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Managing Partner’s Message – January 2024

Happy New Year! We at Barbacane, Thornton & Company hope this message finds all who read it in good health and spirits as we step into a fresh calendar year full of possibilities. As we bid farewell to the busy audit season that has just concluded, we want to take a moment to reflect on our achievements and share some exciting initiatives happening at the firm.

First, it is important that we express our sincere gratitude for the continued support of our clients and the trust in our firm. Throughout the past year, our clients, both new and old, have been an integral part of our success, and we are immensely grateful for the opportunity to serve you. Our client satisfaction and success remain at the core of our purpose.

As we embark on this new year, we are delighted to announce several initiatives that will further strengthen our ability to meet the evolving needs of our clients and community. Recognizing the increasing demand for our services, we have been hiring additional talented professionals who will bring diverse skills and perspectives to our firm. We are assembling a team that not only complements our current strengths but also shares our unwavering commitment to exceptional client service.

In addition to welcoming new team members, we are proud to celebrate recent advancements of several of our existing staff. Most notable is the advancement of Supervisor Joe Manfre, CPA to the position of Manager. Joe is an integral part of the team and leads through example in training and developing of staff, managing client relationships, and serving on the PICPA local government committee. Joe is a past recipient of the Young Leaders Award and served as a PICPA Firm Liaison.

Furthermore, we are thrilled to share that we have already lined up a group of exceptional interns who will be joining us during the summer months. These individuals are currently pursuing accounting degrees and will bring their enthusiasm and highly proficient technology skills to our audit practice.

A new audit season is kicking off and we feel poised to continue our initiatives to provide excellent service and to be the trusted advisor our clients depend on.

Thank you for entrusting us with your audit needs. We look forward to another season of collaboration, excellence, and building stronger relationships.

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Managing Partner’s Message – September 2023

As the leaves begin to change and autumn settles in, we’re excited to welcome the start of our Fall Audit Season. This is a special time of year for us, marked by a renewed focus on delivering exceptional service and value to our clients.
At Barbacane, Thornton & Company, we understand the importance of trust and reliability in the world of auditing. Our commitment to excellence remains unwavering, and the Fall Audit Season provides us with a fresh opportunity to demonstrate just that.

Over the past year we have focused on initiatives to enhance the way we conduct our audits. Several of our clients have been participating in a pilot program to better establish timelines and engagement management through revisions to our portal. We anticipate having the new system fully integrated by end of year.

Our team has also been busy in our community and with strengthening our teams. Over the past few months, we volunteered by cooking dinner for the Ronald McDonald House Charities of Delaware and sorted clothes at Friendship House. We ran our annual United Way campaign and participated in Do More 24. We also enjoyed returning in person at the DANA conference in Delaware and the PASBO conference in Pennsylvania.

Our clients, both long-standing and new, are the heart of our business. Your trust in us motivates us to continuously raise the bar and exceed your expectations. As we embark on this Fall Audit Season, you can expect:

Excellence: Our commitment to delivering accurate, thorough, and timely audits is at the forefront of our mission. We are dedicated to maintaining the highest level of quality in our work.

Communication: We believe in open and transparent communication. Our team is here to listen and respond promptly if you have any questions, concerns, or ideas throughout the audit process.

Client-Centric Approach: Your success is our success. We’re not just auditors; we’re your partners in achieving your financial and operational goals. We will work diligently to provide you with the insights you need to make informed decisions.
As we navigate this season, we encourage you to connect with us. Your feedback, questions, and insights are invaluable to us, and they help us continuously improve our services.

Thank you for entrusting us with your audit needs. We look forward to another season of collaboration, excellence, and building stronger relationships. Together, we’ll make this Fall Audit Season a success.

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Managing Partner’s Message – December 2022

The end of another year is fast approaching. Another set of deadlines to meet, holiday events to attend, Board presentations to give, and planning for the next audit season are all converging these last few days of 2022.

December 14 marks my 34th year with Barbacane, Thornton & Company. I seem to be a little more reflective this year and wondering why. Several thoughts come to mind.

The first thought is that we are ending the first year in our new offices. This time last year we were packing up the old space, signing off on finishing touches, and tracking down furniture deliveries, unsure if we would have an operational office on January 1 when everyone returned to work. Now, a year later, it feels like we were meant to be in our new space. Everything is as it should be, and the new space has provided everything we hoped it would. In the New Year we hope to introduce our space to more of our clients and associates. Look for us to be hosting small learning get togethers.

My second thought is how tremendous our Partner group has become over this past year. We have spent the last 5 years building a new team of Partners, having seen two of our top team members advancing to the level of Partner. This year we pushed ourselves to complete intensive leadership analysis and we held a firm retreat to strategize around our 5-year vision for the future. We are looking forward to the advancement of additional team members and the managed growth of our practice.

My third thought revolves around our entire team. I am proud of the fact that we have advanced our initiatives to a point where thirty-six percent of our staff are women and fifty percent of our leadership team are minority and women. We are better positioned than ever to observe the benefit of having voices at the table who bring different perspectives and new ideas. We are moving forward with improved ways to work remotely and more flexibly. We are embracing the concept that remote work is not just the way TO work — it is the way WE work. We are bringing value to our clients through the testing of their systems in a more paperless environment and providing constructive advice around how to have stronger internal control systems within increasingly automated, cloud-based environments.

My next thought comes from the realization that I will not be doing this for another 34 years – for sure! So, what will be the future and what should we be doing today to prepare the next generations for that future. I have had the pleasure of serving on the Board of the PICPA Foundation for the past 2 years. During that time, I have had more of a “front row” seat to some of the initiatives being undertaken to advance the CPA profession and to get young people excited to pursue careers in accounting. As a Board member I recently had the opportunity to speak to a group of high school students who were taking an accounting course. I was able to share with them what a meaningful and important career choice this has been for me and many others. For one hour I was given a glimpse into the future as 30 young people listened intently, asked thoughtful and meaningful questions, and provided me a sense of what the future can be as they move into the workforce.

Lastly, my thoughts are more reflective of the struggles, the challenges, and the ups and downs everyone has experienced since 2020 turned everyone’s world upside down. It wasn’t all good, but I do believe we have all learned from the experiences of the past 2 years- and for all we have learned I am grateful.

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Managing Partner’s Message – June 2022

Summertime – school is out, vacations, graduations, weddings, and a host of other celebrations are in full swing. Barbacane, Thornton & Company is in full swing as well. We are coming off of a very busy winter season and in full preparations for an even busier summer/fall season. A lot has been happening in our world and we are excited to share some of the highlights.

In January of this year, we officially relocated to our new offices located at 503 Carr Road in Wilmington, Delaware. It was the first time we have changed office locations in over 12 years – and that move had only relocated us two buildings away in the same complex. So, this move marked a significant change – 3 whole miles away in what felt like 3 States! We purged, redesigned, rethought the way we work, and generally gave ourselves an entire new look. We are still finalizing some of our art installations but look forward to sharing pictures of our new space in the near future. In the meantime, we love giving tours of our new space and have conference rooms available for use by our clients.

Our newest Partner, Edmund Fosu-Laryea welcomed the newest member to his growing family. Eli Fosu-Laryea made his entrance into the world March 4th, and we are thrilled to share the newest set of milestones with Edmund and his family.

RFP (request for proposal) season has been busier than we have seen in several years. The changing economy, the great resignation, increased Federal funding, and audit rule changes, just to name a few contributors, seem to be driving more governments and nonprofits to be in need of audit services. We have been very strategic and careful to respond responsibly to opportunities to onboard new clients so that we may meet the needs of existing clients. We are thrilled to welcome several new school clients, nonprofits, and a new municipality to our lineup for the fall season.

Staffing continues to be an issue for everyone, including CPA firms. I have the privilege to sit on the Board of the PICPA Foundation, where the topic of increasing accounting graduates is top of mind. The Foundation is doing great work to reach high school students and beyond to help them understand the opportunities in the accounting field. They also provide scholarships and important mentoring for those considering a career in accounting. For our firm, staffing remains top of mind for us as well. We have undertaken several initiatives over the past months to be certain that we are current and competitive with what we are offering to those pursuing a career in accounting. We have revamped and improved our retirement options, increased health benefits, provided retention bonuses, increased salaries, and revamped performance review and mentoring. Our staff are our biggest asset, and we feel that ours represent some of the best in the audit field and we will do everything we can to support them and provide meaningful opportunities for them to prosper. Know someone looking for a challenging and rewarding career – we would love to meet them!

Our Partner group continues to stay active in the community provided value through participation in nonprofit events, speaking as technical experts, serving on local Boards, and sharing insights into current standards for our clients. They remain focused, professional, approachable, and are here to support our values of Integrity, Responsiveness, and Quality.

Enjoy your summer and wherever plans might take you – and if you are in the neighborhood stop by and see us – we would love to provide a tour!

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Funds With Benefits: How to Leverage Donor-Advised Funds

Nonprofits have come to know donor-advised funds (DAFs) as a disruptor in charitable giving. The popularity of these funds has grown exponentially in recent years, fueled by the pandemic and tax reforms that have reduced incentives for traditional charitable giving.

But this growth has created a double-edged sword for charities, which rely on foundations for the lion’s share of their funding, as some donors set up donor-advised funds instead of foundations that come with strict tax laws and a 5% minimum payout requirement.

DAF donors receive immediate tax deductions for their contributions, and they can park their money in a DAF account indefinitely without actually disbursing the money to a charity.

As this trend evolves, nonprofits must respond accordingly to the rapidly shifting giving landscape and seek opportunities to leverage donor-advised funds.

How Donor-advised Funds Work

Donor-advised funds are an attractive giving vehicle because they function as tax-free investment accounts and make giving more approachable for individual donors.

Public charities manage these funds, which allow donors to deposit money as charitable contributions over time, and donors may recommend grants from the fund to any public charity of their choice.

Donors like these funds for a few reasons:

  • Upfront tax deductions: Donations become eligible for an immediate tax deduction. Donors may deduct up to 60% of their adjusted gross income if they give to a donor-advised fund. By comparison, foundations allow a deduction of only 30%.
  • Growth potential: Since the funds are market-based, they rely on stocks, bonds, and other interest-bearing accounts that can yield growth while the fund is active.
  • Easy to use: Donors can set up donor-advised funds for as little as $50. They’re also easier to establish and maintain than foundations, which may have steep startup and maintenance costs and require larger investments.
  • Alternative to tax reforms: The Tax Cuts and Jobs Act of 2017 lowered individual income tax rates, which reduced the value of all tax deductions and lowered the tax incentives for traditional forms of charitable giving.
  • Long-term planning: Since donors have no deadline to disburse their DAF assets, donors have more time to plan for future giving. These funds may also help streamline estate planning by allowing donors to name charitable beneficiaries of the fund.

Post-pandemic Popularity

The COVID-19 pandemic, coupled with racial justice movements and economic crises, fueled growth for donor-advised funds in 2020.

DAF contributions grew 20.6% to $47.85 billion, charitable assets increased 9.9% to $159.83 billion, and the number of DAF accounts surpassed one million for the first time, according to the National Philanthropic Trust’s 2021 Donor Advised Funds Report, which came out in November.

But the metric that nonprofits have been closely monitoring is the payout rate for donor-advised funds. And in 2020, grantmaking skyrocketed in response to the global health, economic and social crises of that year, according to the NPT report.

The report measured the highest grantmaking increase in a decade, with 2020 becoming the first year grantmaking exceeded $30 billion. The value of charitable grants from donor-advised funds accounts totaled $34.67 billion in 2020, a 27% increase from the previous year. Although it was unclear in 2020 whether that level of giving was sustainable, 2021 data on the organization level suggests that growth has continued, albeit at a slower rate.

Fidelity Charitable, an independent public charity that sponsors the largest donor-advised fund program in the U.S., reported its donor-recommended grants in 2021 surpassed $10 billion for the first time, a 41% increase over pre-pandemic levels.

What Makes DAF Donors Different?

It’s important to recognize someone who contributes to a donor-advised fund is different from a traditional donor.

DAF donors are:

  • Serious philanthropists: They prioritize giving, as evidenced by the fact they took the time to set up their own giving fund.
  • Generous givers: Donor gifts from DAFs generally are larger than the average charitable contribution.
  • Quick to donate: Data from Fidelity Charitable suggests 38% of the money donated to DAFs is disbursed within a year, and 74% is gifted within five years.
  • Planners: DAF donors put a lot of thought into their philanthropic strategy and are often interested in their donations’ long-term effectiveness.

Strategies to Leverage DAFs

  • To make the most of DAFs, nonprofits can employ these strategies:
  • Promote the fact you accept donor-advised fund gifts.
  • Include DAFs as a dropdown option on your website’s donations menu.
  • Ask your current donors if they have their own donor-advised fund.
  • Share your nonprofit’s narrative through success stories and testimonials.
  • Follow up with DAF donors to let them know how their donation dollars were used.
  • Play up the tax benefits of DAFs, but make sure not to confuse donors by sending them a tax receipt, as DAF contributions receive tax deductions upfront.

If you’re interested in accepting or leveraging donor-advised fund gifts, our team of trusted advisors can help your organization better understand the tax rules and benefits of this growing giving vehicle.

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Financial Considerations When Setting Up a Legacy Giving Program

There’s a financial case for setting up a legacy giving program for your nonprofit, as legacy giving accounts for the third-largest source of charitable contributions behind individuals and foundations, respectively, but ahead of corporations.

And of all fundraising types, legacy gifts offer the highest return on investment. Organizations can expect an average return of $56.83 on every dollar spent on fundraising bequest gifts, according to research by AskRight. By comparison, major giving has a return of $33.33 per dollar, while regular giving gets $8.41 per dollar.

Creating a legacy program requires some planning and budgeting, though, and there are several considerations involved. Here is a guide to what nonprofits need to know and what steps to follow.

What is Planned Giving?

Also known as planned giving programs, gift planning, or deferred giving, legacy giving is when donors leave their money or assets to a charity of their choice after their death.

Bequests, which account for most planned gifts, make up the third-largest source of contributions for charities behind individuals and foundations, respectively, and ahead of corporations. In 2019, bequests accounted for 10% of charitable giving, according to research by Giving USA. Overall giving reached nearly $450 billion, and more than $43.2 million came from bequests.

Develop a Legacy Giving Strategy

Coming up with a strategy is the first step to creating a legacy giving program. Remember to:

  • Leverage demographics. Mine your donor-based data to develop your legacy giving donor base. Identify which donors might be interested in legacy giving based on factors such as age and years of involvement with your organization. According to Giving USA, more than half of donors surveyed contributed to the same organization for more than 20 years, with 52.8 years old being the average age when donors made their first planned gift.
  • Educate your board. Your board’s buy-in is essential. You’ll need to convince board members a legacy giving program is necessary to your organization’s long-term financial health — and thus a worthwhile investment. According to Giving USA, 7% of planned giving donors said their annual gifts to the organization they support increased after making a planned gift.
  • Determine how you will recognize donors. You can put a donor’s name on a building, scholarship, or institution to help them carry on their legacy.

Encourage Donors to Put Their Wishes in Writing

  • Motivate donors to make a will. Nearly half of Americans 55 and older do not have wills, according to 2019 findings by Merrill Lynch and Age Wave. In that age group, only 18% have the recommended essentials of a will, a health care directive or proxy, and power of attorney. Although organizations can encourage donors to create a will and offer resources such as attorneys and estate planners, a nonprofit cannot be directly involved in creating a person’s will and could face legal challenges if accused of “exerting undue influence.”
  • Remind donors to name your organization. Creating a will is just the first step to legacy giving. The donor will have to name your organization as a beneficiary to seal the deal. Individuals who include a charity in their will accounted for only 3% of Americans in 2020, according to a Give.org survey. Again, nonprofits cannot dictate to donors what they should put in their will, but they can offer printed materials such as newsletters with general guidance on how to word a bequest appropriately.

Seek Out Professional Resources

  • Bring in outside advisors and consultants. Professionals can help your nonprofit establish policies for accepting gifts and developing a legacy society.
  • Designate a planned giving contact or division in your organization. Identify individuals who can help with marketing and relationship-building with potential donors, and assign a point person to field inquiries about legacy giving. You may also consider hiring staff with experience in legacy giving.

Design a Marketing Plan

  • Invest in a marketing budget. Marketing will be essential to reaching potential donors. Set aside a reasonable budget to allow your nonprofit to promote its legacy giving program.
  • Add a planned giving page to your website. Include resources such as a planned giving calculator, contact information, and a link to where individuals can set up a legacy gift.

Take Financials into Account

  • Start small. Setting up a simple bequest program can get the ball rolling on your legacy giving initiative. Eventually, you can add more complex planned giving instruments such as annuities and trusts.
  • Implement a robust financial management system. A comprehensive financial management system is essential to a successful legacy giving program. Build relationships with reputable financial institutions, and employ a consultant who can help you scale your program over time.
  • Develop an annual financial report. Be transparent to ensure your nonprofit builds a good reputation for how to deal with money. This will help people trust your group to do its work and understand its money needs.

If you’re setting up your first legacy giving program or need to adjust your strategy, our team of financial professionals can help you navigate the financial aspects to ensure success.

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New Accounting Standards Are Here: Are You Ready?

Despite ongoing challenges with remote work, labor shortages, and supply chain bottlenecks, many accounting regulation concessions are expiring. With those grace coming to an end, nonprofits need to adopt and implement policies that were deferred to allow time to manage operations as they emerge from the COVID-19 pandemic.

The Financial Accounting Standards Board (FASB) publishes Accounting Standards Updates (ASUs) that provide guidance and updated implementation dates when revisions occur. Here are a few ASUs nonprofits need to be aware of to ensure their organization remains in compliance.

Gifts-in-kind

Nonprofits have new presentation and disclosure standards for gifts-in-kind under ASU 2020-07. The requirements increase transparency by requiring nonprofits to present contributed nonfinancial assets as separate line items in the statement of activities. Organizations also must disclose the amounts of contributed nonfinancial assets received by type and category.

Disclosures must include a note of whether an asset was used or monetized, any donor-imposed restrictions, and the valuation technique used to determine the price assigned.

Nonprofit leaders can turn to FASB ASC 820 for fair value measurement and disclosure guidance for gifts-in-kind. Fair value is a market-based measurement, and existing marketplace conditions at the time of the asset transfer should be considered and implemented. If an identical asset or liability is not located, make an assumption and document it when determining its fair market value.

Lease Accounting

The requirement for nonprofits to implement new lease accounting standards (ASU 2016-02, Topic 842) was delayed with the issuance of ASU 2020-05 until fiscal years beginning on or after December 15, 2021. Many nonprofits have not have yet integrated the requirements into their workflow and accounting practices but should begin the process they haven’t already started.

With the deferral deadline now passed, nonprofits with leased equipment, services, vehicles, or real estate should conduct comprehensive inventories of all lease agreements and create the lease schedules the new standard requires. Nonprofits should review all contracts with embedded service agreements, as they will need to include the lease portion within the schedules.

Revenue Recognition

ASU No. 2020-05 provided the option of a one-year delay to adopt the revenue recognition standards (ASC Topic 606) for nonprofits that had not issued financial statements, including the new requirement. The new five-step model takes time to perform and create the new disclosures, so ensure you allow adequate time to complete the process when preparing your financial statements.

Stay Current to Succeed

Keeping abreast of accounting standard updates allows you to stay aware of expectations and can help you set priorities and timelines. Thanks to other entity types having earlier implementation dates, nonprofits can learn from their implementations and trouble spots (particularly with lease accounting and revenue recognition requirements) to streamline their adoptions.

Ease your burdens where you can and gather the information needed to implement these and other accounting standards, providing significant time for your team to learn what’s necessary and meet all deadlines with time to spare.

Contact us today if you need assistance implementing current guidelines to stay focused on supporting your core mission.

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The Summary of Changes under ASC 842 – Lease Accounting

After multiple delays, the Financial Accounting Standards Board’s (FASB) new lease accounting guidance is in effect for nonprofit organizations with fiscal years beginning after December 15, 2021 (Calendar year 2022 for organizations with a December 31, fiscal year end and the fiscal year beginning in 2022 for most other entities). The FASB’s stated objective when initially announcing Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) was to improve transparency and accountability between organizations regardless of whether the assets used by an organization were purchased or leased.  To do this, the guidance calls for most leases to be recognized as lease assets and lease liabilities on the statement of net position, and to disclose key information about leasing transactions.

Accounting Standards Codification (ASC) 842 defines leases as contracts, or portions of contracts, granting control of an identifiable asset for a specific period of time in exchange for compensation. Control of an asset is demonstrated when a business entity is able to obtain substantially all of the economic benefit from the asset’s use and direct its use throughout the period of the contract.

ASC 842 applies to most leases and subleases, but exceptions do exist. Leases of intangible assets (including intangible IT arrangements), leases for natural resources or biological assets, leases of inventory and leases of assets under construction are not included within the scope of the ASU. However, both leases previously treated as operating leases and those previously treated as capital leases are included, as are sale-leaseback transactions and leveraged lease arrangements.

Similar to the previous standards, the new lease accounting standard uses a two-model approach for lessees; each lease is classified as either a finance lease or an operating lease. Finance lease is a new term and the term capital lease, previously used to define some lease agreements, is no longer in use. While similar, the criteria in which a finance lease is defined is not the same as the criteria used in the past for capital leases, so it is more than just a terminology change.

Topic 842 requires lessees to recognize both the assets and the liabilities arising from their leases. The lease liability is measured as the present value of lease payments. The lease asset is generally equal to the lease liability, but should be adjusted for certain items like prepaid rent and lease incentives.

Under the new rules, both financing and operating leases will be reflected on the statement of financial position. FASB defines the lease asset as a right-of-use asset, or (ROU asset), and represents the lessee’s right to use the underlying asset. The lease liability represents the lessee’s financial obligation over the lease term. When measuring the assets and liabilities, both the lessee and the lessor should also include “reasonably certain” lease renewals beyond the current lease term and “reasonably certain” asset purchase options, based on the criteria in the ASC.

Leases which have a term less than 12 months after accounting for all renewal options are permitted to not recognize a ROU asset and lease liability. If they choose not to recognize, they should instead recognize lease expense on a straight-line basis over the life of the lease.

Existing capital leases have been provided transitional relief and will not require adjustment or remeasurement upon transition. However, the financial statements should refer to them as finance leases.

Financial statement recognition of the leases is similar for both operating and finance leases, but there are few key differences.  Operating leases should recognize a single lease cost allocated over the lease term, generally on a straight-line basis, and should be recognized within operating activities on the statement of cash flows.  Finance leases should recognize the interest component of the lease separate from the rest of the repayments. The interest portion of the repayment should be considered an operating activity for the statement of cash flows, while the rest of the payment should be treated as a financing activity.

Lessor accounting practices remain largely unchanged from ASC 840 to 842, except that the “leveraged lease” type of lease has been eliminated.

Interested in knowing more about ASC 842?  Contact us at Barbacane Thornton & Company, LLP.  We have a team of professionals excited to be your auditors and trusted advisors.

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ASC 842 – Leases Transition: Getting Ready

  1. Identify all leases

Identification of all leases is crucial for compliance, and will not apply just for leases entered after the implementation of the new standards. All leases currently in place should be identified and assessed under the new guidance.

  1. Begin gathering your embedded leases:

Not all leases are obvious. Some may be embedded into service contracts or other agreements. Be sure to identify embedded leases. Examples of embedded leases include:

  • Equipment leases may be embedded in security contracts, such as scanners, monitors, and other equipment.
  • Contracts for logistics and transportation may identify and assign specific vehicles to be used solely for your organization.
  1. Prepare for the calculations and disclosures needed under ASC 842:

The new disclosure requirements are significantly more robust than those required under prior guidelines. Beyond calculating the initial lease liability and right-of-use asset discussed above, you may also need to calculate implicit discount rates, weighted average lease terms, and amortization schedules.

The disclosure requirements for FASB 842 are both qualitative and quantitative. A few of the specific disclosures required are:

  1. Discussions covering the lease arrangements
  2. Descriptions of significant judgments made
  3. Details about the lease costs reported on the income statement
  4. Weighted-average analysis of discounts and remaining lease terms

 

Interested in knowing more about ASC 842?  Contact us at Barbacane Thornton & Company, LLP.  We have a team of professionals excited to be your auditors and trusted advisors.

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Fraud Prevention Best Practices for Nonprofits

Nonprofits, like any organization, must protect themselves from fraud. While fraud in the nonprofit sector isn’t as prevalent as in for-profit entities — comprising just 9% of fraud cases according to the Association for Certified Fraud Examiner’s 2020 Report to the Nations – the results can be devastating because nonprofits usually have fewer resources to prevent and recover from losses.

The following fraud considerations can help you protect your nonprofit from fraud.

Educate employees, donors

Fraud schemes tend to follow trends. For example, disaster relief scams trend up after every natural disaster or other emergency. These scams seek donations to help victims via emails, phone calls, social media posts, and crowdfunding platforms. The trouble is, the donations end up with the fake charity’s creator.

These fake charities often have names that sound similar to well-known relief organizations. Not only do they funnel donations away from legitimate charities, but they can also harm a legitimate organization’s reputation. If your organization collects donations for disaster relief, consider educating regular donors on how to identify legitimate requests for help. Remind them legitimate charities don’t ask for large donations in cash, gift cards, or bank wires.

Keep digital donations secure

Online fundraising allows nonprofits to collect donations from anywhere and enables donors to give one-time and recurring donations easily. But keeping donors’ personally identifiable information (PII) is crucial.

In addition to credit card, driver’s license, and Social Security numbers, PII also includes names, addresses, and other numbers and information linked or linkable to an individual.

The first way to protect donor PIIs is not to collect them. Hackers can’t steal information you don’t have, so avoid collecting and storing unnecessary information about donors. Ensure that all communication to and from your website is encrypted with a Secure Sockets Layer (SSL) certificate purchased from a trusted certificate authority. Work with your IT professional or use a reputable online fundraising platform to ensure all online transactions take place in a secure environment.

Implement sound internal controls

Many nonprofits have small teams and may rely on volunteers to help with back-office work. In that environment, sound internal controls are more challenging but not impossible.

Internal controls are like armor protecting your organization’s assets and financial reporting. Consider implementing these basic financial controls to safeguard your data:

  • Segregate duties. Limit a single individual from having control over two or more phases of a financial transaction or operation. For example, the employee who receives cash or check donations should not also record the deposit in the accounting records. The person who sets up new vendors in the accounting software should not issue payments to vendors. Our team of professionals can provide advice on other ways to segregate duties in your organization.
  • Reconcile bank and credit card statements monthly. Regularly reviewing and reconciling bank and credit card statements can help you spot unusual activity or fraud and take steps to limit potential losses.
  • Secure your physical premises and assets. Ensure petty cash boxes, blank check stock, undeposited cash and checks, debit and credit cards, and other assets are locked up when not in use. Something as simple as locking office doors when nobody is monitoring the entrance can prevent someone from stealing computers and other assets.
  • Take tips and complaints seriously. According to the ACFE, 40% of nonprofit fraud is detected because of a tip or complaint, compared to just 17% by internal auditors and 6% by examination of documents. Educate everyone in your organization on the importance of fraud prevention and detection, and provide a way to report suspected fraud without the risk of retaliation.

Ultimately, trust is the true value of preventing fraud at your organization. Trust is the foundation of the organization’s relationship with employees, directors, board members, fundraisers, donors, and the communities it serves. Proper training, technology, and controls will help your organization build and maintain that culture of trust so you can continue creating positive change in the world.

Do you need help updating or creating your nonprofit’s security strategy? Contact our team of professionals today!

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