When to take the option When to exercise discretion When to get an - PDF document

10/18/2019 UFLC 2019 Ashley Voss, CPA Ratliff & Associates Options & Opinions: The Art of Accounting 1 Session Summary When to take the option When to exercise discretion When to get an opinion When to get something else 2 1

10/18/2019 When to take the option Other methods of accounting and reporting 3 Accounting Methods vs Reporting Methods Most nonprofit organizations operate (“account”) on a modified cash basis. Therefore, the real question is what method, or presentation framework, do you use (or should use) for reporting…? Modified Cash Basis GAAP SPF (Special purpose Accrual accounting framework, OCBOA) 4 2

10/18/2019 • What is your reporting requirement? GAAP • What about in the future? Accrual • Who is your reader? Option • Internal • External • Do you want a balance sheet (SoFP)? • Property & equipment – historical cost • Accumulated depreciation • Investments – fair market value 5 • How difficult are your accruals? GAAP • Depreciation Accrual • AP Option • Payroll • Interest • How different will the final GAAP report be from your internal report? 6 3

10/18/2019 • “Cash‐basis” is usually, truly modified‐cash basis • Bank recs ‐ record o/s items SPF • Investments – adjusted to FMV • Notes payable – accrued Modified • Budgetary basis is modified cash Cash basis • Accrue yearend donations in and out Option • Record revenue for Christmas contributions • Record expenses for the current years mission’s budget • This is modified‐cash NOT modified‐GAAP • Modified‐GAAP is called noncompliance (an error or scope limitation) and for the audit a qualified opinion 7 • Don’t need a complete balance sheet • No or minimal AP and accruals SPF • Some or all property and equipment expensed rather than capitalized Modified • Property but may not have depreciation expense Cash • Still have notes payable Option • Still have net assets requirements • Still have most GAAP disclosures • More closely resembles your internal accounting 8 4

10/18/2019 When to exercise The judgement discretion call 9 + Depreciation Accounting + Expense allocation Payroll & Facilities Estimations + Investment valuations + Current accruals + Allowances + Internal designated funds + Future commitments + Fewer for modified cash (but still disclose…?) 10 5

10/18/2019 SoFP = classified vs unclassified (current assets/liabs) SoA = net asset activities over/under vs columnar SoCF = direct vs indirect; reconciliation or no rec SoFE = functions and naturals Disclosures = note 1; Reporting net asset summary; Presentation liquidity disclosure Modified‐cash= even more….! 11 When to get an opinion The audit 12 6

10/18/2019 Time‐tested Highest assurance Comprehensive (but not completely) Universally accepted Costly 13 When to get Other than an audit something else 14 7

10/18/2019 Review Compilation Agreed Upon Procedures Examination Attestation vs Advisory Consulting Outsourcing Bookkeeping Risk Assessment Policies & Procedures Internal Controls Governance 15 What’s your budget? Is an attestation required? Is audit‐review rotation an option? Are you more concerned about annual close or monthly close? Or daily close? Do you need an independent party? Do you need financial statements? Do you need recommendations? Do you just want to know if you’re doing it right? Do you need help? 16 8

10/18/2019 Questions ? Ashley Voss, CPA, R&A avoss@ratliffcpas.com 817‐332‐3222 17 9