By: Peggy Jennings, CPA
The allocation of expenses among program, management & general (M&G), and fundraising functions is sometimes a mysterious process, often left to chance or defaulted to SALY (same as last year), or, in certain unfortunate cases, is determined based on desired ratio outcomes. If done properly, the allocation methodologies can be as diverse as the nature of the expenses incurred.
For those wanting to “do things right,” why the confusion?
One reason is the sometimes over-generalization of the requirements, which themselves are rather sparse in the FASB Accounting Standards Codification (ASC). For example, the definition of program services found in the ASC is “The activities that result in goods and services being distributed to beneficiaries, customers, or members that fulfill the purposes or mission for which the not-for-profit entity (NFP) exists. Those services are the major purpose for and the major output of the NFP and often relate to several major programs.” Little wonder that a question often heard is, “Aren’t all of our expenses incurred in fulfilling our mission?”
A more useful reference can be found in the AICPA Audit and Accounting Guide, Not-For-Profit Entities (Guide), which provides helpful guidance in Chapter 13, Expenses, Gains and Losses.
To learn more, read the full article here.
By: Peggy Jennings
Nonprofit organizations, much like public companies, rely on their external audit firm to perform a quality engagement. The audit committee plays a critical role in the governance of nonprofit organizations and one of the tasks assigned to this group is the evaluation of the audit firm.
The AICPA’s Audit Committee Toolkit for Not-for-Profit Entities (3rd Edition) contains a chapter devoted to the evaluation of the audit firm, including the following excerpts of considerations:
Quality of Resources and Services: Does the audit team identify and discuss appropriate risks in planning the audit?
Quality of Communications: Is the auditor comfortable raising issues that would reflect negatively on management?
Independence and Objectivity: Are you confident that the audit team maintains appropriate objectivity and professional skepticism?
Questions for Management: Are you satisfied with the knowledge, skills and abilities of the staff assigned to the audit engagement?
These queries, and many more, can be found in the Toolkit referenced above. If you don’t have access to this valuable document, consider joining the AICPA’s Not-for-Profit Section where you can find resources devoted to assurance, financial accounting & reporting, governance & management and tax compliance.
As always, feel free to contact Eide Bailly with any questions regarding this topic!
Save the date for the 2015 NonProfit Conference! Just announced is the AICPA’s 2015 National NonProfit Industry Conference – to be held at the newly built Gaylord National Resort & Convention Center in National Harbor, Maryland during June 15-17, 2015. Early registration is open now, and by registering by July 31, 2014 you can lock in the 2014 conference price! Promised in 2015 is expanded content, more sessions, more exhibitors and additional CPE credits.
The Conference brings together the industry’s top experts and thought leaders to offer their perspectives on the most crucial issues facing nonprofits and those who serve them. Learn how to deal with new regulatory and existing issues affecting tax, compliance, accounting & auditing, and governance. Join your peers for Ask the Experts Panels, in-depth workshops, and targeted Yellow Book sessions.
During the 2015 Conference, you’ll get your comprehensive update for the year. It’s your chance to get your questions answered by the industry’s top experts, hear insightful perspectives from thought leaders and discover financial management strategies to best fit your organization’s needs. You’ll learn what the future may hold, how to create innovative new ways to position your organization, drive fundraising and stay true to your mission values.
We’ll see you there!
Management and finance teams in nonprofit organizations often ask for an update as to what is ahead in the world of nonprofit accounting. As of now, we see a couple of things that may be issued or clarified in the coming months.
The long-awaited revised AICPA Audit and Accounting Guide for Not-for-Profit Entities will be issued in the spring. The Financial Reporting Executive Committee (FinREC) of the AICPA issued a working draft of the accounting content of the guide. This proposed guide addresses many new accounting issues that have emerged over the years and includes guidance dedicated specifically to not-for-profit entities. There will be sections that address reporting relationships with other entities, reporting and measuring noncash gifts, programmatic investments and microfinance loans, reporting the expiration of donor-imposed restrictions, and a discussion of the legal and regulatory environment.
The FASB has requested comments on its EITF Issue 12-B “Not-for-Profit Entities: Personnel Services Received from an Affiliate for Which the Affiliate Does Not Seek Compensation”. A final document is expected during the first half of 2013.
The FASB also has a couple of projects in process. Non-for-Profit Financial Reporting: Financial Statements is a standards setting project and Non-for-Profit Financial Reporting: Other Financial Communications is a research project. Currently there are no expected dates of completion for these projects.