Category

CPA

Internal Controls & Abila MIP Fund Accounting™

By | Accounting, Audit, CPA, Internal Controls, Nonprofit, Uncategorized | No Comments

Internal controls provide safeguards against losses, thefts and mistakes. An old-fashioned way of keeping internal controls may be to have one staff member count out the petty cash box while another watches the process. The watcher in this case is the internal control. An extra set of eyes on the counting process keeps the person holding the cash in hand from making “mistakes”, whether intentional or not, when it’s handed over for counting.

Implementing internal controls can be easy! Our “Internal Controls for Nonprofits: Best Practice Resource Guide” can help your nonprofit establish best practice principles, policies, and procedures.

In larger, automated accounting systems for nonprofits, such as those that run Abila MIP, internal controls are built into the system. By automating many of the financial processes, it becomes more difficult for someone to circumvent the system and steal from your nonprofit.

A publication from the Virginia Society of Certified Public Accountants brings home the point that good internal controls, through the use of Abila MIP fund accounting and processes around them, can help prevent loss and “keep honest people honest.”

Safeguards Against Loss: Simple Internal Controls

The first and best internal control is to avoid handling cash when at all possible. It’s not that cash is bad, it’s just that it can be “lost” more easily than money that is already in the bank account and tallied in Abila MIP fund accounting.

A system of checks and balances keeps careful watch over your finances. A few internal controls to keep losses to a minimum:

  1. Lock checks and cash in a safe or drawer both during business hours and afterwards.
  2. Monitor access to the keys.
  3. Make it a rule that all employees, regardless of their job title or function, must have another employee present when opening the safe or cash drawer, and counting out money.
  4. Don’t let checks and cash pile up in the office. Make a bank deposit when the threshold reaches a certain amount.
  5. Use timecards to monitor hourly workers’ wages.
  6. Have a manager review timecard information regularly to ensure no one is ‘padding’ the hours.
  7. Do not let anyone borrow funds from the organization’s accounts for personal reasons, or use business credit cards for personal reasons.

Acting Swiftly

It is important to have written policies in place regarding fraud and theft so that you can take the appropriate steps to document, correct, and if necessary, terminate employees who circumvent or ignore internal controls. Depending on the circumstances, your organization may also have a zero-tolerance policy for theft, and a written policy regarding grounds for termination should include such information.

Take steps to create policies and internal controls for your staff. Train and teach them their expectations. Set in termination policies in place. Know who is handling your accounts, who has access to cash and checks, and how such resources are handled. Keeping track of your finances using good fund accounting software is a way to detect fraud and act swiftly.

Abila MIP Fund Accounting

Abila MIP Fund Accounting includes fraud protection and analysis within the system, so you can use the data within it to detect patterns of losses, analyze data, and prevent fraud.

Most losses do not occur in isolation. People find that if they can get away with one theft, they return and try again. This leaves a footprint or a recognizable pattern. Data ran from your fund accounting system may be able to display such patterns so that you can take immediate, corrective action.

At Welter Consulting, we want to help our nonprofit customers prevent losses and fraud. By utilizing good nonprofit fund accounting software, such as Abila MIP, you can keep careful track of all of your accounts and detect suspicious activity quickly.  Click to learn more about Abila MIP fund accounting.

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.

CPA Continuing Education – Ideas and Tips for Professional Development

By | Abila, Accounting, Audit, CPA, Grant Management, MIP Fund Accounting, Nonprofit | No Comments

Passing the CPA exam is only the first step in a long series of challenges for CPAs. One ongoing challenge is meeting the required 40 hours annually of professional development.

Large, public accounting firms and big corporations may arrange to send their CPAs for annual professional development workshops and classes to help you meet the 40-hour requirement. CPAs who own their own businesses or who work for smaller companies don’t have that luxury.

It can be difficult to take time away from your own accounting practice to take classes that satisfy your continuing education requirements. Let’s face it; if you can take a week off, you want to go to the beach or the mountains, not to a stuffy meeting room. It can also be expensive to pay for airfare, hotel, and workshop fees.

There are alternatives to the typical round of workshops and conferences offering professional development hours for CPAs. On-demand learning is the latest method of distance learning that offers flexibility with the quality for certification credits.

On-Demand Learning for CPAs

On-demand learning for CPAs consists of online courses, workshops, and seminars. Those that receive CPA credit hours count towards your annual 40-hour certification requirement.

You can find on-demand learning from many providers:

  • Companies offering workshops in conjunction with products or services
  • Consulting firms offering on-demand learning on a variety of accounting topics
  • Professional organizations and groups
  • Local colleges and universities
  • Online learning organizations and companies offering a variety of classes.

In all cases, check to make sure that the workshop you are interested in attending qualifies for CPA certification requirements.

Factors to Consider When Choosing Learning Opportunities

There are several factors to consider when assessing on-demand learning opportunities. These include:

  • Quality: You’re going to spend 40 hours each year participating in workshops and classes. Make sure they are of the highest quality and relevant to your needs. Look for courses that address relevant topics. Instructors should be fellow CPAs or otherwise highly qualified to teach the subject matter. It’s also helpful if instructors are currently working as CPAs. People who are currently working as CPAs and senior accountants can answer questions and offer insights into common workplace scenarios more easily than those with solely academic qualifications.
  • Affordability: One of the best things about on-demand learning is its affordability. Because most on-demand courses can be taken online, you immediately save money on travel expenses. You can also sandwich them into your day, taking them at lunchtime, in the evenings, or on weekends if they are pre-recorded. Most online courses and other on-demand learning opportunities are reasonably priced. Some are even free. A subscription-based continuing education provider can also provide greater savings, with an unlimited number of courses available to you during the subscription period.
  • Speed: Another great benefit of on-demand learning is that it is self-paced. You can take classes as you need them. You don’t have to wait for a specific conference or workshop. Although it’s not smart to leave your continuing education requirements until the last minute, if you do get to the end of the year and find yourself lacking a few course hours, you can usually find an on-demand course to take online that will let you complete your requirement in record time.

Who doesn’t like to save time or money while learning valuable information? On-demand professional development answers the need for CPAs to finish their 40 hours of annual continuing education in a way that fits their needs.

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.

Are You Ready for the FASB Accounting Standards Update (ASU) No. 2014-09?

By | Abila, Accounting, Audit, CPA, FASB, Nonprofit | No Comments

By now you’ve probably heard of FASB Topic 606. This is an accounting standards update that seeks to provide greater clarity to organizations on how to report revenue. After the initial release of the update, several clarification statements have been issued to help organizations and companies prepare for the new guidelines. As you’re getting ready to implement the new standards (they go into effect for certain not for profits starting December 15, 2017, and for most others December 15, 2018), it’s important to understand both the gist of the update as well as the clarifying statements that have been issued.

What Is FASB Topic 606?

FASB 606 deals with revenue from contracts with customers. FASB Accounting Standards Update No. 2014-09 seeks to streamline statement preparation, as well as provide better disclosure to the public and to others. Clear, transparent reporting is essential for nonprofits; it helps build trust between nonprofits and their constituents. With FASB Topic 606 and Accounting Standards Update No. 2014-09, the revised guidelines are intended to help nonprofits clearly disclose their relationship with their customers and the revenues such relationships and contracts provide.

Another reporting area that FASB No. 2014-09 seeks to improve is the ability for people to compare financial statements. If revenue is reported differently, it makes it harder to compare them across entities. If revenues follow a consistent reporting pattern, they can be compared more easily.

Clarifications on the Original Statement

Accounting professionals charged with the implementation of this revised standard have asked for, and received, clarification on several items. First, intellectual property issues required several clarifying statements. Organizations who license their IP needed information on how to record revenues. A nonprofit health association, for example, who licenses a special ‘badge’ that packaged food companies can put on their products to indicate they meet specific dietary guidelines needs to understand whether they should record revenues at once or over time as they occur.

So far, FASB has issued four clarifications:

  1. ASU No. 2016-08, which addressed principal versus agent considerations.
  2. ASU No. 2016-10 identified performance obligations and licensing
  3. ASU No. 2016-12, clarified a narrow scope improvements and practical expedients directed at items such as the reporting of noncash consideration, contract modification and completed contracts at transition, collectability matters, and similar matters.
  4. ASU No. 2016-20 which correct loan guarantees, contract costs—impairment testing, and provision for losses on construction-type and production-type contracts. Because this area is so complex, interested people should keep up to date with any further changes on 2016-20.

Caution: Implementation Ahead

With all of the clarifications and updates, it’s difficult to say whether or not organizations are truly ready to implement the new rule. Although many indicate that they are, it may be wishful thinking.

A few other cautions have come above. The new rule indicates that transaction prices should be allocated to each performance obligation based on the stand-alone price. Software companies are paying particular note of this requirement since it may accelerate revenue recognition for their products.

Another area where this may impact revenue recognition is on bundled items. Revenue recognition for bundled, package items may now be considered one item instead of many.

Lastly, revenues must be recorded when it appears probable that they can be collected. For nonprofits, this means that they cannot record as donations or revenues money left to them with conditions attached unless it becomes very clear that those conditions will be met.

Confused? Let Welter Consulting Help

If you’re confused about all the FASB changes and the implementation of these new guidelines, Welter Consulting can help. 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 You Need to Know About Nonprofit Payroll Taxes

By | Accounting, Audit, CPA, MIP Fund Accounting, Nonprofit | No Comments

Keeping abreast of payroll taxes can be difficult, but nonprofit payroll taxes can be especially challenging. Some nonprofit organizations mistakenly think that obtaining the tax-exempt status exempts them from recording and paying all payroll taxes. The truth may be more nuanced and complicated than that, with variances according to worker status and more. Get the facts about nonprofit payroll taxes in order to maintain compliance with local, state, and federal law.

Need help setting up or processing payroll in your Abila MIP Fund Accounting™ system? Join us for our hands on training event, Payroll in MIP.”

Nonprofit Payroll Taxes: Tax Status

Tax exempt status is obtained by completing the appropriate forms and receiving notification from the IRS that it has been granted to a nonprofit organization. This is a federal tax exemption and not a blanket exemption from paying all taxes. That’s an important distinction.

You may be exempt from paying federal corporate income taxes, but your employees must still pay their payroll taxes. Social Security and Medicare taxes are also not exempt and are important contributions that must be made and recorded to remain compliant with the law.

FUTA Taxes

The IRS states that “Religious, educational, scientific, charitable and other organizations described in section 501(c)(3) and exempt from tax under section 501(a) are not subject to FUTA tax and do not have to file form 940.” You must receive and keep on file a designation from the IRS.

States, however, can have different rules from the federal ones, so you may be required to pay taxes on the state level. Check with your state taxation department or your accounting firm to determine state taxation requirements.

FICA Taxes

Like for-profit corporations, nonprofits are required to pay employment taxes on compensation to employees. There are a few exceptions to this which include:

  • Churches and some religious organizations can elect an exemption from FICA (Social Security and Medicare).
  • Ministers and other members of the clergy or religious organizations can exempt certain services from FICA taxes.
  • FICA compensation paid to students may be excluded.

 

Volunteer Compensation

By the nature of volunteer work, it is usually uncompensated time. However, many nonprofits give gifts to volunteers. Small gifts of appreciation such as an award plaque are usually untaxed, but major gifts such as gift cards, gift certificates and any gifts of significant value may be subject to taxes. Generally speaking, non-cash gift items with token value only or sentimental value aren’t taxed, but anything that can be construed as cash or the equivalent of, like a gift certificate, may be taxed.

Who Is In Charge?

Who is on the hook if mistakes are made on taxation? You may be surprised to learn that it is the Board of Directors. The Board has ultimate oversight on all financial matters, and that includes taxes paid. If mistakes are made, the responsibility lies with the Board.

Board members should be aware of this requirement and take precautions to ensure that all employment taxes are paid accordingly. Reviewing this information with your nonprofit’s accounting and financial management staff is vital to ensure compliance.

Although it may seem, by virtue of being a nonprofit organization, you should not have to pay any taxes, there are still some which might need to be paid. A bit of research now and prudent oversight from your Board can ensure that you are in good standing with federal and state taxation laws.

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.