In addition, without clear distinctions, net assets may be held in restriction unnecessarily instead of being used where they are most needed. Conversely, net assets could be expensed inappropriately for general purposes, putting the church at risk of not having funds available to fulfill its legal responsibility in good faith to donors who gave funds for specific purposes or projects.

The table below highlights how net assets should be categorized and the differences between each category.

Ultimately, the proper net asset category comes down to messaging. Did the donor give their gift for a specific purpose, project, or program, as indicated by a note accompanying the donation, or because it was given during a particular offering time or in response to a specific appeal? Those funds would be classified as donor restricted. Did the governing body vote to designate or reserve a certain amount from the general fund toward a specific initiative? Those funds would be classified as designated.

A key point is that it matters who makes the statement that a gift is given for a specific purpose, whether they use the term “restricted,” “designated,” or another term. If the designation or restriction as to purpose is made internally, such as by the board or management, then this is not a “restricted” gift within the meaning of generally accepted accounting principles (GAAP), nor is such a designation or restriction legally recognized if a judgment were issued against the church in favor of a creditor. If the designation or restriction as to purpose is made by a donor, then the funds must be separately accounted for and only used for the purpose specified by the donor.

Gift Acceptance Policies

An effective gift acceptance policy can help your church manage donated funds appropriately. A gift acceptance policy should broadly address the following:

• The types of gifts your church will accept
• Handling procedures for different types of gifts
• The stipulations for the expiration of donor restrictions

For example, a church’s gift acceptance policy could include a statement that if the total giving for a specific program or purpose exceeds the need for that program, the surplus funds can be allocated to a different purpose. This could be one of the “terms and conditions” donors accept when submitting a gift online or by mail with a reply card, or it could be delivered more straightforwardly for donor approval.

A gift acceptance policy can help provide guidance to your donors and prospective donors as well as protect your church, your leaders, and your staff from feeling pressure to accept gifts with restrictions that the church is not prepared to manage.

Gaining Financial Clarity

Correct net asset classification is essential for maintaining financial integrity and transparency within churches. By taking steps to categorize your net assets accurately, your church can ensure that funds are used appropriately and in alignment with donor intentions. You will also gain vital insight into the funds available for unrestricted use, which can help your church make informed financial decisions and uphold your commitment to good stewardship.

Please contact us with any questions or if we can assist your church.

Additional Resources:

Elements of a Well-Drafted Gift Acceptance Policy

Should Your Organization Accept that Gift?

Authors: Courtney B. Gregory, Partner and Rachel Malone, Supervisor – Consulting

The post The Importance of Accurate Net Asset Classification in Church Accounting appeared first on CapinCrouse.

We’ve put together steps to help you identify errors before your annual compliance audit. These actions do not have to be time-consuming or expensive, and they can be done by someone in an existing financial aid role. In other words, these steps can be quick, easy “wins” for your institution.

Six Quick, Easy Wins

Here are six proactive measures for your institution to consider:

1. Create a process to ensure Pell Grant calculations are accurate under the new enrollment intensity requirements.

Your institution’s IT team may be able to write a report to pull all the data at once. If not, you can follow these steps to generate the information shown in the example table below:

1. Run a file of all currently enrolled students with fall hours.
2. Run a file of all currently enrolled students with spring hours.
3. Merge the two lists. Add any non-matching rows to the bottom so you catch students who are only enrolled in one term.
4. Run a file of all Student Aid Indices (SAIs) and merge it into your report. Remove any students without a FAFSA, graduate students, or students in a program that is ineligible for the Pell Grant.
5. Run a file of all minimum and maximum Pell-eligible students. Although their SAI may not reflect that they should receive the Pell Grant, you need to identify them.
6. Once you have listed minimum and maximum Pell-eligible students, you can remove any students with an SAI over $7,395, as they are not eligible for the Pell Grant.
7. Create an “expected Pell” column and enter a formula of $7,395 minus SAI. Copy this formula all the way down. This is what you would expect to disburse to their account if they are enrolled full-time for both terms. (Note: this won’t be accurate for your maximum and minimum students, but you can calculate their formula separately.)
8. Update any negative SAIs to $0 for the expected Pell amount to be accurate.
9. Round to the nearest $5.
10. Clean up the expected Pell column for various groups (for example, if the SAI is over $7,395 but they have a minimum Pell indicator, the expected Pell should be $740).
11. Reorganize your spreadsheet into groups with similar enrollment intensity. You can sort the data as follows and then keep resorting and grouping enrollment intensities together so that it is easier to check for accuracy:
    • All students who were full-time for both terms, since they should have full expected Pell disbursed.
    • Students who were full-time for one semester with 0 hours for another term.
    • Students who were full-time for one semester with 11 hours for another term.
    • Students who were full-time for one semester with 10 hours for another term, etc.
12. Once you have finished sorting, run a report of Pell disbursed within your student information system and merge it into the sorted spreadsheet to show what has actually been disbursed to each student’s account.
13. Now look for any amounts disbursed that don’t match the expected amount and see if there is a logical reason for the discrepancy or if it was caused by an underpayment or overpayment issue.

The finished report should look similar to this (click on the image to enlarge it):

Don’t automatically rely on your student information system to properly calculate the Pell grant. Double check it, especially this first year!

2. Create a process to identify subsidized loan awards that exceed the student’s grade level.

You could accomplish this by creating a report that helps identify students who have received a subsidized loan, along with their total credits earned. This report could be set up as follows:

In this example, Jane is a freshman but appears to have been awarded a sophomore loan amount, so she has an overawarded subsidized loan.

You should run and review this report prior to the first disbursement of the award year so that award revisions can be sent to the student before disbursement.

3. Run a report of all students with federal aid whose Institutional Student Information Record (ISIR) is selected for verification and indicate whether they have been verified.

The report could be set up as follows:

If a student shows up as not verified, research and document the reason why. If verification needed to be completed but was not, the aid awarded must be returned.

4. Develop a report to identify students who have received awards that are over-need or over-budget (cost of attendance (COA)).

This report would contain these columns:

In this example, something Jane was awarded is causing the aid to be over-need since “Unmet Need” is a negative amount. When this happens, it is important to determine the cause of the overaward. For example, if the student received subsidized loans, a Federal Supplemental Educational Opportunity Grant (SEOG), or Federal Work-Study (FWS), she has been overawarded.

This report can also include data that helps you identify students whose total awards exceed their COA. To do this, add a column that pulls the COA.

In a perfect scenario, the financial aid system would stop awards from awarding if it caused an over-budget (COA) issue. However, this issue can still occur if the budget was changed or additional scholarships were added to the package and caused the over-need, over-budget, or COA issue.

5. Look for students who had aid offered that exceeded their budget or COA.

It’s important to make sure these students’ aid was not overawarded. You could set up the report that identifies this as follows:

In the example above, the student likely experienced an event that changed his financial situation, such as moving home with his parents or receiving an outside scholarship.

Regardless of the reason, it’s important to identify this before the aid is disbursed. Review the budget to see if there was a change that would allow the higher offered amount. If not, the aid awarded must be reduced. If it was already disbursed, it must be returned. Reviewing this report before disbursing aid would prevent this from happening.

Remember that if the budget is adjusted, it may be considered a special circumstance and should be documented as such.

6. Monitor the level of FWS paid to see if it is greater than the level offered.

The report to identify this could be set up as follows:

In this example, the student was paid FWS wages greater than the original amount offered. Identifying this promptly will allow your institution to see if an increased FWS award is an option or if the student needs to be moved to non-work study and have his FWS wages reduced so he is not paid over need.

Reviewing this report monthly will help you promptly identify students who have exceeded their need by $300. This will allow your institution to redirect the student payroll from FWS into another institutional account so that all future earnings are recorded in the correct account. That will prevent having to make correcting journal entries at year-end, when you are busy closing out the year.

Additional Steps

Here are some other actions your institution can take to help prevent compliance findings:

• Request a list of withdrawals from the registrar a couple of times each semester. Use the list to double-check that all withdrawals have been processed properly, with any needed R2T4 calculations and subsequent returns processed within the time limits. We also recommend having a member of your financial aid department with the appropriate experience periodically review modular students’ R2T4 calculations and returns. This will help ensure that internal controls over such processes can operate effectively and achieve compliance.
• Perform a monthly reconciliation on any Pell or Federal Direct Loan (FDL) activity. Reconciliations must be done by student detail. In other words, you must compare the student’s system-disbursed amount to what the Common Origination and Disbursement (COD) detail report reflects for each student disbursement, not just the totals disbursed for each loan type.
• Maintain documentation that supports actions taken, such as satisfactory academic progress, special circumstances, reconciliations (Pell and FDL), data accumulated for the Fiscal Operations Report (FISAP), support for any correction such as an R2T4, and so on. It’s important to keep an audit trail of the compliance requirements at the point you completed them.
• Be proactive. If you encounter an error, don’t assume it is an isolated incident. Instead, look for similar issues and verify that no other students have the same overaward or compliance error.

Keep in mind that this is not an all-encompassing list but rather simple procedures your institution can use to help identify award issues before the end of the financial aid year. Taking these proactive measures can result in quick, easy wins that help you identify any issues promptly and avoid future compliance findings.

If you have any questions or would like assistance with any of the considerations above, please contact us.

This article has been updated.

The post Quick, Easy Wins to Help Your Institution Prevent Title IV Compliance Findings appeared first on CapinCrouse.

Watching the landscape for seasonal changes is similar to looking at key financial indicators for your church. If you pay attention and study the signs, you can prepare for what lies ahead.

Effective financial ratios can give your church vital insight into its financial condition and trends. In this article, we discuss how to analyze cash flow ratios, using sample ratios from the CapinCrouse Church Financial Health Index^TM (Index). You’ll learn:

• Why monitoring cash flow ratios is important.
• How to analyze different cash flow ratios to provide significant insight for your church.
• Recommended benchmarks for cash flow reserves and measures.
• How to use cash flow ratios with other ratios to gain insight into what drives certain trends.

Why Monitor Cash Flow Ratios?

Churches must have sufficient cash balances to operate. Positive net income and net asset balances won’t make up for inadequate cash reserves to fund outflows. They also won’t help the church handle months when giving is down. A church without necessary reserves will be scrambling to operate in the short term, no matter what its other balances are.

It is important to consider debt and other ratios alongside your cash flow ratios. It’s also prudent to consider upcoming capital needs that have not been accrued or paid for and the impact they would have on these ratios. For example, a church that needs to spend $500,000 on a new roof should consider this when looking at cash flow ratios and the impact pending expenditures will have on them. It’s the same decision process churches use when choosing whether to maintain cash reserves versus spending them to pay down debt or pay for construction instead of financing it with more debt.

Days Ratios

These ratios are designed to tell your church how many days of cash reserves are on hand by looking at cash from three unique perspectives. We discuss these ratios in more detail below.

Days of Operating Cash and Investments

Operating cash and investments are those resources that do not carry donor restrictions on the assets and are available for the church to spend without restrictions. This ratio calculates the days of operating cash and investments that are available to fund annual expenditures, but specifically related to very liquid assets. It only considers operating cash and investments, not other current assets and liabilities. Operating investments would exclude funds for endowment, split-interest agreements, and other non-operating purposes.

This amount is divided by the total cash expenses the church would incur. This is calculated by taking expenses, excluding the largest non-cash expense of depreciation, and adding the current debt principal. The current debt principal is added back because it represents cash spent but is not recorded as an expense in the statement of activities.

Let’s look at some sample ratios that have very different results and trends, and what this may indicate for each hypothetical church.

In 2019 and 2020, Sample Church #1 was outside of the recommended benchmark of 40 – 80 days of operating cash and investments.

In addition to the church’s results compared to its peers and the recommended benchmark, you can also look at the trend of the ratio between years. Sample Church #1’s trend was moving in the right direction between 2019 and 2023, when its result dropped. This may reflect a one-time event, such as a building project, expansion, or large gifts to other ministries. However, there could also be a decrease in contributions or a significant increase in expenses to the point where the church can’t fund current operations from annual contributions. Management should review this trend and make sure it is not cause for concern.

Sample Church #2’s trend is cause for concern because it shows that after 2019, its result dropped significantly and remained low. This indicates that the decrease wasn’t caused by a one-time expenditure or event — rather, it’s the result of another underlying cause. This could be a decrease in contributions or a significant increase in expenses to the point where the church can’t fund current operations from annual contributions. Most likely, it’s a combination of both. Looking at debt, contribution, and expense ratios will help this church see what is driving this trend.

You can also look to the other ratios to indicate why these results are going back and forth. Is it because the church is spending and rebuilding reserves, or are attendance and contributions fluctuating? Although you can’t discern this from the cash flow ratio alone, it’s important to understand what is causing the change between years. Looking at just one indicator instead of the combined ratios in other areas is similar to the difference between looking at a two-dimensional picture compared to a three-dimensional hologram. You get more information from the additional dimension of the hologram. The same is true when you look at several ratios and measures in conjunction with each other.

Sample Church #3 is above the recommended benchmark, but had a significant drop (that was still within the benchmark) in 2021. Upon further investigation and understanding, the church used its reserves to renovate a campus it received from another church. The church did not want to incur debt with this buildout and rebuilt its reserves over the next two years.

Analyzing the trend, benchmark, and peer information for these ratios provides significant insight. And while it doesn’t answer every question you may have, it does tell you where to look next.

Available Days of Cash Flow Coverage

This ratio is the sum of:

• How much your church has on hand at the beginning of the year that is available to spend without restrictions (operating cash and investments); plus
• The cash you will generate during the year from day-to-day operations (cash flow from operations from the statement of cash flows); plus
• Additional cash that could easily be borrowed, if needed (available operating line of credit).

This total is divided by the sum of cash expenses plus mandatory debt service payments. The result is multiplied by 365 to convert the ratio into days. The final product shows how long your church could continue to operate on these sources. It’s the maximum level of reserves and should always be the highest of the days ratios that calculate cash reserves.

Cash flow from operations typically has the biggest influence on this ratio. If a church has extremely high positive cash flows from operations, that will increase the ratio. The same is true if a church has significant negative cash flows from operations. The numerator includes prior-year operating cash and investments, which if high (or low) may increase or decrease the ratio. Finally, this ratio also includes the impact of an unused operating line of credit. If your church does not have this, your result may not be comparable to other churches that can add it to the calculation.

Think of it as how much you have on hand at the beginning of the year plus what you will generate during the current year and what you could borrow for operations. Let’s look at our examples again:

Sample Church #1 has strong results. It is within or above the benchmark each year and hovers around the peer average. However, you can see the downward trend from the peak in 2021. The question for the church is why this trend is occurring. Are there specific, identifiable expenditures that were budgeted for and expected? If not, the church should start discussing changes to correct this. If this trend continues over the long term, the ministry of the church could be permanently threatened.

The key is to know whether Sample Church #1 is intentionally making operating decisions that are keeping reserves at these levels or if the church is unaware of what is causing this trend. A church that makes intentional operational decisions that could result in growth is less worrisome than one that has no idea what is driving the trend in its reserves. Talking to management and reviewing other ratios can complete the picture.

Sample Church #2 has been outside the benchmark and below the peer average since 2021, but always above the minimum of at least 60 days of reserves on hand. When you compare this result to the Days of Operating Cash and Investments ratio, you can see that the church is able to pull this result up into the benchmark range. Although the result is below the peer average, it could be that the level of reserves is supporting certain deliberate investments in new programs or infrastructure. Comparison to the result of the Days of Operating Cash and Investments ratio further proves that the church is having challenges maintaining adequate reserves. Sample Church #2 likely has minimal cash flow from operations in the years the result is below 90 days, which means it is breaking even in its day-to-day operations.

Sample Church #3 has a very healthy trend. Not only are its results well above the peer average, but the church also is able to rebuild cash reserves after using them for specific programs or capital projects. This indicates that the church has healthy giving and manages operating expenses well. It also probably does not have significant debt. The question for this church is how it will invest these abundant resources to support future ministry growth.

All three churches require different questions, supported by ratio results.

Liquidity Ratio

This ratio measures how well operating cash and investments can cover current operating liabilities. The calculation is similar to the Current ratio, except that it is only calculated on a portion of current assets (operating cash and investments). This is not the same as all cash and investments because it excludes cash and investments that support donor restrictions.

And like the Current ratio, this modified asset amount is divided by modified liabilities. Operating liabilities (those due in less than 10 days) exclude current building fund liabilities, which normally have a separate source of cash from revenues with donor restrictions. They also exclude any amounts owed on a short-term construction line of credit as these are typically interest-only until converted into long-term debt and paid over time. As a result, a short-term construction line of credit does not require payment from current operating cash or investments.

This ratio will tell the reader how many times operating liabilities can be funded from operating reserves. We believe a reasonable benchmark for this measure is greater than or equal to 5.0.

Sample Church #1’s results are trending down and below the recommended benchmark. This likely decreased between years due to an increase in operating liabilities. The church may have chosen to use resources in other ways (such as to pay off debt, which is a non-operating liability) and used its operating cash and investments to do so. In that scenario, operating liabilities could have increased because non-operating liabilities decreased.

Sample Church #1 must carefully manage its operating reserves and make sure they increase at a rate greater than operating liabilities to improve this ratio. This will require careful cash forecasting and management, which the church’s other cash flow ratios and measures indicate it is doing. This church needs to keep a close eye on trends in these ratios in the future.

In Sample Church #2’s results, the main factor that stands out is the trend. While the results are below the recommended benchmark, the biggest concern is that the result has decreased every year until the church had a 0.2 in 2023. This indicates that not only is Sample Church #2 unable to handle unexpected operating expenses, events, and new ministry opportunities that may come along, but it also is unable to handle the current expenses necessary to operate on a day-to-day basis.

Sample Church #2 appears to have used all its reserves and needs to drastically cut expenses to an absolute minimum to survive on current income. The most likely place to make cuts is in staffing, which is typically a church’s largest expense. However, while reducing staff may help Sample Church #2 survive in the short term, it won’t help over the long term and will severely impact the church’s ability to provide programs and services on an ongoing basis. It’s a tough place for a church to be and Sample Church #2 is likely looking at closing or combining with another church.

Sample Church #3’s results are very strong and above the benchmark in every year except 2021, which is not far below the benchmark. As you compare this ratio to the other cash flow ratios and measures, there is no cause for concern at Sample Church #3.

Net Cash Availability

This measurement calculates the amount of cash available for other uses after the church has satisfied its current liabilities and set aside appropriate funds for projects with donor restrictions that have not been completed. It is one of the most important measures provided to your church leadership because it answers the question “Whose cash is it and how much of it can we spend?” not “How much cash do we have?” These are typically two very different questions.

Sample Church #1 has wavered above and below one month’s worth of cash expenditures. Unlike Sample Church #2, however, it appears to have a plan to handle the fact that it is consistently going below the benchmark. The measure reflects that in 2021, Sample Church #1 took out a $2 million operating line of credit and increased it to $3 million in 2023. So, while the church’s net cash availability is below one month’s worth of expenses, with the availability of the operating line of credit it is within the benchmark. This is only a safety net, and by actively monitoring reserves and forecasting cash flow, Sample Church #1 appears to be managing its operations.

Sample Church #2’s results are negative, which is below the benchmark of one month’s worth of cash expenditures. The trend is also concerning because the church is increasingly spending money it does not have, and the result appears to be growing exponentially. So how is this church able to go so far negative? It’s likely that because other resources aren’t available, Sample Church #2 spent resources with donor restrictions to fund operations. These resources are not to be expended for general operating purposes, which is why they are excluded from the subtotal of net cash available for spending. A negative result indicates the church has likely spent resources with donor restrictions. There can be an obligation to the donor if a church misspends its net assets with donor restrictions.

A negative result can also indicate that a church may be funding operations with short-term revolving debt. You can tell that Sample Church #2 isn’t doing that because its Net Cash Availability measure is the same with and without the operating line of credit, indicating that the church does not have one. But it’s clear the church has “borrowed” from resources with donor restrictions and doesn’t appear to be able to pay them back.

Sample Church #3 is well ahead of peers, above the benchmark, and has consistently increased cash available to spend on operations. You can tell Sample Church #3 manages its cash reserves and is forecasting cash needs because the ratio shows that in 2021, it obtained a $5 million operating line of credit, which the church decreased to $2.5 million in 2023. While Sample Church #3 doesn’t appear to need it, the church is covering itself with a one-month expense reserve through revolving debt.

You can also see that Sample Church #3’s average monthly expenses are increasing. Since the largest two expenditures in most churches are personnel and debt, the church is likely growing and expanding its programs and operations. It’s probably a combination of these factors. To know for sure, you would need to analyze the church’s debt and personnel expense ratios along with attendee trends. However, the key is that Sample Church #3’s reserves are growing and expanding as its operations do the same.

Just like noticing the leaves changing in the fall, if you know what to expect and can read the signs, putting these metrics together can provide a comprehensive examination of your church’s cash reserves, which can be very valuable to your church leadership.

If you want to benchmark your church but are unsure where to start, ask us about the CapinCrouse Church Financial Health Index. This convenient online tool is designed to help churches measure and analyze financial strengths, weaknesses, and trends to see where they have been and map the best route forward.

This article has been updated.

The post Analyzing Key Financial Indicators: Cash Flow Ratios appeared first on CapinCrouse.

High-Level Considerations

Here are some potential benefits and challenges of mergers and acquisitions you can use when starting to consider this step at a high level. As with any strategic decision, there are a lot of factors to weigh, and you should consult with your legal counsel to determine the feasibility of a merger or acquisition arrangement.

Potential benefits:

• Expansion into a new geographic area or market
• Consolidation of redundant or under-performing programs
• Access to additional resources (research, athletics, student life, etc.)
• Stability for students, faculty, and staff
• Streamlining of back-office functions (HR, facilities, food services, finance, financial aid, etc.)

Potential challenges:

• Limitations due to federal and state regulations
• Inadequate time to go through the merger and acquisition process due to financial constraints
• Difficulty of successfully completing a merger or acquisition from a legal standpoint
• Loss of unique brand identity or recognition
• Misalignment of culture or beliefs with the other institution
• Impact on students, faculty, and staff who were not anticipating a change
• Potential impact on alumni and donors

Finding a Potential Merger or Acquisition Partner

With the limited number of higher education institution mergers and acquisitions occurring each year, there is no tried-and-true roadmap to follow. However, the importance of understanding and finding the right potential partner institution cannot be understated.

This does not mean that you should try to find another institution that is just like yours, except in a better financial position. Many private higher education institutions are members of associations based on geographic region or denomination affiliation. These associations are a good place to float ideas and get insight into other institutions that may be in a similar situation or interested in expanding their reach through a merger or acquisition.

Or perhaps a more creative solution would be feasible. You could consider pursuing a partnership with an institution affiliated with a different denomination, or a merger between a private and a public institution. You could also look for potential partners with value-added services that your institution does not offer or, conversely, that are lacking in areas where your institution is strong.

Planning for Success

No matter which side of the merger or acquisition you are on, it is crucial to have pre-established guidelines and a reasonable plan. In addition to this template for successful nonprofit mergers and acquisitions, here are a few tips:

1. Put together a list of “non-negotiables,” or aspects of the other institution that must or must not be the case before any next steps are taken.
2. Collect information about potential partner institutions and have thorough conversations with internal and external stakeholders.
3. Allow ample lead time for the various accrediting and regulatory bodies to review and work through due diligence.
4. Be vigilant about following regulations throughout the process and promptly providing any requested information.
5. Communicate with students, faculty, and staff as soon as is appropriate to quell any concerns.

Please contact us if you would like to learn more about how CapinCrouse can support your institution through the merger and acquisition process.

Additional Resources:

When Your Institution is Facing an Uncertain Future: Revenue Enhancement Considerations

A Template for Successful Nonprofit Mergers and Acquisitions

Authors: Dana S. Stuart, Senior Manager – Consulting and Christopher M. DuKate, Partner

The post When Your Institution is Facing an Uncertain Future: Merger and Acquisition Considerations appeared first on CapinCrouse.

Sunday, June 8 – Thursday, June 12
2025 SBC Annual Meeting & Pastors’ Conference
Dallas, TX

Visit us in Booth 1616!

The post 2025 SBC Annual Meeting & Pastors’ Conference appeared first on CapinCrouse.

Tuesday, April 29  – Thursday, May 1
Christian Leadership Alliance (CLA) Outcomes Conference
Dallas, TX

Featuring these workshops with CapinCrouse and CapinTech professionals:

•  Hard Board Conversations – CapinCrouse Managing Partner Fran Brown
• Accounting and Auditing Update – CapinCrouse Partners Tim Sims and Nathan Salsbery
• Empowering Decisions through Data – CapinCrouse Partner Lindsey Whinnery
•  Cyber Threat and Control Update – CapinTech Partner Allison Ward and Senior Manager Katie Herbert

The post Christian Leadership Alliance (CLA) Outcomes Conference appeared first on CapinCrouse.

A Look at What’s Changed

In 2021, Congress enacted the Corporate Transparency Act (CTA) with the goal of reducing illegal activity such as money laundering, tax fraud, and terrorism financing by requiring the reporting of more ownership information from certain U.S. businesses. This makes it harder for bad actors to hide income and other types of gains through shell companies or other opaque ownership structures.

Under the CTA, entities that meet specific criteria must submit a Beneficial Ownership Information (BOI) report to FinCEN. “Beneficial owners” are those individuals who exercise substantial control, either directly or indirectly, over a reporting company, or who own or control at least 25% of a reporting company’s ownership interests.

The interim final rule issued in March 2025 changed the definition of a reporting company to include only entities formed under the law of a foreign country that have registered to do business in any U.S. state or tribal jurisdiction. These entities must report BOI unless they qualify for one of the 23 exemptions listed in Section 1.2 of the FinCEN Small Entity Compliance Guide.

Under the interim final rule:

• Domestic (U.S.) entities — including nonprofit entities — are exempt from the BOI reporting requirements.
• Foreign entities registered to do business in the U.S. are exempt from reporting BOI for any U.S. persons.
• S. persons are not required to report BOI for any foreign entities in which they hold ownership.
• Foreign pooled investment vehicles where no non-U.S. person exercises substantial control are not required to report BOI.

The new rule focuses on foreign entities and foreign individuals, relieving the requirements for domestic entities and persons.

Please contact us if you have questions about BOI reporting or other issues for tax-exempt entities. We are here to help.

The post Treasury Narrows Beneficial Ownership Reporting Requirement to Foreign Entities appeared first on CapinCrouse.

Upcoming Title IV Requirements

1. FSA Electronic Announcement GENERAL-25-16, Acting Under Secretary James Bergeron Letter to Education Stakeholders (March 14, 2025) – This announcement links to a letter from ED with updates on the department’s reduction in force.
2. FSA Electronic Announcement GENERAL-25-14, Notice of Updated School Participation Division Contact Information – The contact information for the School Participation Division has been updated due to the recent regional organizational changes at ED, as outlined in this announcement.
3. FSA Electronic Announcement CB-25-05, Apply by April 7, 2025 for Designation as a Title III or Title V Institution and Waiver of the Non-Federal Share Requirement for FWS and FSEOG – New information has been released regarding the designation of Title III or Title V status for institutions and the resulting waiver of the non-federal share requirements for the Federal Work-Study (FWS) and Federal Supplemental Education Opportunity Grant (FSEOG) programs.
4. FSA Electronic Announcement CB-25-06, 2025–26 Federal Work-Study Program Community Service Waiver Requests – This electronic announcement provides the submission requirements for a 2025–26 FWS community service waiver request. The waiver deadline is 11:59 p.m. EDT on Monday, April 21, 2025.
5. FSA Electronic Announcement GENERAL-25-15, SAIG Message Class File Update – ED has sent the message class “MESSAGTB” via the Student Aid Internet Gateway (SAIG) to all user mailboxes. The next time the user connects to the SAIG network, the software will automatically request, download, and import this new message class table.

Free Application for Federal Student Aid (FAFSA) Simplification Announcements

1. FSA Electronic Announcement APP-25-09, 2024-25 and 2025-26 FAFSA Update: Availability of Batch Corrections Processing, Resolution of ISIR Processing Error – This is a reminder that institutions should not submit their batch corrections to the old Central Processing System (CPS) mailbox but rather to the new SAIG mailbox TGDE552. If your institution submits files that are not processed within 48 hours, you should confirm whether they were submitted to the correct SAIG mailbox.
2. FSA Electronic Announcement APP-25-10, 2025–26 FAFSA^® Form Reminder Campaign – This announcement links to an attachment that provides two fully drafted emails institutions can send to students and parents to remind them to complete their 2025–26 FAFSA form.

Webinar

1. FSA Electronic Announcement ANN-25-01, Virtual Training Course – Policies and Procedures Training – This two-day course will cover best practices and strategies necessary to comply with the required statutes and regulations through written policies and procedures, which serve as the basis for effective administration of Title IV programs. The course will be offered in April, June, and August. Participants can register in the FSA Training Center.

Please contact us if you have questions or would like to discuss how these announcements apply to your institution.

The post Top Seven March 2025 Announcements for Higher Education Institutions appeared first on CapinCrouse.

While the SECURE 2.0 Act provides many benefits, nonprofit organizations should be aware of a specific provision that could impact certain 403(b) plans, especially those that exclude employees working less than 20 hours a week (1,000 hours annually).

Requirement to Allow Participation

The SECURE 2.0 Act encourages more inclusive eligibility rules, including offering participation to long-term, part-time employees (LTPTs). LTPTs are employees who have worked at least 500 hours a year for two consecutive years. Years of service before January 1, 2023, are disregarded for purposes of determining if an employee meets the definition of a LTPT. If your ERISA-covered Section 403(b) plan currently excludes employees who regularly work less than 20 hours a week, you need to pay special attention to this new LTPT rule.

With the increased focus on inclusion, the IRS could view failure to offer participation as a compliance issue.

Potential Issue

For employers with ERISA-covered Section 403(b) plans that currently exclude employees who regularly work less than 20 hours a week (1,000 hours annually), there’s a risk of noncompliance if excluded employees worked 500 hours or more for two consecutive years prior to January 1, 2025. Those employees should have been given the opportunity to participate in the plan in 2025.

Failure to extend eligibility to these employees may result in penalties or a requirement to offer participation in the retirement plan retroactively.

Action Items

If your organization has an ERISA-covered Section 403(b) plan, we recommend that you take the following steps:

• Review your eligibility requirements – Confirm whether your 403(b) plan currently excludes employees who work less than 20 hours a week. (This is an optional provision, not a requirement.)
• Audit historical participation – If you did not give employees who work less than 20 hours a week the opportunity to participate in your 403(b) plan, evaluate the hours these individuals worked during the previous two years. If they worked more than 500 hours a year for two consecutive years, they should have been given the opportunity to participate as of January 1, 2025 (for calendar year-end plans).
• Consult with legal or plan experts – Work with your legal counsel or retirement plan experts to determine the best course of action if employees should have been offered participation in 2025. This could include offering retroactive participation or adjusting plan procedures to ensure future compliance.
• Notify affected employees – If you determine that certain employees were inadvertently excluded from your 403(b) plan in 2025, you may need to notify them and provide an opportunity for retroactive participation, including any adjustments to contributions or matching funds that were missed.
• Update plan documents and policies – Make any necessary updates to your 403(b) plan documents and policies to ensure compliance with the SECURE 2.0 Act provisions, particularly around eligibility and automatic enrollment. Non-governmental 403(b) plans have until December 31, 2026, to amend the plan document, but the policy must be in place now.
• Prepare for your audit – If your plan is subject to audit, ensure that all documentation is in order so you can demonstrate compliance with SECURE 2.0 Act provisions, particularly those concerning eligibility, employee notifications, and participation opportunities for employees working less than 20 hours a week.

Please contact us with questions or if you would like to discuss how our employee benefit plan auditors can assist your organization.

The post SECURE 2.0 Act Alert: Potential Employee Eligibility Issue for 403(b) Plans appeared first on CapinCrouse.

Upcoming Title IV Requirements

1. FSA Electronic Announcement GE-25-02, Extension of the Completers’ List and Reporting Processes for Financial Value Transparency and Gainful Employment Until September 30, 2025 – This electronic announcement notifies institutions that the ED is extending the deadline for evaluating completers lists and reporting data associated with Financial Value Transparency and Gainful Employment (FVT/GE) to September 30, 2025.
2. FSA Electronic Announcement CB-25-04, 2023–24 Campus-Based Awards Closeout – ED announced that the closeout of all 2023–24 campus-based program awards will be completed by March 3, 2025, using the data submitted on the Fiscal Operations Report for 2023–24 and the Application to Participate for 2025–26.
3. FSA Electronic Announcement DL-25-01, Direct Loan Closeout Information for 2023–24 Program Year – This electronic announcement reminds institutions that the closeout deadline for the 2023–24 Direct Loan Program Year is July 31, 2025. All data must be received and accepted by this date to be included in your institution’s final ending cash balance for the year.
4. FSA Electronic Announcement GRANTS-25-01, First Pell Grant Administrative Cost Allowance Payments for 2024–25 Award Year – ED announced that the Federal Pell Grant regulations at 34 CFR § 690.10 provide for a $5.00 administrative cost allowance to each participating institution for each student receiving a Pell Grant at that institution for an award year.
5. FSA Electronic Announcement LOANS-25-03, FY 2022 Draft Cohort Default Rates Distributed Feb. 24, 2025 – This electronic announcement notes that ED distributed the FY 2022 draft cohort default rate notification packages to all eligible domestic and foreign institutions only.
6. Dear Colleague Letter GEN-25-02, 2025-2026 Federal Pell Grant Maximum and Minimum Award Amounts – This letter includes the Pell Grant maximum and minimum award amounts for the 2025-2026 award year (July 1, 2025, through June 30, 2026).

Free Application for Federal Student Aid (FAFSA) Simplification Announcements

1. FSA Electronic Announcement GENERAL-25-10, NSLDS Professional Access – NSLDS Financial Aid History Report (FAT001) (Updated Feb. 26, 2025) – This electronic announcement informs institutions that the National Student Loan Data System (NSLDS) Financial Aid History Report (FAT001) is now available on the NSLDS Professional Access website. The FAT001 Report, previously described in FSA Electronic Announcement APP-25-02, provides institutions with detailed financial aid histories for selected students.
2. FSA Electronic Announcement APP-25-01, Update on timeline for batch corrections processing for 2024–25 and 2025–26 FAFSA forms (Updated Feb. 21, 2025) – This electronic announcement provides an update about the timeline to launch batch institutional corrections for the 2024–25 and 2025–26 FAFSA cycles via the Electronic Data Exchange.

Updated Guides

1. 2025–26 FAFSA Specifications Guide – This guide was updated on February 21, 2025.
2. 2024–25 FAFSA Specifications Guide – This guide was updated on February 21, 2025.

Please contact us if you have questions or would like to discuss how these announcements apply to your institution.

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