Nonprofit Tax Tidbits: Form 990 Schedule M

In continuing with our series on the schedules of the IRS Form 990, this quarter we will focus on Schedule M: Noncash Contributions.

The purpose of this schedule is to provide information about the contributions the Organization has received during the year that consist of property other than money. This includes stocks, bonds, works of art, vehicles, real estate, etc. Noncash contributions not included are donated services or donated use of property.

Schedule M is required to be completed if the Organization has received noncash contributions, in the aggregate, greater than $25,000. Noncash items are reported on Schedule M even if they are received and sold immediately.

The schedule lists different types of categories to describe the donated property. Information as to the number of contributions of that type of property, the value of the contribution, as well as the method used to determine the property’s value, is detailed.

The bottom section of the form has a series of yes and no questions that give the reader further information about the contributions, such as:

As with most schedules that support IRS Form 990, there is a section that allows the preparer to explain any portion of the form that requires further explanation or detail.

A question on Form 990 Part IV Checklist of Required Schedules asks the preparer if they have received noncash property greater than $25,000. If the answer is yes, Schedule M is required to be completed and attached and submitted as a supporting schedule of the 990. The sum of all the property reported on Schedule M should correspond to the amount recorded on Federal Form 990 Part VIII Statement of Revenue line 1f.

If you receive noncash property during the year, take the time to keep a list of the type of property received, the date and value of the property. So you have one less thing to gather at year-end, keep a folder to hold all supporting documentation regarding the noncash contribution.

If you have any questions regarding Schedule M or any of the other schedules, please contact your Hawkins Ash CPAs representative.

New Reporting Requirements for Restricted Cash

In November 2016, the Financial Accounting Standards Board (FASB) issued Statement of Cash Flows – Restricted Cash (ASU 2016-18), to clarify how cash and cash equivalents and restricted cash and cash equivalents are presented in the statement of cash flows. Because there was no previous specific guidance there had been much diversity in how these cash items were being reported on the statement of cash flows. The standard is effective for all Organizations for fiscal years beginning after Dec. 15, 2018, which would be Dec. 31, 2019, for a calendar year Organization and fiscal year end 2020 for a fiscal year end Organization. If prior periods are presented on the statement of cash flows in the year of implementation, the prior period should be reclassified to conform to the new presentation.

The new standard will not change the current accounting for restricted cash and cash equivalents, but you will notice a change in the upcoming year in how these items are reported on the statement of cash flows and footnotes for your Organization, including:

The new standard will require your Organization to include restricted cash or cash equivalents with the beginning and ending cash and cash equivalents on your statement of cash flows. The restricted cash and cash equivalents inflows and outflows will be presented separately as operating, investing or financing based on the nature of the activity whenever the total of an Organization’s cash and cash equivalents (restricted and unrestricted) is affected. The additional disclosures will require your Organization to describe the nature of the restrictions on restricted cash and cash equivalents in narrative form. Furthermore, if your Organization is reporting cash items in more than one line on the statement of financial position you will be required to include a reconciliation of each line item to the total cash and cash equivalents presented on the statement of cash flows.

There is some flexibility in reporting the above items on the face of the statement of cash flows or in the notes to the financial statements. We will work with you on determining the best approach for the reporting of cash items in order to comply with the new standard.

If you have any questions in regards to how ASU 2016-18 will impact your Organization, please contact your Hawkins Ash CPAs representative.

The mission of Opportunity Development Centers, Inc. (ODC), is to empower people with disabilities to achieve their work and life goals. After more than half a century, the not-for-profit agency has evolved to remain a community resource for countless individuals, employers and businesses to help make this mission a reality.

When ODC was founded in 1965, employment opportunities after graduation from high school for people with disabilities were less common. At the time, ODC’s model primarily involved contacting businesses and securing contract work for participants, who were trained at ODC facilities in everything from woodworking to packaging and bulk mailing services, and even computer and electronics recycling in recent years.

While participants still engage in some contract work to this day, ODC President Pam Ross reports that the agency has transformed its services to be significantly more community-based than facility-based. In 2019 alone, ODC helped more than 900 people become employed and engaged in their local communities.

Ross explains that this shift can be attributed, in part, to a number of new services offered by ODC that assist with on-the-job training and education for people with disabilities. This includes partnering with high schools and the international Project SEARCH initiative to teach soft skills in the classroom, including work and independent life readiness. Through coaching and internships at host business locations, this school-to-work transition service for young adults with disabilities helps them to prepare for and secure competitive employment. According to Ross, the goal is that when students graduate from Project SEARCH, they will be employed or ready for employment in the community. The Division of Vocational Rehabilitation of Wisconsin’s Department of Workforce Development is the funding partner that supports the Project SEARCH sites.

For Ross, witnessing participants’ growth and transformation over time—developing friendships, confidence and experience—makes ODC one of the most impactful programs she has ever seen. “How we do what we do has changed, but at the core we are the same,” said Ross.

Throughout the years, ODC has grown in both size and scope, with facility locations in Wisconsin Rapids, Marshfield and Stevens Point that serve nine counties in Central Wisconsin. Each location offers a variety of services for participants, such as employment services, employment training, day services, school transition services and mental health services.

In addition to maintaining several contract services for area businesses, ODC also recently established two of its own social enterprises: Milkweed Market , which is a home décor and custom sign business with products handcrafted by people at all levels of ability, and Ink Splash, a full-service apparel printing business. Both of these businesses operate within ODC’s Wisconsin Rapids location.

Q&A with Pam Ross

Pam Ross, president of ODC, originally joined the team in 1986 when she was hired as the first job coach for ODC’s emerging Supported Employment program. After devoting more than 33 years to the agency, read what she has to say about lessons learned throughout the years, ODC’s progress and goals for the future.

What are some things you know now that you wish you knew when you first started as a nonprofit leader?

I have always believed that having the right people on your team is essential to success as a leader and as an organization. Now that I have been in the role a long time, I would say it is absolutely the single most important thing—to have the very best people on the team, who are passionate about your organization’s mission, who work well together and are effective in getting things done.

Whether you run a “for profit” business or a not-for-profit organization, it is all about the people. I believe the quality of the organization has everything to do with the quality of leadership and people within the organization.

I would also say it is extremely important to have a great board—people with connections, diverse expertise and people who are excited about the mission of the organization. The executive director has a key role in board development and leadership to keep the board informed and engaged.

What has been your biggest source of pride as executive director?

Without a doubt, I am the most proud of the accomplishments of the people we serve. ODC’s mission is to empower people with disabilities to achieve their work and life goals, and I am always so proud of people when they experience something new, learn new skills, make progress toward a goal, make new connections in the community and get a job that interests them.

At the same time, I am so proud of our team at ODC that supports these individuals on their journeys. We have an amazing team of people who really believe in the people we are serving and put their hearts and souls into helping individuals achieve their goals.

Finally, I am proud of how well our team has done in establishing great relationships with so many people, businesses and organizations in our community. Our community supports us in so many ways, and we are ever grateful for how they help us to achieve our mission.

What are your three biggest accomplishments in your career as a not-for-profit leader?

It is not so much about my personal accomplishments, but the accomplishments of the organization that matter. I am proud of ODC’s progress under my leadership—I could not have accomplished anything without great people on the team. We really have incredible people working here!

I am proud of ODC’s strong reputation within the community—with the families of people we serve, our funding sources, employers, donors and the many organizations that partner with us to accomplish our mission. It is so important to have great partners!

I am also proud of the significant transformation we have made as an agency during the past several years, in creating many more opportunities for people to be involved and working in the community.

What are the dominant challenges that you see nonprofit organizations facing and what do you think would be viable solutions?

Funding is always challenging for any not-for-profit organization. For our organization, it has been important for us to diversify our funding streams and supplement the funding with donations and revenue from our social enterprises.

I also think that having an endowment fund to provide stable income on a year-to-year basis is crucial, as funding can fluctuate based on a number of factors. In order to accomplish your mission and retain good staff, money is vital, so anything an organization can do to supplement their funding is a plus.

The other challenge is governance; having an effective, engaged and strategic board requires identifying the right people, and then making sure that the board is well-trained to do its job. It is so important to provide the board governance training, and often not-for-profits may lack the time and resources to provide the training. Having free or inexpensive governance training, materials, videos, etc., would definitely be helpful to many organizations.

How do you see the organization changing in the next two years, and how do you see yourself creating that change?

ODC and our industry, which provides employment services for people with disabilities, has changed significantly throughout the past several years from a primarily center-based model of services to a primarily community-based model of services. We are focusing our efforts on finding opportunities for people to be connected to people and opportunities of interest to them in the community, actively engaged in the community and ultimately employed in the community. We will continue to support people wherever they are at in their personal journeys, and help them to grow and achieve their goals.

We will also continue to respond to emerging needs, and look for ways to serve additional people or ways we can provide different types of support. For example, in the past few years, ODC has added youth transition services to our offerings, to work with younger individuals (14 and older) as they prepare for life and work after high school.

In addition, we are now offering mental health services to support people in the community in reaching their goals to maintain their mental health.

There are many other opportunities to serve people in our communities, and we look forward to continuing to meet those needs.

New W-4 for Use in 2020

The IRS has released a revised Form W-4 Employee’s Withholding Certificate to be used beginning in calendar year 2020. Form W-4 needed to be revised in order to more accurately calculate withholding due to the tax law changes made late in 2017.

The new Form W-4 can be completed using a simple method or a more comprehensive method. For the simple method, only Steps 1 and 5 are required to be completed. Completing these few lines will only provide for withholding based upon the one job and no credits. There are no longer any withholding allowances. The status of married but withholding at higher single rate is now gone.

Employees can use Steps 2-4 if they want their withholding to be fine-tuned. Steps 2-4 of Form W-4 can affect withholding by taking into consideration second jobs, jobs of a spouse and credits.

Only employees hired in 2020 and employees who want to change their withholding need to use the revised W-4 for tax year 2020. Other employees can continue to use their original W-4 filing. You may, however, suggest to your employees that they do a paycheck withholding checkup at the IRS’ website http://www.irs.gov/W4App. The withholding calculator should be used when the employee has more than one job or has additional income. The estimator will give the employee an additional amount to be withheld from each paycheck.

Employees using the 2020 Form W-4 will need to complete a separate State withholding form (Wisconsin WT-4, Minnesota W-4MN). The Federal form will not coordinate to State withholding, which is still tied to the number of dependents.

Your payroll software should be able to handle both types of filing statuses (pre-2020 with withholding allowances, and post-2019). If you manually calculate withholding, however, you will need to use both the post-2019 Publication 15-T Federal Income Tax Withholding Methods and the pre-2020 Publication 15 Circular E tables.

As the employer, you can require that all employees complete new Forms W-4 and state withholding forms in order to make your payroll processing more streamlined.

Please let us know if we can answer any questions or assist you with helping your employees understand this new form.

Additional References:

Form W-4 2020: https://www.irs.gov/pub/irs-pdf/fw4.pdf

Circular 15-T: https://www.irs.gov/pub/irs-pdf/p15t.pdf