Category

Accounting

Dec 20
0

The Benefits of Data-Driven Audits

By | Accounting, Audit, Nonprofit | No Comments
person at laptop doing audit, interacting with virtual data file screen

The annual audit offers nonprofits an unbiased third-party analysis of their finances. It also assures the public, based on the auditor’s report, that funds are being accounted for correctly.

But many audits are conducted on a routine basis. Auditors often perform the same analysis year after year. Others may focus on areas that have little impact on the overall audit but are easier to see, or things they deem vital, but which may not have a significant impact on the organization.

A data-driven audit, on the other hand, focuses on data from the trial balance and general ledger to conduct a robust risk assessment. From this risk assessment, the auditors then tailor their approach and methodology to identify and assess risk areas. The resulting audit leverages data from both prior years and the current year to present a clear, robust picture of an organization’s financial health and risk areas.

Data-Driven Audits Require the Right Tools

If data-driven audits are so helpful, why aren’t more auditors performing them?

Organizations and auditors need the right tools to perform data-driven audits. This includes financial and accounting software that can provide ready access to current and prior year finances, as well as software to perform complex analysis of the data. This type of analysis cannot be completed easily using a calculator or spreadsheet; auditors who offer data-driven audits typically work with nonprofit software and databases to crunch the numbers they analyze later.

The Benefits of Data-Driven Audits

Data-driven audits provide many benefits. These include:

  • Enhances efficiency: Leveraging software and tools to perform data analysis reduces the auditors’ hands-on time with the finances. They can use their time more efficiently to focus on risk identification and assessment.
  • Improves outcomes: Risk identification enables nonprofits to take remediation steps for improved outcomes. Auditors can review 100% of the information because the initial analysis is completed using technology.
  • Reduces risk: Auditors who do not leverage data-driven audits may miss crucial information because they rely upon sampling techniques rather than a deep-dive into the entire database. Data-driven audits analyze everything, thus reducing the risk of missing something important in the audit.

Supports Remote Audits

Another benefit of using data-driven audits is that most of the technology used to gather and analyze data is cloud-based. Cloud systems enable remote access, meaning that the auditors do not have to spend as many days onsite with you as in the past. They can pull data remotely, analyze it, and focus on findings. This provides a more efficient and cost-effective audit, giving both nonprofits better results and saving auditors time.

With the current accounting employment shortage, in which fewer people seem to be entering the accounting profession, there will likely be a shortage of experienced auditors soon. However, by using technology, auditing firms can increase the amount of work they do, while providing better service and more detailed analysis to nonprofits. This can offset some of the accounting labor shortage.

No Need for a Big IT Department to Benefit from Data

Another benefit to using cloud-based accounting and finance software is the ease with which organizations can add it to their tech stack. Unlike site-based systems, which may require special hardware and personnel to maintain and manage them, cloud-based systems are accessed through the internet. The software provider takes care of maintenance, updates, and security. No special hardware or software is needed to use them either, thus enabling you to continue using the hardware that you have.

Added Value with Few Drawbacks

Data-driven audits add so much value and have few, if any, drawbacks. Not only can they cover more transactions than a traditional audit, but they also help auditors more easily focus on possible risk areas. With the right technology in place, nonprofits can reap the benefits of big data even with limited budgets.

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 us for more information.

Dec 13
0

How to Accommodate Neurodiversity in the Accounting Team

By | Accounting, Nonprofit | No Comments
people at table with laptop and ERP accounting dashboard printouts

According to Harvard Health, neurodiversity refers to a spectrum of neurological differences among people with autism and other conditions. Neurodivergent people demonstrate unique strengths and challenges.

However, many workplaces shy away from hiring neurodivergent individuals. With the continuing debate over a shortage of people entering the accounting profession, many companies are rethinking their hiring practices and finding ways to welcome neurodivergent people to the accounting team. Here are several ways in which nonprofits can hire from this community with confidence.

Reach Out to the Autism Community

As part of your organization’s hiring practices, you probably have connections with local universities, for example, to be part of job fairs and other recruiting efforts. The same type of networking can help you hire from within the autism community. Such groups or organizations that offer support to people with autism may also have career centers that look for placement opportunities. Share your job notices and hiring criteria with them and encourage people with autism to apply.

Allow for Accommodations

Many autistic people thrive in the workforce with simple accommodations, but such accommodations are not one size fits all. Ask what the person needs to feel comfortable and do their job well. Often, it’s as simple as reducing distractions: allowing them to wear noise canceling headphones or work in corner cubicle that limits distractions. Most accommodations can be easily made without disruption to other workers.

Find an Internal Champion

Perhaps you think it’s a great idea to expand the hiring pool by tapping into neurodivergent communities but others within your organization think differently. Find a champion to support your efforts. A champion refers to someone at the senior or executive level who can lead the change from the top. With the help of a champion, you can more easily lead change from both the management and senior levels in the organization and convince more people to welcome people with different abilities.

Benefits of Hiring Neurodivergent People

Are there any special benefits from hiring neurodivergent people? In the accounting profession, yes!

Many people with autism excel at pattern recognition, and an important aspect of many accounting tasks is recognizing when something deviates from the norm. Of course, this is a generalization, and people have unique skills, but neurodivergent people do think differently—and it’s this strength that can make a great difference to your organization. Encouraging people with different ways of thinking and seeing the world to be part of the accounting team can lead to improved work and better outcomes overall.

According to the CDC, about 2.2% of the United States population is on the autism spectrum. This figure does not include other diagnoses within the neurodivergent community. While it may not seem like a big number, it is likely that you know at least one or two people who have autism or who have children with autism. Having autism doesn’t mean someone can’t work. It simply means they think differently and possibly process information and sensations differently. And while this may make it challenging for them in some areas, it may make them perfect for the accounting profession. Don’t avoid hiring neurodivergent people. There’s a wealth of untapped talent within the community that may benefit your organization.

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 us for more information.

Dec 01
0

Payroll Tax Credits May Be Available to Businesses That Paid Emergency Leave

By | Accounting, Nonprofit, Tax | No Comments
person at desk with pen, ledger, and mobile device

If your business paid for emergency leave during the COVID-19 pandemic, you may be eligible for certain payroll tax credits.

Billions of dollars in aid resulted from a series of laws passed around March 2020. These laws were intended to offset the financial burden from small business owners who continued to pay employees wages and paid emergency leave during the pandemic. Now that the national health emergency is over, businesses must be vigilant and claim any rightful tax credits that remain from the pandemic-era laws.

Family First Coronavirus Response Act and Tax Credits

Under the Families First Coronavirus Response Act (FFCRA), private American employers with fewer than 500 employees could receive payroll tax credits to offset the costs of the requirement to provide employees with qualifying paid leave for specified reasons related to COVID-19.

The mandate ended in 2020. However, the American Rescue Plan Act (ARPA) extended and expanded the payroll tax credits, allowing covered employers to take the credits until Sept. 30, 2021, if they voluntarily provided employee paid leave under the FFCRA framework. Keep in mind that the credit could be affected by local and state COVID-19 leave requirements and the interaction with the requirements under FFCRA. Another caveat is that an employer could only qualify for the federal tax credit if the leave met the requirement of the original FFCRA mandate.

What You Need to Know About FFCR Act

From April 1, 2020, through March 31, 2021, American private employers with fewer than 500 employees and self-employed individuals could claim certain COVID-19-related leave credits. The maximum leave days varied based on the situation and the calculation was dependent on regular work hours. Qualifying reasons for leave during this period included various COVID-19-related circumstances, and part-time employees received leave equivalent to their regular hours.

From April 1, 2021, through September 30, 2021, healthcare providers and certain governmental employers became eligible for the credits, and the limit on self-employed family leave credit increased. Non-discrimination rules were also established. Also, during this period, more reasons for leave were added, including COVID-19 testing and vaccination-related leave.

Wage calculations for paid sick leave depended on the reason for the leave, with varying pay rates.

The American Rescue Plan Act (ARPA) introduced changes in the Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (EFMLEA), affecting the refundable portion of credits and other details.

Under EFMLEA, the maximum leave amount and eligibility were modified, allowing for an increase in the aggregate amount and extending eligibility to healthcare workers and emergency responders.

Organized Recordkeeping Is Critical for Compliance and Reimbursement

Regardless of whether you granted leave, you must keep all the requests and time tracking information for up to four years. The Department of Labor requires employers to maintain the following documentation for four years:

  • Documentation demonstrating how the employer determined how much paid leave an employee was eligible for
  • Documentation showing how the employer determined the amount of qualified health plan expenses that were allocated to wages
  • Copies of completed IRS Forms 7200 and 941 that employers submitted to the IRS (If you use a third-party payer to meet employment tax obligations, you’ll need a copy of their records to meet this requirement).

Although the pandemic may be over, many of the record-keeping and reporting requirements for businesses will carry over for several years as the reconciliation between applications for tax credits and reimbursements continues. It is always a good idea to maintain clear, consistent records, in an organized fashion, for the required time so that you can back up any claims when needed.

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 us for more information.

Nov 29
0

Converting from INFR to GAAP: Considerations

By | Accounting, Nonprofit | No Comments
person using computer at desk

One unusual question that may arise is when a client wishes to change from INFR (international financial reporting) standards to the GAAP (generally accepted accounting principles) standards. Most of the available literature covers the opposite: GAAP to INFR.

Currently, there is no authoritative standard to refer to when changing from INFR to GAAP. Financial Standards Accounting Board FASB ASC 250 provides guidance solely for reporting accounting changes within the same basis, not for moving from one basis to another. However, we can refer to several nonauthoritative sources and draw inferences to guide the transition.

INFR: Not a Special Purpose Framework

A publication by the AICPA’s Center for Plain English Accounting (CPEA), “Common Questions About Special Purpose Frameworks” points out that IFRS does not constitute a “special purpose framework.” Why is this important? Because nonauthoritative guidance for special purpose frameworks does exist. The AICPA designated the International Accounting Standards Board (IASB) as the body to establish professional standards, including those pertaining to international financial accounting and reporting principles. Because of this, INFR may be considered generally accepted accounting principles. Most literature refers to changes within the same accounting basis, not moving from one basis to another.

Suggestions to Make the Standards Switch

So, if there are no authoritative guidelines, and the nonauthoritative guidelines aren’t clear, then what? Deloitte published a paper in 2020 attempting to address this issue as well. First-time adoption of GAAP after using INFR is a bit more complex than converting INFR to GAAP, but it can be done.

Deloitte’s authors suggest the following:

  • Organizations should review all historic transactions since their inception to determine whether the accounting for such transactions would have been different had U.S. GAAP been applied. If that sounds tricky it’s because it is. For example, you’ll need to consider all historic business combinations and whether there should be any amounts (goodwill, fair value adjustments to long-lived assets) that should be included in the opening balance sheet.
  • Companies moving from INFR to GAAP usually complete a full retrospective application. One of the key principles of IFRS 1 is to apply retrospectively all standards effective as of the reporting date of the entity’s first IFRS financial statements (with some exceptions and exemptions). However, U.S. GAAP requires the application of the standard effective as of the transaction date and apply new or changes in accounting policies in accordance with the respective transition requirements of each standard.

What if your company has a very long history? Long-established companies converting to GAAP may need to refer to the previous accounting hierarchy and original pronouncements to determine the appropriate accounting for a particular transaction.

Disclosing Such a Change

For successor auditors, the question arises as to how to report such a change. Such changes should be reported as a “change in accounting standards” or “change in accounting basis” (not change in accounting) within reports. This makes it clear what has changed. Successor auditors would be wise to proceed with caution if inheriting such a situation and carefully consider all options. The lack of authoritative guidelines makes it challenging, but not impossible. Reading between the lines, making decisions that err on the side of transparency and full disclosure, and common sense can go a long way towards making statements clear.

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 us for more information.