Nonprofit Uniform Guidance

Uniform Guidance

Year of Changes

Hello again!

It’s been a long time since our last post here, tax season kept us really busy this year! Thank you to all of our loyal clients and to our new clients! You were and continue to be fantastic to work with!

There are a lot of exciting things happening this year both at the firm and with the IRS!

Firstly, Mike Desmond one of our Partners is wrapping up a successful year as president of the Rochester Chapter of the New York State Society of CPAs. Some of his accomplishments this year have been working with the Monroe County Bar Association in the creation of an all-day tax update for local CPAs, and working with chairs of other committees to interact with high school and college students considering a career in accounting. Additionally, Mike spent a day in Washington, DC meeting with members of the US House Ways and Means Committee.

Stephanie Annunziata, another one of our Partners, has been named Chair of the Nonprofit committee of the New York State Society of CPAs.   She hopes to engage other area CPAs to help educate nonprofit organizations in recent developments and new standards.

Another exciting bit of news is that Jeanne Beutner is becoming a Principal at Heveron & Company CPAs! Many of our clients already know Jeanne as she has worked with them during their financial statement and compliance audits, and/or assisted them with affordable housing tax matters, business and personal tax planning, preparation and review. For those of you that don’t, Jeanne has been with the firm since 2004; she is a great team leader and is a boundless source of knowledge.

Congratulations to Mike, Stephanie and Jeanne!

Also, good news for some of you applying for 501(c)(3) status! The IRS has actually introduced a shortened form 1023-EZ, a way to make your life easier. I know it’s hard to believe the IRS is doing something to make life easier! Joking aside, this new form should be approved for use in August and for those organizations that have annual projected receipts of no more than $200,000 and total assets of no more than $500,000 the form should make it easier to attain exemption. The new form is only 2 pages long, and while the instructions are 40 (don’t panic); these pages mostly document the different categories of nonprofits.

Of course, there are exceptions, churches, schools, certain hospitals and medical research organizations, and supporting organizations cannot use this new form. Also, organizations that have lost their status and are reapplying, or are changing from a for-profit to a nonprofit, as well as limited liability companies are all disqualified from using this form. With decades of experience under our belts we’d be more than happy to provide you with further information on whether you qualify, or with general help for your exemption applications.

Lastly, for all of our tax clients thinking of setting up a private foundation, the IRS and tax courts have an additional hurdle for you to jump through, but don’t worry it’s not that “high.” The IRS and tax courts are requiring that as a donor you receive a letter from the private foundation that documents your contribution and states that you did not receive anything in return. It seems kind of odd, but if you are setting up the private foundation that you control, this letter can, in fact, be from you. The only requirements of the confirmation of your contribution is the amount, a statement that you did not receive anything in return for the contribution, and it must be dated and produced no later than the due date for the tax return where you deduct the contribution (and of course you have to make the contribution).

Until Next Time!

Heveron & Company CPAs

OMB Proposed Uniform Guidance

Hello everyone, welcome back!

Today we’ll be discussing the Proposed OMB Uniform Guidance: Cost Principles, Audit, and Administrative Requirements for Federal Awards, more specifically changes to OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Wow, that’s quite a mouthful; see if you can say it 5 times fast!

The most important and impactful proposed change is to the limit for requiring a single audit, currently, if you expend $500,000 or more of federal funds than you are required to undergo an A-133 audit, however, there is good news for some of you. That threshold is proposed to be increased to $750,000! What this means for some of you is that the current scope of your audit will be lessoned. This change is only for the A-133 portion of your audit and does not affect other requirements imposed by other municipalities or organizations. Therefore, if you fall under $750,000 in federal expenditures you may not need to read further, however, you may want to in case this part of the proposed changes is not fulfilled.

Another proposed change in the above referenced guidance would be to increase the threshold between Type A/B programs from $300,000 to $500,000. As those of you whom have Type A know, these programs must be audited every three years as they are considered normal risk the third year after their last audit regardless of prior findings. This means that for some of you your Type A programs may be decreased or even eliminated, which may decrease the scope of you’re A-133 audits!

In addition they are considering other changes to a Type A program being labeled normal risk. Some of these are: questionable costs above 5% of the total expenses for the program, a material weakness found in the internal controls, or a failure to achieve an unqualified auditor’s opinion in its last audit.

Furthermore, they are proposing changes to the Percentage of Coverage decreasing the 50% for normal organizations to 40% and the 25% for low-risk to 20%. This means we, as auditors, may not have to test as many programs.

The proposal also includes changes to who may be deemed low-risk versus normal. The criteria for low-risk would now include the auditor’s findings regarding going concern of the organization and the timely submission of data collection forms. This proposal may help some of you to drop from normal to low-risk, again reducing the scope of your A-133 audit.

Finally, remember that all of the above are simply proposals and will not affect anyone until they are made official! Check back with us in the future for further information.

Until next time!

All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence,” Rev. Dr. Martin Luther King, Jr.

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