NONPROFIT & FOUNDATION SUMMER 2018

GEORGE JOHNSON & COMPANY

SUMMER 2018


 

Dear Clients and Friends,

Welcome to the Summer edition of the GJC Advisor, Nonprofit Organizations and Foundations Update.
It’s been an active year so far as the summer months roll on by. Back on February 27th, we hosted our annual Employee Benefit Plan Seminar, and later on May 22nd, we followed with our annual Nonprofit Organizations and Foundations Updates Seminar. Both were conveniently held at the Detroit Athletic Club. Our speakers provided updated information on the tax reform law now in place. Have a look below at some of the photos we added in the Community section. If you are interested in receiving information from our seminars, contact Rodelyn Frijas at rfrijas@gjc-cpa.com. We would be happy to share.  Following the seminars, the speakers stayed to train our accountants on reporting updates as it relates to the industries we service. The continued educational programs ensure that we use the most current standards and practices.
Also, read on in the Spotlight section, where we recognize team members, Michael Nicholas and Gloria Zhao, celebrating their tenures with George Johnson & Company.
In this issue, among many important concepts, we bring to you information on grants, data privacy and suggestions on how to perfect your audit charter. As always, if you have any questions on this material, feel free to contact us.
Sincerely,
George Johnson & Company
Are Grants Subject to Revenue Recognition?

Many nonprofit organizations receive grants and contracts from federal, state and local governments and other funding sources such as foundations. The most recent BDO Nonprofit Benchmarking Survey reveals that 45 percent of organizations say the time and effort required to deal with regulatory and legislative changes pose a moderate- or high-level challenge.

Key financial players such as CFOs and Controllers are facing a fast-approaching deadline to implement new revenue recognition requirements (Topic 606). The revenue standard aims to improve accounting for contracts with customers, but it also introduces a layer of complexity and challenge to nonprofits of every size. Contributions, defined as an unconditional transfer of cash or assets in a voluntary non-reciprocal transfer, are scoped out of revenue recognition. Exchange transactions-a reciprocal transaction in which two parties exchange something of commensurate value-are within the scope and need to be accounted for following the new revenue recognition requirements.

Read more…

 
Pay Data For ‘Similarly Qualified Persons In Comparable Positions At Similarly Situated Organizations’ –
We’ve got that… don’t we?
Valid information on competitive pay levels and practices for “… similarly qualified persons in comparable positions at similarly situated organizations” has long been the basis for responsible management, and Internal Revenue Service (IRS) enforcement, of appropriate pay practices among all tax-exempt organizations.
When the IRS Intermediate Sanctions (Internal Revenue Code 4958) were enacted, the importance of good comparative data was underscored by its inclusion as one of the three elements of the protection offered in the Rebuttable Presumption of Reasonableness. The data provides a critical context for determining how much and how to pay a nonprofit’s executives.

Read more…

Privacy Is a Must-Have These Days-
Guide to Implementing a Holistic Privacy Program
By Karen Schuler, CFE, IGP, IGP and Taryn Crane, PMP – BDO USA
Notwithstanding the EU General Data Protection Regulation (GDPR)-the most sweeping change to data privacy in 20-plus years, with extraterritorial scope that went into effect on May 25, 2018-there are numerous privacy laws that are often  overlooked.

Earlier this year companies like Facebook have come under fire for privacy violations while Congress is looking for ways to protect the privacy of American citizens. These movements are just the beginning of widespread change that we expect for privacy laws over the next several years.

Read more…

Transportation Fringe Benefits Are Now UBI-Effective Jan. 1, 2018
By Laura Kalick, JD, LLM in Taxation – BDO USA
 
Does your tax-exempt organization provide transportation and parking benefits to employees? If so, you may have another commuter headache: a new tax. Under the Tax Cut and Jobs Act of 2017 (the Act), a provision was added to the Internal Revenue Code that is likely to require many tax-exempt organizations to pay unrelated business income tax (UBIT). Certain costs of qualified transportation, including transit passes, qualified parking and more, will now be taxed as unrelated business income at 21 percent.
The Act added the following provision to the Internal Revenue Code: Internal Revenue Code (IRC) Section 512(a)(7): Increase in unrelated business taxable income by disallowed fringe.
This provision was an attempt to put exempt organizations on the same footing as taxable organizations that will no longer be able to deduct these costs. The provision is effective for amounts paid or incurred after Dec. 31, 2017.
5 Suggestions to Perfect Your Audit Committee Charter
By Lewis Sharpstone, CPA, Partner, West Region Nonprofit Industry Group Practice Leader – BDO USA
The quality and completeness of the audit committee charters that I have seen typically range from very good to great. This is why there is no mention in this article, other than here, of core audit committee responsibilities such as auditor appointment, audit review, monitoring of whistleblowing incidents, or conflicts of interest reporting. However, here are my top five suggestions that should be considered for strengthening even a great audit committee charter.
  1. Incorporate all your state audit committee requirements into the charter
  2. Minutes of meetings
  3. Executive sessions
  4. The authority to independently consult with and retain outside legal counsel
  5. Self-review
Podcast: 7 Steps to Revenue Recognition Readiness
What prompted the new guidelines, and how can nonprofits prepare? We had the opportunity to answer these questions in a recent New York Nonprofit (NPN) Media podcast with Aimee Simpierre.
Please see a summary of the podcast’s top questions and answers below.
What prompted the FASB to issue the new revenue recognition standard?
There are two main reasons the FASB would issue an accounting standard update (ASU). The first is to address diversity in practice and standardize common practices. Why, for example, would one nonprofit that was awarded a contract mark it as a contribution, while another in the same situation mark it as an exchange or reciprocal transaction? Through the ASU, the FASB addresses such differences. The second reason is to keep up with the times. For example, the FASB recently issued an ASU on cloud computing, which would have been an alien concept 30 years ago.
Other Items to Note
2018 OMB Compliance Supplement Released
The Office of Management and Budget (OMB) released the final 2018 OMB Compliance Supplement (2018 Supplement) on May 18, 2018. The 2018 Supplement has been prepared in a different format from previous years. The format for the 2018 Supplement is to only include sections with significant updates and changes. Thus, the 2018 Supplement is smaller in size and has been referred to as a “skinny” supplement. Based on this, organizations must use both the 2018 Supplement and the 2017 OMB Compliance Supplement (2017 Supplement) together when determining the federal program objectives, procedures and compliance requirements that the Federal government expects to be considered as part of a single audit.
 
Key Changes to the 2018 Compliance Supplement
 
All organizations with federal funds should review Appendix V, List of Changes for the 2018 Compliance Supplement, for more information about the changes made and the specific programmatic changes for specific Catalog of Federal Domestic Assistance (CFDA) numbers.
A few highlighted changes are as follows:
Table of Contents of the 2018 Supplement is a critical roadmap for determining how to use the 2017 and 2018 Supplements together as it specifies where the 2017 Supplement is superseded and/or continues to be relevant.

Read more…

SPOTLIGHT

Join us in congratulating Michael Nicholas and Gloria Zhao on their tenure with GJC! 

We are happy to share that our Quality Control Principal, Michael Nicholas is celebrating 32 years of service with George Johnson & Company. He joined GJC in 1986 and has been a Principal since 1994. Aside from being responsible for managing all facets of audits, reviews, other attestation engagements, and tax return preparation services for our clients, Mike also maintains our quality control standards.  We are fortunate to have him on our team!

This year also marks Gloria Zhao’s 16th year with us. Gloria started in 2002 as a staff accountant and has progressed to Principal in 2007. Among many responsibilities, including managing all facets of audits and reviews for many of our major clients, Gloria also serves as our Certified Fraud Examiner. We are proud to have Gloria on our team!
We appreciate the selfless service Mike and Gloria have provided for so many years. It is the loyalty, hard work and expertise that have helped GJC achieve its present stature.
Congratulations to Mike and Gloria!

COMMUNITY

Annual Client Seminars
Earlier this year, GJC hosted its annual client seminars at the historic DAC (Detroit Athletic Club).

On February 27th, our keynote speakers from BDO, Luanne MacNichol of Grand Rapids, and Kim Flett out of Akron, Ohio, shared the podium and addressed hot topics in the Employee Benefit Plan industry including: impacts of tax reform on compensation and benefits issues and important information regarding employee benefits; Affordable Care Act updates; cybersecurity; and Department of Labor and Internal Revenue Service investigations – current trends and best practices for sponsors of benefit plans.

Luanne MacNichol – Director, Employee Benefit Plan Audit Practice, BDO USA LLP

Kim Flett – Compensation & Benefits Services Managing Director, BDO USA LLP

Lee Klumpp – National Assurance Partner, Nonprofit & Government Industries, BDO USA LLP

The Nonprofit Organizations & Foundations Seminar was later held on May 22nd. Our keynote speaker was the highly accredited Lee Klumpp, National Assurance Partner – Nonprofit & Government for BDO, out of the Washington, D.C. office. Lee discussed the latest trends and topics including tax reform and current accounting developments affecting the nonprofit industry.

With various changes occurring in the industry, we modified the format of the seminar by supplementing with two additional guest speakers. Following Lee’s presentation, Attorney Jeremy Cnudde, from KempKlein, spoke about Mergers & Acquisitions and Creating Value for Nonprofits. John Caldwell, Investment Specialist and Executive Director of J.P. Morgan Private Bank, discussed Key Principles of Effective Governance & Investment Management and Investment Policy Statements for the Current Environment.

Jeremy Cnudde – Attorney/Shareholder, KempKlein Law Firm

Based on the seminar feedback, we are pleased to announce that the attendees were overall satisfied with the new format! Stay tuned for future seminars!

If you are interested in receiving information from the seminars, or if you would like to be added to our events guest lists, please contact Rodelyn Frijas at rfrijas@gjc-cpa.com.