New Accounting Standards Implementation (ASU 2016-14)
(Course #E915)
Presented by: Rodney Smith, CPA CFEPSK LLP Audit Partner
PresenterPresentation Notes©2017 Shelby Systems, Inc.Other brand and product names are trademarks or registered trademarks of the respective holders.
PREPARING FOR THE NEW STANDARDS
In this session you hear about these topics…• History of development and the content of the Accounting
Standards Update (ASU 2016-14) promulgated by the Financial Accounting Standards Board (FASB)
• Implementation considerations, including timeline• Impact of the new standards on your financial reporting
HISTORY
• The current nonprofit accounting standards have been in place with very few changes since about 1995. (Codified as Topic 958 much later)
• In 2011, the Financial Accounting Standards Board (FASB) launched a standards setting project and a research project based upon suggestions from the Not-for-Profit Advisory Committee (NAC).
PresenterPresentation NotesFinancial Accounting Standards Board (a/k/a The Accounting Gods in Norwalk CT) promulgates accounting standards. Nonprofit (a/k/a Not-for-profit) standards are basically added onto or noted as exceptions to accounting standards for commercial enterprises. Topic 958
NAC Key Recommendations
• Revisit current net asset classifications and how they may be relabeled or redefined, in conjunction with improving how liquidity is portrayed in a not-for-profit’s statement of financial position and related notes.
• Improve the statements of activities and cash flows to more clearly communicate financial performance.
PresenterPresentation NotesThe NAC consists of 15 to 20 members who demonstrate (a) a keen interest in and knowledge of financial accounting and reporting matters, (b) experience working within the NFP sector, (c) a commitment to improving financial reporting for users of financial statements, and (d) the ability to provide input on a wide variety of financial reporting matters.SEQUENCED = LIQUIDITYAn alternative view of expenses and cash flows that are not influenced by commercial business principles of performance
NAC Key Recommendations
• Streamline, where possible, existing not-for-profit specific disclosure requirements to improve their relevance and clarity.
IMPLEMENTATION
• On August 16, 2016, FASB issued ASU 2016-14 : Presentation of Financial Statements of Not-for-Profit Entities
• Effective for annual financial statements issued for fiscal years beginning after December 15, 2017
• 2018 for Calendar Year accounting period; otherwise, first fiscal year ending in 2019
IMPLEMENTATION
• Early adoption is permitted, but only for an annual fiscal period.
• If comparative financial statements are issued, then the update must be applied retrospectively, except for two provisions in the new standards – 1) analysis of expenses by natural classification , 2) disclosures about liquidity and availability of resources.
APPLICATION
• Applies to nonprofit organizations, including churches that issue financial statements in accordance with generally accepted accounting principles.
• Does not apply to organizations that generate financial statements for internal use only, but the new standards are still relevant.
MAIN PROVISIONS
• Net assets – two classes instead of three.• Expenses – by natural classification in addition to
functional classification• Investment returns – simply report net of expenses• Liquidity and availability of resources – qualitative
and quantitative information required• Operating cash flows – choose one presentation:
direct method or indirect method
TWO NET ASSET CLASSES
Without donor restrictions•Unrestricted is merely renamed
With donor restrictions•Temporarily restricted and
permanently restricted are combined
PresenterPresentation NotesExample designations: Operating Reserve, Building Repair & Replacement, Missions, School, Support for Auxiliary Ministry
NET ASSETS PRESENTATION
• Classes may be disaggregated on statements or notes but must be totaled if disaggregated on statement of financial position
• Underwater endowment funds classified completely within Net Assets with Donor Restrictions
• Disclosures – Subject to…– Specified purpose– Passage of time– Spending policy and appropriation– When a specific event occurs
EXPENSES
Functional classification•Programs and supporting services
Natural classification•Salaries, benefits, insurance,
utilities, depreciation, interest, etc…
EXPENSE ALLOCATIONS
The financial statements…shall disclose… • the relationship between functional
classification and natural classification for all expenses in an analysis that disaggregates functional expense classifications by their natural expense classifications…
• a description of the methods used to allocate costs among program and support functions…
EXPENSE REPORTING OPTIONS
•Statement of Functional Expenses1
•Schedule in Footnotes2
•Detailed in Statement of Activities3
BEFORE AND AFTER: Functional Expense Allocation Disclosures
Current optional example (before):The costs of providing various programs havebeen summarized on a functional basis in thestatement of activities. Accordingly, certain costshave been allocated among the programs andsupporting services benefited.
BEFORE AND AFTER: Functional Expense Allocation Disclosures
ASU 2016-14 example (after):The financial statements report certain categories ofexpenses that are attributable to more than oneprogram or supporting function. Therefore, theseexpenses require allocation on a reasonable basisthat is consistently applied. The expenses that areallocated include depreciation, interest, and officeand occupancy, which are allocated on a square-footage basis, as well as salaries and benefits, whichare allocated on the basis of estimates of time andeffort.
BEFORE: Activities
Temporarily PermanentlyUnrestricted Restricted Restricted Total
Total support and revenues 6,021,569 (697,855) 96,707 5,420,421
Program expensesChurch ministries 2,313,633 - - 2,313,633 Outreach and missions 1,085,761 - - 1,085,761 School 855,765 - - 855,765
Total program expenses 4,255,159 - - 4,255,159
Supporting servicesGeneral and administrative 960,916 - - 960,916 Fundraising 95,780 - - 95,780
Total supporting services 1,056,696 - - 1,056,696
Total expenses 5,311,855 - - 5,311,855
Change in net assets 709,714 (697,855) 96,707 108,566
SoFP
Page 2
COMMUNITY CHURCH
Statement of Financial Position
December 31, 2015
ASSETS
Cash and cash equivalents$ 586,582
Prepaid expenses123,366
Certificates of deposit500,810
Assets restricted for capital expansion43,397
Property and equipment, net15,116,134
Investments1,158,816
Total Assets$ 17,529,105
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable$ 104,092
Accrued expenses51,682
Deferred revenue8,672
Other liabilities6,030
Note payable1,622,643
Total liabilities1,793,119
Net Assets
Unrestricted
Undesignated13,910,407
Board designated313,674
Total unrestricted14,224,081
Temporarily restricted375,658
Permanently restricted1,136,247
Total net assets15,735,986
Total Liabilities and Net Assets$ 17,529,105
-
&L&"Times New Roman,Italic"&11The accompanying notes are an integral part of these consolidated financial statements.
Activities (2)
Page 3
COMMUNITY CHURCH
Statement of Activities
Year Ended December 31, 2015
TemporarilyPermanently
UnrestrictedRestrictedRestrictedTotal
Support and revenues
Tithes and offerings$ 3,221,149$ 1,242,340$ -$ 4,463,489
Program income and fees658,936--658,936
Tuition revenue179,730--179,730
Net investment and interest income-21,55996,707118,266
Net assets released from restrictions1,961,754(1,961,754)--
TemporarilyPermanently
UnrestrictedRestrictedRestrictedTotal
Total support and revenues6,021,569(697,855)96,7075,420,4212,874,271
Program expenses
Church ministries2,313,633--2,313,633
Outreach and missions1,085,761--1,085,761
School855,765--855,765
Total program expenses4,255,159--4,255,159
Supporting services
General and administrative960,916--960,916
Fundraising95,780--95,780
Total supporting services1,056,696--1,056,696
Total expenses5,311,855--5,311,855
Change in net assets709,714(697,855)96,707108,566
Net assets at beginning of year13,355,2071,073,5131,039,54015,468,260
Net assets at end of year$ 14,064,921$ 375,658$ 1,136,247$ 15,576,826
159,160--159,160
&L&"Times New Roman,Italic"&11See independent accountants' review report.The accompanying notes are an integral part of these financial statements.
Carol.Nichols:Plug to get to total TRNA from SS-1-1
Activities
Page 3
COMMUNITY CHURCH
Statement of Activities
Year Ended December 31, 2015
TemporarilyPermanently
UnrestrictedRestrictedRestrictedTotal
Support and revenues
Tithes and offerings$ 4,110,037$ 1,242,340$ -$ 5,352,377
Program income and fees658,936--658,936
Tuition revenue179,730--179,730
Net investment and interest income-21,55996,707118,266
Net assets released from restrictions1,961,754(1,961,754)--
Total support and revenues6,910,457(697,855)96,7076,309,3093,763,159
Program expenses
Ministry3,251,584--3,251,584
Evangelism323,592--323,592
Worship325,685--325,685
Discipleship113,633--113,633
Fellowship----
School176,642--176,642
Designated expenses267,431--267,431
Total program expenses4,458,567--4,458,567
Supporting services
General and administrative1,583,016--1,583,016
Fundraising----
Total supporting services1,583,016--1,583,016
Total expenses6,041,583--6,041,583
Change in net assets868,874(697,855)96,707267,726
Net assets at beginning of year13,355,2071,073,5131,039,54015,468,260
Net assets at end of year$ 14,224,081$ 375,658$ 1,136,247$ 15,735,986
----
&L&"Times New Roman,Italic"&11See independent accountants' review report.The accompanying notes are an integral part of these financial statements.
Carol.Nichols:Plug to get to total TRNA from SS-1-1
SoFE
Page 4
COMMUNITY CHURCH
Statement of Functional Expenses
Year Ended December 31, 2015
Program ServicesSupporting Services
ChurchOutreach andChurchFund
MinistriesMissionsSchoolAdministrationRaisingTotal
Salaries and wages$ 1,277,451$ 341,690$ 435,680$ 294,922$ 42,804$ 2,392,547
Employee benefits472,657126,425161,202109,12115,837885,2420.37
Professional development8,8592,65514,38814,074-39,9760.37
Insurance54,88316,77711,58940,375187123,8110.37
Interest expense20,3076,2074,28814,939-45,7410.37
Office expenses7,5142,3889,96412,6092,45834,9330.37
Curriculum14,3672,66987,691--104,7270.37
Printing5,31632,4816,1556,73314,28864,9730.37
Supplies74,56071,3324,13427,875695178,5960.37
Contract services28,587-12,00064,515-105,1020.37
Professional fees1,5651,4594,20021,50012,00040,7240.37
Food, dining and kitchen54,0963,80931,446-3,55692,9070.37
Missionary support-164,519---164,5190.37
Cooperative giving-207,542---207,5420.37
Local mission support-57,9931,655--59,6480.37
Repairs and maintenance8,5601,3654,13457,054-71,1130.37
Utilities121,95521,65934,65087,8322,467268,5630.37
Depreciation162,95624,79132,589209,3671,488431,1910.37
Total$ 2,313,633$ 1,085,761$ 855,765$ 960,916$ 95,780$ 5,311,855
801,617336,243445,116- 0(448,747)(450,598)
Cash Flow
Page 5
COMMUNITY CHURCH
Statement of Cash Flows
Year Ended December 31, 2015
Cash flows from operating activities:
Change in net assets$ 267,726
Adjustments to reconcile change in net assets to net cash
and cash equivalents provided by operating activities:
Depreciation755,574
Loss on disposal of property and equipment1,010
Contributions restricted for capital expansion(916,864)
(Increase) decrease in assets:
Accounts receivable-
Prepaid expenses16,176
Increase (decrease) in liabilities:
Accounts payable64,501
Accrued expenses5,522
Deferred revenue(2,897)
Other liabilities6,030
Net cash and cash equivalents provided by operating activities196,778
Cash flows from investing activities:
Change in assets restricted for Church expansion798,569
Purchases and maturities of certificates of deposit, net(50,810)
Proceeds from disposal of property and equipment-
Purchases of property and equipment(1,109,579)
Net cash and cash equivalents used in investing activities(361,820)
Cash flows from financing activities:
Payments on note payable(477,357)
Contributions restricted for capital expansion916,864
Net cash and cash equivalents provided by financing activities439,507
Net change in cash and cash equivalents274,465
Cash and cash equivalents at beginning of year431,393
Cash and cash equivalents at end of year$ 705,858
Supplemental disclosure:
Cash paid for interest and expensed$ 77,258
Noncash investing and financing activity:
Acquisition of property and equipment$ 3,013,227
Less amount paid in cash(913,227)
Note payable conveyed to seller$ 2,100,000
&L&"Times New Roman,Italic"&11The accompanying notes are an integral part of these consolidated financial statements.
AFTER: Activities
Without WithRestrictions Restrictions Total
Total support and revenues 6,021,569 (601,148) 5,420,421
Program expensesChurch ministries 2,313,633 - 2,313,633 Outreach and missions 1,085,761 - 1,085,761 School 855,765 - 855,765
Total program expenses 4,255,159 - 4,255,159
Supporting servicesGeneral and administrative 960,916 - 960,916 Fundraising 95,780 - 95,780
Total supporting services 1,056,696 - 1,056,696
Total expenses 5,311,855 - 5,311,855
Change in net assets 709,714 (601,148) 108,566
SoFP
Page 2
COMMUNITY CHURCH
Statement of Financial Position
December 31, 2015
ASSETS
Cash and cash equivalents$ 586,582
Prepaid expenses123,366
Certificates of deposit500,810
Assets restricted for capital expansion43,397
Property and equipment, net15,116,134
Investments1,158,816
Total Assets$ 17,529,105
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable$ 104,092
Accrued expenses51,682
Deferred revenue8,672
Other liabilities6,030
Note payable1,622,643
Total liabilities1,793,119
Net Assets
Unrestricted
Undesignated13,910,407
Board designated313,674
Total unrestricted14,224,081
Temporarily restricted375,658
Permanently restricted1,136,247
Total net assets15,735,986
Total Liabilities and Net Assets$ 17,529,105
-
&L&"Times New Roman,Italic"&11The accompanying notes are an integral part of these consolidated financial statements.
Activities (2)
Page 3
COMMUNITY CHURCH
Statement of Activities
Year Ended December 31, 2015
TemporarilyPermanently
UnrestrictedRestrictedRestrictedTotal
Support and revenues
Tithes and offerings$ 3,221,149$ 1,242,340$ -$ 4,463,489
Program income and fees658,936--658,936
Tuition revenue179,730--179,730
Net investment and interest income-21,55996,707118,266
Net assets released from restrictions1,961,754(1,961,754)--
WithoutWith
RestrictionsRestrictionsTotal
Total support and revenues6,021,569(601,148)-5,420,4212,874,271
Program expenses
Church ministries2,313,633--2,313,633
Outreach and missions1,085,761--1,085,761
School855,765--855,765
Total program expenses4,255,159--4,255,159
Supporting services
General and administrative960,916--960,916
Fundraising95,780--95,780
Total supporting services1,056,696--1,056,696
Total expenses5,311,855--5,311,855
Change in net assets709,714(601,148)-108,566
Net assets at beginning of year13,355,2071,073,5131,039,54015,468,260
Net assets at end of year$ 14,064,921$ 472,365$ 1,039,540$ 15,576,826
159,160(96,707)96,707159,160
&L&"Times New Roman,Italic"&11See independent accountants' review report.The accompanying notes are an integral part of these financial statements.
Carol.Nichols:Plug to get to total TRNA from SS-1-1
Activities
Page 3
COMMUNITY CHURCH
Statement of Activities
Year Ended December 31, 2015
TemporarilyPermanently
UnrestrictedRestrictedRestrictedTotal
Support and revenues
Tithes and offerings$ 4,110,037$ 1,242,340$ -$ 5,352,377
Program income and fees658,936--658,936
Tuition revenue179,730--179,730
Net investment and interest income-21,55996,707118,266
Net assets released from restrictions1,961,754(1,961,754)--
Total support and revenues6,910,457(697,855)96,7076,309,3093,763,159
Program expenses
Ministry3,251,584--3,251,584
Evangelism323,592--323,592
Worship325,685--325,685
Discipleship113,633--113,633
Fellowship----
School176,642--176,642
Designated expenses267,431--267,431
Total program expenses4,458,567--4,458,567
Supporting services
General and administrative1,583,016--1,583,016
Fundraising----
Total supporting services1,583,016--1,583,016
Total expenses6,041,583--6,041,583
Change in net assets868,874(697,855)96,707267,726
Net assets at beginning of year13,355,2071,073,5131,039,54015,468,260
Net assets at end of year$ 14,224,081$ 375,658$ 1,136,247$ 15,735,986
----
&L&"Times New Roman,Italic"&11See independent accountants' review report.The accompanying notes are an integral part of these financial statements.
Carol.Nichols:Plug to get to total TRNA from SS-1-1
SoFE
Page 4
COMMUNITY CHURCH
Statement of Functional Expenses
Year Ended December 31, 2015
Program ServicesSupporting Services
ChurchOutreach andChurchFund
MinistriesMissionsSchoolAdministrationRaisingTotal
Salaries and wages$ 1,277,451$ 341,690$ 435,680$ 294,922$ 42,804$ 2,392,547
Employee benefits472,657126,425161,202109,12115,837885,2420.37
Professional development8,8592,65514,38814,074-39,9760.37
Insurance54,88316,77711,58940,375187123,8110.37
Interest expense20,3076,2074,28814,939-45,7410.37
Office expenses7,5142,3889,96412,6092,45834,9330.37
Curriculum14,3672,66987,691--104,7270.37
Printing5,31632,4816,1556,73314,28864,9730.37
Supplies74,56071,3324,13427,875695178,5960.37
Contract services28,587-12,00064,515-105,1020.37
Professional fees1,5651,4594,20021,50012,00040,7240.37
Food, dining and kitchen54,0963,80931,446-3,55692,9070.37
Missionary support-164,519---164,5190.37
Cooperative giving-207,542---207,5420.37
Local mission support-57,9931,655--59,6480.37
Repairs and maintenance8,5601,3654,13457,054-71,1130.37
Utilities121,95521,65934,65087,8322,467268,5630.37
Depreciation162,95624,79132,589209,3671,488431,1910.37
Total$ 2,313,633$ 1,085,761$ 855,765$ 960,916$ 95,780$ 5,311,855
801,617336,243445,116- 0(448,747)(450,598)
Cash Flow
Page 5
COMMUNITY CHURCH
Statement of Cash Flows
Year Ended December 31, 2015
Cash flows from operating activities:
Change in net assets$ 267,726
Adjustments to reconcile change in net assets to net cash
and cash equivalents provided by operating activities:
Depreciation755,574
Loss on disposal of property and equipment1,010
Contributions restricted for capital expansion(916,864)
(Increase) decrease in assets:
Accounts receivable-
Prepaid expenses16,176
Increase (decrease) in liabilities:
Accounts payable64,501
Accrued expenses5,522
Deferred revenue(2,897)
Other liabilities6,030
Net cash and cash equivalents provided by operating activities196,778
Cash flows from investing activities:
Change in assets restricted for Church expansion798,569
Purchases and maturities of certificates of deposit, net(50,810)
Proceeds from disposal of property and equipment-
Purchases of property and equipment(1,109,579)
Net cash and cash equivalents used in investing activities(361,820)
Cash flows from financing activities:
Payments on note payable(477,357)
Contributions restricted for capital expansion916,864
Net cash and cash equivalents provided by financing activities439,507
Net change in cash and cash equivalents274,465
Cash and cash equivalents at beginning of year431,393
Cash and cash equivalents at end of year$ 705,858
Supplemental disclosure:
Cash paid for interest and expensed$ 77,258
Noncash investing and financing activity:
Acquisition of property and equipment$ 3,013,227
Less amount paid in cash(913,227)
Note payable conveyed to seller$ 2,100,000
&L&"Times New Roman,Italic"&11The accompanying notes are an integral part of these consolidated financial statements.
AFTER: Activities
Without WithRestrictions Restrictions Total
Total support and revenues 6,021,569 (601,148) 5,420,421
Program expensesChurch ministries 2,313,633 - 2,313,633 Outreach and missions 1,085,761 - 1,085,761 School 855,765 - 855,765
Total program expenses 4,255,159 - 4,255,159
Supporting servicesGeneral and administrative 960,916 - 960,916 Fundraising 95,780 - 95,780
Total supporting services 1,056,696 - 1,056,696
Total expenses 5,311,855 - 5,311,855
Change in net assets 709,714 (601,148) 108,566
SoFP
Page 2
COMMUNITY CHURCH
Statement of Financial Position
December 31, 2015
ASSETS
Cash and cash equivalents$ 586,582
Prepaid expenses123,366
Certificates of deposit500,810
Assets restricted for capital expansion43,397
Property and equipment, net15,116,134
Investments1,158,816
Total Assets$ 17,529,105
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable$ 104,092
Accrued expenses51,682
Deferred revenue8,672
Other liabilities6,030
Note payable1,622,643
Total liabilities1,793,119
Net Assets
Unrestricted
Undesignated13,910,407
Board designated313,674
Total unrestricted14,224,081
Temporarily restricted375,658
Permanently restricted1,136,247
Total net assets15,735,986
Total Liabilities and Net Assets$ 17,529,105
-
&L&"Times New Roman,Italic"&11The accompanying notes are an integral part of these consolidated financial statements.
Activities (2)
Page 3
COMMUNITY CHURCH
Statement of Activities
Year Ended December 31, 2015
TemporarilyPermanently
UnrestrictedRestrictedRestrictedTotal
Support and revenues
Tithes and offerings$ 3,221,149$ 1,242,340$ -$ 4,463,489
Program income and fees658,936--658,936
Tuition revenue179,730--179,730
Net investment and interest income-21,55996,707118,266
Net assets released from restrictions1,961,754(1,961,754)--
WithoutWith
RestrictionsRestrictionsTotal
Total support and revenues6,021,569(601,148)-5,420,4212,874,271
Program expenses
Church ministries2,313,633--2,313,633
Outreach and missions1,085,761--1,085,761
School855,765--855,765
Total program expenses4,255,159--4,255,159
Supporting services
General and administrative960,916--960,916
Fundraising95,780--95,780
Total supporting services1,056,696--1,056,696
Total expenses5,311,855--5,311,855
Change in net assets709,714(601,148)-108,566
Net assets at beginning of year13,355,2071,073,5131,039,54015,468,260
Net assets at end of year$ 14,064,921$ 472,365$ 1,039,540$ 15,576,826
159,160(96,707)96,707159,160
&L&"Times New Roman,Italic"&11See independent accountants' review report.The accompanying notes are an integral part of these financial statements.
Carol.Nichols:Plug to get to total TRNA from SS-1-1
Activities
Page 3
COMMUNITY CHURCH
Statement of Activities
Year Ended December 31, 2015
TemporarilyPermanently
UnrestrictedRestrictedRestrictedTotal
Support and revenues
Tithes and offerings$ 4,110,037$ 1,242,340$ -$ 5,352,377
Program income and fees658,936--658,936
Tuition revenue179,730--179,730
Net investment and interest income-21,55996,707118,266
Net assets released from restrictions1,961,754(1,961,754)--
Total support and revenues6,910,457(697,855)96,7076,309,3093,763,159
Program expenses
Ministry3,251,584--3,251,584
Evangelism323,592--323,592
Worship325,685--325,685
Discipleship113,633--113,633
Fellowship----
School176,642--176,642
Designated expenses267,431--267,431
Total program expenses4,458,567--4,458,567
Supporting services
General and administrative1,583,016--1,583,016
Fundraising----
Total supporting services1,583,016--1,583,016
Total expenses6,041,583--6,041,583
Change in net assets868,874(697,855)96,707267,726
Net assets at beginning of year13,355,2071,073,5131,039,54015,468,260
Net assets at end of year$ 14,224,081$ 375,658$ 1,136,247$ 15,735,986
----
&L&"Times New Roman,Italic"&11See independent accountants' review report.The accompanying notes are an integral part of these financial statements.
Carol.Nichols:Plug to get to total TRNA from SS-1-1
SoFE
Page 4
COMMUNITY CHURCH
Statement of Functional Expenses
Year Ended December 31, 2015
Program ServicesSupporting Services
ChurchOutreach andChurchFund
MinistriesMissionsSchoolAdministrationRaisingTotal
Salaries and wages$ 1,277,451$ 341,690$ 435,680$ 294,922$ 42,804$ 2,392,547
Employee benefits472,657126,425161,202109,12115,837885,2420.37
Professional development8,8592,65514,38814,074-39,9760.37
Insurance54,88316,77711,58940,375187123,8110.37
Interest expense20,3076,2074,28814,939-45,7410.37
Office expenses7,5142,3889,96412,6092,45834,9330.37
Curriculum14,3672,66987,691--104,7270.37
Printing5,31632,4816,1556,73314,28864,9730.37
Supplies74,56071,3324,13427,875695178,5960.37
Contract services28,587-12,00064,515-105,1020.37
Professional fees1,5651,4594,20021,50012,00040,7240.37
Food, dining and kitchen54,0963,80931,446-3,55692,9070.37
Missionary support-164,519---164,5190.37
Cooperative giving-207,542---207,5420.37
Local mission support-57,9931,655--59,6480.37
Repairs and maintenance8,5601,3654,13457,054-71,1130.37
Utilities121,95521,65934,65087,8322,467268,5630.37
Depreciation162,95624,79132,589209,3671,488431,1910.37
Total$ 2,313,633$ 1,085,761$ 855,765$ 960,916$ 95,780$ 5,311,855
801,617336,243445,116- 0(448,747)(450,598)
Cash Flow
Page 5
COMMUNITY CHURCH
Statement of Cash Flows
Year Ended December 31, 2015
Cash flows from operating activities:
Change in net assets$ 267,726
Adjustments to reconcile change in net assets to net cash
and cash equivalents provided by operating activities:
Depreciation755,574
Loss on disposal of property and equipment1,010
Contributions restricted for capital expansion(916,864)
(Increase) decrease in assets:
Accounts receivable-
Prepaid expenses16,176
Increase (decrease) in liabilities:
Accounts payable64,501
Accrued expenses5,522
Deferred revenue(2,897)
Other liabilities6,030
Net cash and cash equivalents provided by operating activities196,778
Cash flows from investing activities:
Change in assets restricted for Church expansion798,569
Purchases and maturities of certificates of deposit, net(50,810)
Proceeds from disposal of property and equipment-
Purchases of property and equipment(1,109,579)
Net cash and cash equivalents used in investing activities(361,820)
Cash flows from financing activities:
Payments on note payable(477,357)
Contributions restricted for capital expansion916,864
Net cash and cash equivalents provided by financing activities439,507
Net change in cash and cash equivalents274,465
Cash and cash equivalents at beginning of year431,393
Cash and cash equivalents at end of year$ 705,858
Supplemental disclosure:
Cash paid for interest and expensed$ 77,258
Noncash investing and financing activity:
Acquisition of property and equipment$ 3,013,227
Less amount paid in cash(913,227)
Note payable conveyed to seller$ 2,100,000
&L&"Times New Roman,Italic"&11The accompanying notes are an integral part of these consolidated financial statements.
AFTER: Functional Expense Allocation
Church Outreach and General and FundMinistries Missions School Administrative Raising Total
Salaries and wages 1,277,451$ 341,690$ 435,680$ 294,922$ 42,804$ 2,392,547$ Employee benefits 472,657 126,425 161,202 109,121 15,837 885,242 Professional development 8,859 2,655 14,388 14,074 - 39,976 Insurance 54,883 16,777 11,589 40,375 187 123,811 Interest expense 20,307 6,207 4,288 14,939 - 45,741 Office expenses 7,514 2,388 9,964 12,609 2,458 34,933 Curriculum 14,367 2,669 87,691 - - 104,727 Printing 5,316 32,481 6,155 6,733 14,288 64,973 Supplies 74,560 71,332 4,134 27,875 695 178,596 Contract services 28,587 - 12,000 64,515 - 105,102 Professional fees 1,565 1,459 4,200 21,500 12,000 40,724 Food, dining and kitchen 54,096 3,809 31,446 - 3,556 92,907 Missionary support - 164,519 - - - 164,519 Cooperative giving - 207,542 - - - 207,542 Local mission support - 57,993 1,655 - - 59,648 Repairs and maintenance 8,560 1,365 4,134 57,054 - 71,113 Utilities 121,955 21,659 34,650 87,832 2,467 268,563 Depreciation 162,956 24,791 32,589 209,367 1,488 431,191 Total 2,313,633$ 1,085,761$ 855,765$ 960,916$ 95,780$ 5,311,855$
Program Services Supporting Services
SoFP
Page 2
COMMUNITY CHURCH
Statement of Financial Position
December 31, 2015
ASSETS
Cash and cash equivalents$ 586,582
Prepaid expenses123,366
Certificates of deposit500,810
Assets restricted for capital expansion43,397
Property and equipment, net15,116,134
Investments1,158,816
Total Assets$ 17,529,105
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable$ 104,092
Accrued expenses51,682
Deferred revenue8,672
Other liabilities6,030
Note payable1,622,643
Total liabilities1,793,119
Net Assets
Unrestricted
Undesignated13,910,407
Board designated313,674
Total unrestricted14,224,081
Temporarily restricted375,658
Permanently restricted1,136,247
Total net assets15,735,986
Total Liabilities and Net Assets$ 17,529,105
-
&L&"Times New Roman,Italic"&11The accompanying notes are an integral part of these consolidated financial statements.
Activities
Page 3
COMMUNITY CHURCH
Statement of Activities
Year Ended December 31, 2015
TemporarilyPermanently
UnrestrictedRestrictedRestrictedTotal
Support and revenues
Tithes and offerings$ 4,110,037$ 1,242,340$ -$ 5,352,377
Program income and fees658,936--658,936
Tuition revenue179,730--179,730
Net investment and interest income-21,55996,707118,266
Net assets released from restrictions1,961,754(1,961,754)--
Total support and revenues6,910,457(697,855)96,7076,309,3093,763,159
Program expenses
Ministry3,251,584--3,251,584
Evangelism323,592--323,592
Worship325,685--325,685
Discipleship113,633--113,633
Fellowship----
School176,642--176,642
Designated expenses267,431--267,431
Total program expenses4,458,567--4,458,567
Supporting services
General and administrative1,583,016--1,583,016
Fundraising----
Total supporting services1,583,016--1,583,016
Total expenses6,041,583--6,041,583
Change in net assets868,874(697,855)96,707267,726
Net assets at beginning of year13,355,2071,073,5131,039,54015,468,260
Net assets at end of year$ 14,224,081$ 375,658$ 1,136,247$ 15,735,986
----
&L&"Times New Roman,Italic"&11See independent accountants' review report.The accompanying notes are an integral part of these financial statements.
Carol.Nichols:Plug to get to total TRNA from SS-1-1
SoFE
Page 4
COMMUNITY CHURCH
Statement of Functional Expenses
Year Ended December 31, 2015
Program ServicesSupporting Services
ChurchOutreach andGeneral andFund
MinistriesMissionsSchoolAdministrativeRaisingTotal
Salaries and wages$ 1,277,451$ 341,690$ 435,680$ 294,922$ 42,804$ 2,392,547
Employee benefits472,657126,425161,202109,12115,837885,2420.37
Professional development8,8592,65514,38814,074-39,9760.37
Insurance54,88316,77711,58940,375187123,8110.37
Interest expense20,3076,2074,28814,939-45,7410.37
Office expenses7,5142,3889,96412,6092,45834,9330.37
Curriculum14,3672,66987,691--104,7270.37
Printing5,31632,4816,1556,73314,28864,9730.37
Supplies74,56071,3324,13427,875695178,5960.37
Contract services28,587-12,00064,515-105,1020.37
Professional fees1,5651,4594,20021,50012,00040,7240.37
Food, dining and kitchen54,0963,80931,446-3,55692,9070.37
Missionary support-164,519---164,5190.37
Cooperative giving-207,542---207,5420.37
Local mission support-57,9931,655--59,6480.37
Repairs and maintenance8,5601,3654,13457,054-71,1130.37
Utilities121,95521,65934,65087,8322,467268,5630.37
Depreciation162,95624,79132,589209,3671,488431,1910.37
Total$ 2,313,633$ 1,085,761$ 855,765$ 960,916$ 95,780$ 5,311,855
801,617336,243445,116- 0(448,747)(450,598)
Cash Flow
Page 5
COMMUNITY CHURCH
Statement of Cash Flows
Year Ended December 31, 2015
Cash flows from operating activities:
Change in net assets$ 267,726
Adjustments to reconcile change in net assets to net cash
and cash equivalents provided by operating activities:
Depreciation755,574
Loss on disposal of property and equipment1,010
Contributions restricted for capital expansion(916,864)
(Increase) decrease in assets:
Accounts receivable-
Prepaid expenses16,176
Increase (decrease) in liabilities:
Accounts payable64,501
Accrued expenses5,522
Deferred revenue(2,897)
Other liabilities6,030
Net cash and cash equivalents provided by operating activities196,778
Cash flows from investing activities:
Change in assets restricted for Church expansion798,569
Purchases and maturities of certificates of deposit, net(50,810)
Proceeds from disposal of property and equipment-
Purchases of property and equipment(1,109,579)
Net cash and cash equivalents used in investing activities(361,820)
Cash flows from financing activities:
Payments on note payable(477,357)
Contributions restricted for capital expansion916,864
Net cash and cash equivalents provided by financing activities439,507
Net change in cash and cash equivalents274,465
Cash and cash equivalents at beginning of year431,393
Cash and cash equivalents at end of year$ 705,858
Supplemental disclosure:
Cash paid for interest and expensed$ 77,258
Noncash investing and financing activity:
Acquisition of property and equipment$ 3,013,227
Less amount paid in cash(913,227)
Note payable conveyed to seller$ 2,100,000
&L&"Times New Roman,Italic"&11The accompanying notes are an integral part of these consolidated financial statements.
EXPENSE REPORTING CONSIDERATIONS
• Code multiple debits at time of accounts payable, cash disbursement and / or general journal entry?
• Export natural classifications to a formula-driven MS Excel workbook for functional allocation?
• Chart of accounts revisions – a certain digit in the account code for a natural expense could relate to functional expense column in the “matrix”?
• Utilize MS Excel pivot tables?
EXPENSE REPORTING CONSIDERATIONS
• Coding multiple debits at time of accounts payable, cash disbursement and / or general journal entry, would be very cumbersome – not necessary.
• Export natural classifications to a formula-driven MS Excel workbook for functional allocation – expected to be most common method.
• Chart of accounts revisions – a certain digit in the account code for a natural expense could relate to functional expense column in the “matrix” – possibly a time saver
• Utilize MS Excel pivot tables – for advanced Excel users• Limit the number of programs reported for simplicity
INVESTMENT ACTIVITIES
• Investment returns only need to be reported in the aggregate and net of expenses.
• Disclosure of expenses is no longer required.• Net investment returns may be allocated
between operating activities and non-operating activities, if an intermediate measure of operations is presented.
DISCLOSURES ABOUT LIQUIDITY AND AVAILABILITY OF RESOURCES
• Qualitative information that is useful in assessing an entity’s liquidity…
• Quantitative information about financial assets available within one year of the statement of financial position date for general expenditure, i.e., cash, receivables, short-term investments, etc…
• Also disclose external limits imposed by donors, laws and contracts with others, as well as internal limits imposed by governing board decisions
LIQUIDITY AND AVAILABILITY OF RESOURCESSample Disclosure
3 – Liquidity and Availability of ResourcesThe Church operates under a balanced budget for activities supported byunrestricted tithes and offerings. Its Finance Committee (the “Board”) isresponsible for monitoring the liquidity necessary to meet the Church’s operatingneeds, and meets periodically throughout the year to evaluate the actual results offinancial operations versus the budget. Church management, in accordance withChurch policy and/or in collaboration with the Board, also appropriates resourcesfrom donor-restricted and Board-designated accounts as needed.The Church holds an investment portfolio comprised of a perpetual endowmentand Board-designated funds purposed for the support of mission efforts. (SeeNotes 4, 5 and 8.)Additionally, the Church maintains several Board-designated and donor-restricted ministry funds purposed for various other activities consistent with the mission of the Church (See Notes 9 and 10).
LIQUIDITY AND AVAILABILITY OF RESOURCESSample Disclosure (continued)
Financial assets available for general expenditure, that is, without donorrestrictions limiting their use or without requiring specific action of the Board,within one year of the date of the statement of financial position are comprised ofthe following:
Cash and cash equivalents 1,107,436$ Investments 781,800
1,889,236 Donor-imposed restrictions:
Endowment funds (335,880) Other donor restrictions (394,236)
Board designations:Missions (418,427) Other (179,217)
Financial assets available to meet generalexpenditure needs within one year 561,476$
Sheet1
Cash and cash equivalents$ 1,107,436
Investments781,800
1,889,236
Donor-imposed restrictions:
Endowment funds(335,880)
Other donor restrictions(394,236)
Board designations:
Missions(418,427)
Other(179,217)
Financial assets available to meet general
expenditure needs within one year$ 561,476
2017
Cash and cash equivalents$ 435,049
Tuiton receivable, net19,773
Investments-
454,822
Board designations:
Maintenance fund(200,000)
Financial assets available to meet general
expenditures needs within one year$ 254,822
OPERATING CASH FLOWS
• Indirect method is recommended under current standards.
• If direct method is presented, then reconciliation to indirect method is required.
• The new standards allow the choice of either the indirect method or direct method.
• No reconciliation is required if direct method is chosen.
OPERATING CASH FLOWS
DIRECT METHOD:Cash Flows From Operating Activities:
Tithes and offerings 5,790,782$ Program service fees 285,800 Interest income 62 Payments for ministry activities (898,250) Payments to employees and for supporting services (3,505,378) Interest paid (200,206)
Net cash and cash equivalents provided by operating activities 1,472,810
INDIRECT METHOD:Reconciliation of change in net assets to net cash and cash equivalents provided by operating activities:
Change in net assets 863,132$ Depreciation and amortization expense 596,515 (Increase) decrease in assets: Prepaid expenses and deposits 792 Increase (decrease) in liabilities: Accounts payable and accrued expenses 12,371
Net cash and cash equivalents provided by operating activities 1,472,810
Sheet1
DIRECT METHOD:
Cash Flows From Operating Activities:
Tithes and offerings$ 5,790,782
Program service fees285,800
Interest income62
Payments for ministry activities(898,250)
Payments to employees and for supporting services(3,505,378)
Interest paid(200,206)
Net cash and cash equivalents provided by operating activities1,472,810
INDIRECT METHOD:
Reconciliation of change in net assets to net cash and cash equivalents
provided by operating activities:
Change in net assets$ 863,132
Depreciation and amortization expense596,515
(Increase) decrease in assets:
Prepaid expenses and deposits792
Increase (decrease) in liabilities:
Accounts payable and accrued expenses12,371
Net cash and cash equivalents provided by operating activities1,472,810
PHASE 1 TRANSITION
• Assuming no early adoption, for example, if 2017 financial statements are presented in comparison to 2018, then 2017 would have to be restated to conform.
• Two exceptions. The following could be omitted:– Analysis of expenses by both functional and natural
classifications– Disclosures about liquidity and availability of resources
IMPACT ON CHURCHES
• Consider internal vs. external reporting needs.• If you have an annual audit, review or
compilation, discuss expectations, implementation date and fee adjustments with your CPA firm.
• This could be a catalyst to make changes to your chart of accounts and even modify (simplify) accounting policies.
Rodney Smith, CPA CFEPSK LLP Audit Partner
As a partner with PSK LLP, Rodney Smith, CPA serves churches and religious organizations
across the nation. Prior to joining the firm in 2004, Rodney garnered 16 of years of experience as a Controller/CFO in the private sector for an entrepreneurial group of companies. Currently, his practice emphasis is in the area of nonprofit
auditing and consulting. This includes fraud prevention and best practices for policies and
procedures, particularly for churches and ministry organizations.
mailto:[email protected]
New Accounting Standards Implementation (ASU 2016-14)�(Course #E915)PREPARING FOR THE NEW STANDARDSHISTORYNAC Key RecommendationsNAC Key RecommendationsIMPLEMENTATIONIMPLEMENTATIONAPPLICATIONMAIN PROVISIONSTwo Net asset classesNET ASSETS PRESENTATIONExpensesEXPENSE ALLOCATIONSExpense reporting optionsBEFORE AND AFTER: Functional Expense Allocation DisclosuresBEFORE AND AFTER: Functional Expense Allocation DisclosuresBEFORE: ActivitiesAFTER: ActivitiesAFTER: ActivitiesAFTER: Functional Expense AllocationEXPENSE REPORTING CONSIDERATIONSEXPENSE REPORTING CONSIDERATIONSINVESTMENT ACTIVITIESDISCLOSURES ABOUT LIQUIDITY AND AVAILABILITY OF RESOURCESLIQUIDITY AND AVAILABILITY OF RESOURCES�Sample DisclosureLIQUIDITY AND AVAILABILITY OF RESOURCES�Sample Disclosure (continued)OPERATING CASH FLOWSOPERATING CASH FLOWSPHASE 1 TRANSITIONIMPACT ON CHURCHESRodney Smith, CPA CFE�PSK LLP Audit Partner�[email protected]��As a partner with PSK LLP, Rodney Smith, CPA serves churches and religious organizations across the nation. Prior to joining the firm in 2004, Rodney garnered 16 of years of experience as a Controller/CFO in the private sector for an entrepreneurial group of companies. Currently, his practice emphasis is in the area of nonprofit auditing and consulting. This includes fraud prevention and best practices for policies and procedures, particularly for churches and ministry organizations. ��