October 27th, 2008 Nancy
The new clients I’ve been working with have shown me that there’s still wide misunderstanding about the new auditing standards that went into effect more than a year ago. Statement on Auditing Standards No. 112 is titled, “Communicating Internal Control Related Matters Indentified in an Audit”, but the guidance it provides to auditors isn’t limited to “communicating”. It describes standards, responsibilities and procedures they must follow in order to conduct an audit and pronounce an opinion on financial statements. Auditors have to follow what it says.
The three experts I’ve read on the subject agree: there is no question that a client cannot make their auditor “part of their internal control system”. If that were to happen, the auditor’s independence would be impaired and they wouldn’t be able to express an opinion on the financial statements. So can your auditor prepare your financial statements without becoming part of your internal control system?
What’s your experience with auditors who’ve prepared - or helped prepare - your financial statements? Are you worried that you’re not ready for an audit that’s coming up soon? Read the full article at www.NFPAccountingHelp.org and then post your comments here.
Posted in Nonprofit Financial statements | No Comments »
October 21st, 2008 Nancy
Have you looked at the new Form 990, the one for years beginning in 2008? Last summer, three issues of the Not-for-Profit Accounting Help newsletter were devoted primarily to the financial sections of the 990, but I think you’ll agree that the biggest changes to the form are in the non-financial parts. IRS has taken it upon itself to gather a lot of information about how exempt organizations are governed, and there’s a fair amount of discomfort with that decision among my professional colleagues.
Whether you agree that it’s a good move or think that IRS should stay out of these areas, you’ll be faced with preparing the form – or assisting your auditor or accountant in preparing it - sooner or later. The task will require that you understand thoroughly the structure and authority of the board and its committees as well as the organization’s policies in more depth than you may otherwise have the need to.
Completing the 990 may be more of a challenge than you would like if your organization hasn’t completely achieved good governance yet. Do you know where the board policies are? I hope they’re collected safely in a binder that’s kept in the office, given to each new board member, and recorded digitally as well. Has your board passed a whistleblower policy or a conflict of interest policy? Has it written a job description for its members?
If you believe you’re not completely prepared, here’s a resource. Friends of mine, Randa Cleaves and Jonathon Abramson, are partners in Avenue2possibilities LLP. They provide planning, development and training services to non-profit organizations. They have put together a workbook and checklist of actions “to ensure that your nonprofit organization will be ready” for the changes in the 990. And they are making this wonderful tool available to you on their website. www.accga2p.com/materials takes you directly to the page you’ll want.
“IRS Form 990 Revisions Made Easy” will lead you through those tasks you may have been putting off for months, such as finding the version of your mission statement that was submitted to the IRS with your application and making sure it’s up-to-date, or drafting a record retention policy for your board to pass. Each section discusses an issue thoroughly, giving background and a description of what IRS believes constitutes good governance, and then poses questions, suggests actions, and makes related recommendations.
Topics it covers include organizational documents, governing body, governance and management policies, investments, fundraising, conflicts of interest, and more. All the sources are footnoted so you can go to the original material if you want to for any reason.
In addition to the workbook, you’ll find examples of entire policies, such as fundraising, and whistleblower protection. If your board or management team has found the task of crafting policies to be difficult, these should be a great help.
Posted in Form 990-Nonprofit Tax Return | No Comments »