Category Archives: Raleigh CPA Firm

Valuing and reporting gifts in kind and donated services

Not-for-profit organizations don’t receive only cash donations. Your support also likely comes in the form of gifts in kind and donated services. But even when such gifts are welcome, it can be challenging to determine how to recognize and assign value to them for financial reporting purposes.

Recording gifts in kind

Gifts in kind generally are pieces of tangible property or property rights. They may take many forms, including:

• Free or discounted use of facilities,
• Free advertising,
• Collections, such as artwork to display, and
• Property, such as office furniture or supplies.

To record gifts in kind, determine whether the item can be used to carry out your mission or sold to fund operations. In other words, does it have a value to your nonprofit? If so, it should be recorded as a donation and a related receivable once it’s unconditionally pledged to your organization.

To value the gift, assess its fair value — or what your organization would pay to buy it from an unrelated third party. In many cases it’s easy to assign a fair value to property, but when the gift is a collection or something that doesn’t otherwise have a readily determinable market value, its fair value is more difficult to assign. For smaller gifts, you may need to rely on a good faith estimate from the donor. But if the value is more than $5,000, the donor must obtain an independent appraisal for tax purposes, which will give you documentation for your records.

Recognizing donated services

The fair value of a donated service should be recognized if it meets one of two criteria:

1. The service creates or enhances a nonfinancial asset. Such services are capitalized at fair value on the date of the donation. These types of services either create a nonfinancial asset (in other words, a tangible asset) or add value to an asset that already exists.

2. The service requires specialized skills, is provided by persons with those skills and would have been purchased if it hadn’t been donated. These services are accounted for by recording contribution income for the fair value of the service provided. You also must record it as a related expense, in the same amount, for the professional service provided.

Beyond the basics

These are only basic guidelines to recognizing and valuing gifts in kind and donated services. For more comprehensive information about handling these gifts, contact us.

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

 

 

 

 

What Can We Do For You?

By Lee Byrd

Small business owners and nonprofit executives often wear many hats while managing their organization. Whether it’s day-to-day accounting or oversight of an internal accounting department, an accounting firm offers many services that will allow you to focus on the core strategies of your business. Here at Langdon & Company LLP, we offer a wide range of services from basic bookkeeping to acting in a CFO role to financial statement audits and tax return preparation. Often times you will find that the cost of hiring an accounting firm to perform these services is less than hiring an employee.

Bookkeeping Services

Many small organizations do not have the need or financial resources to hire a full-time employee to perform the day-to-day bookkeeping tasks. In such caserviceses, it may be helpful to seek the aid of an accounting firm that can provide services such as accounts payable and receivable, billing, payroll, bank reconciliations, general ledger entries and monthly financial reports. You will gain the knowledge of an experienced bookkeeper with access to CPAs within the firm at a cost effective rate.

CFO Services

Do you need the expertise of a Chief Financial Officer but can’t bear to add such a salary to your already tight budget? A CPA firm can offer the expertise of a CFO in tasks such as creating budgets, preparing financial statements, analysis of financial data, or review of your organization’s internal accounting personnel offering a greater segregation of duties. These services can be provided on a periodic basis, such as monthly or quarterly, or on a project by project basis, as needed throughout the year.

Audit and Attest Services

Whether it is at the request of a lender or required by the organization’s by-laws, many organizations feel the need for a higher level of review of the financial statements. CPA firms offer attest services that will provide the level of assurance needed. An Audit provides the highest level of assurance that the finaauditncial statements are free from material misstatement and includes the auditor obtaining an understanding of the client’s internal controls and assessing fraud risks. An audit is also the most costly level of attest service. While less costly, a Review is substantially narrower in scope than an audit and provides only limited assurance. A review consists mostly of inquiry and analytical procedures. If the audit or review services do not meet the needs of the organization, CPA firms also offer Agreed Upon Procedure (AUP) services. An AUP is an engagement in which an auditor is engaged to carry out procedures of an audit nature to which the auditor, the client, and any appropriate third party have agreed and to report on factual findings.

Tax and Consulting

In addition to day-to-day booking or more extensive oversight services, accounting firms also advise clients on financial strategies, such as lowering tax burdens, providing suggestions on a business plan, or suggestions on the most effective way to comply with third party regulations. CPAs can also assist with the preparation of state and federal tax returns.

Langdon & Company LLP is a full-service CPA firm committed to providing quality customer service in the highest professional manner. Contact us to see how we can help you!

Lee ([email protected]) is an Audit Manager with Langdon & Company LLP. She works with many not-for-profit and healthcare organizations.

2017 Tax Season Update/Reminders

by Tony Pandiscia

Updates to Important 2016 Income Tax Return Filing Deadlines:

  • Individuals                  Tuesday, April 18, 2017
  • C Corporations           Tuesday, April 18, 2017
  • Trust/Estates              Tuesday, April 18, 2017
  • Partnerships       Wednesday, March 15, 2017
  • S-Corporations   Wednesday, March 15, 2017

HIGHLIGHTS OF FEDERAL TAX CHANGES

  • The Standard Deduction amount for Married Filing Joint couples has increased by $100 for 2017 to $12,700; all other filing status standard deductions have increased by $50.
  • The maximum annual “profit sharing” contribution limit for certain retirement plans has increased to $54,000 for 2017.
  • The annual compensation limit for certain retirement plans has increased to $270,000 for 2017.
  • The Social Security maximum earnings base for application of FICA tax has increased to $127,200 for 2017.
  • The thresholds for each of the Individual Income Tax Brackets for 2017 have been increased slightly due to annual Cost of Living Adjustments.
  • The gross income levels for which a 2017 income tax return is required have been increased to $ $20,800 (Married Filing Joint filers) and $10,400 (Single filers).
  • Effective January 1, 2017, Business-related travel expense “standard mileage rate” has been revised to 53.5 cent per mile for business miles driven. The “standard mileage rates” for medical or moving expense purposes is now 17 cents per mile, but the rate for charitable activities remains unchanged at 14 cents per mile.
  • Tax Exempt Organizations can now receive an automatic six-month extension of time to file using Form 8868 prior to the initial due date for their 2016 tax returns.

HIGHLIGHTS OF NORTH CAROLINA TAX CHANGES

  • The standard deduction has been increased by $1,000 for married individuals who file jointly (or as “head of household”) and $500 for all other individuals.
  • Effective January 1, 2017, many service businesses will now be subject to Sales & Use Tax collection and reporting when providing “repair, maintenance, or installation” services that are not “Capital Improvements.” In addition, a new exemption form has been issued for service businesses to qualify for a “Capital Improvement” exemption.

HELPFUL REMINDERS

  • Charitable Contribution:
    • Tax deductible contributions can be made in the form of cash or noncash but not “service” to a qualified 501(c)(3) organization. Out-of-pocket costs and travel expenses incurred may be subject to deduction.
  • Any single donation larger than $250 to a “qualified organization” requires acknowledgement (or receipt). For noncash donations, fair market value assessment is the responsibility of the donor and if over $5,000, a certified appraisal is required.
  • Reporting of Foreign Bank and Financial Accounts (FBAR):
    • If you have a financial interest in or signature authority over a foreign financial account with overall value exceeding $10,000 at any time during the calendar year, you are required to file an FBAR. (As a protective measure, many of our clients file this report regardless of the threshold in order to run the statute of limitations for audit.)
    • The annual due date for filing has been revised to April 18, 2017. All taxpayers will be granted an automatic six-month extension to October 15.

This is a summary of 2017 tax changes.  If you have any questions regarding the details of the changes and how they may affect your specific situation, please feel free to contact us to discuss.

Tony ([email protected]) is the Tax Partner with Langdon & Company LLP.  He is a CPA and also an attorney, advocating for clients on many levels-including with the State and the IRS.

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.

Two NC Budgets Passed!

by Rachel Owens

It’s the beginning of summer in NC.  That means that the two chambers of our General Assembly are hard at work trying to agree on a state-wide budget.

The House of Representatives passed the Health and Human ServicesNC health news budget a few weeks ago.  The Senate just passed theirs.  As always there are similarities and differences in each department; each of which, have very “hot topics” that are addressed.  Thanks to NC Health News for a comparison chart to show the differences between the two.

If you have additional questions about the budget decisions and how they affect your organization, contact our office.  We’ll be happy to give you some insight on what these choices mean for you.

Rachel ([email protected]) is a Senior in the Cost Report department at Langdon & Company LLP.  She works with various healthcare companies, several of which, from the audit all the way through their state reporting compliance.

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.

Changes in NC Behavioral Healthcare

by Rachel Owens

Consolidation of the state-funded management organizations has been officially declared!

Currently, there are eight LME/MCOs across North Carolina.  The consolidation will reduce the number of LME/MCOs down to four, by combining the catchment areas into contiguous regions.  The LME/MCO’s that are merging are: Smoky Mountain + Partners, Cardinal + CenterPoint, Trillium + Eastpointe, and Alliance + Sandhills. LME_MCO_ConsolidationMap

No timeline has been established for the transition, but the hope is that it will not take more than two years to implement.  The first merger will be between CenterPoint and Cardinal Innovations – somewhere between May 1 and June 30. This change affects each county from “Murphy to Manteo.”  Read more about the consolidation in Rose Hoban’s recent article in NC Health News .

Langdon & Company LLP is committed to assisting the mental health provider population in any way we can.  Please contact our office if you have questions on how these changes will affect your organization.

 

Have you received all of the tax forms you expected?

by Cody Taylor

As we’re into February you should have received most if not all of the tax documents related to preparing your 2015 tax returns.  This article in Forbes explains when various tax forms are due to you.  What if you are missing some forms you were expecting?

It’s important to note that some forms may not be received in time to prepare your tax returns on time and you may require an extension as a result.  The most common scenario is if you receive a Schedule K-1 from a pass-through entity.  These entities have to file their tax returns before issuing you a Schedule K-1 which may not happen right away.  As the article also says- your best course of action is to contact the K-1 issuer and find out when they expect the tax returns to be completed so you can plan your own tax filings accordingly.tax forms

If you haven’t received expected W-2s, 1099s or other forms that should have been received by now you have a few options available.  The first and most obvious is to look back through any mail you have sitting around and to check your emails to see if you missed anything.  We’ve all missed something the first time through only to have to document be sitting right there the whole time.  However if the forms really are missing here are a few steps you can take as outlined here and summarized below.

  1. Contact the issuer – They may have simply mailed it to the wrong address, maybe you moved or your form got lost in the mail. Most issuers will be happy to send you a new copy, but keep in mind if they tell you it was sent and you did not receive it make sure to check that they have the correct address on file for you.
  2. Employer or Issuer has moved or closed – Still try to contact them. The income they paid you still should be reported on your tax returns and if they issued W-2s or 1099s in your Social Security number that are not reported on your tax returns the IRS will almost assuredly contact you about it.
  3. Still no forms by February 14th – If you are unable to resolve the missing information through the previous steps you can contact the IRS starting February 15th regarding missing forms. Try to have your address, phone number, Social Security Number, dates of employment, earnings estimate and federal withholdings amount on hand when you call the IRS.  Your most recent pay stub is a good place to get this information.  The IRS phone number is 1-800-829-1040 and I recommend trying to call first thing in the morning when the wait times are often shorter.
  4. Patience – The IRS will then contact the issuer to send you replacement forms but this is done through the mail and is usually not a fast process.

The good news is most of the time the issue of missing forms can be resolved rather painlessly, but if you find yourself missing important tax documents as it gets closer to filing time follow the above steps and contact the IRS, if necessary.

Cody ([email protected]) is a member of our tax staff at Langdon & Company LLP.  He works with various types of clients on tax matters year-round.  Please contact us to get more information on how we can help make your 2015 tax season, a smooth one.

 

NC Senate Bill 424 “Fostering Success,” an analysis of the current proposal and how it will affect the Foster Care Benefits Program in North Carolina

by Josh Bryant

Under current State law, foster children stop receiving benefits on their 18th birthday, unless they are a full-time student, up until the age of 21. However, North Carolina legislators have been working to extend the age limit for foster care benefits from 18 to 21 under a wider swath of requirements that will undoubtedly benefit thousands who are currently cared for in the Foster Care Program.

In order to receive foster care benefits until the age of 21, under the current law a child must be a full-time student. With the passage of NC Senate Bill 424, effective August 1, 2016, under Section 1 a foster child may fulfill one of following five requirements and remain eligible to receive benefits until 21:

  • completing high school or a GED,family
  • being enrolled in a college or a vocational program,
  • participating in an employment program,
  • being employed for at least 80 hours per month,
  • or, incapable of completing one of these requirements due to a medical condition or disability.

Additionally, “Fostering Success” also expands the ability of foster parents and children to succeed in life by allowing more “wiggle room” for decisions to be made on part of the child. For example, under the proposed law, a foster child who is a full-time student over age 18 may now be approved to live outside a foster care facility in a college dormitory or a partially-supervised residential agreement. Furthermore, the Bill will make it easier for foster children who are eligible for guardianship but are unlikely to find a permanent residence in the formation of the Guardianship Assistance Program or GAP.

In summary, “Fostering Success” lends a hand to individuals who are otherwise deemed an adult the necessary assistance they need to supplement their life without having to endure additional hardship in order to receive such help.

Funding for the bill has been set aside for implementation in the coming year and will be fully implemented August 1, 2016.

Josh ([email protected]) is a staff Auditor with Langdon & Company, LLP.  He works on a variety of clients in the non-profit sector.  Please contact our office if we can help your organization better understand the latest legislation and how it affects your constituents.