Upload
cally-lowe
View
129
Download
3
Tags:
Embed Size (px)
DESCRIPTION
Planned Parenthood Finance Directors. Risk Assessment Standards and Changes to the 990 Presented by: Gelman, Rosenberg & Freedman Certified Public Accountants Terri McKnight, CPA, Director, Audit Department Richard J. Locastro, CPA, JD. March 26, 2008. Eight New Auditing Standards. - PowerPoint PPT Presentation
Citation preview
Planned Parenthood Finance Directors Planned Parenthood Finance Directors
Risk Assessment Standards and Changes to the 990
Presented by:
Gelman, Rosenberg & FreedmanCertified Public Accountants
Terri McKnight, CPA, Director, Audit Department
Richard J. Locastro, CPA, JD
March 26, 2008
Gelman, Rosenberg & Freedman, CPAs 2
Eight New Auditing Standards
Collectively referred to as the “Risk Assessment SAS’s” # 104 - #111
Effective for all audits of financial statements for fiscal years beginning on or after January 1, 2007
Requires changes in the audit process Increased effort by your organization and
CPA firm
Gelman, Rosenberg & Freedman, CPAs 3
What is Risk Assessment?
More focused audit approach using the COSO internal framework:
Control Environment Risk Assessments Control Activities Communication and Information Monitoring
Gelman, Rosenberg & Freedman, CPAs 4
What are the Requirements?
Obtain a more in-depth understanding of the organization and its operating environment
Identify specific risks of material errors or fraud occurring and remain undetected by you along with the actions you are taking to mitigate those risks
Perform a rigorous assessment of the risks of material misstatements of your financial statements based on that understanding
Link the assessment with the resulting audit procedures
Meet new documentation requirements
Gelman, Rosenberg & Freedman, CPAs 5
What will CPA firms do differently?
Perform more up-front time planning the audit
Perform new, required planning procedures Evaluate internal control in more depth Reevaluate materiality levels Test some accounts differently Communicate more internal control
deficiencies
Gelman, Rosenberg & Freedman, CPAs 6
Perform new, required planning procedures
Ask more questions about your business risks, responses, and –performance measures
Formally discuss the risk of material errors
Observe more of your procedure and controls
Inspect more documents and records
Gelman, Rosenberg & Freedman, CPAs 7
Perform new, required planning procedures (cont’d)
Consider what can go wrong at a more detailed level to identify specific risk of error or fraud
Assess the identified risks
Link the risks to our audit procedures
Gelman, Rosenberg & Freedman, CPAs 8
How will the Risk Assessment Standards Impact you?
Request more information and documentation
The demands on your personnel will increase
Gelman, Rosenberg & Freedman, CPAs 9
Key Internal Control Elements
Control environment – everyone’s roles and responsibilities are clearly defined
Accounting System
Methods and records established to identify, assemble, analyze, classify, record and report on transactions
Maintains accountability for the related assets and liabilities
Accounting Principles
Gelman, Rosenberg & Freedman, CPAs 10
Key Internal Control Elements
Document accounting policies and procedures, including:
Cash management Procurement policies Disbursement policies Budgeting and monitoring Reporting Payroll Chart of accounts Investment policies
Gelman, Rosenberg & Freedman, CPAs 11
Key Internal Control ElementsDocument accounting policies and procedures, including:
Financial statement presentation and
disclosures OMB Circular A-133, A-122 requirements Grant requirements Revenue recognition Account reconciliations Fraud and fraud indicators Conflict of interest Allowable and unallowable costs associated
with grants Credit card policies
Gelman, Rosenberg & Freedman, CPAs 12
New Form 990
Still in “draft” status
New Form 990 and background information available on IRS website:www.irs.gov/charities/article/0,,id=176637,00.html
Effective Date Years beginning on or after 1/1/08 Transition period if gross receipts < than
$1MM and assets <$2.5MM Bond reporting on Schedule K delayed for 1
year (limited reporting in 2008)
Gelman, Rosenberg & Freedman, CPAs 13
New Form 990
Much more detailed reporting
GRF estimate of time (both client and GRF) to prepare 990 will increase 50%-100% in first year
Gelman, Rosenberg & Freedman, CPAs 14
New Form 990
“Transparency” Emphasis on Governance and
Compensation 11 page Core form
16 “schedules” that are filed, if applicable
Gelman, Rosenberg & Freedman, CPAs 15
New Form 990
Changes from first “draft”
Eliminates ratios, percentages from Summary page
Moves Program Service description to Page 2 (from Page 10)
Checklist (Page 3) of Required Schedules
Gelman, Rosenberg & Freedman, CPAs 16
New Form 990
Changes from first “draft” (cont’.)
More opportunity to provide “supplemental” information
Revised governance and compensation sections
Less detailed reporting on some schedules
Gelman, Rosenberg & Freedman, CPAs 17
New Form 990
Core form, Part VI - Governance, Management, and Disclosure
“Best practices” – not required by Internal Revenue Code
Independence issues Oversight – was Form 990 provided to
governing body before filing? Describe review
process.
Gelman, Rosenberg & Freedman, CPAs 18
New Form 990
Core form, Part VI - Governance, Management, and Disclosure (cont’.)
Whistleblower policy? Document retention/destruction policy?
Gelman, Rosenberg & Freedman, CPAs 19
New Form 990
Part VII, Compensation
Must use W-2 amounts (calendar year) Detailed reporting on officers, former officers,
and independent contractors
Gelman, Rosenberg & Freedman, CPAs 20
New Form 990
Schedule A – Public Charity Status and Public Support (no major changes)
Schedule B – Schedule of Contributors (no changes)
Schedule C – Political Campaign and Lobbying Activities
Gelman, Rosenberg & Freedman, CPAs 21
New Form 990
Schedule D – Supplemental Financial Statements
Donor Advised Funds Conservation Easements Art Collections and Similar Assets Trust, Escrow, and Custodial Arrangements Endowments
Gelman, Rosenberg & Freedman, CPAs 22
New Form 990
Schedule D (cont’.)
Investments Other assets Other liabilities Reconciliation to Financial Statements
Supplemental information
Gelman, Rosenberg & Freedman, CPAs 23
New Form 990
Schedule E – Schools Schedule F – Statement of Activities
outside of U.S. Schedule G- Fundraising and Gaming
Activities Schedule H - Hospitals
Gelman, Rosenberg & Freedman, CPAs 24
New Form 990
Schedule I – Grants and other assistance in the U.S.
Schedule J – Compensation
Policy questions about setting and monitoring compensation
Payments for “perks” such as first- class travel, club dues, housing, companion travel
Gelman, Rosenberg & Freedman, CPAs 25
New form 990
Schedule K – Tax Exempt Bonds
Issue descriptions Proceeds Private Business Use Arbitrage
Gelman, Rosenberg & Freedman, CPAs 26
New Form 990
Schedule L – Transactions with Interested Persons
Excess benefit transactions Loans to/from Interested Persons Grants to/from Interested Persons Business transactions involving Interested
Persons
Gelman, Rosenberg & Freedman, CPAs 27
New Form 990
Schedule M – Non-cash contributions (detailed descriptions of types of property)
Schedule N – Liquidation, Termination, or Significant Disposition of Assets
Schedule O – Supplemental Information (for longer explanations)
Gelman, Rosenberg & Freedman, CPAs 28
New Form 990
Schedule R – Related organizations and unrelated partnerships
Disregarded entities Related tax-exempt entities Related partnerships Related corporations Unrelated partnerships
Gelman, Rosenberg & Freedman, CPAs 29
New Form 990
Next Steps Have management try to complete it now
to identify: “Challenging” questions New information that will need to be
collected for 2008 Have Board perform detailed review of
management draft so that there are no surprises
Gelman, Rosenberg & Freedman, CPAs 30
Taxation of Benefits
IRS increased scrutiny on benefits Automatic excess benefit
transactions Items covered: cell phones,
computers, cars Other perks
Gelman, Rosenberg & Freedman, CPAs 31
QUESTIONS?Gelman, Rosenberg & Freedman
Certified Public Accountants4550 Montgomery Avenue
Suite 650 NorthBethesda, MD 20814
301-951-9090www.grfcpa.com
Terri McKnight, CPA, Director,Audit Department
Richard J. Locastro, CPA, JD, Principal,Nonprofit Tax Department