Category: Meetings

Is your nonprofit ready to share with the public how you mange liquidity within your organization? Nonprofits will have to implement accounting standards update 2016-14 presentation of financial statements of not-for-profit entities beginning December 31, 2018.  With this implementation comes new disclosures on liquidity that lead to an increased level of transparency in the financial statements and will force organizations to ask tough questions about how their liquidity and reserves are positioned currently and in the future.  In this interactive session participants learned about the required disclosures for liquidity and discussed the considerations many organizations are discussing as to how it relates to their current liquidity and reserve strategies.

Presenters from CliftonLarsonAllen, LLC:

Tim Warren, CPA: Tim has over 16 years of experience providing auditing, accounting, consulting, and tax services to nonprofit organizations including higher education, housing, social service organizations, membership based-organizations, community-based organizations, foundations and arts/cultural organizations. Tim has also assisted organizations on strategic implementation of new accounting standards including the new nonprofit reporting framework and revenue recognition.

Melissa Murphy, CPA: Melissa has over four years of experience auditing, accounting and consulting with an emphasis on nonprofit organizations, including those with Single Audit and Yellow Book compliance requirements. She has worked with many nonprofit organizations including human service organizations, healthcare, community based and associations. Melissa also has a strong background in 990 preparation and compliance.

Materials:
NPFM Oct Meeting – Liquidity
Liquidity Disclosures

Do you know what an Affirmative Action Program is?  Many folks confuse having non-discrimination policies with having an Affirmative Action Program.  Many don’t realize that a written Affirmative Action Plan sets specific targets for recruitment, hiring and advancement, tracks progress data, and must be updated regularly.

Often nonprofit organizations undertake “Diversity” or “Equity and Inclusion” initiatives and would benefit from following a structured, data-driven, and comprehensive approach.  Affirmative actions include training programs, outreach efforts, and other positive steps. These procedures should be incorporated into the company’s written personnel policies.  For those receiving federal funds, affirmative action must be taken by covered employers to recruit and advance qualified minorities, women, persons with disabilities, and covered veterans.

Virginia Capezio, a Senior Human Resource Consultant with TriNet (a professional employer organization) presented to our group.  Virginia is considered to be TriNet’s expert on Affirmative Action.

Hui-Ting Grady, CPA  and Olga Yasinnick CPA, MBA  from AAF CPA’s gave a presentation about what you need to know if your organization receives Federal funds, is hoping to do so, or simply wishes to use the federal regulations as a standard for “best practices.”  Hui-Ting has extensive experience providing assurance solutions to diverse nonprofit organizations, including: affordable housing development projects with HUD requirements, multi-service human & social services providers, and behavioral health agencies. Olga specializes in driving high-energy audit teams, and advising sophisticated nonprofit organizations, including multi-services human & social services providers, community development corporations (CDCs) and their affordable housing development projects.

If your agency receives less than $750K in Federal funding, through Direct Federal funding, pass through the State, or pass through another organization, you are subject to the traditional GAS yellow book audit. Organizations are subject to the Federal Single Audit standards if they receive $750K or more in Federal funds in a fiscal year, either directly or indirectly. The funding could be cash or noncash awards. OMB A-133 Compliance Supplement is an extensive United States Federal government guide created by the Office of Management and Budget (OMB) and was originally created in 1996.  It is used in auditing federal assistance and federal grant programs, as well as their respective recipients. It is considered to be the most important tool of an auditor for a Single Audit. It serves to identify existing important compliance requirements that the Federal Government expects to be considered as part of a Single Audit.

For December 31, 2015, year-ends and beyond

1. • All single audits performed under Subpart F of the Uniform Guidance
   • Auditees comply with the new administrative requirements and cost principles for federal awards made on or after December 26, 2014, and to incremental funding made on or after that date
   • Auditees comply with the “old” OMB administrative requirements and cost principles for awards made prior to December 26, 2014, until those funds run out
   • With regard to subawards, the effective date of the Uniform Guidance is the same as the effective date of the federal award from which the subaward is made
   • Auditor compliance testing will test against both the old criteria and the new criteria depending on federal award dates

New procurement standards go into effect for those agencies with a year end of 12/31/17 on 1/1/18, and for 6/30 year end, on 7/1/18. It is the auditees’ responsibility to prepare a complete Schedule of Expenditures of Federal Awards (SEFA) and to comply with all OMB A-133 standards, regulations, and audit report requirements, and to have a strong system of Internal Controls.  As much as possible, try to segregate Federal funding from other sources of funds.  If you are a contractor/vendor that receives Federal funds, then you do not have to comply.  If your organization is a sub-recipient, then you have to comply.  Generally, it you should comply with the standards even if you receive less than $750K in Federal funds, but you are not subject to the more expensive and extensive audit.

There are usually some changes to the regulations annually, which are listed in the Compliance Supplement. Part 3 lists Compliance Requirements, and Part 4 lists Agency Program Requirements (specific to the Federal program).  Internal controls are included in Part 3.  For effective internal controls, there are five major components:  1) Control of the environment 2) Risk Assessment 3) Contract Activities 4) Information and Communication, and 5) Monitoring.  Part 3 also identifies and describes the 12 types of compliance requirements where noncompliance may have a direct and material effect on a Federal program and provides audit objectives and suggested audit procedures. The 12 types of compliance requirements are: A. Activities Allowed or Unallowed B. Allowable Costs/Cost Principles C. Cash Management D. (Reserved) (Note: Some agencies have made Davis-Bacon Act (Wage Rate Requirements) a Special Test and Provision; see 20.001 in Part 4 for a cross-cutting section addressing Wage Rate Requirements.) E. Eligibility F. Equipment and Real Property Management G. Matching, Level of Effort, Earmarking H. Period of Performance I. Procurement and Suspension and Debarment J. Program Income K. (Reserved) L. Reporting M. Subrecipient Monitoring N. Special Tests and Provisions.

At the end of the process, the auditors will issue a set of Financial Statements in Accordance with Government Auditing Standards and Uniform Compliance. You will have to file a Data Collection Form also. If your auditors have detected any material weaknesses or issues a material finding in the course of their A-133 audit, then your organization will be required to file and implement a Corrective action Plan.

 

Considerations and Legal Issues relating to Separation Packages for a Departing Employee

Separations from employment present a minefield of overlapping statutes, regulations, and internal policies and procedures. They are often emotionally charged for both the employer and the departing employee.  Jeff Siegel and Desiree Murphy, experienced management-side employment attorneys from Morgan, Brown & Joy, LLP, gave a presentation about when an employer should consider proposing a separation package for an employee, the types of clauses and options available to employers when presenting or negotiating a separation package, and how to draft legally enforceable separation agreements.  They provided insights and practical experience on how to navigate the legal issues these disputes present and offered suggestions on how to avoid costly litigation and (hopefully) reach an amicable resolution to an often difficult situation. Morgan, Brown, & Joy LLP has been representing employers in employment and labor law since 1923. Jeff has worked there for 13 years and Desiree for 3 years.

Most often, severance packages to departing employees who have been terminated involve giving a certain amount of money to them in exchange for agreeing not to sue the organization, its management, etc. Money is the driving force 90% of the time. From the employer’s viewpoint, you should offer the least amount that will accomplish the task. There are several ways to do this. You can offer a lump sum payment or you can arrange to continue paying the ex-employee’s salary for a certain number of weeks or months. You can also offer to continue health insurance payments for a set period of time. The employment ends as of the termination date, even though you are continuing payment in some form. The employer is under no obligation to offer the same package to different employees.   The employer can also agree not to contest the ex-employee filing for unemployment benefits. It is best to treat the payments as reportable on W-2 forms. If the terminated employee signs a release form with the employer, that will not affect their ability to file for unemployment benefits.

There can be non-monetary features of a separation agreement. The employer can agree to give the ex-employee either a positive or a neutral reference.   Often, these agreements have a confidentiality clause. Usually the employer wants this, and sometimes the ex-employee wants this also. Any confidentiality agreement applies to everyone in your organization.   In adversarial terminations, it is best to get everything settled and signed at the same time. If the employer asks the ex-employee to sign a release of claims, that does not affect any future rights against the employer. It is important to cite the specific laws, regulations, etc. explicitly in the body of the release. The regulations affecting releases are a creature of state laws, so you need to closely follow your state regulations. You need to ensure that the release covers the appropriate claims and potential claims, and that the release complies with ADEA (age discrimination) and OWBPA (older American protection).