Category Archives: Accounting

Now may be a good time to start a paid family and medical leave program

 

Does your organization have a formalized program under which it offers employees paid time off for an illness or family emergency? If not, there’s now an excellent reason to consider establishing one: The Tax Cuts and Jobs Act, passed late last year, created a tax credit for qualifying employers that begin providing paid family and medical leave to their employees.

Qualifications and percentages

The credit is available only in 2018 and 2019. To qualify, employers must grant full-time employees at least two weeks of annual family and medical leave during which they receive at least half of their normal wages. In addition, all less-than-full-time qualifying employees must receive a commensurate amount of paid leave on a pro rata basis.

Ordinary paid leave that employees are already entitled to doesn’t qualify for the tax incentive. For example, if you already provide full-time employees with, say, five days of paid sick time per year, you can’t claim the credit for that paid time off. Similarly, if you’re already subject to mandatory paid sick leave requirements by your state or local government, you won’t be able to claim the new tax credit for leave paid under those requirements.

Employees whose paid family and medical leave is covered by this provision must have worked for the employer for at least one year, and not had pay in the preceding year exceeding 60% of the highly compensated employee threshold.

The credit is equal to a minimum of 12.5% of the employee’s wages paid during that leave. That credit amount increases to the extent that employees are paid more than the minimum 50% of their normal compensation, to a maximum of 25% of wages paid. The maximum amount of paid family and medical leave that can be eligible for the tax credit is 12 weeks per year.

Competitive advantage

Establishing a paid family and medical leave program can boost morale and serve as a point in your favor when competing for job candidates. But additional rules and limits may apply beyond the points discussed here. Please contact us for further details and assistance.

© 2018

Charitable Solicitation License Refresher

By Rebecca Lunn

In the nonprofit arena, charitable solicitation licenses are a necessity for certain fundraising efforts. If you are an organization or individual that asks the public for contributions or donations to support a charitable purpose, a charitable solicitation license (“CSL”) is needed, unless specifically exempt by law. As many states have laws regulating the solicitation of funds for charitable purposes, it is important to check the requirements for each state your organization operates in to ensure compliance.

For organizations based in North Carolina whom are currently registered with the NC Secretary of State (SoS) Charities Bureau, keep in mind the following renewal requirements:

·       The NC SoS notifies by mail all organizations who already hold licenses 65 days prior to their annual renewal date of the renewal requirements.  Typically, each organization files its own CSL renewal directly with the NC SoS.

·       The NC SoS has published on its website that all organizations who have a current CSL should disclose its licensure status, such as including a statement with the following wording on all solicitations: “Financial information about this organization and a copy of its license are available from the State Solicitation Licensing Branch at 919-807-2214 or 888-830-4989 for NC Residents.”

·       Licenses are generally due 4 ½ months following the fiscal year-end date of the organization; however, all organizations in “current” standing with the NC SoS receive a 60-day extension without having to request it.  For example, a calendar year organization in current standing has a CSL renewal due date of July 15th in reliance on the automatic 60-day extension.  Absent current standing status, an organization will be subject to late filing penalties upon its eventual updating of its record with the NC SoS.

·       If more time is needed to file the CSL renewal, an additional 30-day extension is available to the organization by filing a copy of the Federal Form 8868 (extension for IRS Form 990) prior to the expiration of the automatic 60-day extension.  As a result, a calendar-year organization may, by timely-filed request, extend the period of time for CSL renewal to August 15th.

·       When the CSL renewal is actually prepared, organizations must comply with the annual financial disclosure requirements via submission of one of the following: (1) a copy of the duly executed Form 990, (2) copy of the Audited Financial Statements, or (3) completing a NC SoS “Annual Financial Report” signed by 3 members of the organization’s board of directors, finance committee or audit committee. 

If you are an organization who needs assistance or has additional questions on the Charitable Solicitation License requirements or renewal process, our accounting professionals at Langdon & Company would be glad to assist. Please contact us at 919-662-1001 for further information.

Also, for further information specific to the North Carolina filing requirements, please visit https://www.sosnc.gov/csl/ThePage.aspx. 

Rebecca [email protected] is an Audit Senior who works primarily with non-profit organizations.

Update: NC Adult Care Home Cost Reports

The NC Department of Health and Human Services released a memo dated May 15, 2017 detailing the official instructions for Adult Care Home reporting requirements as well as the release of Agreed-Upon-Procedures (AUP) instructions. As of November 21, 2016, the Cost Report for Adult Care Homes was reinstated with the significant change being reporting is only every two years, beginning this year.

To comply with these requirements all facilities that receive State/County Special Assistance funds are required to file a cost report. Those facilities that have more than 7 beds are additionally expected to have Agreed-Upon-Procedures performed.  The cost reports will be completed using the latest completed fiscal year end. These cost reports are due – September 30, 2017!

As an advocate for providers we are flexible in the midst of inconvenient legislation and would be happy to serve your Organization as well. If you have questions, please contact [email protected] or [email protected]!

https://www2.ncdhhs.gov/control/acf/2016-17/aup/adult-care-mental-health-faciliites.pdf

 

 

 

 

Nonprofits: Choosing or Changing the Fiscal Year-End

by Lee Byrd

What is a fiscal year? A fiscal year is the period used for calculating annual (“yearly”) financial statements in businesses and other organizations. Many nonprofits have a fiscal year-end of June 30th. However, this is not a requirement and the organization’s fiscal year can end whenever the nonprofit should chose, as long as the end date is specified in the organizational documents.

So how should a nonprofit chose the best fiscal year-end for the organization? Some things to consider include:

  • Program year – the organization’s fiscal year should coincide with its program year so that one year’s program activities should not fall into two fiscal years. For example, if the majority of the nonprofit’s programs fall during the summer months, June 30th is most likely not the best option for that nonprofit’s fiscal year-end.
  • Grant cycles – Some organizations may find it helpful to align their fiscal year-end with the terms of the organization’s major grants and/or funders. This enables the organization to develop a clean cut-off for grant reporting and simplifies the grants process.
  • Audit evidence – Nonprofits who require an audit generally need time subsequent to year-end to close out the books and gather audit evidence in preparation for the audit. Having a year-end that falls during the organization’s busiest time of year may impact the availability and timeliness of sufficient audit evidence.
  • Debt covenants – For organizations with significant debt covenants, the cyclical nature of the organization’s operations and the impact on the calculation of those covenants should be considered when choosing a year-end.

Once the above factors have been considered and a year-end has been chosen, many nonprofits question the audit and reporting impact of a fiscal year-end change. A year-end change will affect how the nonprofit presents its audited financial statements in the year of change and in the subsequent fiscal year. An organization can chose to extend the period under audit in the year of change or undergo an audit for the short period, plus the original fiscal year. For this reason, it is often common for single year financial statements to be presented rather than comparative statements in the year of change. The need for a comparative financial statement presentation and the costs of an extended or additional audit period should be considered in the year of change.

Lastly, in order to change the organization’s year-end with the IRS, Form 1128 “Application to Adopt, Change, or Retain a Tax Year” will need to be filed along with Form 990 for the short period to bridge the gap between the original year-end and the new year-end. A copy of the nonprofit’s tax exempt ruling letter from the IRS will need to be submitted with along with Form 1128. If an extension is needed for the short-period Form 990, the extension must be filed prior to the initial due date of the new fiscal year. Additionally, the nonprofit will want to review and amend any organizational documents (such as bylaws) that refer to the fiscal year-end.

If you are considering a change to your nonprofit’s year-end, contact Landon & Company LLP for further guidance on your specific situation.

Lee ([email protected]) is an Audit Manager with Langdon & Company LLP.  She works with many healthcare nonprofit organizations.

New Overtime Rule – What you need to know

by Meagan Bulloch

On May 18, 2016, the US Department of Labor (DOL) published the Final Rule on overtime, which amended the Fair Labor Standards Act (FLSA).  This change is expected to affect approximately 4 million workers across the United States.

Beginning December 1, 2016, the salary threshold for non-exempt workers increases from $455/weekly ($23,660 annually) to $913/weekly ($47,476 annually).  Under this new rule, any worker regardless of their role or title who earns less than that amount will have to track their hours and will be entitled to overtime pay which equates to time and a half for any hours over 40 in a week.

How does this compare to the old rule?  Check out this comparison table.

What are my Options?

  1. Raise salaries for non-exempt “white collar” employees above the $47,476 threshold so that they will be exempt from overtime
  2. Limit the hours worked by these employees to 40 or fewer per week
  3. Hire additional workers to perform the extra hours
  4. Pay non-exempt employees overtime for any hours worked beyond 40 per week

What else should I consider?

  • Determine whether your organization is entitled to minimum wage and overtime pay protections on an enterprise or individual basis.
  • Review personnel records, job descriptions and worker classifications to make sure their actual job duties (not titles) are used to determine exempt or non-exempt status.
  • Review employee workload to evaluate current staff capacity considering weekend or seasonal workload fluctuations.
  • Review terms of any grant agreements or contracts and identify staffing needs. Keeping in mind that the organization may be contractually obligated to maintain services at a predetermined level.
  • Consider “what if” scenarios and estimate budget and cash flow impacts.
  • Revisit organizational policies and procedures including timekeeping, compensation and overtime to make sure they are in line with the new rule requirements.

Is anyone excluded?

The DOL has a non-enforcement policy for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds.  From December 1, 2016 through March 17, 2019, the DOL will not enforce the updated salary threshold of $913 per week for the subset of employers covered by this non-enforcement policy.

Be sure to give Langdon & Company LLP a call if you have questions on how this affects your organization.

Meagan ([email protected]) is an Audit Partner at Langdon & Company LLP.  She works on various clients from associations to healthcare.

IT Controls: How to Keep Your Organization Safe

by Rebecca Lunn

As organizations become more and more reliant on technology, the risks around technology also continue to grow. Recently, we have heard on the news of large hospitals being attacked with ransomware, which encrypts files. Hackers then refuse to give the key to unlock the files unless a ransom is paid, typically in the form of bitcoin, which is more difficult to trace. Although these particular hackers were after sensitive patient data, other types of organizations should also be aware of this risk. For example, non-profits who have large databases of member or donor data may also appeal to these types of hackers. In the face of increasing risk, it is vital that organizations re-evaluate their IT controls. Strong IT controls consist of the following:

  • The Organization has an IT strategic planning and risk management process in place to support financial reporting requirements.
  • The Organization maintains reliable systems that include appropriate data backup and recovery processes. This includes not only backing up data, but testing the backup restoration process on a periodic basis.
  • Physical security and access to programs and data are appropriately controlled to prevent unauthorized use, modifications, damage or loss of data.
  • Program and system changes are appropriately managed to ensure that the application software adequately supports financial reporting objectives.

If your organization would like additional information about implementing or improving IT controls, please contact Langdon & Company LLP.

Rebecca [email protected] is an Audit Senior who works primarily with non-profit organizations.

The New Overtime Rule: Q&A

by Kendall Tyson

If you are an employer, you should get ready for the new overtime and worker classification changes to the Fair Labor Standards Act (FLSA) that was recently published by the Department of Labor (DOL).  According the DOL, the rule, which goes into effect December 1st 2016, will:

  • Raise the salary threshold indicating eligibility from $455/week to $913 ($47,476 per year), ensuring protections to 4.2 million workers.
  • Automatically update the salary threshold every three years, based on wage growth over time, increasing predictability.
  • Strengthen overtime protections for salaried workers already entitled to overtime.
  • Provide greater clarity for workers and employers.

Please visit the DOL’s Question and Answers section of their website for more detailed information.

Langdon & Company LLP is also available to assist business owners and help determine the impacts for their businesses.

Kendall ([email protected]) is a Manager in our tax practice.  She works with various types of clients according to professional standards and tax laws.

US DOL Announces Overtime Changes

by Rachel Owens

The U.S. Department of Labor recently issued its final rule regarding overtime, at President Obama’s instruction.  Overall, the rule is expected to cover 4.2 million more Americans, and boost wages by $12 billion in the next 10 years. One of the most significant changes is that it doubles the salary threshold—from $23,660 to $47,476 per year—under which most salaried workers are guaranteed overtime (hourly workers are generally guaranteed overtime pay regardless of their earnings level). The final rule takes effect on December 1, 2016.

More information about this rule can be found in the links below.

To learn more about how you or your organization are affected, contact our office.

 

FASB Update

by Josh Bryant

Throughout the calendar year, the Financial Accounting Standards Board, or FASB, meets in order to deliberate on proposed standards and amendments. On March 30, 2016, the authoritative board redeliberated on Topics 954 and 958- of which relate to the presentation of Financial Statements of Not-for-Profit Entities. These pronouncements affect entities that are required to evaluate whether they should consolidate certain legal entities either using the variable interest entity, or the voting interest entity model for consolidation of limited partnerships and similar legal entities.

The discussion was primarily focused on the effective date and the transition method utilized for any not-for-profit or health care entity for which the standard applies.

Effective Date

The Board has decided that the amendments will take affect for financial statements relating to fiscal years beginning after December 15, 2017, and for interim statements following December 15, 2017.

Transition Method

“The Board has decided that not-for-profit entities, or NFPs, should apply the amendments on a retrospective basis for all years presented in the financial statements.”  The Board also made concessions for NFPs during this transitional stage to enable the organization to do so cost effectively. The following two items are optional for any organization that uses presents financials statements on a comparative basis for any years before adoption:

  • Analysis of expenses by both functional and natural classification.
  • Disclosures regarding liquidity and availability of resources.

Furthermore, the Board decided it would be permitted for NFPs to present interim financial statements in the year of adoption as they did prior to the amendment, however, subsequent restatement of the financial statements at year-end would be required on a retrospective basis.

The Board also discussed the application of the consolidation process for not-for-profit entities that are a general partner in a for-profit limited partnership. A result of these discussions is still forthcoming, however, they have decided to reinstate the current guidance that existed in Subtopic 910-20, Consolidation- Control of Partnerships and Similar Entities, and included it within Subtopic 958-810, Not-For-Profit Entities- Consolidation.

To conclude, however long it may be before these amendments become effective- it is always prudent to plan ahead in order to maintain forward longevity in the competitive business environment for not-for-profits.

If you have additional questions about these differences, please contact our office.  We would appreciate the opportunity to share with you the impact to your organization and ways to prepare for the upcoming changes.

Josh ([email protected]) is an audit staff working primarily with not-for-profits and healthcare organizations.

 

Refer to this site for additional updates.

The Big Impact of Big Data

by Rebecca LunnSmall Business Accounting

In recent years, there has been a buzz around the term “big data.” As SAS describes, “big data is a term that describes the large volume of data – both structured and unstructured – that inundates a business on a day-to-day basis.” With the influx of technology and increasingly complex ways to collect and analyze data, understanding big data is becoming essential to business.

We see examples of big data every day, such as personalized coupons at the checkout counter or ad placement on social media. However, it is much easier to visualize how a financial or retail business can use big data, as compared to a nonprofit. Nonprofits may not have the same volume of data as corporations, but these organizations can still take advantage of the big impact of big data.

Marketing: With the introduction of new technology, the marketing strategy of organizations has transformed. By collecting data about website visits, email subscribers and social media likes, nonprofits can analyze their audience. Using this data, the organization can tailor posts to include topics which interest their audience, leading to increased sharing of information and awareness of the organization’s mission.

Development: In addition to marketing uses, social media can also be used to encourage donations. With the increased sharing of information mentioned above, comes the possibility of increased support. Similar to email subscribers, organizations should maintain a database of donor demographics. This information can be used to make an appeal for funds on a more personal level. In addition, the organization can send individual donors information about events or fundraisers that might specifically interest them, rather than a mass mailing with higher costs.

Programs: The primary focus of most nonprofits is their programs, which have a direct impact on the community. On a periodic basis, organizations should collect data related to program growth and clients served. This can assist the organization in allocating sometimes scarce resources, such as funds and employees, for maximum impact.

Langdon & Company LLP has in place a team of professionals that specialize in working with nonprofit organizations.  Please contact our office for additional information on how we can assist you.

Rebecca ([email protected]) is an audit senior in our firm.  She works closely with the audit staff in the areas of healthcare and nonprofits.