If you had any personal New Year’s resolutions a year ago, it’s possible you tossed them out the window not all that long into a 2020 that veered wildly off-course. We can’t blame you for it, but from an institutional standpoint, it’s important to stay on track during a challenging time.
Check out these suggested 2021 resolutions for financial officers in postsecondary education. We certainly can’t promise what twists and turns the new year will bring, but no matter the circumstances, you can be sure there will be reporting due dates to hit and standards to meet.
1) Meet the first annual HEERF reporting due date.
If you’ve been keeping pace with the other milestones for the Higher Education Emergency Relief Fund, hopefully, you’ve probably started to prepare the first annual reporting. If you haven’t, the deadline is February 1.
In addition to including student and institutional disbursements incurred through December 31, 2020, the annual report requires additional information about subsequent statuses for students who received HEERF grants and Full-Time Equivalent employee data as well. The Office of Postsecondary Education has created a “Reporting and Data Collection” website to assist schools with the process, which includes the final form for the annual submission here.
2) Understand the final rules for business meals and entertainment deductions.
Although 2017’s Tax Cuts and Jobs Act (TCJA) eliminated the deductions for business expenses related to entertainment, amusement or recreation, while still allowing a partial deduction on business meals, it wasn’t until later in 2020 that the IRS released the final rules on these changes.
The new regulations continue to allow a 50% deduction for the cost of a business meal, as long as it isn’t considered lavish or extravagant, so think twice before ordering lobster tails and top-shelf drinks. Companies may want to consider creating additional general ledger accounts to record meals and entertainment expenses by deductible category.
As with most changes to tax rules, there are nuances and murky areas. Check out this McClintock Minute article for a primer on the new rules, and our experts are on-hand as tax season approaches.
3) As people go remote, monitor economic nexus laws.
Since the Supreme Court’s 2018 ruling in South Dakota v. Wayfair, Inc., nearly all states have enacted economic nexus laws, allowing them to tax remote sales on companies that don’t have a physical presence in the state. These laws are not uniform, of course, so it can be difficult to sift through what obligations an institution may have depending on its level of activity in a certain state.
Institutions with online programs often have students, and sometimes instructors, in a large number of states. This trend only grew during a 2020 that saw more and more students (and employees) working remotely. This article breaks down when institutions should worry about nexus, and remember, our tax professionals are ready to assist you with a nexus study.
4) Consider the revenue recognition standard.
In light of the pandemic, the Financial Accounting Standards Board (FASB) pushed back the effective date for the revenue recognition standard by one year. The effective date for private companies and private not-for-profit organizations is now for fiscal years beginning after Dec. 15, 2019.
The standard establishes principles to report useful information to users of financial statements about revenue from contracts with customers. To ensure compliance, institutions need to use sound judgment. Through consulting with clients and our interactions at virtual industry events, we see some institutions having trouble with this nuanced rule. We’ve developed a tool to assist people through the process and capture the required documentation. Reach out to one of our experts to learn more.
5) Project the new lease standards’ impact on your composite score.
The delays continued when it came to the Financial Accounting Standards Board implementing new lease accounting rules for private organizations, giving them until 2022 to comply. (Public organizations have been required to do so for two years now.)
In general, the new standard aims to ensure lessees recognize all assets and liabilities created by leases with terms of more than 12 months on their financial statements. Previously, lessees were not required to recognize assets and liabilities from operating leases; they only needed to recognize capital leases.
More assets and liabilities will impact institutions’ composite scores, so private institutions should begin capturing the information needed to comply with the new standard in order to project its impact on their composite score. Don’t count on another delay.
Our auditors are ready to help model your school’s composite score according to the new standards.
Here’s to a better year
2020 was remarkable in many ways, most of which were not positive, so we’re pulling for an improved 2021. As we mentioned throughout this article, we are here to help financial officers, financial aid departments and their institutions manage the ever-changing regulatory environment and find customized solutions to any issues they face. Schedule a call today.