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How to Make a Nonprofit Audit Easier

By | Audit, Nonprofit | No Comments

Many businesses conduct annual or quarterly audits. Retailers, for example, often work with external auditors to monitor their gross receipts and spot potential shrinkage.

Nonprofits also conduct annual audits. Although there’s no official law that states a nonprofit must conduct an annual audit, many have this requirement written into their bylaws.

If your nonprofit is among the many with an audit requirement written into the bylaws, here’s how to make the audit process easier for both the auditor and your staff.

How Often Should Your Organization Be Audited?

Your organization should be audited at a minimum according to the schedule set forth in its bylaws, but there is no rule that says it can’t be audited more frequently.

Why would you request an audit outside of the normal audit cycle? If you’re undergoing a merger, acquisition, or creating a new legal entity from the parent organization, an audit may be required or, at the least, a good idea. It will help you and your board gain clarity and confidence in the status of the organization’s finances.

Another way in which an audit can be useful is to detect fraud. A 2020 study conducted by the Association of Certified Fraud Examiners (ACFE) found that typical nonprofit fraud involves a median loss per instance of $75,000, and an average loss of $639,000. When every penny should count towards achieving your organization’s mission, all losses should be taken into consideration and dealt with immediately. An audit can detect areas where things “don’t add up” so that you can examine them more closely. Uncovering fraud, waste, or honest mistakes can help reconcile these discrepancies.

Take Notes (and Share Them)

Even before the audit begins, sit down and take notes. It will be helpful to your auditor if you have a list of items they should pay particular attention to during the audit process. These may include:

  • Any large windfalls, i.e., a lump-sum grant or large donation
  • Starting, pausing, or ending a new program or service
  • Any federal grants or funds received
  • New leases, contracts, or long-term debt obligations
  • Significant changes to existing leases or contracts
  • Converting to new accounting or payroll software

Anything that seems significant is likely important information to share with the auditors. Make a list, because it’s easy to forget items when you speak with them. A list will keep you focused and help keep track of all the items to discuss.

A Smoother, Easier Audit

In addition to the audit prep work described here, there are other steps you can take to make your audit easier each year.

  • Your auditor may ask you for a list of documents needed for the audit. Organize these documents well in advance of the date scheduled for the audit so that you’re all set and don’t waste the auditor’s time.
  • Agree on which tasks you may need the auditor’s assistance with to prepare ahead of time. It may be easy to download transactions from your financial software but difficult to prepare financial statements. Work with your auditor on what you may need help completing in time for the audit.
  • Gather all contracts, lease agreements, and similar paperwork and label it for the auditor.
  • Alert staff that an audit will be conducted and ask them to set aside time in their schedules to meet with the auditor. Auditors often wish to speak with key staff members including, but not limited to, personnel from accounting, payroll, and finance, as well as those tasked with grant management.

An audit doesn’t have to be a disruption to your organization’s work. It’s a useful step to detect fraud, reconcile discrepancies, and assure your board, staff, members, and donors that the organization’s finances are in good order.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

What Nonprofits Need to Know About the Consolidated Appropriations Act of 2021

By | Government, Nonprofit, Tax | No Comments

The Consolidated Appropriations Act of 2021 offers relief to nonprofits hit hard by the coronavirus pandemic. The new relief efforts clarify elements of the Paycheck Protection Program, offer funding for new loans (PPP2), enhance the employer tax credit, and extend employee benefit modifications.

Paycheck Protection Program Updates

The Paycheck Protection Program offered significant benefits to help organizations retain employees who might otherwise go on unemployment benefits. PPP2, an extension or continuation of the Paycheck Protection Program, allocated $284.45 billion for loans, $43.5 billion in Small Business Administration (SBA) debt relief, and $20 billion for certain live venues and cultural institutions that remain shut down or have significant operational restrictions due to the pandemic.

The new Act not only extends the PPP2 loans into 2021 but provides additional guidance and clarification. Nonprofit managers should now focus on PPP loan forgiveness and whether or not they should access funding under the new PPP2.

PPP2: New Guidelines

PPP2 comes with brand new guidelines for potential borrowers, so it is important for nonprofits to review the guidelines again in light of these changes. It encompasses organizations with 300 or fewer employees and reduces the maximum loan amount from. $10 million to $2 million. If your organization did not previously quality for the Paycheck Protection Program, these changes may qualify it in 2021.

SBA Requires “Loan Necessary” Questionnaire

The new PPP act requires borrowers to complete a new questionnaire from the Small Business Administration attesting to the necessity of the loan. The new version of the questionnaire for nonprofit was finalized on November 30, 2020 and is an entirely separate requirement for the loan application. Nonprofits seeking loans of $2 million or more are required to complete both the questionnaire and the loan application. Note that evidence must accompany the responses, too, such as proof of liquidity and revenues between 2019 and 2020 and other facts to attest to the need for the loan.

Tax Treatment of PPP Loans

The PPP loan clarification also includes confirmation that any amount of PPP loans forgiven will not be taxable.

Employer Tax Credit Enhancements

Two employer tax credits are in the Consolidated Appropriations Act of 2021: Employee Retention Tax Credit and Employer Tax Credit for Family and Medical Leave.

Under the 2021 bill, the Employee Retention Tax Credit (ERTC) has been extended to employers who claim PPP loans. One important item to note: wages used to justify forgiveness of any PPP loan may not be used again to calculate the ERTC. Although this limits the possible benefits for recipients of PPP loans, it also expands the eligibility for the credit to others.

The Employer Tax Credit for Family and Medical Leave refundable payroll tax credits have been extended through March 2021. Note that this extension does not require an employer to provide the leave—it simply extends the credit for employers who voluntarily provide the leave.

The credit is equal to 12.5% of eligible wages if the rate of payment is 50% of such wages. It is increased by 0.25 percentage points (but not above 25%) for each percentage point that the rate of payment exceeds 50%. The maximum amount of family and medical leave that may be taken into account with respect to any qualifying employee is 12 weeks per taxable year.

Seek Professional Advice

As with any new bills, this one may take some time to fully understand its limits and ramifications. If you’re in doubt about the financial or tax implications to your organization, please contact Welter Consulting.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

9 Steps to Choose the Right Software for Your Nonprofit Organization

By | Nonprofit | No Comments

You’re fed up. Your nonprofit software doesn’t work the way it should. You’re cobbling together reports in Excel that should be run directly from the organization’s current software—if it actually worked right. What should take one hour to accomplish takes three because the software system is so old it practically creaks when it runs.

Sounds familiar? You are at the point where it’s time to search for new software for your nonprofit organization. The search, however, feels like a huge mountain you must climb. What if you make a mistake and pick the wrong software?

Others have climbed that mountain before you and have marked a clear trail for you to follow. We have put together the following list of tips for choosing the best nonprofit software for your needs based upon the latest advice from others in the nonprofit world. It is a tried-and-true formula that will help you select the right software to save you time and effort.

Getting Started: The Basic Software Selection Steps

It’s time to embark on your software selection process when the benefits of change outweigh the costs of continuing to do business as usual. But do not take the easiest path and simply upgrade your current software package to the latest edition. Do some digging and investigate your options. Perhaps the current software is the right choice, but it is likely that there are more options available for you to explore.

Step 1: Find a champion

The first step is to find an internal champion, or project sponsor, who will back you up and act as a liaison to senior management for you. Such a person can help you frame the requirements document with the overarching needs of the organization in mind and ensure you haven’t forgotten anything during the early stages of the project. They may also be able to help you navigate through any budgetary issues and find additional funding for the project, if necessary.

Step 2: Begin a needs assessment

A needs assessment is, as the name suggests, a survey of the needs of the organization. The tricky part of any needs assessment is making sure you have surveyed all areas of the organization and included the requirements of various stakeholder groups.

Step 3: Create a project team and plan

The key to building an effective project team is to ask people from each area of the organization to participate in the team. A representative from finance, accounting, operations, marketing, and program development, as well as any other core groups and departments, should be part of the project team.

One trick to establishing an effective project team is to set a weekly meeting to work together on the search for the new software package. During this time together, the team can develop the software project plan and discuss any concerns or considerations as a group.

Step 4: Interview key users

In addition to building a team of representatives from various departments, create a list of key software users within the organization. Interview each potential user to find out what they like about the current software, what they dislike, and any special needs they may have.

Step 5: Build a gap analysis

A gap analysis takes the findings from the interviews and compares the present software to the stated needs of the key users. The gap between the existing software and stated needs provides a guideline for what to look for in the new package.

Step 6: Search for potential vendors

You can search for potential nonprofit vendors online or contact a consulting firm such as Welter Consulting. We can help you find the right software for your needs. You can also ask other nonprofit organizations for their recommendations, read reviews in nonprofit journals, or find potential vendors to interview through trade shows and online conferences.

Step 7: Request for proposal

The request for proposal distills the team’s interviews and gap analysis into a formal document that can be submitted to multiple vendors with a deadline for response. The resulting proposals should address the needs and requirements outlined in the RFP. Bids can be submitted with the RFP response or later, depending on the vendor and the organization. Some teams conduct a two-level search, receiving proposed solutions first, winnowing the proposals down to a handful, then requesting bids based on clarifying questions to the potential vendors. 

Step 8: Vendor demonstration

Once you have a small selection of possible proposals to choose from, schedule meetings with potential vendors. Ask for a demonstration of the software. Confirm how the vendor conducts training and the support available post-implementation.

Step 9: Select the software

After completing this thorough process and conducting full due diligence, it’s time for the final selection. Be sure to take full advantage of training and support offered by the software vendor and address any questions or hiccups in the process as soon as they arise.

Welter Consulting

Although there’s no one “best” software for all nonprofit organizations, working with a professional nonprofit consulting firm such as Welter Consulting can help you shorten the time it takes to find the right software. We’d be happy to work with you to find your “happy medium” and transition to your new nonprofit software. Please contact Welter Consulting at 206-605-3113 for more information.

Working from Home and Managing Your New Work-Life Balance

By | Professional Development | No Comments

Working from home may feel like a dream come true—or a nightmare unfolding. It all depends on your perspective.

For the past year, ever since most states announced mandatory stay-at-home orders, many accountants have been working from home. And while that’s not necessarily a bad thing in and of itself, it may be compounding our stress levels.

A 2017 report from the United Nations indicates that people who work from home report higher levels of stress than people who commute to an external office every day. It’s not the home environment that increases stress, but the interruptions, lack of specific business hours and frequent use of mobile devices that is adding layers of stress to the already pandemic-stressed-out population.

While we may still be many months away from a full return to business as usual, there are many techniques to reduce stress and avoid burnout that you can try … from the comfort of your home.

Establish Clear Work and Home Boundaries

One of the biggest areas of added stress for accountants working from home is the blurring or blending of “home” versus “work” time. When commuting to the office every day, there is a clear distinction between work and home hours, with the time to commute the transition period between each. Move work to your kitchen table and suddenly there is no transition between work and making dinner, or helping kids with their homework, or any of the other homemaking tasks waiting for you.

If having a home office (with a door that closes against noises and distractions) isn’t possible for you right now, establishing clear and definite “work” and “home” hours is necessary. Create your own “after work” ritual. One CPA shuts her laptop each night and says aloud, “Mission accomplished.” It sounds silly, but this is her psychological cue that work is done for the day and it’s time to transition back into her off-duty self as a wife, mother, and avid yoga enthusiast.

Stagger Video Conferencing Hours

Zoom fatigue is real. Whether it’s everyone’s new favorite video conferencing tool or one of the many options available, feeling exhausted and drained after too many video conferences in one day is reality. Humans are hardwired to pick up a multitude of social cues, from facial expressions to posture, that may be lost or misunderstood on a small video screen. Add that to feeling like you’re on a stage or a movie set every day with the cameras rolling and it’s easy to see how video conferencing fatigue is more than a myth—it’s reality.

To avoid feeling frazzled and burned out from too many video chats, leave plenty of time between each call. Get up and walk around your house or go outside if you have a garden or place to get away from your computer for a few minutes. Note how many calls per day feels comfortable for you and seek to balance urgent requests against the need for your own time away from video conferencing. It may not always be possible, but at least knowing why you feel so exhausted after four hours of back-to-back video meetings can help.

Find Your Happy Place

Lastly, find your own happy place. It may be in your rec room listening to your favorite music or in the kitchen baking an apple pie, but there is some place or activity for you that is very freeing and relaxing. That’s finding your happy place. And while it may be limited right now since we cannot gather safely indoors with many people, an alternative might exist that lets you shed some of that stress and feel like your old self again.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.