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New Rules that Impact Nonprofits
Do you know about the New Financial Reporting Rules that Impact Nonprofit Organizations starting in December 2017?
My name is Joye Sistrunk, Principal of Premier Group and I am here to help.
This is overall, the most extensive change in 24 years. The goal of these changes is to really help not-for-profits tell their story through their financial statements and to level the playing field.
The first question you may ask is; does this apply to me and the answer is, yes, if your nonprofit has audited financial statements.
The most impact surrounds, net assets:
1.) The old standard has three classifications for net assets — unrestricted, temporarily restricted and permanently restricted — which was very confusing. The new standard just has two classifications: net assets with donor restrictions and those without.
2.) Secondly the new standards require nonprofits to provide an analysis of expenses by functional and natural classifications. Functional expense classifications are your categories such as program, management and fundraising. Natural expense classifications include categories such as salaries, employee benefits, rent and utilities and don’t forget you must also include how you allocate expenses to specific functional categories.
3.) Nonprofits are now required to disclose liquidity. Meaning they must explain the availability of financial assets, i.e cash and investments to meet cash needs for general expenditures.
The changes will be in effect for annual financial statements issued for fiscal years beginning after Dec. 15, 2017, and for interim periods within fiscal years beginning after Dec. 15, 2018.