It’s that time of the year again. The auditors are on site, diligently performing their fieldwork. You know that just right around the corner you will be drafting and reviewing annual financial statements and related disclosures. As you consider your annual disclosure reporting requirements, we wanted to share with you some common financial reporting challenges that not-for-profit (NFP) organizations face.
What areas within the financial statements can be streamlined or improved? Below, I will highlight my top considerations that should be given when drafting your NFP’s financial statements this year:
- Consider the readers or users of your financial statements. What will they focus on? Once identified, these are the areas in which you should focus your time.
- Who are your organization’s “competitors”? Consider obtaining financial statements of these like organizations and comparing for consistency. It also is a great idea to identify areas for improvement within your NFP’s financial statements.
- If a disclosure is discussing matters or transactions that are greater than two years old, can the disclosure be deleted or is it a disclosure that is still required? If the latter, consider disclosing current year matters before old or outdated information.
- Does your organization footnote reflect the current operations and programs of the organization? Consider reaching outside of the accounting or finance department to facilitate drafting of this disclosure.
- Does your statement of financial position barely fit on one page? Consider collapsing line items that represent less than 1% of total assets.
- Consider collapsing detailed line items on the statement of financial position into one line and disclosing the details within the footnotes. For example, showing just one line for “Fixed assets” on the statement of financial position and breaking out the detail within a footnote disclosure.
- What are all the accounting policies that should be disclosed? As a general rule of thumb, you should have an accounting policy disclosure for each financial statement caption or line item.
- Investments, fair value and endowments. Often, these disclosures repeat financial information. Consider combining the disclosures where appropriate.
Hopefully by taking the above considerations into account, the burden of drafting your NFP’s financial statements and disclosures this year will be eased. For further information, feel free to contact Jason Pierce or another member of the Schneider Downs Not-for-Profit Industry Group.
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