Category

Government

Jun 06
0

New Law Raises DOL Minimum Salary Threshold for Overtime Pay – Are You Ready?

By | Accounting, Budget, Government, Nonprofit, Overtime | No Comments
binders labeled salary and overtime, with printout, calculator, and magnifying glass, Minimum Salary Threshold for Overtime Pay

Salaried employees are typically exempt from overtime, but a new law from the U.S. Department of Labor slated to become effective on July 1, 2024, may change that for up to one million people. What is this law and how might it impact your business? We’ll look at the law, what it means for the average business, and what you need to do now to prepare for it when it becomes effective.

What Is the DOL Minimum Salary Threshold Raise?

The DOL released a final rule on April 23, 2024, which raises the minimum salary threshold for the standard exemption applied to executive, administrative, professional, and outside sales employees, as well as certain computer employees, exempting them from minimum wage and overtime protections under the Fair Labor Standards Act (FLSA). These exemptions are typically called “white collar” exemptions meaning that so-called white-collar jobs—usually salaried office jobs—do not normally qualify for overtime. The new law may change some of that.

FLSA covers organizations with two or more employees earning $500,000 or more in annual sales. It also includes education institutions and hospitals caring for the sick, mentally ill, or elderly. If your organization falls into these categories, you must adhere to the overtime laws and the new rollout of the minimum salary threshold increase.

What Are the New Salary Thresholds?

The threshold for the EAP exemption’s minimum salary will increase to $844 per week (approximately $43,888 per year) from its current level of $684 per week (approximately $35,568 per year) on July 1, 2024, and then to $1,128 per week (approximately $58,656 per year) on Jan. 1, 2025

The second increase marks the threshold nearly $3,600 more than the previous Department of Labor proposed overtime rule back in 2023. Increases for highly compensated employees’ (HCE) salary are also more than originally proposed.

The new minimum annual compensation threshold for Highly Compensated Employees increases to $132,964 on July 1, 2024, and then to $151,164 on Jan. 1, 2025

How Can Your Organization Prepare for the Change?

Now is the time to take steps to prepare for the new law to take effect. While several states have filed lawsuits to block the law from going into effect, it is uncertain whether this will happen. You should proceed as if the law will indeed be effective on July 1, 2024, and plan accordingly.

First, consider your options. You can adjust an employee’s salary or reclassify them as nonexempt. However, changing classification from exempt to nonexempt may create additional considerations such as how compensation and bonuses impact overtime pay owed to a reclassified employee.

Additionally, changing employees from exempt to nonexempt increases your record-keeping responsibilities. Do you have the right nonprofit accounting software to handle this step? If not, is it time to upgrade or seek new software?

Consider also how reclassifying employees may impact your budget and employee morale. From a budgetary standpoint, you may incur higher overtime expenses, which can strain money you may have set aside to pay bonuses. From an employee morale perspective, benefits tied to compensation may change. Some employees may view the change as a demotion. You may need to think through how you will roll this out. Speak with your accounting and human resources team and consider all options.

Another area of consideration is around workplace policies, such as travel, or equipment use. If you currently restrict nonexempt workers from travel or from using equipment while traveling, you may need to revise your policies if you choose to reclassify people from exempt to nonexempt.

Work with Your Accounting Consultant 

There are many, many considerations when this law goes into effect. Each organization is different, with complex needs and considerations. For our current clients, we encourage you to speak with our team to determine the wisest course of action with minimal disruption to your organization and its finances while fully complying with the law.

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.

Mar 28
0

The Top 3 Challenges of Managing Government Contracts

By | Government, Grant Management, Nonprofit | No Comments
person standing in front of sticky notes making decisions

Nonprofit organizations frequently enter government contracts. Whether contracting with town, city, state, or federal government entities, nonprofits provide a valuable service to government entities. This mutually beneficial relationship spans many areas of nonprofit work including education, health and human services, the arts, and much more.

However, there are common challenges that nonprofits face once they have contracted with government entities to provide services. We’re not talking about the obvious initial hurdles that nonprofits must overcome to secure contracts, such as winning RFP bids to be on approved vendors lists and so on. No, we are talking about challenges that arise once the contract is signed and work has commenced.

Below are the top three challenges faced by many nonprofits and possible solutions. Perhaps after reading these, you’ll recognize your own work, and the challenges you face, in similar situations. Some of these dovetail with grant management challenges, so read our article on that topic for additional insights.

Challenge 1: Contract rates do not cover administrative costs

This one can make any nonprofit feel a pinch in the pocketbook. Unfortunately, it’s all too common—in one survey conducted by the state of Oregon, 75% of respondents felt this was the number one challenge when dealing with government-based contracts.

Nonprofits need to clearly assess the overall administrative costs of all contracts and add these costs into the contracted amount. What roles will be required to administer, maintain, and support the contract? What are the salary and related costs associated with the administration, and for what duration should the contract cover them?

To address this challenge requires working with your accounting and finance team to accurately assess costs for future contracts and ensure it is written into the contract itself. If you fail to do so, you could find yourself losing margin on future contracts as administrative costs sap whatever margin you intend to make from the account.

Challenge 2: Timelines are unrealistic

This is another challenge frequently encountered by nonprofits—the timelines given to them by the government agency to achieve a stated goal are considered unrealistic. Perhaps the government wishes to see a change of X percent in Y days, but given your knowledge of the issue, that is impossible.

First, ascertain where this time pressure is coming from within the government entity with which you are conducting business. Is it coming from a politician eager to gain votes? Or is it from a time-pressed bureaucrat who simply doesn’t understand the work itself?

It’s important to determine the source of the timeline pressures so you can address them. If it’s coming from people eager to see results (and enhance their standing within the organization) then sitting down with them and helping them to understand why a slower approach may be beneficial is essential. They may agree with you that more time is needed to get better results, which will also reflect well on them.

But do your part as well when negotiating contracts. Oftentimes nonprofits are so eager to secure government contracts that they do a poor job estimating how long it will take to achieve the desired results—or they do not have all the information necessary during contract negotiations to make a sound estimate. Adding some padding to timelines ahead of the project may give you enough grace to successfully achieve the desired outcomes or at least negotiate a longer timeline.

Challenge 3: Burdensome reporting requirements

Red tape, red tape, and more red tape—if you feel like you’re tangled in it, you’re not alone, as many nonprofits in the previously cited Oregon study also felt that reporting requirements were often burdensome.

To make reporting less burdensome, keep good records along the way. Using a cloud-based fund accounting system can make the financial reporting easier, for example, as it can directly chart expenses and revenues to specific budget lines.

Some nonprofits find that having a staff member on the team dedicated to the government contract and solely responsible for reporting requirements takes the burden off the rest of the team, enabling them to deliver services without worrying about completing the proper reports  You may wish to plan on a portion of a team member’s time for this function for your next government contract to avoid the feeling of always working on reports, rather than the delivery services for which your organization has been contracted.

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.

Mar 30
0

What Nonprofits Need to Know About the Consolidated Appropriations Act of 2021

By | Government, Nonprofit, Tax | No Comments

The Consolidated Appropriations Act of 2021 offers relief to nonprofits hit hard by the coronavirus pandemic. The new relief efforts clarify elements of the Paycheck Protection Program, offer funding for new loans (PPP2), enhance the employer tax credit, and extend employee benefit modifications.

Paycheck Protection Program Updates

The Paycheck Protection Program offered significant benefits to help organizations retain employees who might otherwise go on unemployment benefits. PPP2, an extension or continuation of the Paycheck Protection Program, allocated $284.45 billion for loans, $43.5 billion in Small Business Administration (SBA) debt relief, and $20 billion for certain live venues and cultural institutions that remain shut down or have significant operational restrictions due to the pandemic.

The new Act not only extends the PPP2 loans into 2021 but provides additional guidance and clarification. Nonprofit managers should now focus on PPP loan forgiveness and whether or not they should access funding under the new PPP2.

PPP2: New Guidelines

PPP2 comes with brand new guidelines for potential borrowers, so it is important for nonprofits to review the guidelines again in light of these changes. It encompasses organizations with 300 or fewer employees and reduces the maximum loan amount from. $10 million to $2 million. If your organization did not previously quality for the Paycheck Protection Program, these changes may qualify it in 2021.

SBA Requires “Loan Necessary” Questionnaire

The new PPP act requires borrowers to complete a new questionnaire from the Small Business Administration attesting to the necessity of the loan. The new version of the questionnaire for nonprofit was finalized on November 30, 2020 and is an entirely separate requirement for the loan application. Nonprofits seeking loans of $2 million or more are required to complete both the questionnaire and the loan application. Note that evidence must accompany the responses, too, such as proof of liquidity and revenues between 2019 and 2020 and other facts to attest to the need for the loan.

Tax Treatment of PPP Loans

The PPP loan clarification also includes confirmation that any amount of PPP loans forgiven will not be taxable.

Employer Tax Credit Enhancements

Two employer tax credits are in the Consolidated Appropriations Act of 2021: Employee Retention Tax Credit and Employer Tax Credit for Family and Medical Leave.

Under the 2021 bill, the Employee Retention Tax Credit (ERTC) has been extended to employers who claim PPP loans. One important item to note: wages used to justify forgiveness of any PPP loan may not be used again to calculate the ERTC. Although this limits the possible benefits for recipients of PPP loans, it also expands the eligibility for the credit to others.

The Employer Tax Credit for Family and Medical Leave refundable payroll tax credits have been extended through March 2021. Note that this extension does not require an employer to provide the leave—it simply extends the credit for employers who voluntarily provide the leave.

The credit is equal to 12.5% of eligible wages if the rate of payment is 50% of such wages. It is increased by 0.25 percentage points (but not above 25%) for each percentage point that the rate of payment exceeds 50%. The maximum amount of family and medical leave that may be taken into account with respect to any qualifying employee is 12 weeks per taxable year.

Seek Professional Advice

As with any new bills, this one may take some time to fully understand its limits and ramifications. If you’re in doubt about the financial or tax implications to your organization, please contact Welter Consulting.

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.

Jan 15
0

Tips to Offset the Postal Price Increase

By | Government, Nonprofit | No Comments

Just when you thought it was safe to send out more direct mail, the United States post office announces an increase. This year’s 10 % rise represents one of the most significant price hikes in the cost of a first-class stamp from .50 cents to .55 cents per ounce.

For those nonprofits who use both DSCF (nonprofit bulk mail) and first class mail to solicit for donations, it’s a double hit: both first class and DSCF are going up this go-round.

Most nonprofits take advantage of the post office’s third-class nonprofit rate which saves considerable money on mailings. This bulks price must be obtained after securing nonprofit status with the United States post office and using a special indicia on outbound mail with a nonprofit permit number.

However, even with the nonprofit rate, the price of nonprofit bulk mail has gone up too, rising twice the rate of inflation from 4.8 to 5.5% for destinational sectional center facility (DSCF).

Save Money on Mailings: What You Can Do Now

It’s a shame that the price increase impacts nonprofit organizations. Nonprofits remain one of the post office’s most prominent customers as fewer people send cards, letters, and other mail via first class, relying on email and texting instead.

But what’s done is done, and now is the time not to complain but to act to reduce the cost of mailings. Here are a few steps you can take to keep prices down:

  1. Clean up your mailing lists: Work with a mail service provider or list vendor to clean your lists. The mailing list should be cleaned annually of old, unusable addresses, incomplete addresses, returned mail, and duplicate mailings. Mailing list data handlers can access files from the post office of people who have moved or died during the past year; they can then update those who have moved and remove the deceased persons from your mailing list. This alone can update a list so that less mail ends up in the trash or undeliverable.
  2. Stop sending trinkets: Although many nonprofits send items such as stickers, cards, and pens to potential donors, these add to the cost of the mailing. Instead of sending return address labels, consider uploading something printable to your website and inviting people to download it. Not only will you save on the cost of outbound postage because the envelopes weigh less, but you can track the open rate of your letters by determining the percent of recipients who received the letter and downloaded the freebie.
  3. Talk to your printer: Printing companies offer people who are experts at their craft and who can advise you on ways to reduce the cost of your mailings. For example, an experienced printer can suggest an alternative paper for your printing job that cuts the weight down of each envelope and reduces the cost per piece. Printers can also recommend the best times to mail so that your nonprofit mail isn’t swimming against the tide of high volume or better ways to batch your mail so that you achieve the maximum postal discounts possible.
  4. Improve your ROI: As costs of direct mail increase, the need to achieve a mailing ROI increases. To improve your direct mail, consider A/B tests, which test a control (a mailing package with a known response rate) against a test piece (the same package with one element changed, such as the design or the copy inside). By continually testing and improving with each mailing, you’ll be able to improve your ability to meet or exceed the mailing ROI.
  5. Increase online donor solicitations: Learn to use all forms of online donor solicitations from better email outreach to social media. Although direct mail remains a popular and effective method of meeting fundraising goals, the more expensive it gets, the more you may need to switch to online fundraising.

Although the postal price increase is a ‘done deal’ and effective in 2019, the impact upon your nonprofit isn’t signed, sealed, and delivered. You can affect and mitigate its effects by using these steps to counteract the steep postal price increase.

Welter Consulting

Welter Consulting bridges people and software technology to help nonprofits be more efficient and effective. We work exclusively with nonprofits and have the experience necessary to help them build, grow, and develop over time. We invite you to contact us for any assistance you need with nonprofit technology and business solutions. Call 206-605-3113 or contact us.