Are you ready for the changes that are coming to not-for-profit accounting? Do you know what they are and how they are likely to impact your organization?
While we don’t have a crystal ball, the AICPA’s National Not-For-Profit Industry Conference is a close second. The Conference brings together the industry’s top experts and thought leaders to offer their perspectives on the most crucial issues facing not-for-profits and those who serve them, and Jacobson Jarvis is there representing our clients and your needs. Every year, we look for the most important tax, compliance, accounting & auditing, and governance issues and changes facing our sector and bring back insights to share with you.
Here are this year’s highlights:
Proposed Changes to Not-for-Profit Accounting
For the first time in approximately 20 years, the financial reporting model of nonprofit organizations is changing. On April 22, 2015, the Financial Accounting Standards Board (FASB) issued an exposure draft: Presentation of Financial Statements for Not-for-Profit Entities. The key objectives of the project are to improve the net asset classification scheme, and to improve information in the financial statements and the notes about liquidity, financial performance, and cash flows.
The changes made to the reporting model are designed to help tell the “financial story” of nonprofit organizations. This recent Journal of Accountancy article describes the rationale for the proposed changes.
The timeline for introduction of the new reporting framework is slated to be 2016. The board is seeking public comment on the proposed Accounting Standards Update before issuing a final standard. Comments can be emailed to firstname.lastname@example.org by Aug. 20.
Uniform Grant Guidance
If your organization receives federal funding, you are probably aware that the Uniform Grant Guidance (UGG) was issued in December 2014. Entities subject to UGG will need to implement conforming administrative requirements and cost principles for all new Federal awards made after December 26, 2014, and to additional funding to existing awards (referred to as funding increments) made after that date.
The UGG brings under one big tent all the Office of Management and Budget (OMB) regulatory guidance that was previously issued in separate circulars (A110, A102, A122, and A133) in order to update and unify.
Contract recipients need to familiarize themselves with the new guidance, as, not surprisingly, there are some areas of nuanced change and some, such as procurement guidelines, with substantial changes. The government is providing a grace period of one full fiscal year after the effective date of UGG for nonfederal entities to implement the new procurement standards. This election should be documented in writing (e.g. finance committee or board minutes).
The best on-line resource for accessing the Uniform Guidance is Council on Financial Assistance Reform 2 C.F.R 200 Uniform Guidance. This is the website of the Council on Finance Assistance Reform (COFAR), an organization of top-level government financial managers. The COFAR website has links to the UGG, to the impending rules from each federal department, training materials, and FAQs.
Views from the IRS & Treasury
Tammy Ripperda, new Exempt Org Director, discussed how the IRS uses data analysis to find trends to implement their risk-based strategy for audit selection. Also, the IRS is implementing an education program to help charities understand the rules on “How to Stay Exempt”. The IRS resource page has several tools to check the tax exempt status of a charity, to get reinstated after being revoked, and on how to apply for tax exempt status: Tax Information for Charities & Other Non-profits.
Ruth Madrigal, Treasury Office of Tax Policy attorney, discussed the Treasury’s Priority Guidance Plan for writing new regulations in 2015 and 2016. She works with the exempt organizations regulations. The Plan is available on the Treasury resource page Priority Guidance Plan.
Victoria Judson, Treasury Associate Chief Counsel, discussed how Chief Counsel Memoranda, at Legal Advice Issued by Associate Chief Counsel, help people understand the correct interpretation of tax law. Currently, she is working on a project to help people understand unrelated business expense allocation rules and is looking for suggestions from the nonprofit community. The AICPA Technical Resource Panel (EO TRP) is collecting suggestions, so feel free to email yours to email@example.com.