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Monthly Archives: July 2014

Does your Nonprofit Need an Audit?

Pam Williams0 Comment

baudity Brittany Powell

The National Council of Nonprofits’ Audit Guide (“Audit Guide”) can provide your organization with a starting point for making the decision on whether or not your nonprofit organization needs an audit.

As the Audit Guide points out in its “Does your nonprofit need to have an independent audit?” section, nonprofits may be required to have an audit for various reasons including, but not limited to, compliance with specific grant agreements or loan covenants.  Additionally, a nonprofit organization may be required to have a Yellow Book or Single Audit depending on its level of Federal or State expenditures.  A nonprofit with federal expenditures equal to or exceeding $500,000 is required to have a Single Audit.  As discussed in our February 10, 2014 blog post, this threshold will increase to $750,000 beginning with fiscal years beginning on or after December 26, 2014.  This Audit Guide provides a summary for each state’s audit requirements.  North Carolina requires “a non-governmental entity that receives $500,000 or more annually in state funds” to submit a Yellow Book audit.

However, an audit may not be necessary or cost effective for all nonprofit organizations.  A review, while substantially less in scope than an audit, provides limited assurance over an entity’s financial statements.  Therefore, a review can be a viable, less costly alternative to an audit for some nonprofit organizations.

If you are considering an audit or review for your nonprofit, contact someone at our office to help you determine the engagement type that best fits your organization’s needs.  See the Audit Services & Consulting section of our website for more information about audits, reviews, and other services we provide.

Brittany Powell is a Senior Accountant with Langdon & Company LLP.  She specializes in audit, serving a wide variety of nonprofit organizations.

IRS Unveils New Form for Organizations Applying for 501(c)(3) Tax-Exempt Status

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by Taylor Elliott

On July 1, 2014, the Internal Revenue Service (IRS) released Form 1023-EZ as part of its efforts to streamline the application process for organizations seeking tax-exempt status.  The form is specifically designed for charities who wish to be classified as exempt under section 501(c)(3).  An organization must meet several criteria in order to be eligible to apply using the form, including a gross receipts test of $50,000 or less as well as an assets test of $250,000 or less. The form instructions outline additional criteria, including an eligibility worksheet that helps charities determine whether the form is right for them through a series of yes and no questions.

The IRS has indicated that the overall goal in developing Form 1023-EZ is to reduce the time and paperwork associated with providing a charity a determination as to its tax-exempt status. Previously, the IRS has been intensely criticized for a lengthy and cumbersome 1023 application process that includes an application backlog that is many months behind. Until now, all organizations, regardless of size, have been subject to the same 23-page form filled with a seemingly endless list of tedious questions, many of which are not relevant to smaller, simpler charities. After soliciting feedback from impacted parties, the IRS was able to whittle down to Form 1023-EZ, a three-page form containing only the most essential questions pertaining to determination of tax-exempt status of smaller organizations. According to IR-2014-77, as many as 70% of applicants are expected to be eligible to use this form, not only slashing the time spent by those charities in completing the application but also minimizing the time spent by the IRS in reviewing their files. The electronic filing requirement  is  also expected to increase the efficiency of the process. An application fee of $400 must be electronically submitted with the application as well.

For questions about this form or the tax-exempt application process in general, please contact our office.  We would love to discuss with you the ways that Langdon and Company LLP can help your organization obtain and maintain a tax-exempt status.

Taylor Elliott is a tax manager with Langdon & Company LLP. She specializes in tax compliance and planning, working with several not-for-profit organizations in the Triangle area.

Long Term Care Update

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Nursing-homeby Rachel Owens

There is a proposed Medicare rate increase on the drawing board for skilled nursing facilities.  If the proposed rule (CMS-1605-P) is approved by CMS, there will be a market basket increase of 2% beginning 10/1/2014. This will result in an estimated economic impact on the country is $750 Million in FY 2015.  There are also wage index changes on the horizon.  These wage index reductions/increases vary by region.  In addition there are upcoming changes to the Medicare reimbursable bad debt percentages.  For fiscal year 2014, the reimbursable portion of non-dual bad debts has been reduced from 70% to 65%.  For dual eligible bad debts, only 76% – reduced even further for fiscal year 2015 to 65%.

On the Medicaid front, the FRV (Fair Rental Value) valuation will be changing to reflect renovations, bed additions and replacements (that were not adjusted with initial submission and now are included in the rates).  Also, NC’s Medicaid billing system has seen changes as well.  NC Tracks has been in the news for all the issues related to billing, and for good reason.  Beyond those problems, they have made the Medicaid application process a headache with extensive delays.

Many other changes continue to thwart our healthcare system.  Langdon & Company LLP continues to stay updated on the most recent issues.  Our professionals will be happy to help you sort through the details and understand the facts!

Rachel Owens is a Senior Accountant with Langdon & Company LLP.  She specializes in serving healthcare clients, including skilled nursing facilities and behavioral healthcare providers.