Newsletter by Hawkins Ash CPAs
In this edition
June 2021

COVID-19 Related Assistance Reminders

ASU Standard Update: ASU 2020-07

Recap of Requirements and Common Errors in Functional Expense Reporting

What Triggers a Single Audit?

Boys and Girls Clubs Fox Valley: Profile and Executive Director Q&A
COVID-19 Related Assistance Reminders

PPP Loans

Don’t forget to file for your PPP loan forgiveness. A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.

Employee Retention Credit

Employers can retroactively file for credits for the 2020 year by amending previously filed 941’s for periods in which they qualify for the credit. The credit was also recently extended through December 31st, 2021.

Shuttered Venue Operators Grant

The grant application portal is now open. To submit an application you can visit
ASU Standard Update: Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets (ASU 2020-07)

In September of 2020, the FASB (Financial Accounting Standard Board) issued a new pronouncement regarding the presentation of contributed nonfinancial assets in the financial statements. This came about in response to users of not-for-profit financials requesting that more transparency was needed regarding the types of non-financial gifts that organizations receive, how these gifts were being valued and what was their intended use. Prior to the issuance of this standard, there was only guidance requiring footnote disclosure for contributed services.

Annually, many organizations receive a substantial portion of their total contributions in the form of donated goods and services. They rely on these gifts in order to accomplish their mission. Oftentimes, however, the reader of the financials is not aware that the organization is receiving them. Examples of in-kind donations are stocks, fixed assets, materials, supplies, clothing, and contributed services. These in-kind gifts are typically included in the contribution line of the statement of activities and are not called out for the reader.

The standard is effective for fiscal years beginning after June 15, 2021, and must be done retrospectively.

Upon implementation, not-for-profit organizations will be required to show in-kind contributions as a separate line, apart from cash contributions, on the statement of activities. There will also be additional footnote disclosure required for each category of in-kind gifts that includes the following:

  • The amount of revenue recognized for that category
  • Identification of any donor restrictions that exist on the in-kind gift
  • Qualitative information about the not-for-profits policy about monetizing rather than using the in-kind gift 
  • Techniques used to estimate fair value of contributed non-financial assets in that category 
  • The principal market used to estimate fair value if it is a market in which the organization is prohibited by a donor restriction from selling or using the contributed nonfinancial assets.

This standard does not affect the amount or timing of the recognition of in-kind donations, only their presentation in the financial statements.

If you have any questions in regards to how the standard will impact your organization, please contact your Hawkins Ash CPAs representative.

Author: Sandy Jensen, CPA
Direct: 608.793.3126
Recap of Requirements and Common Errors in Functional Expense Reporting

With the implementation of FASB Accounting Standards Update 2016-14 several years ago many organizations were introduced to the concept of functional expense reporting. Now that we are a few years out from implementation, it is helpful to take a look back at the concepts and ensure your organization is properly reporting your functional expenses.

Functional Expense Categories

According to FASB 958-720-45, functional expenses are broken up into the following main categories:

  • Program Services: Activities that result in goods and services being distributed to beneficiaries, customers, or members that fulfill the purposes or mission for which the NFP exists. Those services are the major purpose for and the major output of the NFP and often relate to several major programs.
  • Management and General Activities: Supporting activities that are not directly identifiable with one or more program or fundraising development. Examples include oversight, business management, general recordkeeping and payroll, budgeting, financing, administrating customer contracts, and human resources management. The costs of oversight and management usually include the salaries and expenses of the governing board, the chief executive officer of the NFP, and the supporting staff. If such staff spend a portion of their time directly conducting or supervising program services or categories of other supporting services, however, their salaries and expenses shall be allocated among those functions.
  • Fundraising Activities: Involve enticing potential donors to contribute money, securities, services, materials, facilities, other assets, or time. Examples include publicizing and conducting fundraising campaigns, maintaining donor mailing lists, conducting special fundraising events and preparing and distributing fundraising manuals, instructions, and other materials. 

Allocation of Expenses

Most organizations accounting systems will track expenses by their natural classification but many are not set up to report into the three categories described above, therefore, allocations are often utilized to report costs for functional expense reporting purposes.

Some common expenses that need to be allocated are salaries/wages, benefits, occupancy costs including rent, utilities, insurance, repairs and maintenance and deprecation. There are a few different methodologies you can use to allocate costs. One methodology is based on employee time which may require a time study. Time studies can be as elaborate as having each individual track their time daily through a time management system or hiring an outside contractor to conduct a time study for each functional category. Less elaborate time studies can be as simple as picking a “representative” one week to one month in the year and having each employee track their time daily to each functional category. A “representative” period of time is one that is similar to what is done year-round. A common method for allocating expenses pertaining to space/occupancy would be to allocate based on square footage.

The key is to ensure you document the methodologies that you use and that there is some basis behind your methodologies. You should also review your cost allocation plan annually at a minimum.

Common Errors

A recent article published by the AICPA Center for Plain English details some common areas of noncompliance in not-for-profit functional expense reporting. These common errors include the following:

  • NFPs with contribution revenues reporting no fundraising expenses. In some situations, this may be true. However, if your NFP is bringing in contribution revenue, there is more than likely some resources of the organization being used in an effort to bring in this revenue.
  • Fundraising function includes salaries but no benefits or occupancy related costs such as utilities, rent, or telephone. Generally, if you have employee expenses being allocated to the fundraising function, the general overhead expenses of the organization should also be allocated. 
  • Depreciation expense not allocated to functional expense categories. Depreciation expenses need to be allocated to their appropriate function, if assets are being utilized for program and supporting activities.
  • Incorrect presentation of functional expenses. All NFPs are required to report all expenses by both functional and natural classification (these are mutually exclusive and shouldn’t be intermixed), in one location either on the face of the statement of activities, as a schedule in the notes to financial statements (not a supplementary schedule) or in a separate financial statement. The presentations should report the relationship between functional expense classifications, essentially answering the question, “why were the costs incurred?”

Importance of Proper Reporting

The overall intention of functional expense reporting is to help donors, creditors, and other users of your financial statements see your NFP’s service efforts and how you are utilizing your resources. It is important that expenses are reported properly so the users of your financial statements are able to reach reasonable and useable conclusions.

If you have other questions regarding the functional expense reporting requirements, please contact your Hawkins Ash CPAs representative.

Author: Brittany Leonard, CPA
Direct: 608.793.3123
What Triggers a Single Audit?

The pandemic has brought many changes to nonprofit organizations, including changes in operations, reduced funding from traditional revenue streams, and perhaps, new funding from various Federal programs.

While the assistance from various federal programs is helpful in maintaining services, there may be some additional reporting requirements, including the potential for a single audit under Uniform Guidance requirements. The general rule is if an organization expends at least $750,000 in federal funding (either directly or indirectly through state or local agencies), a single audit is required.

If you are in need of assistance in determining whether your organization requires a single audit, please contact your Hawkins Ash nonprofit representative.

Author: Chuck Krueger, CPA
Direct: 920.684.2547
Client Feature: Boys & Girls Clubs of the Fox Valley
Accomplishing Goals Through a Pandemic
During the heat of the COVID-19 pandemic, as many organizations and companies were cutting their losses and trimming back services, the Boys & Girls Clubs of the Fox Valley doubled down on its mission and fundraising goals. Its 2020 Great Futures Campaign was its core strategy to help meet the increasing needs of the area’s youth population. This multi-faceted campaign pushed the organization to raise over $10 million and set it on a path to enhance critical services such as STEM, career readiness, and professional mental health counseling, increase the average number of young people served each school day by the Club from 1,300 to 1,700 and expand and improve its facilities and improve safety.

The organization completed a 15,200 square foot addition to its Menasha, WI, facility. The two-story addition features a new career readiness lab, a sensory room, and dedicated spaces for no-cost licensed counseling services, the Home Base program that serves children and families who are facing homelessness, and the Center for Grieving Children. New safety and security systems were implemented at this location and its Appleton, WI, facility.
In 2021, the Boys & Girls Clubs of the Fox Valley opened two new school-based Boys & Girls Clubs at James Madison Middle School in Appleton, WI and Little Chute Intermediate School in Little Chute, WI. These Clubs provide a wide array of positive youth development programs in the core areas of education, health and wellness, workforce readiness, character and leadership, and the arts. The Club also has plans to open three additional locations later this year. The Boys & Girls Clubs of the Fox Valley accomplished these goals all while evolving to meet the ever-changing needs of the community’s youth and families impacted by the pandemic. 

In 2020, the Boys & Girls Club of the Fox Valley opened its doors to support youth of essential workers, provided more than 85,000 meals at its Club locations and through drive-through meal assistance, shared virtual Club programming daily, provided virtual counseling and grief support, as well as offered student support through the Club’s many positive youth development programs and targeted support services.

Since opening its doors in 1998, the Boys & Girls Clubs of the Fox Valley have grown to serve up more than 15,000 area youth each year at multiple locations. The Club provides youth development programming, a diverse array of no-cost mental and behavioral health services such as the Center for Grieving Children, the Home Base program for youth who are homeless, Youth & Family Counseling, and educational support through the Club’s STAR initiative, truancy intervention services and more.
Q&A with Boys & Girls Clubs of the Fox Valley CEO Greg Lemke-Rochon
Greg Lemke-Rochon is the current CEO of the Boys & Girls Clubs of the Fox Valley and has been serving children and youth in need for over 30 years. Greg was recognized for his contribution to youth in 2019 with the Blue Spirit Award, the highest honor bestowed by the President of the Boys & Girls Clubs of America. Greg is also the recipient of the Executive of the Year for the Association of Boys & Girls Club Professionals for the Midwest and has the Horizon Award from the Boys & Girls Clubs of America’s Midwest Region.

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

A: When I started, I thought I needed to be the “expert” at everything programs, accounting, board governance, advocacy…the whole list. I’ve since learned especially as we’ve grown over the years, that my job isn’t to know everything, but it is to cascade leadership throughout the organization. Collectively we get a lot more done this way!

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

A: Our team is extraordinary. I am incredibly fortunate to be surrounded by so many dedicated and selfless people who show up every day wanting to do whatever it takes to make a difference in kids’ lives.
Q: What are your three biggest accomplishments in your career as a nonprofit leader?

A: Our biggest accomplishment is figuring out how to measure and track the complicated and multi-faceted work we do so we know we’re having the outcomes we’ve set out to achieve. 

Another big win for us is the development of a strong and talented leadership team. 

Finally, I would say creating a culture that allows our team members to perform and their best and highest levels. We focus on trust, autonomy, a growth mindset, and, of course, why we do what we do.
More Resources from CPA-HQ
Online Giving: Key Internal Control Considerations for Nonprofit Organizations

Accepting online donations can be a great way for nonprofit organizations to grow their donor participation. For organizations expanding their online giving options, ensure the factors covered in this article are considered ahead of time to prevent any problems with the process down the road. 
How to Handle Stock Donations

Many organizations have a gift policy which requires that gifts of stock are liquidated upon receipt to minimize the risk associated with the stock market. If your organization has such a policy and received a donation of stock, the following will help ensure the donor is properly thanked and the transaction is correctly recorded.

Capital Campaigns: Where to Start and What to Avoid

Most not-for-profit entities have at least considered running a capital campaign at one point, but many do not know where to start. The first step in starting a campaign is creating a strategic plan on how the campaign will be conducted. The planning phase is where to find the answers. Here are some steps to get started on a capital campaign
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