Takeaways from the 2023 NFP governance and fiscal workshop

Baker Tilly hosted the 2023 Not-for-Profit governance and fiscal workshop June 7-8, 2023. Not-for-profit (NFP) specialists covered technical topics relevant to NFPs including ASC 842 Lease Accounting, Inflation Reduction Act (IRA) energy credits, unrelated business income (UBI), fraud and internal controls, cryptocurrency and an update on federal funding and questions around single audit. View our workshop recording for the entire program. Here are a few takeaways from some of the sessions:

Federal funding and single audits

For the past several years, there has been historic federal spending that has resulted in a significant increase in federal awards being claimed by not-for-profit organizations. The normal federal funding on an annual basis is about $600 billion. Over the last few years, the federal government has provided over $1 trillion in additional pandemic funding. Not-for-profit organizations have been among the top recipients of this funding through various grants.

If your nonfederal entity expends $750,000 or more in federal awards within a fiscal year you are required to undergo a single or program-specific audit in accordance with 2 CFR 200, Subpart F. The purpose is to ensure compliance with federal regulations and to provide assurance that the federal funding is being used in accordance with federal guidelines.

More and more NFP organizations are having to undergo a single audit. It’s important to stay informed about the latest regulations regarding your circumstances, federal funding and audit requirements. Tune into our webinar on Oct. 18 to hear frequently asked questions and answers to help guide you through the single audit process. More information will be released soon.

Unrelated business income

What is unrelated business income (UBI)? Generally, it’s a gross income derived from any trade or business regularly carried out and not substantially related to the organization’s exempt purpose or function of your organization. Not-for-profit organizations are typically exempt from paying taxes on income that is directly related to their mission. However, if they partake in trade or business that is unrelated to their exempt purpose, the income generated from such activities may be subject to unrelated business income tax (UBIT).