How ASU 2016- 14 Will Affe c t Your Not- for - Pr ofit E ntitie s - - PowerPoint PPT Presentation
How ASU 2016- 14 Will Affe c t Your Not- for - Pr ofit E ntitie s Pa rt I: L iquidity a nd E xpe nse Alloc a tion De c e mb e r 8, 2016 T o da y s Pre se nte rs T r e nt F oste r , CPA Par tne r We ave r E duc atio n and No
De c e mb e r 8, 2016
Pa rt I: L iquidity a nd E xpe nse Alloc a tion
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T r e nt F
, CPA Par tne r We ave r E duc atio n and No npro fit Prac tic e L e ade r
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Ho w re a dy is o ur o rg a niza tio n to imple me nt ASU 2016-14?
to o ur o rg a niza tio n
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Whe n is ASU 2016-14 e ffe c tive ?
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►E
ffe c tive fo r fina nc ia l sta te me nts fo r fisc a l ye a rs b e g inning afte r
De c e mbe r 15, 2017 (i.e . c a le nda r YE
‘ 18 a nd fisc a l YE ’ 19)
► E
ar ly adoption is pe r mitte d,
sub je c t to the de sig na te d tra nsitio n me tho d
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T ime line for Adoption
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► I
mpro ve ne t a sse t c la ssific a tio n
► I
mpro ve info rma tio n in fina nc ia l sta te me nts a nd no te s: » F ina nc ia l pe rfo rma nc e » Ca sh F lo w » L iq uidity
► Be tte r e na b le NF
Ps to te ll the ir fina nc ia l sto ry
► Be tte r se rve the ne e ds o f fina nc ia l sta te me nt use rs ► Cre a te c la rity, unifo rmity a nd c o mpa ra b ility in re po rting a c ro ss
the fina nc ia l sta te me nts o f va rio us NF Ps
► Pro vide do no rs a nd le nde rs with liq uidity info rma tio n to b e tte r
a sse ss the fina nc ia l he a lth o f the NF Ps
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Goa ls And Obje c tive s
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Ps) must re po rt e xpe nse s b y na ture a nd func tio n in o ne pla c e , a nd de sc rib e the me tho ds use d to a llo c a te a mo ng func tio na l c a te g o rie s
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e limina te s re c o nc ilia tio n o f c ha ng e in ne t a sse ts to c a sh flo ws fro m (use d fo r) o pe ra ting a c tivitie s
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sta te me nts to a sse ss the org a niza tion’s liquidity a nd to de te rmine the a va ila b ility o f re stric te d re so urc e s to fund g e ne ra l e xpe nditure s
L iquidity
Cur r e nt GAAP: T
he re is no re q uire me nt to disc lo se info rma tio n a b o ut liq uidity, a ltho ug h sta te me nt o f fina nc ia l po sitio n must b e pre se nte d in o rde r o f liq uidity. F ASB to o k a de e p lo o k into liq uidity a nd a va ila b ility o f funds:
► L
iquidity: Re la te s to the type o f a sse ts the Org a niza tio n ha s
a nd the ma turity o f tho se a sse ts to me e t c urre nt o b lig a tio ns.
► Availability: I
s it a va ila b le fo r use ? Are the re do no r impo se d
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L iquidity
T he F ASB Bo a rd de c ide d tha t a n e ntity ne e ds to disc lo se ho w it ma na g e s its liq uidity a nd a va ila b ility. Yo ur o rg a niza tio ns fina nc ia l sta te me nts will no w ne e d to disc lo se the fo llo wing :
mation: All about the numbe r s
mation: All about the wor ds
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L iquidity
►De te rmine the fo rma t to pre se nt the re q uire d
q ua ntita tive disc lo sure o f liq uidity info rma tio n
► Ga the r info rma tio n fo r q ua ntita tive fo o tno te re q uire me nts.
» Asse ss ho w the y ma na g e the ir liq uid » E va lua te a ll o rg a niza tio n fina nc ia l a sse ts (this c a n g e t tric ky)
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L iquidity
Ga the r info rma tio n fo r q ua lita tive fo o tno te re q uire me nts.
de ntify a ll fina nc ia l a sse ts
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L iquidity
Do yo u think yo ur use rs o f the fina nc ia l sta te me nts will g e t a ny b e ne fit fro m this ne w disc lo sure ?
do n’ t think it will he lp
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Do yo u think yo ur use rs o f the fina nc ia l sta te me nts will g e t a ny b e ne fit fro m this ne w disc lo sure ?
►Po ll Re sults
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L iquidity
Qua ntita tive : NF
P A ha s $395,000 o f fina nc ia l a sse ts a va ila b le within 1 ye a r o f the b a la nc e she e t da te to me e t c a sh ne e ds fo r g e ne ra l e xpe nditure c o nsisting o f c a sh
$300,000. No ne o f the fina nc ia l a sse ts a re sub je c t to do no r o r o the r c o ntra c tua l re stric tio ns tha t ma ke the m una va ila b le fo r g e ne ra l e xpe nditure within o ne ye a r o f the b a la nc e she e t da te . T he c o ntrib utio ns re c e iva b le a re sub je c t to implie d time re stric tio ns b ut a re e xpe c te d to b e c o lle c te d within o ne ye a r.
Qua lita tive : NF
P A ha s a g o a l to ma inta in fina nc ia l a sse ts, whic h c o nsist o f c a sh a nd sho rt-te rm inve stme nts, o n ha nd to me e t 60 da ys o f no rma l o pe ra ting e xpe nse s, whic h a re , o n a ve ra g e , a ppro xima te ly $275,000. NF P A ha s a po lic y to struc ture its fina nc ia l a sse ts to b e a va ila b le a s its g e ne ra l e xpe nditure s, lia b ilitie s, a nd o the r o b lig a tio ns c o me due . I n a dditio n, a s pa rt o f its liq uidity ma na g e me nt, NF P A inve sts c a sh in e xc e ss o f da ily re q uire me nts in va rio us sho rt-te rm inve stme nts, inc luding c e rtific a te o f de po sits a nd sho rt-te rm tre a sury instrume nts. As mo re fully de sc rib e d in No te XX, NF P A a lso ha s c o mmitte d line s o f c re dit in the a mo unt o f $20,000, whic h it c o uld dra w upo n in the e ve nt o f a n una ntic ipa te d liq uidity ne e d.
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L iq uidity
NF P A’ s fina nc ia l a sse ts a va ila b le within o ne ye a r o f the b a la nc e she e t da te fo r g e ne ra l e xpe nditure a re a s fo llo ws. NF P A’ s e ndo wme nt funds c o nsist o f do no r-re stric te d e ndo wme nts a nd a q ua si-e ndo wme nt. I nc o me fro m do no r-re stric te d e ndo wme nts is re stric te d fo r spe c ific purpo se s a nd, the re fo re , is no t a va ila b le fo r g e ne ra l e xpe nditure . As de sc rib e d in No te Y, the q ua si-e ndo wme nt ha s a spe nding ra te o f 5 pe rc e nt. $1.65 millio n o f a ppro pria tio ns fro m the q ua si-e ndo wme nt will b e a va ila b le within the ne xt 12 mo nths. As pa rt o f NF P A’ s liq uidity ma na g e me nt, it ha s a po lic y to struc ture its fina nc ia l a sse ts to b e a va ila b le a s its g e ne ra l e xpe nditure s, lia b ilitie s, a nd o the r o b lig a tio ns c o me due . I n a dditio n, NF P A inve sts c a sh in e xc e ss o f da ily re q uire me nts in sho rt-te rm inve stme nts. T
una ntic ipa te d liq uidity ne e ds, NF P A ha s c o mmitte d line s o f c re dit in the a mo unt o f $20 millio n, whic h it c o uld dra w upo n. Additio na lly, NF P A ha s a q ua si-e ndo wme nt o f $33 millio n. Altho ug h NF P A do e s no t inte nd to spe nd fro m its q ua si-e ndo wme nt o the r tha n a mo unts a ppro pria te d fo r g e ne ra l e xpe nditure a s pa rt o f its a nnua l b udg e t a ppro va l a nd a ppro pria tio n pro c e ss, a mo unts fro m its q ua si-e ndo wme nt c o uld b e ma de a va ila b le if ne c e ssa ry).
E XAMPL E F OOT NOT E B
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L iq uidity
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L iq uidity
Qua lita tive E xa mple
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L iq uidity Ho w to I de ntify a ll fina nc ia l a sse ts a nd a ny limita tio ns
Gro ss a mo unt o f a sse ts fro m the SOP – a mo unts una va ila b le fo r g e ne ra l e xpe nditure s = a mo unts a va ila b le to me e t the o rg a niza tio n’ s c a sh ne e ds in the ne xt 12 mo nths Ite ms to T hink About:
nve stme nts
ndo wme nt a sse ts
Ite ms to E xc lude :
ixe d Asse ts
nve nto ry
Whic h o f the fo llo wing ite ms sho uld NOT b e inc lude d in the a va ila b le to me e t o b lig a tio ns?
ndo wme nt a sse ts
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Whic h o f the fo llo wing ite ms sho uld NOT b e inc lude d in the a va ila b le to me e t o b lig a tio ns?
ndo wme nt a sse ts
d- de signate d funds
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► Mixe d fe e db a c k fo r disc lo sure s o f info rma tio n a b o ut
liq uidity
» Mo re suppo rt fo r q ua lita tive disc lo sure s tha n q ua ntita tive disc lo sure s » So me who disa g re e e xpre ss c o nc e rn tha t:
nfo rma tio n will b e o utda te d b y time fina nc ia l sta te me nts a re issue d
Ps
xte nsive disc lo sure s re duc e use fulne ss, a nd ma ny use rs do n’ t re a d no te s
a mo ng NF Ps, re duc ing c o mpa ra b ility
de ntify a c ha mpio n
ra ining to a c c o unting sta ff
Clie nt T
ist
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nc re a se unde rsta nda b ility a nd use fulne ss
nc re a se c o mpa ra b ility a c ro ss no npro fits
All no npro fits a re no w re q uire d to pre se nt e xpe nse s b y b o th NAT URE (sa la rie s, re nt, tra ve l) a nd F UNCT I ON (pro g ra m a nd suppo rting )
E xpe nse Re por ting
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Curre nt GAAP
Sc he dule o f func tio na l e xpe nse s ma nda to ry fo r he a lth a nd we lfa re
re c o mme nde d, b ut no t re q uire d, fo r o the r NF Ps.
Ne w GAAP
E xpe nse s re po rte d b y na ture a nd func tio n e ithe r in sta te me nt
func tio na l e xpe nse s o r in no te s fo r a ll NF Ps. T his sha ll b e pre se nte d in a n a na lysis tha t disa g g re g a te s
func tiona l e xpe nse c la ssific a tions b y the ir na tura l e xpe nse c la ssific a tions.
E xpe nse Re por ting
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E xpe nse Re por ting
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E xpe nse Re por ting
Pro g ra m se rvic e s: Ac tivitie s tha t re sult in g o o ds a nd se rvic e s b e ing distrib ute d to b e ne fic ia rie s, c usto me rs
whic h a no npro fit e xists E xpe nse Re por ting
Suppo rting se rvic e s: Suppo rting a c tivitie s a re a ll a c tivitie s o f a NF P o the r tha n pro g ra m se rvic e s. Ge ne ra lly, suppo rting a c tivitie s inc lude the fo llo wing a c tivitie s:
undra ising a c tivitie s
E xpe nse Re por ting
E xpe nse Re por ting
ina nc ing , inc luding una llo c a te d inte re st c o sts
ibutions a nd
me mb e rship due s c o ntra c ts, inc luding b illing a nd c o lle c ting fe e s.
Suppo rting se rvic e s: Ma na g e me nt a nd g e ne ra l a c tivitie s
E xpe nse Re por ting
Suppo rting se rvic e s: Ma na g e me nt a nd g e ne ra l a c tivitie s
NF P’ s ste wa rd ship o f c o ntrib ute d funds
mplo ye e b e ne fits ma na g e me nt a nd o ve rsig ht (huma n re so urc e s)
dire c t c o nduc t o f pro g ra m se rvic e s, fundra ising a c tivitie s, o r me mb e rship de ve lo pme nt a c tivitie s.
sho uld b e a llo c a te d
a llo c a tio n, re po rting , a nd disc lo sure o f jo int c o sts
E xpe nse Re por ting
At No t-fo r-Pro fit F luffy Puppy, the c hie f e xe c utive o ffic e r spe nds a po rtio n o f time :
fundra ising a c tivitie s
luffy Puppy Ho w sho uld yo u a llo c a te the CE O’ s c o mpe nsa tio n? A. Pro g ra ms B. Ma na g e me nt a nd g e ne ra l
undra ising D. Allo c a te d to A & C E . Allo c a te d to A, B, C
E xample : Co st a llo c a tio ns - CE
O
E xpe nse Re por ting
At No t-fo r-Pro fit F luffy Puppy, the c hie f e xe c utive o ffic e r spe nds a po rtio n o f time :
a c tivitie s
luffy Puppy Ho w sho uld yo u a llo c a te the CE O’ s c o mpe nsa tio n? A. Pro g ra ms B. Ma na g e me nt a nd g e ne ra l
undra ising D. Allo c a te d to A & C
E . Alloc ate d to A , B, C
E xample : Co st a llo c a tio ns - CE
O
E xpe nse Re por ting
At No t-fo r-Pro fit F luffy Puppy, the CF O ha s prima ry re spo nsib ility fo r
luffy Puppy’ s e ndo wme nt.
Ho w sho uld yo u a llo c a te the CF O’ s c o mpe nsa tio n? A. Pro g ra ms B. Ma na g e me nt a nd g e ne ra l
undra ising D. Allo c a te d to A & B E . Allo c a te d to A, B, C
E xample : Co st a llo c a tio ns - CF
O
E xpe nse Re por ting
At No t-fo r-Pro fit F luffy Puppy, the CF O ha s prima ry re spo nsib ility fo r
luffy Puppy’ s e ndo wme nt.
Ho w sho uld yo u a llo c a te the CF O’ s c o mpe nsa tio n? A. Pro g ra ms
B. Manage me nt and ge ne r al
undra ising D. Allo c a te d to A & B E . Allo c a te d to A, B, C
E xample : Co st a llo c a tio ns - CF
O
E xpe nse Re por ting
T he huma n re so urc e s de pa rtme nt a t F luffy Puppy g e ne ra lly is invo lve d in the b e ne fits a dministra tio n fo r a ll pe rso nne l o f F luffy Puppy. T his inc lude s:
Ho w sho uld yo u a llo c a te the Huma n Re so urc e s e xpe nse s? A. Pro g ra ms B. Ma na g e me nt a nd g e ne ra l
undra ising D. Allo c a te d to A & B E . Allo c a te d to A, B, C
E xample : Co st a llo c a tio ns - Huma n Re so urc e s E xpe nse Re por ting
T he huma n re so urc e s de pa rtme nt a t F luffy Puppy g e ne ra lly is invo lve d in the b e ne fits a dministra tio n fo r a ll pe rso nne l o f F luffy Puppy. T his inc lude s:
Ho w sho uld yo u a llo c a te the Huma n Re so urc e s e xpe nse s? A. Pro g ra ms
B. Manage me nt and ge ne r al
undra ising D. Allo c a te d to A & B E . Allo c a te d to A, B, C
E xample : Co st a llo c a tio ns - Huma n Re so urc e s E xpe nse Re por ting
F luffy Puppy re c e ive s fe de ra l g ra nts a nd e mplo ys a n a c c o unta nt who is re spo nsib le fo r g ra nt a c c o unting a nd re po rting . I n so me c a se s, unde r the te rms o f the g ra nt a g re e me nt, a fisc a l re po rt is re q uire d to b e file d tha t de ta ils e xpe nse s inc urre d a nd c ha rg e d a g a inst the g ra nt.
Ho w sho uld yo u a llo c a te the Gra nt Ac c o unting e xpe nse s? A. Pro g ra ms B. Ma na g e me nt a nd g e ne ra l
undra ising D. Allo c a te d to A & B E . Allo c a te d to A, B, C
E xample : Co st a llo c a tio ns –
Gra nt Ac c o unting a nd Re po rting
E xpe nse Re por ting
F luffy Puppy re c e ive s fe de ra l g ra nts a nd e mplo ys a n a c c o unta nt who is re spo nsib le fo r g ra nt a c c o unting a nd re po rting . I n so me c a se s, unde r the te rms o f the g ra nt a g re e me nt, a fisc a l re po rt is re q uire d to b e file d tha t de ta ils e xpe nse s inc urre d a nd c ha rg e d a g a inst the g ra nt.
Ho w sho uld yo u a llo c a te the Gra nt Ac c o unting e xpe nse s? A. Pro g ra ms
B. Manage me nt and ge ne r al
undra ising D. Allo c a te d to A & B E . Allo c a te d to A, B, C
E xample : Co st a llo c a tio ns –
Gra nt Ac c o unting a nd Re po rting
E xpe nse Re por ting
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No te X1: Me tho ds Use d fo r Allo c atio n o f E xpe nse s fr
Manage me nt and Ge ne r al Ac tivitie s
T he financ ial state me nts re po rt c e rtain c ate g o rie s o f e xpe nse s that are attrib utab le to o ne o r mo re pro g ram o r suppo rting func tio ns o f the Org anizatio n. T ho se e xpe nse s inc lude de pre c iatio n and amo rtizatio n, the pre side nt’ s o ffic e , c o mmunic atio ns de partme nt, and info rmatio n te c hno lo g y de partme nt. De pre c iatio n is allo c ate d b ase d o n sq uare fo o tag e , the pre side nt’ s o ffic e is allo c ate d b ase d o n e stimate s o f time and e ffo rt, c e rtain c o sts o f the c o mmunic atio ns de partme nt are allo c ate d b ase d o n e stimate s o f time and e ffo rt, and the info rmatio n te c hno lo g y de partme nt is allo c ate d b ase d o n e stimate s o f time and c o sts o f spe c ific te c hno lo g y utilize d.
E xpe nse Re por ting
► Ove ra ll suppor
t fo r a ll NF
Ps to re po rt a na lysis o f o pe ra ting e xpe nse s b y b o th func tio n a nd na ture in sing le lo c a tio n
► Sug g e st it a ids in use r unde rsta nding a nd c o mpa ra b ility a c ro ss industrie s
► So me who disa g re e :
» E xpre ss c o nc e rn with la c k o f c o nsiste nc y b e twe e n F
pro po se d GAAP a na lysis » Pre fe r tha t re po rting o f e xpe nse s b y b o th func tio n a nd na ture re ma in o ptio na l
Clie nt I mple me nta tio n:
e xpe nse a llo c a tio ns
disc lo se d
sta b lish to p-side re a llo c a tio n a ppro a c h fo r indire c t o r sha re d e xpe nse s fo r func tio na l pre se nta tio n
E xpe nse Re por ting E xpe nse Re por ting
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