In this edition

May 2024

How to Manage a Non-Profit Organization Investment Portfolio

The Impact of Wisconsin State Audit Threshold Changes on Charitable Organizations in 2024

Client Feature:The Women’s Shelter and Support Center

Executive Director Q&A: Artyce Thomas

Having an investment portfolio is one way non-profit organizations can accept gifts from donors and access cash flow and produce additional income. The article provides an overview on how to manage an investment portfolio for your non-profit organization.

General Investment Policy and Spending or Withdrawal Policy

If an organization is going to have investments recorded on its statement of financial position, there are certain policies that it should have in place. The first policy is a general investment policy. Since the organization will rely on a professional investment advisor to do the actual investing of funds in most cases, the policy should include which types of investments the advisor is allowed to make and how aggressive the investment advisor can be. The second policy is a spending or withdrawal policy. This policy should establish the amount the organization can take out of any restricted funds each period based on the needs of the organization. It is also important to have a gift policy in place. Many organizations have a gift policy which requires that gifts of stock are liquidated upon receipt to minimize the risk associated with the stock market.

How to Record Donated Stocks and Changes in Value

Gifts of stock are very common for non-profit organizations as this can be an effective way for donors to give to non-profits and fit it into tax planning. The donated stock is recorded by an organization in investments on the date of donation at the fair market value at that point in time. The difference between the proceeds that are received from the sale of stock and the fair market value recorded on the date of donation should be recorded as a realized gain or loss. If any fees are incurred related to this transaction, they would be recorded as investment fees expense.

Once the investments are recorded on the statement of financial position, any changes in the value of the investments will need to be recorded on the statement of activities. Different types of income including interest and dividends, realized gains or losses, and unrealized gains or losses in addition to investment fees will be shown on a line with a description of, for example, investment income, net of fees. These amounts can be found on the investment statements received from the investment advisor.  

Interest income is based on the interest rates in place for the accounts, and dividend income is percent of the profit for certain investments that is earned. Realized gains or losses result when investments are sold during the period. The difference between the cost basis of the investments (the original purchase price or donated value) and the fair market value of the investments (the current value) equals the total unrealized gains or losses on these funds. The activity recorded for the current period is the change in this amount from the prior period compared to the current period. All of these items make up the total change in the value of the investments for the period being reported on.

For additional assistance with recording investment activity and questions on investment-related policies, contact your Hawkins Ash CPAs representative.

In March 2024, the Wisconsin State Legislature announced it’s updating the financial statement requirements (specifically the thresholds) for charitable organizations to reduce burdens on the organizations. Changes include (but are not limited to) dollar amount revisions for review and audit requirements and waiver applications. These changes may have a profound effect on how charitable organizations prepare financial statements and maintain financial integrity. This article explores the changes in the Wisconsin State Legislature in 2024 and its potential implications for charitable organizations.

Overview of the Wisconsin State Thresholds

The thresholds for the State of Wisconsin are based on the level of contributions received during the year. A contribution is defined as a grant or pledge of money, property or other item of value given to a charitable organization. It does not include government grants or donations of food, used clothing or household goods. These regulations ensure transparency, accountability, and efficiency in the use of donor funds.

Important Dates

The changes apply to the fiscal years that begin on or after March 23, 2024.

Changes in the Wisconsin State Legislature and Its Potential Implications

1. Increased Review Threshold in State Financial Assistance

The revised State Legislature raises the review threshold from $300,000 to $500,000. 

“A reviewed financial statement for the most recently completed fiscal year of the charitable organization, if the charitable organization received contributions in excess of $500,000, subject to adjustment under sub. (8), but not more than $1,000,000, subject to adjustment under sub. (8), during its most recently completed fiscal year.”

2. Increased Audit Threshold in State Financial Assistance

The revised State Legislature raises the audit threshold from $500,000 to $1 million. 

“An audited financial statement for the most recently completed fiscal year of the charitable organization, if the charitable organization received contributions in excess of $1,000,000, subject to adjustment under sub. (8), during its most recently completed fiscal year.”

3. Increased Threshold in Waiver Applications

The revised State Legislature raises the waiver application thresholds. Organizations may apply for an audit waiver under the following circumstances:

•In the last fiscal year, the organization received $1,000,000 (previously $500,000) or more in contributions; AND during the fiscal year for which the waiver is being requested the Organization received one or more contributions from one contributor that exceed $700,000 (previously $400,000); AND in each of the preceding 3 years, the Organization received less than $300,000 (previously $100,000) in contributions.

Organizations may apply for a review waiver under the following circumstances:

•In the last fiscal year, the organization received in excess of $500,000 (previously $300,000) but not more than $1,000,000 (previously $500,000) in contributions; AND during the fiscal year for which the waiver is being requested the Organization received one or more contributions from one contributor that exceed $300,000 (previously $200,000); AND in each of the preceding 3 years, the Organization received less than $300,000 (previously $100,000) in contributions.

The waiver requirement may be an option for your organization, this allows you to submit a financial statement as part of its annual report. There are a few options: your organization may choose to submit a form #1952 and form 990 or form #308 “Charitable Organization Annual Report”.

These changes will ultimately decrease review and audit costs for organizations that will no longer be required to have a review or an audit. However, keep in mind that reviews and audits can still be valuable tools for ensuring financial integrity, operational efficiency, and public trust. 

Charitable Organizations Should Proactively Prepare

The changes in the Wisconsin State Legislature for charitable organizations in 2024 will likely have a significant impact on how charitable organizations prepare financial statements and maintain financial integrity. Charitable organizations should proactively prepare for these changes by staying informed, seeking guidance from relevant authorities, and adopting necessary adjustments to ensure the financial statements are up to par if it’s not prepared by an independent accounting firm. By adapting to the new requirements, charitable organizations can continue serving their communities effectively while maintaining transparency and accountability in their use of state funds. 

Please contact your Hawkins Ash CPAs representative to see if your organization will need an audit or review in 2025 and discuss more proactive ways to prepare for these significant changes.

The Women's Shelter and Support Center serves victims of domestic abuse in 10 Southeast Minnesota counties. Beginning 48 years ago, the nonprofit has a long-standing history in the community supporting survivors and empowering donors and volunteers to make a difference. 

Today, the nonprofit operates eight facilities and several satellite offices. The Women's Shelter and Support Center offers clients emergency shelter, transitional housing, rental assistance, and permanent rentals. It operates a hotline and support groups for adults, youth, and children affected by domestic violence. Additionally, volunteers and staff assist clients through the legal process from orders of protection to court and legal filings. For rural clients, the nonprofit provides transportation to services and programs. 

Children are often the innocent bystanders of abuse and the nonprofit advocates for their needs. The children's department at the Women's Shelter provides them with support and life enrichment activities, like field trips and weekly support groups. 

"Families sometimes return to share success stories and this is so rewarding," remarked Artyce Thomas, Executive Director. 

Thomas notes that the organization's success is evident by their capacity to attract and retain a very generous donor base. They also receive daily inquiries from individuals interested in volunteering.

"Going forward, our goal is to bring more awareness to our communities, be as far-reaching as possible, and be more visible."

The Women's Shelter also engages with the community and presents topics to local businesses on how to notice and respond to domestic violence. 

The Women's Shelter and Support Center will soon build a new facility that will increase its emergency shelter capacity from 30 to 75 individuals, making them more visible in the community. The organization is slated to move into the facility at the end of 2025. The nonprofit was awarded a grant through the Minnesota Department of Human Service, Office of Economic Opportunity. The new building will offer gender-inclusive support, an onsite kennel, a child development center, an onsite consignment shop, and space for additional programming. 

For Thomas, who has worked in domestic abuse prevention and support for nearly 25 years, this project is career-defining for herself and her entire director team. 

Learn more about The Women's Shelter and Support Center online: https://www.womens-shelter.org/

Artyce Thomas joined the Women’s Shelter and Support Center in the role of Executive Director, in August of 2019, bringing with her a wealth of experience and profound commitment to the cause. The WSSC is a domestic violence program serving a 10-county region throughout Southeastern Minnesota. She is the previous Executive Director of the Pennsylvania Immigrant and Refugee Women’s Network, (PAIRWN) in Harrisburg PA. In this capacity, she spearheaded transformative initiatives aimed at empowering immigrant and refugee women and children, fostering a culture of inclusivity, and nurturing emerging leaders withing the community. She is also the former Executive Director of the Women’s Help Center, a domestic violence program in western Pennsylvania. During her tenure there, she provided executive-level management within a domestic violence residential program setting, across a three-county region. She has dedicated her 20+ year career to amplifying the voices of survivors and advocating for social change.

What has been your biggest source of pride as executive director?

My biggest source of pride has always resided in fostering seamless collaboration, be it through the expansion of programming initiatives or the establishment of effective grant partnerships.  

What are your three biggest accomplishments in your career as a nonprofit leader?

I’d have to say my three most significant accomplishments entail guiding families as they embark on their journey to safety and healing, and actively participating in that transformative process. Following closely is my commitment to amplifying the voices of survivors withing the realm of legislation, embodying social justice advocacy. Finally, paramount in importance, is my stewardship of WSSC as we traverse a historic milestone with the Shelter Capital Project. 

What are the dominant challenges that you see nonprofit organizations facing and what do you think would be viable solutions?

The predominant challenges confronting nonprofits revolve around the insufficiency of operational funding. Like many organizations, we have witnessed a notable surge in the demand for services, oftentimes surpassing the funding capacity. Addressing this dilemma necessitates a strategic augmentation of financial resources to adequately meet the escalating needs of the community.  

What other executive directors or philanthropic leaders do you look up to?  

Thankfully, I have wonderful working relationships with my board members, in addition to strong connections with other DV Executive Directors locally and across the state. This network serves as an invaluable resource, particularly in leadership roles where one can occasionally feel isolated in their endeavors.  

What aspects of nonprofit accounting do you find most challenging?

Challenge, What challenge? In all honesty, we are blessed with an exceptional team comprising dedicated staff, accountants, and a highly engaged Finance Subcommittee within our WSSC board of Directors. Their collective efforts alleviate much of the burden, and for that I consider myself exceedingly fortunate.  

How do you see the organization changing in the next two years, and how do you see yourself creating that change?  

I envision the organization becoming more visible across the expansive 10-county region that we serve. Furthermore, I anticipate a significant expansion of our shelter services programming within the new facility, thereby enabling us to provide refuge for even more victims and their families.    

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