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Nonprofit

FASB Updates Gifts-in-Kind Standards

By | Accounting, FASB, Nonprofit | No Comments

FASB introduced accounting standards update 2020-07, Presentation and Disclosure by Not-for-Profit Entities for Contributed Nonfinancial Assets, to clarify the existing standard around gifts-in-kind. Such gifts may include assets like land, buildings, and equipment, or the use of such assets. Other items included in this category are utilities, materials and supplies, such as food, clothing, or pharmaceuticals, intangible assets, and recognized contributed services.

The standard must be applied retrospectively and organizations may choose to adopt the updated standard earlier than the effective date. The amendments take effect for annual reporting starting after June 15, 2021, and interim periods within annual reporting periods beginning after June 15, 2022.

What Is the Updated Requirement?

The newly updated standard requires nonprofit organizations to show contributed nonfinancial assets as a separate line item in the statement of activities. This should be kept separate from contributions of cash or other financial assets. Nonprofits are now required under the standard to disclose contributed nonfinancial assets within the statement of activities. These should be disaggregated by category. The categories should depict the type of nonfinancial asset being presented.

What Must Nonprofits Disclose?

Additional details should be disclosed around the statement of gifts-in-kind. Nonprofits should prepare statements that include the following disclosures:

  • Whether the asset was used or monetized during the reporting period.
  • If the asset was used, include a description of how the items were used and for which programs run by the nonprofit.
  • A policy statement from the nonprofit about how gifts can or cannot be monetized rather than using the gifts-in-kind.
  • A full description of any donor-imposed restrictions on how the gift may be used or monetized.
  • The valuation techniques used to assess the gift’s value upon receipt. For guidance, see
  • If the nonprofit is prohibited by a donor-imposed restriction on selling or using the item, the market by which fair value was estimated.

Challenges Involving Gifts-in-Kind

Accurately and clearly accounting for gifts-in-kind has always been challenging, but it can be particularly challenging for some nonprofits, especially if they aren’t used to receiving gifts-in-kind. The previously cited FASB Topic 820 offers help but common sense, previous experience, and prudent judgment must guide a nonprofit as they value items used for programs.

Some items are easier to value than others. An automobile donated to a nonprofit can be valued by using the Kelly Blue Book Value. But what about a horse or pony donated to an equine therapy program? Here, the marketplace where the animal might be sold offers some insight. Similar horses sold in the equine therapy program’s service area may be used as a basis for judging the value of the donated animal.

Some watchdog groups view gifts-in-kind differently than other donations. Because there is so much leeway in how such gifts can be valued, nonprofit accounting professionals must keep detailed records and notes of how values are obtained and reported.

Another consideration is that there may be donor or legal restrictions on gifts. A donor may choose to restrict a gift so that it cannot be sold or they may have specific conditions around the use of the gift. These conditions must be adhered to in order to be compliant with the terms of the gift.

Lastly, gifts are sometimes purchased at below market value by the nonprofit from a donor. How you account for this varies but should be considered as part of the gifts-in-kind guidelines within your nonprofit organization. You may need to establish policies around GIK so that such situations are treated consistently over time.

Gifts-in-kind can be a valuable addition to your nonprofit. Accounting for them clearly and consistently enables you to welcome them when donors step up with generous gifts.

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.

Top Accounting Issues for Nonprofits

By | Accounting, COVID-19, Nonprofit | No Comments

As we move into the last quarter of 2020, it’s time to take another look at several accounting issues facing nonprofit organizations this year. Many issues pertaining to the coronavirus relief package signed into law in March 2020, and similar pandemic-related responses may change how nonprofits account for activities and expenses this year.

Financial Relief for Nonprofits

In March 2020, President Trump signed into law the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act (H.R. 748). The act provided relief to businesses and nonprofits through the United States impacted by the coronavirus pandemic.

The CARES Act provided many resources including the Paycheck Protection Program. AICPA has provided a resource center that offers many tools to help organizations understand the CARES Act resources and how they may be utilized.

Other good resources to help you with your accounting needs related to the CARES Act include IRS and FASB guidelines.

Delayed Effective Dates for Several New Accounting Standards

The AICPA Auditing Board has delayed the adoption of several new standards due to the disruption created by the coronavirus pandemic. The standards listed below have been delayed one year to allow time for audit firms to focus on implementing the new model and to make effective changes.

Standards delayed one year include:

  • SAS No. 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, as amended by SASs No. 137, 138, and 140.
  • SAS No. 135, Omnibus Statement on Auditing Standards — 2019.
  • SAS No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, as amended by SASs No. 138 and 140.
  • SAS No. 137, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports.
  • SAS No. 138, Amendments to the Description of the Concept of Materiality.
  • SAS No. 139, Amendments to AU-C Sections 800, 805, and 810 to Incorporate Auditor Reporting Changes From SAS No. 134.
  • SAS No. 140, Amendments to AU-C Sections 725, 730, 930, 935, and 940 to Incorporate Auditor Reporting Changes From SAS Nos. 134 and 137.

SAS No 141 has been delayed until December 15, 2021.

FASB Votes to Extend Deadline for Revenue Recognition

Another change: FASB voted to extend by one year the effective date of its revenue recognition standard to all nonpublic entities. This pertains only to those entities which have not yet issued their financial statements.

Other Considerations Unique to This Year

There are several other conditions unique to 2020 that accounting and financial professionals must take into consideration.

Remote auditing may be necessary, so it is important to prepare now for a virtual audit. This includes adding or enhancing existing financial and accounting systems to allow for external auditing professionals to access accounts and documents.

Internal controls may be impacted due to staffing restrictions. You may need to adjust internal controls to l staff present in a physical office location.

Fraud risks are heightened. The FBI warns that there is an increase in scamming activity this year due to the coronavirus pandemic. For example, fraudulent unemployment claims are on the rise, and phone and email phishing scams have also increased. Vigilance and additional awareness training for your staff may help prevent cyberattacks and crimes.

Board and Finance Committee meetings may need to be held using virtual technology. Use an encrypted file-sharing service or protect sensitive documents with passwords (do not send passwords via email but relay them over the telephone to the intended recipient.)

Because the financial situation for your nonprofit may be uneven this year, continue to adjust budgets and revenue projects as necessary to adapt to the continually evolving situation.

The global pandemic has created many changes worldwide, including changes to the world of finance and accounting. Stay on top of the most recent FASB, IRS, and AICPA recommendations, deadline extensions, and updates through the Welter Consulting blog.

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.

A Telecommuting Cyber Security Checklist for Nonprofits

By | cyber security, Nonprofit | No Comments

Many nonprofits are discovering that telecommuting offers a viable alternative to working in an office. As concerns about the coronavirus continue, more organizations are relying on telecommuting to ensure their operations continue.

Telecommuting offers many benefits, but some drawbacks too. Many organizations worry about cybersecurity in the age of video conference calls, instant messenger conversations, and myriad other cloud-based software that enables people to meet, share, and collaborate on projects.

If you’re among those concerned about security when employees work from home, you’re not alone. We’ve put together a three-point checklist to help you think through all aspects of telecommuting safety. Apply this information to your organization’s telecommuting policies and procedures and safeguard your nonprofit’s data and reputation.

Three-Point Telecommuting Security Checklist for Nonprofit Organizations

There are many areas of concern when employees work from home. Everyone has access to different technology and internet services yet logs into central cloud-based systems. Viruses, hacking, phishing, and other threats remain, while new ones emerge. There is no one size fits all policy for all organizations embarking on a telecommuting program, but there are guidelines you can put into place to reduce the risk of problems.

Below you’ll find three areas to review and address as part of your cybersecurity checklist. For more on this topic, we recommend listening to Cybersecurity Advisory. Working From Anywhere, Rebooting Securely.

1. Review hardware configurations and security settings

Many organizations purchased laptops and other hardware to enable critical employees to work from home. This helped them ramp up quickly and get everyone online, but they failed to review each unit’s software and security configurations. The result: the potential for serious security flaws that offer criminals the opportunity to attack an organization’s critical systems.

To address this issue, have an IT specialist review all of the devices and ensure standard configurations. Install antivirus software and make sure it is run periodically. And create a policy and procedure to ensure that in the future, all hardware purchased meets minimum security standards, and IT reviews them before they are distributed to staff.

2. Bring your own device (BYOD)

As an alternative to purchasing hardware for all employees, some organizations allowed employees to use whatever equipment they had at home to log in to their network and systems. This is called “bring your own device” or BYOD and is common among many companies and organizations.

The problem with implementing BYOD on the fly is that everyone in your organization is connecting with a unique device, some of which may be infected by trojans and malware. Some people may be diligent about running security scans and updating their software, while others don’t know they should be taking such actions. The results could be catastrophic if someone uploads a document infected with a virus or malware.

To fix this problem, make sure that you ask employees to use a VPN to connect to the corporate network. Remind employees to run security checks and update software. Have your technical specialists draft a process by which employees can use their own devices safely. This may include steps taken on the organization-owned hardware and systems to secure sensitive data, upgrading security measures on an organization-wide level, and other steps indicated by your technology team.

3. Temporary changes that (accidentally) became permanent

Many organizations implemented temporary changes to address the confusion of the early stages of the pandemic. These included forgoing required password changes, allowing employees to share logins, and other things that at the time solved problems but now pose a threat to the organization.

The solution is to return to the pre-pandemic best practices and procedures as soon as possible. Speak with your teams and ensure that everyone understands why the changes are implemented and why it is essential to return to “all systems normal” as soon as possible.

Cyber Security Training Remains an Urgent Priority

According to the University of San Diego, phishing attacks have become more sophisticated. Increasing vigilance and protection against all types of cyberattacks is critical.

Many cyberattacks can be thwarted simply by user awareness. That’s where training for your team comes into the picture. Make sure that you frequently offer, uptodate training to remind staff about the many ways in which criminals use the internet to attack and steal data. Update policies that address cybersecurity and offer virtual training to ensure that all staff remains alert to cyber attacks.

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.

Encouraging Diversity in Nonprofit Organizations

By | Nonprofit | No Comments

You can’t turn on the news today without hearing something about equality, diversity, and racial disparities. Not since the 1960s has the topic of racial equality been so prevalent in our society and culture. Discussions about how every organization, from schools to businesses, can welcome and include greater diversity are critical to ensuring that all voices are heard from the boardroom to the classroom.

Importance of Diversity in Nonprofit Organizations

Nonprofits are better positioned to plan for the future and embrace current challenges when they have a diverse staff and board. Diverse people bring unique perspectives, life experiences, and opinions to the table to add to discussions.

Another reason why diversity is essential in nonprofit organizations is to ensure that the staff reflects the populations served. People from similar backgrounds share common approaches to problem-solving, shared understanding of cultural norms, and other attributes that make it easier to connect and communicate. Having people of diverse races, genders, and other factors that reflect the demographic your organization services improves your ability to reach others to achieve your mission.

Many nonprofit organizations address sensitive issues as part of their mission: reproductive rights, healthcare, child and family needs, domestic violence, hunger, poverty, religious freedoms, education. It can be difficult for people to talk about their needs with nonprofit volunteers and staff who do not look like them or do not share the same cultural background. Improving diversity can lead to better outcomes because people may open up more to others from the same background.

Diversity Improves Performance

Many reports indicate that having diverse teams and boards improves an organization’s fundraising and revenue-generating ability. Forbes reports that companies with ethnically diverse executive teams were likely to achieve 33% more profits. Boards that were racially and ethnically diverse led companies to achieve 43% more profits.

Another study found that nonprofits with a higher percentage of women on their boards engaged more in fundraising and advocacy. The Association of Fundraising Professionals agrees that diversity improves an organization’s outreach efforts and leads to better fundraising.

Diversity Among Accountants Still Lacking

The accounting profession has made some inroads in diversity, but much work remains to be done. According to the U.S. Bureau of Labor Statistics, among the 1.9 million auditors and accountants in the United States, just about 9% are black. There is much room for improvement in these statistics.

How Can Nonprofits Improve Diversity?

Nonprofit organizations can take many steps to improve diversity throughout all levels of their organizations, including their accounting team. As we have seen, a more diverse organization can lead to better advocacy, communications, and fundraising activities.

To improve organization-wide diversity, your organization can:

  1. Establish organization-wide policies on diversity and inclusion.
  2. Appoint resources for diversity training.
  3. Review policies and hiring practices for potentially hidden biases.
  4. Train hiring managers and recruiters to be “color-blind” when hiring candidates.
  5. Seek board members who reflect the diversity of the population that your organization serves.
  6. Include diversity and inclusion language in job postings to welcome potential candidates of all ethnicities, races, genders, etc.
  7. Create and measure diversity goals.

It is only by becoming aware of a problem that we can confront it head-on and address it. Becoming aware of any diversity issues in the workforce is a necessary part of growth. “Futureproof” your nonprofit organization by ensuring a diverse workforce now.

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.