Nonprofit Accounting Blog – Page 4

Nonprofit Financial Management: Choosing an Online Donation Processing System

Our nonprofit financial management tips continue with tips for choosing an online donation system. Most donors now expect to be able to donate online using their credit or debit cards. Accepting donations through your website makes it easier to run email campaigns, social media campaigns, and other campaigns online since you can encourage respondents to click through to donate immediately.

But, choosing your online donation processing system can be confusing, especially if you’ve never dealt with merchant accounts, bank card systems, or aggregator systems. Here, we provide you with a handy guide to online processors and how to choose between the two most commonly used systems by nonprofit organizations: merchant accounts and aggregators.

Accepting Online Payments: How It Works

Almost everyone reading this has purchased goods or services online, and most have also donated online. You’re familiar with how systems work from the front end or user interface.

Behind the scenes, however, there is a complex network of information shared by multiple parties to complete a credit card transaction online.

After clicking “pay” or “order”, your credit card information is encrypted for security purposes and sent to either a merchant account or an aggregator. They, in turn, verify the purchase and process it. Money may be sent to your bank account and the transaction is complete.

Merchant accounts are created by a merchant bank (called an acquirer). The bank settles and deposits the funds from the transaction into your bank account. They are responsible for ensuring that payment is rendered to your account once the transaction is approved.

An aggregator is a company that processes payments. They enable multiple entities such as merchants, nonprofits, and others to accept credit card payments and bank transfers without the need to set up a special merchant account. The aggregator forms an agreement with the merchant bank and batches multiple companies under their account for processing. In return, they assume a greater risk since they are dealing with multiple entities and may charge more for their services.

Which Is Better for Nonprofit Financial Management?

Neither a merchant bank account nor an aggregator is a clear-cut “better” choice for sound nonprofit financial management. There are pros and cons to each.

Setting up payments: Merchant banks may have a lengthy due diligence and approval process. The process to set up an aggregator account is faster and less cumbersome. It may be easier for new nonprofits or those with a limited credit history to establish an aggregator account.
Payment processing: Merchant banks provide somewhat better customer service than aggregators, although this varies. They are more likely to alert you rather than freezing your account due to suspicious activity, for example. Aggregators accept risky clients and therefore take few chances with potential fraudulent activity.
Fees: Fees vary with both types of processors. Merchant banks may adjust their fees based on volume while aggregators typically have fixed fees. Generally, aggregators charge more because they assume greater risk when they accept clients and transactions.
Size: Smaller nonprofits or those who anticipate few donations through credit cards may be better off starting with an aggregator. Merchant banks may require you to estimate transaction sizes and quantities and base fees upon those estimates.
Fraud prevention: Aggregators are on high alert for fraud since they process so many transactions for a wide range of entities. Merchant banks also pay attention to potentially fraudulent transactions. However, aggregators are faster to pull the trigger and shut down an account if it hints at fraud, which could cripple your ability to accept donations, especially during a busy marketing campaign or donor season.

Choosing the Right Fit

Ask yourself the following questions to choose the best fit for your nonprofit?

Count 1 point for every “yes” answer.

Is this the first time you are accepting donations online?
Is your nonprofit newly incorporated?
Do you expect only a handful of donations online each year?
Do you tend to receive small donations rather than big donations? For example, donations of $5 – $25 rather than $100 – $1,000?
Has your nonprofit every been the target of online fraud?

Score:

0 – A merchant bank is likely to be your best choice

1 – 2 – Merchant banks may take a bit of time to approve your account but are likely to be the best choice

3 – 4 – Your nonprofit may benefit the most from working with an aggregator.

5 – An aggregator is likely to be the best fit for your situation.

As you explore your options for accepting donations online, don’t forget about mobile apps for taking donations at events. Card readers, which transform a smartphone or tablet into a credit card processor, can make it easier to accept payments at charity events, dinners, and galas.

There are many options for nonprofit organizations to accept donations online. Whether you choose a merchant bank or an aggregator, be sure to shop around and take your time comparing services and rates. Read the fine print in any contracts and be sure that the rates aren’t going to be a burden for your organization. The benefits, as always, must outweigh the risks and costs of accepting donations online.

Beck & Company

We provide nonprofit financial management, auditing, and CPA services throughout the northeast region from our Washington, D.C. headquarters. If your nonprofit is looking for solid financial and accounting advice and services, contact us today.

Nonprofit Financial Management: An Update on Accounting Standards FASB ASU 2016-14

As part of your nonprofit financial management best practices, keeping up to date on FASB standards is important. We have an update on FASB ASU 2016-14 that nonprofits should understand and follow to comply with the latest accounting standards updates.

FASB ASU 2016-14: Net Asset Classification Information

As you may recall, FASB ASU 2016-14 changes net asset classification from three categories to two. The reporting and disclosures of net assets changes with this update.

The two new categories are:

Net assets with donor restrictions
Net assets without donor restrictions

These two categories replace the current three categories:

Unrestricted
Temporarily restricted
Permanently restricted

Many areas may affect financial statements and how net assets are classified. It’s smart to speak with a CPA who specializes in nonprofit accounting. A CPA may ask you, for example, if your organization has already updated the statement of financial position and the statement of activities. You may wish to update these areas to change the net asset categories from temporarily and permanently restricted net assets to the updated terms. Remember, the updated terms are net assets with donor restrictions and net assets without donor restrictions.

Review the Notes to Financial Statements

Take time now to review the notes to the financial statements. Replace “temporarily restricted” and “permanently restricted” net assets with the new categories, net assets with donor restrictions and net assets without donor restrictions.

You Can Disaggregate the Two Net Asset Categories

If you feel as if you still need more leeway in the net asset categories, the option remains open to further disaggregate them in the financial statements. For example, after reflection and discussion, your nonprofit financial management team may decide to disaggregate net assets with donor restrictions between those expected to be maintained in perpetuity and those expected to be spent over time. The amounts for each of the two categories of net assets, as well as the total of net assets, must be reported in a statement of financial position.

Required Enhanced Disclosures

Also of note, the ASU will require enhanced disclosures about the purpose and amounts of the governing board’s designations, appropriations, and similar actions that result in self-imposed restrictions at the end of the period.

The placed-in-service approach will also be required when releasing restrictions related to long-lived assets.

Also, the option to imply a time restriction and release the restrictions over an asset’s useful life will no longer be permitted unless it’s explicitly stated by the donor.

Confused? Please don’t be. There’s still time to read up and learn more about ASU 2016-14.

For more information on ASU 2016-14, please see:

Beck & Company

We can help you with the FASB and ASU updates, with audits, and any nonprofit accounting needs. We are CPAs who focus on the nonprofit area and who have the experience to help you navigate the unique needs of nonprofit financial reporting. Contact us today.

Improving Productivity and Reducing Stress in Nonprofit Financial Management

Nonprofit financial management comes with inherent stressors. Tax time, budgeting time, and end of year accounting can call for some long meetings and late nights. While we like to think we are all as productive as we can be, the fact remains that our days are filled with interruptions that can lead to lost productivity rather than increased productivity.

Experts tell us it can take up to 20 minutes to refocus after an interruption to our thoughts. Think about all the interruptions during your average workday. Phone calls, emails, text messages, instant messages, and people showing up unexpectedly at your desk with urgent needs are all interruptions that can break concentration and slow productivity.

Now, add onto that the late nights of tax preparation season, the long days during budgeting cycles, and other potential business activities that add to your work and you will quickly see why reducing stress and improving productivity in nonprofit financial management is essential.

Five Tips to Reduce Stress and Enhance Productivity

We’ve reviewed the best stress management and productivity advice around to develop this list of nonprofit financial management stress relievers, productivity enhancers, and all around helpful hints.

Plan: Even though some people insist they cannot plan their days because of work interruptions, planning ahead tends to take a lot of stress off people. Knowing the work you need to accomplish this week, the people you need to speak with, and the other work that takes priority during the workweek helps you fit it into the week’s activities. Even if you are interrupted during the day, you can return to your list and plan and pick up where you left off.
Turn off instant messages: Turn off the instant messenger apps unless they are absolutely essential to your workplace. Constant dings, pings, and other sounds and flashing messages break your concentration and make it difficult to return your focus to the task at hand. Pick one channel such as Skype, Slack, or another messenger for your team and teach them to use it only for emergencies.
Schedule time to review and respond to emails: The average employee receives 200 emails a day. We can almost guarantee that just a handful of those emails are truly deserving of a response. To that end, don’t feel obligated to respond to every email immediately. Instead, set aside three time periods—9 a.m., 12 noon, and perhaps 3 p.m.—to respond to emails. This is usually adequate for the majority of nonprofit financial management tasks.
Set office hours: Set specific periods during the day when your door is open to interruptions. Use this time as your planning period or to review materials and make it the time when you can be interrupted. Then, set aside other times when you wish to be undisturbed. By making this schedule public, you’ll manage interruptions and block them into specific time slots.
Prioritize: Push the work that will get maximum impact to the top of your list and let everything else flow from there. You may not be able to get to everything you wish to accomplish in a day, week, or month but if you can prioritize around maximum impact work, everything else should fall into place more easily.

Technology as the Servant, Not the Master

Lastly, make sure that the technology available to you is your servant, not your master.

Learn how to use any time-saving features on it but do not feel obligated to use every feature all the time.
Turn off notification sounds, pop-ups, or other alerts during your focused time periods.
Use calendars and scheduling apps to manage your time.
Automate whatever you can to enhance your time.
Delegate any manual or routine tasks, when possible, to technology.

With a few adjustments such as these, you may feel less pressured and stressed and more in control of your time. Nonprofit financial management includes many days when unforeseen events, meetings, calls, or tasks take you away from your plan, but there are also days when working your productivity plan will help you do better work.

Beck & Company

Beck & Company is an independent certified accounting firm specializing in nonprofit organizations. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.

Washington DC Nonprofit Advisors Recommend Retention Strategies for Nonprofits

As Washington DC nonprofit advisors, we work with many nonprofit organizations in and around the Eastern seaboard on a variety of topics. This includes both financial and organizational management.

One topic that we’ve been watching carefully lately is the topic of employee engagement. Employee engagement leads directly to employee retention, an important aspect of a stable, long-term leadership and development team at any nonprofit organization.

According to the Journal of Accountancy, the number one concern among CPA firms is retaining staff. Turnover rates exceeded 13% in 2015, the last year of the survey, a high percentage caused in part by the strengthening economy. Job seekers can find new opportunities more easily than in past years, which leads to lower retention rates for organizations.

Employee turnover is costly. Every time an employee leaves, nonprofits must spend time and money to recruit, hire, train, and onboard new employees.

Focusing your time and effort on improving employee retention is more than a human resource imperative. As Washington DC nonprofit advisors, we will tell you that it is also an important aspect of nonprofit financial management, helping to keep your costs low and improve the productivity of your organization.

Focus on Employee Engagement

The biggest tip for improving employee retention is to focus on employee engagement. Millennials, the biggest employee cohort currently working in the American market, has a low tolerance for boredom. Because of this, they tend to job hop not out of a sense of disloyalty but disconnection. When boredom strikes, they leave before giving it a chance to dissipate.

You can offset this tendency by encouraging employee and job engagement. Prevent boredom by providing plenty of opportunities for employee growth. Challenge all employees, not just millennials, to take on new responsibilities and projects. Find work that offers expression, insight, and leadership roles so people feel motivated by their work.

What Sets Your Workplace Apart?

Another way in which you can encourage employee engagement is to focus on the positive strengths that your workplace offers. What sets your workplace apart from others?

For nonprofits, the general atmosphere is one usually of positive, mission-driven alignment. The workplace is fueled by a sense of dedication to the mission and motivated by the thought of doing good while making money. Both are powerful concepts that motivate, inspire, and engage people in their work.

Retention Begins with the Hiring Process

Improving employee retention rates begins by improving your hiring process. Ensuring the right people are in the right jobs is the first step.

Evaluate your current hiring process. How are you finding potential employees? What do you look for during the screening process?

This may be a great time to update job descriptions, evaluate new hiring methods, and examine your nonprofits corporate brand. Social media, for example, is a powerful method these days of finding new employees and shoring up your organization’s brand. A strong brand presence brings interested people to your doorstep, so you do not have to work as hard during the hiring process; people are eager to work at your organization.

More Than Workers

Remember that employees are more than workers. As Washington DC nonprofit consultants, we often encounter workplaces that treat lower level employees as commodities rather than individuals.

Your workers are more than cogs in a wheel. They are valuable members of the community and culture that makes up your nonprofit. The more you can embrace their unique strengths and offer the flexibility and challenges that people crave, the greater the improvement in employee retention.

Beck & Company

Nonprofit Financial Management: Managing the Millennials

Nonprofit financial management includes managing not just the money but the people. As part of the leadership team at your nonprofit organization, you’ll be in charge of hiring new employees (especially ones intended for the accounting and finance departments) as well as meeting other potential employees. You’ll also work with broad, diverse teams across the organization—some of which may include millennial employees.

According to AICPA, millennials now make up the largest portion of the United States workforce. Millennials are the generation born between 1977-1995. There are 83 million of this generation in the workforce, making it likely you’ll be working with someone from the millennial group soon.

This is a group that thinks differently from Baby Boomers and Generation X employees. If you are in a senior management position, you are likely from among those generations of people born after 1945 (Boomers) and after 1965 – 1977 (roughly the dates for Generation X). Each generation is shaped by their life experiences, cultural experiences, and family experiences, with specific traits shared among many members that tag them by their group.

AICPA has put together a list of points to help you manage millennials in the workplace. This group, more so than other groups that came before it, values autonomy and mission-driven organizations. This makes them perfect fits for the nonprofit world. Let’s take a look at some of the characteristics of millennials in the workforce.

Long-Term Employment? Think a Year

Our parents and grandparents valued long-term employment and the stability this brought to their paycheck, lifestyle, and families. This generation believes that 13 months or more is long-term employment. Their parents lived through many of the employment upheavals of the 1990s and early 2000s which, unfortunately, made long-term career stability a thing of the past.

If you desire to have these employees around for longer than 13 months, make it a point to engage them in the work early on. Help them feel motivated and inspired by the organization’s mission. This may help develop the loyalty you prize and the career goals they prize.

Control Is Big

Control is big with this generation. They like to run the show and think like entrepreneurs. They prefer to control their workflow, schedule, and environment as much as possible.

As you work with millennials, consider how much autonomy you can give them. It’s probably not a big deal to be more flexible with their work schedule. Allowing some work from home or flex time may benefit all. But, control over the work process may be a point in which you do not wish to compromise. Pick your battles and provide as much autonomy to the workers in this generation as you can.

They’re Used to Grown-Ups Doing Things for Them

A contradiction with control is their need for others to do things for them. On the one hand, they dislike being told what to do, but on the other, they are used to their parents doing quite a lot for them.

Avoid falling into the trap of acting like the parent around them and picking up the slack when they do not perform job duties. Instead, mentor, coach, and advise them on how they can do it for themselves. By empowering them, you’ll help them achieve their potential.

The Good News: This Is a Generation that Values Lifestyle Over Career

The good news among this generation is they value lifestyle over a career. They’re accepting of diversity and will bring new, fresh thoughts to your organization. This includes the area of nonprofit financial management.

Perhaps more importantly, they are passionate about a cause that matches their lifestyle. This makes them seek positions at nonprofits whose mission aligns with their goals and values. You’ll find that once this generation commits to your organization, you have a passionate, motivated employee.

Beck & Company

Nonprofit Financial Management Makes a Bigger Impact Than You Think, New Study Shows

A new study published by Bill Meehan and Kim Jonker indicates that nonprofit financial management has a greater impact on how nonprofits are viewed by the public than previously thought. The study, The Stanford Survey on Leadership and Management in the Nonprofit Sector, penned by “friends” of the GuideStar organization, outlines seven areas which the study’s authors call “the engine of impact.” Several of these points, when taken together, point to nonprofit financial management’s role in the leadership of an organization.

The Seven Engines of Impact and Their Role in Nonprofit Financial Management

We know that nonprofit financial management can make or break an organization. Sound financial management provides a sturdy base from which a nonprofit may fulfill its mission. Without responsible financial management, nonprofits—like their for-profit counterparts—may cease to exist.

Among the seven “engines of impact” cited in the study, several can be taken together under the umbrella heading of nonprofit financial management. Let’s take a closer look at each, but especially those that impact nonprofit financial management.

Mission
Strategy
Impact Evaluation
Insight and Courage
Organization and Talent
Funding
Board Governance

Among the seven, most directly or indirectly intersect with the world of nonprofit financial management. The survey’s authors found that among the 3,000 nonprofits they surveyed, most—if not all—fell short in at least one area. Successful nonprofits were strong in all seven.

Supporting Your Nonprofit: Improving the Engine of Impact

The good news is, according to the survey results, more than 80% of nonprofits fell short in one or more of the seven areas. The bad news is your nonprofit may be among that large majority.

Board governance, funding, and impact evaluation—three key areas of nonprofit financial management—were cited among 50% of respondents as areas in which they fell short.

How does your organization measure up? The survey’s authors put together a questionnaire which you can fill out online at the link cited above to assess your own nonprofit.

If you find your organization comes up short, there are quite a few things you can do to improve:

Work with an outside consultant: A CPA firm specializing in nonprofit organizations can help you assess your financial status and suggest direct improvements to benefit its health.
Use software: Software to help track, manage, and assess fundraising activities, donor communications, and general organizational management can be helpful to add a layer of accountability to your organization. Many nonprofit accounting software packages include good reporting capabilities, which can transform data into useful information that will help finance and non-finance personnel alike manage their work better.
Engage the board in direct conversation: If you feel that board governance is an area in which your nonprofit falls short, build an action plan with your board, along with directors and other key stakeholders, to improve stakeholder engagement. How can you engage in conversation with your board so they feel both empowered and invested in the activities of the organization?

There’s no magic to improving nonprofits. A concerted, focused effort, based on an evaluation of major criteria such as those outlined in the seven points presented in this study, can help you improve your nonprofit and build a stronger organization that can best serve your constituents.

Beck & Company

Easy Cloud Computing for Nonprofits

Getting employees buy-in when making the change from an old accounting system to cloud-based fund accounting can be a daunting task. Your staff may resist the change altogether. Some may fear losing their value as the team “go-to person” for navigating through the old system and all its antiquated processes. However, when the staff sees how easy their job can be using software in the cloud, you may find it doesn’t take long to have a happier and more productive team.

It’s Easy to Find Data!

For example, “Randall” keeps his data on a USB drive and is rushing to his flight for an important event. He slips the USB drive into his pocket while digging out his ID, the USB drive tumbles to the airport floor. Randall isn’t aware that the USB drive containing his entire presentation—the one he worked on for hours last week—is gone. He can’t retrace his steps because he doesn’t know it’s missing. Only when he gets to his next meeting is when he realizes the USB drive is missing, at which point it’s too late. Anxiously, he makes calls to his office for help, but he is still dealing with problems he wouldn’t have had if he had hosted his data on the cloud.

With cloud computing, you’ll never worry about losing data again. Upload your data to the cloud in D.C., take the metro to Annapolis for an important meeting, and access it as easily as if you were in your office at home. All you need is an internet connection, your user name and password, and you can find, access, and retrieve data quickly.

USB drives can be lost. Computers break down. People forget to back up vital data. The cloud does it all for you, so you don’t have to worry.

It’s Easy to Collaborate!

Many nonprofit organizations are transitioning to flexible work arrangements or environments. It’s not uncommon today to find entire departments outsourced to third parties or to hire a temp, consultant, or freelancer who you’ll never meet in person but who provides outstanding work. These people may be scattered all over the country or the world, but technology connects them in ways never dreamed of. Skype, Trello, Slack, social media and cell phones make it easy to hire the best no matter where they live.

That leads to some challenges when it comes to sharing data on old systems. On-premises systems do not allow for internet access. You must be physically present to log into the system. New, cloud-based systems enable anyone, anywhere with access permission to log onto the system. Collaborate and share data easily no matter where you and your team work. Cloud systems make it seem as if you’re all in the room together working on the same document.

It’s Easy to Overcome Challenges!

“Randall” continues with his tough day. Not only did the USB drive fall out of his pocket, but his laptop is infected with a virus and the computer won’t allow him to access his files.

An infected laptop that won’t allow you to access your data is trouble enough, but compound that with software loaded onto the laptop that you’ve just lost access to and you’ve got heaps of trouble. With cloud systems, it doesn’t matter if you’re using the laptop you’ve always used or if you’re using a loaner while yours gets fixed. The software is located on the cloud, not on your laptop, desktop, or smartphone, so you can access it anywhere, anytime.

It’s peace of mind for your organization software and data.

Beck & Company believes in excellent service, technical expertise, and creative thinking.

Our services are highly personalized, cost effective, accurate, and dependable. Above all, we find the most practical solution to foster success and opportunity in your business and personal financial ventures. Serving small and mid-sized organizations and individuals, we provide audit, tax, accounting, and consulting service that address all aspects of your organization with one goal in mind—exceeding your expectations. Contact us today for more information or assistance.

Will Blockchain Technology Eventually Affect Accounting for Nonprofits?

In the field of accounting for nonprofits, you may never have dreamed that you’d need to consider blockchain. Blockchain, the technology undergirding the entire cryptocurrency realm and beyond, is a rising star in the world of technology innovations. You may not think that as an accountant, especially one who does accounting for nonprofits, that you must consider blockchain. But, its impact goes well beyond Bitcoin, Ripple, and all the other cryptocurrencies out there.

What Is Blockchain?

In 2008, a white paper appeared on an obscure forum for technology enthusiasts. The paper, entitled, “Bitcoin: A Peer-to-Peer Electronic Cash System”, outlined a new system of value exchange. This pure peer-to-peer electronic cash system was built upon a foundation of mathematical computations called blockchain.

Before this paper was published, people worldwide had dreamed up an electronic transfer system for cash, but the problem of double counting and tracking securely each transaction had not been solved. The pseudonymous author of the paper, Satoshi Nakamoto, discovered a solution to the double counting problem through what has since become known as blockchain.

The blockchain is a distributed database of records. This database is also called a public ledger. It contains all the transactions or digital events that have been executed and shared among participating parties.

When a transaction is made in the public ledger, it must be verified by consensus of a majority of the participants in the system. Once a transaction is confirmed, it’s never erased. Every single transaction on the blockchain from the moment it began to this present second is recorded and saved. You can look back along the blockchain to verify a transaction or see it changing now.

The blockchain can be accessed from any location via the internet. Transactions which take place between users are verified and added to the global blockchain ledger by “miners” who, by contributing their computing power, earn small transaction fees.

While we use the singular term “blockchain”, there are literally thousands of blockchains worldwide, or distributed ledgers, each running on their own mathematical code. That’s what sets them apart from one another. When you want to make a transaction, a signal goes out along the blockchain, which then is received by all the computers, or nodes, on the chain. When the majority or consensus verifies the authenticity of the transaction, the transaction is complete.

An Example of a Blockchain Transaction

Let’s use bitcoin as an example since that’s the most famous (and first) cryptocurrency ever on the blockchain, and the first transaction on the blockchain was the transference of bitcoin. In this example, you want to send 1 bitcoin from your account, called a wallet, on an exchange, or place where fiat currency such as dollars can be exchanged for bitcoins.

You want to send this bitcoin to your friend Susan. You log into your exchange account and type in Susan’s public bitcoin wallet address. Each account has a public address, which looks like a long string of letters and numbers, and a private key, which is held by the account owner. The private key is NEVER shared—sharing it gives anyone access to your wallet. It’s like leaving your wallet, purse, or bank account open.

You enter the amount of bitcoin you want to send to Susan and her public wallet address and hit “send.” A signal goes out through the exchange to all the nodes on the bitcoin blockchain. Miners on the blockchain confirm that yes, you have the bitcoin in your account and that yes, Susan’s wallet account is authentic. Once this is confirmed, a process which can take a few hours or even days, depending on blockchain traffic, the bitcoin arrives in Susan’s wallet. Now Susan, using her private key set up on the site hosting her wallet, can access her money and spend it or exchange it for another currency such as dollars, euros, or other cryptocurrencies.

The Impact on Accounting for Nonprofits

Although this may sound esoteric, blockchain technology itself goes well beyond cryptocurrencies. The government of Sweden moved all its land titles onto a unique blockchain, forming a permanent and publicly accessible record of every land title transaction. Think about that for a minute and how it impacts the real estate market. Anyone can now do a title search. It is no longer relegated to title search companies to hunt down records—they are all available via the internet for anyone to view.

For accountants, the potential is still being explored. Imagine using blockchain to record all your nonprofit’s transactions. The blockchain would form a permanent, public ledger. It would eliminate fraud since consensus must be reached to change data on the nodes, so one person can’t tamper with the books.

The Ethereum blockchain offers something called smart contracts which eliminate the middleman in any contract. Consider the benefits of transactions without having a third party involved. Real estate and automobile transactions could take place on the blockchain via smart contract without needing to run them through the court system or another recording body—it’s all on the blockchain.

For accountants, this is an exciting time, and although the blockchain can be difficult to wrap your head around when you’re immersed in traditional finance, it holds enormous potential. It’s still in its infancy, but bears watching.

Beck & Company

Beck & Company is a certified public accounting firm serving the greater Washington D.C. area and the Eastern seaboard. We offer consulting services, auditing, and software selection to help nonprofits with their accounting needs. Contact us today for more information or assistance.

Nonprofit Financial Management Topics: FASB Update

As part of our ongoing efforts to help you with nonprofit financial management, we’d like to share information on the recent FASB update. As you may recall, FASB issued Accounting Standards Update No. 2016-14 Not-for-Profit Entities, the first major change to Statement #117 since 1993. The feedback is in, and the changes took effect starting on December 15, 2017. It’s time to get up to speed and get your team ready for these changes. Are you ready?

The Impacts of FASB Statement #117

The changes begin to impact financial statements starting in 2018. The standards should be implemented during the calendar year 2018 or by the end of the fiscal year 2019.

The impacts on nonprofit financial management are as follows:

Net assets are now two classes instead of three. The three classes of net assets—unrestricted, temporarily restricted, and permanently restricted—are going away. Instead of three, there are now two. The two classes, moving forward, are net assets with donor restrictions and net assets without donor restrictions. You may be thinking, “Wait, this isn’t new!” and you’d be right. Many nonprofits have already moved into these two categories since few used all three. However, this is now the standard. You may need to tweak or update your current net asset classes to adjust for this change.
Enhanced disclosure relating to both classes of assets. Additional disclosure requirements apply to governing board designations, appropriations, or similar actions. If it results in self-imposed limits on the use of resources without donor restrictions, you may need to add additional disclosures. Some reading this may have already voluntarily disclosed information in the past, and that’s great. Now everyone is being held to the same standard and asked to document everything.
Additional disclosure related to qualitative and quantitative aspects of liquidity. This change impacts nonprofit disclosures related to how you manage liquidity to meet short-term cash demands. This may impact how you handle reserves, cash management practices, and anything that influences how cash is handled to meet short-term demand. The nature of financial assets, limitations, and other important facts must be disclosed.
You can now eliminate indirect cash flow reconciliation when direct method cash flow is presented. The direct method is preferred by many for-profit entities and, while not a requirement, has gradually become the standard. It is generally easier for the average person to understand. As such, nonprofits would be smart to adopt it. Under the new guidelines, if the direct method is presented, presenting indirect reconciliation is optional.
Required presentation of both natural and functional classification of expenses and enhanced disclosure of expense allocation methodologies. The goal is simply to improve comparability across not for profit financial statements by addressing differences in practice.
Show the nature and function of each expense in the same location. Functional expenses, which show the natural and functional categories of the expense, should be shared in the same location. It doesn’t matter if it’s in the notes or on the page, just put them near each other.
Report investment returns net of external and direct internal investment expense. You’re no longer required to report the amount of investment expenses. All nonprofits are now asked to report investment returns as net of external and direct internal investment expense. By making this a guideline that now applies to all nonprofit financial management, it helps make comparisons easier across all nonprofit entities.
Changes to restrictions on gifts. Right now, unless a donor states specifically how a gift can be used, you can use that gift for long-term assets. Now such restrictions must be released when the long-lived asset is used instead of a service. If your nonprofit used to release over time, you’ll see a bigger impact than others.

As with all changes to FASB standards, it’s a good idea to speak with a CPA or an accounting for nonprofit firm. Beck & Company is a certified public accounting firm serving the greater Washington D.C. area and the Eastern seaboard. We offer consulting services, auditing, and software selection to help nonprofits with their accounting needs. Contact us today for more information or assistance.

Tax Changes Impacting Accounting for Nonprofits

The House and the Senate passed the tax reform bill late in 2017, and it will change accounting for nonprofits. This tax reform bill impacts many areas of taxation, including several that will impact nonprofit organizations. President Trump is expected to sign the bill into law, which will enact some sweeping changes that benefit corporate America as well as educational nonprofits, and more.

Some things remain the same, while others are changing. The biggest changes affecting nonprofits include the increase in the deduction limit for charitable contributions and the significant reduction in the corporate tax rate. Below, a summary of major points nonprofit financial managers needs to know. For a complete review of your nonprofit finances, contact Beck & Company. We are happy to assist you with compliance with the new tax laws and reviews and audits of your current financials.

Taxation Changes that Affect Accounting for Nonprofits

Many previous tax reform bills had little, if any, impact on accounting for nonprofits. This one, however, will offer many changes that you should be aware of as you move into the new year.

Here’s a summary of the major changes that will affect accounting for nonprofit organizations:

The deduction limit for charitable contributions increased to 60% from 50%. This may be a good time to add a few donor campaigns to your nonprofit marketing and add this fact to encourage increases in donations.
The corporate tax rate drops from 35% to 21%. This is a big change intended to free capital in the for-profit sector, but one that will also help your nonprofit.
Section 529 plans are now available for both elementary and secondary education support, which may impact educational nonprofits.
Unrelated business activities must report profit and loss as a stand-alone figure before accounting for the $1,000 deduction.
There’s a provision in the House bill under which unrelated business income tax that includes any expenses paid or incurred by a tax-exempt organization for the following, provided such amounts are not deductible under section 274: qualified transportation fringe benefits, a parking facility used in connection with qualified parking, or any on-premises athletic facility.
There’s a new excise tax on education institutions. It generally applies to schools with 500 or more students with 50% of students located in the U.S. The new Act includes a 1.4% excise tax on the net investment income. That’s not yet defined, so you’ll need to check back to see how this ripples through the new year.
There’s a new 21% excise tax on compensation in excess of $1 million to the top five highest-paid employees at tax-exempt organizations. There are several exemptions, limitations, and qualifications to this, so you may wish to consult with the experts at Beck & Company for details.

There are, of course, more changes in the new Act, and some things are untouched. The Johnson Amendment, for example, which restricts 501(c)(3) organizations from directly or indirectly participating in political campaigns or activities remains unchanged.

You may read the Act in its entirety on the White House website.

Any change to the tax code is sure to impact your organization. Large or small, such changes can feel disruptive. Beck & Company is here to help you understand and comply with tax changes and other issues impacting accounting for nonprofit organizations.