Article Archives: 2013

Posted by: Sarah Wine

By Sarah Wine, CPA

As auditors we are often asked for guidance on how to implement strong controls in small organizations. The key is to, at a minimum, segregate the four functions in the accounting process: 1) authorization, 2) custody, 3) record keeping and 4) reconciliation so that every transaction cycle has at least one other person performing at least one of the functions.

Depending on the size of the organization, this may require the enlistment of employees outside of the accounting function to assist with maintaining controls. While segregation of duties is not a sure way to prevent, detect and deter fraud,

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Posted by: Troy Rector

By Troy Rector, CPA

For some, GAAP may seem like a typo. For others, it may seem like a government group. In fact, GAAP is the abbreviation for generally accepted accounting principles, which are the principles commonly used by Not-for-Profit (NFP) organizations for financial reporting.

What does GAAP mean to you as a board member? Simply put, an understanding of an NFP organization’s financial reporting is a prerequisite for effective oversight of its financial affairs; a key to understanding a NFP’s financial reporting is to understand the accounting policies developed by management and the unique accounting requirements that may be applicable to your NFP.

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The holiday season is here, which means spending time with good friends, eating good food, and of course… presents! Although shopping for friends and family can be challenging at times, giving a gift card to a favorite restaurant, museum or theater can be sure to please the pickiest of people.

As easy as it is for the consumer to buy the gift card, the seller should be aware of the related tax and legal considerations so as not to create any unintended exposure.

In 2004, the Washington Legislature substantially overhauled the state’s general rules related to gift cards and gift certificates.

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By now everyone should have filed their 2012 business and individual income tax returns. Before we settle into the holidays, let’s not forget to do some basic year-end tax planning.

The American Taxpayer Relief Act of 2012 (ATRA) passed in January 2013, as well as the Patient Protection and Affordable Care Act (Obamacare), contained significant tax law changes that take effect in 2013 of which taxpayers may not be aware.

3.8% Tax on Net Investment Income

What’s Included in This Tax?

The Affordable Care Act is funded by the addition of a 3.8% tax on Net Investment Income.

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Posted by: Megan Ryan · Karen Dunn

By Megan Ryan, CPA and Karen Dunn, JD, LLM

With the holiday season approaching, organizations may find that individuals or groups who benefit from the organization’s services, desire to make year-end gifts to the organization’s employees for their loyal service.

Examples include the parents of private school students providing year-end gifts to their children’s teachers or a hospital patient’s desire to financially thank the medical team that provided excellent care for the patient.

While we all would like the ability to just graciously give or accept gifts from the heart without worrying about tax consequences, many questions arise regarding the tax consequences of such gifts.

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Posted by: Candi Avery

By Candi Avery, CPA, CGMA

Charities rely on the generosity of donors to make programs happen, and contributions are often the lifeblood of the organization. Organizations that build responsible fundraising practices are more likely to succeed than those that do not. The following are practical guidelines, policies, and practices that charities soliciting funds should review and address:

1. Abide by the Code of Ethics and Donor Bill of Rights

Without public trust and confidence, fundraising would not be able to exist. Ethical, responsible fundraising practices should be openly talked about and frequently communicated within each organization. The Association of Fundraising Professionals (AFP) has developed the Code of Ethics,

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Posted by: Elizabeth Nesmith

By Elizabeth Nesmith

With the current combined gift and estate tax exemption for 2013 at $5,250,000, a couple can transfer up to $10,500,000 while avoiding federal estate tax. An important question now is how to get the most out of this increased exemption. With appropriate leverage, a gift of $10,500,000 can become substantially more through use of key estate planning tools.

An important and popular tool is the grantor retained annuity trust or “GRAT”. GRATs are irrevocable trusts from which the grantor retains a right to receive a series of fixed payments for life or a term of years. The balance left after the end of the annuity stream is transferred to the remainder beneficiaries.

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Posted by: Pete Miller

By Pete Miller, CPA, CFE

A new business agreement is generally cause for excitement and celebration. Most people enter into such agreements in good faith and with the best of intentions. However, it’s important to plan for contingencies that are not apparent during those days of handshakes and high aspirations. Business disputes frequently arise because of accounting issues that were not fully thought out when drafting the contract that underlies a major business transaction, whether it’s a compensation agreement, a merger or acquisition, or the sale of real property.

In Clark Nuber’s experience, disputes usually arise either because of contingent compensation arrangements or some aspect of an agreement that relies on an estimate rather than a hard number.

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Posted by: Mitch Hansen

By Mitch Hansen, CPA, CMA, CFE

If you want some real scary reading, put down your Steven King novel and read the Report to the Nations on Occupational Fraud and Abuse that is put out biannually by the Association of Certified Fraud Examiners. According to this study of 1,388 organizations where fraud occurred, the typical organization loses 5% of its revenues annually to fraud. Of the fraud cases studied, the median fraud loss for religious, charitable, or social service organizations was $85,000, and was $200,000 for health care organizations. The report goes on to say that tips are the number one way frauds are detected,

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Posted by: Karen Dunn

By Karen Dunn, JD, LLM

No prohibition exists against a 501(c)(3) organization using the internet for fundraising, the IRS said in a recently released information letter. Web or email fundraising should comply with the same rules* that apply to other solicitations. Since most organizations do some sort of internet solicitations, organizations must be cautious and aware of the requirements. IRS examination guidelines and the recent information letter highlight recommendations to follow.

IRS Recommendations for Online Fundraising
1. Comply with the Regular Donation Substantiation Requirements

This includes such requirements as the substantiation of quid pro quo contributions of more than $75.

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