An outside financial audit may seem like an extravagance to not-for-profits working to contain costs and focus on their mission. But undergoing regular audits allows your organization to identify risks early and act quickly to prevent problems.

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Independent audits also provide valuable reassurance to donors. Fortunately, you can reduce the cost of external audits with good preparation.

Continue Reading Prepare Your Not-for-Profit for a Financial Audit

Married couples often wonder whether they should file joint or separate tax returns. The answer depends on your individual tax situation.

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It generally depends on which filing status results in the lowest tax. But keep in mind that, if you and your spouse file a joint return, each of you is “jointly and severally” liable for the tax on your combined income. And you’re both equally liable for any additional tax the IRS assesses, plus interest and most penalties. This means that the IRS can come after either of you to collect the full amount.

Continue Reading The Benefits for Married Couples Filing Taxes Separately

As part of their Disclosure Effectiveness Initiative, the Securities and Exchange Commission (SEC) recently proposed interpretive guidance to eliminate some disclosures in Regulation S-K and to amend other requirements to better focus on material information in Item 303, “Management’s Discussion and Analysis.”

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More specifically, the SEC’s proposal would eliminate duplicative disclosures and modernize “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” (known as MD&A) to benefit investors and to simplify compliance for issuers. The proposed amendments are part of a comprehensive evaluation of the SEC’s disclosure requirements intended to improve the SEC’s overall disclosure regime. Specifically, the proposed amendments would eliminate Item 301 of Regulation S-K, “Selected Financial Data,” and Item 302 of Regulation S-K, “Supplementary Financial Information,” as the information is largely duplicative of other requirements.

Continue Reading SEC Proposes Disclosure Changes to Regulation S-K

Russ: This is the PKF Texas Entrepreneur’s Playbook. I’m Russ Capper, this week’s guest host, and I’m here with Frank Landreneau, Director and one of the faces of the International Tax team. Frank, welcome back to the Playbook.

Frank: Thanks, Russ. Thanks for having me; always a pleasure.

Russ: You bet. Next time you’re on I am going to count to see how many times have you been on, because I’m sure it’s more than anybody else.

Frank: Okay, great.

Russ: But our topic today is primarily going to be the Tax Cut Jobs Act that I think was passed in 2017, started in 2018, and it’s mind boggling to me, because we’re still sorting that thing out. Is that right?

Frank: That’s exactly right. And it’s been a little bit over two years, but we’re still getting guidance even now and even there’s pending guidance that we’re anticipating on getting even this year as we speak.

Russ: How does a business person make decisions based upon this thing playing out over such a long period of time?

Continue Reading Restructuring Strategies for Small- to Medium-Sized Businesses

A key fiduciary duty of your not-for-profit’s board of directors is to oversee and monitor the organization’s financial health. Some financial red flags and warning signs, such as the loss of a major funder, may jump out immediately.

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But other red flags can be more subtle. Here are some of them.

Continue Reading Watch for These Financial Red Flags for Your NFP Board

On Monday, February 10, 2020, the Financial Accounting Standards Board (FASB) issued a Proposed Accounting Standards Update (ASU) – “Not-for-Profit Entities (Topic 958).” The update aims to improve transparency of contributed nonfinancial assets — or more commonly referred to as in-kind donations — for not-for-profits by enhancing presentation and disclosure.

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According to the draft of the Proposed ASU for Topic 958, the provisions would require a not-for-profit to:

  1. “Present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets
  2. Disclose:
    • a) Contributed nonfinancial assets received disaggregated by category that depicts the type of contributed nonfinancial assets
    • b) For each category of contributed nonfinancial assets received (as identified in (a)):
      • Qualitative information about whether the contributed nonfinancial assets were or are intended to be either monetized or utilized during the reporting period and future periods. If utilized, an NFP would disclose a description of the programs or other activities in which those assets were or are intended to be used.
      • A description of any donor restrictions associated with the contributed nonfinancial assets.
      • The valuation techniques and inputs used to arrive at a fair value measure, including the principal market (or most advantageous market) if significant, in accordance with the requirements in Topic 820, Fair Value Measurement.”

Comments are due April 10, 2020, and after the Board considers stakeholders’ feedback on the amendments, an effective date will be decided. If accepted, the amendments will be applied retrospectively to the first set of financial statements following the effective date.

For the full proposed amendments, visit www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176174168241

To learn more about how PKF Texas serves the not-for-profit sector, visit www.PKFTexas.com/NotForProfit.

Russ: This is the PKF Texas Entrepreneur’s Playbook. I’m Russ Capper, this week’s guest host, and I’m here once again with Kristin Ryan, Audit Senior Manager and one of the faces of the PKF Texas employee benefit plan team. Kristin, great to see you again.

Kristin: Thank you.

Russ: Last time you were on we got into the SECURE Act and the impact on defined contribution plans, which was fascinating. I like doing this, because I get to learn stuff, too. But there’s a lot more about what actually the impact is on defined contributions; that’s why I want to talk about it again.

Kristin: Yeah, absolutely. So, we focused on defined contributions, the 401(k) plans last time. We want to focus on pension plans this time. So, one of the big things that I’m hearing about a lot with the pension plans is their relief for nondiscrimination testing for frozen plans. So, now a plan that’s frozen, participation frozen contributions, doesn’t have to do as much testing.

Russ: And why would they do that?

Continue Reading How the SECURE Act Affects Pension Plans

There was a full house for our first employee benefit plan seminar of the year, “Engaging and Communicating with Your Employees,” on Thursday, February 6, 2020, featuring speaker, Monirah Bacnik, founder and CEO of brand28. Employee engagement is a universal topic companies and organizations want to address and improve, and Bacnik delivered an energetic and colorful presentation.

Bacnik focused on introducing and providing examples of effective communication strategies to engage a multi-generational workforce. She also provided an interactive workbook for attendees to follow along with her presentation, where they can fill in their personal thoughts and goals for employee engagement.

Continue Reading Recap: Employee Engagement and Communication Strategies Seminar

The deductibility of most charitable gifts hasn’t changed since passage of the Tax Cuts and Jobs Act, but some recordkeeping requirements have. Helping your donors who itemize deductions understand the rules and benefits of their gifts can strengthen your not-for-profit’s ties with them — and may help increase contributions.

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Continue Reading The Tax Implications on Your Not-for-Profit’s Donors

On January 30, 2020, Chairman of the Securities and Exchange Commission (SEC), Jay Clayton, released a public statement, “Proposed Amendments to Modernize and Enhance Financial Disclosures; Other Ongoing Disclosure Modernization Initiatives; Impact of the Coronavirus; Environmental and Climate-Related Disclosure.”

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Clayton’s statement discusses these four topics:

Continue Reading Public Statement from SEC Chairman: Amendments, Initiatives, more