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Team Welter

Aug 04
0

Gifts in Kind: Upcoming Changes to Presentation

By | Accounting, Nonprofit | No Comments

Philosophers tell us the only thing constant in the universe is change. When it comes to accounting rules, that seems to be the norm as well. The past year we had a little break from the constant stream of changes coming from FASB, but a new change to the presentation of gifts in kind is on the horizon. Here’s what nonprofits need to know about ASU 2020-07, changes to the presentation of gifts in kind.

What Are “Gifts in Kind”?

The term “gifts in kind” may refer to fixed assets or intangible assets. Examples of gifts in kind that are included in the updated accounting rules include fixed assets such as land, buildings, and equipment. It also includes the use of fixed assets, so if a donor allows you the use of a building, for example, that must be included as well.

Other donations must be included: utilities, food, clothing, medicines, and medical supplies. Lastly, intangible assets such as contributed services are also categorized as gifts in kind and should be described as such in your accounting documents.

5 Required Disclosures

Under the revised ASU 202-07, nonprofits are now required to disclose five things related to each item included as a gift in kind.

  1. Qualitative information
  2. Nonprofit policies
  3. Donor restrictions
  4. Valuation technique
  5. Principal market

Let’s unpack each one.

Under qualitative information, nonprofits are asked to disclose whether the asset was sold or utilized. If the asset was used by the nonprofit for its work, the disclosure should include information about which project the asset was used for and how it was used.

Nonprofit policies refer to the organization’s written policy regarding gifts in kind. Some organizations have written policies about how gifts in kind are monetized. For example, are assets sold at auction or sold in a charity shop? How are they valued? Such policies should be included as part of the description.

Donor restrictions include any conditions that donors place upon how the asset is used or disposed of; for example, if the donor restricts an item to use by the nonprofit rather than allowing it to be monetized.

Valuation techniques are described in FASB ASC Topic 820, Fair Value Measurement. The technique used to value items at initial recognition should be described and recorded.

Principal market (or most advantageous market) used to arrive at a fair value measure if it is a market in which the recipient not-for-profit is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial assets.

Reporting Changes to Gifts in Kind Are Retroactive

FASB has stated that these reporting changes should be applied retroactively, so nonprofits should begin immediately to assess gifts in kind and how they are reported. The amendments take effect for annual reporting periods beginning after June 15, 2021 (for example, fiscal years ending June 30, 2022, and December 31, 2022). And, if you’re so inclined, you may report early—FASB is allowing early adoption of the updated reporting standard.

Everything changes, and that includes FASB standards. If your organization accepts gifts in kind, now is the time to act on these 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.

Jul 29
0

Become a Data-Driven Organization

By | Data, Nonprofit | No Comments

Nonprofits today have more data at their fingertips than perhaps at any other time in history. But if this data remains hidden among reams of reports, it’s useless. Data that is difficult to read, interpret, or use offers no benefit to anyone.

You can change that by helping your nonprofit transition into a data-driven organization. True data-based decision making can be challenging to implement and may take years as you add more data-focused people to the staff, update technology, and provide training to everyone on how to use data (more on that later). But it is worth it in the long run.

Why Become a Data-Driven Organization?

Data-driven organizations can provide stakeholders with facts to substantiate their claims. They can offer donors, granting organizations, and others the proof through verifiable data of program efficacy and responsible stewardship of funds.

Perhaps more importantly, using data, these nonprofits can make better decisions on which programs to fund and where to put their efforts. Instead of guesswork, data driven organizations look at the facts to support their choices. They can better fulfill their mission when they see the facts that support their choices.

Steps to Becoming a Data-Driven Organization

As you shift your organization’s focus toward using data to make decisions, you may need to take several steps to help the transition.

  1. Provide staff with the tools they need.

Your current software may be unable to produce or analyze the data available. You may need to update or upgrade software. You may need to add business intelligence software, grant reporting software, and true fund accounting. A thorough assessment of the systems used to collect, support, and share data is necessary before choosing new software. But, in order to use data, staff must be able to collect it and access it easily, and that calls for the right software.

  1. Offer training and support.

Few people are trained in the use of data, and fewer still know how to analyze data. You may wish to find a consultant to work with your team to help them learn how to access, analyze, and report on data.

  1. Share data.

Another important step is to ensure all data from your organization can be shared easily and quickly. Silos may exist now that must be breached in order to ensure data is shared among all departments. A data-driven organization is no place for “data misers” who hoard their information. Make it an organization-wide expectation that data should be shared, within reason.

  1. Make data gathering a priority.

Ask key questions and add data gathering to all projects where it makes sense to do so. Ensure new initiatives get the green light only if there is enough data to support their launch. Make sure your teams know you expect efficacy data, retention data, and other key data to support projects and goals.

The Marriage of Data and Storytelling: A Match Made in Heaven

Data alone rarely sticks in people’s minds. Data, when combined with stories, does. Using storytelling techniques and having a hero, a villain, a wise guide, a quest, and other traditional story points, underscored with data to support the story, can make data come alive for your audience.

For example, a food bank may know that hunger affects 5% of their local community. What does 5% mean? What does it look like?

Telling a story about a hardworking single parent of four who is juggling two jobs to pay the rent and needs a weekly grocery supplement from the food bank makes that 5% statistic come alive. Now, it’s clear how donations to the food bank are used and who that 5% represents.

Ready for a Data-Driven Approach?

If you’re ready to focus more on data but you aren’t sure where to start, we 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.

Jul 28
0

Four Important Tax Matters for Nonprofits

By | Nonprofit, Tax | No Comments

While there are many tax issues that nonprofits must be aware of, these four are often misunderstood or overlooked. Between unusual circumstances and foreign income tax, how many of these tax matters does your nonprofit face?

Line Items

Recent updates from the IRS may be to your organization’s advantage.

  • IRS Announcement 2021-7 states that amounts paid for hand sanitizer, sanitizing wipes, personal protective equipment and masks by the taxpayer may be treated as paid for medical care under Sec. 213 (d). That’s if these expenses were incurred primarily to prevent the spread of COVID-19. If your organization purchased this equipment, IRS 2021-7 may apply. Unreimbursed amounts are deductible as an itemized medical expense to the extent that, along with other allowable medical expenses, they exceed 7.5% of adjusted gross income. Or they may be paid for or reimbursed from a health savings account. Check to see if your organization’s Group Medical Plan has been amended to also cover protective and sanitizing equipment.
  • The IRS also posted COVID Tax Tips which guides employers through how to pay for their portion of Social Security tax of certain employees that were deferred from Sept. 1, 2020, through Dec. 31, 2020. This information supersedes Notice 2020-65 and Notice 2021-11. According to the latest update from the IRS, employers can make the deferred payments through the Electronic Federal Tax Payment System (EFTPS) or by credit or debit card, money order, or check. The IRS asked that employers separate these payments from other tax payments and promised that an option for ‘deferral payment’ would be added to the EFTPS system to make it easier to identify the tax payment as one for the deferred Social Security tax.

T.D. 9940 issued by the IRS provides helpful information on how to correct tax funds that are misdirected or direct deposited to the wrong bank account. The procedures are mandated in Sec. 6402(n) in the Taxpayer First Act, P.L. 116-25.

Key takeaway: Nonprofits may be able to deduct the cost of sanitizing supplies to combat COVID. Guidelines are also out now to help employers pay their portion of deferred Social Security.

Charitable Bequests

For those organizations that receive charitable bequests, it is worth noting that the Tax Court has examined the issues of charitable bequests; it redetermined the value for gift and estate tax purposes of interests in limited liability companies (LLCs) holding real estate, ground leases, and leased-fee interests. The court upheld the IRS’s determination that a discount applied to property should be split between two charitable donees. The case that the court ruled on may be read in full in Tax Bulletin 2021-17.

Key takeaway: Nonprofits should check with their accountants regarding charitable bequests, especially if they involve real estate.

Gambling Losses

In another update, the Tax Court recently ruled that a taxpayer sufficiently substantiated gambling losses of at least as much as gambling winning reported for the year.

The case that brought about this ruling centered on John Coleman, an insurance agent whose compulsive gambling offset his earnings as an agent. Despite gambling winnings in excess of $350,00 in 2014, Coleman failed to file his income taxes. Typically, taxpayers who do not gamble for their trade may itemize their deductions to including gambling losses, to the extent of any gambling winnings.

Coleman, through a detailed retrace of his receipts and expert testimony, presented his evidence. The court found reasonable evidence to support Coleman’s substantiation of his losses. (The complete case may be read at TC 2020-146.)

Key takeaway: Records from the casinos, plus expert evidence on the probability of slot machines, were upheld by the court as evidence in a tax-related case. Casinos should take note that their records of patron activities might be called upon to substantiate an IRS filing.

Should You Opt-In for a PIN?

PIN numbers are ubiquitous. You’ve probably used a person identification number (PIN) in the last week or two to access your bank account or conduct other secure transactions.

Now, the IRS is offering taxpayers the option of using PINS to verify their identity online. The program is voluntary and allows taxpayers to opt-in to receive a PIN to prevent identity theft.

Key takeaway: The FTC stated that in 2020, over 167,000 people reported identity theft. It’s a continuing problem. If you were the victim of identity theft, it may be a good idea to request an IRS PIN. Or, if you feel like your organization may be open to tax refund or identity theft, talk to your tax preparer about requesting a PIN.

Keeping up-to-date with tax changes can be challenging, but following this blog makes it much easier. We hope you’ll bookmark our site to watch for future 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.

Jul 22
0

The Data Analytics Chain: A Primer for Accounting Professionals

By | Accounting, Data | No Comments

Accounting professionals are used to working with data. After all, they work with numbers all the time. And aren’t numbers just a form of data?

Numbers are indeed a form of data, but there’s much more to data and analytics than working with standard reports. Data has come a long way from the manual data collection and use that some may remember from years ago. Now the question becomes which data to collect, rather than if it can be collected.

The Data Analytics Process

The data analytics process is a loosely connected series of steps that collects, prepares, organizes, reports, and offers for analysis important data from your company. This data may take many forms. It may include financial data, but it may also include warehouse reports, time to completion, and other quantifiable facts.

Sources of data today abound in the workplace. Many companies utilize enterprise resource planning, or ERP systems, which are finance and accounting systems that gather data from various points through a company.

The data analytics process takes into account every step of the process from finding to utilizing data.

  1. Data Collection

The first step, data collection, may already be taking place within your organization. As an accountant or financial professional, your input into data collection is invaluable. You can identify valuable data within the organization or among its suppliers and vendors that should be tracked.

Take time to work with your team to identify and list all potential sources of data that would be useful to your data analytics process. This activity should also include “dark data.” Dark data is data your business has access to but may not know how to extract it from its source. Sources include competitor websites, government and state websites and data reports, PDFs, and similar public documents. Web scraper or technology that can extract data from such sources can add to your repository of data.

  1. Data Preparation

Data preparation includes profiling, cleaning, and correcting the data before it is used. You’re probably familiar with profiling and cleaning data. It’s not unusual for accountants to work with data files in this manner. What is unusual is the size of the newer data files. They are often too large to work with manually and instead must rely on automated processes to identify data duplicates or discrepancies and clean the files.

  1. Build Information Models

The information model is critical for the analysis phase. The model provides the details of the data to be stored in the data warehouse. If the information model is incomplete or inaccurate, it can lead to significant challenges and mistakes later on during the analysis phase.

This is the time to build and review information models with your team. Go through what-if scenarios to ensure the information you’ve collected is enough to fulfill needed situation analysis. If not, return to earlier steps to define and collect the appropriate data.

  1. Analytics

In the analytics phase, insights are developed and shared with key stakeholders. Many companies find that business intelligence tools, aligned and integrated with enterprise resource planning systems, enable the analytic phase to be completed quickly and easily. Business intelligence software prepares visual representations of data that, depending on the type of report and the data fields chosen for the report, may be more easily understood than pure data alone. Bar graphs, pie charts, scatterplots, and similar diagrams are examples of business intelligence reports that transform data into more easily understandable graphics.

Challenges and Opportunities

There are many challenges and opportunities available in the data analytics process. Being aware of various challenges in each step of the analysis process can help you avoid or overcome them.

Data has always provided accountants with powerful information. Now, more than ever, with access to so many software tools to gather and utilize data, accountants can provide useful and valuable insights to benefit others.

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.