Crosslin Technologies Named to Inc. 500

Crosslin Technologies is excited to announce that we have been included in this year’s prestigious Inc. 500 list.  This exclusive list ranks the fastest-growing private companies in America and to be part of this group is an incredible honor.   Crosslin Technologies ranked 455 on the list, having grown 963.7 percent over the last three years.  We are extremely proud of our amazing team and leadership, whose hard work has made this growth and accolade possible.  We are also thankful for our fabulous roster of customers and their support of our company.  Crosslin Technologies is proud of this accomplishment and looks forward to the growth yet to come.

You can read the full coverage at and Crosslin Technologies will be in this month’s issue of Inc. magazine.

Sales Tax Holiday This Weekend

This weekend in Tennessee is the sales tax holiday.  Get your shopping lists ready!

During this weekend, certain goods may be purchased sales tax-free. The tax-free holiday weekend begins at 12:01 a.m. on Friday, July 28 and ends Sunday, July 30 at 11:59 p.m.  To see the full list of what items are considered tax-free, please visit

As always, please feel free to call the tax department at Crosslin with any of your tax-related questions.  We appreciate your business!

Crosslin Technologies Ranked Among Top 501 Managed Service Providers by MSPmentor

Crosslin Technologies ranks among the world’s most progressive 501 Managed Service Providers (MSPs), according to MSPmentor’s 10th-annual MSP 501 Worldwide Company Rankings. The top MSP 501 companies ranked this year include organizations from around the world and from diverse technology and business backgrounds. Collectively, they amassed $14.48 billion in total revenue (based on 2016 results), up more than 15 percent from a year earlier.  Crosslin Technologies registered No. 343 on the list.

“Crosslin Technologies is extremely proud to be recognized as one of the top managed service companies in the world,” said Co-Managing Principal Bryan White. “Our team works extremely hard to deliver exceptional products while providing superior customer service.  We have an incredible team and this prestigious honor is a testament to their talent and unwavering commitment to our customers.”

Founded in 2011, Crosslin Technologies leverages its internal technical and security experience to manage a variety of computing, networking, and security-related technologies ensuring that customers stay current and compliant in today’s information-rich business environments.  Customers enjoy the assurance of predictable IT investment and IT management overhead costs, while receiving a high level of personal service and attention.

“On behalf of MSPmentor, I would like to congratulate Crosslin Technologies for its recognition as an MSP 501 honoree,” said Aldrin Brown, Editor in Chief, MSPmentor. “The managed service provider market is evolving at a rapid pace and the companies showcased on the 2017 MSP 501 list represent the most agile, flexible and innovative organizations in the industry.”

The complete 2017 MSP 501 list is available at  The 2017 MSP 501 list is based on data collected by MSPmentor and its partner, Clarity Channel Advisors. Data was collected online from Feb. 16 through May 15, 2017. The MSP 501 list recognizes top managed service providers based on metrics including recurring revenue, growth and other factors.

Interview with Ashley Coots, Summer Audit Intern

Crosslin is fortunate to have a fabulous audit intern this summer, so we thought it would be fun to get her thoughts on internships, career choices, etc.  Thanks, Ashley Coots, for a fabulous interview.  We are glad you are part of the Crosslin team!

Where are you in school and what are you studying? 

I am going into my senior year at The University of Tennessee at Martin getting a BSBA in Accounting and Finance.

Why did you apply for an internship at Crosslin?

I applied to several accounting and finance firms looking for an internship.  I chose Crosslin because of many reasons; however, I will just name the top two. The first one being they were going to give me a full summer internship, and even asked me when I wanted to start and wanted to end, working hands-on within the audit department.  With Crosslin, I would be able to go to clients and be a part of a full audit from start to finish. The second, which was a very close second might I add, was the atmosphere Crosslin brings to its employees. If you ask any employee who works at Crosslin what there favorite thing about their job is they will most likely say “the people I work with,” or “the friendliness of the upper management.” It is very important to me to work in an environment where you are happy to be and can be yourself around everyone, and Crosslin brings that atmosphere.

What do you hope to learn during your internship?

During my internship, I hope to learn what an auditor does from day in and day out, some of the struggles a person in this position may face, where you can go with being an auditor, the extra education you must obtain in order to succeed at this job, and if I take interest in this type of work.

What have you done during the first few weeks of your internship?

The first week of my internship I worked on online courses that explain all of the different steps in each type of audit. I worked mainly on the basic audits such as auditing cash, inventory, property plant and equipment, and payroll.  My second and third week here I was actually able to go to a client with three other auditors and work on-site. I was able to see how an audit worked from the beginning, and was able to apply what I have been studying to real life situations. This was an amazing experience because this was one of the first times I was able to actually see and understand how a business works, and was able to look at data and prove why the amounts were what they are and why they are there. I did something in a matter of a week into my internship that some interns have to wait until the end of their internship to do.     

What are you goals once you graduate?

Once I graduate in May 2018, I hope to obtain a full time job at a local company here in Nashville. During the fall of 2018, I will take online courses to finish up my hours needed towards the required 150 hours for the exam, and then I will start on the process of being a Certified Public Accountant (CPA). Being a CPA and/or CMA is something every accountant should try to obtain because it shows employers you are dedicated and are not afraid to take on a challenge.      

Would you recommend other college students participate in internship programs in their field?  If yes, why? 

I would absolutely recommend an internship for any college student, especially going into senior year, in their field. I would recommend it because nobody knows exactly what they like until they actually try it. A career is something you will stick with your whole life, so why not be completely certain this is the career path you want to go down when you graduate. Learning it and actually doing it are two completely different things.

Four Crosslin Principals Named Power Leaders in Finance

Crosslin is extremely proud to have FOUR honorees in this year’s Power Leaders of Finance, sponsored by the Nashville Business Journal.  Congratulations to Dell Crosslin, John Crosslin, Justin Crosslin, and David Hunt.  We know they are power leaders and we are glad to see that others agree.  Way to go, guys!

See the full slideshow here.

EBS Tips: Useful Information

You are the best at what you do!  You know more about your business than anyone else.   You are the master of your product and service, and you know best why your customers want or need what you provide.

Since you are the expert in your field, your products and services are awesome.  You likely know how your product beats your competitors.  You likely also know how your services are easily differentiated from similar providers.  You have what it takes to be successful!

What if there was information that would enable you to fully understand the benefits of reducing the cost of your product or improving the efficiency of your service delivery model? What if you had information that gives you the opportunity to increase your revenue or create cost savings within your business?  How useful that information would be to improve your profitability.

So what are forms of useful information?

  • Profitability of your business in total.
  • Profitability of each product or service provided to customers.
  • Status of cash at a given point in time.
  • Revenue by month compared to previous months.
  • The costs and expenses of one period compared to previous periods.
  • The amount you owe your creditors.
  • The quantity of products that need to be sold to breakeven or make a targeted amount of profit.
  • The cost of providing services compared to the prices you charge.
  • Your cash needs over the coming months or year.
  • A summary of the financial position of the business at a given point in time that is frequently requested by lending institutions.

When the Entrepreneurial Business Services of Crosslin assists with your accounting needs, useful information outlined above plus much more becomes readily available without you being distracted from what you do best.   You are better equipped to make more informed decisions regarding how to increase your revenue, reduce your expenses, and increase your profitability.  You will also be better able to determine how you might modify your pricing structure to create more profit.  Perhaps you will also see that certain products and services generate more profit, so you may then modify your business strategy to best achieve your goals.

With useful information, you are better positioned to achieve the success you deserve!

Fraud Risk Within Non-Profit Audits

Recently, John Crosslin, Co-Managing Principal, presented to the Tennessee Society of CPAs about audit issues and deficiencies in the non-profit sector.  He brought up a very important issue that can taint a non-profit’s reputation and cause other very substantial issues:  fraud risk.

Fraud in non-profits can reveal itself in a variety of different ways.  Such examples include a college employee in the financial aid office signing up false students, an employee using a credit card for personal uses, or creating fake credit card statements for reimbursements.  Significant control by the founder or executive director, difficultly in verifying certain revenue streams, lack of management oversight, unusual disbursements or reliance of volunteer boards can cause red flags.  Ultimately, many of these types of occurrences point to fraud within the non-profit.

How can an auditor detect fraud?   Establishing a system that requires all employees to submit expense reports that include original support for all expenses, identifying where/when the expenses occurred is vital. These expense reports must be carefully reviewed and all expenses will need approval by the designated person.  It is also important to always limit employee credit cards.  Additionally, assigning identification numbers to approved vendors while using pre-numbered purchase orders will also decrease the opportunity for fraud.  Fraud can also appear through financial reporting.  Failing to disclose significant related party transactions, misclassifying restricted donations to mislead readers, overstating program expenses, and incorrectly valuing donated assets are some examples where auditors encounter fraud.

It is important to formulate procedures to reduce fraud risk exposure.  You can do so by periodically testing management fraud expenses, journal entry testing for odd items at odd times (SAS 99),  test their 800 hotline, look for abnormalities in budget to actual reports, and review accrued vacation to ensure employees are taking regular vacation.

What are the effects of fraud?  Non-profit organizations that experience fraud can be faced with financial damage, loss of support from donors; auditors will suffer and can lose relationships with their customers.  The most extreme result can be that the organization will dissolve.

Remember that when something seems fishy while performing an audit, always trust your gut and use professional skepticism.

Getting Customer Service Right

Customer service seems like such a simple concept, but yet so many businesses get it wrong. I personally believe the reasoning behind this is every customer and every business has a diverse set of expectations of what they consider excellent customer service to be.

After attending the Crosslin customer service seminar and reading the Huffington Post article “6 Ways to Create Experiences That Customers Crave,” it seems clear to me that the best way to succeed in customer service is to know your customer and build a relationship with your customer.

No two customers are the same. One customer may want to only communicate via email and never meet the accountant that prepares their taxes. Another customer may want to only communicate face-to-face and want to tell their accountant about their family and their latest vacation.  The only way to know how customers like to do business is by building a relationship with them. It is the foundation. In today’s world, a customer has so many options for services and products. If you build a relationship with them and know their likes and needs, they are less likely to turn their back on you and leave your company for a competitor.

An important piece of the puzzle when building this relationship with a customer is the company’s employees.  Some companies believe that they need to spend an extreme amount of money to fix their customer service and please their customers.  But, it really lies in the attitude and willingness of the company’s employees.  If a company gives an employee the opportunity to build that relationship with a customer, and praises them for achieving results with customers, then the employee will most likely want to continue doing so.

At the end of the day, we need to remember that each and every one of our customers are not just a tax return, or an audit, they are actual people. They expect personalized service to stay loyal. If we give them each a personalized customer service experience, they will keep coming back.

Kellie Tucker, Operations Team (Tax)



Your Very Own Financial Executive

Your very own financial executive can be an expensive proposition.  However, ‘what if’ the accessibility of your own CFO was more economical?  Consider the following:

  • Have you had situations where access to relevant and timely financial information was critical to making the best decision?
  • When have you wished for sound financial data and advice from a seasoned expert inside your shop?
  • Have you ever had one of those complicated issues for which you needed the expertise of a Certified Public Accountant?
  • Are you receiving timely financial statements each month which have been reviewed by a seasoned financial executive?
  • Do you have the one-two punch of timely transactional bookkeeping as well as the expertise of a CFO on a routine basis?
  • Have business decisions been challenging because you did not have the information that would monetize the financial impact of your options?
  • What if you have consistent access to your very own financial executive as a member of your team without paying for an additional full-time senior executive of your management team?
  • Do you find the budgeting and financial planning processes of your firm so overwhelming that it distracts you from doing what you do best?
  • Have you considered the great value to the operations of your business if your cash flow was under the management of a CFO?
  • Are you sometimes puzzled by potential financial and operational outcomes of certain significant business decisions, wishing you had seasoned expertise at your fingertips?

The Entrepreneurial Business Services of Crosslin, PLLC include solutions to all of these situations.  When an owner or management team of a business wishes to focus on what they do best such as sales, production, or operations, the burden of accounting expertise and services can be placed in the hands of your own external accounting and CFO professionals.  The blend of fundamental bookkeeping services and the trusted advisory oversight of a financial executive provide economical solutions and timely financial expertise, which enable you to make better business decisions and improve your profitability.

So what does it mean to have your very own financial executive as an outside resource?

  • The financial expertise to make the most profitable business decisions.
  • Accurate and timely financial reporting that enables reliable operating decisions.
  • A trusted advisor that provides relevant financial tools that best fit your business.
  • A sustainable economical solution to your needs for seasoned financial expertise.
  • The comfort of knowing you have a financial executive on your team.

When you wish you had your very own financial executive, an outside service provider is a smart solution.  Contact the entrepreneurial business services (EBS) team at Crosslin today!

What You Need to Know About the WannaCry Ransomware Program

Just days after President Trump signed a much-anticipated executive order on cybersecurity, a massive cyberattack—potentially the largest the world has ever seen, with more than 75,000 ransomware attacks in 153 countries—stole headlines.

The “WannaCry” ransomware program hit organizations around the world on Friday, May 12, encrypting computer files and demanding roughly the equivalent of $300 in Bitcoin (increasing over time) to restore user access.

Russia, Ukraine, India and Taiwan were reportedly the most affected countries, but organizations across Europe, Asia and North America—with an estimated 3,300 infections in the U.S. alone—were also attacked. Notable targets included, among others, the Russian Interior Ministry, logistics carrier FedEx, automakers Renault and Nissan, a number of Chinese universities and secondary schools, as well as Britain’s National Health System (NHS). Forty-seven of the 248 NHS trusts were attacked by the ransomware program, and as of May 15, seven trusts had yet to regain control of their computer systems.

The rapid spread of WannaCry is slowing, for two primary reasons: 1) Microsoft took the rare step of issuing patches for outdated versions of Windows operating systems it no longer supports, going back as far as 14 years; and 2) the accidental discovery of a “kill switch” by a security researcher in Britain, which spared much of the U.S. However, neither “fix” helps systems that are already infected, and hackers could easily create a new strain of WannaCry that bypasses or negates the kill switch.

In response to the threat, the FBI issued a FLASH (FBI Liaison Alert System) report with confirmed threat indicators and recommended steps for prevention, remediation, and defending against ransomware generally.

What is ransomware?

Ransomware is a type of malware that targets critical data and information systems for purposes of extortion, preventing users from accessing their data files until a ransom is paid. The software frequently infects computers through spear-phishing—a targeted attack via a malicious link or email attachment. Ransom demands are most often made in the difficult-to-trace virtual currency Bitcoin.

What’s different about WannaCry?

In April, an elusive cyber group called the “Shadow Brokers” leaked a cache of powerful NSA hacking tools, including highly sophisticated (and expensive) software exploits. WannaCry is purportedly based on one or more of these exploits, taking advantage of a zero-day vulnerability in Microsoft Windows that enables it to spread itself laterally.  Microsoft issued a security update to address this bug in March, but users that didn’t make the update remain vulnerable.

WannaCry is the first cyber program to make use of the leaked NSA tools—but likely not the last.

Why were healthcare organizations the hardest hit?

The healthcare sector remains uniquely at risk to cyber incidents due to a variety of factors, including a lack of resources devoted to cybersecurity, the complexity of networks, and the vast array of internet-connected devices. Because many hospitals still maintain and rely on end-of-life technologies, and may prioritize immediate access to data over data security, cybercriminals have found their systems relatively easy to penetrate.

The healthcare sector is also one of the most targeted sectors by cybercriminals and nation states because it is the only sector which combines highly valuable and sought-after bulk data sets of personal health information, personally identifiable information, payment information, medical research and intellectual property.

Hospitals also don’t have the luxury of time: A ransomware infection that blocks access to critical medical data endangers patients’ health. Ahead of a scenario where patients’ lives are at risk, organizations should ensure they have preventive measures in place.

Is your organization safe?

The FBI recommends the following preventative measures:

  • Apply the Microsoft patch for the MS17-010 SMB vulnerability dated March 14, 2017.  (Organizations using unsupported Windows operating systems including Windows XP, Windows 8 and Windows Server 2003 should follow customer guidance from Microsoft.)
  • Enable strong spam filters to prevent phishing e-mails from reaching end users and authenticate in-bound e-mail using technologies like Sender Policy Framework, Domain Message Authentication Reporting and Conformance, and DomainKeys Identified Mail.
  • Scan all incoming and outgoing e-mails to detect threats and filter executable files from reaching the end users.
  • Ensure anti-virus and anti-malware solutions are set to automatically conduct regular scans.
  • Manage the use of privileged accounts, assigning administrative access only when absolutely needed.
  • Configure access controls including file, directory, and network share permissions with least privilege in mind.
  • Disable macro scripts from Microsoft Office files transmitted via e-mail. Consider using Office Viewer software to open Microsoft Office files transmitted via e-mail instead of full Office suite applications. Develop, institute and practice employee education programs for identifying scams, malicious links and attempted social engineering.
  • Have regular penetration tests run against the network, no less than once a year, and ideally, as often as possible/practical.
  • Test your backups to ensure they work correctly upon use.

Crosslin offers these additional recommendations:

  • Don’t forget the human element. The WannaCry attack was entirely preventable. It succeeded at infecting computers because users failed to install a months-old patch—in other words, because of human negligence and a lack of awareness. Change user behavior by introducing a training program based on employees’ organizational roles, implementing cyber hygiene best practices (i.e., not opening suspicious emails or attachments) and regularly testing the program’s effectiveness.
  • Implement a risk-based, threat-driven patch management program. Patch management should be a dynamic, risk-based process rather than a check-the-box compliance approach. Organizations must be able to identify system vulnerabilities and relevant patches in a timely manner, understand the degree of risk the vulnerability presents, and work with asset owners to deploy the update.
  • Monitor, monitor, monitor. To be cyber resilient, organizations need to have threat monitoring and analytics tools to detect an attack, as well as the investigative and digital forensics capabilities to understand what went wrong and the scope of the damage. The sooner a cyberattack is detected, the sooner incident response and mitigation strategies can be put into effect. When it comes to ransomware, early detection can make all the difference in salvaging critical data and information systems.


What should you do when preventative measures fall short?

  • Isolate the issue. Buy more time to respond to the attack by removing infected systems from the network and cutting off access to the parts of the network that are not corrupted. Change the passwords to those isolated segments, if possible.
  • Secure backup data or systems by taking them offline. Make sure your backups are clean.
  • Contact your local FBI field office’s Cyber Task Force immediately. The FBI is there to help; its role is not to find fault or lay regulatory blame on a victim organization, but rather to conduct the investigation in cooperation with the victim organization and determine who perpetrated the attack.
  • Implement your incident response plan. Ensure all stakeholders have been notified and understand their respective responsibilities.
  • Change all passwords. Once your networks are back up and running, change all online account and network passwords.

2017 Tennessee Reappraisal of Real Estate Valuations

     2017 is a critical year for minimizing your real property tax bills for the next four to six years for real property held in 22 Tennessee counties that are undergoing reappraisal.   Tennessee’s largest counties (including Davidson) are all undergoing reappraisal this year.   The purpose of the reappraisal, which occurs every four to six years, is to restore equity and hopefully ensure taxpayers are being treated fairly by updating all appraisals to “current market value.” 
     As you can imagine this is a huge task for each county assessor and, by necessity, the counties must utilize various mass appraisal techniques in order to reappraise all real property in a timely fashion.  These mass appraisal techniques will actually, for some taxpayers, cause inequity and lead to a higher than market value being placed on property.  Obviously when that occurs, the inequity causes a higher property tax bill than is fair to the taxpayer potentially for the entire four to six year period of the cycle. 
     During April or May, owners of real estate in these counties will be receiving the 2017 assessment notices by mail.  These assessment notices will advise taxpayers of the new reappraised valuation as of January 1, 2017.  For taxpayers who hold significant real estate in the counties listed below, we strongly recommend that your 2017 assessment notices and new appraisal values be evaluated for potential appeal opportunity.  Unfortunately, the time frame to appeal valuations is fairly short after it is received and, depending on the county, is generally prior to June 1, 2017. 
     Crosslin’s state and local tax group can evaluate your 2017 real estate appraisal for potential appeal.  We will do the initial evaluation and consultation at no charge to you and will make a recommendation on whether an appeal is warranted.   If, based on that recommendation, you authorize Crosslin to pursue an appeal; our fee would be based on a percentage of the first year’s actual tax savings.  There is no further fee for the other three to five years that you will enjoy the tax savings.   If the appeal is unsuccessful and there is no tax savings, there would be no fee charged. 
     We are limiting this opportunity to only those individual (or collective) properties with valuations over $750,000 as of January 1, 2017.  All we need to do this evaluation is to review the county assessment notices that will be mailed to each taxpayer.
     Counties undergoing this process include Bledsoe, Bradley, Claiborne, Clay, Cumberland, Davidson, Fayette, Franklin, Giles, Hamilton, Hancock, Henderson, Humphreys, Knox, Louden, Marshall, Sequatchie, Shelby, Smith, Sullican, Unicoi, and Union.  
     If you have property in one of these counties and would like to discuss your reappraisal, please contact Mark Loftis at 615-320-5500 ext. 472

Crosslin Technologies Named Best Places to Work Winner

Crosslin Technologies came in 3rd place overall across all categories and was named a winner in the 2017 Best Places to Work Awards today, sponsored by the Nashville Business Journal. Companies are selected for displaying a strong commitment to creating a positive work environment which fosters respect, comfort, and engagement of its employees.

We are honored to be part of such a prestigious group. Crosslin Technologies is proud of its team and our workplace!

Crosslin Named Finalist in Best in Business

Crosslin was today named a finalist in the 2017 Best in Business Awards, sponsored by the Nashville Business Journal.  Companies are judged on service, growth, innovation, and strategy.  We are honored to be part of such a prestigious group.  Way to go, Team Crosslin!

Crosslin Technologies Named One of 2017 Best Places to Work

Congratulations to Crosslin Technologies! We are so thrilled to announce that CT was named one of the 2017 finalists in the Small Business Category by the Nashville Business Journal. We are so proud of our team and honored that we have been chosen as a finalist in this group. Thanks to CT for all of your continuous hard-work, dedication and everything you do to make CT a best place to work!

Click here to read the full article!


Other Upcoming Tax Filings

Other than my income tax return, are there other upcoming filings of which I should be aware? Tax team members Mark Loftis and Katie Almond answer that question and more in this week’s Tax Tips.  Check out the video here.

Other than my income tax return, are there other upcoming filings of which I should be aware?

Besides the corporate, partnership and individual filings due March 15 and April 15, there are several other filings for which you should be aware.

That’s right, for example, if your business owns personal property used in the business such as furniture, equipment and computers, you should file a Property Tax Schedule B by March 1 with your county.

It’s important to note that this is just an informational filing at this time and the actual assessment and tax bill will come later in the year.  If you are still in the process of filing your business return, you can file a provisional return now and amend it as soon as you have final fixed asset numbers.

The next upcoming filing will be your entity Annual Reports, due April 1.

These reports are filed online with the Secretary of State and merely report certain informational items related to your corporate or LLC structure.  There are payments due with these reports and the amounts depend on the type of structure.

Following these reports are city and county business license tax returns.  These are due April 15 and must be filed online with the state of Tennessee.

The tax on these returns is computed based on gross sales, before expenses, taxable in Tennessee.  Therefore, you can exclude out of state sales from the tax base.  Also, the rate of tax is based on your business status, whether a wholesaler or a retailer.

We here at Crosslin are happy to help you with all of your tax compliance and planning needs.  Please feel free to contact us anytime.

Upcoming Financial Reporting Changes for Not-for-Profit Organizations

The Financial Accounting Standards Board (“FASB”) has issued FASB Accounting Standards Update (“ASU”) No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, which is an accounting standard that will impact several aspects of a not-for-profit organization’s financial statements. The provisions in the new standard represent some of the most significant changes to a not-for-profit organization’s financial statements since the FASB issued Statement No. 117 in June of 1993.

This new standard changes how a not-for-profit organization classifies its net assets, as well as the information it presents in financial statements and notes about its liquidity, financial performance, and cash flows. A summary of the main provisions of ASU 2016-14 is as follows:

  • The standard changes the number of net asset classes from three classes (unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets) to two classes (net assets without donor restrictions and net assets with donor restrictions).
  • Currently, not-for profits organizations present, on the face of the statement of cash flows, the net amount for operating cash flows using either the direct or indirect method. It the direct method is used, then a reconciliation with the indirect method is required. The new standard no longer requires this reconciliation if using the direct method.
  • Not-for-profit organizations will be required to provide enhanced disclosures about how the organization manages its liquid resources available to meet cash needs for general expenditures within one year of the balance sheet date as the availability of a financial asset may be affected by (1) its nature, (2) external limits imposed by donors, grantors, laws, and contracts with others, and (3) internal limits imposed by governing board decisions.
  • Currently, only voluntary health and welfare organizations are required to present expenses by their natural and functional classification. Going forward, all not-for-profit organizations will be required to present their expenses by both their natural and functional classification. This information may be provided in one location, which could be on the face of the statement of activities, as a separate statement, or in notes to financial statements.
  • Not-for-profit organizations with endowment funds that are underwater will now classify their deficit in the endowment fund as part of net assets with donor restrictions. Currently, these deficits are presented as a reduction in unrestricted net assets.
  • The standard will now allow a not-for-profit organization to report its investment return net of external and direct internal investment expenses and no longer require disclosure of those netted expenses. The goal is to provide a more comparable measure of investment returns across all not-for-profits, regardless of whether their investment activities (1) are managed by internal staff, outside investment managers, volunteers, or a combination or (2) employ the use of mutual funds, hedge funds, or other vehicles for which management fees are embedded in the investment return of the vehicle.

The new standard is effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. The changes in this new standard should be applied on a retrospective basis in the year that the new standard is first applied.

Please contact Crosslin with any questions about how this new standard may impact your not-for-profit organization.