Top Issues for Non Profits in 2017
AICPA - As auditors and management begin to prepare for June 30 year-end audits, it’s a good time to share some of the top concerns for not-for-profits this year. How can not-for-profits reassure donors that their contributions are in safe hands? What key implementation issues on new accounting standards updates are not-for-profits grappling with? Outlined below are four topics that should not be overlooked.
In addition to common hacking risks, not-for-profits that accept electronic contributions are targets for credit card fraud. While retailers collect certain personal information to set up customer accounts and ship goods, not-for-profits often forgo requiring that level of detail to make donating simple. Unfortunately, this makes not-for-profits an easier testing ground for stolen credit card data. Not-for-profit entities with real-time credit card authorization and settlement are even more likely to fall victim because real-time verification makes the stolen data more valuable. These organizations then bear the burden of repaying fraudulent donations in addition to paying fees related to the refunds. Organizations that use electronic methods to accept contributions should consider adopting appropriate controls to ensure revenues are properly recognized and that cash receipts are safeguarded.
2. FASB Not-for-Profit Financial Statement Presentation Standard
This past summer Financial Accounting Standards Board (FASB) issued a financial reporting standard for not-for-profits (ASU No. 2016-14), which constitutes the most significant change to not-for-profit financial statement presentation since the mid-1990s. The new standard will simplify and improve how not-for-profits classify net assets and present information about liquidity, financial performance and cash flows. In turn, the financial statements of these entities will provide more relevant information to donors, grantors, creditors and other users.
Given the significance of these changes, it is important for not-for-profit accounting and assurance professionals to familiarize themselves with the requirements of the new standard and consider how the financial statements, as well as the systems and processes used to produce them, will change. Early adoption of ASU No. 2016-14 is permitted and may reduce the complexity of financial statement preparation for not-for-profits whose contribution streams currently affect all three net asset categories and those whose endowment funds currently have material unappropriated earnings or are underwater. Not-for-profit auditors also will be called upon for assistance as their clients begin implementing this standard and must be careful not to impair their independence.
Posted by AICPA on April 24, 2017.