Monthly Archives

January 2020

FASB Delays Several Effective Dates: Credit Losses, Leasing, Hedging, and Long-Duration Insurance Standards Affected

By | FASB | No Comments

The Financial Accounting Standards Board announced at the end of 2019 that they were delaying several effective dates. These changes impact four areas: credit losses, leasing, hedging, and long-duration insurance standards.

You can find a chart of all the dates and standards impacted on the FASB website.

Who Is Affected?

If your nonprofit is considered a public business entity (PBE), it may be subjected to the same rules and requirements as PBEs. When looking at FASB ASU 2019-10, this would place nonprofits in “bucket 2” in the update, subjecting them to the same changes as other entities when it comes to reporting financial instruments such as credit losses, leasing, derivatives, and hedging.

What Are the Major Implications?

If your nonprofit is affected by ASU 2019-10, here are the critical points found in the standards update:

  • Credit Losses: If your organization is on a calendar-year end, and it is eligible for the deferral, the new effective date is January 1, 2023. Organizations can determine whether they are eligible to be ‘smaller reporting companies’ based on their most recent filing determination. This must be in accordance with SED regulations as of November 15, 2019.
  • Derivatives: Nonpublic business entities get a one-year deferral. If your organization is on a calendar year-end, and it is eligible for the deferral, the effective date is January 1, 2021.
  • Leases: All non-public business entities get a one-year deferral. This includes nonprofits that have issued, or are conduit bond obligators for securities that are traded, listed, or quoted on an over-the-counter market or exchange, as well as employee benefit plans that file or furnish financial statements with or to the SEC. If your organization is on a calendar year-end, and it is eligible for the deferral, the new effective date is January 1, 2021.

Why the Update?

According to the FASB report, there is a significant change to the underlying philosophy of the standards, thus necessitating updates to:

  1. Accounting Standards Update No. 2016-13, Financial Instruments— Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (Credit Losses)
  2. Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (Hedging)
  3. Accounting Standards Update No. 2016-02, Leases (Topic 842) (Leases).
  4. Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944)

Is Your Nonprofit a PBE?

It is essential to note whether your nonprofit is considered a PBE, which would make the changes applicable to your organization. FASB amended its glossary of terms in 2013 to create one definition for PBEs.

Although nonprofits are left out of the general definition of PBE in the Master Glossary, specific nonprofits may be subjected to the requirements imposed on PBEs by specific FASB standards. When that occurs, nonprofits are differentiated using similar terms to those used for the definition of PBEs.

“Nonprofits that have issued, or is a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or an over-the-counter [OTC] marketare held to the same accelerated effective dates and expanded disclosure requirements imposed on PBEs,” according to AICPA.

Your best recourse is to consult with the Master Glossary definitions and use these to evaluate whether your nonprofit fits in the PBE category. Then, check what disclosures are required. Nonprofits, for example, are required to disclose certain pension information only if the nonprofit is determined to be a public entity.

Fortunately, FASB has granted more time to adhere to the news standard. They’ve also provided plenty of clarifying information in the documents we’ve linked to help you understand the full impact of the changes and updates.

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.

Simple Steps You Can Take to Prevent Cybercrime

By | Fraud | No Comments

If you’re not taking steps to reduce your risk of cybercrime, you should. Nonprofits aren’t immune to attacks from criminals, and, in fact, the opposite may be true. Many cybercrimes target small businesses and nonprofits because criminals know that these organizations lack resources, such as insurance or IT specialists, to fight back. Instead, they often submit to the criminals’ demands and pay the ransom. The criminals can then head to their next victim without punishment.

It’s time to reduce cybercrime risk by taking proactive steps. While you cannot eliminate the threat from attacks, you can certainly take steps to minimize risk. It’s like installing sturdy locks on the door of your home, an alarm system, and a webcam; it won’t stop someone determined to break in and steal your possessions, but it sure makes it harder for them to do so, and easier to catch them.

Five Tips to Reduce a Nonprofit’s Risk of Cybercrimes

  1. Improve password strength: Please, say goodbye to using “password123” or “namename123” as your passwords. Yes, according to MetroNews, people still use passwords like 1234567. Despite news of security breaches affecting millions of people (and their credit rating), people continue to use weak passwords. Don’t allow this within your organization. Insist that everyone choose strong passwords and change them monthly. Strong passwords are difficult for the average person to guess, do not include common words or phrases, and include capital letters and lower case letters as well as symbols and numbers. Think that’s a tall order? It could save you a great deal of trouble later by making the proverbial “lock on the door” very strong and keep attackers from easy entry into your database or website.
  2. Review your cybersecurity strength: Conduct a cybersecurity audit or work with us to conduct one. A cybersecurity audit examines all areas of your organization where attackers may gain entry and cause trouble. It also helps you pinpoint things you’re doing right so you can replicate them. AICPA provides a free guideline to help you conduct your audit.
  3. Update your software and website: All software needs to be updated to patch known problems and fix gaps that hackers exploit for nefarious reasons. When your software prompts you that it needs to update, please don’t ignore the message or quiet it and forget it. Websites also need to be updated frequently. WordPress, a common framework used to build websites, typically includes codes called plugins, which are areas hackers are known to exploit. These should be checked and updated regularly, which can be done from the administrative panel in WordPress. Other site providers and frameworks have similar places to update software.
  4. Provide training: Train employees to recognize attempts to gain access to systems. Some common things to watch for include phishing schemes, which trick people into revealing passwords through phony reset messages or similar emails; scams that encourage you to click on a link, thus infecting your computer with a virus or similar code; or downloading a ‘free’ item that includes malicious code embedded in it. Another method that criminals use to gain access to company systems is to pretend to be the CEO or another public-facing executive and request information from someone about the system or their password. By teaching your staff all of these methods, you help raise awareness of what they may encounter and encourage the appropriate steps to confirm any requests for passwords and confidential information. Write and document all procedures and provide training to both new employees and refresher training for current employees.
  5. Back up everything: If a security breach occurs, you may be locked out of your systems. It’s a nightmare that some companies face, and it can be costly to fix it. By backing up your systems, you’ll be able to access and replace any information that may be compromised by an attack.

Take Cybercrime Seriously

Take cybercrime seriously. An ounce of prevention is always worth more than a pound of cure.

If you need help with a cybersecurity audit or more information, please don’t hesitate to contact Welter Consulting for information.

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.

The Importance of Nonprofit Strategic Planning

By | Nonprofit | No Comments

Of all the items on your to-do list, strategic planning probably ranks low on the list—if it’s there at all. Most nonprofit managers and directors believe they are too busy serving constituents and members, leading teams, and reacting to challenges and demands of the organization to develop a strategic plan.

That’s the key: reactive. Most nonprofits and indeed most companies overall react rather than act with forethought, planning, and insight.

That’s where strategic planning comes into the picture. By creating a strategic plan, you’re taking charge of your nonprofit’s future. While you must still react to changing circumstances and the daily challenges and demands of an active nonprofit, you’ve got an overarching plan in mind to guide the organization through it all.

What Is a Strategic Plan?

Many people confuse strategy with tactics, so it’s essential first to understand what a strategic plan entails. A strategic plan presents a series of coordinated actions and activities that help advance the nonprofit’s mission. After describing the actions and activities, the “how-to” may be added. The “how-to” are the tactics or discrete actions to be taken to achieve the overall strategy.

Think of a strategic plan as a deliberate choice. Rather than react and rely upon your creativity, knowledge, and insight, it helps you to outline a series of intentional and considered steps to advance your organization’s mission.

If your mission is to reduce hunger in your town, your strategic plan may include establishing a pipeline of donations from local restaurants (hot meals) and supermarkets (non-perishable and perishable food) as well as networking with local churches and charities to meet the needs within the community. How you do this may include phone calls to the owners of the restaurants, meeting with corporate representatives of supermarket chains, and local networking. The strategy to reduce hunger will guide your decisions and the overall work of the organization for the year.

Why Bother with Strategic Planning?

Some people view strategic planning as a mere exercise or paperwork. Not so. It’s vital for a healthy nonprofit. If you have a strategic plan in place you can:

  1. Make better decisions: Strategic plans provide a framework against which daily choices can be made. It’s easier to decide whether to do one thing or another if you have a rubric against which you can check the choices.
  2. Clarifies the organization’s mission and values: With a strategic plan in place, it is crystal clear what your organization values and what it intends to do. It clears up where you are headed and makes it easier to describe activities to the public and staff.
  3. Guides the staff: One way to improve employee engagement is to give them clear directions. People generally work better together when they understand what is expected of them and the direction in which they’re heading. When you build a strategic plan, you outline the overall goals and direction for the year, and the staff understands now what they can do to help achieve the plan and support the organization’s mission.
  4. Improves fundraising: A strategic plan may provide the impetus and inspiration for marketing staff to create new campaigns and better align their messaging with the organization’s mission.

As you can see, a strategic plan serves many functions. An annual strategic plan offers you the opportunity for direction-setting and cohesive staff guidance. Perhaps, more importantly, it helps you set and guide the direction of your organization, so you’re no longer tossed about by the winds of chance but have your hand firmly at the wheel to steer where you’re headed.

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.