Archive for August, 2017

Prepare financial statements that will impress your nonprofit’s stakeholders

Thursday, August 31st, 2017

Annual financial statements that have been audited by a professional auditor can help assure funders and lenders that your not-for-profit is financially sound. Here are three critical audit issues to understand when preparing financial statements:

1. The auditor’s role

Auditors are responsible for expressing an opinion on financial statements. Beyond that, they’re responsible for obtaining reasonable assurance that financial statements are free of material misstatements — be it from error or fraud.

Your nonprofit and its advisors, on the other hand, are responsible for developing estimates adopting sound accounting policies and establishing, maintaining and monitoring internal controls. Although your auditor may make suggestions about these items, it isn’t his or her responsibility to institute them or to ensure they’re working properly. While management is strictly responsible for decision making, your auditor is required to evaluate whether internal controls, accounting policies, and estimates are adequate to prevent or detect errors or fraud that could result in material misstatements of the financial statements.

2. The board’s role

Sometimes a nonprofit board of directors’ role is overlooked in annual financial statement preparation, and that’s a mistake. Keep in mind that your board generally has a strategic and oversight role in the process, which is part of its overall fiduciary duty. Your board isn’t responsible for completing the job. However, board members can be a good resource for certain technical matters, depending on their professional background.

3. Financial analysis
Annual financial statements are designed to help you manage your organization. Financial statement metrics — such as debt ratios, program vs. administrative expense ratios and restricted vs. unrestricted resources — can be calculated to indicate how your organization is doing.

One of the best ways to see the big financial picture is to compare your budget, year-end internally generated financial statements and statements generated during the annual audit. This task can be completed more easily if the format of your audited statements is similar to that of your internal financial statements and budgets.

When reviewing internal vs. audited statements, look for large differences in individual accounts resulting from audit correcting adjustments. These can indicate an internal accounting deficiency. You’ll also be able to spot any significant discrepancies between what was budgeted for the year and the actual outcome.

Audited results demonstrate professionalism and provide assurance that your results are free from errors and fraud. For help preparing financial statements, contact us.

© 2017

Wednesday, August 30th, 2017

Top 3 Millennial Money Woes http://bit.ly/2vAmZ9H

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Find the right path forward with KPIs

Wednesday, August 30th, 2017

From the baseball field to the boardroom, statistical analysis has changed various industries nationwide. With proper preparation and guidance, business owners can have at their fingertips a wealth of stats-based insight into how their companies are performing — far beyond the bottom line on an income statement.

The metrics in question are commonly referred to as key performance indicators (KPIs). These formula-based measurements reveal the trends underlying a company’s operations. And seeing those trends can help you find the right path forward and give you fair warning when you’re headed in the wrong direction.

Getting started

A good place to start is with some of the KPIs that apply to most businesses. For example, take current ratio (current assets / current liabilities). It can help you determine your capacity to meet your short-term liabilities with cash and other relatively liquid assets.

Another KPI to regularly calculate is working capital turnover ratio (revenue / average working capital). Many companies struggle with temperamental cash flows that can wax and wane based on buying trends or seasonal fluctuations. This ratio shows the amount of revenue supported by each dollar of net working capital used.

Debt is also an issue for many businesses. You can monitor your debt-to-equity (total debt / net worth) ratio to measure your degree of leverage. The higher the ratio, the greater the risk that creditors are assuming and the tougher it may be to obtain financing.

Choosing wisely

There are many other KPIs we could discuss. The exact ones you should look at depend on the size of your company and the nature of its work. Please contact our firm for help choosing the right KPIs and calculating them accurately.

© 2017

Wednesday, August 30th, 2017

Beware of Fake Charity Scams Relating to Hurricane Harvey http://bit.ly/2gpxkCB

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Wednesday, August 30th, 2017

IRS: Beware of fake charity scams relating to Hurricane Harvey http://bit.ly/2iIysC1

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Wednesday, August 30th, 2017

IRS Issues Urgent Warning to Beware IRS FBI Themed Ransomware Scam http://bit.ly/2vAJ1sM

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Tuesday, August 29th, 2017

IRS plans to revive FAFSA student loan tool on October 1 http://bit.ly/2iGDBdK

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The ABCs of the tax deduction for educator expenses

Tuesday, August 29th, 2017

At back-to-school time, much of the focus is on the students returning to the classroom — and on their parents buying them school supplies, backpacks, clothes, etc., for the new school year. But let’s not forget about the teachers. It’s common for teachers to pay for some classroom supplies out of pocket, and the tax code provides a special break that makes it a little easier for these educators to deduct some of their expenses.

The miscellaneous itemized deduction

Generally, your employee expenses are deductible if they’re unreimbursed by your employer and ordinary and necessary to your business of being an employee. An expense is ordinary if it is common and accepted in your business. An expense is necessary if it is appropriate and helpful to your business.

These expenses must be claimed as a miscellaneous itemized deduction and are subject to a 2% of adjusted gross income (AGI) floor. This means you’ll enjoy a tax benefit only if all your deductions subject to the floor, combined, exceed 2% of your AGI. For many taxpayers, including teachers, this can be a difficult threshold to meet.

The educator expense deduction

Congress created the educator expense deduction to allow more teachers and other educators to receive a tax benefit from some of their unreimbursed out-of-pocket classroom expenses. The break was made permanent under the Protecting Americans from Tax Hikes (PATH) Act of 2015. Since 2016, the deduction has been annually indexed for inflation (though because of low inflation it hasn’t increased yet) and has included professional development expenses.

Qualifying elementary and secondary school teachers and other eligible educators (such as counselors and principals) can deduct up to $250 of qualified expenses. (If you’re married filing jointly and both you and your spouse are educators, you can deduct up to $500 of unreimbursed expenses — but not more than $250 each.)

Qualified expenses include amounts paid or incurred during the tax year for books, supplies, computer equipment (including related software and services), other equipment and supplementary materials that you use in the classroom. For courses in health and physical education, the costs for supplies are qualified expenses only if related to athletics.

An added benefit

The educator expense deduction is an “above-the-line” deduction, which means you don’t have to itemize and it reduces your AGI, which has an added benefit: Because AGI-based limits affect a variety of tax breaks (such as the previously mentioned miscellaneous itemized deductions), lowering your AGI might help you maximize your tax breaks overall.  

Contact us for more details about the educator expense deduction or tax breaks available for other work-related expenses.

© 2017

Tuesday, August 29th, 2017

Hurricane Harvey Could Hit Storm Victims Again on Tax Day http://for.tn/2vB68Du

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Tuesday, August 29th, 2017

IRS Gives Tax Relief to Victims of Hurricane Harvey; Parts of Texas Now Eligible; Extension Filers Have Until Jan. 31 to File http://bit.ly/2vAgKCJ

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