February 2014 Vol. 5 No.

UHY Advisors Mid-Atlantic MD, Inc.

Tax & Business Consultants

Nonprofit Insider
By Cindy McGiffin, Senior

UHY LLP brings specialists in nonprofit solutions in accounting and tax

Taking Care of Business

Simple Governance Steps for Nonprofits

By Marilyn Pendergast, Partner

Website Development Costs

n area of confusion I see frequently on audits is the treatment of website development costs. Clients tend to place their entire website development costs in one bucket, either expensing or capitalizing everything. The correct treatment is somewhere in the middle, and knowing which activities are which is important. Fortunately, there are detailed accounting rules on what to capitalize and what to expense. Website development costs can generally be divided into various stages. The following table summarizes the accounting treatment for the most common activities in each stage. The table is based on FASB ASC 350-50 Intangibles - Goodwill and Other: Website Development Costs. It is intended as an overview and exceptions may apply. Ask your website development consultant to provide a breakdown of their fees based on this table (see page 2). Imagine the delight of your auditors when they see the spectacular job youve done of properly accounting for your website development costs!
continued on page 2

ost nonprofit organizations focus their energy and resources on a dedicated cause. This dedication and commitment can sometimes create a situation where less priority is placed on basic policies related to governance. Board-governance policies, in particular, can help strengthen the organization without significant costs.

backgrounds? Are the majority of board members independent of the entitys management? I Maintaining a conflict of interest policy. Is the policy in writing? Does it require regular disclosure? Is the policy applied to both management and the board?

It is both helpful and important for nonprofit boards to consider their role in establishing policies and overseeing managements implementation, where appropriate. To do so, board discussions should include the following: I Reviewing the size and structure of the board. Is the board the right size to accomplish its objectives? Does it have members from diverse

I Documenting policies for fund raising and acceptance of gifts. How are the gift restrictions documented? What is the minimum level for a restricted gift? What types of fund-raising activities are considered appropriate? How is the donor listing utilized? Are grant applications and reporting functions properly established and monitored? I Developing a policy for upper level management and board compensation. Do board members receive a stipend or expense reimcontinued on page 2

the next level of service

For more information, please contact Jennine Anderson at janderson@uhy-us.com

8601 Robert Fulton Drive l Suite 210 l Columbia, MD 21046 l 410-720-5220 l Fax 410-381-2524 l www.uhy-us.com

the next level of service

Simple Governance Steps for Nonprots continued from page 1 bursements? Who approves these transactions? Who approves the executive directors compensation? What are the procedures used in determining the compensation level? Website Development Costs, continued from page 1

Stage
Planning

Activities
I I I I I

Treatment
Expense

Developing the business/project plan Determining functionalities Identifying hardware and web applications/software Conceptual formation of graphics and content Selection of vendor(s) Acquiring or developing hardware and software needed to operate the website Obtaining domain name Developing or acquiring the software or website operations, database and applications Purchasing the hardware Installing the hardware/software Testing the hardware/software

I Monitoring financial matters. Is there an independent audit committee or similar group? Does this group oversee the work of the independent auditor? Is the 990 return reviewed by board representatives and management before it is filed? I Establishing a document-retention policy. Are there legal requirements related to document retention? Is the policy understood by those who work with the documents? I Documenting board activities. Are minutes maintained for all meetings? Are meetings open to the public? What matters are considered in closed meetings? Is there enough detail in the minutes to support decisions and policies? To accomplish the organizations mission, there must be thoughtful consideration and establishment of governance policies by board members. They must help focus scarce resources in the areas where they count the most. It is important that board members understand their organizations policies and goals. In doing so, they will be able to focus on the organizations key purposes with a strong underlying base of documented policies and processes.

Application and Infrastructure Development

Capitalize

I I

I I I

Graphics Development Content Development

I Overall design of web pages

Capitalize

(design, layout, color, images)

I Data entry and data conversion

Expense Capitalize

of content
I Software used to integrate a

database with the website Operating Stage

I Training employees on the new website I I I

Expense

Registering the website with internet search engines User administration activities Backups

I On-going maintenance I Upgrades and enhancements that

Capitalize

increase functionality

Our firm provides the information in this newsletter as tax information and general business or economic information or analysis for educational purposes, and none of the information contained herein is intended to serve as a solicitation of any service or product. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided as is, with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose. UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of UHY Advisors. UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. and UHY LLP are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. UHY is the brand name for the UHY international network. Any services described herein are provided by UHY Advisors and/or UHY LLP (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.