Spring 2013 issue of Horizons

NOT-FOR-PROFIT

Financial Reporting Trends and Tips A working draft of the new AICPA Audit and Accounting Guide for Not-for-Profit Entities was released in August 15, 2012. The period for comments on this guide ended on October 15, 2012 and the final version was recently released. This guide includes significant revisions and clarifications from the prior version(s) as well as recommendations. ∙ Although a statement of functional expenses is only required for voluntary health and welfare organizations, the Guide encourages all not-for-profit organizations supported by the general public (i.e., organizations for which contributions comprise greater than 20% of total revenue) to present this statement as a basic financial statement or in the footnotes. Key revisions, clarifications and recommendations include the following:

of functional expense as supplementary information, but not all not-for-profits present this level of detail. ∙ With increased attention on transparency, the trend in the not-for-profit industry is to include and/or enhance disclosures of related party transactions, whether or not the dollar amounts of the transactions are material. The new guide contains more information and specific examples of related parties and related party transactions that should be considered for disclosure. A charity, for example, might want to consider whether it should disclose the total amount of contributions received from board members. ∙ To help readers of the financial statements clearly understand which of the organization’s assets are available/ not available to meet current operating obligations, assets (e.g. cash, promises to give, etc.) subject to donor restrictions or board designations should be clearly distinguished from assets without restrictions/designations in the financial statements. The nature of the assets, the purpose for which the asset is segregated and the act causing the segregation should be disclosed either on the face of the financial statement or in the notes to the financial statements. ∙ Additional clarification regarding the proper accounting treatment for various contribution transactions is provided in the guide. Timing of releases of restricted promises to give, presentation of current promises to give at their net realizable value, recognition of naming opportunities, as well as accounting for various non- cash contributions such as advertising, guarantees and below-market interest rate loans are all addressed.

Some non-voluntary health and welfare organizations currently include a schedule

OMB Proposes Changes to Single Audit Requirements On January 31, 2013, the U.S. Office of Management and Budget (OMB) issued proposed regulations that would significantly modify the requirements associated with Single Audits. The proposed changes include:

∙ Increasing the threshold of federal expenditures which triggers the need for a Single Audit from $500,000 to $750,000.

∙ Modifying the process used by auditors to determine major programs. Generally, these changes should result in fewer programs being selected as major.

∙ Reducing the number of compliance requirements to be tested for each major program from 14 to 6.

Public comments on the proposed regulations may be submitted by June 2, 2013, at www.regulations.gov.

For more information, please refer to our detailed e-focus newsletter located at http://tinyurl.com/OMBSingleAudit.

page 48 | horizons Spring 2013