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101 ACCOUNTING THAT COUNTS
Roxie Alexander, Greater
Twin Cities United Way
Steve Anseth, Abdo Eick &
Meyers LLP
Mary Kinder, MNCASA
BIOS
Roxie Alexander is Controller for Greater Twin Cities United Way, a nonprofit dedicated to uniting caring people to build pathways out of poverty. In her role at GTCUW, Roxie leads the day to day operations of the finance team, ensuring that the organization’s $93 million are accounted for appropriately. She’s been in the nonprofit sector for over 15 years.
BIOS
Steve Anseth, CPA, is a Partner at Abdo Eick & Meyers, a top Minnesota accounting firm. Steve leads the firm's Non-profit segment. Steve and his team work with over 100 nonprofit organizations from across the state, ranging in size from $5,000 in revenue to over $150 million in assets.
BIOS
Mary Kinder has nearly 30 years of experience as a finance manager in the nonprofit and healthcare sectors. These positions included Accounting Manager of a large hospital system in Minneapolis; Controller of a Minnesota regional HMO; and CFO/Finance Director of four government contract funded Minnesota nonprofits.
WHO IS THE ROOM?
Board Members
Executive Directions/CEO/Presidents?
Program Staff
Finance Staff
Other
Size?
Less than $5M
More than $5M
CASH VS. ACCRUAL ACCOUNTING
Cash basis – record transaction as cash moves (in and out)
Accrual basis – record transactions as they are incurred
Generally accrual accounting is more accurate.
Cash basis more susceptible to manipulation
Modified cash basis – typically cash basis but with fixed assets and possibly long-term debt. More common than pure cash basis.
RECORDING PLEDGES & NONGOVERNMENTAL GRANTS
Record when notified – email notification, award letter, phone call with follow-up email
Record full amount when a multi-year grant
Temporarily restrict the portion that is for future periods
Discount (present value) grant at year-end based on payment schedule
Allowance for uncollectible pledges when dealing with individual donors
Can use various methods to determine allowance
One example includes using a historical percentage – Look at bad debt from past and use same percentage for future
“GOV’T GRANT CONTRACTS”
Contributions vs. Earned Income
Read document thoroughly to determine whether earned income or contribution
Contract type
Exchange transaction: paid for performance; reimbursed for actual expenses; quarterly “invoices” or payment request
Contribution type
Temporarily restricted, lump sum, payment upfront, may have a financial report periodically or at the end of the grant, similar to a foundation grant
RESTRICTED VS. UNRESTRICTED GRANTS
Read the award letter thoroughly
Look for time restrictions and program restrictions
Foundation grants have become more restricted
Finance folks should look at proposals to see what was included in the budget proposal that could affect the restriction
Create a temp restricted schedule to track if receiving multiple grants
Grant period, restrictions, amount/yr, releases
When to track in a cost center/class as opposed to a schedule
GRANT REPORTING
Allocating Indirect Expense to Programs/Grants
• There must be some method to clearly track expenses for each unique restricted or government grant – in accounting system is best, but may be a spreadsheet.
• Overhead costs must be allocated consistently to all programs/cost center/grants.
• Examples?
• Direct expenses do not get allocated and are program specific.
NON-CASH CONTRIBUTIONS
Examples – goods, professional services, rent, etc.
Record it at fair market value when received (or at least quarterly)
Professional Services: Best to get documentation for pro bono services if possible (invoice, bill, etc).
Generally recording noncash contributions results in an increase to revenue and increased expenses - net to zero on the bottom line
Exception: When capitalizing in-kind contributions does not net zero
NON-CASH CONTRIBUTIONS
Receipting
Under $250, donor not required to have substantiation
Over $250, donor must have acknowledgement from the organization
Requirements for Receipt: in writing, date of the gift, sent within reasonable timeframe, and must describe item(s) given. Do NOT assign a dollar value to the item(s) give. Donor must value items donated for tax purposes
Vehicle donations require Form 1098-C form must be completed within 30 days if org keeps the vehicle or 30 days from the date of sale if the vehicle is sold
SINGLE AUDITS
Threshold for single audit is $750K/year in federally funded expenses
Nonprofit is responsible for all information, even if sub grantees are involved.
Happens in conjunction with your annual audit
Each grant can be a mini audit.
PREPARING FOR SINGLE AUDITS
Verify in writing with your gov’t funder the amount of federal funds
received.
Ensure that CFDA numbers are in grant agreements.
Auditors will sample expenses and related payments - % of total
federal grants.
Document, document, document
Compliance auditing is included in single audit
Super circular – web site link below explaining all compliance.
https://www.grants.gov/web/grants/learn-grants/grant-policies/omb-uniform-guidance-2014.html
PROGRAM VS. FUNDRAISING, GENERAL & MANAGEMENT
Required for nonprofit financial statements
Definitions of each
Program – costs related to providing program services
Management and general – costs related to administering day to day activities of the org, such as accounting, mgmt., HR, IT, governance, etc.
Fundraising – costs of call activities related to an appeal for financial support, such as fundraising event, solicitation of contributions, salaries of staff working on this, managing of volunteers, costs of grant writers
PROGRAM VS. FUNDRAISING, GENERAL & MANAGEMENT
Charities Review Council’s Accountability Standard, Use of Funds Standard, April 2014
Definitions of each
Program – costs related to providing program services
Management and general – costs related to administering day to day activities of the org, such as accounting, mgmt., HR, IT, governance, etc.
Fundraising – costs of call activities related to an appeal for financial support, such as fundraising event, solicitation of contributions, salaries of staff working on this, managing of volunteers, costs of grant writers
FINANCIAL POLICIES
Living document – loose leaf
Expense reimbursements
Purchase/invoice approvals – procurement policies
Fixed asset policy
Record retention
Credit card policies
Cell phone reimbursement
Travel and entertainment
Timesheet approval
PTO request process
FINANCIAL MANAGEMENT
Profit and Loss – Income Statement unaudited
3 observations from the profit and loss
What stands out to you?
What questions do you have?
What would you suggest the notes to the financials say?
FINANCIAL MANAGEMENT
Profit and Loss – Statement of Activities audited
3 observations from the profit and loss
What stands out to you?
Why do you suspect the revenue and support increased significantly year over year?
What explains the increase in temp restricted column?
FINANCIAL MANAGEMENT
Balance Sheet - Statement of Financial Position
3 Observations from the balance sheet
Overall financial health (1 to 10, 10 being the best)?
Have they “spent” restricted funds?
Are they going in the right direction? Based on what info?
Would you send this out to the board? Explain?
FINANCIAL MANAGEMENT
ADDITIONAL QUESTIONS?
Feel free to call or email any of us.
Roxie Alexander, Greater Twin Cities United Way
612-340-7604, [email protected]
Steve Anseth, Abdo Eick & Meyers LLP
952-715-3029, [email protected]
Mary Kinder, MNCASA
651-288-7448, [email protected]