Nonprofit Blog

Welcome to the Nonprofit Blog hosted by the professionals at Armanino, CPAs & Consultants. This blog is set up to inform nonprofit organizations of trends, rule changes, best practices and free educational offerings that we have built to support nonprofit organizations. Our professionals bring you their insights from an accounting and organization perspective to help nonprofits reach their goals. We support our clients with advice, direction and best practices.

Wednesday, June 28, 2017

Telling Your Liquidity Story

Posted by Stacie Kowalczyk

Donors and grant makers rely heavily on financial statements when making endowment and contribution decisions. But until now, financial statement users were unable to assess a nonprofit’s liquidity unless they posed follow-up questions directly to the nonprofit. With the new nonprofit reporting requirements soon to take effect, nonprofit leaders have the opportunity to add more detail to their financial statements, by providing information about cash flow and telling their liquidity story.

The new nonprofit reporting model provides transparency about liquidity by requiring additional disclosures. These disclosures are both quantitative and qualitative in nature: They describe which assets are liquid and available to meet cash needs, and they also describe how the assets will meet cash needs.

Why Tell Your Liquidity Story?

Too often, nonprofits lose potential contributions simply by being an “unknown” to the big players. Your nonprofit may have a history of managing its liquidity wisely, but potential donors may not have been able to recognize that. The new requirement permits potential contributors to see your true value just by glancing at your financials. Being transparent about your liquidity position allows grant makers and donors to fully understand your nonprofit’s potential.

The new requirements also empower nonprofit boards to make better informed decisions. If your organization has had cash flow challenges in the past, preparing these new disclosures will help you discuss potential changes to operations that can be strategic in the long run, as opposed to continuing to operate under the status quo, especially in these challenging and changing times.

Not understanding your organization’s liquidity position can have negative long-term effects on operations and growth of programs. So approach this new reporting model as an opportunity, rather than an obligation. It can provide insight that will help management and the board of the organization address issues and highlight the successes you want donors to see.

For help implementing the new FASB standards or addressing liquidity concerns, contact your Armanino nonprofit accounting team.

Stacie has more than 14 years of experience in public accounting. She specializes in serving nonprofit organizations, higher education, social service, healthcare and religious organizations, and she has extensive experience providing single audit services. She also provides audits, reviews and other attestation services to for-profit entities in the retail, consumer products, financial services and professional services industries.

She works collaboratively with her clients, to keep them informed of accounting regulations that can impact their audit. She also provides specialized expertise on complex accounting issues, including revenue recognition, convertible debt instruments, investments and fair value measurements, endowment accounting, equity compensation, board governance and benchmarks for financial performance. In addition, she has experience performing gap analyses and developing process and workflow charts to strengthen internal controls and mitigate risk.

Stacie is a member of the American Institute of Certified Public Accountants and the California Society of CPAs. She is a former adjunct professor of accounting at the University of San Francisco, and she received a B.S. in accounting and an MBA from Arizona State University.

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