Planned%20Parenthood%20Finance%20Directors

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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
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Eight New Auditing Standards

• Collectively referred to as the Risk Assessment
  SASs 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

3
What is Risk Assessment?

• More focused audit approach using the COSO
  internal framework
• Control Environment
• Risk Assessments
• Control Activities
• Communication and Information
• Monitoring

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

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

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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

7
Perform new, required planning procedures
(contd)

• 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

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How will the Risk Assessment Standards Impact you?

• Request more information and documentation
• The demands on your personnel will increase

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Key Internal Control Elements

• Control environment everyones 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

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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

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Key Internal Control Elements

• Document 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

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New Form 990

• Still in draft status
• New Form 990 and background information available
  on IRS website
• www.irs.gov/charities/article/0,,id176637,00.htm
  l
• Effective Date
• Years beginning on or after 1/1/08
• Transition period if gross receipts lt than 1MM
  and assets lt2.5MM
• Bond reporting on Schedule K delayed for 1 year
  (limited reporting in 2008)

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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

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New Form 990

• Transparency
• Emphasis on Governance and Compensation
• 11 page Core form
• 16 schedules that are filed, if applicable

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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

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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

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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.

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New Form 990

• Core form, Part VI - Governance, Management, and
  Disclosure (cont.)
• Whistleblower policy?
• Document retention/destruction policy?

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New Form 990

• Part VII, Compensation
• Must use W-2 amounts (calendar year)
• Detailed reporting on officers, former officers,
  and independent contractors

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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

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New Form 990

• Schedule D Supplemental Financial Statements
• Donor Advised Funds
• Conservation Easements
• Art Collections and Similar Assets
• Trust, Escrow, and Custodial Arrangements
• Endowments

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New Form 990

• Schedule D (cont.)
• Investments
• Other assets
• Other liabilities
• Reconciliation to Financial Statements
• Supplemental information

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New Form 990

• Schedule E Schools
• Schedule F Statement of Activities outside of
  U.S.
• Schedule G- Fundraising and Gaming Activities
• Schedule H - Hospitals

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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

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New form 990

• Schedule K Tax Exempt Bonds
• Issue descriptions
• Proceeds
• Private Business Use
• Arbitrage

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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

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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)

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New Form 990

• Schedule R Related organizations and unrelated
  partnerships
• Disregarded entities
• Related tax-exempt entities
• Related partnerships
• Related corporations
• Unrelated partnerships

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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

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Taxation of Benefits

• IRS increased scrutiny on benefits
• Automatic excess benefit transactions
• Items covered cell phones, computers, cars
• Other perks

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QUESTIONS?

• Gelman, Rosenberg Freedman
• Certified Public Accountants
• 4550 Montgomery Avenue
• Suite 650 North
• Bethesda, MD 20814
• 301-951-9090
• www.grfcpa.com
• Terri McKnight, CPA, Director,
• Audit Department
• Richard J. Locastro, CPA, JD, Principal,
• Nonprofit Tax Department