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Please Note: Our office will be closed Wednesday, April 16th.
Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Please Note: Our office will be closed Wednesday, April 16th.
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Keeping your personal and financial information secure and confidential remains a top priority for us. Please contact us with any questions or concerns.
You may not be aware of some of the services local CPA firm, Stockman Kast Ryan and Company of Colorado Springs provides that could benefit you and your business. Here is just a partial list:
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Peer-to-peer fundraising events — for example, walks and runs — have become one of the most common ways for nonprofits to raise money. But are you doing all you can to maximize and safeguard those funds?
Peer-to-peer fundraising is often an attractive option for resource-strapped organizations. As opposed to traditional fundraising, which requires you to invest heavily in building relationships with donors, peer-to-peer events let you tap the existing relationships of participants. Instead of relying on staff to get the word out about your organization, you can deploy an enthusiastic battalion of true believers to spread your message and create awareness.
But it’s important to remember that awareness isn’t the end goal — fundraising is. A study by Blackbaud, a software and service provider for nonprofits, found that peer-to-peer event participants see participation and fundraising as separate tasks.
According to Blackbaud, these events are frequently marketed as awareness events, with the fundraising aspect only implied. It’s not unusual, then, for a participant to sign up for a 10K run, pay the registration fee and not pursue fundraising at all.
One of the most effective ways to encourage fundraising by participants is to set goals. Blackbaud found that 80% of survey respondents who set a goal raised that amount or more. And participants who are working toward a team goal generally raise more than if they’re fundraising on their own. Goals also make it easier for an organization to implement metrics and analyze financial performance during and after an event.
Establish goals at the outset, in the initial materials sent to participants and with online fundraising tools (where both participants and their donors can see goals). Feature the top fundraisers on the event’s website and in posts on your social media accounts, and offer low-cost prizes like T-shirts.
Avoid setting goals too high, though. It’s best to set lower, achievable goals. Not only will your participants be less likely to become frustrated, but smaller donors will be more likely to feel as if they’re making a difference.
Also be aware that, if participation in an event requires meeting a fundraising minimum, a participant might cover the whole amount, rather than actually engage in fundraising that could attract new donors. So while success is usually measured based on the total amount a participant raises, also consider the number of donations a participant generates.
By definition, fundraising involves the handling of funds, which presents the opportunity for fraudulent misappropriation and simple accounting errors by nonprofessionals. Nonprofits, therefore, need to implement appropriate controls from the outset.
The good news is that the use of social media to drive peer-to-peer fundraising means that monies are typically submitted through the Internet, as opposed to the not-so-distant past when participants would collect cash and checks. As with any online transaction, you’ll need effective controls to protect credit card data and personal information and prevent fraud, including firewalls, encryption and similar protections.
Although peer-to-peer participants shoulder much of the burden with these events, it’s up to your nonprofit to provide appropriate support. Make it as easy as possible — but also as secure as necessary — for them to drum up support.
The IRS has released its long-awaited final regulations implementing the Affordable Care Act’s (ACA’s) employer shared-responsibility — also known as “play or pay” — provision that applies to “large” employers, including for-profit, nonprofit and government entities. These regulations are effective January 1, 2015. The final regs push out one year, from 2015 to 2016, the risk of play-or-pay penalties for eligible midsize employers that otherwise would be considered large employers under the ACA. They also provide other significant relief for 2015 and clarify certain aspects of the play-or-pay provision.
The play-or-pay provision imposes a penalty on large employers that don’t offer “minimum essential” health care coverage — or that offer coverage that isn’t “affordable” or doesn’t provide at least “minimum value” — to their full-time employees (and their dependents) if just one full-time employee enrolls in a qualified health plan through a government-run health insurance exchange and receives a premium tax credit.
Under the ACA, a large employer is one with at least 50 full-time employees or a combination of full-time and part-time employees that’s equivalent to at least 50 full-time employees. This involves totaling part-time employees’ monthly hours and dividing that figure by 120 to calculate full-time equivalent employees (FTEs). That figure is then added to the total number of actual full-time employees. A full-time employee generally is someone employed on average at least 30 hours a week, or 130 hours in a calendar month.
Under the final regs, eligible midsize employers will not be subject to the play-or-pay provision until 2016.
To qualify for the midsize-employer penalty relief, an employer must:
Be aware that these employers will still be subject to the ACA’s large-employer information-reporting requirements in 2015.
Under the ACA, large employers that don’t offer at least 95% of their full-time employees minimum essential health coverage will be assessed a penalty if one of their full-time employees receives a premium tax credit when buying health care insurance from an insurance exchange. The annual penalty is $2,000 per full-time employee in excess of 30 full-timers.
The final regs provide that large employers that don’t qualify for the midsize-employer penalty relief in 2015 can avoid the penalty for not offering minimum essential coverage by offering such coverage to at least 70% of their full-time employees (and their dependents.) The 95% requirement will apply in 2016 and beyond.
The final regs extend and expand transitional relief in other ways as well, such as the following:
The IRS indicated it will consider whether it’s necessary to extend any of this transitional relief beyond 2015.
Generally, if an employee’s share of the premium would cost that employee more than 9.5% of his or her annual household income, the coverage isn’t considered affordable. Because an employer generally won’t know an employee’s household income, the proposed regulations provided safe harbors under which an employer can determine affordability. The final regs maintain the proposed safe harbors with some minor changes.
Under these safe harbors, affordability can be determined based on:
If the employer meets the requirements of a safe harbor, the offer of coverage will be deemed affordable.
The final regs allow employers to use an optional look-back measurement method to determine whether employees with varying hours and seasonal employees are full time for purposes of determining large employer status. They also clarify the application of the look-back and alternative monthly methods of determining full-time status.
Additionally, the final regs clarify whether certain types of workers will be considered full time. For example, bona fide volunteer hours worked for government or tax-exempt entities won’t cause the volunteer to be considered a full-time employee.
The IRS is expected to soon issue final regulations that will substantially streamline information-reporting requirements related to the play-or-pay provision. We’ll keep you apprised of the relevant changes. In the meantime, if you have questions on how these or other ACA provisions may affect your company, please contact us.
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The Financial Accounting Standards Board (FASB) has issued two updates to Generally Accepted Accounting Principles (GAAP) that are intended to reduce the cost and complexity of preparing financial statements for private companies. As outlined in Accounting Standards Update (ASU) 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill, and ASU 2014-03, Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach, the alternative standards streamline the method for goodwill impairment and make it easier for certain interest rate swaps to qualify for hedge accounting.
The updates grew out of proposals from the Private Company Council (PCC) and were endorsed by FASB last year. The Financial Accounting Foundation, FASB’s parent organization, formed the PCC in May 2012 to improve the process of setting accounting standards for private companies that need or are required to have financial statements prepared in accordance with GAAP.
In December 2013, FASB and the PCC released new guidance, Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies (the Guide), to be used to determine whether private companies should be allowed to use alternative standards in the areas of recognition and measurement, disclosures, display/presentation, effective date and transition method. For each of these areas, the Guide describes criteria FASB and the PCC will use to evaluate whether to permit alternative guidance. ASU 2014-02 and ASU 2014-03 contain the first of the alternative guidance.
The term “goodwill” refers to the residual asset recognized in a business combination, such as a merger, after recognizing all other identifiable assets acquired and liabilities assumed. Under GAAP, goodwill is carried on the books at its initial value less any impairment. It isn’t subject to amortization.
Goodwill is considered impaired when the implied fair value of goodwill in a company’s reporting unit — basically, an operating unit that has its own discrete financial information, separate from the overall company — falls to an amount that’s less than its carrying amount, or book value, including any deferred income taxes. Under GAAP, companies must test for impairment at least annually, and more frequently if certain conditions exist.
GAAP allows a company to choose initially to perform a qualitative evaluation to determine whether it’s more likely than not (that is, a likelihood of more than 50%) that a reporting unit’s fair value is less than its carrying amount. If the company determines it’s not more likely than not that fair value is less than the carrying amount, it need not perform a quantitative two-step impairment test. If it is more likely than not, the company must proceed to the two-step impairment test.
In the first step, the company calculates the fair value of the reporting unit and compares that amount with the reporting unit’s carrying amount, including goodwill. If the carrying amount exceeds the fair value, the company performs the second step — measuring the amount of the goodwill impairment loss, if any, by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. This requires performing a hypothetical application of the acquisition method to determine the implied fair value of goodwill after measuring the reporting unit’s identifiable assets and liabilities.
Preparers and auditors of private company financial statements have complained about the cost and complexity involved in carrying out the existing GAAP goodwill standards. Moreover, users of these financial statements have indicated that the requirements provide limited benefits to them because they often disregard goodwill and impairment losses when analyzing a company’s financial condition and operating performance.
The alternative standards in ASU 2014-02 are designed to address these concerns. They allow a private company to amortize goodwill after its acquisition (and initial recognition and measurement) on a straight-line basis during a period of 10 years, or less if the company demonstrates that another useful life is more appropriate. The company can revise the remaining useful life of goodwill in response to events and changes in circumstances that warrant a revision, but the cumulative amortization period can’t exceed 10 years.
A company that elects this alternative must make an accounting policy decision to test goodwill for impairment at either the company level or the reporting unit level. But goodwill needs to be tested for impairment only when a triggering event — such as a significant adverse change in business climate, legal issues or loss of key personnel — occurs that indicates the fair value of a company or a reporting unit may be below its carrying amount.
The alternative standard also drops the second step of the existing impairment test: the costly and complicated hypothetical application of the acquisition method. Instead, the amount of the impairment equals the amount by which the carrying amount of the company or reporting unit exceeds its fair value. The goodwill impairment loss can’t exceed the company’s or reporting unit’s carrying amount of goodwill.
The aggregate amount of goodwill net of accumulated amortization and impairment will appear as a separate line item in the company’s statement of financial position. The amortization and aggregate amount of goodwill impairment will be presented in income statement line items within continuing operations unless the amortization or impairment is associated with a discontinued operation. Such amortization and impairment must be included on a net-of-tax basis within the results of discontinued operations.
The disclosures required under this alternative are similar to existing GAAP. A company that elects the alternative, however, isn’t required to present changes in goodwill in a tabular reconciliation.
Private companies that opt for the goodwill alternative may experience significant cost savings because of the combination of the amortization method and the elimination of the requirement to test goodwill for impairment at least annually. Amortization should reduce the likelihood of impairments, and testing may occur less frequently. When impairment testing is required, the removal of the second step and the ability to test at the company level (as opposed to the reporting unit level) should cut the test’s cost.
Once elected, the goodwill alternative will apply prospectively. A company will amortize existing goodwill starting at the beginning of the period of adoption in which the alternative is elected, as well as new goodwill recognized after the beginning of the annual period of adoption.
Private companies can find it difficult to obtain fixed-rate loans. They often must enter into an interest rate swap (a derivative instrument) to economically convert their variable-rate loans to fixed-rate loans. Existing GAAP guidance requires a company to recognize all of its derivative instruments in its balance sheet as either assets or liabilities and measure them at fair value.
A company may elect cash flow hedge accounting to mitigate income statement volatility if certain requirements are met. But many private companies lack the resources and expertise to comply with the requirements and, therefore, remain vulnerable to volatility.
The alternative standards in ASU 2014-03 will allow nonfinancial institution private companies to apply a simplified hedge accounting approach to their receive-variable, pay-fixed interest rate swaps as long as the terms of the swap and the related debt are aligned. Using this hedge accounting results in presenting interest expense in the income statement as if the company had directly entered a fixed-rate loan, instead of a variable-rate loan and an interest rate swap. Companies applying the alternative will have until the issuance of their financial statements to complete the required hedging documentation.
The alternative standard also allows a private company to recognize the swap at its settlement value, which measures the swap without consideration of nonperformance risk, rather than at fair value. Private companies that apply this alternative may enjoy cost savings, because settlement value is generally easier to determine than fair value. The variability of the fair value or settlement amount will be recorded as accumulated other comprehensive income (part of equity).
The standard can be applied to both existing and new qualifying swaps because the election of hedge accounting can be made on a swap-by-swap basis. This is good news for private companies that chose not to elect hedge accounting in the past because of the difficulty involved in complying with the requirements.
Users of financial statements, including regulators, lenders or other creditors, may require a private company to continue to apply traditional GAAP accounting standards, even if the company is otherwise eligible for the alternatives. Further, FASB is working on a project that addresses the subsequent accounting for goodwill for public companies and not-for-profit organizations, which could result in a future change to the subsequent accounting for goodwill for all entities, including private companies.
And a company that elects an accounting alternative could subsequently become subject to public company reporting and, therefore, need to recast prior periods as if it hadn’t elected the alternative.
Both of the new alternatives will be effective for annual periods beginning after Dec. 15, 2014, and interim periods beginning after Dec. 15, 2015. Early adoption is permitted, so an eligible private company could elect to apply the alternatives on its 2013 financial statements, as long as the financial statements weren’t made available for issuance before the ASUs were released.
If you have questions regarding how the updates affect how you prepare your financial statements, please give us a call. We’d be happy to answer your questions.
For a contribution of cash, check, or other monetary gift, regardless of amount, you must maintain a bank record or a written communication from the donee organization showing its name, plus the date and amount of the contribution. Any other type of written record, such as a log of contributions, is insufficient.
For a contribution of property other than money, you generally must maintain a receipt from the donee organization that shows the organization’s name, the date and location of the contribution, and a detailed description (but not the value) of the property. If circumstances make obtaining a receipt impracticable, you must maintain a reliable written record of the contribution. The information required in such a record depends on factors such as the type and value of property contributed.
If the contribution is worth $250 or more, stricter substantiation requirements apply. No charitable deduction is allowed for any contribution of $250 or more unless you substantiate the contribution with a written receipt from the donee organization. You must have the receipt in hand when you file your return (or by the due date, if earlier) or you won’t be able to claim the deduction. If you make separate contributions of less than $250, you won’t be subject to the written receipt requirement, even if the sum of the contributions to the same charity total $250 or more in a year.
The receipt must set forth the amount of cash and a description (but not the value) of any property other than cash contributed. It must also state whether the donee provided any goods or services in return for the contribution, and if so, must give a good faith estimate of the value of the goods or services. If you received only “intangible religious benefits,” such as attending religious services, in return for your contribution, the receipt must say so. This type of benefit is considered to have no commercial value and so doesn’t reduce the charitable deduction available.
In general, if the total charitable deduction you claim for non-cash property is more than $500, you must attach a completed Form 8283 (Noncash Charitable Contributions) to your return or the deduction is not allowed. In general, you are required to obtain a qualified appraisal for donated property with a value of more than $5,000, and to attach an appraisal summary to the tax return. However, a qualified appraisal isn’t required for publicly-traded securities for which market quotations are readily available. A partially completed appraisal summary and the maintenance of certain records are required for (1) nonpublicly-traded stock for which the claimed deduction is greater than $5,000 and no more than $10,000, and (2) certain publicly-traded securities for which market quotations are not readily available. A qualified appraisal is required for gifts of art valued at $20,000 or more. IRS may also request that you provide a photograph.
If you receive goods or services, such as a dinner or theater tickets, in return for your contribution, your deduction is limited to the excess of what you gave over the value of what you received. For example, if you gave $100 and in return received a dinner worth $30, you can deduct $70. But your contribution is fully deductible if:
If you made a contribution of more than $75 for which you received goods or services, the charity must give you a written statement, either when it asks for the donation or when it receives it, that tells you the value of those goods or services. Be sure to keep these statements.
You can substantiate a contribution that you make by withholding from your wages with a pay stub, Form W-2, or other document from your employer that shows the amount withheld for payment to the charity. You can substantiate a single contribution of $250 or more with a pledge card or other document prepared by the charity that includes a statement that it doesn’t provide goods or services in return for contributions made by payroll deduction.
The deduction from each wage payment is treated as a separate contribution for purposes of the $250 threshold.
Although you can’t deduct the value of services you perform for a charitable organization, some deductions are permitted for out-of-pocket costs you incur while performing the services. You should keep track of your expenses, the services you performed and when you performed them, and the organization for which you performed the services. Keep receipts, canceled checks, and other reliable written records relating to the services and expenses.
As discussed earlier, a written receipt is required for contributions of $250 or more. This presents a problem for out-of-pocket expenses incurred in the course of providing charitable services, since the charity doesn’t know how much those expenses were. However, you can satisfy the written receipt requirement if you have adequate records to substantiate the amount of your expenditures, and get a statement from the charity that contains a description of the services you provided, the date the services were provided, a statement of whether the organization provided any goods or services in return, and a description and good-faith estimate of the value of those goods or services.
Please call us if you have any questions about these rules. Together we can make sure that you’ll get all the deductions to which you are entitled when we prepare your 2013 tax returns..
While board members typically bring a variety of talents and expertise to the table, they don’t always have extensive experience in financial and accounting matters. But they can’t properly perform their functions if they don’t obtain and understand information about the organization’s financial position. This article explains how to best communicate the essential financial information board members need. It looks at the specific kinds of information they should receive and how it can be presented in a user-friendly format. A sidebar notes that a dashboard — a one- or two-page snapshot of key metrics — may be especially useful in some instances.
If an activity conducted by a nonprofit is a trade or business carried on regularly, and not substantially related to furthering its exempt purpose, the income generated is considered unrelated business income (UBI). And accumulating too much can subject the nonprofit to taxes — and even threaten its tax-exempt status. This article explains what kinds of activities do and do not generate UBI.
Peer-to-peer fundraising events — for example, walks and runs — have become one of the most common ways for nonprofits to raise money. This article offers tips for maximizing and safeguarding those funds. It observes that one of the most effective ways to encourage fundraising by participants is to set goals, and notes the importance of implementing appropriate financial controls from the outset.
The IRS has released its long-awaited final regulations implementing the Affordable Care Act’s (ACA’s) employer shared-responsibility — also known as “play or pay” — provision that applies to “large” employers, including for-profit, nonprofit and government entities. These regulations are effective January 1, 2015.
