Category

Nonprofit

Dec 07
0

Changes Coming to the Audit Opinion

By | Audit, Nonprofit | No Comments

Many nonprofits are gearing up for their annual audit. Expect a “facelift” in your annual audit this year thanks to new AICPA rules. AICPA’s Auditing Standards Board (ASB) has issued Statement on Auditing Standards (SAS) No. 134, Auditor Reporting Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements, which will become effective for periods ending on or after December 15, 2021.

What this means is that the auditor’s opinion section of your annual audit will be different this year. Here’s what to expect from this “audit opinion makeover.”

Auditor’s Opinion

The revised ASB Auditing Standards calls for new ways to organize the audit report. First, the auditor’s opinion will now come first in the document. The initial wording remains the same, but the opinion itself will be at the front of the document. This makes it easy for readers to find.

New Ethics Statements

New statements must be included in the report. This includes an ethics statement that clearly indicates that the auditor is required to be independent of the auditee. Additionally, the auditor must include a statement specifying they will meet all ethical standards of the profession.

Responsibilities of Management

Another new section and statement must include the responsibilities of management in respect to evaluating ongoing concerns.

Auditor’s Responsibilities

The auditor’s responsibilities section is still included, but it has been revised to include additional information. The auditor’s responsibilities will be included and described in a bulleted list to make them easier to find and read.

Another change is the inclusion of a paragraph that describes in detail the auditor’s responsiblities to communicate certain matters with those charged with governance. These matters include the scope and timing of the audit, significant findings, and internal control related matters.

Key Audit Matters

Lastly, the ASB (SAS) 134 also introduces new ways to report on Key Audit Matters. This new framework means that entities must specifically hire an auditor to report on this matter. For example, if it is required by a third-party, you may wish to add this, but for most audits, it is not part of required reporting.

The changes also require enhanced reporting in regard to ongoing concerns, including a separate section in the auditor’s report where substantial doubt exists.

Is Your Organization Affected by the Changes?

All nonprofits are affected by the initial changes, but whether or not you need additional reporting on Key Audit Matters does depend upon the nature and scope of your organization and its responsiblities. This is where a good accounting professional or consultant is of great help. They can assist you through the audit process and help you determine how and where these changes impact your organization.

Preparing for Your Audit

Even if you feel that the audit is weeks or months away, it is a good idea to begin preparing for your audit now. Many nonprofits have discovered the benefit of cloud-based fund accounting programs, software that enables auditors to log in and view financial records without the need for time-consuming onsite visits. Such software makes it simple for auditors to log in from their offices and begin their auditing process. If you have such software, you may wish to take advantage of this feature and make it easier for auditors to spend any in-person time with you effectively.

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.

Nov 17
0

An Overview of In-Kind Gifts

By | Accounting, Donations, Nonprofit | No Comments

Many nonprofits rely upon in-kind donations for their activities. Gifts “in-kind” are any donations to a nonprofit that are not cash. A good example is food collected and given to a food bank to distribute directly to others.

If your nonprofit relies heavily upon gifts in-kind for its activities and programs, this guide to accounting for and handling the financial aspects of in-kind donations will be invaluable.

Distinguishing In-Kind Gifts from Other Types of Donations

It is important to distinguish in-kind gifts from other types of donations. For example, items given to a charity in which the use is specified by the donor are not true in-kind donations. Neither are items given to the charity that are to be used by another entity.

An in-kind gift consists of a broad array of goods that may include:

  • Computer hardware and software
  • Office furniture
  • Equipment such as saddles used in a therapeutic riding program
  • Wheelchairs or medical equipment used by a charitable health program
  • Food donated to a food bank

Such items are used directly by the organization or given to the people the charity serves.

Accounting for In-Kind Donations

Under GAAP rules, gifts in-kind should be recorded as revenue when received and also recorded as an expense. Recording them as revenue upon receipt means:

  • Recording the revenue at “fair market value.” Fair market value reflects the average price that your organization would have paid for the item if you had to buy it.
  • Recording the offset value, or the amount of revenue that is the corresponding value as an expense of in-kind good or services.
  • Recording tangible property, such as land or buildings, as an asset to your organization.

Budgeting In-Kind Gifts of Services

One important consideration is the gift of in-kind services. If these services occur on a regular basis, they should be budgeted for in your nonprofit’s budget. For example, if your accountant donates her time to preparing the annual report, she should provide you with a receipt stating the value of the services rendered. You would then budget for that amount in your yearly budget. This way, if your accountant retires, moves, or simply chooses not to donate her services again, you are still prepared to pay the going amount for similar professional services.

Acknowledging the Gift and Providing a Receipt

As we’ve shared in a previous article on tax donation receipts, gifts should be recognized with both a thank-you note and a receipt. The receipt should be similar to those provided for cash gifts. An in-kind gift donation form created by your organization also provides a consistent record of all gifts in-kind and helps you record and track their value over time.

Create a Gift Policy

Lastly, it is a good idea to create a gift policy for your organization that lists the types of gifts accepted, how gifts in-kind are recognized, and how they are used.

Donors come in all shapes and sizes. Some prefer to give cash. Others want to give tangible property that they know can be put to good use. Gifts in-kind offer a valuable asset to your organization, one that should be recognized properly both in your accounts and in the donor’s taxes. With the right tracking and organization, you’re on your way to a solid in-kind donation policy and process that can help you handle these gifts with ease.

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.

Nov 10
0

The Washington Cares Fund: Making Long Term Care Affordable

By | Accounting, MIP Fund Accounting, Nonprofit | No Comments

Organizations located in Washington state have another benefit they can offer to their employees: the WA Cares fund. This fund, created and managed by the state itself, provides long-term care options to all residents in the state. Residents contribute to the fund while they are working and can access the benefits if they meet certain criteria for long-term care needs.

How Does the WA Cares Fund Work?

In 2019, Governor Inslee signed the LTSS Trust Act into law. Through this act, Washingtonians will begin contributing .58 cents out of every $100 earned into the WA Cares fund starting in 2022. By 2025, those eligible for benefits may tap into them for long term care needs.

Why the WA Cares Fund?

Only about 7.5 million Americans have long-term care insurance, but more than 52% of people age 65 and older are likely to need long-term care at some point in their lives. And, with costs exceeding $300,000 on average over the course of a person’s lifetime, the expenses can be devastating to older Americans.

Washington is now the first state to offer long-term care insurance at an affordable rate for residents who meet eligibility criteria.

What Nonprofit Employers Need to Know

Employers do not need to contribute to the new fund. They do, however, have to track employee hours and wages, and report them to the state. Starting January 1, 2022, you will be required to report employees’ wages and hours worked, as well as collect WA Cares premiums from your employees’ wages. This is the same as you do now for Paid Leave.

You will not need to file a report during any quarters in which your employees have no hours or wages to report.

Are there exemptions?

Employees who wish to be exempt from the WA Cares premium may apply for an exemption. It is their responsibility to apply and to provide you with proof that their exemption was approved. Proof consists of a letter issued by the Employment Security Department (ESD). Once approved, exemptions are permanent, and employees cannot opt back in.

If you are notified that an employee has received approval for an exemption, you must keep a copy of the exemption letter on file and omit collecting the premium from the employee’s wages.

What if my organization offers long-term care insurance?

You may continue offering long-term care insurance to your employees, but it is up to them (not you) whether they should apply for exemption from the WA Cares coverage. There is no organization-wide exemption, so you are still responsible for monitoring wages and hours worked and deducting the appropriate amount of premiums from employees’ wages and reporting them.

You can learn more at: wacaresfund.wa.gov

MIP Fund Accounting Can Help You Track WA Cares Fund Premiums

For nonprofits running MIP Fund Accounting, setting up tracking of the WA Cares premiums is identical to the setup in the system for tracking WA Paid Family and Medical Leave. The only difference is that the setup for WA Cares should deduct .58 cents per every $100 of wages.

Washington is now the first state to offer this important coverage to employees. It’s one more benefit you can use to attract great employees to your organization and to provide your employees with peace of mind for their futures.

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.

Nov 03
0

Acknowledging Donations Graciously – and With Tax Receipts

By | Accounting, Donations, Nonprofit | No Comments

Nonprofit managers know the power of a gracious thank you when it comes to acknowledging donations. It’s part of donor management—ensuring that donors feel valued and appreciated.

But accompanying a lovely thank-you note should be something more ordinary: a tax donation receipt. A receipt for donation isn’t just proof that the donor gave money to your organization, but a document that can be used by donors to take a tax write-off. Here’s what your donation thank you and receipt should include.

Tax Deductions for Nonprofit Donations

Tax deductions may be claimed for those who donate goods or money to a charitable organization. Charitable organizations should be recognized as a 501 (c) (3) organization by the IRS.

A donation means that the money or goods given to the organization are done so without anything given in return. If you paid for a t-shirt at a museum gift shop, for example, that would not count as a charitable donation because you received the t-shirt in return. If, however, you donated $25 to the museum without receiving an item in return, it may be considered a charitable donation.

Thank-You Letters and Tax Documentation

Thank-you letters may seem old-fashioned, but donors do appreciate the acknowledgement of their generosity. In addition to a personalized thank-you letter, your organization should also include a receipt for the donation which the donor can use for charitable tax deductions.

Such receipts should include specific information, such as:

  • The donor’s name, address, and date the donation was received
  • The organization’s legal name
  • The organization’s tax status
  • The organization’s EIR
  • Total dollar amount given
  • If anything other than money was given, a description of the item donated

You should also include a note stating whether or not a gift was given as a thank you. A simple description is fine— “We hope you enjoy this small bookmark as a token of our gratitude” is sufficient. Remember, they are not paying for the gift, but you should acknowledge it in the letter.

Lastly, be sure to include a reminder to the donor to keep the letter and receipt as proof of their donation. Keep a copy in your files, too. You never know when you might get a call from a donor looking for it!

MIP Fund Accounting Makes Donation Receipts Easy

If your nonprofit is running MIP Fund Accounting software, you have the ability to print donation receipts right from your system. It’s part of the general ledger module, and it’s included in every MIP package.

You can access it immediately or, if you’re a current client and can’t quite figure it out, give Vicki at call at Welter Consulting, 206-605-3113. And, if you’re not currently a client but you’re interested in finding out more about how nonprofit accounting software can make your organization run smoothly, we welcome your call too.

Other Ideas to Thank Donors

One of the best ways to thank donors is to do so personally. A handwritten letter, a heartfelt typed letter, and of course, that donation receipt is much appreciated.

Other ways to thank your donors include:

  • Mentions on social media
  • Mentions in printed newsletters
  • Share a story or picture of how the donation was used
  • Create a short “thank you” video
  • Offer a small gift or inexpensive token of appreciation

A gracious thank you goes a long way toward enhancing the donor experience. And, along with a thank you, be sure to include your donor’s receipt so they can take advantage of the tax deduction.

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 fo