April, 2014 | RKL LLP
Posted on: April 24th, 2014

Allocating Costs for Your Non-Profit Fundraising Expense Reporting

nonprofit accounting fundraising reporting Every not-for-profit engages in fundraising activities of one kind or another. Whether it’s an employee’s time preparing annual appeal letters or maintaining a donor mailing list, fundraising activities come in all shapes and sizes – and aren’t necessarily always carried out by a team member officially assigned to the task of development. Unfortunately, when these expenses aren’t properly reported, it could mean trouble with the IRS – and with attracting sought-after donors.

With competition heating up for donors, your financial statements can be an asset – or work against you. With greater IRS scrutiny around how fundraising expenses are reported, sophisticated donors are becoming increasingly aware of how to interpret non-profit financial reporting. Thorough, accurate reporting is the expectation among the educated donors you want to attract.

So how can you determine how to best report your allocation of expenses? Here are some tips:

If you have contribution revenue, you have fundraising expenses.

A 2012 Scripps Howard News Service report based on a review of 2008-2010 Form 990’s noted that 37,987 not-for-profits raised over $1 million in contributions, but reported $0 in fundraising expenses.  Logic would suggest that someone or something helped these organizations generate contributions

Employees’ time spent at local events connecting with potential donors, grant writing activities and the development of fundraising materials are just a few examples of tasks considered to be fundraising activities, and any costs associated with those activities should be reported as fundraising expenses.

Fundraising expenses can be both direct and indirect.

Many not-for-profit organizations make the critical error of believing they don’t perform formal fundraising activities because there is no specific person with a development or fundraising job description employed by the organization.  As noted, any employee within the organization can, and likely does, perform fundraising activities for the organization, particularly if there is no one employed in a development capacity.

Indirect costs, such as salaries and benefits for program or management and general employees that participate in a fundraising capacity and occupancy costs for those employees can all be indirectly allocated to fundraising expense.  Direct expenses, such as postage and printing costs for annual appeals and special event costs, are usually more easily identifiable and should be tracked and recorded as appropriate.

There is no one right way to allocate costs.

Accounting guidance does not specify a required method to allocate costs among program, management and general, and fundraising.  The only requirement with the selected allocation method is that it be reasonable, consistently applied, updated for any changes in the overall activities of the organization, and documented.  Employee time studies, square footage allocations, actual usage tracking, and percentage of direct costs are all acceptable methods of allocation if based on documented, reasonable assumptions and judgments.

Need guidance on your fundraising expense reporting? RKL can help. Our Not-for-Profit Industry Group is dedicated to helping community benefit organizations tackle challenges and seize opportunities. To learn more, contact Douglas L. Berman, Partner, at (717) 843-3804.

wayneContributed by Wayne E. Groff, CPA, a manager in RKL’s Audit Services Group. Wayne specializes in serving the audit and accounting needs of closely-held businesses, manufacturing operations and not-for-profit organizations.

Posted on: April 1st, 2014

How Manufacturers Can Increase Cash Flow Using Cost Segregation

cost_segPerhaps no other industry stands to benefit more from cost segregation studies than the manufacturing industry. With the accelerated depreciation that cost segregation allows, you can increase tax deductions and pay less tax during the early stages of a property’s life, resulting in increased cash flow. Even if you built or purchased your facility several years ago, the benefits of a cost segregation study are not lost.

What is cost segregation?

Cost segregation is a tax-savings strategy that involves a comprehensive analysis of capital expenditures related to your property. The study identifies all of the different non-structural elements that go into your property – ranging from electrical to plumbing costs – and reclassifies them so they can be depreciated over shorter timeframes. Accelerating depreciation on your real estate investment results in increased tax deduction and less taxes in the early stages of a property’s life, thereby increasing cash flow.

How the Cost Segregation Process Works for Manufacturers

In manufacturing, what may appear to be structural elements of a facility – steel and concrete – may actually be considered short-lived equipment costs if they exist solely to support the manufacturing equipment within that facility. Additionally, building systems, such as plumbing, HVAC and electrical systems used to support, maintain or operate manufacturing equipment may also qualify as short-lived property in many instances.

In studies our team members have performed, light manufacturers have benefited by reclassifying anywhere from 15% to 40% of the depreciable cost of a facility to a shorter tax life. Heavy manufacturers have been able to reclassify 25% to 70% of the cost to a shorter tax life, and processing plants often can reclassify 60% to 90% of their facility depreciable cost to short-lived property.

Example of a Cost Segregation Study

The best way to understand the potential tax benefits of a cost segregation study is to look at an example. Assume a $5,000,000 facility was placed in service by a taxpayer and depreciated over 39 years in 2008. Assume further that a cost segregation study was performed in 2013, and as a result, 30% of the building cost was reclassified to a 7-year property and 15% was reclassified to a 15-year property.

By filing for a tax accounting method change in 2013 to reflect the cost segregation report, the taxpayer would have an additional $1.3-million-dollar tax deduction to reflect the missed depreciation expense from prior years. At a 40% tax rate, that’s $520,000 taxes not paid in 2013. Assuming a 6% borrowing rate, the net present value of accelerating the depreciation deductions for this taxpayer would be approximately $370,000.

Depreciation Deductions Now Vs. Later

As tax rates increase, so does the value of your tax deductions. Even though a cost segregation study allows you to “catch-up” your missed depreciation from prior years, you still get to take the deduction at today’s tax rate – not what the rates were when the facility was first placed in service.

Since cost segregation only accelerates the tax deductions you would have over a 39-year timeframe, each year that passes reduces the net present value benefit of taking tax depreciation deductions now instead of waiting for them.

Cost Segregation at RKL

To maximize your tax savings and meet complex compliance requirements, it’s essential to work with experienced cost segregation specialists. RKL stands apart in Central and Eastern Pennsylvania for our history and expertise in providing cost segregation services to the manufacturing industry. Before engaging in the study, we will provide you with an analysis of benefits based on our experience with other projects that have similar characteristics.

Interested in learning more about how a cost segregation study might benefit your manufacturing company? Contact Steven E. Fisher, partner and leader of RKL’s Manufacturing & Distribution Services Group, at sfisher@rklcpa.com or (610) 376-1595.

roblContributed by Robert M. Gratalo, CPA, MST, a partner in RKL’s Tax Services Group. Rob specializes in federal and state taxation of privately held businesses in the construction, manufacturing and distribution, real estate development, architecture and engineering and service industries.


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Posted on: April 1st, 2014

Anstine Recognized Among Central PA’s “Women of Influence”


YORK, PA (April 2, 2014) – Reinsel Kuntz Lesher (RKL) LLP, Certified Public Accountants & Consultants, is pleased to announce that Amy Gohn Anstine, CPA, has been named to Central Penn Business Journal’s 2014 “Women of Influence” awards list for her leadership and achievements at RKL, as well as her contributions to the community.

RKL's Amy Anstine was recently named to Central Penn Business Journal's "Women of Influence" awards list.

RKL’s Amy Anstine was recently named to Central Penn Business Journal’s “Women of Influence” awards list.

As the leader of RKL’s Small Business Services Group in the York office, Anstine manages a 20-person team in delivering accounting, tax and business consulting services to family- and privately-owned businesses. She is responsible for managing the day-to-day operations of the group, as well as developing new strategies to retain and grow the firm’s client base. Her dedication to her clients and team has played an important role in RKL’s success in the York, PA market.

“Amy is respected among her clients and team members alike for her integrity, her approachable nature and her genuine desire to help others succeed,” commented RKL CEO Edward W. Monborne.

Anstine has more than 25 years experience in the accounting profession. She was named leader of the York office’s newly established Small Business Services Group in 2013.

Anstine is an active member of her community and currently serves as treasurer of Child Care Consultants of York, a board member of Eastern York Dollars for Scholars, a member of the Women’s Business Center Organization at York College of Pennsylvania, as well as several others. She is a graduate of York College of Pennsylvania and resides in Wrightsville, PA.

The “Women of Influence” awards recognizes 25 women leaders in the mid-state who are influential in their companies, industries and communities, and have solid reputations based on their experience, integrity, leadership and accomplishments. Anstine will be honored, along with her peers, at an event scheduled for Monday, June 16, at the Hilton Harrisburg.

For more information on CPBJ’s “Women of Influence” awards, visit http://www.cpbj.com/section/Women-of-Influence-Awards.