Not-For-Profit Notebook

Practical insight and analysis on the accounting, audit and tax issues impacting not-for-profit organizations.

The New Lease Standard (ASC 842): How to Prepare for Implementation

Posted by Melissa Dunn Sep 29, 2022 5:08:49 PM

The Financial Accounting Standards Board (“FASB”) has issued a new lease standard (ASC 842) to increase transparency and comparability among organizations with leasing activities. Below are some key facts related to this new standard and its impact on your organization.

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About That IRS Notice: Do You Need To Respond?

Posted by Melissa Dunn Feb 18, 2022 3:22:09 PM

BBD has seen many of our nonprofit clients experience an uptick in IRS notices, but, unfortunately, there has been no correlating rise in the IRS’ ability to manage responses.

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Hurricane Ida- Important Tax Relief Information for Pennsylvania and New Jersey Nonprofits

Posted by Melissa Dunn Oct 25, 2021 4:43:05 PM

The IRS is continuing to update the list of Pennsylvania and New Jersey counties that qualify for an additional extension of time to file returns until January 3, 2022 as a result of the impact of Hurricane Ida.

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Update for Nonprofits on the American Rescue Plan Act’s Employee Retention Credit

Posted by Melissa Dunn Jul 13, 2021 7:13:00 PM

The American Rescue Plan Act (the Act) was signed in March and expanded the eligibility for the Employee Retention Credit (ERC), as well as extending the credit period through the end of 2021. While the 2020 credit was limited to 50% of $10,000 in qualified wages per employee, the Act increased this amount to 70% of qualified wages paid per employee per quarter. That’s a potential credit of $28,000 per employee for 2021!

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Nonfinancial Gifts-in-Kind: Impact of ASU Update 2020-07 On Your Nonprofit Organization

Posted by Melissa Dunn Jul 6, 2021 8:30:00 AM

As you receive gifts-in-kind, it's important to keep these new reporting requirements in mind.

The term “gifts-in-kind” is used broadly to refer to all noncash gifts, both tangible and intangible. Tangible gifts-in-kind include contributions of items such as stock, land and supplies. Intangible gifts-in-kind include contributions of items such as advertising and other professional services. While greatly appreciated by an organization, it can be challenging to account for these gifts.

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Pennsylvania Nonprofits: Don't Forget to File Your Decennial Report

Posted by Melissa Dunn Jan 5, 2021 4:00:00 PM

Beginning January 15, 2021, the Pennsylvania Department of State will begin notifying all corporations, including nonprofit corporations, of their need to file a Decennial Report. 

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COVID Update: Consolidated Appropriations Act of 2021

Posted by Melissa Dunn Jan 4, 2021 12:29:00 PM

On December 27, 2020, the Consolidated Appropriations Act of 2021 (Act) was signed into law. The Act affects several provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The largest of these relates to the Paycheck Protection Program (PPP) loans.

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CARES Act Update: PPP Loan Forgiveness

Posted by Melissa Dunn May 29, 2020 3:57:43 PM

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, provided the Small Business Administration (SBA), the authority under a new program titled the Paycheck Protection Program” (PPP), to forgive up to the full principal amount of loans guaranteed under this program. In general, subject to several limitations, the eligible forgiveness amount covers payroll costs and non-payroll costs, such as business mortgage interest payments, business rent obligations and business utility payments paid during the covered period.

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The CARES Act and Nonprofits: What You Need To Know

Posted by Melissa Dunn Mar 30, 2020 8:53:58 AM

As Americans continue to grapple with the devastating effects of the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (CARES) was signed into law on Friday, March 27. CARES contains 880 pages of stimulus intended to bolster the economy through benefits aimed at individuals and businesses alike. But how will CARES help the nonprofit community, which relies so heavily on the generosity of donors in order to fulfill missions and perform services? Although advocates are still seeking $60 billion in stimulus aimed directly at nonprofits, there are a number of provisions included in CARES that may help aid nonprofits through these uncertain times.

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Your Nonprofit's Board Needs Financial Experts

Posted by admin Sep 9, 2019 2:00:00 PM

Even though nonprofits don’t face the same government regulations or public scrutiny as for-profit public companies do, that doesn’t mean your board can afford to get slack about financial governance. Donors and watchdog groups pay close attention to organizations’ Forms 990, and the media is quick to pounce on rumors of fraud in the nonprofit sector.

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Intricacies of Accounting for Pledges

Posted by admin Aug 21, 2019 11:00:00 AM

Receiving pledges from donors who will make their contributions at a later date is great for your nonprofit, but accounting for these pledges is complicated. Pay close attention to the details below so you are able to record your contributions properly.

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Add Value to Your Nonprofit with an Advisory Board

Posted by admin Aug 7, 2019 4:00:00 PM

An advisory board can bring new value, skills and resources to your existing, more formal board of directors. Is creating an advisory board right for your nonprofit?

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Is That Tax Notice You Received Really From the IRS?

Posted by admin Jul 23, 2019 8:44:53 PM

Many people feel a sense of dread when they receive a letter from the IRS. Often, people will comply with whatever request is made, assuming that they must have made a mistake when completing their tax return. But what if that letter isn’t really from the IRS? Scams involving people claiming to represent the IRS are so prevalent that the IRS has an entire page on their website devoted to helping determine if an encounter is actually with an IRS representative.

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Considerations for Maturing Nonprofits

Posted by admin Jul 17, 2019 11:00:00 AM

There is a standard life cycle that most not-for-profits experience. It begins with their early stage, which precedes a growth period that runs several years, followed by maturity. Once mature, the nonprofit has built its core programs and achieved a reputation in the community. But no organization can afford to rest on its laurels.

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It May be Time to Refresh or Replace your Programs

Posted by admin Jul 3, 2019 8:00:00 AM

Are your programs relatively the same as they were a few years ago? If so, it’s time to review each of your programs and potentially replace, or simply refresh, your offerings.

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Ongoing IRS Oversight Challenges Noted With Form 1023 and Form 1023-EZ

Posted by admin Jun 30, 2019 10:48:59 PM

In her latest report, the National Taxpayer Advocate, Nina E. Olson, says that the IRS still isn’t asking for enough information on the simplified Form 1023-EZ to ensure organizations using the form actually qualify for the exempt status. Further, a soon to be released revised Form 1023 runs the same risk.

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Foster Gift Matching at Your Nonprofit

Posted by admin Jun 13, 2019 12:00:00 PM

When a corporate partner agrees to match the value of a donor’s gift, you can quickly double your organization’s gain. Are you doing everything you can to educate your financial supporters and their employers about matching gifts?

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Maximize the Potential of your Internal Audit Function

Posted by admin May 30, 2019 11:00:00 AM

The key role of a not-for-profit’s internal auditors was once limited largely to testing financial and compliance controls and reporting their findings to the organization’s leadership. But today, with their cross-departmental perspective, internal audit staff (whether employees or outside consultants) can help anticipate and mitigate a variety of risks, improve processes — and even help evaluate your nonprofit’s strategies.

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How to Regain Tax-Exempt Status after Automatic Revocations

Posted by admin May 16, 2019 8:00:00 AM

If your organization neglects to file the required annual forms with the IRS for three consecutive years, you will lose your tax-exempt status. Loss of your tax-exempt status will likely mean loss of donors, so it is imperative that you take action to reinstate your status immediately. Use the steps we’ve outlined below to reclaim your nonprofit designation.

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Distinguishing Between Sponsorship and Advertising Incomes, and Paying Proper Taxes

Posted by admin May 2, 2019 2:06:26 PM

While you are able to supplement your usual income-producing activities with sponsorships and advertising programs, it’s important to understand the possible tax implications of income from these outside sources.

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Finding the Perfect Bookkeeper for Your Organization

Posted by admin Apr 16, 2019 11:13:32 AM

The perfect bookkeeper will seamlessly handle your day-to-day accounting functions, but finding this person can be difficult. Be sure to consider your organization’s needs before actively starting your search. 

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Reporting Donations at Your Nonprofit

Posted by admin Apr 4, 2019 12:57:59 PM

Hopefully your organization already ensures that donors receive a receipt with information about claiming a charitable contribution deduction on their tax return. Did you know that your obligations may go further than that? For noncash donations, you might have responsibilities related to certain tax forms. 

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Remove "Employee Parking" Signs by March 31

Posted by Melissa Dunn Feb 28, 2019 3:50:50 PM

By now you probably know that the Tax Cuts and Jobs Act that was signed into law in December 2017 eliminated the business deduction for Qualified Transportation Fringes (QTFs).

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How Auditors Review Your Revenue and Why You Should Too

Posted by admin Feb 19, 2019 9:53:48 AM

Auditors examining a nonprofit's financial statements should spend considerable time on the revenue figures. At BBD, we look at the accounting methods used to record revenues and perform a detailed income analysis. You can use the same techniques to increase your understanding of your organization's revenue profile. 

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Complying with Challenging New Procurement Standards

Posted by admin Feb 15, 2019 1:15:56 PM

The relatively new federal procurement standards, which went into full effect in fiscal year 2017, significantly alter the way nonprofits receiving federal funding handle purchasing. You may have changed your written policies, but are you complying with the standards in practice? If not, you could risk losing funding. 

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IRS Publication 15-B Offers Additional Guidance on Qualified Transportation Fringe Benefits

Posted by Melissa Dunn Aug 2, 2018 4:00:09 PM

The Tax Cuts and Jobs Act of 2017 that was signed into law on December 22, 2017 contains several provisions, including some related to qualified transportation fringe benefits.

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Are you Asking for too Much? Beware of Donor Fatigue

Posted by admin Jul 19, 2018 10:48:34 AM

The end of your fiscal year is often a time for a push in fundraising and giving. But after the flurry of this year-end fundraising, you and your not-for-profit’s staff are probably ready for a little break. Be aware that your supporters may be tired, too. At some point, even the most philanthropic individuals experience donor fatigue and start saying “no” — even to their favorite charities.

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Nonprofit Collaborations are Complex, but could Pay Off

Posted by admin Jul 10, 2018 11:23:57 AM

As discussed in a previous post, we’re seeing an increase in nonprofit collaboration, whether through mergers, acquisitions or, as we’ll discuss in this post, alliances. The success of these arrangements depends on careful planning and oversight.

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A Checklist to Avoid a Conflict of Interest in Nonprofit Organizations

Posted by admin Jun 28, 2018 11:56:03 AM

When an arrangement is personally benefiting one of your officers, board members or employees, you are in violation of IRS guidelines regarding conflicts of interest in nonprofits, and you could lose your tax-exempt status as well as your good reputation.

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The Basics for Executing a Successful Nonprofit Capital Campaign

Posted by admin Jun 20, 2018 11:24:33 AM

A nonprofit capital campaign is one of the best fundraising methods, particularly if you have a certain project or purchase in mind. But capital campaign fundraising requires strong leadership, extensive planning and dedicated participants.

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Six Strategies for Financially Troubled Nonprofits

Posted by admin Jun 14, 2018 11:41:43 AM

When your nonprofit organization is struggling financially and you’ve already attempted to cut costs in more traditional ways, like wage freezes and layoffs, what’s next? 

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Accounting For Gifts In Kind And Donated Services

Posted by admin Dec 5, 2017 3:30:00 PM

Not-for-profit organizations do not exclusively receive cash donations. Your support also likely comes in the form of gifts in kind and donated services. But even when such gifts are welcome, it can be challenging to determine the value of donated items for financial reporting purposes.

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Make The Most Of Your Audited Financial Statements

Posted by admin Nov 28, 2017 11:30:00 AM

Many organizations are required to receive an annual audit, and it may at times seem like a burden to an organization. However, effectively audited financial statements are a tool for good governance. Your management team and board can learn a great deal and truly better your organization.

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How To Get The Most Out Of Your Nonprofit's Endowment Fund

Posted by admin Nov 21, 2017 4:00:49 PM

Many not-for-profit organizations rely on income from endowment funds to help meet operating expenses, ease cash-flow problems and supplement each year’s annual budget. Although endowments are often a financial bedrock for nonprofits, there are endowment fund rules that you must follow.

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Are Nonprofit Board Term Limits Right For You?

Posted by admin Nov 14, 2017 3:00:00 PM

In one of our previous posts, we discussed toxic behaviors that often warrant firing a board member. Having an ineffective board of directors is not an option for a successful nonprofit, but removing a board member can be awkward and difficult.

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The Four Steps Of A Nonprofit Executive Search Plan

Posted by admin Oct 30, 2017 11:30:00 AM

It seems inevitable that your nonprofit will need to replace a top executive within your organization at some point, and having the right executives in place is imperative to your organization’s success. Why not prepare your staff and Board now? Discuss these four basic steps of the executive search process today so you’re ready when it’s time to find a new person to lead your nonprofit organization. 

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Should You Consider Removing A Board Member At Your Organization?

Posted by admin Oct 17, 2017 9:00:00 AM

Your not-for-profit has probably spent a lot of time and effort attracting board members who have the knowledge, enthusiasm and commitment to make a difference to your organization.

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Avoiding Investment Fraud in Nonprofit Organizations

Posted by admin Oct 10, 2017 9:00:00 AM

Investment fraud in nonprofit organizations, such as Ponzi schemes, is common. A 2013 analysis by The Washington Post found that more than 1,000 nonprofits had discovered fraud at their organizations between 2008 and 2012. Fraud cases can cause significant financial loss for not-for-profits, but the biggest consequence is often the loss of donors and the marring of the organization’s public reputation. Donor loss can, of course, have long-term financial implications beyond the initial post-fraud loss.

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The Accounting and Financial Reporting Complexities of Nonprofit Collaboration

Posted by admin Aug 22, 2017 3:30:00 PM

As funding sources diminish, an increasing number of nonprofit organizations are collaborating, merging or being acquired by other organizations. Pooling resources cuts costs and often increases efficiency, but it also means complicated accounting work and uncharted reporting obligations. Here, we'll explore different ways nonprofits are collaborating and what it means from an accounting and financial reporting perspective. 

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Four Fundraising Strategies For Nonprofits That Use Personal Appeal

Posted by admin Aug 15, 2017 1:46:03 PM

It is difficult to develop new and successful fundraising ideas for nonprofits. Instead of starting from scratch, why not amplify your current fundraising methods by personalizing them?

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Do Nonprofit Organizations Pay Taxes? Understanding Unrelated Business Income Tax on Investment Income

Posted by admin Aug 8, 2017 4:00:00 PM

It is often assumed that all nonprofit organizations are completely tax exempt, but do nonprofit organizations pay taxes? While most nonprofits do have exempt status, they can still be subject to tax if they have unrelated business taxable income (UBTI). UBTI is subject to unrelated business income tax (UBIT). 

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Effective Audit Committees and Their Role in Good Governance

Posted by admin Nov 18, 2016 2:10:54 PM

Unlike public companies, nonprofit boards aren’t required to have audit committees. So it’s not surprising that 42% of nonprofits don’t, according to Stanford Graduate School of Business’s 2015 Survey on Board of Directors of Nonprofit Organizations.

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IRS Releases 2016 Work Plan for Tax Exempt and Governmental Entities Division

Posted by Merideth McDowell Mar 23, 2016 4:30:00 PM

The Tax Exempt and Governmental Entities (TE/GE) division of the IRS consists of three subdivisions, as follows:

  1. Exempt Organizations subdivision (EO)
  2. Employee Plans subdivision (EP)
  3. Federal State and Local Governments subdivision (FSLG)

The 2016 tax year brings specific compliance issues into focus for each of these three subdivisions.

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A Warning on Soliciting Funds Out of State and Form 990 Disclosure

Posted by admin Jan 27, 2016 12:30:00 PM

Form 990 disclosure pumps up the urgency of state registration

For years Anytown, USA, Charity has asked for donations from out-of-state residents. This started on a small scale — a handful of the charity’s donors retired in other states or lived there part of the year.

Now the charity has begun to reach out to hundreds of potential contributors in multiple states. The Internet makes it easy and inexpensive for the not-for-profit to solicit funds outside of its backyard. But along with this expansion comes the need for registration in additional states.

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6 Tips for Finding The Perfect Board Members

Posted by admin Jan 25, 2016 11:30:00 AM

For many nonprofits, it’s a never-ending challenge: finding board members who are qualified, passionate about the organization’s mission and committed to good governance. This article provides tips for a more successful search — including targeting individuals with specific skills, not overlooking volunteers and treating the board position as an actual job.

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Cybercrime: How to Fight Back

Posted by admin Jan 18, 2016 11:30:00 AM

Cyber thieves don’t physically grab your keys or force an entry into your home, but the damage they do to your organization can be just as consequential. If your nonprofit becomes the victim of cybercrime, it could suffer a blow to its reputation that’s impossible to overcome.

So it’s important to assess your risks of data breaches carefully, and implement effective security policies and procedures. This will put you in a better position to protect valuable financial and personal data about donors and other constituents.

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The Responsibilities Behind Managing an Endowment

Posted by admin Dec 28, 2015 1:00:00 PM

Every nonprofit dreams of receiving a large endowment that will keep it financially worry-free in the future and allow it to fulfill its mission with ease. But, in the real world, endowments also carry serious responsibilities, created by the Uniform Prudent Management of Institutional Funds Act (UPMIFA). There are many endowment fund rules to follow. When managing endowments, nonprofit leaders must keep the following realities in mind.

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Take "Macro Advantage" of Micro-Donations: 4 Tips

Posted by admin Dec 14, 2015 11:00:00 AM

The first successful U.S. micro-donation effort may have been in 1891 when a Salvation Army captain put a kettle out on a San Francisco street and collected donations to fund a Christmas dinner for the poor. Micro-donations have morphed in many ways since then, involving small-sum donations made via checkbooks, credit cards and, in more recent years, website links, text messages and other “new technology” tools.

How successful your charity will be in following the micro-donation tradition depends on many factors, including the economy, marketing ingenuity, ease of making donations and security controls. Here are four suggestions for making those small potatoes add up.

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How to Make Your Special Event a Financial Success

Posted by admin Dec 7, 2015 12:00:00 PM

Many nonprofits depend on the funds raised at an annual gala, conference or other special event to keep their organization in the black. But successful events require a careful balancing act. You need to keep a tight rein on expenses, yet attract and entertain as many generous supporters as possible. Here are some ideas for maximizing revenues.

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Corporate Sponsorship Money: Is It Taxable?

Posted by admin Nov 9, 2015 11:00:00 AM

Nonprofits have pursued corporate sponsorships for years, with good reason. Effectively executed, sponsorships can benefit both sponsor and organization. But if your nonprofit isn’t careful, a sponsorship can be deemed paid advertising and your organization could end up liable for unrelated business income tax (UBIT). Although the Internal Revenue Code includes an exception from UBIT for certain sponsorship arrangements, navigating the rules can prove tricky.

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3 Tips to Improve Communication Between Development and Accounting Departments

Posted by admin Nov 2, 2015 11:00:00 AM

Communication breakdowns between a nonprofit organization’s development and accounting departments can lead to confusion, embarrassment and, worse yet, financial problems. Nonprofits, therefore, must take proactive steps to facilitate collaboration between these two critical functions. Here are three tips:

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How COSO Helps Nonprofits Bolster Internal Controls

Posted by admin Oct 26, 2015 11:35:00 AM

For more than two decades, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) has provided for-profit companies with guidance on designing and maintaining internal controls, as well as assessing their effectiveness. A joint initiative of several professional accounting groups, COSO recently revised its original framework with the release of Internal Control — Integrated Framework.

Not all of the updated framework will apply to nonprofits. But this new guidance can provide a structure for organizations trying to establish, strengthen or assess their internal controls.

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FASB Proposes Reporting Model Changes For Not-For-Profit Organizations

Posted by Steve Glueck Oct 20, 2015 1:30:00 PM

Changes to not-for-profit reporting rules are coming. Are you familiar with the FASB’s proposed new model of reporting for not-for-profit organizations, Presentation of Financial Statements of Not-for-Profit Entities? Currently, the FASB is reviewing comments received for this proposed standard, which was issued in April, and the FASB will consider comments received during a comment period that closed August 20 before setting an effective date. The proposed changes will require retrospective application once adopted.

We have summarized the following areas we consider to be the significant changes outlined in the proposed standard.

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Beyond the Bottom Line: The Power of Outcome Measures

Posted by admin Oct 19, 2015 12:05:00 PM

A U.S. charity recently made the news when it was accused of reporting an inaccurately high percentage of every donated dollar that went to program services. The media outlet that uncovered the discrepancy looked beyond that claim, though, to scrutinize the organization’s outcomes — a strong sign of the growing importance of outcome measurement. Savvy stakeholders, as well as savvy nonprofits, realize that outcomes can convey a more complete picture of an organization’s performance than figures pulled from financial statements.

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Rebuttable Presumption and Compensation Packages

Posted by Melissa Dunn May 15, 2015 3:00:00 PM

An Excess Benefit Transaction occurs when the consideration that a disqualified person receives exceeds the value that is warranted by the person’s employment with a tax-exempt organization.  In simple terms, the employee is getting paid more than their actions are worth.  This can cause serious complications as the IRS imposes an excise tax on these excess benefits. 

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Important Information About FinCEN Form 114 For Not-For-Profit Organizations

Posted by Melissa Dunn Apr 6, 2015 1:30:00 PM

tax_formsThe Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, requires the annual filing of FinCEN Form 114, Report of Foreign Bank and Financial Accounts, by organizations that had an interest in, or signature or other authority over, financial accounts having an aggregate value exceeding $10,000 in a foreign country at any time during the calendar year reported.  Financial accounts include bank accounts, brokerage accounts, mutual funds, trusts, or other types of foreign financial accounts.  Keep in mind that the FinCEN Form 114 supersedes the prior Form TD F 90-22.1.

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