants. While it was intended primarily for auditors, the material was pertinent to the audited client organizations as well. I am not an auditor, for which I’m eternally grateful, but I have to say some of the content was new to me – – and gave me a newfound appreciation for what an auditor needs to know to successfully navigate through the maze of government regulations, accounting and auditing standards, and pronouncements. Ironically, there’s a ‘clarity’ initiative within the profession to rewrite auditing standards to make them more consistent and understandable.
That all aside it was a useful course. The following are what I gleaned as the main takeaways that have relevance to nonprofit and governmental CFOs, controllers and accountants:
- Auditor independence means just that. The auditor renders an opinion on the fairness of the financial statements, period. The client creates the financial statements following generally accepted accounting principles. The auditor can prepare an audit report that contains the critical financial statements, but these should mirror what the client already has prepared and transmitted to the auditor per the ending trial balance. Any services performed outside this attest function are considered non-audit services that may be specifically prohibited and could compromise audit independence. So if the auditor gives you the cold shoulder on performing non-audit duties, it’s for his or her protection and yours too.
- As for changes that affect accounting now, there are few, but some worth mentioning:
- The threshold for federal funding requiring a single or (OMB Circular A-133) audit will be raised from $500,000 to likely $750,000.
- GASB 65 effective fiscal years ending after December 15, 2012 create new reporting categories for the outflow and inflow of deferred resources formerly included within assets and liabilities.
- The FASB has proposed a change to the nonprofit cash flow statement requiring the direct method of reporting and changes in the internal classification of certain transactions. See a related article in the BOD Standard.
- There is a new AICPA Not-For-Profit Audit and Accounting Guide that follows the new ‘clarity project’ guidelines and incorporate new material on various accounting issues.
- There are a number of emerging issue affecting not-for profit entities that the accounting ‘profession’ has recognized as requiring new or revised rules and approaches. Expect to hear more about these in the future.
- Use of social media and mobile devises for fund raising
- Theft and fraud at NFPs
- Organizational sustainability
- Payment in lieu of taxes (PILOT)
- Measuring organizational effectiveness
- Social impact bonds
- Accounting for gifts in kind