Monthly Archives

September 2022

SEFA: What You Need to Know About Federal Expenditures

By | Audit, Nonprofit | No Comments
woman looking at paperwork in front of a laptop at desk

Is your nonprofit subject to a Schedule of Expenditures of Federal Awards (SEFA)?

Over the past several years, many nonprofits availed themselves of federal grants. These funds may have been related to the pandemic relief programs or separate programs intended to support the work of nonprofits. However, the increase in federal grant programs, and the number of nonprofits tapping into them, may mean that your organization is now subject to the Single Audit. To determine whether you now complete a Single Audit, you should first complete the SEFA.

What Is SEFA?

SEFA is a separate document required as part of an audited financial statement. It may be presented in the accrual or cash-based method of accounting.

If federal grants total more than $75,000 over an organization’s fiscal year, the organization is then subject to the Single Audit. SEFA must be completed as part of the Code of Uniform Guidance.

What should be included in the SEFA? According to the guidelines, federal expenditures to be included should be based on when the federal award is considered “expended.”

Determining which funds should be included is a bit more complex than looking over your awards and determining which came from federal sources. The Uniform Guidelines categorize the following to be included:

  • Grants
  • Cost-based Contracts under Federal Acquisition Regulations (FAR)
  • Cooperative Agreements
  • Direct Appropriations

Loans and Loan Guarantees

Loans and loan guarantees should also be considered under SEFA. The basis of determining them may be found in 2 CFR Part 200.502 as:

  • Value of new loans made or received during the audit period; plus
  • Beginning of the audit period balance of loans from previous years for which the federal government imposes continuing compliance requirements; plus
  • Any interest subsidy, cash, or administrative cost allowance received

Donated Personal Protective Equipment (PPE)

If your organization received a donation of PPE, you must account for its value. Calculate the fair market value at the time of the donation and include it as a footnote on the SEFA.

Note that the amount of the donated PPE should not count towards the determination of a Single Audit.

Donated Property and Donated Food

Donated property and food follow similar guidelines to PPE. The fair market value should be calculated at the time of the donation.

Determining Receipt of Income

The receipt of income date is determined for the SEFA by assessing the date by which the income from a federal source was received or used by the program.

Endowment Funds

Endowment funds from federal sources should be reported on the SEFA at the cumulative year-end balance if the restriction applies.

Medicare and Medicaid

Check with your state’s regulations or consult with a nonprofit accountant. In many cases, Medicare and Medicaid funding is not counted towards SEFA calculations. However, state guidelines may make your state an exception to the rule.

Presenting the SEFA

To ensure clarity and transparency, it is vital to report the information on the SEFA according to the Uniform Guidelines. The Guidelines specify that organizations should list each individual federal program by federal agency, and you can group a cluster of programs together. You must also note the name of any passthrough entities and identifying numbers if the organization received funds through a passthrough entity. The same applies if your organization passes funds through to another entity—you’ll be required to provide the total amounts provided to each subrecipient.

The totals on the SEFA are required for each federal program and Assistance Listing (AL) number (formerly the Catalog of Domestic Assistance, CFDA). If the AL number is not available, organizations can use another identifying number. Each cluster reported on the SEFA must also provide a total.

Lastly, footnotes: yes, they’re required. Nonprofits must disclose the outstanding balance of any loan and loan guarantees reported on the SEFA as of the end of the audit period. Additionally, organizations are required to disclose whether they utilized the de minimis indirect recovery during the year.

AICPA provides a checklist to help guide you through the complexities of SEFA preparation.

Preparing the SEFA properly requires a great deal of time and attention to detail, not to mention nonprofit accounting expertise. We highly recommend contacting us for assistance to ensure full compliance and the best preparation of these important documents.

Nonprofit Accounting Topics to Watch

By | Accounting, Nonprofit | No Comments

One of our goals is to ensure that our clients are always up to date on the most important nonprofit accounting topics. To that end, we bring you this update on trends of note. Additional information will be shared on similar topics as it becomes available.

Financial Impacts of COVID-19

Although much of the nation has returned to “business as usual,” the effects of the global COVID-19 pandemic are still being felt throughout much of the accounting and financial world.

Financial managers, auditors, accountants, and others leading finance and accounting at nonprofits must be aware of the following.

  1. Paycheck Protection Program (PPP)

In March 2020, the government passed the CARES Act, which set aside $2 trillion in funding. This was followed by the American Rescue Plan Act in March 2021 with $1.9 trillion in funding.

Under the aegis of these programs come many sub-programs, such as the Paycheck Protection Program. Many nonprofits availed themselves of this program which enabled them to tap into the SBA’s loan program for forgivable loans. These loans could be used to cover payroll, mortgages, rent, and utilities—in other words, necessary expenses to keep a business or nonprofit afloat.

Additionally, the American Rescue Plan Act of 2021 enabled many large NFPs to apply for PPP loans for the first time. This act provided additional or extended employment-related funding and benefits, as well as provided additional federal funding for numerous nonprofit programs (e.g., childcare, arts and humanities, food assistance, and homeless prevention).

  1. Charitable Giving Threshold Changed

Also, under the CARES Act came added incentives for charitable giving. The Act raised the limitations on deductible charitable contributions of cash by individuals who itemize. It also included a $300 above-the-line deduction to individuals who do not itemize and raised the cap for deductible charitable contributions of cash by corporation. These changes were intended to increase charitable gifts to assist nonprofits.

  1. Extended Family Leave

Also, as part of the pandemic response, the Families First Coronavirus Response Act was signed into law on March 18, 2022. It temporarily expanded the Family and Medical Leave Act, permitting certain employees to take up to 12 weeks of leave for specified reasons relating to COVID-19.

  1. Grants for Venues Forced to Close

Many nonprofit organizations such as galleries, performing art venues, and similar artistic services were forced to close during the pandemic to ensure patron safety. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act was enacted in December 2020 and provided grants to venues temporarily closed due to the pandemic. Included in this act was $15 billion in grants for museums, zoos, aquariums, and performing arts organizations who meet the criteria outlined in the grant. Entities who qualified for this grant were able to apply for 45% of their gross earned revenue (up to $10 million).

Did Your Organization Avail Itself of These Opportunities?

If your organization took advantage of these opportunities to make it through the pandemic, it is important to note how to account for such finances, whether funds need to be repaid, and so on.

Here are several resources.

About 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.

5 Trends to Watch

By | Nonprofit | No Comments

Trends come and go, but some are worth watching because they point to a larger current in the nonprofit world. For example, the trend towards hybrid and remote work has been within motion for some years, but the pandemic brought it to a head and forced many organizations to make a rapid switch to virtual work.

As with any trend, many factors influence whether it fades or becomes part of the nonprofit workplace. The following five trends, however, are ones worth watching.

Five Trends Nonprofits Should Watch

  1. Remote work and collaboration

We began this article by using the historic transition to remote work as a trend to watch and for good reason: it is here to stay. Many nonprofits have embraced the hybrid and remote work arrangements begun during the pandemic as models they can continue to offer to workers. And workers rejoice at this news: more than half of all workers in a recent HubSpot survey state they’d rather quit than return to the office!

Even if your workplace does not currently have a remote work policy, it is best to be prepared in case an emergency does necessitate everyone working from home. Cloud computing technology, such as cloud-based accounting programs, enable users to share data from wherever they log on and foster collaboration and cooperation. Having the right technology in place to facilitate remote work is important in today’s world and a trend we expect to continue.

  1. Demand for speed (and availability)

Gone are the days when a slow response was chalked up to poor technology. Even the most resource-tapped nonprofit is expected to have basic technology in place and fast, reliable internet. Donors, colleagues, and constituents demand answers at the speed of light—and people available to help them. Be prepared to assist more people personally than ever before or put in place technology, such as smart chatbots, to help answer frequently asked questions.

  1. Blockchain, cryptocurrency, and NFTs (non-fungible tokens)

Although they may have seemed like a fad, blockchain, cryptocurrency, and NFTs are now part of the popular parlance. The IRS has set guidelines for how to account for cryptocurrencies, and nonprofits may have to wrestle with such unusual gifts and donations as cryptocurrency and NFTs. Consider the long view that these new digital items are here to stay and that your organization needs a policy for accepting and accounting for them.

  1. Cybercrime

It’s sad to have to put this on the list, but it’s fact: cybercrime isn’t just here to stay, it’s affecting more organizations, including nonprofits, than ever before.

As the economy struggles, criminals continue to prey on the vulnerable—and that includes nonprofits which often lack the IT resources to fight back against cybercrime.

Consider an annual cybersecurity check a must-have and take great care to shore up your defenses. Cloud software offers multiple layers of security that can help protect your nonprofit against the worst effects of a breach or hack. Looking into insurance that protects your organization from cybercrime’s worst financial effects may also be a prudent step.

  1. Multiple business services with one advisor or consultant

In the past, organizations thought nothing of going to multiple specialists for needed services: accountants, auditors, legal advice, marketing firms and so-on. Now, however, there’s a distinct trend of offering one company with multiple resources so that organizations can have all their business needs taken care of in one place.

Consider an accounting firm that offers basic accounting, tax preparation, and financial advice services. Such a firm may now offer software consulting and implementation, an in-house lawyer for legal advice, payroll processing, and benefits administration. It makes it much more convenient for organizations to deal with one company than multiple businesses. If your organization needs such services, Welter Consulting offers many business needs in one group: accounting, software consulting, and more.

Although trends come and go, in business, trends are often much slower to take hold of the general consciousness. Adapting to trends is part of the business mindset, and one which requires prudence to follow only those which benefit an organization.

About 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.