Guest post: Overview of Changes to NFP Accounting Rules

August 24, 2016, 9:12 am
Image courtesy of DollarPhotoClub before they merged into Adobe Stock.

Image courtesy of DollarPhotoClub before they merged into Adobe Stock.

Gary L. Krausz, CPA, CFF, is an audit and accounting services partner in the Los Angeles accounting firm, Gursey | Schneider LLP. Mr. Krausz works with many not-for-profit agencies and private foundations in Southern California. The firm’s website is http://www.gursey.com. Mr. Krausz offers the following guest post as an overview to help the not-for-profit community understand the major changes about to take place in accounting and financial reporting for not-for-profit organizations.

By Gary L. Krausz, CPA, CFF

This past Thursday, August 18, 2016, the Financial Accounting Standards Board (FASB) approved the long-awaited first step in changes to the financial reporting model for not-for-profit organizations by releasing Accounting Standards Update No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. These changes, when effective, will result significant reporting improvements for most not-for-profit organizations including our clients with such diverse operations such as (1) schools, (2) community agencies, (3) private foundations, (4) associations, and (5) religious organizations. The proposed changes will be effective for years beginning after 12/15/2017 (which means calendar years ending on 12/31/2018 and fiscal years ending during the calendar year 2019). Early adoption is permitted.

To highlight just a few of the improvements in Phase I of FASB’s plan:

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Guest Post – Cash Conversion Cycle of Donors

September 25, 2013, 7:35 am

Mr. Jeff Beaumont is a CPA working for a firm that focuses on serving the nonprofit community. His opinions are his own and do not reflect the opinions or positions of his firm in any way. Because he speaks for himself, I won’t identify him or his firm in any more detail. He doesn’t speak for me either.

He has about seven years experience as an auditor working on the issues discussed on this blog.

By Jeff Beaumont, CPA

Would it be helpful to more thoroughly understand incoming church attendees, their giving, and if they feel accepted, welcomed, and a part of the local church family? This post will explore analyzing how long it takes for someone to give as a means to understand the newcomers.

About tracking trends, there are some considerations we need to ponder. When someone first shows up at church, they rarely give the first day. If they do give, they rarely would give their “normal” amount unless they felt part of the church, as if they had some sort of relationship or ownership.

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Guest Post – Forecasting Annual Church Revenues: Using Trends and Cycles to Help Predict Future Revenues – part 4

September 6, 2013, 7:23 am

Mr. Jeff Beaumont is a CPA working for a firm that focuses on serving the nonprofit community. His opinions are his own and do not reflect the opinions or positions of his firm in any way. Because he speaks for himself, I won’t identify him or his firm in any more detail. He doesn’t speak for me either.

He has about seven years experience as an auditor working on the issues discussed on this blog. This is the fourth post in a series.

By Jeff Beaumont, CPA

Part 4– Final thoughts

Introduction is here. Description of forecasting model is here. Calculations discussed here.

Okay, once the research is complete, we can put together a fair and reasonably accurate estimation of tithes and offerings for budgeting for next year.

Next, the smell test. I have learned the necessity of this. So if the model says next year will increase by 5-10%, I should look at what has happened in the past (at least with the past I won’t have to make any guesses since it already happened!).

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Guest Post – Forecasting Annual Church Revenues: Using Trends and Cycles to Help Predict Future Revenues – part 3

September 3, 2013, 6:57 am

Mr. Jeff Beaumont is a CPA working for a firm that focuses on serving the nonprofit community. His opinions are his own and do not reflect the opinions or positions of his firm in any way. Because he speaks for himself, I won’t identify him or his firm in any more detail. He doesn’t speak for me either.

He has about seven years experience as an auditor working on the issues discussed on this blog. This is the third in a series.

By Jeff Beaumont, CPA

Part 3 – Calculations

Introduction is here. Description of forecasting model is here.

You still with me?

Good.

Trying to figure out how to forecast revenue for nonprofits is quite a sticky issue. After all, it is much simpler to try to forecast revenue for a company that sells some product, say, bread, soda, or gasoline. There is a reasonable understanding that people need (or want) those items.

For a financial model, there is the term “financial driver” which means anything that affects the rise and fall of revenues, expenses, etc. The four categories for revenue drivers are: Read the rest of this entry »


Guest Post – Forecasting Annual Church Revenues: Using Trends and Cycles to Help Predict Future Revenues – part 2

August 28, 2013, 8:07 am

Mr. Jeff Beaumont is a CPA working for a firm that focuses on serving the nonprofit community. His opinions are his own and do not reflect the opinions or positions of his firm in any way. Because he speaks for himself, I won’t identify him or his firm in any more detail. He doesn’t speak for me either.

He has about seven years experience as an auditor working on the issues discussed on this blog. This is the second in a series.

By Jeff Beaumont, CPA

Part 2 – Philosophy and foundation discussion

Introduction and encouragement to pastors is here.

We were forecasting revenue for the next year and knew we needed to be accurate. We needed to do our best to discern changes (be that attendance, economic changes, etc.) in the church that will affect revenue.

After the first year or two of using a flat percentage increase by looking at the past few years and trying to make a determination for the entire year’s revenue in under an hour (yes, that happens frequently in churches!), we realized our mistake to make it such a hasty and cursory decision-making process.

We then then took a different road. One that required more work but—hopefully—would be worth it in the end.

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Guest Post – Forecasting Annual Church Revenues: Using Trends and Cycles to Help Predict Future Revenues – part 1

August 26, 2013, 8:20 am

Mr. Jeff Beaumont is a CPA working for a firm that focuses on serving the nonprofit community. His opinions are his own and do not reflect the opinions or positions of his firm in any way. Because he speaks for himself, I won’t identify him or his firm in any more detail. He doesn’t speak for me either.

He has about seven years experience as an auditor working on the issues discussed on this blog. This is the first in a series.

By Jeff Beaumont, CPA

Introduction and encouragement to pastors

I found myself with a group of others only a couple of months before that church’s year-end was over to discuss the seemingly never-ending debate on how to set a budget. The good part, everyone agreed that expenses should be less than or match revenues. But then we needed to figure out revenue.

How do you determine that? I found myself holding in tension believing in faith that He will deliver what we need and, sometimes seen as “at odds”, being responsible and wise to take care of what we have been given. I was working in spreadsheets. I didn’t—still don’t!—know how to factor those concepts into budgeting. After all, God doesn’t fit in a spreadsheet.

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GIKS – More difficult for Small NPOs – and why accurate valuations are so tough to come by!

July 29, 2013, 7:47 am

Mr. Jeff Beaumont is a CPA working for a firm that focuses on serving the nonprofit community. His opinions are his own and do not reflect the opinions or positions of his firm in any way. Because he speaks for himself, I won’t identify him or his firm in any more detail. He doesn’t speak for me either.

He has about seven years experience as an auditor working on the issues discussed on this blog. Here is Jeff’s second guest post:

By Jeff Beaumont, CPA

Valuing gifts-in-kind is not an easy task. Nor is it quick.

There are not-for-profit organizations that appear to be aggressive with GIKs valuations – a quick internet search will reveal that truth. Not convinced? Ask the IRS for their opinion. Then there are others that take whatever value they can find because they lack the capability – they don’t have the know-how.

This post was written with smaller organizations in mind as they usually do not have the expertise, capacity, and staffing to the extent of their larger brethren.

To record GIKs, it seems there are three choices for management (and, by extension, the auditors) on reporting values: Read the rest of this entry »


Guest post – Unintended consequence: the pressure for ‘good’ overhead ratios creates pressure to get GIK

June 4, 2013, 7:01 am

The following guest post was submitted to me by a reader. As with other guest posts, this is his/her opinion and does not represent the opinion or experiences of his/her employer. It also does not represent my opinion.

I wrote the headline. I hope it captures the tone of the post.

For your consideration:

The more and more that I hear about the “controversy” over pharma values, the more and more it shows the completely unnecessary overreliance on overhead rates as a mean of valuing charities. Think about some of the issues that arise from the use of overhead rates:

  1. Charities feel pressure to increase revenue (Charity Navigator expects 10% a year growth in addition to low overhead and high net assets)
  2. Charities may get into a donation that can quickly boost revenue without adding fundraising cost (like GIK, or dewormers)
  3. Charities forgo donations when they no longer provide high enough revenue (charities now are using far less dewormers because they no longer have high revenue value)

What does this mean?

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Guest post – GIK Valuation: The issues not being discussed

May 31, 2013, 6:54 am

The following is a guest post submitted to me from a reader. As I read the article, it became obvious that the author is familiar with the issues of the relief and development organizations.  Whether the author is an outside auditor, accountant inside an NPO, or even a medical vendor does not matter. Obviously the comments reflect the author’s opinion and not those of his/her employer.  This also does not reflect my opinion.

Agree or disagree as you wish, here are ideas deserving your careful consideration:

GIK Valuation:  The issues not being discussed

While there are many, if not dozens, of misconceptions and false information floating around pharmaceutical values, GIK values, and NPOs supposed conspiracy to inflate revenues to improve their Charity Navigator rating, I thought I would point out a few things to try to bring the conversation around to the big picture rather than focusing on the quite narrow discussion around non-FDA approved, 500mg mebendazole.

500mg mebendazole is a red herring

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Guest post – Determining FMV is difficult. Let’s keep in mind the good that is accomplished by donated meds.

May 24, 2013, 8:33 am

The following is a guest post submitted anonymously. The writer raises some good points and good questions. I’ll post it verbatim except for breaking two large paragraphs into smaller ones for easier reading. I hope the title of the post, written by me, fairly summarizes the ideas. 

One of the cool things about blogging is the ability to provide links to cited sources – if the author would like to forward links for the two quoted sources, I will add them.

Thanks to the author for taking the time to write. Here are his or her thoughts:

(Update 5-31: In case it wasn’t obvious, this post reflects the author’s opinion and not that of his/her employer. It does not reflect my opinion.)

Thank you for providing a space for this conversation. I have studied this specific aspect of researching fair market value (FMV) of donated items in depth. As with any discussion we must ensure that we start with the same definition of fair market value.

Accounting guidelines state that FMV is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To bring it into simpler terms, if I am selling apples and you are looking to buy apples, what price can we agree upon?

There are three points that I would make to start the conversation on the valuation of donated goods.

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Guest post – What about underreporting GIK?

May 22, 2013, 8:09 am

Mr. Jeff Beaumont is a CPA working for a firm that focuses on serving the nonprofit community. His opinions are his own and do not reflect the opinions or positions of his firm in any way. Because he speaks for himself, I won’t identify him or his firm in any more detail. He doesn’t speak for me either.

He has experience as an auditor working on the issues discussed on this blog.  He took me up on my invitation for guest posts, so here is Jeff:

 

by Jeff Beaumont, CPA

There has been quite an amount of discussion, articles, and consideration given to recording gifts in kind.

However, I would like to ask nearly the opposite question: what about organizations that don’t record gifts in kind?

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Call for guest posts on GIK valuation

May 16, 2013, 5:30 pm

I’ve noticed a remarkable lack of conversation on the ‘net for the GIK issue from people who think the current methodologies are reasonable and appropriate. Perhaps part of that is the lack of a place to comment.

I’m willing to host guest posts on the GIK valuation issue if someone would be interested in writing something. Rules would be simple. Be professional, no ad hominem attacks, advance the conversation. I will do minimal editing without permission.

Since this is a blog, length is not an issue. Brief or long, your choice.

Since comments are moderated, you could reply to any post and I’ll see it.  Leave a comment and we can start a conversation.

Make up a good nom de plume and leave me a note if you are interested.