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Managing Partner’s Message – April 2018

Pamela W. Baker CPA Managing PartnerSpring has finally arrived both within and beyond the borders of our firm. Internally, we marked the passing of another Department of Community and Economic Development (DCED) deadline for audit reports as well as the three month mark of the implementation of new audit software. Our team reports that our new software is a welcome addition to our arsenal of audit tools and even though implementation added additional strain during an already busy time, everyone looks forward to further integration of the new product.

We now are turning our sights to the next audit season – for entities with years ending June 30. For our government clients this will mean the first year of implementation of the Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Similar to GASB Statement No. 68 for pensions, this new standard establishes standards for recognizing and measuring liabilities and related financial statement elements of the actuarially determined value of other post- employment benefits offered to employees. Our team of professionals have been evaluating the impact of this new standard since its release and are ready to assist our clients in facilitating a smooth implementation. On the horizon is a GASB project designed to develop eventual new standards regarding revenue and expense recognition. We are involved with that discussion and encourage you to visit our blog for our letter of comment to the GASB Board.

For our nonprofit clients, no changes for this year – but big changes on the horizon. We have been discussing the effects of new Financial Accounting Standards Board (FASB) rules that affect not-for-profit presentation of financial statements, revenue recognition, and reporting of leases. Those conversations will continue and for some of our clients, we will begin the process of preparing pro forma financial statements under the new requirements.

Spring is also a time to get outdoors and be active! Several of our staff have begun participating in community activities on behalf of our nonprofit clients. These are great outings to bring friends and family to. Eliza Kowalczyk, our Partner Jeff’s daughter loves participating in 5k events – she is a young philanthropist in training!

On Wednesday, May 9, we will be celebrating the retirement of our Founding Partner, Robert Barbacane. Rob has touched many lives through the past FORTY years since he began our firm. His passion and commitment to the accounting profession, the development of the next generation of CPA’s, the public sector and the mission of so many nonprofits has been felt by many. We will forever be grateful for his visionary leadership.

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Comment on the Governmental Accounting Standards Board’s (GASB) Revenue and Expense Recognition Project, No. 4-6I

Barbacane, Thornton & Company LLP
200 Springer Building
3411 Silverside Road
Wilmington, Delaware 19810

T 302.478.8940
F 302.468.4001

April 24, 2018

Via electronic mail
Governmental Accounting Standards Board 401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116

RE: Revenue and Expense Recognition, Project No 4-6I

Thank you for the opportunity to comment on the Governmental Accounting Standards Board’s (GASB) Revenue and Expense Recognition Project, No. 4-6I. In our capacity as a public accounting firm specializing in providing accounting and auditing services to the government sector, we appreciate the GASB involvement of preparers and other stakeholders in order to enhance and promote consistent application of accounting principles in financial reporting.

Our firm works primarily with small to mid-size governments, many who do not have complex transactions, but do struggle with sometimes defining revenue and expense recognition principles. Therefore, we encourage the GASB to continue to pursue this project through to standards implementation. We offer the comments below in response to the questions posed in the above referenced project, not with the intention of selecting the “best” approach, but rather to offer insight from a user’s perspective.

Regarding the exchange/nonexchange model. Continuing to build on the existing guidance of exchange vs. nonexchange could prove effective if clarity is provided to further explore and explain the criteria for defining exchange transactions. Specifically, in paragraph 11 of chapter 2, “substantially accomplished” might result in different conclusions by different users. The two criteria offered in the same paragraph make sense and would provide a better foundation for determining recognition – we would suggest not using terms like “substantially accomplished” which lead to ambiguity. Specific criteria are much more effective. Current GASB guidance for nonexchange transactions is an area that many of our governments struggle with. Therefore, for this model to be effective, examples will need to be incorporated either as Appendices to the standard or through a dedicated implementation guide.

Regarding the performance obligation/nonperformance obligation model. This model, by taking a fresh approach in terms of terminology, might be more effective at gaining attention of governments in applying a new standard. The term “performance” seems to be more indicative of a principles-based approach as opposed to a “rules” based approach. Historically, based on application of gaap that we have seen, “exchange” vs. “nonexchange” can cause confusion in establishing correct accounting for certain transactions. Performance obligation also mirrors the FASB revenue recognition standard thereby increasing understandability for financial statement users of governmental entities who have a for-profit background.

We did not find the alternative models helpful or complete enough to be useful for this project and would recommend pursuing either the standards described in Chapter 2 or 3.

Additionally, we would recommend that, at the point in time that this becomes a GASB standard, that a specific implementation guide be completed in order to enhance interpretation of the standard.

On behalf of our firm and our clients we would like to thank the GASB for its efforts in putting together this project and for providing a forum for feedback. Please feel free to contact us if you have any questions.

Respectfully submitted,
Pamela W. Baker,CPA,CGFM Managing Partner
Barbacane, Thornton & Company LLP

Cc: Kristopher Knight


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Auditors Need to Be Up to Speed on Local Politics

The auditing profession has gotten used to the need to adjust due to rapidly changing regulations and standards. One factor, though, that may not immediately jump to mind as an issue to monitor is the impact of local politics.

In a preview of her presentation at the May 31 PICPA Pennsylvania School District Conference, Pamela Baker, Managing Partner of Barbacane Thornton & Company LLP in Wilmington, Del., joins us to explore why auditors must keep local politics in mind when performing their role.

Listen to the podcast.

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The PPC Governmental Update – March 2018

Tax Cuts and Jobs Act Impact on State and Local Governments

The recently signed Tax Cuts and Jobs Act of 2077 brings about many changes to the rules on taxation of individual taxpayers for tax years through 2025, including establishing new income tax rates and brackets, increasing the standard deduction, suspending personal deductions, and limiting state and local tax deductions, among others. The leg­islation also provides numerous changes for businesses and other entities. State and local governments are impacted by the legislation in direct and indirect ways on these matters:

  • Advance refunding
  • Other bond
  • New tax withholding tables for employees.

Advance Refunding Bonds

State and local governments fund many types of activities through the issuance of tax-exempt bonds, which are favorable to investors because the interest received on state and local bonds is generally not included in gross income. The inter est income exclusion on state and local bonds extends to refunding bonds, as well as advance refunding bonds with some limits. While there is no statutory limit on how many times tax-exempt  bonds may be refunded, there were limits on advance refundings.

A refunding bond is defined as any bond used to pay principal, interest, or redemption price on a prior bond issue (the refunded bond). A current refund- ing occurs when the refunded bond is redeemed within 90 days of issuance of the refunding bond. On the other hand, a bond is classified as an advance refund­ ing bond if it is issued more than 90 days before the redemption of the refunded bond. Proceeds from advance refunding bonds are generally placed in an escrow account and held until a future date when the refunded bond may be redeemed. The ability to issue advance refunding bonds allowed state and local governments to issue and have outstanding two sets of tax-exempt debt related to the same activity.

To eliminate this duplicative exclusion of interest, the Tax Cuts and Jobs Act repeals the interest exclusion on advance refunding bonds issued after December 31, 2017. The removal of the tax-exempt status of advance refunding bonds may cause them to be a less attractive funding source for governmental entities.

 Practical Consideration:

Interest on advance refunding bonds issued on or before December 31, 2017, are subject to pre-Tax Cuts and Jobs Act rules and generally continue to be tax-exempt.

Other Bonds

For 2009 and 2010, state and local governments could issue Build America bonds (a type of tax credit bond) that could have been treated as tax-exempt bornds, but that the issuer elected to treat as taxable governmen­tal bonds with a tax credit taken by the bond holder or the bond issuer. For state and local bonds that were qualified bonds, the issuer could elect to receive a refundable tax credit in the form of a direct payment from the IRS in place of any credit otherwise allowed to the bond holder, also known as direct-pay bonds. The Tax Cuts and Jobs Act repeals the IRS Code provisions that  authorized  the issuance of tax credit bonds and the provision that allowed direct-pay bonds. While no new tax credit bonds may be issued after 2017, current rules continue to apply to tax credit bonds issued before January 1, 2018.

New Tax Tables and Other Impacts

The Tax Cuts and Jobs Act revised the income tax rates and brackets for individuals, and all employers must change the tax tables used to  withhold federal taxes for employees throughout the year. The four tax rate schedules for individuals are based on filing status (single, married filing jointly/surviving spouse, married filing separately, and head of household) that are then divided into income ranges which are taxed at higher marginal tax rates as income increases. Under the Tax Cuts and Jobs Act, individuals are subject to seven tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These rates are in effect beginning after December 31, 2017, and before January 1, 2026, when the previous tax rates are reinstated, unless new legislation extends or changes the rates.

The Tax Cuts and Jobs Act provides a new measure of inflation applied to annually adjust the tax bracket amounts, standard deduction amounts, personal exemptions, and various other tax figures that affect the tax tables used to determine withholding amounts. For tax years beginning after December 31, 2017, dollar amounts that were previously indexed using the Con­sumer Price Index for all urban consumers will instead use the chained Consumer Price Index for all urban consumers. The new measure of inflation is a perma­nent change.

Sweeping Changes  Proposed to Auditor’s Reports

The AICPA recently proposed major changes to the auditor’s reporting model. On November 28, 2017, exposure drafts of five proposed statements on auditing standards were issued:

  • Forming an Opinion and Reporting on Financial Statements
  • Communicating Key Audit Matters in the Independent Auditor’s Report
  • Modifications to the Opinion in the Independent Auditor’s Report
  • Emphasis-of-Matter Paragraphs and Other-Matter Paragraphs in the Independent Auditor’s Report
  • The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports

Proposed Changes to the Standard Auditor’s Report

The exposure draft proposes the following changes to the standard report:

  • Requires the first section of the auditor’s report to have the heading “Opinion” and to include theauditor’s opinion on the financial statements, followed directly by the “Basis for Opinion” section (unless a different order is prescribed by law or regulation). For governmental entities with multiple opinion units, the authors believe the pluralized headings “Opinions” and “Basis for Opinions” will be permitted, consistent with current practice.
  • Requires the “Basis for Opinion(s)” section to include an affirmative statement about the auditor’s independence and fulfillment of the other ethical responsibilities in accordance with relevant ethical requirements.
  • Adds an option to communicate key audit matters (KAMs).
  • Expands the description of management’s responsibilities for the financial statements. It requires a section with the heading “Responsibilities of Management for the Financial Statements” that, in addition to the description of management’s responsibilities now included in auditor’s reports, is also required to identify those responsible for oversight of the financial reporting process when those responsible for oversight differ from those responsible for preparing the financial statements, and to state management’s responsibility for assessing the entity’s ability to continue as a going concern and whether use of the going concern basis of accounting is appropriate.
  • Expands the description of the auditor’s responsibilities for the audit and of key features of an audit. The expanded requirements would be included in a section with the heading “Auditor’s Responsibilities for the Audit of the Financial Statements .”
  • Requires the section of the auditor’s report that describes the auditor’s responsibilities to also state that the auditor communicates with those charged with governance about the planned scope and timing of the audit and significant audit findings, including any significant deficiencies and material weaknesses in internal control that were

When applicable, the auditor’s report would include:

  • A separate section when the auditor concludes there is substantial doubt about the entity’s ability to continue as a going
  • A separate section that includes the auditor’s report on financial and nonfinancial information included in an entity’s annual

In addition, the proposal would require the auditor to communicate with those charged with governance about (a) significant risks identified by the auditor and (b) circumstances that affect the form and content of the auditor’s report.

Modifications to the Report

The proposals would make the same changes to the auditor’s report when the auditor’s opinion is modi fied.

Key Audit Matters

Under the proposed standards, the auditor may be engaged to communicate KAMs in the auditor’s report; however, communicating KAMs wouldn’t be required. The proposal describes KAMs as matters that (a) the auditor concludes were of most significance in the audit of the financial statements and (b) are selected from matters communicated to those charged with governance.

KAMs may include the following:

  • Areas of higher assessed risks of material misstatements.
  • Areas in the financial statements that involve significant management judgments, such as accounting estimates having high estimation uncertainty.

When the auditor communicates KAMs in the auditor’s report, the auditor would do so in a separate section of the auditor’s report under the heading “Key Audit Matters.” An emphasis-of-matter paragraph isn’t a substi­tute for describing KAMs in the auditor’s report when the proposed SAS on communicating KAMs applies.

Emphasis of Matter

The proposed guidance would require the heading of the emphasis-of-matter paragraph to include the term “Emphasis of Matter.”

Supplementary and Other Information

Governmental financial statements often include required supplementary information (RSI), supplemen­tary information (SI), and other information (01.) The proposed SAS, The Auditor’s Responsibilities Relating to Other Information Included in Annual Reports, would supersede the current guidance on 01 by providing (a) clarification as to what other information is within the scope of the auditor’s procedures, (b) additional guidance on the auditor’s objectives in reading other information, (c) direction regarding the group auditor’s responsibilities for reading other information when reference is made to a component auditor in the group auditor’s report, and (d) new reporting requirements. It defines other information as information other than financial statements and the related auditor’s report included in the annual report. It also adds a new report­ ing requirement to include an “Other Information” section to the auditor’s report when the auditor obtains such information prior to the date of the auditor’s report.

Effective Date

The proposed SASs would be effective no earlier than for audits of periods ending on or after June 15, 2019, with no early adoption. That being said, given the perva­ siveness of the changes to auditor’s reports the propos­als would require, the authors believe it likely that the effective dates could be postponed up to an additional six months, to periods ending on or after December 15, 2019.

Practical Consideration:

The SAS exposure drafts are available at or in the Advanced and Proposed Documents section of the AICPA Professional Standards on Checkpoint (

Thomson Reuters Checkpoint . March 2018 . Volume 25. No. 3

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Revised Financial Reporting Requirements for Charitable Organizations Now Law

This is a wonderful article by Peter Calcara, Vice President, government relations of the PICPA.

On Dec. 22, 2017, Gov. Tom Wolf signed into law much needed changes to the Pennsylvania Solicitation of Funds for Charitable Purposes Act, which has been championed by the PICPA. House Bill 1420 and House Bill 1421 – now Acts 71 and 72, respectively – were sponsored by PICPA member and state Rep. Keith Greiner (R-Lancaster), and will go into effect on Feb. 20, 2018. The bills passed both chambers of the General Assembly without a single negative vote – 189-0 in the House and 49-0 in the Senate.

Regulations Stamp image“I recognize the need for continuity in the way charitable organizations are measured and monitored,” Greiner says. “My legislation is an attempt to align state guidelines with requirements set forth by the federal government for audits of state and local governments and nonprofit organizations.”

Under current Pennsylvania law, once a charitable organization reaches annual contributions of $300,000 or more, it has to file an audited financial statement prepared by an independent CPA. As noted in a PICPA issue brief, these thresholds are extremely low in today’s marketplace. For comparison, as part of the federal audit guidance update, effective Dec. 31, 2015, all nonfederal entities that expend $750,000 or more of federal awards in a year are required to obtain an annual Subpart F audit.

Act 71 raises the threshold of annual contributions to $750,000 before it triggers the need for an audit. Those receiving annual contributions of at least $250,000, but less than $750,000, will be required to have a review or audit; and those with annual contributions of at least $100,000, but less than $250,000, will be required to have a compilation, review, or audit. A compilation, review, or audit will be optional for any charitable organization that receives annual contributions less than $100,000.

According to information posted by the Pennsylvania Bureau of Corporations and Charitable Organizations (BCCO), which oversees compliance of the law by the more than 12,000 charities soliciting in Pennsylvania, the Act 71 thresholds for audit, review, or compilation of financial reports will be applied to all charitable registration renewals due Feb. 15, 2018 (March 31, 2017, fiscal year ends) and all subsequent renewals, as well as to all new charitable organization registrations for all other fiscal year ends filed on or after Feb. 20, 2018.

Act 72 clarifies that annual registration statements for charitable organizations must be refiled annually based on the postmark date instead of the date it is received at the BCCO. Act 141 of 2014, which the PICPA championed, changed the renewal date for charitable organizations from 135 days after the close of the fiscal year to the 15th day of the fifth month following the close of the fiscal year. But, an interpretation by the BCCO that any registration statement postmarked on the due date will not be timely filed created confusion.

In addition, Act 72 increases the deemed approved time for charitable organization, solicitor, and fundraising counsel registration filings from 10 to 15 days.

Finally, under Act 72, due dates will be applied to all charitable organization registration renewals due Feb. 15, 2018 (March 31, 2017, fiscal year ends) and all subsequent renewals, and to new charitable organization registrations for all other fiscal year ends filed on or after Feb. 20, 2018.

The PICPA thanks Greiner for all his guidance and support throughout the legislative process.

The issue is a good example of PICPA’s legislative advocacy efforts in action. Together with our nearly 22,000 members, the PICPA can achieve positive changes that benefit Pennsylvanians and the CPA community.

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Podcast: E-filing Now Mandatory for Municipal Authority and Authority Nonprofit Reports

The Pennsylvania Department of Community and Economic Development (DCED) now requires municipal authorities and authority nonprofits to file their annual reports online. Karen O’Neill, local government policy specialist with the DCED, provides more details on the entities this impacts and e-file instructions.
Listen as Pam Baker, CPA, managing partner of Barbacane, Thornton & Company, provides further perspective on this big change, and highlights the benefits and challenges for CPAs who work with these authorities. Click here for the podcast.
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What Tax Change Proposals Could Mean for Annual Giving

What Tax Change Proposals Could Mean for Annual Giving
Whatby Jeffrey A. Kowalczyk, CPA, CFE, CGAP

Since its debut nearly a century ago, the charitable deduction has fluctuated with ever-changing tax plans. Now, in the year of its 100th anniversary, the deduction is facing yet another change. An analysis by the nonpartisan Tax Policy Center estimates that one proposed tax plan will reduce charitable giving by as much as nine percent, or $17 billion dollars. While these are just projections, nonprofits should consider how changes in the tax law may impact charitable giving and their organizations. Here are two major threats charitable deductions might face under such a plan.

1. Income Tax Changes

While the proposed plan does not eliminate charitable deductions, it will limit the tax incentive for charitable contributions. Simply put, the proposed plan will reduce the tax bracket. The table below displays what a $100 donation looks like under the current plan versus the proposed plan.

Currently, 25 percent of people who file an income tax return make charitable deductions. Should the new plan pass, less than five percent of people who file an income tax return will be able to make charitable deductions. With the elimination of the 39 percent tax bracket, nonprofits fear that the reduction in after-tax benefits will make donating less appealing.

2. Estate Tax Repeal

Under the current plan, there is a 40 percent tax on everything you own upon death. However, if your net worth is under $11 million dollars you are exempt from the 40 percent tax. High net worth individuals often make a charitable bequest, as these are not subject to estate tax. The elimination of the estate tax under the proposed plan has many organizations concerned that charitable bequests may significantly decrease.

The Flip Side

While there are many studies that have found no correlation between tax law and the motivation to donate, a U.S. Trust Study of High Net Worth Philanthropy found that just 34 percent of participants cited tax benefits as the reason for making charitable gifts. In a separate poll, 73 percent of participants indicated personal satisfaction and making a difference as the main motivation for giving. One could also argue that should the tax plan be approved, the “Tax-Rate Effect” will be offset by the “Income Effect.” By reducing taxes, more disposable income will be available for charitable contributions and ultimately be invested back into the economy.

Under one proposed plan, the business tax rate will be lowered from 35 percent to 15 percent. This could give large corporations more incentive to give to nonprofits. Many corporations leave a substantial amount of money overseas to avoid U.S. tax – if the rate is reduced, corporations will be more inclined to bring their money home. This homecoming means nonprofits could see more activity from large corporations.

Your Position

It is important for nonprofits to remember projections are just projections. No one can say for certain if the proposed plan will pass, and if so, how donors will react to the changes. Either way, nonprofits should be proactive. Below are several tips for positioning your organization for the future.

o Review Financial Statements and Form 990

Most tax-exempt organizations are required to file Form 990, but how many know that this form can be used for much more than IRS compliance and maintaining a tax-exempt status? Nonprofits should recognize that Form 990 is more than just a financial reporting mechanism; it presents the opportunity to engage potential stakeholders by providing a snapshot of an organization’s financial health, governance, and operations – all in one convenient place. Donors will often refer to Form 990 to learn more about your organization and to see if your values align with theirs. Taking advantage of the narrative sections on these forms is an opportunity to tell your story.

o Determine what works

Multiple studies have found that when organizations match donations, giving increased by as much as 20 percent. The amount of the match did not matter!

o …and what doesn’t

When an organization receives funding from other sources, such as government grants, donors are not as motivated to contribute. They are under the impression that the organization can thrive without them.

If passed, the proposed tax law changes will disrupt the current marketplace. The best thing nonprofits can do to prepare include:

o Thinking about their donors – how will the tax law changes affect them?
o Being prepared to make changes to their budgets.
o Making lawmakers aware of how these law changes would impact their ability to fulfill their mission.
o Evolving their fundraising efforts.

We will continue to monitor the proposed tax law changes. The professionals in our office can help you prepare for the uncertain future, call us today.

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Prepare for a Successful Audit Experience

Prepare for a Successful Audit Experience
by Edmund Fosu-Laryea, CPA

Audits may at times be time consuming, intrusive and stressful as you often have auditors come in for a week or two and disrupt your regular flow of work. However, there are a few things you can do to have a successful audit and help eliminate the stress that comes with having your audit done.

The genesis of a successful audit starts with learning from the past. Take a retrospective look at prior year audits to see if there were any major issues or problem areas encountered, and work on resolving them before the start of the audit. Review prior year audits for any audit findings or internal control recommendations and make sure these conditions are corrected. Also, make sure any recurring journal entries from prior year audits are posted to your general ledger prior to the start of the audit, as this will save both you and your auditor time and energy.

Communication is also always key to having a successful audit. Keep an open line of communication with your auditor during the year and seek guidance on any new standards or unusual transactions encountered. Your auditor will generally be receptive to answering your questions as they would rather you use the correct accounting treatment for these transactions the first time around instead of correcting it during the audit.

As the saying goes, “By failing to prepare, you are preparing to fail.” Preparation is one of the keys to having a successful audit. Audit preparation can be time consuming but, if done right, allows you to reap the benefits of having a stress-free audit. As part of preparing for the audit, you may want to do the following: i) Designate a point person for the audit. ii) Make sure your records are accurate, organized and up-to-date. iii) Make sure all year-end reconciliations are completed. iv) Make sure all documents requested in the planning memo are completed and ready by the start of the audit. Reach out to your auditor if you have any questions on the items requested. v) Make sure all schedules and work papers to be provided to the auditor agree to your general ledger and trial balances. vi) Make sure the draft financial statements is available on or before the start of fieldwork.

It is important to ensure that all key staff are available during the audit. Although most of the schedules and work papers may have been requested by your auditor prior to the start of the audit, they will always ask for additional information, including supporting documents and explanations. The availability of key staff will allow the audit to be conducted more efficiently and effectively.

Finally, try to occasionally get an open items listing and a status update from your auditor to track the progress of the audit and to consider any additional help you can provide in getting the audit completed successfully.

It is to everyone’s benefit that your staff is ready in advance. If you need advice, we have professionals who can help with your questions or concerns, especially before your audit begins. Please contact us for more details.

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Nonprofits Should Focus on Building Volunteerism as U.S. Volunteer Rates Continue to Decline

Nonprofits Should Focus on Building Volunteerism as
U.S. Volunteer Rates Continue to Decline
By Pamela W. Baker, CPA, CGFM

Each year the Corporation for National and Community Service (CNCS) teams up with the National
Conference on Citizenship to conduct a Current Population Survey (CPS) that collects information on
the frequency of volunteering and the characteristics of volunteers in the United States. Recent survey
data confirms that the volunteer rate continues to decline among American adults. Between 2012
and 2015, the number of residents who volunteer dropped by 3.4%.

For nonprofits that depend on volunteers for projects, events, and fund-raising, these statistics can be
particularly alarming. It is crucial that nonprofits keep this data at the top of their minds and adjust
their volunteerism-building strategies so that they align with shifting volunteer demographics. This
article will highlight the key findings found in the Volunteering and Civic Life in America: 2016 study.

According to the CNCS, the research shows that 62.6 million adults volunteered in 2015, down from
62.8 million in 2014 and 64.5 million in 2012. Also declining are the number of service hours. In 2015,
an estimated 7.8 billion hours of service were logged, a decline from the 7.96 hours recorded in 2014.
The data paints a clear picture of decreased volunteer activity in the U.S.  The research also
demonstrates that volunteer rates vary by generation. Below is an overview of key statistics by
generation. A more complete list of statistics by demographic is available to you at


In 2015, 16.9 million millennials contributed 1.6 billion hours of service. It is notable that young adults
attending college are volunteering at twice the rate of their non-college-attending peers.

Generation X

In 2015, 19.9 million Americans aged 35-44 contributed 2.3 billion hours of service. Generation X has
the highest volunteer rate among generations.

Baby Boomers

In 2015, 19.2 million baby boomers contributed 2.7 billion hours of service. Baby boomers and Generation X tend to volunteer more hours compared to other generations.

Older Adults

In 2015, 11.0 million Americans age 65+ contributed 1.9 billion hours of service. This generation has
both the inclination and the means to make larger charitable contributions. In 2015, this generation
had the highest median hours with ages 65-74 at 88 hours and 75+ with 100 hours.

The most common volunteer activities across all generations include:

• Collecting, preparing and distributing food (24.2 percent)
• Fundraising (23.9 percent)
• Providing general labor (18.8 percent)
• Tutoring/teaching (17.9 percent)
• Mentoring youth (17.4 percent)
• Providing professional services (14.6 percent)
• Collecting, making and distributing clothing (13.5 percent)
• Being an usher, greeter or minister (11.4 percent)
• Providing office/administrative services (11.2 percent
• Engaging in music or another form of performance (9 percent)
• Coaching, supervising sports teams (7.8 percent)
• Providing medical care and fire/EMS services (6.1 percent)

The CNCS reports that Americans volunteered 113 billion hours over the past 14 years, with an
estimated worth of about 2.3 trillion dollars. Nonprofits should focus on building volunteerism in key
age brackets to ensure success in their mission, even with volunteer rates dipping.

It is clear that volunteer rates in the U.S. are declining, and nonprofits need more effective strategies for
building volunteerism in key age brackets to ensure success.

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Low-Cost Steps to Strengthen Internal Controls

Low-Cost Steps to Strengthen Internal Controls By Robert M. Barbacane, CPA, CGMA

In small organizations, internal controls are often sacrificed for the sake of delivering quality services.
This is especially true for cost-conscious nonprofit organizations. Ignoring internal controls is risky. In a
recent report, the Association of Certified Fraud Examiners (ACFE) found that organizations with less than
100 employees are more vulnerable to occupational fraud. The median annual fraud loss for nonprofit
organizations was $82,000. This number does not take into consideration the financial repercussions of
a damaged reputation. For nonprofits that depend on the public for support, the occurrence or
allegation of fraud can also severely impact fundraising capabilities.

While there are many ways to manage risk, the Committee of Sponsoring Organizations (COSO) internal
control framework is a popular method because of its ability to be widely adopted. The COSO
framework recognizes that internal controls should be designed with the entity’s unique environment
and risk tolerance in mind. Rather than identifying specific activities, the COSO framework emphasizes
that risk-based, informed decisions work best.

Applying internal controls is a best practice for all organizations, but is particularly important for
nonprofits because donors often assess an organization’s ability to use funds responsibly before
contributing. Adopting the five COSO framework steps below can help protect your organization by
strengthening governance, improving the reliability of financial reporting and deterring fraud.

Setting the tone internally

It is important for the board and leadership team to set a strong tone as internal controls are impacted
by employees and their actions. The ACFE study found that only 6.4 percent of fraud is discovered by
external auditors. A powerful tone will lay the foundation for successful internal controls.

Providing a formal system to report concerns

The ACFE study reports that 29.6 percent of fraud cases are discovered from internal tips. To encourage
employees to report concerns without fear of retaliation, create a formal reporting mechanism.
Incorporate this policy into employee handbooks and new-hire training programs.

Staying aware as to what is happening within the organization

Leaders should be aware of pressures, tensions, conflicts or incentives that could negatively affect the
entity’s financial reporting. For instance, a poorly designed incentive-based compensation structure or
unbalanced workload can put employees under pressure and tempt them to take advantage of control

Focusing on building relationships and open communication

Adopting an open-book management style can simultaneously build relationships and open communication. One way of doing this is by explaining the business rationale behind particular processes. First, identify the observed behavior; then give the employee a chance to offer their perspective. After acknowledging the employee’s point of view, explain the business reason for any changes. This type of transparency can enable employees to make better business decisions

Upholding fairness by enforcing and upholding policies

The following policies can help avoid internal conflicts:
 Have periodic one-on-one discussions with employees about policies.
 Train new employees on what is and is not acceptable use of the organization’s property.
 Check references and perform background checks on employees with access to the
organization’s financial information.
 Review IT system logs.
 Separate duties so that one person does not have complete control of a transaction.
 Separate authorization and record keeping duties.

Management cannot prevent all problems; however, setting the right tone and policies internally will
signify to employees what activities are unacceptable. Contact us today to discuss how we can help you with internal controls.

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