• New York City Indirect Cost Reimbursement — Per the March 2019 Cost Policies and Procedures Manual, we are entitled to a 12% indirect cost rate reimbursement for eligible New York City Health and Human Services contracts. Our calculation is that we will receive $180,000 of revenue for our indirect costs in 2020. Another way to educate your Board is through trainings. Boards often go to trainings focused on governance and leadership, but those are general trainings for all Boards. We recommend a training session tailored specifically to your programs, explaining how they operate and how to expect the unexpected. Management can run the training or hire outside professionals to do so. Board members do not serve forever, and new suitable members are recruited, nominated and voted upon to fill vacancies. Adding education to the onboarding of new Board members is a great strategy. If you previously provided your Board with a tailored training, film it and show the film to new members as part of their orientation. Although it can be difficult to find an expert in nonprofit accounting for your Board of Directors, educating your Board with plenty of MD&A and annual trainings is a great way to start turning them into the experts you are seeking. Once your Board members understand the nonprofit accounting of your programs, the knowledge they provide will include a better perspective, which will enable your organization to further its mission.
The importance of adding management discussion and analysis (MD&A) to everything with numbers presented to the Board cannot be stressed enough. MD&A gives management a chance to comment on each revenue stream. This commentary should explain the gray areas and can explain the best- and worst-case scenarios of a budget. The MD&A can be taken a step further and address future goals and approaches. The more the MD&A is put in front of the Board, the more times they will be able to read it and educate themselves about how the different revenue streams of the organization operate. For the three scenarios listed above, this is a sample MD&A: • Human services organization residential unit multiplied by rate revenue stream —The program has had consistent attendance and limited vacancy during the past three years, leading the organization to expect near full attendance in 2020. The current rate is a prospective rate; the final rate is expected in June 2020. Because of food component cuts, the final rate is expected to be lower or remain the same (offset by a cost of living adjustment). This projects program revenue to be at best $1.5 million, and at worst $1.25 million. • CCBHC recoupment —We received notification that the CCBHC fixed rate is retroactively reduced by 20%. This will result in a liability for 2017–2019 revenue received of $2 million (20% of $10 million). In addition, 2020 revenue is projected to be 20% lower than the prior year.
Matthew Castellano, CPA , Senior Manager in the firm’s Nonprofit, Government & Healthcare Group, has extensive experience planning and con- ducting operational and financial audits for a variety of nonprofit organizations, including human service organizations, charitable organizations and trade organizations, as well as educational institutions. He also has extensive experi- ence in audits pursuant to Uniform Guidance (Single Audits), as well as audits of the NYS Consolidated Fiscal Report, defined benefit and employee benefit plans, and Housing Development Fund Corporations (HDFCs). Matthew can be reached via email at firstname.lastname@example.org or at 212.201.2260.
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