Nonprofit Financial Management Network

Transcription

1 August 14, Nonprofit Financial Management Network Gregory Demetriades, CPA CFO, Community Partners David J. Thomas, CPA, CGMA Managing Partner, 2 1

2 8:30am-9:00am Registration & Breakfast 9:00am-9:10am Introduction 9:10am-9:40am Uniform Guidance for Federal Awards 9:40am-9:50am Break 9:50am-10:50am FASB Exposure Draft for NFP Financial Statement Presentation 10:50am-11:00am Summary & Questions 3 Presenter: Thomas A. Brockway, CPA, CGMA 4 2

3 1. What is the Uniform Guidance for Federal Awards? 2. Key Changes Subpart D Post Federal Award Requirements Subpart E Cost Principles Subpart F Audit Requirements 5 A-133 A-122 A-21 A-110 A-50 A-102 A-87 A

4 Subpart A Acronyms and Definitions Subpart B General Provisions Subpart C Pre-Federal Award Requirements, Contents of Federal Award Subpart D Post Federal Award Requirements Subpart E Cost Principles Subpart F Audit Requirements Appendices IV Indirect (Facilities & Admin - F&A) Cost identification and Assignment and Rate Determination for NPO VIII NPO exempted From Subpart E-Cost Principles of Part 200 X Data Collection Form (SF-SAC) XI Compliance Supplement 7 1. Supersedes and streamlines requirements of 8 OMB Circulars into 1 Super Circular 2. Eliminates duplication & conflict in guidance 3. Focuses on performance over compliance 4. Encourages use of fixed amount awards These minimize compliance requirements in favor of meeting performance milestones 8 4

5 1) Uniformity for Federal awards to non-federal entities 2) Alternative accounting methods based on performance outcomes for salaries and wages 3) Pass-through entities to provide indirect cost rate to subrecipients 4) De minimis indirect cost rate of 10% of Modified Total Direct Cost 5) Audit threshold raised to $750, ) Prohibits imposing additional or inconsistent requirements 7) Certain compliance requirements may be waived on a case-by-case basis 8) Enhanced section of definitions 9) More restrictive requirements only allowed if: Approved by OMB Required by Federal statutes or regulations 10 5

6 December 26, March 31, 2015, June 30, 2015, September 30, 2015 Non-federal entities adopt new admin requirements and cost principles to all new awards and additional funding to existing awards Single-audit threshold uses old regulation and testing affected by clients use of new requirements December 31, 2015 and after New administrative requirements, cost principles, and new single audit requirements apply 12 6

7 13 1. Non-Federal Entities (NFE), including notfor-profit (NFP) recipients, must comply with all requirements of award 2. Administrative requirements 14 7

8 Requirements with most impact to NFP: 1) Financial Management System 2) Internal Controls 3) Payment 4) Cost Sharing/Matching 5) Program Income 6) Procurement Standards Financial Management System Must provide for: a) Separate accounts for Federal Awards b) Compare Budget to Actual for Federal Awards c) Written procedures for: i. Payments & Cash Management ii. Determining the allowability of cost according to the Cost Principles (Subpart E) 16 8

9 2. Internal Controls a) Establish and maintain internal controls i. Such as Tone at the Top, ii. Assessment of Fraud Risk, iii. Monitoring iv. etc b) Safeguard protected personally identifiable information (PII) i. Ex. social security number Payment a) Minimize time between transfer and disbursement funds b) $500 interest earned may be retained by NFE for administrative expense i. Interest earned > $500 must be remitted annually 18 9

10 4. Cost Sharing or Matching a) NOT paid from Federal government under another Federal award b) Allowable under Subpart E Cost Principles Program Income a) Encourage to earn program income to defray costs b) Use specified in the award c) During the performance period 20 10

11 6. Procurement (general) a) Document procedures b) Maintain oversight c) Avoid duplicate items d) Encourage use of Federal excess and surplus property e) Open competition Procurement o Methods of procurement: Sole source Micropurchases, < $3,000 aggregate Small purchases, > $3,000 but < $150,000 Sealed bids, > $150,000 Competitive bid, > $150,

12 6. Procurement o Performance and Monitoring Requirements: 1. NFE must monitor compliance with Federal Award requirements 2. Subrecipient vs Contractor defined 3. Remedies for non-compliance

13 1. Consolidated cost principles into one document 2. NFE is responsible for efficient & effective administration Allowable Costs 2. Allocable Costs Personnel cost Indirect Facilities and Administration-Major NFE 3. Specific Costs - examples 4. Certification required 26 13

14 1. Allowable Costs a) Reasonable & necessary b) Consistent with policies and procedures c) Consistent treatment d) GAAP e) NOT included if used for cost sharing or match under another Federal award (i.e. double dipping) f) Adequately documented Allocable Costs Personnel cost allocation a) Time & distribution records MUST be retained for all employees b) Budgets do NOT qualify as support for charges to Federal program c) NEW standard for documentation d) Non-exempt employee must also prepare allocation records 28 14

15 2. Allocable Costs Personnel costs Direct Charge (Admin & Clerical) May be appropriate only if all of the following conditions are met: 1. Administrative or clerical services are integral to a project or activity; 2. Individuals can be specifically identified with the project or activity; 3. Such costs are explicitly included in the budget or have the prior written approval; and 4. The costs are not also recovered as indirect costs Allocable Costs Facilities and Administrative (F&A) Indirect Costs 1. Negotiated Indirect Cost Rate a) Must be accepted by Fed l Awarding Agency/PTE 2. 10% de minimis Cost Rate - Appendix IV 30 15

16 2. Allocable Costs Facilities and Administrative (F&A) Indirect costs Additional Negotiated Rate Options 1. Non-federal entities will have a one-time option to extend rate for up to four years 2. For non-federal entities who have never received a negotiated rate, de minimis rate of 10% of modified total direct costs may be used indefinitely Specific Costs UNALLOWED a) Advisory councils b) Alcoholic beverages c) Bad debt d) Donations e) Entertainment costs f) Fundraising (general) g) Others 32 16

17 3. Specific Costs ALLOWED with limitations a) Advertising & public relations b) Audit cost c) Compensations cost d) Maintenance & repair costs e) Pre-award costs allowable if allowable after award and written permission of FAA f) Professional costs g) Others Required Certification Certification on annual and final fiscal reports or vouchers requesting payment Signed by an official who is authorized to legally bind the non-federal entity 34 17

18 1. Audit threshold increased to $750, NFE expends $750,000 or greater must have single audit a) If NFE is recipient or subrecipient, then subject to Single Audit b) Generally for most NPO $750,000 type A/B threshold 3. Questioned Costs increase to $25, Minimum Coverage ratio decreased a) Non low risk from 50% to 40% b) Low risk from 25% to 20% Know effective dates December 26, Understand new requirements 3. Focus on significant areas, i.e. areas with the most changes Time & expense, reporting, allowable costs, procurement, internal controls, monitoring 4. Develop a plan 5. Involve senior management 6. Explore resources & training 36 18

19 COFAR (web presentations for Uniform Guidance): Administrative requirements Cost requirements Audit requirements 3. E-CFR: Title 2 Part

20 Presented by: Paul Bertoni and Beth Stevens, CPA, CGMA What is an exposure draft? What is the FASB trying to accomplish? Why is this important now? 40 20

21 Statement of Financial Position: 1) Two net asset classes 2) Changes to underwater endowment accounting and reporting Statement of Activities: 1) Intermediate measures of operations 2) Restriction releases to operations with long-lived assets transferred from operating to non-operating Statement of Cash Flows: 1) Direct method cash flows for operating activities 2) Reclassification of certain items An analysis of natural and functional expenses Disclosure modifications 41 21

22 FASB s Objectives: Simplify the net asset classes Present net asset and liquidity information in a more useful and understandable format Address misunderstanding of term unrestricted net assets Current Proposed Unrestricted Temporarily Restricted Without Donor Restrictions With Donor Restrictions Permanently Restricted 44 22

23

24 1) With donor restrictions a. Composition of nature and amount b. Emphasis on how and when resources (net assets) can be used i. Specified purpose ii. Specified time iii. Perpetual (endowment) 2) Without donor restrictions - Quantitative and qualitative information about board designations 47 Current Proposed Original Gift Permanently Restricted Fair Value With Donor Restrictions Underwater Unrestricted 48 24

25 Additional disclosures required 1) Spending policy 2) Original gift 3) Fair value at balance sheet date 49 Summary of changes 1) Net assets categories 2) Underwater endowments Also considered: Liquidity UPMIFA 50 25

26 FASB s Objectives: Improve comparability across all NFPs Address inconsistencies in reporting intermediate measure of operations & expenses 26

27 Intermediate Measures of Operations Transfers Contributions of PP&E 53 Operating vs Non-Operating Mission Purpose for existence Availability Current period activities 54 27

28 55 Let s breakdown the Statement of Activities: - Operating excess (deficit), before transfers - Transfers, operating - Operating excess (deficit), after transfers - Non-operating changes - Transfers, non-operating - Increase (decrease) in net assets 56 28

29 57 Transfers Effects of internal transfers resulting from governing board: Designations Appropriations Self-imposed limits on the use of resources 58 29

30

31 Without donor restrictions Include in operating activities when received Transfer to nonoperating if not used for operations in year received With donor restrictions Donated assets and funds to construct or acquire capital assets Recognize as revenue with donor restrictions when received Funds to construct or acquire capital assets Release to operating activities when asset placed in service Concurrently transfer to nonoperating

32

33

34 Summary of changes 1) Intermediate measures 2) Transfers 3) Contributions of PP&E Also considered: How these changes will impact the small to medium-sized NFP 67 34

35 FASB s Objectives: Improve usefulness of statement of cash flows Align operating cash flows with operating measures in statement of activities Direct method Will be required Indirect method Will be allowed, but not required Reclassifications 70 35

36 Activity 1 Cash gifts restricted for the acquisition or construction of longlived assets to be used for operating purposes 2 Cash payments for the acquisition or construction of long-lived assets to be used for operating purposes Current Classification Financing Investing Proposed Classification Operating Operating 3 Cash proceeds from sale of longlived Investing Operating assets 4 Cash dividends and interest income Operating Investing 5 Cash payments of interest expense Operating Financing

37 Summary of changes 1) Direct method 2) Reclassifications Also considered: NFP will differ from for-profit 73 37

38 FASB s Objective: Improve decision usefulness of information disclosed Proposed changes: 1) Expense Analysis 2) Net Assets 3) Liquidity 4) Investment Return 5) Underwater Endowment 75 1) Expense Analysis Present an analysis of expenses by function and nature in one location in the notes, statement of activities, or separate statement Description of the allocation method in the notes Only operating expenses required to be functionalized Investment expenses netted against investment returns may be excluded from functionalized 76 38

39 77 2) Net Assets With Restrictions Nature and amounts of donor-imposed restrictions at end of year Without Restrictions Amounts and purpose of board designations on net assets without donor restrictions Focus: How & when resources will be used 78 39

40 3) Liquidity Defined Time Horizon Ex. 30, 60, 90 days Quantitative Information Total amount of financial assets Amounts not available to meet cash needs within time horizon Total liabilities due within time horizon Qualitative Information How liquidity is managed Strategy for entity-wide risks Policy for liquidity reserves Basis for time horizon 79 4) Investment Return Required to be shown net of external and direct internal investment expenses Disclosure of total direct internal investment salaries and benefits netted against investment returns Include in expense analysis as separate line (nature) and column (not required to be functionalized) 80 40

41 5) Underwater Endowments Required to disclose 1) NFP s spending policy for underwater endowments 2) Aggregate amount by which funds are underwater 3) In the aggregate for all underwater funds: i. The fair value of underwater funds (a) ii. The original endowment gift or level required by donor stipulation by laws that extend donor restrictions (b) iii. The aggregate amount deficiencies of each of the underwater endowment funds (a b) 81 Statement of Financial Position: 1) Two net asset classes 2) Changes to underwater endowment accounting and reporting Statement of Activities: 1) Intermediate measures of operations 2) Restriction releases to operations with long-lived assets transferred from operating to nonoperating Statement of Cash Flows: 1) Direct method cash flows for operating activities 2) Reclassification of certain items 82 41

42 An analysis of natural and functional expenses Disclosure modifications Net Assets Liquidity Investment Return Underwater Endowment 83 Statement of Activities Questions #6 & #7 Intermediate measures of operations Question #8 Reflecting ALL internal transfers on Statement of Activities Question #10 Gifts of, or for, Property, Plant and Equipment (long-lived assets) Statement of Cash Flows Question #20 Classification of certain cash inflows and outflows 84 42

43 Comments due August 20, questions Answer one, some, or all 2 ways: 1) written letter to director@fasb.org 2) Electronic feedback form at A36E92204EBFDB

44 87 April Exposure Draft Released Sept. & Oct Public Roundtables TBD Effective Date August 20, Comment Period End Fall 2015 Board Redeliberations Begin Comment letters due AUGUST 20,

45 FASB.org Exposure Draft FASB in Focus (FAQ s) Archive of FASB webcast Electronic Feedback Form AICPA Non-for-Profit Resource Library 89 45