Derrick Strosnider, CPAPartner, Calibre CPA Group25+ years in public accounting focused on not-for-profit entities concentrating in labor unions and their related benefit plans and political action committees. Lead Partner for several relationships providing value added audit and consulting services including financial statement audits, dues objector audits, operational reviews, internal control analysis and compliance and reporting consulting.
Member of the firm’s Management Committee and oversees the efforts of Calibre CPA Group’s Marketing Team.
Welcome
National Labor Union Conference 2017
• Focused on the needs of the tax-exempt community concentrating on Labor Organizations
• Offices in metropolitan Washington, DC, Chicago, IL and most recently, New York, NY with clients across the United States
• Serve the majority of National and International Labor Unions and a leading provider to a significant number of Locals, Lodges, District Councils and other affiliates and organizations
• Providing audit, accounting, tax, and advisory services for 80+ years
• Specialized knowledge of compliance and reporting requirements with the Department of Labor and Internal Revenue Service
About Calibre CPA Group, PLLC
National Labor Union Conference 2017
Educating and Communicating with Clients• Blogs, emails and other posts• We routinely hold informational seminars, webinars, and CPE
sessions on a variety of topics:• Annual National Labor Union Conference• Annual Chicago Labor Union Conference (and soon New York)• Annual Employee Benefit Plan Conference• Other periodic seminars and webinars. Recent topics include:
• Changes to Federal Forms 990 & 5500• Implementation of the Risk-Based Auditing Standards• Not-for-Profit Complex and Emerging Accounting Issues• Dashboard Reporting• Internal Controls and Fraud Deterrence
National Labor Union Conference 2017
AgendaNavigating the Labor Union Landscape – A Best Practices Approach
• John Lund, Founder & Principal, Pacific Northwest Labor Research
Calibre CPA Group Annual Labor Union Report - Findings• Derrick Strosnider, Partner, Calibre CPA Group• Art Budich, Partner, Calibre CPA Group
Fifteen Minute Break
How are You Navigating the Labor Union Landscape?• Interactive session
Hot Topics – GAAP & Tax Updates• Mary Margaret Prange, Partner, Calibre CPA Group• Scott Hallberg, Senior Director, Calibre CPA Group
About Direct Pay: What We’ve Learned & Its Impact to Labor• Kyle Bazzy, Director of Growth, Billhighway• Tish Olshefski, Assistant to the Secretary Treasurer, AFT
National Labor Union Conference 2017
Navigating the Labor Union Landscape• Relevancy of Today’s Theme:
• Legal Issues• Increase in Right to Work States• Janus v. AFSCME (Illinois) and Yohn V. California Teachers Association
- likely to head to Supreme Court• Proposed Presidential budget increases OLMS spending by 20%
• Other observations• Continue to see a need for budget planning for various scenarios • Potential increase in I-CAP and CAP audits
• Conference is Designed to Help You:• Identify potential areas of risk• Learn and assess best practice approaches for tightening controls and
operating more efficiently• Network and share with others who have faced similar challenges
National Labor Union Conference 2017
2017 National Labor Report Findings
National Labor Union Conference
National Labor Union Conference 2017
National Labor Union Report - 2017
Derrick Strosnider, CPAPartner, Calibre CPA Group26+ years in public accounting focused on not-for-profit entities including labor unions, single, multiple and multiemployer benefit plans, trade associations, educational and charitable organizations and political action committees.
Arthur E. Budich, CPA, CFEPartner, Calibre CPA GroupAn Audit partner and member of the Forensic & Risk Advisory team, Art has been in public accounting since 2003. Art has significant audit experience with tax-exempt organizations including trade and professional associations, charitable foundations, advocacy groups, employee benefit plans and labor unions.
National Labor Union Conference 2017
Background & Methodology
• Data compiled from 2016 LM-2s filed on DOL website• 59 National and International Labor Unions• Grouped into 3 categories:
• Group A:Over $100 million in Dues and Agency Fees/Per Capita Tax (13)
• Group B: Between $20-100 million in Dues and Agency Fees/Per Capita Tax (23)
• Group C: Less than $20 million in Dues and Agency Fees/Per Capita Tax (23)
• Union names have not been disclosed• Analyzed and compared data over last four years
National Labor Union Conference 2017
Background & Methodology
• Notes and Comments• Some Unions may be on cash or modified cash basis of
accounting so Statement A – Assets and Liabilities may not be comparable for all organizations
• Impact of Multi-employer plans vs. Single Employer Plans• Investments reported at lower of cost or market• Total Receipts – not Revenue
• Includes sales of investments, loans obtained, collections on behalf of affiliates and from members
• Total Disbursements – not Expenses• Includes purchases of investments, loan repayments,
disbursements to affiliates of funds collected on their behalf, and disbursements to individual members
National Labor Union Conference 2017
Net Assets
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
2013 2014 2015 2016
Group A Group B Group C Average
National Labor Union Conference 2017
Per Capita Tax/Dues
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
2013 2014 2015 2016Group A Group B Group C Average
National Labor Union Conference 2017
Administers a Trust
Has a PAC
Had anAudit
Pledged Assets
ContingentLiabilities
Group A Average 100% 92% 100% 69% 38%
Group BAverage 87% 87% 100% 43% 26%
Group CAverage 70% 61% 96% 22% 9%
Chart 2 - Responses to Selected Questions 10-17
National Labor Union Conference 2017
Chart 2 – Bonding Amount
Blue = HighRed= LowGreen= Average
National Labor Union Conference 2017
Chart 2-Cash and Investments-Group A
National Labor Union Conference 2017
Chart 2-Cash and Investments-Group B
National Labor Union Conference 2017
Chart 2-Cash and Investments-Group C
National Labor Union Conference 2017
Chart 7 – Functional Expense Breakdown
GROUP A
National Labor Union Conference 2017
Chart 7 – Functional Expense Breakdown
GROUP B
National Labor Union Conference 2017
Chart 7 – Functional Expense Breakdown
GROUP C
National Labor Union Conference 2017
Chart 8 – Payments to Officers, Employees & Benefits as a Percentage of PCT/Dues
Schedules 11,12 & 20As a % of PCT/Dues
Low High AverageGroup A 29% 76% 50%Group B 26% 123% 63%Group C 33% 220% 76%
National Labor Union Conference 2017
Chart 8 – Payments to Officers, Employees & Benefits as a Percentage of Total Functional Expenses
Schedules 11, 12 & 20As a % of Schedules 15-19
Low High AverageGroup A 30% 136% 70%Group B 16% 113% 74%Group C 16% 140% 72%
National Labor Union Conference 2017
Chart 8 – Benefits (Schedule 20) as a Percentage of Payments to Officers & Employees
Benefits as a % of Amounts in Schedules 11 and 12Low High Average
Group A 21% 197% 64%Group B 25% 118% 58%Group C 10% 182% 44%
National Labor Union Conference 2017
Chart 9- Operating Reserves-Number of Months
National Labor Union Conference 2017
Chart 10-Average Officers Salary > $100,000
NOTE: For those officers with salaries in excess of $100,000
National Labor Union Conference 2017
Chart 11-Average Employee Disbursement
National Labor Union Conference 2017
We Want to Hear From You!
National Labor Union Conference
National Labor Union Conference 2017
How are You Navigating the Labor Union Landscape?
When asked…
What are some of the biggest issues or challenges facing labor today?• Solving the payroll deduction crisis and getting the right
infrastructure in place• Potential financial impact from national and state
regulatory changes that could result in declining membership
• Ability for national unions to monitor and provide training and support to their affiliates
Agree or Disagree? How are You Addressing?
National Labor Union Conference 2017
How are You Navigating the Labor Union Landscape?
When asked…
Where do you see room for growth over the next year?• More proactivity in building databases and tracking
systems to ensure affiliate compliance and controls• Better communication and engagement with members
to help them understand the value they derive from the union and why they should stay with the union
Agree or Disagree? How are You Addressing?
National Labor Union Conference 2017
GAAP Updates from FASB
National Labor Union Conference
National Labor Union Conference 2017
Hot Topics – GAAP & Tax
Mary Margaret Prange, CPAPartner, Calibre CPA GroupAn audit partner with Calibre CPA, Mary Margaret has been in public accounting since 2001. She has significant audit experience with labor unions, not-for-profit organizations including trade and professional associations, charitable foundations, advocacy groups, faith-based organizations and employee benefit plans. She heads the firm’s Continuing Education Committee and is responsible for a majority of the firm’s internal CPE programs.
Scott Hallberg, CPASenor Director, Calibre CPA GroupIn public accounting since 1976, Scott is considered the firm’s main authority in tax matters relating to labor unions, employee benefit plans, and tax-exempt organizations. He has had extensive dealings with the DOL and IRS in the examination of various organizations and funds.
National Labor Union Conference 2017
1•2015 Accounting Standard
Updates
2•2016 Accounting Standard
Updates
3•2017 Accounting Standard
Updates
Topics
National Labor Union Conference 2017
•Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (a consensus of the FASB Emerging Issues Task Force)
ASU 2015-07
•Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient
ASU 2015-12
2015 Accounting Standard Updates
National Labor Union Conference 2017
• Public Business Entities - Effective for fiscal years beginning after 12/15/15
• Non-public Business Entities –Effective fiscal years beginning after 12/15/16
Effective
• Retrospective application to all periods presented • Early adoption permittedApplication
• Investments measured at fair value using the NAV practical expedient not be included in the fair value hierarchy
• Amounts of such investment should be disclosed as a reconciling item between the amounts reported in the fair value hierarchy table and the balance sheet
General Overview
ASU 2015-07 (Issued May 2015)
National Labor Union Conference 2017
•Fiscal years beginning after 12/15/15, only applicable to Employee Benefit PlansEffective
•Early adoption is permitted•Plans can early adopt any of the ASU’s three parts without
early adopting the other partsApplication
•FASB issued a 3 part ASU to simplify reporting for benefit plans•Part 1: Fully Benefit-Responsive Investment Contracts•Part 2: Plan Investment Disclosures•Part 3: Measurement Date Practical Expedient
General Overview
ASU 2015-12 (Issued July 2015)
National Labor Union Conference 2017
• Leases (Topic 842)
ASU 2016-02
• Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities
ASU 2016-14
2016 Accounting Standard Updates
National Labor Union Conference 2017
•Fiscal years beginning after 12/15/18 for a non-profit entity that has issued, or is a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or an over-the counter market
•For other non-profit entities, effective for fiscal years beginning after 12/15/19
Effective
•Early adoption is permittedApplication
•Targets to improve financial reporting regarding leasing transactions and will effect non-profits that lease assets (property and equipment)
•Require lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by those leases.
General Overview
ASU 2016-02 (Issued February 2016)
National Labor Union Conference 2017
ASU 2016-02 More Specifics
For LesseesPrior to ASU 2016-02 (Current GAAP) • Recognition, measurement and presentation of lease
expenses and cash flows depended on whether it was a capital or operating lease
• Only capital leases were required to be recognized on the balance sheet
After ASU 2016-02 (Balance Sheet)• Recognize right-of-use asset and a lease liability for
virtually all leases over 12 months in term• Liability equal to the present value of lease payments• Asset will be based on the liability, subject to adjustment
for initial direct costs.
National Labor Union Conference 2017
ASU 2016-02 More Specifics
For Lessees
After ASU 2016-02 (Income Statement)•Leases will be required to be classified as either
operating or finance•Operating Leases - result in straight-line expense
(similar to current operating leases)•Finance Leases - result in a front-loaded
expense pattern (similar to current capital leases).
New Disclosure requirements
National Labor Union Conference 2017
For Lessors• Similar to current GAAP.• Leases still classified as either operating, direct
financing, or sales-type (Leveraged lease accounting has been eliminated)
ASU 2016-02 More Specifics
National Labor Union Conference 2017
Disclosure Requirements
Information about the nature of leases (and subleases)• General description of leases• Basis, and terms and conditions, on which variable
lease payments are determined• Existence, terms and conditions of options to
extendor terminate the lease
• Existence, terms and conditions of lessee residual value guarantees
• Restrictions or covenants imposed by leases
National Labor Union Conference 2017
Disclosure Requirements
Information about leases that haven’t yet begun, but that create significant rights and obligations for lessees
Information about significant judgements and assumptions made in accounting for leases• Determination of whether a contract contains a lease• Allocation of the consideration in a contract between
lease and non-lease components• Determination of the discount rate
National Labor Union Conference 2017
Disclosure Requirements
Main terms and conditions of any sale-leaseback transactions
Whether an accounting policy election was made for the short-term lease exemption. If so, lessees should disclose if the short-term lease expense doesn’t reflect amounts attributable to the lessee’s short-term lease commitments and the amount of its short-term lease commitments
National Labor Union Conference 2017
ASU 2016-02 - What do you need to do?
• Make sure your organization has a process in place to identify and gather information on all leases (office space, office equipment, autos, regional offices, etc)
• This new standard could potentially have broader implications than just the financial statements and related disclosures:• Could impact debt covenants• Could trigger a more in depth discovery process on
purchase vs. lease transactions
National Labor Union Conference 2017
Identifying a Lease
Flow chart for identifying a lease
National Labor Union Conference 2017
•Calendar year beginning after 12/15/17 and interim periods beginning after 12/15/18Effective
•Early adoption is permitted. Should be applied retrospectively in the year update is first applied, however certain disclosures can be omitted for prior comparative yearApplication
•Issued to improve existing standards for financial statement presentation by NFP entities, focusing on:
•Improving Net Asset classification requirements•Increasing information provided in financial statements and notes about liquidity, financial performance and cash flows
General Overview
ASU 2016-14 (Issued August 2016)
National Labor Union Conference 2017
ASU 2016-14 More Specifics
Net Asset Classification & Disclosures• Temporarily and permanently restricted classes of net assets will be
combined into “net assets with donor restrictions”• Unrestricted net assets would be renamed “net assets without donor
restrictions”• Expanded disclosures about nature and amount of donor restrictions
and amounts and purposes of board-designated net assets
Expenses• Disclosure of expenses by both natural & functional classification
(excluding investment expenses that have been netted with investment return).
• Investment expenses should be included in net investment return on the Statement of Activities. Disclosure of the amount netted in the return is no longer required.
• Enhanced disclosures regarding cost allocation among program and support functions.
National Labor Union Conference 2017
ASU 2016-14 More Specifics
Liquidity and availability of resources
•Disclosure of how the Organization manages its liquid resources to meet general expenditures over the next year.
•Quantitative disclosures to indicate the availability of financial assets (excluding property, plant and equipment, prepaid expenses and inventory) to meet cash needs within one year
•There are illustrations of these disclosures in the final ASU
Statement of Cash Flows: Methods of presenting operating cash flows•Indirect or Direct Method Allowed•Reconciliation of operating items no longer required when using
the direct method.
National Labor Union Conference 2017
• Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting
ASU 2017-06
• Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
ASU 2017-07
2017 Accounting Standard Updates
National Labor Union Conference 2017
• Fiscal years beginning after December 15, 2018.Effective
• Early adoption is permitted. Should be applied retrospectively in the year update is first appliedApplication
•Issued to improve consistency in reporting of master trusts between all types of employee benefit plans
•Update requires a plan’s interest in that master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively.
General Overview
ASU 2017-06 (Issued February 2017)
National Labor Union Conference 2017
• Calendar year beginning after 12/15/18 and interim periods beginning after 12/15/19Effective
• Early adoption is permitted. Should be applied retrospectively in the year update is first appliedApplication
•Changes in presentation, not calculation.•Requires bifurcation of net benefit cost. The service cost
component should be presented with other employee compensation costs in operating income. The other components will be reported separately outside of operations.
General Overview
ASU 2017-07 (Issued March 2017)
National Labor Union Conference 2017
Tax Update
National Labor Union Conference
National Labor Union Conference 2017
• Form 990• No changes to form or schedules• Extension changes – only need one for 6 months
• Form 5500• Administration Penalties
• Now $2,063 per day for failure or refusal to file a complete / accurate Form 5500
• Now adjusted annually for inflation• Schedule H & I - Line 5c
• If covered by PBGC then enter my PAA generated confirmation number for the PBGC premium
• IRS compliance questions on Schedule H & I, lines 40 and 6a-6d not required
• Same for preparer information on page 1• Same for Schedule R Part VII
Tax Update – Form Changes
National Labor Union Conference 2017
National Labor Union Conference 2017
• Form FinCEN Report 114 (FBAR)• Due date now April 15 v. June 30• Extensions
• Automatic for 6 months• No extension form currently required
• Individual with signature authority, but no financial interest not required to report. FinCEN Notice 2016-1 extended non-filing until April 15, 2018
Tax Update – Form Changes
National Labor Union Conference 2017
National Labor Union Conference 2017
• Form 5500, 1040• Remain the same
• Form 1120 (1120-POL) Calendar Y/E• Was March 15 now April 15• Extension: Same – September 15
• Form W-2 & 1099’s• Was due to IRS/SSA February 28 or March 31 if e-filing, now
due January 31 for W-2 & 1099-Misc• Other 1099 due February 28 or March 31 if e-filing
• Form 990• Was May 15, still May 15• Extension was 2 for 3 months each now only 1 for 6 months
each
Tax Update – Due Date Changes
National Labor Union Conference 2017
National Labor Union Conference 2017
• Form 1065• Was April 15, now March 15• Extension same - September 15
• Form 1041• Was April 15, still April 15• Extension was to September 15, now September 30
• Form FinCEN Report 114• Was June 30, now April 15• Extension/ was none now automatic to October 15
Tax Update – Due Date Changes
National Labor Union Conference 2017
National Labor Union Conference 2017
• EBSA• Concern for assets whose value was neither readily
determinable or on an established market• DOL sending out letters to plan on this issue• Proposed changes to Form 5500:
• Would be effective for 2019 filing year• Comment period extended to December 3, 2016
• OLMS• Potential for reinstatement of I-Cap audits
Tax Update – DOL
National Labor Union Conference 2017
National Labor Union Conference 2017
Thank You!
7501 Wisconsin Avenue, Suite 1200 WestBethesda, MD 20814
202.331.9880 phone 202.331.9890 fax
866.464.2839 toll-free calibrecpa.com
National Labor Union Conference 2017
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