CPAs in the not-for-profit (NFP) sector are busy keeping up with financial accounting, tax law, technology, and operational changes. Many recent tax provisions affect NFP organizations, as well as businesses, and the IRS Tax Exempt and Government Entities Division has also updated its compliance program with new initiatives. Establishments that have traditionally run on a tight budget with multi-tasking personnel have faced special challenges under the remote working and fundraising environment.

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On the financial accounting front, FASB has continued to issue guidance for NFP entities. A relatively recent pronouncement, ASU 2020-07, Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets (September 2020), is aimed at increasing transparency in reporting “gifts in kind” of nonfinancial assets.

This month’s column looks at two web-sites that offer free resources on a wide variety of accounting issues to help CPAs provide assistance to the NFPs they serve.

RSM Ideas & Insights

RSM’s Ideas & Insights blog (https://rsmus.com/our-insights.html) offers a great collection of articles, reports, newsletters, and webcasts that is organized by topic, by industry, and by service. Selecting by topic brings up specific webpages, while selecting by industry or service yields a search results listing. Although this format is a little awkward, each item includes a subheading indicating its source, such as Financial Reporting Insights, Tax Alerts, and Insights Article; this makes the blog a little easier to navigate. The individual resource pages include convenient print and share features, including email, which shortens the search to locate the item again at a later time. The following is a review of a few recent sample materials.

Financial Reporting Insights.

“FASB Provides Goodwill Impairment Triggering Event Alternative” (April 6, 2021) includes a link to ASU 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events, and an overview of FASB’s basis for conclusions, along with RSM’s suggestions and examples. Entities that report financial statements on an interim basis would perform goodwill impairment triggering event analysis as of the interim reporting date. Organizations that only report on an annual basis would conduct their impairment triggering event analysis only as of the annual date, not periodically throughout the year (https://rsm.us/2RcroPr).

“Presentation and Disclosure of Contributed Nonfinancial Assets” (September 21, 2020) briefly summarizes FASB’s ASU 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, which requires that contributed nonfinancial assets be presented as separate line items—contributed cash, or financial assets. A nonprofit must disclose qualitative information regarding whether nonfinancial assets received were monetized or utilized, a description of valuation techniques under Topic 820, Fair Value Measurement, and the principal market used to determine a fair value (https://rsm.us/330sTmM).

RSM: Ideas & Insights

https://rsmus.com/our-insights.html

Tax Alerts.

“American Rescue Plan Act Provisions Affecting Exempt Organizations” (March 17, 2021) addresses specific applications of the new law to nonprofits, and provides a link to a more comprehensive RSM analysis. The act made additional Paycheck Protection Program (PPP) funds available to certain IRC section 501(c) organizations, other than 501(c)(4)s. Expanded assistance was created under the Shuttered Venue Operator Grants (SVOG), and PPP loans were made available to these organizations. Other provisions that may affect nonprofits include the extensions of the employee retention credit and unemployment benefits provisions, and changes to the paid sick leave and paid family leave credits (https://rsm.us/3u7NoJW).

“IRS TE/GE Division Releases New Compliance Initiatives” (April 7, 2021) outlines eight new updates to the IRS Compliance Program and Priorities for tax exempt and government entities (https://bit.ly/3u3ZPq5). The new initiatives address items such as audits of exempt organization expenses being claimed as Schedule C deductions, the determination of exempt organizations’ eligibility to file Form 990-N rather than Form 990-EZ or the regular Form 990, and an expansion of examinations of retirement plans of small exempt organizations (https://rsm.us/2Re7kws).

Insight Articles.

“5 Ways Nonprofits Can Stay Agile” (April 06, 2021) provides recommendations for nonprofit organizations to optimize their technology and operate more efficiently. The first suggestion is to create at least one version of the budget based on a worst-case scenario, and use that information to evaluate and plan for risks. Followup on the alternative budget is accomplished by building reserves, a process that is detailed in a linked article. Organizations also need to generate useful data and develop effective ways to analyze it. The article recommends that nonprofits increase their ability to operate in a virtual environment (https://rsm.us/3u5iTEG).

Nonprofit Industry Webcast Series.

RSM offers a free webcast series that discusses accounting, tax, and operational topics affecting NFP organizations. The easiest way to find the presentations is via the landing page at https://rsmus.com/events/nonprofit-webcast-series-2020.html. The December 2020 program was a “Tax Update for Exempt Organizations” covering federal, state, and international tax issues affecting exempt organizations. The September 2020 Nonprofit Accounting Update covered FASB’s ASC Topic 842, with emphasis on office leases classified as operating leases, calculating journal entries for typical office lease transactions, and understanding how different lease components impact the financial statements.

AICPA NFP Resources

The AICPA’s “Not-for-Profit” main page (https://future.aicpa.org/topic/notfor-profit) organizes resources that are mostly targeted to NFP section members and subscribers. Several useful materials are available to the general public, and this month’s review highlights a few of the free resources.

“Top Issues for Not-for-Profits This Year” (https://bit.ly/3xCd9nR) includes links to many explanatory resources on the AICPA and external websites. The concerns addressed include coronavirus (COVID-19) considerations, including specific accounting considerations such as subsequent events, revenue recognition, and going concern evaluation for leases. Several auditing issues are impacted, such as the need for remote auditing, the effect on internal controls and segregation of duties, and the going concern implications of negative financial consequences. Other major topics covered include the implementation of ASU 2018-08, Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made, and changes to the auditor’s report under SAS 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements.

“Perspectives on New Accounting Standards for Not-for-Profits” (https://bit.ly/3vwvu4a) provides a table of the newest standards that apply to a wide range of nonprofits, with effective dates of 2018 through 2023. The article includes an interesting graphical presentation of the author’s view on the number of organizations affected by specific standards compared to the effort required to implement each standard.

Two articles address the subject of functional expenses under ASU 2016-14. “Functional Expense Schedule Best Practices for Not-for-Profits” (https://bit.ly/2Qyp2e9) recommends that for most nonprofits, presentation of between five and 10 categories should be sufficient; 15 or more categories is probably too much detail for users. In contrast to the new standard’s apparent recommendation to disaggregate program services as a way of meeting functional expense requirements, smaller organizations may truly have only one program. Finally, implementation of the new reporting standards offers an opportunity to review an organization’s method of allocating expenses. A related article, “Top 7 Functional Expense Allocation Errors” (https://bit.ly/3aOOBOU) discusses common mistakes.

The “Sample Not-for-Profit Audit Reports” webpage (https://bit.ly/2S3hFLR) offers several Word-format templates for terminology to be included in auditor’s reports prior to the updates recommended in SASs 134 through 141. These may be a useful starting point for new engagements; however, the most current recommendations are presently only available to section members.

More Nonprofit Resources

FASB Non-for-Profit Reporting Webpage

https://www.fasb.org/jsp/FASB/Page/ImageBridgePage&cid=1176168380111

IRS Charities and Nonprofits Webpage

https://www.irs.gov/charities-and-nonprofits

IRS Tax Exempt & Government Entities Compliance Program

https://www.irs.gov/government-entities/tax-exempt-government-entities-compliance-program-and-priorities

Foundation for Accounting Education Nonprofit CPE Seminars

https://cpe.nysscpa.org/find-products?q=nonprofit

Susan B. Anders, PhD, CPA/CGMA is the Louis J. and Ramona Rodriguez Distinguished Professor of Accounting at Midwestern State University, Wichita Falls, Tex. She is a member of The CPA Journal Editorial Advisory Board.