Recent Developments

Several recent federal updates may have an impact on nonprofit organizations and their financial processes and procedures. Make sure your organization is up to date with the new information outlined below.

Nonprofit Accounting Updates
The Financial Accounting Standards Board (FASB) has released two updates to accounting standards that affect nonprofit organizations.

Accounting Standards Update (ASU) No. 2013-06, Not-for-Profit Entities (Topic 958) Services Received from Personnel of an Affiliate, requires that if a nonprofit receives donated services from an affiliated group, the cost of the services must be measured in the nonprofit’s financial statements at the donor’s actual cost. For example, if a corporation performs fundraising for its foundation, the foundation would report the cost of the fundraising at the corporation’s cost. The purpose of this change is to make it easier to assess the financial viability of nonprofit organizations by shedding light on whether they have low overhead because they are efficient or because they have certain services donated. The change is effective for fiscal years beginning after June 15, 2014, but can be adopted by the nonprofit before that date.

ASU 2012-05, Statement of Cash Flows (Topic 230) Not-for-Profit Entities: Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows, generally requires organizations that convert donated securities nearly immediately into cash by selling the securities to classify the related cash receipts as cash inflows from operating activities, unless the donor restricted the use of the contributed resources to long-term purposes. This change is effective prospectively for fiscal years beginning after June 15, 2013.

401(k) Compliance Check
Earlier this year, the IRS released a final report on its 401(k) Compliance Check Questionnaire. The questionnaire was designed to measure overall plan compliance, to identify the main tax compliance issues, to evaluate the effectiveness of voluntary compliance programs, and to determine how the IRS can foster greater compliance. The questionnaire serves as a valuable self-audit tool for plan sponsors. An IRS 401(k) Plan Questionnaire Self-Audit Tool, including new internal control questions, is to be made available online.