Category Archives: Q&A

More Questions and Answers

Posted on October 28, 2009 | 2 comments

Questions and AnswersHere are some more nonprofit accounting and financial questions that have come to from this site and from my workshops and my answers.

Question – Should the donor know?

I am curious to know if FASB 116 or FASB 117 prohibit the use of endowment as collateral against a line of credit without donor’s acknowledgment or knowledge of this action.

Answer – I do not believe that either of those prohibit the use of endowment funds as collateral. But unless the donor has told you it is OK to use the funds in that fashion I would be very wary of doing so without the donor’s consent. It has happened before that nonprofits have used the funds as collateral and then lost those funds. You could be in for some hard times if that happens.

Question – SAS 112 issues

For the past two years, our auditor firm has noted material weakness in the management letter due to the fact that there are adjustments made to deferred membership revenue, interest revenue, depreciation, etc. We were told that this could impact us getting grant monies and these “weaknesses” need to be corrected.

It was my understanding that an audit was to make necessary adjustments so that the books balance and reflect the current financial state. We were told by our auditing team this year that there are not allowed to make adjustments to our books and that is why there are material weaknesses. This has never been an issue before last year nor was it an issue with other auditing firms. Any guidance?

Answer – Those SAS rules for risk assessment kicked in at the end of 2006. As these weaknesses are listed in the Management Letter and become a part of the audit, a funder who asks for a copy of the audit might question what those weaknesses are. The SAS rules change what auditors are allowed to do. Making changes to your books may infringe on their independence, which under the new rules is a pretty big issue.

The purpose of an audit is to verify the quality and soundness of your organization’s financial reporting. The errors they find are now up to you to fix. If they can give you some direction on how to fix them and then how to do the entries correctly going forward you should not have anymore problems.  Otherwise, if the auditors keep finding the same mistakes the language gets more severe.

Question – Remote Employees

Do you know of any best Practices with regards to remote employees or employees who work from home?

Answer – Here are two articles that may be of help:

More questions answered in the next post!

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Posted in Nonprofit Accounting, Q&A

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Financial Management

Posted on September 30, 2009 | Leave a comment

MFMP-logoI have written before about creating policies for your nonprofit. Now nonprofits have a new tool they can easily use to create their own financial management policies and plans. The Nonprofit Risk Management Center has a new tool called My Financial Management Plan where users can go through up to 21 different modules on nonprofit financial and accounting topics to create a variety of policies and procedures to help manage, organize and streamline their financial operations. From the Risk Management Center:

Nonprofit leaders have spent countless hours developing the necessary components of a financial management plan. But for many organizations the components, from an annual budget, return on investment strategy, cash flow planning tool and more, remain disparate. The nonprofit lacks a cohesive plan that reflects the organization’s commitment to the effective stewardship of its assets. My Financial Management Plan was created to guide leaders in updating the components of their financial management systems and integrating these components into a cohesive plan. This powerful system features covers topics such as Board Fiduciary Obligations, Managing Fraud Risk, Managing Cash Flow, Return on Investment Analysis, Cost Allocation, Classifying Net Assets, Managing Cash Flow, Budgeting, the form 990 and Grants and Contributions.

My Financial Management Plan is a powerful tool to turn financial management strategies, policies and protocols into a plan that will help your nonprofit demonstrate both competence and accountability. Use the “Plan Modules” feature to go through the 22 system modules. Each module offers the opportunity to upload existing material from your financial management system, create new content (based on our templates or created “on the fly”), or skip sections you don’t wish to use. Use the “Manage My Plan” feature to edit your draft plan, upload supporting PDF files and view/download your plan. The system also features a classroom with easy-to-understand articles and resources on a wide range of financial management topics.

I was fortunate enough to work on this project and create a lot of the module content. I know that this will be a great tool for nonprofits to learn about what they need know about with regards to their nonprofit’s finances and creating the appropriate policies and procedures to ensure good financial stewardship. For those not ready to buy access to the program you can register with the site to receive periodic email updates on nonprofit financial issues.

If you have any questions or comments about the program please let me know via email or in the comments below.

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Posted in Governance, IRS, Nonprofit Accounting, Policies and Procedures, Q&A, Risk Management, Tax Forms

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Nonprofit Trainings and Workshops

Posted on September 9, 2009 | 3 comments

aztecMy calendar is getting full as we move into the Fall and I want to help out the groups that have asked me to do trainings for them. But before that I want to point your attention to two other learning opportunities.

The first is the Nonprofits Assistance Fund’s new Financial Management Webinars. Their first on projecting and managing cash flow is coming up on September 18, do check them out. The other is the Nonprofit Risk Management Center’s 2009 Risk Management and Finance Summit for Nonprofits. The event is always good, and I’m disappointed I can’t present at it this year and attend it (new baby due at any minute!).

Nonprofit Accounting Trainings

In September I’ll be at:

In October I’ll be at:

I’ll add more details as I get them for my events and more trainings I find out about from other groups that look good. If I miss any let me know.

Questions and Answers

I’ll end with a quick Q&A:

Question – Our nonprofit has funds remaining from last fiscal year. Is there any special treatment for the funds left over or can it just be rolled into the current year beginning balance?

Answer – If the funds were donated to you for a specific purpose (if they are restricted in any way) then you would have to use them per the donor’s instructions. If they are just left over general (unrestricted) funds you can use them for the nonprofit’s business, or even create a reserve account.

Got a question of your own? Ask away.

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Posted in Nonprofit Accounting, Q&A, Risk Management

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