2021 FAQs for Nonprofit Accounting
Internal Controls, Functional Expenses and Donor Records
COVID-19, the Public Support Test and your Nonprofit’s StatusBy Marie DeCicco, Denise McKnight and Sarah Avery
COVID-19 has had a vast and varied impact on our economy. Unfortunately, in many ways nonprofits are bearing the brunt of a post-COVID economy characterized by tightening of wallets and reduced cash flow. Among the many unexpected challenges it has introduced, a post-pandemic economy could contribute to an unanticipated change...
Are Your Internal Controls Strong Enough to Withstand the Impact of COVID?By Marie DeCicco, CPA, Partner and Denise McKnight, CPA, Partner
Beyond business closures, widespread unemployment and entire industries staggered by depressed spending, savvy boards and owners are carefully tracking an unheralded but insidious threat to their reputation and financial standing. Like the film cliché of the call that’s coming from inside the house, fraud is a haunting reminder that those...
[Update June 2020] Accessing Disaster Assistance Opportunities and Tax Relief
Disaster relief provisions are traditionally triggered when forces of nature are unleashed-- such as, a severe storm causing flooding, landslides or mudslides; hurricanes; wildfires; tornadoes or earthquakes. A global pandemic, of course, qualifies as a disaster.
This exclusive Nonprofit Advisor will help you to identify powerful assistance options for disaster victims—ensuring...
Which New IRS Rules Introduce Refund Opportunities or New Requirements for Tax Exempt Organizations?
The Internal Revenue Service (“IRS”) recently introduced several changes that could have a material impact on not-for-profit organizations in 2020 and beyond. This article will highlight a few of these new developments and offer insight into how your nonprofit can adapt.
Repeal of the Tax on Transportation Fringe Benefits
Under Internal Revenue...
The Taxpayer First Act and What it Means for Your Nonprofit
The passage of the Taxpayer First Act (“TFA”) in 2019 redefines some of the IRS’ processes and structure, with the stated aim of “expanding and strengthening taxpayer rights” and “reforming the IRS into a more taxpayer friendly agency.” The TFA introduces changes to the way nonprofits file information returns with the...
Analyzing a Major Audit Victory From the Accountant and Attorney PerspectiveBy Sarah Avery, CPA, Director
This edition of Nonprofit Advisor delivers an attorney’s insights on representing clients whose revenue streams have come under Internal Revenue Service (“IRS”) scrutiny and the importance of planning ahead to ensure that revenue generating practices are compliant with the regulations affecting nonprofit organizations. In the case analyzed, an IRS audit...
Donor Advised Funds – by the Numbers
According to a recent Fidelity Investments report, a relatively low percentage (36%) of donors understand the fundamental principles of donor advised funds (“DAFs”). That’s an astounding statistic given the accelerated rate at which donor advised funds have grown in terms of contributions made and grants paid.
DAFs accounted for 4.4% of...
Nonprofits and Cybersecurity: Recognize the Risks and Leverage the Resources
Equifax. Yahoo. Marriott. Large scale data breaches only affect large, well-known, for-profit organizations, right? Unfortunately, as The Utah Food Bank and Save the Children can attest, malicious actors can and will target nonprofits.
You may expect that nonprofit status would deter cybercriminals, but, like the “sticky bandits” of the Home Alone...
What Every Nonprofit Needs to Consider Before Accepting Crypto Currency DonationsBy Steven J. Baum, CPA, Principal & Amish Mehta, CPA, Partner, Nonprofit Practice Leader
With the growing popularity of digital currency, many nonprofits have begun accepting such currency as a form of contribution. However, nonprofits which are currently accepting or contemplating accepting digital currency may not be fully aware of the best ways to receive payments or the compelling information needed to educate donors...
New Nonprofit Liquidity Disclosure – Tips to prepare you for changes to comeBy Marie DeCicco, CPA, Partner
Of all the changes in the new nonprofit financial reporting standard (ASU 2016-14), the Nonprofit Liquidity Disclosure has drawn the most attention and questions. The new standard requires that your nonprofit highlight its liquid assets and add a narrative angle on how it manages liquidity. Specifically, you will need to demonstrate that...
Is your nonprofit ready for new revenue recognition changes?By Sylvia Mazur, Manager
The new revenue recognition guidance, issued by the Financial Accounting Standards Board, takes effect for fiscal years beginning December 15, 2018. This exclusive Nonprofit Advisor provides critical background information and actionable steps to prepare your organization for the steadily approaching deadline.
In May 2014, FASB and the International Accounting Standards Board (“IASB”)...
Tax Cuts and Jobs Act: UBIT Changes Nonprofits’ Decision-Makers Must KnowBy Michael F. Sutter, CPA, Partner
Prevent unwelcome surprises when filing 2018 returns with must-know details on the changes impacting the Unrelated Business Income Tax ("UBIT") Under the Tax Cuts and Jobs Act ("TCJA").
Read on to learn how unrelated business activities will be taxed to stay compliant and maximize your nonprofit's tax position.
What are the four major changes...
The Unrealized Potential of Nonprofit Mergers and Collaborations: By Denise McKnight, CPA
A powerfully strategic move toward achieving your mission
Tax Cuts and Jobs Act: What Your Nonprofit’s Donors Need to KnowBy Sarah Avery, CPA, Director
Donors want to know how the Tax Cuts and Jobs Act will impact their taxes and affect their donations to nonprofit organizations. The best way to secure your donor base is to inform them about the changes that matter most to them. Read on for key information that will promote...
Must-Know Social Media Tips to Safeguard your Nonprofit’s ReputationBy Amish Mehta, CPA, Partner and Not-for-Profit Practice Leader
Editor: Gabrielle Too-A-Foo, Marketing Writer/Communications Specialist
Living in the peak of digital existence makes Warren Buffet’s timeless quote more appropriate than ever, "It takes 20 years to build a reputation and five minutes to ruin it.” Social media is an incredible tool to raise brand awareness about your nonprofit’s mission, fundraise and generate leads; however, it...
How the Tax Cuts and Jobs Act will Impact your Tax-Exempt Organizations and Charitable Giving Strategy By Ralph Citino, CPA, Director & Yana Fishman, CPA, Manager
The “Tax Cuts and Jobs Act,” signed by President Trump on December 22, 2017 includes three sweeping tax law changes that will directly impact the nonprofit sector. This Nonprofit Advisor identifies important changes to reporting rules, unrelated business income tax and excise tax that will greatly affect your tax-exempt organization...
Spend or Save your Nonprofit’s Endowment?By Amish Mehta, CPA, Partner
Donors and policymakers have become increasingly systemic in their consideration of nonprofit endowment management. Whereas the more traditional approach...
Maximize Year-end Charitable Contributions: Navigating Tax Reform for Nonprofit Leaders By Ralph Citino, CPA, Director & Brooke Karafin, Tax Manager
Knowing the best steps to take in order to secure your nonprofit’s longevity can be daunting in an ever-changing tax reform landscape. Many nonprofit organizations fear that they will lose donors in the long run if the federal tax incentive for their charitable giving is reduced or nullified for taxpayers....
5 Must-Knows Before You Hire a Nonprofit Fundraising Consultant
Hiring a nonprofit consultant to execute and amplify your organization’s philanthropic initiatives may seem like a no-brainer. However, subpar fundraising campaigns can often result when organizations do not perform due diligence, which include, scaling the benefit of a fundraising consultant, selecting the right person for the job and knowing how...
The Future of Charitable Giving, Part IIBy Sarah Avery, CPA, Director
Incorporating donor-advised funds and other giving vehicles in your fundraising toolkit
The Future of Charitable Giving:By Audrey Sherrick, CPA, Partner
A Pulse Check on Tax Reform Proposals
Capacity Building: Is Your Organization Ready?By Sylvia Mazur, Audit Manager
“Capacity building” is a broad term which is in vogue among non-profit organizations. In a nutshell, capacity building refers to any effort to improve an organization by implementing internal strategies that will enhance the organization’s effectiveness and take it to the next level. These strategies encompass development of leadership/staff, strategic...
UBIT: What Your Organization Should KnowBy Michael F. Sutter, CPA, Partner
Most organizations exempt from tax under Internal Revenue Code (“IRC”) Section 501(a), including charitable, religious, scientific, and other organizations described in IRC Section 501(c), may be subject to tax on unrelated business income (UBIT), depending on the nature of the activities producing that income. It is important for an organization...
The Top Five Ways Nonprofits Can Increase Millennial Involvement By Matthew Blank, Business Development Officer
Every nonprofit board in America has had a conversation similar to this at least once:
-Board Member #1 – “We have to get more young people involved in our organization.”
-Board Member #2 – “I agree; their money is important to our future.”
-Board Member #3 – “My neighbor is a millennial and...
Understanding the Differences between Lobbying, Grassroots Lobbying, and Advocacy By Sarah Avery, Director, CPA
The current political climate has landed tax advisors in an unpleasant quandary, forcing them to be the bearer of both good and bad news. The good news is most taxpayers are expected to benefit from the current administration’s plans to lower tax rates. The bad news, for tax-exempt, 501(c)(3), charitable...
Do your numbers tell the story?By Denise McKnight, CPA
As we begin 2017, many non-profits are entering the year with a level of uncertainty about how the upcoming changes in our government’s leaders will affect the funding that they receive. Non-profits will look to individual and corporate donors to provide those valuable charitable donations to sustain or enhance their...
The New Administration’s Proposed Tax Plan’s Impact on Nonprofit OrganizationsBy Amish Mehta, CPA, Partner, Not-for-Profit Practice Leader
With the President-elect now officially confirmed through the Electoral College vote and expected to take office on January 20, 2017, there is cause for concern among nonprofit organizations as to what impact the administration’s proposed tax plan will have on charitable giving. Specifically, the tax plan proposes to place limits...
Compliance Considerations for 403(b) PlansBy Marie DeCicco, CPA, Principal
Since the reporting requirements for 403(b) plans changed in 2009, our audits have uncovered certain common deficiencies. In this article, we will take a look at these deficiencies, the questions your organization should be asking, and compliance areas you should be aware of.
Make Sure You Know What The Reporting Requirements...
5 Key Governance Practices for NonprofitsBy Audrey J. Sherrick, CPA Partner
Amid mounting concerns over cybersecurity, social media scrutiny and reputational risk, it is crucial that not-for-profit organizations (“NFP’s”) have good governance practices documented and in place.
Good governance consists of a framework of rules and practices to ensure accountability, transparency, and ethical conduct. Governance and risk management policies and procedures can...
New Financial Reporting Rules for NonprofitsBy Amish Mehta, CPA
In August of 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-14, “Presentation of Financial Statements of Not-for-Profit Entities (Topic 958)”. The issuance of this update represents the most significant change to not-for-profit financial statement reporting rules since 1993, when the FASB issued Financial Accounting...
Recent Litigation Affecting Not-for-Profit Pension Plan Fiduciaries
It was recently reported that the Schlichter Bogard law firm filed lawsuits against NYU, MIT, Yale, Duke, Vanderbilt, Johns Hopkins, Emory and Penn on behalf of numerous participants in retirement plans sponsored by the universities. The suits allege, among other things, that the participants were charged excessive fees. Many similar...
How the DOL Overtime Rules Apply to NonprofitsBy Sarah Avery, Director
On May 18, 2016, the Department of Labor (DOL) announced the Overtime Final Rule. Since then, volumes have been written about the ramifications of the final rule, which is effective December 1, 2016. While you may be aware of the new salary thresholds required by the final rule, what you...
Form 990: What Are 6 Key Compliance Requirements?By Ralph Citino, Director, Stu Katz, Senior Tax Manager and Brooke Karafin, Tax Manager
To help you better understand the Form 990, and as a follow-up to last month’s Nonprofit Advisor article on marketing considerations, we’ve prepared this Part 2 article that takes an in-depth look into what you should know when it comes to complying with the Form 990.
1. Review the Form 990 Carefully:...
Marketing Considerations When Filling Out the Form 990 By Ralph Citino, Brooke Karafin and Stu Katz, Friedman LLP
As most exempt organizations know all too well, preparing federal tax Form 990 can be a time consuming and complicated process. However, the form does have considerable value for the marketing of your organization. We have compiled a list of 5 important marketing considerations on a Form 990.
1. Using the...
The Top 10 Things You Need to Know About Donor AcknowledgementsBy Sarah Avery, Director, Friedman LLP
In our practice we find that “Donor acknowledgements” is an area that raises frequent questions by not-for-profit organizations. Donor acknowledgments are part of a comprehensive system of internal controls for recording contributions that include complying with the Internal Revenue Service (“IRS”) substantiation and disclosure requirements.
What are donor acknowledgements exactly and...
Allocation of Functional Expenses: Why the Increased Scrutiny?By Amish Mehta
The allocation of functional expenses continues to receive scrutiny from donors, board members, regulators (e.g. the Internal Revenue Service), watchdog groups (e.g. Charity Navigator and Guidestar) and the general public. Some governmental agencies have been modifying their audit protocols to focus on the cost allocations reported to them each year....
Google Gives Nonprofits a Break on Advertising
At a time when digital and social marketing is becoming an essential component of overall advertising strategy, nonprofit organizations often struggle to convey their message and benefits due to lack of funds. Many nonprofits are unaware of a program implemented by Google that allows nonprofits to overcome this challenge by...
Here’s How Upcoming Revenue Recognition Changes May Impact NonprofitsBy Sylvia Mazur
Financial Accounting Standards Board issues simplified revenue recognition guidance effective for annual reporting periods after December 15, 2018.
How will this standard affect your nonprofit organization?In May 2014, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board (“IASB”) issued new guidance on revenue recognition, with the goal of developing...
The Overhead Myth: Moving Toward the Solution
In 2013, Guidestar, BBB Wise Giving and Charity Navigator, three of the leading sources for information on nonprofit organizations, joined forces in a campaign to promote the concept that the “Overhead Myth” was harmful to the operations and sustainability of a charity’s success. In a series of actions over the...
Six Steps to Engage Your Board Using a Performance DashboardBy Peter Manzetti
For busy nonprofit business leaders and board members, a seemingly endless stream of reports, meetings, emails, phone calls and text messages can create a strain on their time, limiting their ability to focus on critical business information and interactions.
This begs the question: “What can be done to make every interaction...
Filling out the 990: How to use it and why it’s importantBy Sarah Avery
Charitable organizations continue to be subjected to increasing scrutiny by the public and by the Internal Revenue Service (“IRS”). In recent speeches, the IRS Exempt Organizations Director has reported that IRS priorities include improving data analysis capabilities for analyzing Form 990. The IRS plans to use the data to identify...
Investors, Hackers and Idealists: Understanding Millennial DonorsBy Robert Evans
What’s the secret to unlocking the philanthropic spirit of the millennial generation? Robert Evans, president of nonprofit advisory firm, Evans Consulting Group, shares why for many not-for-profit leaders this is an important, top of mind question.
For many nonprofit leaders, this may be the million dollar – or perhaps billion dollar...
Financial Accounting Standards Board Proposes Overhaul to Not-for-Profit Financial Reporting By Sarah Avery
The Financial Accounting Standards Board ("FASB") issued an exposure draft on April 22, 2015 proposing sweeping changes to the not-for-profit financial reporting model encompassing liquidity, cash flows, operating results, expense reporting and other disclosures intended to enhance comparability between nonprofits. But changing a model that professionals, management, and other users have become accustomed to may shake up the not-for-profit reporting world for financial professionals.
Step-by-Step Compliance: Get Your Not-for-Profit Retirement Plans in CheckBy Amish Mehta
When it comes to not-for-profit organizations and their retirement plans, enterprise-wide governance and internal controls are critical considerations for senior executives. The ultimate goal is to create and administer retirement plans that offer employees viable savings opportunities and that comply with Internal Revenue Service and Department of Labor regulations. What factors should be considered as you strive to achieve that goal?
Challenges of Reporting Net Assets in Appropriate Classifications By Audrey Sherrick
One of the more difficult reporting issues facing not-for-profit organizations is the classification of net assets between unrestricted, temporarily restricted, and permanently restricted categories. These categories are based on the existence or absence of donor-imposed restrictions, and are defined in the accounting standards under FASB ASC 958-210-20. Readers rely on these classifications to determine what assets have external purpose or time restrictions or to put it simply, what assets are spoken for and what assets are available for use. While this net asset reporting model has been around for quite some time, challenging classification issues and reporting pitfalls still exist.
OMB Revisions Governing the Management and Audit of Federal Programs By Amish Mehta
OMB Circular A-133 requires higher education and nonprofit institutions that expend a specific threshold of federal funds to annually undergo a detailed, organization-wide audit that complies with the criteria established under its provisions.
The Office of Management & Budget (OMB) has revised OMB Circular A-133 in the Federal Register entitled "Uniform...
A Summary of New Jersey Sales Tax Exemptions Available to Exempt Non-Governmental EntitiesBy Andrew Cohen, J.D., LL.M
In a previous article in the Non-Profit Advisor (see Tax Exempt Organizations: Don't Forget About New York State Sales Tax), the author reviewed the rules regarding New York State sales tax. Because these rules "are" so complex...
Challenges Faced By Private Foundations TodayBy Kimberly Dula
As the world continues to get smaller and as more and more taxpayers want to see the instant benefit that their charitable giving provides, private foundations are faced with some unique challenges. Traditional giving to qualifying charities continues to be the norm; however, grants to foreign charitable organizations and scholarship giving...
Governance by DesignBy Sylvia Mazur
This past October, the Friedman LLP team was a first-time sponsor at the 2014 BoardSource Leadership Forum (BLF) held in Washington, D.C. The annual two-day conference was attended by BLF members from around the United States, which included nonprofits' board members, chief executives, staff and professionals. BoardSource's mission is dedicated to the advancement of the public good by building exceptional nonprofit boards who will aspire to quality board service.