Mark Koscinski ESG, NFP

The NFP Potpourri

During the past semester, I came across many interesting NFP issues.  I thought I would do a short round up of some of those topics.  So, here goes!

  • Phishing and hacking at NFPs continues unabated. Vigilance is required more than ever.  I was personally caught in a phishing scheme this past semester.  During a particularly intense period I was skimming through my emails where I found what appeared to be an email from the new Dean of the Moravian University School of Business and Economics.  Not being overly concerned, I opened the email.  A big mistake. Unbeknownst to me, this resulted in over six thousand emails being sent out under my name to faculty, staff, and students. Meanwhile, realizing that something didn’t seem right, I contacted the IT security staff.  They were able to mitigate some of the consequences of my screw up, but some harm had been done. The security personnel told me that the University had been under siege in the last couple months. Put another way, just because you are an NFP entity doesn’t make you immune from the cyber-attack. In a previous blog I discussed how a church client of mine had been subject to a ransomware attack.  Who would think that even a relatively small entity such as a church would need to be careful about such things?  Obviously, they were wrong to ignore my warnings on this matter.  One other point before we depart from this subject.  If your organization is put in this position, don’t pay the ransom.  There is no assurance you will get your data and operating systems back. 
  • The Financial Accounting Foundation (FAF) makes it easier to file procedural complaints against the FASB and GASB.  The Financial Accounting Standards Board (FASB) regulates accounting practices for NFP organizations while the Government Accounting Standards Board (GASB) regulates accounting for governmental entities except for the United States itself.  The FAF Oversight Committee has provided a streamlined process for filing complaints about the rule-making process of these entities.  I believe this is a healthy development as  American accounting is often categorized as rule based rather than concept based  (such as the International Financial Reporting Standards).  Therefore, anything that shores up the actual rule-making process is certainly worth exploring.  Additionally, anyone in the accounting profession needs to understand how important transparency is to the profession.  More Vitamin D through sunshine is surely a good thing!
  • ESG reporting is coming. Unless you live in a bubble, you have heard the SEC has published draft regulations on climate change for public companies.  These companies will need to ascertain how their vendors are complying with this reporting. It is only a matter of time before this is pushed into the NFP world as the climate reporting takes hold.  Corporate contributors will then begin pushing this into organizations they make contributions to.  It is not too early to start thinking about this.  In the world of heated competition for contribution dollars an NFP organization complying with these disclosures will have a leg up in this battle. Caution: This is not completely certain as a similar prediction was made about Sarbanen-Oxley reporting as twenty years ago. The implementation of SOX reporting changed when it met resistance. Nevertheless, some form of ESG reporting will eventually be pushed down to the NFP world. 
  • Looking for a good text on Governmental and NFP accounting?  Try Accounting for Government and Nonprofit Organizations by Patton and Patton and published by Cambridge.  It is an outstanding presentation on the topic.
Mark Koscinski ESG

ESG and the Disabled

ESG (Environment, Social, and Governance) reporting is an  important topic in today’s corporate world. Even the SEC has required increased disclosure in this area.  For many years the SEC has required publicly traded companies to disclose the number of employees.  That disclosure has now been expanded to include the types of employees and independent contractors the company has. The purpose of this is to give investors a window into how the company regards its workers. 

The Value Reporting Foundation (VRF) was recently created by the merger of the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council. Its purpose is to help provide a holistic view of what creates corporate value and advance the development of ESG reporting standards.  These include standards for reporting on six capitals, including human capital.  

While it is hard to disagree with the fundamental proposition investors would like to know as much as possible about companies they invest in, I somehow can’t shake the feeling that once again disabled are being left behind.  For instance, the SASB  announced a new project for reporting on the use of plastics in certain industries.  By itself, this seems innocuous enough. However, these initiatives have implications. Several years ago I wrote a post on how the banning of plastic straws has impacted the disabled.  That post can be accessed here.  Perhaps a more humane disclosure would include the impact on the disabled where applicable?  Similarly, the expanded human capital disclosures don’t seem to include any disclosure about the number of disabled personnel a company employs.  Shouldn’t that be considered by the VRF as well?  

As Gandhi said, “The true measure of any society can be found in how it treats its most vulnerable members.”  Perhaps this is a lesson the VRF should take to heart as it promulgates reporting standards about what truly creates corporate value.