LEAN Payables Workshop - Topic for January 25, 2011

Finance and accounting staff at nfp's are accustomed to spending a significant amount of time processing payables because of the various internal control measures that must be followed. Even so, there still may be ways to streamline the process to decrease the number of hours spent on this task. To learn how to make that happen, make plans to join us at the next nfpFMA meeting, Tuesday, January 25, 2011 when Rick Feldt and Mike Lewis of RubinBrown will take members through an interactive payables workshop that will end much leaner than it began.

2011 Tax Law Changes - Healthcare Reform, HIRE Act will have impact

On Tuesday, December 7, 2010, Jim Ritts of Rubin Brown went through many of the 2011 tax law changes that will impact nfp's in 2011. Here are some highlights (1-3 are from the Healthcare Reform Act; 4-5 are from the HIRE Act of 2010):

1. Small-sized nfp's might benefit from the Healthcare Reform tax credit of up to 25% of the cost of premiums. The credit is available to nfp's through a refundable tax credit filed with the IRS by the 990T form.
2. Employers will want to think about voluntarily reporting the value of health care coverage provided to employees on 2011 W-2's as a trial run, because the reporting will be mandatory for 2012 W-2's.
3. Another 2012 filing requirement that might be wise to prepare for in 2011 is with 1099 forms. Beginning in 2012, all businesses must issue 1099 forms to report purchases of goods or services of $600 or more. So nfp's may want to boost up W-9 collection during 2011 so that the 2012 1099 filing goes easier.
4. Any nfp hiring new employees in 2011 will want to check if the Work Opportunity Tax Credit (providing 40% of qualified wages for certain individuals of up to $6,000 per year for maximum credit of $2,400), is in effect for 2011 hiring.
5. Any nfp hiring new employees in 2011 will want to check if the Payroll Tax Holiday is extended into 2011. The tax holiday provides relief from the 6.2% FICA tax of wages up to $106,800 (maximum credit $6,622).  

2011 Tax Law Changes - Topic for December 7, 2010

If you are concerned about the impact 2011 tax law changes will have on your nfp, then make plans to join us Tuesday, December 7, 2010 when John Ritts, Tax Partner at RubinBrown, who specializes in nfp's, will take nfpFMA members through 2011 tax law changes affecting nfp's and how nfp's can prepare for them.

Controlling Audit Costs - Sieze Control!

On Tuesday, October 26, 2010, Jeremy Vinson of Anders, Minkler & Diehl, LLP provided insights for how nfp's can control audit costs. The basic take-away is for the nfp to take control of audit matters up- front, so that there are as few billing overrun hours as possible. Vinson's suggestions include:

• contracting with an audit firm for 3-5 years but re-evaluating the firm regularly
• negotiating audit fees by choosing an off-season time for the audit
• questioning unexpected costs
• attempting to resolve as many issues prior to the audit as possible
• completing confirmations and schedules prior to audit field work dates (asking for templates if needed)
• posting audit adjustments in a timely manner.

As with most aspects of vendor relations, continuous communication is key and will reap dividends.

Controlling Audit Costs - Topic for October 26, 2010

Audits already are anxiety-ridden enough. And breaking the bank to pay for them adds insult to injury. If you would like to learn ways to limit the cost of your nfp's annual audit, then make plans to attend our next meeting, October 26, 2010, when representatives from Anders, Minkler and Diehl will present best practices for controlling audit costs.

Managing Risk & Risk Management - Run for Cover(age)

On Tuesday, September 28, 2010, Michael Everding, of AHM Financial Group LLC, outlined many scenarios which exposed insurance coverage gaps. From fundraising events to simple car trips to the bank, nfp's are exposed to a variety of liabilities that need insurance coverage. Everding recommends updating insurance brokers with any changes to business operations. Also, Everding recommends adding riders to general liability policies rather than purchasing separate stand-alone policies to keep costs in check.

Managing Risk & Risk Management - Topic for September 28, 2010

Join us Tuesday, September 28, 2010 as we kick off the new program year with a session guaranteed to provide you with all you will need to know to pass Insurance 101. Michael Everding, Sr. Account Executive with AHM Financial Group LLC will present scenarios that create financial risk and strategies we can adopt to minimize it.

Please remember to bring your 2010-2011 dues to the meeting if you plan to order lunches for the year's meetings. Otherwise, you'll be taking a risk you may regret!!!

2010-2011 Dues - Are Due!!

All nfpFMA renewing members (and any new members joining at the September meeting) who plan to place lunch orders will be assessed annual dues of $70 for the 2010-2011 program year. Please make plans to bring your payment to the September meeting, Tuesday, September 28, 2010.

Thanks!!!

LEAN Accounting and Budgeting - Plan for it!

Today, Rick Feldt and Mike Lewis took the nfpFMA membership through the concept of LEAN accounting as it applies to budgeting. Most of the general public associates LEAN business practices with cost-cutting and layoffs. However, the best way to practice LEAN is to use it to change and streamline institutional practices. For the not-for-profit world, there are few institutional practices as entrenched as budgeting. To start budgeting LEAN, follow these Do's and Don'ts:

Don't

• Forecast to the wall (most budgets provide fewer and fewer projections as the end budget date draws near)
• Confuse forecasts with targets (be realistic with forecasts, optimistic with targets)
• Insist on forecast accuracy in an unpredictable world (forecasts are a best guess at most)
• Rely on Excel spreadsheets (instead, try to find a way to budget/forecast in the accounting software)
• Engage in excessive detail

Do

• Use a rolling 12 month forecast (update every quarter)
• Focus on critical drivers (rather than excessive detail)
• Use different time horizons for different decisions
• Match forecast with ability to see
• Move to advance planning (such as scenario planning)

LEAN budgeting involves changing from a static budget to a dynamic one, and in doing so, shortens the amount of time and resources spent on budgeting.

A good resource for LEAN accounting is, "Real Numbers: Management Accounting in a Lean Organization," by Jean E. Cunningham, Orest J. Fiume, and Emily Adams.

LEAN Accounting and Budgeting - Topic for June 22, 2010

If you are like most nfp finance people, you spend alot of time preparing financial information that very few decision-makers read, use, or understand. More and more nfp's are becoming aware of this phenomenon and are seeking solutions. One possibility is the adoption of LEAN accounting and budgeting practices. Aren't familiar with LEAN? Then make plans to join us at our final nfpFMA meeting of the program year, Tuesday, June 22, 2010 when Rick Feldt, Michael Lewis, and Kristin Parshay of Rubin Brown discuss how nfp's can get LEAN.

Audit Committees and Audit Planning Letters - For panic and stress-free audits!

This afternoon, Jeanette Bax-Kurtz and Karyn Nunn of Mueller Prost PC discussed ways Audit Committees can assist nfp's with audit preparation and other matters related to the audit. Some considerations they presented are:

• Selecting Audit Committee members - make an effort to select members who will further the exempt purposes of the nfp while minimizing conflicts of interest.
• General Rules Affecting Audit Committee Composition - seek out members of the public who possess expertise in the committee's role, are independent of the nfp and other members, are capable of making sound financial decisions, can understand nfp financial statements, and have a basic understanding of public audits.
• Typical Responsibilities of Audit Committees - include selecting audit firms, reviewing the audit plan and scope, approving the audited financial statements, monitoring internal controls, monitoring accounting policies and procedures, monitoring policies such as code of conduct, and conflict of interest policies, and monitoring federal and state tax filings (such as the 990).

The nfpFMA members also discussed the best way to prepare an Audit Planning Letter, in which the nfp provides the audit firm with notable changes from prior years or "need-to-know" information, and the impact of those changes and "need-to-know" information on the financials statements. Both Bax-Kurtz and Nunn agreed that Audit Planning Letters go a long way toward experiencing a successful audit.

Audit Committees and Management Letters - Topic for May 25, 2010

Are you aware that panic attacks experienced at the onset of the annual audit can be treated with preventative care? Jeanette Bax-Kurtz and Karyn Nunn of Mueller Prost PC will speak at the May 25, 2010 nfpFMA meeting to tell you that YES THEY CAN! The treatment involves nfp's taking two simple steps; forming a board Audit Committee and drafting a Management Letter. So please make plans to join us Tuesday, May 25 to hear Bax-Kurtz and Nunn take us through these activities.

How Healthcare Reform will affect nfp's - Sober up

Not-for-profits, along with all other US businesses, are in for a rude awakening when the healthcare reform legislation kicks in, as Phil Bushnell of Gallagher Benefit Services explained to the nfpFMA members today.  Phil distributed a timetable ranking the changes in order of when they will take effect, beginning in 2010. Some of the most prominent changes will be:

In 2010: Dependent coverage will be available to age 26; Coverage can no longer be rescinded for health reasons; Pre-existing condition exclusion for children under 19 years of age will end; Consumer rebates will be available; and Annual/lifetime coverage limits will end.

In 2011: Value of medical benefit must be reported by all employers (including nfp's) on their employees' W-2's; FSA reimbursement for OTC drug expenditures will end; and The CLASS program will be introduced (to reimburse medical out-of-pocket costs for early retirement employees) which is only expected to last less than the 1st month past its introduction date.

In 2012: No changes.

In 2013: FSA's and HSA's will be capped at $2,500 contribution levels; and High income individuals will begin paying more taxes to pay for costs of reform.

In 2014: Medicare tax rate will increase from its current levels of 1.45% for both employees and employers; Pre-existing exclusions will end; All citizens will be required to have insurance coverage; and All employers will be required to offer insurance coverage.

How the Health Care Reform Bill will affect nfp's - Topic for April 27, 2010

If you snoozed through C-SPAN's wall-to-wall coverage of the health care reform debate, then please make plans to join us when we meet in April to discuss the implications of the reform legislation on not-for-profits. At this meeting, Phil Bushnell of AJ Gallagher will discuss the new legislation and how nfp's can take steps to prepare for it.

Utilizing Internships - Topic for March 23, 2010

Are you a Finance Department of 1 wishing for additional staff to assist with the seemingly never-ending responsibilities of nfp finance? Or are you part of a Finance Department staff that still has trouble meeting deadlines because of excessive workload? If either of those scenarios look familiar to you, then make plans to join us Tuesday, March 23, 2010 when Allison Roba, Internship Program Coordinator at the John Cook School of Business will present information about internships and how nfp's can successfully attract skilled interns and run ongoing finance internship programs.
Some key areas Allison will cover are:

• What students are looking for in an internship
• Student capability levels 
• Availability of graduate students for internship
• Availability of undergraduate students for internship
• What is expected of the on-site supervisor
• How nfp's can compete with paid internships
• Other ways to recruit interns
• Benefits and drawbacks of hiring interns

Attendees also will receive tools and materials to help you kickstart your internship programs.

Promises, Pledges, and Receivables - It's all in the Intention

On Tuesday, February, 23, 2010, Donna Wallace of Kerber, Eck, & Braeckel presented the latest GAAP and best practices for Promises, Pledges and Receivables. The first bit of information we learned was that "promises" is the accounting term for what fundraisers call "pledges." The second piece of information we learned was that all donor contributions begin with "intentions." As you can see from reading the bullet points below, this topic is a bit complex and one we will probably re-visit in the future.

Here are some basic key points:

 

• If the donor expresses a plan or hope for future giving, but does not provide further detail, then their communication is an intent to give, and is not booked as a receivable.
• If the donor expresses a clear commitment to donate, either in writing or orally, then their communication can be interpreted as a promise to give and booked as a receivable.
• If the promise to give is based on the performance of a goal, then that promise is a conditional promise to give (not the same as a restriction) and will either be recorded as a receivable and restricted contribution at the time the promise was made, or recorded when the conditions were met, depending upon how likely the conditions will be met.
• If the receipt of the promise depends only on the passage of time or a demand for performance, then the promise may be recorded as a receivable in the period in which it was made.

Promises, Pledges, and Receivables - Topic for February 23, 2010

Ever find yourself in continuous "discussions" with the development department over when promises or pledges should be recognized as revenue? Or engaged in heated debate with fundraisers over what promises or pledges should be invoiced, or whether those invoices should even be booked as receivables?

If the scenarios described above seem familiar, then make plans to attend the next nfpFMA meeting Tuesday, February 23, 2010 when Donna Wallace of Kerber, Eck & Braeckel will instruct nfpFMA members on the fine points of promises, pledges and revievables. She'll cover the distinction between them, how best to account for them, strategies for collecting and managing them, and how they move from the temporarily restricted classification to the unrestricted one.

It will make for a very informative meeting. Promise.

Accounting for Endowments - Get UPMIFA'd

On Tuesday, January 26, 2010, Ted Williamson of RubinBrown discussed the impace of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) with the nfpFMA members. UPMIFA was signed into Missouri law on July 10, 2009 and Illinois law on June 30, 2009. UPMIFA replaces the Uniform Management of Institutional Funds Act which had been in effect in Missouri since 1976 and Illlinois since 1973.


Though, as always, donor intent reigns supreme, in the absence of specific donor instructions, UPMIFA requires preservation of principal through the practice of a “total return focus” which allows the nfp to spend gains as well as earnings. This applies even for underwater investments provided that what is expended is “prudent for the uses, benefits, purposes, and duration for which the endowment fund is established.”

Also, under UPMIFA, endowment earnings are considered donor restricted until formally approved for expenditure by the organization (usually by board decree). Thus earnings on endowments are considered temporarily restricted until appropriated for expenditure by the organization.

UPMIFA applies retroactively to all previous endowment gifts.

FASB 117-1 adjusts accounting rules for the effects of UPMIFA and applies retroactively to all existing endowments. This means unappropriated earnings in prior years should be reclassified from unrestricted to temporarily restricted net assets. However, prior year financial statements should not be restated because UPMIFA is a change in the law rather than a change in accounting, and the financial statements should reflect the laws in effect during that accounting period.

FASB 117-1 also requires certain disclosures on the financial statements that provide information about the composition of the endowment, a roll forward of the endowment by net asset classification, and certain policy statements, in addition to disclosures required by other FASB statements: the nature and types of temporary and permanent restrictions (FASB 117), and the aggregate amount of underwater endowments (FASB 124).


Recommended Action Steps:
• review existing endowment agreements to see which have spending provisions that will take precedence over UPMIFA
• consider rewriting standard donor endowment agreements to comply with UPMIFA
• work with legal counsel to develop an interpretation of state law relative to the balance of endowments that must be retained permanently
• develop a formal investment policy, or revise the existing policy, to conform to the provisions of UPMIFA
• develop a formal endowment spending policy to conform to the provisions of UPMIFA
• develop a policy regarding the expenditure of underwater endowments
• develop a formal process for appropriating endowment earnings for expenditure
• develop a system for tracking endowment balances by individual endowment fund and allocating earnings and distributions to these funds.