Meaningfulness Matters at Work

Nonprofit HR Solutions has published results of a poll of 450 nonprofits that indicate a stronger job market for nonprofit workers in 2012. Over 40% of nonprofits reported that they are looking to add staff. Lisa Brown Morton, Chief Executive of Nonprofit HR Solutions, told the Chronicle of Philanthropy that organizations need to show caution however, and be aware that an improving job market means turnovers are going to be higher as more get job offers.

Ms. Brown Morton cites lack of money and promotions, along with workload and an perhaps most importantly work meaningfulness are the key components in an employee deciding to stay or go. When the market was in a downturn, employees locked down and held on to the positions they had. People postponed retirement. Those people may have more flexibility now. Organizations need to think about what they need to do to keep their best people and attract the best new staff.

(Source: Nonprofit HR Solutions and Chronicle of Philanthropy)

#nonprofit #jobs

Guidance on Reporting Health Plan Coverage on Form W-2

The IRS has posted a table that helps determine what employer-sponsored group health plan coverage should be included on form W-2 for years 2012 and beyond.

Determining whether or not to include some of the particulars and quirks of different medical plans as a component of wages can be tricky. This should help. For the full table click here.

Spring! Eco-Tourism! Missions! Injuries?

Spring is here and summer is quickly approaching.  And with summer coming, adults and students are anticipating traveling as part of a school, church or other nonprofit sponsored trip to all parts of our county and the world.  These trips help individuals develop a world view.  They can be a great resource to those in need.  They can also expose individuals to dangers not common in a person’s everyday life.  Last June an Arizona jury awarded an individual nearly $6 million in a case involving a mission trip that went terribly wrong when a person working on repairing a roof fell through.

Now that spring is here and trips are still in the planning stages, use this time to meet with your leaders to think through potential risks.  Develop a plan for safety.  Spend time training the participants on the risks, how they will be managed and how to do task they would not normally perform.  Don’t assume everyone knows how to be safe on a construction site.  Also, meet with your insurance, risk management professional to discuss the plans for managing the risks.  Make sure the sending organization and individuals are adequately covered.  Use this time to plan for a safe and life-changing trip!

(read more on the mission trip here)

#ecotourism #riskassessment #nonprofit #taxexempt #precaution

IRS Announces Change in Form 990 K-1

The IRS recently posted a change to the new requirement on the 2011 Federal Form 990 balance sheet regarding reporting assets from partnerships and other joint ventures on the balance sheet in accordance with the Form 1065 Schedule K-1, making it voluntary for the 2011 year.  This is some welcome relief to the nonprofit community which has been grappling with how to comply with this new requirement.  The change has been issued as a “Note” on the IRS website, which means the instructions still contain the requirement.

The “Note” posted by the IRS can be found at: http://www.irs.gov/charities/article/0,,id=233830,00.html.

The 2011 form can be found at: http://www.irs.gov/pub/irs-pdf/f990.pdf.

The 2011 990 instructions can be found at: http://www.irs.gov/pub/irs-pdf/i990.pdf.

#irs #nonprofit #990

Simple Ways to Create Segregation of Duties (and avoid a management letter comment)

There are four categories of potential management letter comments: material weakness, significant deficiency, control deficiency, and “other comment”.  We want to go through some of the common scenarios that occur in each category and go through some suggestions for preventing them. We’ll start with the most common management letter comment we give: the lack of segregation of duties. Depending on severity, this is usually a control weakness. Incompatible tasks include: bank reconciliation and AP approval, cash receipts and authorization to adjust AR,   purchasing and inventory receipts, among others. They key factors to keep separate are:

• Custody of assets (cash, inventory, fixed assets)
• Authorization over transactions affecting those assets (approval for payroll, AP, purchasing)
• Recording transactions (General Ledger and subledger entry)

Of course it’s easier for one person to do it. It’s streamlined and efficient. It’s also extremely dangerous for both the organization and the sole person all fingers will point to if something goes wrong. It doesn’t have to be that complicated or time consuming to add some solid layers of separation.

Below are some suggestions on how to avoid a lack of segregation issue.  I’ve divided the suggestions up based on the size of the accounting department. Continue reading »

PCAOB Reopens Comments For Auditor Rotation

The PCAOB has revisited the idea of mandatory auditor rotation for public companies. The nonprofit community looks to the standards required by public companies to influence their own best practices and has previously embraced the rotation concept. The concept has some high level opponents, though, and the PCAOB has been flooded with opinion letters from CFOs and audit committee chairs that are pushing back against the requirement. Most of the letters argue that the PCAOB has not shown a clear link between auditor rotation and improved audit quality.

Is the argument against auditor rotation self-serving? In theory, if everyone is rotating, then clients out the door should be roughly equivalent to clients in the door, although it’s a reasonable argument to point out that not knowing where next season’s revenue is coming from doesn’t always enhance the auditor’s independence and objectivity. There have been occasions where maintaining integrity meant losing a client to someone who would do things their way and that’s one of the few times I’m happy to be on the losing side.

The goal in rotating auditors is to bring fresh eyes to the scene and reduce any possible independence issues between the auditors and management. However, arguments against rotating cite the high cost of bringing new auditors up to speed (estimated at 20% of audit costs in initial year), the chance of someone unfamiliar with the organization missing something that someone with deeper knowledge and experience would have spotted, and whether there is a sufficient number of skilled auditors with the necessary expertise in particular niches to make changing a viable option.

The comment period has been re-opened until April 22 following the March 21-22 public meeting held at 1201 15th Street NW, Washington DC that is open to the public and available via webcast on the PCAOB website. Comments should be sent to comments@pcaobus.org or mailed to the Office of the Secretary, PCAOB, 1666 K Street NW, Washington, DC 20006-2803.  For more on the meeting, click here.

(additional sources: CFO.com, Journal of Accountancy)

#audit #pcaob #nonprofit

What the (bleep) does Escheat mean? (what you need to know about unclaimed property)

Escheat is defined as a state’s rights to claim the title for unclaimed property. Before you dismiss this as N/A for your organization, take a look at your outstanding check list on your bank reconciliation. How far back does it go? It’s not uncommon for organizations to keep checks as reconciling items that are more than a year old. (The record this auditor has witnessed was 1993). It’s not limited to outstanding checks but can include unclaimed benefits, customer over-payments, gift cards, and refunds due.

It isn’t as simple as reversing the entry or voiding the checks. This is money that doesn’t belong to you anymore. Just because someone else never cashed it, doesn’t make it yours again. It is worth investigating with vendors to determine if they received it, lost it, your account was properly credited, etc. There’s a chance that a check was duplicated in the system – that money is actually yours, unlike the checks that represent actual payments.

Why does this matter? Because states are paying attention to it now. With serious governmental budget slashing, alternative sources of revenue are being sought with few stones left unturned. The state of Delaware listed unclaimed property as its third largest revenue for the year. States are shortening their dormancy periods. Continue reading »

EITF 12-B: Interpreted As Dramatic Narrative

Emerging Issues Task Force (EITF) – Issue 12-B has the same dynamic tension as the narrative in The Hunger Games and end with a killer cliff-hanger. This is the set-up:

The Protagonist: Affiliated nonprofits with separate governance.

The Game: Shared employees.

At Stake: Do you recognize contributed services if employees for Player A work for Player B, although Player A pays their compensation and Player B doesn’t have to reimburse Player A? Does Player B recognize contributed services and at what cost?

Deep in the Codification, Player B knows that paragraph 958-605-25-16 says that such services should be recognized if they create or enhance nonfinancial assets, or they require specialized skills that would typically need to be purchased. BUT! If Player A and Player B are affiliated, is it fair for Player B to recognize contributed service revenue? Should it be at fair value or cost? TWIST!

The jury is split because there are conflicting points of view. The tension is palpable.

One view is that ALL services that are regularly performed by employees of an affiliated entity – whether or not they qualify under Paragraph 958-605-25-16 – should be recognized by Player B as contributed service revenue and associated expense at the known cost to Player A. Put it all on the table. Show your resources. Show what your true costs are.

Opponents to this view observe that it’s possible the fair value of the services received might not be the same as the known costs. Services qualified under Paragraph 958-605-25-16 should be recognized at fair value and non-qualifying services should be recorded at cost, according to the opposition. The argument against this mixed-measurement proposal is that it’s going to get complex and overly burdensome.

Rogue players are suggesting it should all hang on whether Player B controls and directs the services performed or if Player A controls them.

The only thing they can all agree on is that there should be no extensive additional disclosures and no retroactive application requirements (although it would be an option).

The Cliff-hanger: They haven’t decided anything. We will stay on the edge of our seats as they duke it out and when they alert us that they’ve come to some decision. Only then will we know the impact on the players.

To read it yourself, go here.

EITF 12-A: Exciting Cash Flow Guidance for Donated Stock!

EITF (Emerging Issues Task Force) 12-A tackles the question on everyone’s lips: where do you put the sale of donated stock on the cash flow statement? Is it an operating expense or an investing expense?

This is why it might be keeping some of you awake at night: the cash provided (used) by operating indicate how well an organization’s activities support itself (or doesn’t). The cash provided (used) by investing activities indicates how much is going towards capital expenses but can also show if an organization is having to sell investments to pay bills.

The Task Force concluded that a nonprofit’s sale of donated securities that are unrestricted should be classified as an operating activity if it is converted to cash shortly after receipt (general practice). If the donation was restricted, then it should be included with financing cash flows.

The impact: if it’s unrestricted – it’s your operations working that brought in the donation and it should count towards the efforts of operation; if it’s restricted, it still isn’t an investment cash flow and receives treatment similar to endowment activities.

The issue is open for comments for 90 days. No effective date at this time. Read more about it here.

“Temporarily Restricted” is a Binding Legal Concept (Garth Brooks v. Oklahoma Hospital)

As highlighted in Garth Brooks’s lawsuit against the Oklahoma hospital, a donor’s restrictions are a legally binding agreement.

On January 25, the jurors sided with Brooks’s in his claim that the Oklahoma hospital had not honored its agreement to use his donation to build a women’s center and name it after his mother as a way to honor her memory. The original donation was $500,000 and the jury awarded an additional $500,000 as punitive damages.

The agreement for the money’s use appears to have been largely verbal with Brooks testifying that he “thought he had a solid agreement” with the hospital’s president but later learned the hospital wanted to use his contribution for other construction projects. Since these projects were not part of the initial plan to honor his mother, Brooks sued for breach of contract. Whether or not potentially bankrupting a hospital in a lawsuit is really the best way to go about honoring one’s mother, is not for me to say.

The hospital argued that the donation was unrestricted and the request to have it directed towards a women’s center in his mother’s name only came after the fact.

It is important for organizations to remember that restrictions placed on donations are legally binding and can be verbal. This was a very expensive example of needing to get it in writing that it either was or was not restricted. You know what they say about assumptions…

(source: CBS news)