First Major Changes to Not-For-Profit Accounting

 

 

Anthony S. LaNasa, CPA, CFE

Principal at HW&Co.

 

On March 4^th, 2015 the Financial Accounting Standards Board voted to release a proposal that will overhaul how universities, charities, foundations, and other not-for-profit organizations convey how they spend their time and how they invest their money.  With this decision came some dissatisfaction with this standard. The uneasiness that came from the decision is even stronger than anyone had initially thought.  This was especially conveyed by the dissenting votes of FASB Chairman Russell Golden and Vice Chairman James Kroeker. It should also be mentioned that two of the five board members who voted in favor of the proposal did so with reservations.

 

The chief concern that Golden has concerning this decision was his belief that the proposal would create too many reporting differences between not-for-profit organizations and for-profit business.  He also believes that the projected changes would go too far.  Kroeker, who was unable to attend the meeting and voted by proxy, said in a prepared statement that he didn’t agree with the changes that would be made to the not-for-profit groups cash flow statements.

 

Although there was concern about the changes to the cash flow statements for members like, Lawrence Smith, the benefits of changing to the proposal weren’t enough to make him vote against it.

 

“I didn’t object to it and I voted for the changes made because I think when you look at the two cash flow statements side by side, one under direct and one under indirect, it’s pretty obvious the direct method conveys more easily understood information than indirect,” he stated.  He further commented on his decision to vote in favor of the proposal by praising the changes made to the basic performance statement.

 

"Is there flexibility? Yes. There's flexibility up the wazoo in terms of how management designates things, but it's clearly laid out and that's the important thing," he said. "It clearly lays out what funds are available to an entity in terms of furthering its mission."

 

The FASB also would like to improve the statement of activities by including the presentation of an operating measure with the information about expenditures related to the organization’s mission and donated funds available to be spent.

 

The changes in the proposal will be the first major changes to not-for-profit accounting and reporting in over 20 years.  My opinion is that the proposal is long overdue and the changes will enhance not-for-profit financial statements and provide the users of the financial statements, like donors, an increased understanding of the financial performance of Organizations.

 

 

This blog is published periodically by HW&Co. as an information service to our clients, business associates and friends. It is general information and professional advice should be obtained before acting on any comments contained in this document.

 

Caution: Accountants At Play

Not once while I was searching for a job after college did I ever expect myself to begin even looking for a position at an accoutning firm. When I think of an accountant I think of an old man at a desk with a visor and the green lamp my granfather has on his desk in his office.

As it turns out, however, that's a pretty dated view.

(Who knew?)

In fact, I would wager that I work with some of the most eclectic accountants out there. They are fun, they're creative and best of all they like to donate their time.

Recently, a group of our professionals participated in FETCH.

FETCH, for those of you who do not know, is a program that The Ohio Society of CPAs created to educate kids about the value of a dollar. Groups of CPAs volunteer their time to local schools by helping fifth and sixth grade students complete a game about finances.

It's a unique way to teach kids how to properly manage money, and every year it gets a good response. Not only from the children, but the CPAs as well.

It's important for kids to get the access to educational programs that allow for them to learn about money and how to properly utilize it. A child who understands the value of a dollar early on is more likely to understand how to manage money as an adult.

 Financial Education for kids is extremely important and I am fortunate to know a group of CPAs who are dedicated to helping the youth of tomorrow.

With that said I look forward to many years and sharing their different events as they continue to donate their time, their education and their knowledge to the local community.

 

 

For an additional read on the importance of children learning money management skills click the link below!

http://money.cnn.com/magazines/moneymag/money101/lesson12/index.htm