Directors and Officers (D&O) coverage plays a vital role in an organization’s risk mitigation strategy, but for some not-for-profits, the insurance coverage may go under the radar. Executive leaders and board members should understand the basics of D&O coverage so they can carry out your fiduciary duties, as well as protect personal and organizational assets. The following provides a primer for what a not-for-profit’s C suite and board should know.
It is not possible for not-for-profit organizations and higher education institutions to prepare for all the risks they could face in the coming year. At some point, you have to make decisions about which risks have the highest chance of occurring or would have the highest monetary or operational impact if the risks happened.
Chief financial officers (CFOs), boards, and donors all want to see their not-for-profit organizations manage their financial resources well. They want as many dollars as possible put toward the programs and activities that further the organization’s mission. In other words, they want overhead and operating costs to be lower than program-related expenses. The question not-for-profits must ask is: are they setting the bar for overhead expenses too low?
Cyber criminals have gotten wise to the fact that not-for-profits sit on a relative goldmine of sensitive data, including employee health information, Social Security numbers, donor information, and billing information.
Not-for-profit organizations drew the short end of the stick when the new tax law commonly known as the Tax Cuts and Jobs Act (TCJA) made parking expenses incurred on behalf of their employees a taxable increase to unrelated business taxable income (UBTI). Commercial enterprises were equally affected by this law change, but for many not-for-profits, the change comes as a shock. The UBTI inclusions are likely to lead to tax bills at year-end, which is particularly surprising for organizations that historically had no UBTI. Fortunately, the IRS heard the collective pleas for change, and may be remodeling its approach to give not-for-profits some relief.
The countdown to revised ERISA employee benefit plan auditing standards officially began this summer when the AICPA’s Auditing Standards Board (ASB) released Statement on Auditing Standards No. 136, Forming an Opinion on Employee Benefit Plans Subject to ERISA (EBP SAS). The new standard takes effect for plan years ending on or after Dec. 15, 2020. Generally, it will affect audits of calendar year 2020 plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) that are performed in 2021.
Several members of the CBIZ and MHM Not-For-Profit Practice attended the AICPA’s not-for-profit conference in Washington D.C. this summer. The annual conference covers hot topics in accounting, tax, and financial advisory, and other industry trends that practitioners and their clients should have on their radar.
Alternative investments offer attractive features for employee benefit plan sponsors. Investments in real estate, businesses, and partnerships tend to yield higher rates of return when compared to traditional investment vehicles like stocks, bonds, and mutual funds. But those alternative investments could also come with tax consequences. Plan sponsors may not be aware that their plan investments are generating unrelated business taxable income (UBTI), which could lead to compliance issues.
Not-for-profit organizations, private companies, and smaller reporting companies received welcome news on July 17. The Financial Accounting Standards Board (FASB) voted to issue proposals that would delay the effective date for changes to leasing, current expected credit loss (CECL), and hedge accounting. A second proposal would delay accounting for long-term insurance contracts as well.