Not-For-Profit News

February, 2015

Reporting Donated Services for Not-for-Profits

By Renee Bardenwerper, CPA

Manager

Not-for-profit entities are required to record the fairmarket value of donated services they receive if one of the following is true: a) the service creates or enhances a non-financial asset; or, b) the service requires specialized skills and would need to be purchased if not provided by a donation. Up until recently there have been no standards that specifically address when and how to record donated personnel costs from an affiliate. Some organizations have treated these donated services as a gift and recorded the expense and contribution revenue as such. However, other recipients of these affiliated-donated services did not treat the services as a donation and therefore did not record them.

ASU 2013-06 was created to standardize the accounting and reduce the variation in reporting among not-for-profit organizations for this type of transaction. This standard states that recipient not-for-profit entities receiving personnel services (for example wages and fringe benefits) from affiliates must recognize these costs. The cost shall be recorded as either: a) the cost recognized by the affiliate for the personnel providing that service; or, b) the fair value of that service, as if the entity were required to go out and purchase the service.

ASU 2013-06 does not provide specific guidance on how the value of this service received should be recorded and presented. It does, however, state that the increase in net assets associated with the receipt of the services should not be recorded as a contra-expense or contra-asset. It seems logical then that contribution revenue and an expense would be increased by the cost amount determined using one of the two methods mentioned in the previous paragraph. This is similar to the way any other donated service that meets the criteria above would be recorded.

ASU 2013-06 goes into effect prospectively for fiscal years beginning after June 15, 2014, and interim and annual periods thereafter. Early adoption of this standard is permitted. As always, it is a good practice to maintain a record of all contributed service donations and how they are calculated throughout the year.

If you have any questions on donations of services, please contact us.

WKMR Fraud Services

It happens all too often, business owners find that they and their company have been a victim of fraud. Fraud can negatively impact an organization by undermining its financial security and damaging its reputation.

Small businesses are more vulnerable to fraud because resources are usually limited and there is usually a lack of segregation of duties among employees. There are several different types of fraud; however, asset misappropriation is the most common type of fraud to affect small businesses.

Some of the common asset misappropriation schemes are:

* Check Tampering Schemes - An employee steals his or her employer's funds by intercepting, forging, or altering a check drawn on the organization's bank accounts.

* Billing Schemes - An employee causes his or her employer to issue a payment by submitting invoices for fictitious goods or services, inflated invoices, or invoices for personal purchases.

* Expense Reimbursement Schemes - An employee makes a claim for reimbursement for fictitious or inflated business expenses.

Business owners need to be aware of and watch for these fraud schemes. Having strong internal controls in place is an effective way to prevent and detect fraud; however, internal controls can be circumvented through collusion or management override of the controls.

There is action that you can take if you believe fraud is taking place in your organization. At Winter, Kloman, Moter & Repp, S.C. our Certified Fraud Examiners (CFE) can assist you with putting internal controls in place to help prevent and detect fraud.

Our CFEs have the ability to:

* Examine data and records to detect and trace fraudulent

transactions

* Interview suspects to obtain information

* Write investigation reports

* Advise clients as to their findings

* Testify at trial

* Understand the law as it relates to fraud and fraud investigations

* Identify the underlying factors that motivate individuals to commit

fraud

If you suspect fraud is occurring at your business or would like help putting internal controls in place, give us a call.

Contact us:

www.wkmr.com

Brookfield Oconomowoc

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Suite 160 Oconomowoc, WI 53066

Brookfield, WI 53005 262.567.6540

262.797.9050

Watertown

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Watertown, WI 53098

920.261.6767

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At Winter, Kloman, Moter & Repp S.C., our not-for-profit team provides quality audit, accounting, tax, and consulting services to a variety of not-for-profit agencies, government funded businesses, private foundations, and assorted charitable organizations. Our experienced team has helped many not-for-profit organizations throughout Southeastern Wisconsin grow and thrive including:

Human Service Agencies
Cultural & Arts Organizations
Charitable & Religious Organizations
Educational & Day Care Institutions
Professional & Trade Associations
Assisted Living Facilities
HUD/WHEDA Housing Projects
Government-funded For-Profit Businesses

We concentrate on helping you best manage public or donated funds, analyzing how to get the most from your resources and helping you implement your plans to stretch every dollar. Our team of professionals understands your complex financial reporting needs, and will help you to accurately report your finances in an understandable way. We provide the independent audit and accounting services required by many of your funding sources by taking a value-added approach, implementing ever-changing tax reporting requirements, providing information technology consulting, and working with every aspect of your organization to support your success.