Archive for June 29, 2015

What have you done for your employee handbook lately?

In November 2014, Massachusetts citizens voted to entitle Massachusetts workers to earn and use paid sick time. In April 2015, the Attorney General released proposed regulations in order to help businesses comply with the new law. All employers are impacted by the law; however, only employers with 11 or more employees (not full-time equivalents (FTE’s)) during the calendar year are required to provide paid sick time to any employee whose primary workplace is located in Massachusetts, including part-time, full-time, seasonal or temporary employees. The new law takes effect on July 1, 2015.

According to a summary and the draft regulations published by the Attorney General’s office, some of the highlights of the new law are as follows:

• Massachusetts workers whose employers have 11 or more employees for at least 20 weeks during either the current or preceding calendar year (whether consecutive or not) can earn and use up to 40 hours of paid sick time per calendar year

• For employers with less than 11 employees for at least 16 weeks during either the current or preceding calendar year, workers can earn and use unpaid sick time

• The use of earned sick time can be used for:

o Caring for a physical or mental illness, injury or medical condition affecting the employee, spouse, child, parent or parent of a spouse

o Attending routine medical appointments for the employee, spouse, child, parent or parent of spouse

o Addressing the effects of domestic violence on the employee or employee’s dependent child

• Employees will earn at least one hour of sick time for every 30 hours worked

• Hours will begin to accrue on the date of hire, or July 1, 2015 (whichever is later) and employees can begin to use the sick time 90 days after that date (July 1, 2015 or date of hire, whichever is later).

• Up to 40 hours of earned sick time can be carried over to the next calendar year, but the employer is not required to provide more than 40 hours of paid sick time in one calendar year

• Earned sick time is not required to be paid out upon termination from employment

• Employers cannot require workers to make up the used sick time

• Other provisions exist within the law regarding requirements to provide notice, certification, documentation, retaliation, confidentiality, breaks in service, exempt employees and other responsibilities on the part of the employer and employee.

The above highlights are just a sample of what is in the draft regulations. All employers should be reviewing their employee handbooks containing human resource and PTO policies to ensure that their policies are up-to-date and compliant with the new law. An experienced employment attorney is recommended to ensure that circumstances specific to each organization are considered when reviewing for compliance.

Jeanne Pagnozzi Boston AccountantJeanne Pagnozzi is a manager in BlumShapiro’s Accounting and Auditing Department, based in Quincy, Massachusetts, Jeanne oversees attest and tax engagements and is responsible for engagement planning, staff supervision and coordination with client personnel to ensure successful completion of projects.

Best Practices to Keeping Your Board of Directors Engaged

A strong, engaged board of directors is crucial to the success of any non-profit organization, no matter the size, mission or vision of that organization. Ensuring the board is engaged should be a focal point for the leadership of the organization and the board itself. It is not enough to have a full slate of board members. Each of those board members should have a clear role within the organization’s board of directors. Following are best practices in order to keep the board engaged and facilitate the fulfillment of the organization’s mission:

  1. Keep the focus on the organization’s mission. The organization’s culture should assist with all employees and board members in carrying out the mission of the organization. The mission should be at the center of all decisions made by the board and the organization. Board members and potential board members should understand the mission and continually review the activities of the organization to ensure they are in line with the mission of the organization.

  2. Continuously monitor the organization’s strategic plan, including the goals set by the strategic plan. The organization’s strategic plan is not something to file drawer or put on a bookshelf. At least twice a year a significant portion of the board meeting should be devoted to the review of the strategic plan. In addition, the strategic plan should be updated periodically, especially if significant events take place, such as staffing changes or program changes.

  3. Review the needs of the board continuously. How often does someone say to their fellow board members during a meeting, “I wish we had someone who could do that for us.” I’m sure every board has had this conversation. The board should continuously review the skills of the existing board members and identify the holes they may need to fill. For example, if the organization’s social media presence is not quite up to par, the board should seek out a potential board member that can help with social media, or someone who can guide the organization’s staff members, depending on the size of the organization.

  4. Create a clear committee structure. Committees are particularly important to small organizations that rely on board participation and volunteers. Committees are equally important to large organizations that require governance over several different programs and activities. The board should ensure all board members are part of a committee and that each committee has clear marching orders and tasks to complete. This helps board members understand their roles within the organization and keeps them engaged.

  5. Plan for the future. Succession planning for non-profit boards is important. Current leadership must work with their fellow board members to identify the future leadership of the board. This is extremely important in small organizations that are managed by the board of directors or volunteer organizations where the board members take on staff responsibilities. The current leadership should look for opportunities for those future leaders to take on responsibilities within the organization to allow them to grow their skills. They also need to keep an open dialogue with fellow board members regarding the future of the board’s leadership.

  6. Communicate. Keeping the board engaged requires a lot of communication. It is not enough anymore to fill a seat at a monthly board meeting and vote on the issues put forth by the chairperson. Decisions constantly need to be made, and committees and subcommittees are constantly working to accomplish the goals of the organization. The leadership of the organization, the board and the committees must continuously communicate with each other in order to make timely, informed decisions.

There is a lot of responsibility that comes with participating on the board of directors for an organization. The easier the organization and the current board leadership makes getting involved in the organization, the more talented future board leaders they will attract. Also, the clearer and more structured the board is, through use of committees and communications from leadership, the more engaged the board members will be. This will result in a more productive and effective board for the organization, allowing for the organization’s success in fulfilling their mission.

Jessie Kanter, CPA, is a manager in the firm’s Accounting and Auditing Department with 15 years of public accounting experience. She has provided audit services to a variety of clients, including non-profit organizations. Jessie’s focus is in quality control of financial statement audits in which she provides consulting on complex technical accounting matters and internal support and review for the firm.

Revenue Recognition Step 2: Identify the Performance Obligation in the Contract

The second step of the new revenue recognition standard is to identify the performance obligation in the contract. In this step, an entity will evaluate the goods and services offered and determine which are distinct and should be accounted for as separate performance obligations. The key determinant for identifying a separate performance obligation is whether the good or service is distinct.

A good or service is distinct if both of the following criteria are met:

1. Capable of being distinct. This means a customer can benefit from a good or service if the good or service can be used, consumed, sold for an amount that is greater than scrap value or otherwise held in a way that generates economic benefits.

2. Distinct within the context of the contract. Factors that indicate that an entity’s promise to transfer a good or service to a customer is separately identifiable include, but are not limited to, the following:

• The organization is not using the good or service as an input to produce or deliver the combined output specified by the customer.

• The good or service does not significantly modify or customize another good or service promised in the contract.

• The good or service is not highly dependent on, or highly interrelated with, other goods or services promised in the contract.

Each distinct good or service is separately identified from other promises in the contract and represents a separate performance obligation.

Stay tuned for our next post, which will cover transaction pricing.

Read other articles in our “Revenue Recognition” Series:

Revenue Recognition Step 1: Identify the Contract(s) with a Customer

As noted in our prior blog post, new revenue recognition standards were issued in 2014. The first step of the new revenue recognition standard is to identify the contract(s) with a customer. A contract with a customer must meet all of the following criteria:

1. Has approval and commitment of the parties
2. Rights of the parties are identified
3. Payment terms are identified
4. The contract has commercial substance
5. Collectability of consideration is probable

The contract may be written, verbal or implied by customary business practices. The enforceability of the rights and obligations in a contract are a matter of law and vary across legal jurisdictions, industries and entities. An entity should consider these practices and processes in determining when an agreement with a customer creates enforceable rights and obligations of that entity.

A contract does not exist if each party has the unilateral enforceable right to terminate a wholly unperformed contract without compensation to the other party. A contract is wholly unperformed if both of the following criteria are met:

1. The entity has not yet transferred any promised goods or services to the customer
2. The entity has not yet received, and is not yet entitled to receive, any consideration in exchange for promised goods or services.

If an organization receives consideration from a customer, and a contract with a customer does not meet the criteria to be considered a contract under revenue recognition, the entity should recognize the consideration received as revenue only when either of the following events occur:

1. The organization has no remaining obligations to transfer goods or services to the customer, and all, or substantially all, of the consideration promised by the customer has been received by the entity and is non-refundable.
2. The contract has been terminated and the consideration received from the customer is non-refundable.

If one of the above criteria is not met, the organization should record the consideration received as a liability until a contract exists or one of the above criteria is met.

There is also an option to combine two or more contracts entered into at or near the same time with the same customer, and account for them as one contract if they meet the following criteria:

1. The contracts are negotiated as a package with a single commercial objective.
2. The amount of consideration to be paid in one contract depends on the other price or performance of the other contract.
3. The goods and services promised in the contracts (or a portion of goods and services promised in the contracts) are a single performance obligation.

In addition, in this step entities must also determine whether or not it is probable that the consideration to which it is entitled will be collected. This includes considering the customer’s ability and intention to pay the consideration when it is due. If it is not probable that an organization will collect the consideration, then revenue will not be recognized until payment is collected from the customer.

In our next post, we will cover how to identify the performance obligation in a contract.

Read other articles in our “Revenue Recognition” Series:


Michelle Hatch is a partner in our Non-Profit Services Group. She oversees audit and accounting engagements for non-profit organizations, including independent schools, trade associations, health and human service organizations and art, cultural and membership organizations. Michelle is also a member of the Employee Benefit Assurance Group and oversees audits for 401(k), 403(b) and defined benefit retirement plans.

Five Steps for Recognizing Revenue under New FASB and IASB Standards

The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) issued their final standards on revenue recognition in 2014. The new standard will be more principles based versus rules-based, which is how US Generally Accepted Accounting Principles (GAAP) standards are currently structured.

This new standard includes increased disclosure for all entities, but does not affect a non-profit’s accounting for contribution revenue. It will, however, have an effect on the accounting for a non-profit organization’s earned revenue.

The new standard is based on a five-step model for recognizing revenue. The five steps are as follows:

1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognize revenue when (or as) the entity satisfies a performance obligation

The effective date for this standard was recently delayed one year and will now be effective for public entities for annual reporting periods beginning after December 15, 2017 (2018 calendar year-ends) and for non-public entities for annual reporting periods beginning after December 15, 2018 (2019 calendar year-ends and after). Organizations should start thinking about how they will be impacted by this new standard.

Check back over the next few weeks for further detail on each of the five steps for recognizing revenue under the new FASB and IASB standard.

Read other articles in our “Revenue Recognition” Series:

 Michelle Hatch is a partner in our Non-Profit Services Group. She oversees audit and accounting engagements for non-profit organizations, including independent schools, trade associations, health and human service organizations and art, cultural and membership organizations. Michelle is also a member of the Employee Benefit Assurance Group and oversees audits for 401(k), 403(b) and defined benefit retirement plans.