Keiter’s 2023 Not-for-Profit Update

Keiter recently hosted its 2023 Not-for-Profit Update at the Firm’s office in Glen Allen, Virginia. The in-person seminar provided attendees the opportunity to earn CPE credit while learning about the latest impacts of recent accounting and tax guidance and best practices for not-for-profit organizations. Attendees included numerous Richmond not-for-profit organizations.

Not-for-profit accounting specialists share their insights on the latest developments

Technical developments

To kickoff, Colin Hannifin, Business Assurance & Advisory Services (BAAS) senior manager, delved into recent technical developments from the Financial Accounting Standards Board (FASB), including Current Expected Credit Losses (CECL) and Leases:

Key points from new CECL guidance in effect for 2023

• ASU No. 2016-13, originally issued in 2016, is now in effect for organizations with fiscal years beginning in 2023.
• The recognition of credit losses has been accelerated.
• Most impactful to financial institutions but requires consideration for every organization that has trade receivables or issues credit to customers. May also impact organizations with large endowments made up of held-to-maturity investments.
• Contributions receivable and promises to give are out of scope for the standard.
• Requires management to perform additional analysis and develop estimates and policies that should be documented and supportable.
• Additional disclosures in the financial statements will also be necessary.

Ongoing considerations for leases

• Financial statement presentation and disclosure requirements listed in ASC 842 are in effect for fiscal years beginning in 2022.
• ASU 2023-01, issued in March 2023 and effective for fiscal years beginning in 2024, offers insight on how to account for common control leases.
• The use of donated space should still be recognized on the balance sheet. Organizations should recognize the difference between the fair value of rental payments and actual discounted payments as an in-kind contribution.
• Changes to lease agreements should be accounted for as a remeasurement or a modification, depending on the terms of the new or modified arrangements.

Functional expense reporting

Richard Lewis, BAAS partner, discussed several best practices to consider for not-for-profit organizations, including procedures surrounding functional expense reporting. He mentioned that the methodology for allocating joint costs that relate to multiple functions should be rational and systematic, reviewed periodically, and disclosed in the financial statements. Common errors in the preparation of the statement of functional expenses include capturing in-kind contributions of services or materials in program expenses. He also highlighted some policies and procedures that are best to have formalized, including:

• Gift acceptance policies, especially considering the increased popularity of virtual currency.
• Code of Ethics, which should be signed annually by Board members and employees.
• Information security policies.
• Monthly and annual financial close policies.

Keiter offers a variety of resources for developing sound policies and procedures for your not-for-profit organizations.

Changes to UBIT

During the last part of the hour Ginny Belcher, tax senior manager, highlighted some changes to Unrelated business income (UBIT) and the 990-T form.

• Electronic filings for the 990-T are now required, and NAICS codes used on the 990-T have been updated. These codes should be reviewed for proper use and aggregation.
• Suspended net operating losses (NOLs) cannot be used against UBIT if it does not fall into the same activity, even if the activity for which the suspended NOL is related to has been discontinued.

For more not-for-profit insights from our accounting specialists visit Keiter’s blog page or contact your Keiter Opportunity Advisor by Email | Call: 804.747.0000 with questions.