The document provides an agenda for a not-for-profit accounting hot topics discussion. It includes the following topics: organizational topics such as policies to consider and lessons learned from the pandemic; insurance coverages that nonprofits should consider; contributions and distinguishing between conditional and unconditional donations; maintaining an accurate net asset roll forward; and new accounting developments including standards on gifts-in-kind, leases, credit losses, and auditing standards. The presentation is intended to help nonprofits stay up-to-date on important accounting and compliance issues.

1. Not-for-profit Accounting Hot Topics
CBIZ MHM

2. Agenda
2
 A Quick Introduction
 Organizational Topics
 Insurance Coverage
 Contributions – Donor imposed restrictions and
conditions
 Net Assets – maintaining a roll forward
 Questions and Open Discussion
CBIZ MHM

3. A Quick Introduction...

4. ...to us!
4
Danielle Hemme, CPA
Audit Senior Manager
 Direct: (816) 945-5539
 Email: dhemme@cbiz.com
Brent Wilson, CPA
Lead Managing Director
 Direct: (816) 945-5556
 Email: bawilson@cbiz.com
CBIZ MHM
Jessie Kelly, CPA
Audit Manager
Direct: (816) 841-4046
Email: jessie.kelly@cbiz.com

5. ...to our firm!
5
 A National Leader in Accounting &
Advisory Services
 Ranked as the 10th largest accounting
services provider in the nation
 $1.08 billion in revenue
 Practice Structure
 CBIZ provides consulting and tax
services. MHM (Mayer Hoffman McCann
P.C.), an independent certified public
accounting firm, provides financial
statement audits and other attest
services.
 Like many other national firms, our tax
and attest practices are organized as
separate and independent legal entities
that work seamlessly together to serve
our clients.
 Kansas City office has 160+ NFP clients!
CBIZ MHM

6. 6
CBIZ Organizational Overview
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7. 7
Audit Process
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8. Organizational topics

9. Nonprofit Financial Management Stakeholders
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 Who is responsible for ensuring your nonprofit financial management
processes are effective?
 More than one person maintains effective financial processes and
measures your organization’s financial health. It requires input from your
entire nonprofit team. Some of the key stakeholders in your financial
management processes include your board of directors, executive director,
and finance team.
 Board of Directors
 Your board of directors’ role is primarily to provide organizational oversight.
When it comes to your financial management, your nonprofit board will review
and approve several key financial documents for your organization.

10. Nonprofit Financial Management Stakeholders (continued)
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 Executive Director
 Your executive director is in charge of your organization’s day-to-day operations.
They not only oversee your finance team but also act as the liaison between
your organization and the board of directors. This means they also need to both
understand and be able to articulate the various financial reports coming from
the finance and fundraising departments.

11. Potential Policies to Consider
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 Nonprofit Fiscal Policies and Procedures
 Your nonprofit’s fiscal policies and procedures documentation is one of the most
important manuals you’ll create and update on an annual basis. It outlines the
internal controls for the organization’s well-being and ensures compliance with
the Generally Accepted Accounting Principles.
 Essentially, this is a rulebook as to how your nonprofit will conduct its financial
operations for the year. It should be reviewed on an annual basis and updated
as necessary.
 Segregation of duties.
 Gift Acceptance Policy
 This policy has explicit directions and instructions regarding how a nonprofit
should accept the contributions they receive from their generous supporters.
Therefore, it’s a key document for your finance team to play a part in creating.

12. Potential Policies to Consider
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 Expense Reimbursement Policy
 While your nonprofit has a bank account with funding set aside for each of your
organization’s expenses, there will be times when your staff members or
volunteers spend money from their personal accounts on behalf of your cause.
When this occurs, they may be able to be reimbursed for their expenses.
 For this reason, your nonprofit needs to put together a plan and documentation
regarding how you’ll reimburse expenses. Your expense reimbursement policy is
a vital element of nonprofit financial management because it confirms that all
funds reimbursed have actually been used on behalf of the organization and
prevents fraud.
 Conflict of Interest Policy
 A nonprofit’s conflict of interest policy prevents directors, board members, and
other key players from making decisions that could be influenced by outside
financial interests. For example, if a board member owns a software company
and the nonprofit is considering purchasing that software, the conflict of
interest policy may require the board to choose a different solution or that the
company owner must abstain from voting

13. Potential Policies to Consider
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 Compensation Policy
 Compensation policies define the standard for what salary, rewards and any
employee benefits are to be provided by the Organization to its employees.
Compensation can be a sensitive subject for employees so having a policy in
place helps the organization have guardrails in place to ensure fairness between
employees.
 Whistleblower Policy
 An effective way to provide protection to your Organization is through a
whistleblower policy that allows employees to report corruption, fraud, and
other wrong doing within the Organization. This can help to create an open
culture, reduce potential financial loss, avoid reputational damage and provide
early identification of issues.
 “In a 2007 study conducted by PWC, it was found that professional auditors only
detected 19% of fraudulent activities as private corporations, while
whistleblowers detected and exposed 43%.”*
*Souce – National Whistleblower Center, “Why Whistleblowing Works” (whistleblowers.org/why-whistleblowing-
works/)

14. Lessons Learned from the Pandemic
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 Business Continuity
 Remote workforce
 IT Infrastructure
 Development of Operating/Board Reserves
 Crisis management and communication plans
 Business plan adaptability / flexibility
 Diversifying revenue streams and donors
 Supply chain management
 Importance of community involvement and collaboration

15. Insurance coverages

16. Types of Policies an Organization should consider
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 Cyber Security
 This is the most scrutinized coverage in the industry by underwriting.
 Make sure you are working with cyber professionals to ensure that you have all of
the requirements being requested by carriers.
 Devil is in the details. DO NOT take cheapest premium on this one. Coverage can
vary drastically.
 Pricing increases have been substantial as well as increases in deductibles.
 Event Cancellation
 These are easy to obtain and can save organization from financial loss due to an
unforeseen circumstance.
 Make sure you are working with a professional that is going to go over these policies
with you so that you understand what perils are covered and what are not.
 Director and Officer
 Strong headwinds on this line the last couple of renewal cycles although we are
seeing some stabilization of pricing.
 Make sure you are reviewing the policy language closely when entertaining various
options as coverage can vary from carrier to carrier.

17. Types of Policies an Organization should consider
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 Coverage for volunteers
 Coverage for volunteer injuries can often be covered via endorsement on your
organizations Workers’
 Vehicle coverage
 Continued pressure from the insurance markets to increase rates on this line
 Strong risk management (MVR checks, driving guidelines, maintenance plans,
etc.) can help mitigate increases.
 Disaster coverage
 Disaster recovery plans (or lack thereof) are being viewed more closely by
underwriting. This means that these need to be reviewed and updated on a
regular basis while including new exposures such as cyber security.

18. Contributions
Donor imposed restrictions and conditions

19. You received money, now what?
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20. I received a contribution, now what?
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21. Conditional vs. Unconditional
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 A contribution is considered conditional if –
 The condition is placed by the donor,
 A right of return/release exists, AND
 A barrier to entitlement exists.
 (no probability assessment is allowed when considering the likelihood that a barrier
will be overcome)

22. Indicators of a conditions
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 Measurable performance-related or other measurable barrier
 Specific level of service (i.e. 1,000 meals per week for a meal delivery provider)
 Specific output or outcome (i.e. students achieving a 3.5 GPA to receive a scholarship)
 Matching (i.e. a $1M contribution won’t be paid until $1M of funds are raised)
 Outside events (i.e. a $1M contribution will be made if the donor’s investments reach $1B)
 Limited discretion on the conduct of an activity
 Examples include a requirement to incur only qualifying expenses that are based on
specific requirements,
 Requirement to hire specific individuals as part of their team,
 Specified output or outcome, etc.
 Related to the purpose of the agreement
 Example includes a report conveying the research findings on a grant for specific research.
 This excludes trivial or administrative stipulations (i.e. a report indicating how grant
monies have been spent).

23. Example #1
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24. Example #1
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25. Example #2
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26. Example #2
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27. Example #3
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28. Example #3
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29. It’s not always black and white!!
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 Judgement is sometimes required when determining if a condition or a
restriction exists.
 Establish accounting policies for any transactions that require judgement.
 Account for similar transactions consistently.
 Keep materiality in mind.

30. Financial Reporting – Statement of Activities
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31. Financial Reporting – Notes to the Financial Statements
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32. Financial Reporting – Notes to the Financial Statements
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33. Net Assets
Maintaining a roll forward

34. Net asset roll forward – Best Practices
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 Don’t wait until the end of the year to track restrictions received and
released! Review on a monthly basis.
 Review grant agreements upon receipt for conditions vs. restrictions so
nothing is missed. If any questions regarding donor intent, ask the donor at
the time of receipt.
 Utilize restricted funds first before unrestricted funds.
 Review donor restricted balances at year-end to check if any restricted funds
remaining could’ve been released.
 Coordination between accounting and marketing departments to ensure
marketing materials sent to donors clearly state any restrictions (or doesn’t
state any restrictions at all).

35. Great Roll Forward Example!
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36. New NFP Accounting Developments

37. New NFP Accounting Developments
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Development What’s Changing
When Are the Changes
Effective
Recommended
Actions
Presentation and Disclosure for
Contributed
Nonfinancial Assets
(Gifts-in-Kind)
Requires contributed
nonfinancial assets to be
a separate line in
statement of activities.
Requires disclosure by
category.
Requires disclosure
within each category:
Qualitative information
Certain policies
Donor restrictions
Valuation technique and
inputs used for fair value
Years Ended June 30, 2022 /
December 31, 2022 and later
• Understand the
standard
• Model the effects
• Review with
external auditors
• Communicate
impact
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38. Gifts-in-Kind Presentation and Disclosure Examples
(ASU 2020-07)
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Narrative Format
Tabular Format

39. New NFP Accounting Developments
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Development What’s Changing
When Are the Changes
Effective
Recommended
Actions
Lease Accounting Standards Will require most leases
to be accounted for like
capital leases with right
of use assets and
corresponding
obligations being
recorded at inception
with forward amortization
Years Ended December 31,
2022 / June 30, 2023 and later
• Understand the
standard
• Model the effects
• Review with
external auditors
• Communicate
impact
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40. Lease Accounting Summary
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41. New NFP Accounting Developments
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Development What’s Changing
When Are the Changes
Effective
Recommended
Actions
Measurement of Credit Losses
on Financial Instruments
(typically loans and trade
receivables)
Moves from an incurred
loss model to an
expected loss model for
measurement of credit
losses
Years ended December 31,
2023, and later
Our take is that this
will have only a
modest impact given
current practices, but
management will have
to adopt the thinking
and the model in terms
of making their forward
reserving
assessments
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42. CECL – Objective and core concepts
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43. CECL – Key differences from the current standards
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44. CECL – What’s covered?
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CECL does not apply to:
AFS debt securities
Financial assets carried at
FV with changes in FV
reported in net income
Loans and receivables
between entities under
common control
Loans made to
participants by defined
contribution EBPs
Pledges receivable for
NFPs
Financial assets measured at
amortized cost
 Financing receivables (loans and
notes)
 Held-to-maturity debt securities
 Trade receivables
Net investments in leases
recognized by a lessor
Off balance sheet credit exposures
not accounted for as insurance
 Credit exposures related to:
 Off balance sheet loan commitments
 Standby letters of credit
 Financial guarantees

45. New NFP Accounting Developments
45
Development What’s Changing
When Are the Changes
Effective
Recommended
Actions
Statement on Auditing
Standards numbers 142-145
Requires certain
changes to audit
evidence, auditing of
estimates (and related
disclosures), the use of
specialists including use
of pricing information
from third parties and
understanding of the
entity and its
environment in
assessing risks of
material misstatements
Years ended December 31,
2023, and later
Discuss with auditors
the possible effects in
process, scope,
preparation,
documentation and
related matters during
the planning process
of the year of
implementation
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46. Audit Estimates
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SAS 143 identifies 3 Methods which may
be used to test an accounting estimate:
Test management’s process
This method can be used
when management has
utilized an appropriate
estimation method with
supportable inputs. The
auditor should test the
methods and assumptions
identified by management.
Create an independent
estimate
This method allows the
auditor to identify the
factors they believe are
relevant and create their
own estimate to compare
to managements estimate
in order to conclude if it is
reasonable.
Evaluate subsequent
events
This method is only
available if subsequent
events after the balance
sheet date will provide
meaningful information
regrading the value of an
estimate that exists on the
balance sheet date

47. Internal Controls
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 SAS 145 - Auditing Standards Board (ASB) Project
 Enhance the auditing standards relating to the auditor’s risk
assessment to:
 Understand the entity’s system of internal control
 Modernize the standard to address risks arising from an entity’s use of
IT
 Determine risks of material misstatement, including significant risks
Identified controls also include those IT general controls
that address risks arising from the use of IT.
1. Differentiate manual and automated key
controls.
2. Identify Significant IT Applications (those
applications supporting the automated
key controls).
3. Evaluate design and implementation for
IT general controls for Significant IT
Applications.

48. Questions and Open Discussion