Planned Parenthood Finance Directors

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


What is Risk Assessment?

More focused audit approach using the COSO internal framework:

Control Environment Risk Assessments Control Activities Communication and Information Monitoring


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


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


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


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


How will the Risk Assessment Standards Impact you?

Request more information and documentation

The demands on your personnel will increase


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


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


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


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)


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


New Form 990

“Transparency” Emphasis on Governance and

Compensation 11 page Core form

16 “schedules” that are filed, if applicable


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


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


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.


New Form 990

Core form, Part VI - Governance, Management, and Disclosure (cont’.)

Whistleblower policy? Document retention/destruction policy?


New Form 990

Part VII, Compensation

Must use W-2 amounts (calendar year) Detailed reporting on officers, former officers,

and independent contractors


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


New Form 990

Schedule D – Supplemental Financial Statements

Donor Advised Funds Conservation Easements Art Collections and Similar Assets Trust, Escrow, and Custodial Arrangements Endowments


New Form 990

Schedule D (cont’.)

Investments Other assets Other liabilities Reconciliation to Financial Statements

Supplemental information


New Form 990

Schedule E – Schools Schedule F – Statement of Activities

outside of U.S. Schedule G- Fundraising and Gaming

Activities Schedule H - Hospitals


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


New form 990

Schedule K – Tax Exempt Bonds

Issue descriptions Proceeds Private Business Use Arbitrage


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


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)


New Form 990

Schedule R – Related organizations and unrelated partnerships

Disregarded entities Related tax-exempt entities Related partnerships Related corporations Unrelated partnerships


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


Taxation of Benefits

IRS increased scrutiny on benefits Automatic excess benefit

transactions Items covered: cell phones,

computers, cars Other perks


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

Documents

Planned Parenthood Finance Directors