This year I attended the The American Institute of CPAs Not-For-Profit Industry Conference in Washington D.C.
I reported back on some key takeaways from the conference during our annual accounting and tax update on July 19. I also find it important to share insights from my conversation with Eliz Hovsepian, Vice President of Finance & Controller at Children’s Institute Inc . Children’s Institute, Inc. (CII) is a large multi-service child and family service organization. CII’s broad range of mental health, early childhood education, child welfare, family support and youth development services are supported by a mix of government, foundation, corporation and individual funding sources. I was interested to discover what issues and concerns resonated with Eliz and how CII is planning on tackling them.
Melanie: What are your top concerns that you encounter in your role at CII?
Eliz: In general, we have a solid grasp of the new accounting standard updates and transactional accounting. What I was most concerned with was compliance with the Uniform Guidance, in particular the procurement, suspension and debarment standards. I wanted to get more clarification on this topic to help CII improve our efficiency and simplify a somewhat cumbersome process without compromising procurement standards.
I learned during the conference that while not explicitly noted in the standard, it is stated in the FAQ section that the federal guidance does not apply to indirect costs. In our case, since we have a Federally approved indirect cost rate (ICR), the Uniform Guidance procurement standard does not apply to indirect cost used to calculate the ICR. This is great news for us as the procurement threshold is set so low at $3,500. Without that provision, essentially almost every purchase would have to go through the procurement process. An example is if we purchased laptops for the Finance Department, since Finance is an administrative allocation under the indirect cost umbrella, we would no longer require this purchase to be vetted through the Uniform Guidance. Now it has been clarified that only direct costs that are charged to a federal program have to go through the procurement process under the Uniform Guidance.
Melanie: How will you implement this at CII?
Eliz: This will definitely help improve our purchasing efficiency and turnaround times. We have been working on creating a policy for indirect costs and a procurement policy for direct costs, and I noted that the conference highlighted the importance of thoroughly documenting policies and procedures. They have to be very specific, for example, describing how you go about getting bids, through the internet, through the telephone, etc. That sort of clarification is not really outlined in the new guidance.
Melanie: That is great news. I know CII is committed to strong internal policies and controls. Were there any other significant takeaways you can share with me?
Eliz: Two additional highlights that I’d like to share are:
- The conference is not just a technical conference. It also covers non-technical topics, soft skills, group workshops and leadership workshops, which I really enjoyed. Having the same people in the room, who do the same work and have the same mindset is really a pleasure. I enjoyed the opportunity for all of us to come together and learn how to be better leaders for staff and management. This peer dialogue was very beneficial for me and the staff who accompanied me.
- Covering overhead is a challenge for every nonprofit organization, particularly ones that contract with federal, state or local government agencies. One suggestion that everyone at the conference reacted positively to, was the concept of including a small percentage to cover overhead in every donor ask. We are currently discussing this type of policy internally at CII. The question we are grappling with is how to educate our donors about the importance of giving unrestricted funding. We felt this policy was a good opportunity to begin the discussion.
Melanie: In closing, what are the top concerns of your Finance Committee or Board of Directors?
Eliz: The top 3 concerns of our Board currently are:
- Ensuring sufficient short-term cash on hand
- Long-term sustainability
- Mitigating disruptions in funding