Author Archives: Melissa Musser

About Melissa Musser

Melissa Musser currently serves as a Manager in Aronson’s Nonprofit & Association Services Group, with 15 years professional experience, including eight years of public accounting with both a regional and Big Four firm. Her professional experience includes five years as a manager of corporate and IT internal audit where she has implemented major transformation initiatives, such as COSO 2013, data analytics, shared service centers and information security. Melissa specializes in providing assurance and consulting services for associations, faith based organizations, independent schools, and other nonprofit service organizations.

Melissa Musser

Why Independent Schools are Implementing ERM

Risk Management

In a recent article from Net Assets by the National Business Officers Association, Janice M. Abraham noted that an increasing number of independent schools are borrowing a page from universities and corporations. Schools are using Enterprise Risk Management (ERM) to help identify risks and take advantage of opportunities.

With so many emerging risks in today’s world, ERM has become a best practice for managing risk at the enterprise-wide level. There are many short- and long-term benefits to implementing effective ERM at a school. An ERM implementation can:

  • Help prioritize where to invest limited resources
  • Inform and aid with timely decision-making
  • Aid in awareness of emerging risks
  • Assist in achieving strategic objectives
  • Improve succession management – enhanced human capital

Do you know where a school faces the greatest risks and how leadership teams currently address them? Some of the most common risks schools face are:

  • Poor crisis planning
  • Privacy management and information security
  • Social media snafus
  • Economic conditions
  • Conduct risk/organizational culture
  • Employment practices
  • Field trips/foreign travel
  • Fraud
  • Loyalty and retention of teachers/student families
  • Conflict on the board and lack of long-term strategy

How should a school start implementation of ERM? 

  • Conduct risk surveys to identify risks
  • Benchmark against other schools
  • Rank the enterprise-wide risk assessment of the school (address all risks)
  • Gain accountability and ownership from administration and staff
  • Form a risk council and sub committees such as safety committees
  • Develop a written program and action plan

For more information on ERM, please read the Committee of Sponsoring Organizations of the Treadway Commission (COSO) guidance. In 2004, the COSO Board commissioned and published 2004 Enterprise Risk Management — Integrated Framework, this publication has gained broad acceptance by organizations in their efforts to manage risk. Last year, COSO issued an update to their 2004 ERM framework that is still out for public exposure and comment, check it out here.

COSO’s overall plan appears to bring the basic framework more up-to-date by aligning ERM with an organization’s strategic plan. COSO emphasizes that ERM can and should be used by organizations of any size with a mission, strategy, and objectives, as well as the need to make decisions under uncertainty.

Want to start ERM at your school?

For more information, please contact Aronson Nonprofit and Industry Association Group Manager Melissa Musser, CPA, CISA, at or 240.364.2598.

Private Schools Balance between Tuition and Contribution Revenue


Two of the most common revenue streams for private schools are tuition and contribution revenue.  Unfortunately, tuition alone does not cover the cost for private schools to run their programs and maintain their campuses. Contributions are a great addition to tuition for private schools. However, do you know how to account for both revenue sources?

Tuition revenue is accounted for as an exchange transaction that is recognized ratably over the term of the school year net of financial aid. Any money received in advance of revenue recognition treatment being met, should be recorded as deferred revenue liability. See how to account for delinquent tuition payments here.

Contributions are recorded when received or pledged as unrestricted, temporarily restricted, or permanently restricted depending on donor restrictions. Some private schools have capital campaigns that raise funds to improve facilities, initiate new programs, or to build an endowment. Capital campaigns usually have explicit or implied restrictions; the stated objective of the capital campaign usually makes the donor’s restriction clear. Pledges must be carefully reviewed to determine if they are conditional or unconditional. Unconditional pledges should be recognized at fair value as revenue in the year the pledge is made. Conditional pledges are to be recognized as revenue when the conditions are substantially met.

The federal tax code allows taxpayers to deduct contributions or donations made to qualified private nonprofit schools that operate to educate students in the community or serve some other approved purpose. However, a donation made to a nonprofit private school may not qualify for the deduction if the school significantly engages in additional activities that do not relate to charitable, scientific, humanitarian, or religious causes.

A private school may offer a gift or other benefit, such as tuition discounts, in appreciation of a donor’s generosity. Schools that choose to offer discounts should advise donors that they must reduce the deductible value of their donation by the value of all gifts and benefits from the private nonprofit school. For example, providing a $500 gift certificate in appreciation of a $20,000 donation may seem minimal, but it still requires the donor to report a charitable deduction of $19,500 rather than $20,000.

For more information about accounting for private schools or questions, please contact Melissa Musser at

Private Schools: Accounting for Delinquent Accounts


Even schools with the most stringent of tuition policies can find themselves dealing with delinquent accounts. So, how do you account for them?

How to Write-off the Balance?

The accounting profession prefers the allowance method over the direct write-off method because it more accurately matches revenue with expenses. The accounts receivable will be presented on the balance sheet with a reduction called the allowance for doubtful accounts. This means the net amount of the accounts receivable will be lower and closer to the amount that will actually be collected. Bad debt expense is reported at the time the allowance for doubtful accounts is created and adjusted.

In the allowance method, the doubtful tuition collections are estimated and bad debt expense is recognized before the debts actually become uncollectible. A school can do this at the beginning of the school year by calculating a percentage of tuition that may never be paid. You don’t have to know which students won’t pay or the exact unpaid amount, but you can report a conservative estimate of the amount on the books that you don’t expect to collect.

Non-GAAP direct write-off method does not use any allowance or reserve account. Although the direct write-off method is simple and allows you to specifically identify the student account once known to be uncollectible, it often violates the matching principle of accounting because it recognizes bad debt expense which is likely related to a previous accounting period.

Evaluate Tuition Collection History

At the start of each school year, schools should evaluate tuition collection history, make an estimate of uncollectible tuition, and record an allowance for doubtful accounts. For example, tuition contracts total $1,000,000 and the school estimates that 5% or $50,000 will be uncollectible. When making the entry, the school will also record a monthly allowance for doubtful accounts ($50,000/10 months).

Bad Debt Expense – Other $5,000

Allowance for Doubtful Accounts $5,000

When recording an allowance for doubtful accounts, remember that you need to relieve the allowance when an obligation is determined to be uncollectible and therefore a bad debt. The allowance is eliminated, the accounts receivable is eliminated, and any difference is added to the bad debt expense. For example, receivables in the amount of $65,000 were determined to be uncollectible in June. No other write-offs occurred during the year and the Allowance for Doubtful Accounts = $50,000.

Allowance For Doubtful Accounts $50,000
Bad Debt Expense – Other $15,000

Accounts Rec – Tuition $65,000

Afterward the allowance account will be zero and bad debt expense will be $65,000.

Account for the Bad Debt Recovery

While collection efforts for certain students may initially result in a write-off, some families may desire to pay their outstanding balance after the account has been deemed uncollectible. To recover the payment on the school’s books, you will need to account for the bad debt recovery by reversing the original entry of a bad debt depending on what method was used.

  •  GAAP-allowance method – create a debit to the accounts receivable asset account in the amount of the recovery, with the offsetting credit to the allowance for doubtful accounts contra asset account.
  • Non-GAAP direct write-off method – if the original entry was instead a credit to accounts receivable and a debit to bad debt expense, then reverse this original entry when a recovery occurs.

Then record the cash receipt from the bad debt recovery, which is a debit to the cash account and a credit to the accounts receivable asset account.

For more information, please contact Melissa Musser, CPA, CISA at

Top Budget Questions to Prepare your Association for 2017

With year-end and the holiday season approaching, like most organizations you’re probably beginning to prepare the budget. A budget should be a financial description of your association, the priorities at-hand, and demonstrate your sustainability. Asking the right questions as you prepare for 2017, will help to safeguard your association’s budget from maintaining the status quo. Has your organization considered the following?

  1. Who has authority to make budget decisions?
  2. How much uncertainty can be included in the budget?
  3. What will be your dues revenue including member renewals, new memberships, and changes in rates?
  4. How much non-dues revenue will come from other sources such as advertising and sponsorships?
  5. Will an increase in engagement with membership create more revenue?
  6. Where are there other revenue streams available?
  7. What investments will help for future projects and growth?
  8. What are cost drivers such as personnel, member deliverables, etc.?
  9. Is there an opportunity to streamline business and administrative functions?
  10. What is an appropriate investment spending policy?

For more information, please contact Aronson Manager, Melissa Musser, CPA, CISA, at or 240.364.2598.

Click here to submit an RFP.


Does Your Chart of Accounts Make the Grade?

Chart of Accounts (COA) comprise the basic structure used to record the financial effects of transactions. They should store, categorize, structure, and segregate transactional data for supporting financial and management reporting. It serves as the basis for the fiscal administration of your exempt organization’s funds, programs, projects, and activities. If well-designed, Chart of Accounts provide an understanding of your financial health by grouping the accounts that define each class of items for which money is spent or received, and by organizing finances and segregating expenditures, revenue, assets and liabilities

Overhauling your organization’s COA is an opportunity to find new efficiencies in your accounting practices. As a new organization, you likely used the industry default COA when first setting-up the financial system. While the standard may have worked in the initial stages of operation, exempt organizations require more robust reporting. In addition to outgrowing your current structure, other common reasons for a COA change are:

  • New financial system implementation
  • Functional limitations of existing Chart of Accounts
  • Current GL is out-of-date and overly complex
  • COA is out-of-sync with regulatory environment (i.e. compliance under indirect cost rate agreements)
  • Limited scalability to support organizational restructures
  • Time is wasted manipulating data in spreadsheets to create relevant financial reports

By overhauling your COA, your exempt organization gains transparency, consistency, and accountability. A new Chart of Accounts offers:

  • Improved data quality
  • Informed decision-making from clear financial reporting
  • Reduced ad hoc spreadsheets
  • Enhanced consolidated or program level reporting

The COA should be built from consistent definitions for business attributes and data elements. Any redesign should be a collaborative approach driven by vital financial personnel with input from key stakeholders. First, you’ll want to conduct an analysis of the current state of affairs. Considerations as to keep or discontinue certain items within your Chart of Accounts include:

  • How often is the account used?
  • What is the need for the account?
  • How material are the transactions in the account?

After the initial study, interview your information stakeholders (i.e. budgeting, development, program managers and board members) to understand their pain points. Start by asking who needs what information and how? Keep in mind that not every answer can be found in a COA redesign.

Next, determine your new account number structure. Two popular options are a linear structure or a multi-dimensional structure. Linear structures use a limited number of fields, for example: xxxx-xx (account – object code). Multi-dimensional structures are made up of multiple fields that typically record a different element of information about a transaction, for example: xxx-xxx-xxx-xx-xx (fund – organization – project – activity – object). Many exempt organizations use Quickbooks, which requires a linear format of up to 7 digits for an account number; although, there are some workarounds using class lists for separate reporting purposes.

When planning your redesign, don’t forget the future! It is important to evaluate growth and its potential impact on future reporting requirements.

If your organization is considering a Chart of Accounts makeover, or has already started the process, and would like to discuss possible approaches, please contact us for more information.


For more information, please contact Aronson Nonprofit and Industry Association Group Manager Melissa Musser, CPA, CISA, at or 240.364.2598.


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