Pre Preparing fo for Annual Annual Audi Audit & Wh What at Yo - - PDF document

2/3/2016 1

Pre Preparing fo for Annual Annual Audi Audit & Wh What at Yo You Need Need to to Kn Know About About NFP NFP Ta Tax Filin ilings

June 14, 2017

Reasons to have an Audit

• Required by the federal Office of Management and Budget
• State requirement (E‐1)
• Banks
• Funders
• Board of directors
• Bylaws

2/3/2016 2

Your Responsibilities

• Internal controls
• Accounting principles
• Financial statements
• Prevent and detect fraud
• Inform auditors of fraud
• Comply with laws and regulations
• Assume management responsibilities

Auditors’ Responsibilities

• Establish an understanding of services
• Independence
• Generally accepted auditing standards
• Obtain reasonable assurance
• Evaluate appropriateness of accounting policies
• Reasonableness of estimates
• Consider internal controls

2/3/2016 3

What Auditors Do

• Properly plan the audit
• Risk assessment
• Determine materiality
• Obtain an understanding of the organization’s accounting

system and policies

• Engagement team discussion

What Auditors Do

• Audit procedures
• Inspection of documents
• Observation
• Inquiry
• Confirmation
• Recalculation
• Re‐performance
• Analytical procedures

2/3/2016 4

What Auditors Do

• What we are looking for
• Existence and occurrence
• Completeness
• Rights and obligations
• Accuracy or classification
• Valuation or allocation
• Cutoff

Preparing for the Audit

• Have documentation ready
• Reconcile all accounts
• Take an inventory of fixed assets
• Inform your auditor of any unusual items
• Review internal controls
• Be available for questions
• Pre audit meeting with your auditor

2/3/2016 5

Preparing for the Audit

General Items

• Trial balance
• Internal financial statements
• General ledger
• Budget
• Check register
• Listing of all federal awards, including federal award agency,

pass through agency, grant number, CFDA number

• Board of directors’ and committee minutes

Preparing for the Audit

Cash

• Bank reconciliations
• Bank statements
• List of authorized check signers

2/3/2016 6

Preparing for the Audit

Receivables

• Accounts receivable aging
• Listing of promises to give
• Schedule of maturities of promises to give
• Calculation of present value discount
• Award letters for grants/contributions
• Detail of deposits made after year end
• Calculation of allowance for uncollectible accounts
• Award letters received prior to year end for grants to be

received after year end

Preparing for the Audit

Inventory

• Inventory listing

2/3/2016 7

Preparing for the Audit

Prepaid

• Schedule of prepaid expenses
• Invoices for insurance paid during the year

Preparing for the Audit

Investments

• Investment statements
• Listing of any donated investments received during the

year, including the donor’s name, date of donation and valuation

• Summary of investment activity for the year, including

interest, gains/losses and fees

2/3/2016 8

Preparing for the Audit

Fixed Assets

• Listing of all fixed assets purchased during the year,

including description, cost, date in service and life

• Invoices for all fixed assets purchased during the year
• Listing of all fixed assets donated during the year, including

the donor’s name, date of donation and value

• List of all fixed assets disposed of during the year, including

the date of disposal and any proceeds received

• Depreciation schedule for the year

Preparing for the Audit

Accounts Payable

• Accounts payable listing
• Check register for checks paid after year end
• Invoices paid after year end
• Invoices received after year end not yet paid

2/3/2016 9

Preparing for the Audit

Notes Payable

• Detail of notes payable activity for the year, including

proceeds and payments, as well as interest and maturities

• Debt agreements signed during the year
• Listing of any covenants or restrictions and if they are being

met

Preparing for the Audit

Payroll and Withholdings

• Quarterly 941 forms and UC‐1 forms
• W‐3 and W‐2s
• Payroll register for the last payroll in the year and first

payroll subsequent to year end

• Calculation of accrued payroll
• Calculation of accrued vacation, including employee name,

hourly pay rate, hours carried over and hours to be awarded in the following year

2/3/2016 10

Preparing for the Audit

Deferred Revenue

• Detail of deferred revenue, including payee and purpose of

payment

• Is this really deferred revenue? If not, journal entry to

reclass temporarily restricted revenue recorded as deferred revenue.

Preparing for the Audit

Net Assets

• Detail of all restricted money received during the year,

spent during the year and end of year balance. Include donors’ names and restrictions.

• Listing of any board designated net assets as of year‐end,

including the designation.

2/3/2016 11

Preparing for the Audit

Support and Revenue

• Listing of single contributions of $x,xxx or more, including

donors’ names and addresses (addresses for 990)

• Check copies and grant letters for single contributions of

$x,xxx or more

• Grant agreements, including any government awards
• Detail of any fund raising events, including ticket price,

number of tickets sold and amount disclosed to attendees as deductible

• Listing of all revenue received for any fund raising events by

type (ticket sales, contributions, sponsorships, etc.)

Preparing for the Audit

Expenses

• Listing of all expenses for any fund raising events
• Lease agreements signed during the year or subsequent to

year end

• All legal invoices paid during the year
• Detail of any pending litigation
• Policy for allocating expenses to program, management and

general, and fund raising

• Schedule of expenses allocated by program, management

and general, and fund raising

2/3/2016 12 Preparing for the Audit

Other

• List of all related parties paid during the year and invoices for

payments

• General journal entries for the year and supporting

documentation

• Contracts entered into during the year
• Agreements signed during the year for payments to be made

after year‐end

• Communications with IRS
• Changes to bylaws
• Changes to personnel policy manual/employee handbook
• Changes to written financial procedures
• Listing of all board members

Preparing for the Audit

Form 990

• Number of voting members of the board of directors
• Number of volunteers for the year
• Describe the organization’s program service

accomplishments for each of its programs

• Number of 1099s issued for the calendar year
• Description of any board members or key employees that

have a business or family relationship

• Detail of benefits paid by the organization on behalf of the

Executive Director or CFO during the year

2/3/2016 13

Preparing for the Audit

Internal control matrix

Audit Results

• Financial statements with an audit opinion
• Management representation letter
• SAS 114 letter
• SAS 115 letter
• Management letter

2/3/2016 14

Annual Filings

Internal Revenue Service

• Form 990, Return of Organization Exempt from Income Tax
• Form 990‐EZ, Short Form Return of Organization Exempt

from Income Tax

• Form 990‐N, Electronic Notice (e‐Postcard) For Tax‐Exempt

Organizations Not Required to File Form 990 or 990‐EZ

• Form 990‐PF, Return of Private Foundation
• Form 990‐T, Exempt Organization Business Income Tax

Return

• Form 8868, Extension of Time to File an Exempt Organization

Return

2/3/2016 15

IRS Form 990 Series

• Due by the 15th day of the 5th month after your organization’s

accounting period ends (May 15th for calendar year ends)

• Additional 6 month extension available (Form 8868)
• No tax due with Form 990 series (990, 990‐EZ or 990‐N)

Annual Filings

Indiana Department of Revenue

• Form NP‐20, Indiana Nonprofit Organization’s Annual Report
• Form IT‐20NP, Indiana Nonprofit Organization Unrelated

Business Income Tax Return Indiana Secretary of State

• Indiana Business Entity Report

2/3/2016 16

Payroll and Related Forms

Internal Revenue Service

• Form W‐4, Employee’s Withholding Allowance Certificate
• Form 941, Employer’s Quarterly Federal Tax Return
• Form 944, Employer’s Annual Federal Tax Return
• Form W‐2, Wage and Tax Statement
• Form W‐3, Transmittal of Wage and Tax Statements
• Form 1099‐MISC, Miscellaneous Income
• Form 1096, Annual Summary and Transmittal of U.S.

Information Returns

Payroll and Related Forms

Indiana Department of Revenue

• Form WH‐4, Employees’ Withholding Exemption and County

Status Certificate

• Form WH‐1, Indiana Withholding Tax Return (must be filed

through INTax)

• Form WH‐3, Annual Withholding Tax Form

2/3/2016 17

Payroll and Related Forms

Indiana Department of Workforce Development

• Form UC1‐S, Quarterly Contribution Report
• Form UC‐5A, Quarterly Payroll Report
• DWD Form 1065, Election to Pay Tax

U.S. Citizenship and Immigration Services

• Form I‐9, Employment Eligibility Verification

Property Taxes

Allen County Assessor

• Form 136, Application for Property Tax Exemption
• Notice of Change of Ownership or Use of Exempt Property
• Form 103, Business Tangible Personal Property Assessment

Return

• Form 104, Business Tangible Personal Property Return

2/3/2016 18

State Solicitation Registration

• States’ definition of solicitation is broad.
• To protect residents of a particular state from fraudulent

solicitations.

• Requirements, filing deadlines, filing fees, exemptions, initial

registration, annual renewals and penalties vary by state.

• Uniform Registration Statement tries to unify the process.
• Form 990 asks questions regarding state registration.

2/3/2016 19

(multistatefiling.org)

State Solicitation Registration

• Charleston Principles
• National Association of State Charity Officials (NASCO)
• “Internet fund raising guidelines”
• Not required to register in a particular state if have

minimal contacts

• Register with “home” state.
• Register with other states that you have offices in or own

property in.

• Register with other states that you target.
• Register with other states with “ongoing” and

“substantial” activity.

2/3/2016 20

Questions?

Dulin, Ward & DeWald, Inc.

9921 Dupont Circle Drive West, Suite 300 Fort Wayne, Indiana 46825 260.423.2414 www.dwdcpa.com www.dwdcpa.com/blog/catergory/mission‐minded‐nonprofits Carrie Minnich, CPA, MAcct – cminnich@dwdcpa.com