Has your company considered using IFRS?  The IASB has now issued IFRS for Small and Medium Sized Entities (“IFRS for SMEs”) which is a modification and simplification of full IFRS and private companies now have the option of preparing their financial statements in accordance with US GAAP, OCBOA, full IFRS or IFRS for SMEs.  IFRS and IFRS for SMEs are not OCBOA; rather, they are GAAP.  The final version of IFRS for SMEs, in total, is a mere 230 pages in length!

IFRS for SMEs applies to private companies or those that do have public accountability (i.e. companies that file, or are in the process of filing, with a securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market; or it holds assets in a fiduciary capacity for a broad group of outsiders such as banks, insurance companies, brokers and dealers in securities, pension and mutual funds).

For private companies that are owned by a foreign parent, have a significant foreign investor, supplier or venture partner, IFRS for SMEs is an alternative to the more complicated and voluminous US GAAP.  For such companies using a consistent global financial accounting and reporting standard will increase comparability and improve efficiencies of conducting business with their foreign counterpart.

The key differences in IFRS versus US GAAP:

• Disclosures are simplified in a number of areas including pensions, leases and financial instruments
• LIFO is prohibited
• Goodwill and indefinite life intangible assets are amortized over a period not exceeding ten years
• Depreciation is based on a components approach
• A simplified temporary difference approach to income tax accounting
• Reversal of impairment charges, if certain criteria are met, is allowed
• Accounting for financial assets and liabilities makes greater use of cost

 Key challenges if your company decides to use IFRS for SMEs:

• Understanding the differences between IFRS for SMEs and US GAAP
• The willingness of financial statement users to accept financial statements prepared under IFRS for SMEs
• Working with and accepting a more principles-based set of accounting standards compared to the more rules-based US GAAP
• The impact on taxes and tax planning strategies
• The impact on financial reporting metrics

 The final IFRS for SMEs can be obtained free, after registering, from the IASB website: http://www.iasb.org/IFRS+for+SMEs/IFRS+for+SMEs.htm

 Additional information about IFRS for SMEs and about activities of IASB can be found at www.ifrs.com

Anyone…at least that is how one should think when analyzing fraud risks.

Fraud is a hot topic. If you don’t think so ask someone who used to work for Enron or invested in Madoff’s investment company, they might change your mind. But, because of instances like these, people often think of fraud in large terms, and the mention of the words carries a lot of weight; when very often fraud occurs in all sizes and forms.

But, who is likely to commit fraud? Most people use what is commonly known as the fraud triangle to identify areas where one can commit fraud. The three criteria are Pressure/Incentive, Opportunity, and Rationalization.

The pressure/incentive trait is common with performance based jobs where there is motivation for employees to record false sales to meet sales/performance quotas or up their commission, or other incentive pay.

Opportunity rears its ugly head when an individual has too much control over one key process in a business. Let’s say a cashier at a bank did not have to reconcile the cash drawer at the end of the day. The “opportunity” is there for cash to be stolen without any knowledge of it being gone.

A big one in today’s economy is rationalization. This is commonly referred to as the “I deserve this,” mentality. Where an individual develops a frame of mind where they can justify their actions and commit the fraud even though it is outside their typical ethical guidelines. For example, the company is generating large revenue streams, but an employee needs money to pay for his kid’s summer baseball league; this employee could find themselves thinking “They won’t miss this money, and I can’t say no to my child.”

Now let’s not confuse fraud with honest mistakes, errors, or plain ignorance; there is a difference. Fraud is defined as “intentional” deception…intentional being the key word.

Stay tuned as we post methods to address these instances and help you to minimize fraud in your business.

The National Association of Church Business Administration has organized an event to celebrate the power of peer-learning to address the increasing complexity of running the business of a church in contemporary society. 

Scrutiny of non-profits, including churches, has increased in recent years and has magnified with the current condition of the economy. It is even more important during these times to run the business of a church properly.  Honest mistakes and inadequate safeguards can expose churches to many different negative outcomes. This event will provide an opportunity for leaders from different sizes of churches to meet with each other in a training session format to learn from each other how to manage some of these current challenges.

Debbie Miller, secretary of the Greater Kansas City Chapter of NACBA said “Churches need to be the example to our communities in doing things right and with excellence.” Phil Martin, NACBA’s deputy CEO has also made the point that most church leaders do not get formal training in business administration. With these facts in mind, Church Administration Day is a chance for larger churches to reach out to smaller churches that may not even have an administrator. 

The information above was summarized from the article “Complexity of congregational life inspires first annual event for church administration”, which can be found at the following website: http://www.nacba.net/cad/.

For locations and contact information for regional training events:
http://www.nacba.net/cad/cad_locations.htm

For contacting a NACBA chapter in your area:
http://www.nacba.net/Structure/chapterlst.htm

For more information on National Church Administration Day:
http://www.nacba.net/cad/

For information on the National Association of Church Business Administration:
http://www.nacba.net/index.html

Still with me ? Thanks for keeping up and I hope you find this helpful, either now or in the future.  We’ll continue with the 3rd and final post on switching accounting software.  Read the rest of this entry »

So you’re finally ready to switch accounting software! You’ve made the decision to move forward, you’ve received board or management approval, and hopefully you’ve read our first blog entry about the decision and getting ready process. You’ve allocated a budget, determined the required staffing, established a timeline with determinable goals, now add “a wing and a prayer”. From the bottom of my heart, I wish you the very best. I’ll give you all the advice and pointers in this post that I can think of, and you’ll probably come back to me with 10 more questions or comments after you finish the conversion. Read the rest of this entry »

Has your company received a portion of the American Recovery and Reinvestment Act of 2009 funds or do you anticipate applying to receive such funds?  If so the following are a few key points that should be discussed/considered:Consider appointing a Recovery Act “Czar” who is responsible for becoming familiar with the numerous requirements associated with the Recovery Act funds and communicate them to others in the organization.  They will also be a resource for others in the organization and be indicative of a strong “tone at the tope” for the importance of compliance with Recovery Act awards.

• Additional controls and systems may be required to ensure that Recovery Act funds are separately identified and tracked in the accounting system.  This segregation will have to carry through to the Schedule of Expenditures of Federal Awards and the Data Collection Form.
• Additional controls and systems may be required to meet the stringent reporting requirements to the federal agencies. 
• Internal control over compliance is extremely important to ensure funds are spent appropriately.  Consider the following:
  • Are control procedures over federal expenditures appropriate, working properly and designed to prevent unallowable expenditures?
  • Are additional controls and systems required to ensure that Recovery Act funds are separately identified and tracked?
  • Are new controls needed to meet the stringent reporting requirements to the federal government?
  • If Recovery Act funds are passed down to subrecipients are controls in place to ensure appropriate monitoring and reporting requirements?
• The Federal Audit Clearinghouse is required to provide public access, via the internet, to all single audit reports filed with the FAC for fiscal years ending 9/30/09 and later.  This will include the Schedule of Findings and Questioned Costs, if applicable.
• With the addition of Recovery Act funds, there will likely be more high-risk programs and additional compliance requirements that auditors will need to test.

For more information, see the Government Audit Quality Center Alert No.’s 106, 111 and 112 and the OMB Circular A-133 Compliance Supplement Appendix 7.

With limited resources and tightening budgets, establishing effective internal controls can become tricky. Controlling the cash flowing into and out of the organization is supremely important and can generally be done effectively with the personnel and board members that are already in place. The single most important tenet of a control structure, especially in cash disbursements, is to limit opportunity by segregating duties. Think about the person that performs the most duties related to cash disbursements in your organization. What happens if that person receives some added motivation such as an ill family member with medical bills or a spouse losing a job? Could they rationalize the need for additional funds and ultimately cause damage to your organization? As honest as you perceive people in your organization to be, segregation of duties helps keep these people honest. 

The following are a list of helpful controls that limit the ability to perpetrate and conceal theft of cash. Read the rest of this entry »

Are you considering changing accounting software? It is a daunting task. Your current system has gotten outdated and hardly anyone is supporting it anymore. Maybe you’ve gotten too big or your transactions too complex. Or maybe you are working harder than the system, to generate reports needed by management. I’ve been through a few of these conversions and they are no picnic. They’re brought about by all kinds of different factors and it’s rare that you have someone on staff that has the experience of changing software.

Let’s take a look at some of the things to think about before making that jump. There are times when a change is absolutely necessary, but sometimes you can fall into the “grass is always greener” mentality and make a decision before you’re ready.

Read the rest of this entry »

Earlier this month Deloitte & Touche issued their report on General Motor’s financial statements. According to CFO.com, March 5, 2009 article by Sarah Johnson, D&T’s opinion included the following going concern qualification, “The corporation’s recurring losses from operations, stockholders’ deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern.”

Because of the sluggish economy and market conditions, many organizations are facing pointed questions from their auditors. These “going concern” questions are raised because of certain indicators that include the following:

1. Negative trends – recurring operating losses; working capital deficiencies (current liabilities exceed current assets [therefore cash and assets converting to cash in the current period] are not enouch to pay the obligations that are due); operating activities are not producing cash; adverse key financial ratios.

2. Other financial difficulties – default on bank loans or violations of debt covenants; denial of credit from suppliers; noncompliance with statutory capital requirements; seeking new sources of financing.

3. Internal matters – work stoppages; need to significantly revised operations; substantial dependence on new product; labor difficulties.

4. External matters – legal proceedings that may jeopardize operations; loss of principal customer or supplier; uninsured or underinsured catastrophic loss.

During the audit engagement the auditor, complying with generally accepted auditing standards, obtains information about the continued operations of the organization. If any of the above items have been identified, then the auditor must evaluate management’s plans to overcome the operational obstacles. Management must consider the following in order to eleviate a “going concern” by the auditor:  Read the rest of this entry »

Remember following the North Star…

Once your mission is set everything you do should point in that direction. Everything should be born from that idea. Long-term strategies should be striving to achieve this mission. Shorter-range measurable goals should further the mission. In a nonprofit organization the mission is the purpose. The mission is what keeps the needs of those you are helping in the forefront of your mind.

Do you know your mission? Do you have it memorized? Can you paraphrase it accurately? Is it in your mind daily? Do you start your planning meetings with it? Do you measure the performance of your organization by it?

All members of management, all members of the board, all key employees should be able to reiterate the mission. And not just reiterate, but discuss it with passion. If you believe in it, if the key people in your organization are enthusiastic about it, others will become passionate about it also. And when others are passionate about it, when your staff, your donors, the community are passionate about it, can you imagine the consequences?  Can you define PASSION?