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Compliance Focus: Unclaimed Property Laws

By | Accounting, Nonprofit, Unclaimed Property | No Comments

Unclaimed property remains a revenue source for many states. It can take two forms: tangible (such as unclaimed safe deposit boxes) and intangible (unclaimed general ledger property). Each state sets its own rules regarding when property may be declared unclaimed and how to legally dispose of such property. This article offers a general overview of unclaimed property laws and guidelines for how entities must comply with them, but for specific laws regarding unclaimed property in your state, consult your state’s website or an attorney.

What Exactly Is Unclaimed Property?

Unclaimed property is just what the name implies: something left behind, unclaimed for a period of time, or abandoned.

A good example is a bank safe deposit box. Often, families aren’t aware that a relative has a safe deposit box, nor do they have access to the key. If the owner of the box passes away, the bank may be unaware for a period of time during which the family has already settled the estate. The bank may be unable to find the legal owner of the box.

Banks are required to conduct due diligence and make every effort to find the legal owner. After exhausting these avenues and after a specific time period has passed, the laws governing the disposal of such unclaimed property go into effect, and the contents may revert to the state or to the property holder. If the property reverts to the state, this is called escheatment.

Nonprofits May Have Unclaimed Property, Too

Intangible property, such as general ledger entries, may also be declared unclaimed property. An example of such unclaimed property may be paychecks owed to an employee who leaves, moves away, and provides no forwarding address. In such an example, nonprofits are bound to use every appropriate means (letters, emails, etc.) to find the person to which the money is owed. If the owner cannot be located after a set time, state laws also govern how intangible property is disposed.

Dormancy Period

The time period in which property remains idle is called the dormancy period. Depending on the state, this may be one, two, three, or more years. During this time, the holder of the property is required to make every good faith effort to contact the original property owner. After the appropriate efforts have been made and the period has passed without contact from the property owner, the holder must escheat or give the property over to the proper jurisdiction. First dibs go to the property owner’s state, with the holder’s state in second place for the escheatment.

Types of Unclaimed Property Nonprofits May Encounter

Most nonprofit accountants will go through their career with very few instances of unclaimed property crossing their desks. But it can, and does, happen. A few examples of unclaimed property a nonprofit may encounter and should account for include:

  • Customer overpayments
  • Rebates from manufacturers
  • Unclaimed rights (mineral, oil, gas)

If your nonprofit has a history of inconsistent reporting of unclaimed property, the state may flag it as the target of an audit. Audits are conducted by third parties. Once one state requests an audit, others may join in as well.

One way to potentially avoid the unpleasant disruption of an audit is to have a consistent and clear method of reporting unclaimed property. Voluntary Disclosure Agreement programs enable organizations to become compliant and avoid audits and associated late fees and penalties in their reporting.

Although unclaimed property isn’t something you’ll encounter often, it is a possibility, so it pays to be prepared.

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.

Adjusting Accounting Practices in a Time of Uncertainty: Coronavirus Challenges

By | Accounting | No Comments

To say the novel coronavirus or COVID-19 has changed every part of society is an understatement. No area of home or business life remains untouched. This includes the world of accounting, which must adapt and adjust to the many changes that have occurred due to business disruption.

Although the guidelines for financial accounting were established to provide a framework for many situations, nothing could have prepared accountants for what they faced this year. The Paycheck Protection Program and many other adaptions due to the pandemic have raised numerous questions throughout the accounting world.

FASB, AICPA, and other groups have attempted to clarify many of these changes and how to apply them to the fiscal year end. The following provides highlights of the major issues accountants face with reporting this year. Be sure to delve deeply into specific areas of concerns by referring to the specific source documents.

Lease Concessions

FASB answered this question related to lease concessions. The lessor or lessee can elect to apply or not to apply the lease modification guidance in FASB ASC Topic 842, Leases, and Topic 840, Leases, to those contracts. This election is available for pandemic-related concessions that don’t result in a substantial increase in the rights of the lessor or the obligations of the lessee.

When a deferral affects the timing of the lease contract, but the amount is substantially the same, the accountant can choose which method to use. FASB does not favor one or the other. The two methods are:

  • Accounting for the concessions as if no changes to the lease contract were made. In that case, a lessor would increase its lease receivable, and a lessee would increase its accounts payable as receivables/payments accrue. In its income statement, a lessor would continue to recognize income, and a lessee would continue to recognize expense during the deferral period.
  • Accounting for the deferred payments as variable lease payments.

FASB did caution, however, that the same method should be applied to similar situations within the same organization if they arise.

The Paycheck Protection Program

The Paycheck Protection Program (PPP), enacted through the Small Business Administration, was intended to help businesses keep people employed during the coronavirus. The loan should be treated as a financial liability. Please refer to Topic 470 for details.

AICPA added further clarification that nongovernment entities should report PPP loans as follows. An entity accounting for the loan would:

  • initially record the cash inflow from the PPP loan as a financial liability and would accrue interest in accordance with the interest method under Subtopic835-30.
  • NOT impute additional interest at a market rate.
  • continue to record the proceeds from the loan as a liability until either (1) the loan is partly or wholly forgiven and the debtor has been legally released or (2) the debtor pays off the loan.
  • reduce the liability by the amount forgiven and record a gain on extinguishment once the loan is partly or wholly forgiven and legal release is received.

For more information pertaining to accounting change and challenges brought about by the coronavirus, please see the special SBA Paycheck Protection Resources for CPAs brought to you by AICPA.

No one could have predicted the challenges and changes brought about by a virus. But, with the usual flexibility that seems to be built into the fabric of the nonprofit world, organizations are rising to the challenges and finding ways to cope. This includes accountants who must ensure that nonprofits comply with the ever-changing regulations, guidelines, and programs available. Hopefully, these resources will help you navigate such changes more easily.

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.

Networking From Home: Here’s How

By | Professional Development | No Comments

COVID 19 has put a damper on many activities nonprofits typically use for fundraising. Among them is networking.

How often have you used networking events in the past to connect with new talent, mentors, and potential employees, not to mention donors and others interested in your work? If you’re like the typical nonprofit owner, the answer is “Frequently!”

Now, however, with so many events canceled and local orders to shelter at home to avoid spreading the virus, networking options are limited. But are they really? Or are we looking at networking the wrong way?

Consider Networking Goals

The goals of networking are to increase your circle of business acquaintances and friends so when opportunities arise, you’ll be able to tap into your network. This includes filling staff positions, adding members to your organization, or finding new resources like a local marketing firm to handle your print ad campaign, and so on.

When you look at the goals of networking, it soon becomes clear that you don’t necessarily need to network in person. It’s easier to strike up a conversation with someone stuck in line with you at the bank but it’s not necessarily the only place where you can strike up conversations.

Online Networking Offers Great Possibilities

Many are finding opportunities to network online. Social networks, of course, are the obvious choice. But networking online isn’t limited to LinkedIn, Twitter, and Facebook.

Many in-person groups have moved their networking online. Zoom, Go2Meeting, and Facebook Live offers opportunities for people to gather from the safety of their homes. Although not as much fun (and the snacks may not be as good) it’s still a great way to meet new people.

To get the most from online networking events, be sure to be a friend to others first before asking for something in return. The more you give, the more people will be receptive to requests you make. Look for opportunities to solve problems. If someone mentions they need a good local designer, offer to connect them to a graphic designer you know. It is these actions that lead to a network you can count on when you need something.

Work Your Social Networks

Social networking remains an excellent place to network with others. Not only can you increase your personal connections, you can join groups to meet new people, learn what’s happening in your industry, and share your knowledge.

To network effectively on social media, share information that is useful to your audience. This may include links to articles, tips, and resources. Like in-person networking, online social networking relies upon give and take. It’s not just broadcasting your message out but listening to what others say, responding, and sharing helpful resources and information.

Virtual Coffee, Anyone?

Coffee is like the oil that runs the business engine—it’s ubiquitous. Meeting new contacts for a coffee used to be part of the typical business day. Now, however, with many eschewing in-person visits for virtual visits, you can still “meet for coffee” via video conferencing.

Extend the invitation to others to gather on your favorite video platform, mug in hand, and socialize at a predetermined time.

Keep in Touch With Past Contacts

Lastly, networking isn’t just about meeting new people. It’s also keeping in touch with your network. Take time each week to go through your contacts and reach out to say hello to others. During these times when people can feel isolated, it’s always a pleasant surprise to hear from someone you worked with a long time ago. Reach out, say hello, and see if it sparks conversation.

Online Networking: Here to Stay?

Networking online probably won’t take the place of in-person networking for good but, for now, it’s helping many people connect and share resources, time, and care. Make time this week for online networking. Which one of these techniques will you try?

 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.

3 Tips to Improve Website Security

By | cyber security | No Comments

According to Cyber Observer, 68% of businesses feel their cyber risk is increasing. Worldwide, cybercrime is projected to hit $6 trillion by 2021.

If you think you are immune from cybercrime as a small nonprofit organization, think again. Many criminals target small businesses, especially nonprofit organizations, because they know they lack the staff and the resources to front a defense against cyberattacks.

The old truism that the best defense is a good offense holds true with cybercrime as well as in other arenas. Here is your 3-point plan to stop cyber attackers in their tracks.

  1. Use a trusted hosting provider.

It’s tempting to go with the cheapest web host for a recurring expense such as web hosting. However, cheaper hosting companies may not install the best security. Since many attacks occur at the hosting level, choosing the best company you can find is essential.

How do you pick a good host for your website? Look for a site host with the best storage, bandwidth, support, and backups. Having 24/7 support is also essential. If your site undergoes an attack, knowing that someone is available to help is a huge plus.

  1. Install an SSL certificate.

SSL stands for secure socket layer, and it adds the little “s” at the end of the http:// you see at the start of website addresses. What it actually does is protects any information entered into your website by adding a secure and encrypted connection between your browser and the customer’s connection.

Search engines such as Google look for SSL certificates installed in website code as part of their evaluation criteria to gauge the trustworthiness of websites. Google uses it as part of its search engine ranking criteria. For your donors, members, and customers, the SSL certificate adds one more level of protection for their personally identifiable information and payment information.

  1. Update plugins, patches, and code.

You don’t need an IT degree to update plugins, patches, and software code. Most software providers send notices to users when updates are available. Ignoring these because they’re inconvenient can lead to trouble. Often, software companies develop such patches and updates because they’ve discovered loopholes in their code which hackers exploit. By updating known security issues, you’ve added one more defense to your site.

The same goes for plugins which are used on WordPress based websites. Plugins add a wealth of easy customizations to websites built on the WordPress platform which makes them very popular. The flip side is that with this popularity and increased use, comes more opportunities for hackers to exploit plugins as a means of entry into websites. The purpose of updating plugins is the same as updating other software. It closes any gaps and adds better protection.

Other Ways to Prevent Cyber Crime

There are other steps you can take to prevent cybercrime. Educate your team on how to spot phishing scams. These scams are sent via email and try to trick the target of the scam into revealing login information or personal information that can be resold. Many phishing emails appear to come from known entities (like utility companies or well-known name brands like Amazon, Google, or eBay).

Any emails that come without warning and ask users to log into a site should be scrutinized. If you feel the email may be legitimate, close your browser and open it again to the website you wish to log into. Do not click any links in the email.

Such simple steps can save you a great many headaches later. Cybercrime can be a nightmare for a small business and a nonprofit organization. Personally identifiable information can be resold. Each personal record is worth anywhere between $20 and $25 on the black market. To a customer, donor, or member of your organization, however, their personal information is priceless. The resulting firestorm of bad publicity and potential lawsuits can quickly overwhelm a small nonprofit.

Now is the time to prevent cybercrime from harming your organization. What steps will you take to prevent it?

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.