CAN Confernece Session Update

For those of you who attended CAN's 17th Annual Conference and my session on Accounting for Non-Accountants, thanks for coming! Here are some additional resources and links:

• The IRS Guide to Good Governance can be found here, sorry I forgot to add it to the handouts.
• Those of you interested in sample Auditor's reports please click here.
• The details on California's Nonprofit Integrity Act as it relates to Commercial Fundraisers (opens a PDF).
• Has the 990 PF Changed? Not yet.
• For those interested in the potential shift from GAAP to IFRS click here.
  
• When do we file the new 990? Read below or click here for a PDF of a general overview of the instructions.
  

  Calendar year - Use the 2008 Form 990 to report on the 2008 calendar year accounting period. A calendar year accounting period begins on January 1 and ends on December 31.
  
  Fiscal year - If the organization has established a fiscal year accounting period, use the 2008 Form 990 to report on the organization’s fiscal year that began in 2008 and ended 12 months later. A fiscal year accounting period should normally coincide with the natural operating cycle of the organization. Be certain to indicate in the heading of Form 990 the date the organization’s fiscal year began in 2008 and the date the fiscal year ended in 2009.

Let me know if you have any other questions.

IRS Round Up

Here is a list of recent stories and information from the Internal Revenue Service that affect our sector:

1. Not exactly recent but a timely reminder nonetheless about the restrictions placed on advocacy by 501(c)3's. We can and should lobby but we need to make sure we do it the right way.
   
2. Gotta beef with a nonprofit? Want to file a complaint? Here is where to do it and what the process is like.
   
3. Audit? Compliance Check? Examination? Whats the difference and why is it happening to my organization? Find out here.
4. Despite the fact that we file a "tax" return to them, one of the main goals of the 990 and the IRS's Exempt Organizations Division is governance and making sure we are serving a charitable purpose. They have made some changes to their good governance guides and resources, see the update here.

Nonprofit Audit Committee Toolkit

Does your organization have and audit committee? Is it supposed to have one? Even if the answer is "no" I do recommend you have one in addition to your Finance Committee. The nice folks at the AICPA have put together a tool kit just for your audit committee to help them get there job done. From the website:

Audit committees have a big job to do in an organization—tough when the members have other responsibilities and the audit committee role is a part-time job with huge accountability. The AICPA Audit Committee Toolkit: Not-for-Profit Organizations is the needed help for audit committees to do the job they need to do as effectively and efficiently as possibly.

You can find the kit here with details on all of its elements. For those of you who don't want to download all this info you can buy it as well.

How much will an audit cost?

I get asked every once in a while how much an audit costs, and I never have an answer that is $xx,xxx. It really varies on how big you are, the complexity of your funding, the state your books are in to begin with.

But I started think about costs because there are several new audit standards coming, including this one, which will have a dramatic impact on how the audit is done and how much it will cost. I asked a few friends of CAN, folks I look up to a lot and turn to for help on many an occasion how they cost an audit. Here are some of their responses:

"It is not how much total revenue they have but how many different sources of funding that complicates an audit (for instance multiple government contracts versus one or none), also how complicated their balance sheet is (do they have split interest agreements, many notes or capital leases, deferred comp plans etc)."

"We need to know if they have affiliated organizations, a subsidiary or member of a parent organization. We need to know what the nonprofit is looking for in requesting an audit. Do their grants require special reporting even though they do not meet the threshold for a Yellow Book (compliance) audit."

"Some times there are covenants from banks or grants that must be tested. When determining whether to take on an audit, we need to know if they have books and records that are able to be audited. For example if they are a new organization, their internal controls may be lacking or their accounting staff may not have the books computerized and on an accrual basis. Not that they can’t have an audit, but they will require additional work to get ready for the audit."

"Are they in an industry that requires special reporting such as health care industry or schools?"

Some of these answers came form larger firms who can't charge much less than $20,000.00 an audit. Other larger firms can sometimes offer you a deal because they do so many audits and rely on a high volume to keep costs low. Of course you could substitute "larger firm" with "smaller firm" for the above statement, it all depends on the firm.

Those new auditing standards coming will also have an impact on price. According to the folks I have spoken with it could be anywhere from 20 to 40 percent more than prices are now.

Other bits of info I have picked up:

• Many firms will bid on your job assuming you have clean books. If it turns out you don't then additional time (for the auditor) and money (for you) will be spent to get them into shape.
• Initial engagements always cost more than subsequent engagements.
• Reviews cost about half as much as audits. They cover less ground than an audit but CAN has never had anyone say, "you need to give us an audit." when we have submitted an review. Audits are they best way to go, they tell us the most about an organization, but maybe you don't need to do one every year. Unless you are subject to SB 1262, the Nonprofit Integrity Act.
  
• Preparation is the key to a good audit. You will get a list of things to do, documents to fill out, reports to have ready before anyone sets foot in your office to get to work. Get it all done, and stay in contact with the firm to make sure you understand what they are asking.
• Got a weird transaction you don't know how to handle? Got an auditor? Ask them. It will be cheaper to get guidance up front than having to fix any possible errors later on.

Finally, here is a link to CPA and Accounting referrals. Any questions / comments?

OMB Revises Circular A-133

From The PPC Guides' Newsletter

OMB Revises Circular A-133 and AICPA Issues Related Auditing Interpretation. This has to do with the new updated terminology of internal controls, among other things, based upon the AICPA's guidance for a stricter look at an organizations internal controls.

SAS No 112

Statement of Accounting Standards 112 goes into effect / becomes effective for periods ending on or after 12-15-06. I have mentioned in recent boot camps that auditors will soon be looking more closely at your internal controls. With this new standard they are now obliged to report any deficiencies to your board and in the auditor's report. From the linked document:

Requires the auditor to communicate control deficiencies that are significant deficiencies or material weaknesses in internal control.

A significant deficiency is a control, or combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected.

A material weakness is a significant deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.

Here is a PDP of that tells more about it.

Recently_Issued_Standards_SAS_No_112.pdf (application/pdf Object)

Alan

What is a Single Audit?

Do you need to do one? You might if you get federal $.

A link straight from the source.

OFFM Single Audits