Several members of the CBIZ and MHM Not-for-Profit Practice attended the AICPA’s not-for-profit conference in Washington D.C. this summer. The annual conference covers hot topics in accounting, tax, and financial advisory, and other industry trends that practitioners and their clients should have on their radar.
Below are four topics that our team will be keeping an eye on in the coming months. From auditing guidance updates to accounting standards changes, here’s how we expect some of the AICPA conference’s top discussion points to affect the industry.
Clarifications Help with Grant and Contract Guidance
The Financial Accounting Standards Board (FASB)’s ASU 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, is effective for financial statement years ending December 31, 2019 and later. In an effort to clear up confusion surrounding the guidance, the AICPA conference stressed that the cost-sharing requirements does not equate to a matching requirement. Clarifications also stated that a condition to serve 50 meals per day in the past would have been recognized immediately, if an organization consistently served more than this amount, but now the condition cannot be recognized until 50 meals have been served. Presenters also stressed that the standard’s requirement to have an auditor or submit a budget for a grant or contract should not be considered a barrier. Rather, it is an administrative item.
How Clarifications to Grant and Contract Accounting Affect Not-for-Profits
The clarifications provided may clear up some confusion for not-for-profits as they go to implement ASU 2018-08, and the related changes in FASB’s ASC Topic 606, Revenue Recognition from Contracts with Customers.
Liquidity Disclosure Insight
One of the FASB’s goals for the recent changes to not-for-profit financial statement reporting involved enhancing transparency around an organization’s liquidity. The 2019 conference clarified that when it comes to the availability and liquidity disclosure in ASU 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profits, linking to a functional expense statement or disclosure may be utilized as a proxy for what your annual operating budget looks like.
What the Liquidity Disclosure Insight Means for Not-for-Profits
The additional insight into the question may make it easier for not-for-profits meet their compliance requirements for the new financial statement presentation. It may also help financial statement auditors address any questions about this disclosure.
2019 Compliance Supplement Simplifies Single Audit
The Federal Office of Management and Budget (OMB) released its 2019 Compliance Supplement on July 1, 2019. Guidance in the compliance supplement affects Single Audits under the Uniform Grant Guidance for June 30, 2019 reporting. One of the most significant updates involves the limitation of compliance requirements subject to a compliance audit. The OMB limits these requirements to six for each program (or cluster) in the supplement, with the exception of the research and development cluster, which has seven audit compliance requirements. The section on procurement has been updated to reflect the changes to simplified acquisition and micro-purchase thresholds. These thresholds had been unclear, so the 2019 Compliance Supplement also creates a grace period for grant recipients that had implemented 2017 National Defense Authorization (NDAA) thresholds after Dec. 23, 2016, or the 2018 NDAA thresholds after June 30, 2018, so long as the decision to use the NDAA thresholds was documented in an organization’s internal procurement policies.
What do the 2019 Compliance Supplement Changes Mean for Single Audits?
The limit on compliance requirements subject to the audit could drastically simplify Single Audits over June 30, 2019 reporting. If your organization had been among those caught in the crossfire over thresholds for micro-purchases and it had used NDAA thresholds in the past, you may have some accounting relief.
Revisions Potentially Make Yellow Book Audits More Time Intensive
In 2018, the federal Government Accountability Office (GAO) released an update to its auditing guide for governmental agencies and organizations that receive government grants. Auditors use the guidance in the so-called “Yellow Book” to perform financial statement audits. Changes in the revision will affect fiscal periods ending on or after June 30, 2020, and performance audits beginning on or after July 1, 2019.
Many of the updates bring enhanced transparency to the work auditors will do with governmental agencies. For example, revised independence rules will require a higher level of documentation for non-audit services, such as preparation of financial statements. One of the risk items on the radar involves financial statements prepared only using client-submitted accounting records, such as trial balances.
What Do the Yellow Book Revisions Mean for Not-for-Profit Government Agencies?
The accumulation of changes in the 2018 Yellow Book revision may mean that Yellow Book audits and non-attest services for government agencies require more auditor time and attention. Governmental agencies should be prepared to address more questions or requests for documentation from their audit team during the next audit cycle.
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Published on July 31, 2019