Baker Tilly hosted the 2023 Not-for-Profit governance and fiscal workshop June 7-8, 2023. Not-for-profit (NFP) specialists covered technical topics relevant to NFPs including ASC 842 Lease Accounting, Inflation Reduction Act (IRA) energy credits, unrelated business income (UBI), fraud and internal controls, cryptocurrency and an update on federal funding and questions around single audit. View our workshop recording for the entire program. Here are a few takeaways from some of the sessions:
For the past several years, there has been historic federal spending that has resulted in a significant increase in federal awards being claimed by not-for-profit organizations. The normal federal funding on an annual basis is about $600 billion. Over the last few years, the federal government has provided over $1 trillion in additional pandemic funding. Not-for-profit organizations have been among the top recipients of this funding through various grants.
If your nonfederal entity expends $750,000 or more in federal awards within a fiscal year you are required to undergo a single or program-specific audit in accordance with 2 CFR 200, Subpart F. The purpose is to ensure compliance with federal regulations and to provide assurance that the federal funding is being used in accordance with federal guidelines.
More and more NFP organizations are having to undergo a single audit. It’s important to stay informed about the latest regulations regarding your circumstances, federal funding and audit requirements. Tune into our webinar on Oct. 18 to hear frequently asked questions and answers to help guide you through the single audit process. More information will be released soon.
What is unrelated business income (UBI)? Generally, it’s a gross income derived from any trade or business regularly carried out and not substantially related to the organization’s exempt purpose or function of your organization. Not-for-profit organizations are typically exempt from paying taxes on income that is directly related to their mission. However, if they partake in trade or business that is unrelated to their exempt purpose, the income generated from such activities may be subject to unrelated business income tax (UBIT).
There are numerous exclusions and exceptions to the reporting of UBI and UBIT that are discussed in our recent article and within the workshop recording. Contact your Baker Tilly representative to discuss specific circumstances for your organization.
Fraud is becoming more and more common within not-for-profit organizations. There are numerous ways that fraud can be committed, including embezzlement, expense fraud, misappropriation of funds for personal use, and numerous other ways. There are several principles that an organization can practice to help prevent fraud and react if it does occur. These include the following:
These principals can help an organization spot red flags and warning signs of fraud before they become a major issue. Read more about spotting fraud in our recent update.
The Inflation Reduction Act (IRA) includes a wide range of tax credits designed to facilitate a transition to cleaner energy production and encourage the use of clean vehicles to reduce greenhouse gas emissions with alternative fuels and energy-efficient technologies. While many of these credits have previously been only available to for-profit entities, the IRA created an opportunity for tax-exempt organizations to receive cash payments from the government when making investments in projects promoting clean energy and energy efficiency. Learn more about how the IRA may open opportunities for your organization in our recent insight video.
Now that the AEC 842 lease standards have gone into effect, there are a few things to keep in mind. All leases are subject to the new guidance. This includes equipment, building and ground leases, subleases, month-to-month, embedded and related party leases. The new lease standard increases the transparency and comparability among organizations through the recognition of lease assets and lease liabilities on the balance sheet and the disclosures of key information about leasing transactions. Read more on how the ASC 842 leasing standard applies to your not-for-profit in our previously published insight.
Why should your organization consider accepting crypto donations?
Crypto philanthropy is revolutionizing the way not-for-profits fundraise and connect with donors, by diversifying revenue streams and engaging millennial and Gen Z crypto users. The ability to accept crypto donations can really help an organization accelerate and broaden its income donations from fundraising activities. There are several benefits that an organization and their donors will secure when accepting crypto donations. They include the following:
While there are several benefits to accepting cryptocurrency donations, it also comes with risks. Cryptocurrencies are highly volatile, and their value can fluctuate drastically in a short period of time. Managing cryptocurrency transactions requires robust security measures. The risk of hacking and theft is a concern, and if your funds get stolen, recovery might be challenging. To mitigate risks it is essential to research and understand the crypto landscape thoroughly, implement strong security measures and consult with financial experts if needed.
Baker Tilly offers a comprehensive guide for organizations that are considering accepting crypto assets as a form of payment. If your organization is interested in accepting crypto donations and wants to learn more about our crypto services, please contact us.
To view our entire program please visit the 2023 NFP governance and fiscal workshop page.
Please reach out to your Baker Tilly advisors if you have any questions.