AICPA NATIONAL ISSUES
Policy Changes for Not-For-Profits
Many Rhode Island not-for-profits are so small that it is difficult to help them understand their fiduciary and fiscal responsibilities, according to Rebeka Mazzone, Liaison Director for RISCPA’s Not-For-Profit Committee and a regional director for Accounting Management Solutions, Inc.
But that won’t be the case for much longer, she says.
“In the past, the connection between the money coming in and the ‘outcomes,’ or programmatic elements, of the not-for-profit organizations have been very separate,” Mazzone said. But that will be changing for good as new requirements emerge to make small tax exempt groups more accountable to their donors.
It may surprise some people to know that, according to Guidestar.org, there are almost 9,200 filing not-for-profits in the state of Rhode Island, and many more that do not file. 68% of those filing organizations have annual revenues of less than $100,000, while 83% have less than $500,000 of revenue and only approximately 135 of them have over $10 million a year in operating revenues.
“The Not-For-Profit Committee held a conference on Oct. 22, where we had over 100 Rhode Island not-for-profit business leaders in attendance, and we covered a lot of critical issues, including helping these executive directors and board members to understand what their fiduciary and fiscal responsibilities are, and to give them updates on the future of funding,” Mazzone said.
She added that this will likely be an annual conference held by the committee to provide valuable resources to the not-for-profit community. In addition, the Committee holds monthly meetings for those CPAs working with the not-for-profit community.
Mazzone highlights some key changes that apply to not-for-profits:
Annual Returns
There have been significant changes to the not-for-profit returns, Form 990 and 990-N, as of the filing year 2008. Now, small organizations that were previously not required to file a 990 – those that generally have less than $25,000 in annual gross receipts – will be required to file the 990-N (also known as an electronic postcard). In addition, the standard Form 990 has been completely redesigned, and now is much more extensive and requires significant disclosures regarding policies and procedures, compensation and related party transactions. The requirement to file the revised form has been phased in since filing year 2008 based on the size of the not-for-profit. More information on the 990 changes can be found here.
Retirement Plans
There has been one major change to the guidelines for 403(b) retirement plans. Now, if it is an ERISA plan with generally more than 100 eligible participants (with some exceptions), the plan may require an audit. The audit would include disclosure of the prior year ending balances, so significant work would be required now to get ready for the new audit requirements. Also, an updated plan document was required to be put in writing by December 31, 2009. The effect of the changes is that now the 403(b) has become very similar to a 401(k) plan.
Endowments
Significant new disclosures regarding endowments are required after the 2009 issuing of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) and the related FASB Staff Position, FSP 117-1. Those disclosures include the organization’s policies regarding the standards of prudence in both investing and spending of endowment assets, as well as the relationship between the two. If a not-for-profit deems it to be prudent, it can now spend from an underwater endowment, and the requirement to contribute an inflationary factor to the endowment no longer exists in the state of Rhode Island. (Mazzone wrote a white paper on speaking with your board about UPMIFA that can be downloaded from her company’s website.)
Fair Value Measurements
The FASB Statement No. 157 provides guidance as to how to calculate the fair market value of items that are required to be reported at fair market value. These areas include, but are not limited to, pledges receivable, gifts in kind, and certain liabilities.
One other reminder:
Filing with Business Regulation
Though not a new requirement, many organizations often overlook the State registration requirements related to fundraising. The state of Rhode Island requires any charitable organization that intends to solicit and receive contributions from the public in excess of $25,000 during a fiscal (with some exceptions), provided none of its fundraising functions are carried on by professional fund raisers, to register with the Department of Business Regulation each year. This requirement is in addition to the requirement to file an Annual Report with the Secretary of State.
