Time is running out for tiny NPOs to file a 990-N before they loose tax-exempt status

Following is from an IRS press release on September 22:  “A few years ago, Congress passed a law requiring all tax-exempt organizations, even the smallest ones, to file an annual return with the Internal Revenue Service. Any organization that does not file for three consecutive years automatically loses its federal tax exemption. Churches and some church-related organizations are among the few exceptions.

“The first three-year deadline for filing those returns was May 17, 2010. While thousands of organizations did file, a significant number did not.  (more…)

Expanded disclosures for loans and allowance for credit loss – ASU 10-20

Disclosures for financed receivables (i.e. loans) and the allowance for losses will be dramatically expanded by Accounting Standards Update 2010-20, Receivables (Topic 310) – Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses(more…)

Increased fair value disclosures – ASU 10-06

Fair value disclosures will increase for December 2010 financial statements.  Accounting Standards Update 2010-06, Fair Value Measurements and Disclosures (Topic 820) will require a few new items.  The two main items I see for small and medium-sized NPOs are first, disclosing transfers in & out of Level 1 & 2, and second, disaggregation of fair value disclosures. (more…)

The recession officially ended in June 2009

The people who make the official call for the start and end point of recessions, which is the National Bureau of Economic Research, announced on September 20 that the recession officially hit bottom in June 2009.  We need to look at what that actually means.  The bottom point of the economic cycle is considered the end of a recession.  The Bureau calculated the low point, or the trough, was in June last year.  Since then the economy has been recovering, although slowly. (more…)

Dangers of social media

People are using social media to do simple checks on people they are involved with.  Examples?  Employers obviously, but that is old news.  Recently I have read articles mentioning that potential roommates, first dates, parents hiring babysitters, and college admission officers are also using social media to scope out people.

How?  The easiest way is to look at FaceBook and then Google or Bing the person’s name. (more…)

Data on unemployment & GDP changes available on-line

If you are so interested, lots of economic data is available from the federal government on-line.  Two items of interest to me are unemployment data and GDP changes.  Those are fairly major pieces of the economic picture.

Unemployment data:  Alternative measures of labor utilization – table A-15 from the Bureau of Labor Statistics

Of particular interest are U-3 and U-6. The most quoted information is the U-3 measure, which is a calculation of unemployed people as percent of the civilian labor force.  This is the official number you hear about. The broader data is the U-6 measure. That is based on the total number unemployed plus people only able to work part-time, plus people who want to work but have dropped out of the market.  Or at least that is my casual interpretation of the data.

Changes in GDP:  Percent change from preceding period in real Gross Domestic Product – table 1.1.1 from the Bureau of Economic Analysis. 

There are several frequently requested tables from the BEA.

http://www.bea.gov/national/nipaweb/SelectTable.asp?Popular=Y

The internet is permanent–nothing there is private

The internet, social media, and electronic mail are wonderful.  Those tools let us do incredible things that were beyond imagination 15 years ago.

There is danger in the midst of these wonders.  Things you say can travel far.  When it becomes electronic, those things you say can live forever.  (more…)

ECFA changes requirement for audit or review

ECFA has raised the income thresholds for requiring their members to get an audit.  If your revenue is over $3 million, then you must submit financial statements audited by a CPA.  If your revenue is less than $3 million, you may submit financials that are reviewed by a CPA.

There is another option that is even more economical. If your revenue is less than $1 million, you may submit financial statements that are compiled by a CPA.

(Update:  ECFA revised the cutoff for a review in the fall of 2013. See discussion here.)

More information at the ECFA website here.

A review is much less costly than an audit.  Not only in the lower fee you will pay your CPA, but also in terms of the reduced time you spend providing information to your CPA.  A compilation is even less costly than a review.

There are major differences between audits, reviews, and compilations.  I have background here that goes into more detail.

If you are not a member of ECFA and had been thinking about joining, these new thresholds might make it easier to join.  Check them out!  Joining ECFA makes a strong statement to your donor base that you are taking the high road on financial accountability.

Before you shift from an audit to a review, it would be wise to check with your funders, lenders, and a few major donors.  You might want to make sure they are comfortable with seeing a review instead of an audit.  It would not be a good situation to save half your audit fee and lose a grant that is ten times the savings!  There is good news on that issue though — A few of my clients have checked with their constituency and found their funders and donors very accepting of that shift.

Why bother with internal controls? Living above reproach

In his first letter to Timothy, St. Paul outlines many criteria for selecting an elder, including that “the overseer must be above reproach” (1 Timothy 3:2). The overseer—a deacon, elder, or pastor—should not do things that would cause blame or scandal or provide others justification for making accusations.  In my conversations around the church and ministry world, I frequently hear the phrase “living above reproach” from leaders.  Many people use this concept as a guide for everyday behavior.  It provides a superb framework for evaluating decisions:  “Will this action give others grounds for making an accusation against me?”  (more…)

“Weeds in the Garden – the growing danger of fraud taking root in the Church”

Weeds in the Garden – the growing danger of fraud taking root in the Church

Verne Hargrave, CPA, CFE

ISBN 0-9705433-9-5

From the preface of the book:  “The purpose of this short book is to help break {the logjam caused by the long list of reasons that prevent local churches from} taking anti-fraud steps.  As you make your way through its pages, please keep three things in mind.  First, it was {the author’s} intent to keep the book short.  (more…)

Why bother with internal controls? Love your neighbor

One of the key concepts for internal control is called segregation of duties.  The basic concept is to split up financial tasks so that one person cannot do something improper and also hide it.  I will explain this in much more detail on this blog.

Internal controls are usually described from the perspective of the organization, but let’s look at it from the perspective of a staff person.   (more…)

Why bother with internal controls? Stewardship

From a very basic perspective, the reason any governing board puts controls in place is so the board can be sure that the programs and activities they wish to implement are actually implemented.  Put a different way, this means the board needs to make sure that resources entrusted to them are used as intended.  We have a framework for this concept:  It is called stewardship (more…)

“Nonprofit Starvation Cycle”

Stanford Social Innovation Review has a superb article on the cycle many NPOs have of starving themselves of critical infrastructure they need to be effective in their mission.

Superb summary: “The first step in the cycle is funders’ unrealistic expectations about how much it costs to run a nonprofit. At the second step, nonprofits feel pressure to conform to funders’ unrealistic expectations. At the third step, nonprofits respond to this pressure in two ways: They spend too little on overhead, and they underreport their expenditures on tax forms and in fundraising materials. (more…)