Time to address the reporting needs of nonprofits: Commentary
Not that long ago the Financial Accounting Standards Board and the American Institute of CPAs passed new accounting rules allowing small and medium-sized private businesses to use other reporting options outside of the accrual option under the U.S. Generally Accepted Accounting Principles (GAAP), but they excluded all nonprofits, including associations, from this option. This is both bad and good.
FASB and AICPA have not considered how truly diverse the players are in the association and nonprofit community, in both financial size and complexity. These rules could have rescued smaller nonprofits from the growing cost burden of complying with U.S. GAAP and opened the door for discussions with various state regulators about the cost and usefulness of a U.S. GAAP audit for smaller nonprofits.
We are in a time when federal and state governments are pushing more of their services out the door to the nonprofit community while raising contributions continues to be a challenge for nonprofits because of a rocky economy. And, now Congress is considering large charitable gifts as a way to pay off the federal deficit. It is time to discuss the financial burdens of compliance and get creative in reducing those costs while ensuring donor intent is preserved.
By not including nonprofits, FASB and the AICPA might have actually done something right by creating the opportunity to address the reporting needs of the nonprofit industry as a whole. This opens up the possibility of making nonprofit financial statements more meaningful by determining how to show the true value of an organization, and how to reflect the value added to operations by volunteers; also, how to shift the focus from meaningless and harmful input ratios, such as overhead rate, to output ratios, such as miles of streams restored, or number of people fed.
So take the time to let FASB and the AICPA know it is time to address the reporting needs of the nonprofit industry.
Coley is chief financial and administrative officer, Trout Unlimited, Arlington, Va., and VP and president-elect, Greater Washington Society of CPAs. Contact her at HColey@tu.org.
