CPA's & Consultants Providing Business Insight To Churches & Ministries

Related Party – Defined and Reporting Requirements (2 of 4)

In accordance with FAS 57, material related party transactions must be disclosed in the financial statements. In our post #1 we defined a related party. Let’s look closer at these parties to determine who is “related”:

1. Parent company and subsidiary - (under APB Opinion #16), one organization owning a majority of another organization’s voting stock.

2.Affiliate - a party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an enterprise.

Related Party – Defined and Reporting Requirements (1 of 4)

In March of 1982 the Financial Accounting Standards Board (FASB) issued Financial Accounting Standard 57 Related Party Disclosures and this standard became effective for financial statements ending after June 15, 1982.

Transactions incurred by compensation arrangements, expense allowances, and other similar items in the ordinary course of business are not considered to be a related party transactions and therefore not required to be disclosed in the organization’s financial statements.

Tax Exempt Organization - Little Debits #2

In a recent case ruling by the Oklahoma Court of Civil Appeals, a tax-exempt corporation

excludes any entity wherein any part of its net earnings goes to benefit any private shareholder or individual.

Can you spell "inurement?"

Little Debits are selected information obtained from various sources that provide “user friendly” information for churches and ministries. Enjoy!

Brave New World of Risk Assessment (4 of 4)

There are several new auditing standards that will be implemented during the 2006 and 2007 audits of non-profit organizations. The impact to churches and ministries is the auditor will/should be spending additional time understanding "the business" and assessing the "risk" of a material misstatement to the financial statements. Management must assess external factors affecting the operations of the Church.

In post #4, we discuss changes/differences resulting from SAS 106, Audit Evidence (Supercedes SAS 31 of the same name).

Brave New World of Risk Assessment (3 of 4)

This posting is a continuation of previous discussions on the new Risk Assessment Standards. In this posting, we discuss changes/differences resulting from SAS 105 Amendment to Statement on Auditing Standards No. 95, Generally Accepted Auditing Standards.

Brave New World of Risk Assessment (2 of 4)

In a Brave New World of Risk Assessment post #1, we introduced the new risk assessment standards published in March 2006 for CPAs. We will summarize the high-level differences between the old and new standards and their effect on auditors and their clients.

SAS 104 Amendment to Statement on Auditing Standards No. 1, Codification of Auditing Standards and Procedures ("Due Professional Care in the Performance of Work").

Brave New World of Risk Assessment (1 of 4)

In March 2006, the Auditing Standards Board (ASB), the senior technical body of the AICPA, released its long-anticipated Risk Assessment standards (SAS 104-111) relating to assessment of risk in an audit of financial statements. These standards amended or replaced several existing standards in an effort to enhance overall quality of audits by focusing the auditor's attention on areas such as:

1. A more in-depth understanding of the entity and its control environment
2. A more rigorous assessment of the risks of material misstatement of the financial statements based on that understanding

Form 990 vs SFAS 117 Reporting

Form 990 asks if a not-for-profit (church/ministry) is following SFAS 117 or is reporting under the old fund balance approach. SFAS 117 is a Generally Accepted Accounting Principles (GAAP) pronouncement. These questions generally come up if the organiztion has restricted funds. In determining whether the entity is following SFAS 117, the following are a few of the items to look for:

Proactive Hiring and Fraud Prevention - (6 of 7)

How can a church or ministry protect resources against fraud? One of the most important facets of fraud prevention is hiring and promoting appropriate employees. Each employee has a unique set of values and personal code of ethics. When faced with sufficient pressure and a perceived opportunity, some employees will behave dishonestly rather than face the negative consequences of honest behavior. However, the threshold at which dishonest behavior starts varies among individuals.

Proactive hiring and promotion procedures may include:

Creating a Positive Workplace Environment (5 of 7)

Understanding that management has a responsibility to prevent/detect fraud is hard for all types of entities, not just churches and ministries. One aspect of enhancing a value system within an organization is creating an office culture of honesty by creating a positive workplace environment.