Current Events, Audit Issues, Governance Issues, Reporting Issues, Tax Issues

Contributions/Event - #4

As we have discussed in our three previous posts, donors may receive something in exchange for a contribution. Whether it is a meal, a book, a video, all of these items are treated similarly. Remember the criteria for financial reporting?

What has been communicated to the donor and what is the donor’s intention in responding to the solicitation?

As we discussed in post #3, the direct donor benefits can be treated similar to cost of sales OR as a program or supporting service. Showing the expense as gross or disclosing the components of the value is the preferred reporting,

#3 of 3 Filing for Exempt Status

In our previous posts we have discussed the criteria or the "14 point test" for churches. Churches are not required to file a Form 1023, however religious organizations with annual gross receipts greater than $5,000 must file.

In order for an organization to be tax-exempt, IRC 501(c)(3) requires the entity meet the following requirements:

1. organized and operated exclusively for religious, educational, scientific or other charitable purposes
2. net earnings may not inur to the benefit of any private individuals or shareholders

Get FDIC coverage over $100K through one bank

Through a program called the Certificate of Deposit Account Registry Service, or CDARS (pronounced like “Cedars”) you can get full FDIC insurance for your deposit amounts larger than $100,000. Basically, your large deposit made at your bank is broken into smaller amounts and placed with other banks that belong to a special network, who then issue CD’s in amounts less than $100,000, ensuring that your entire investment is covered by the FDIC.

1. The convenience of dealing with one bank
2. Earn one rate on your entire investment

Phase-in filing of new Form 990

To allow organizations time to adjust to the redesigned 990 series returns, the IRS is phasing in the new returns during a three-year transition period. Many more non-profits will be allowed to file Form 990-EZ during the phase-in period, according to

Changes to the Draft Form 990

A redesigned Form 990, Return of Organization Exempt From Income Tax, will be filed beginning with 2008 tax years (2009 filing season). The IRS has completed its review of the public comments and made revisions to the draft instructions. The revised instructions should be posted at by August 15, 2008.

Audit Risk - #5 Risk Definition Series

Audit Risk (AR) expresses the general relationship of risks associated with the auditor's assessments of risk of material misstatements (RMM = inherent risk x control risk); the risk that audit procedures will fail to detect a material financial statement misstatement due to an internal control failure (DR).

Audit Risk must be low because of the high level of assurance provided by the audit opinion.

#5 Contributions - Deductible Amounts

Over the past several weeks we have described the requirements for deducting and recording charitable contributions.

In this post we will discuss calculating the deduction...

The amount of charitable contributions that may be deducted by a taxpayer is limited based on adjusted gross income, the type of property contributed or the nature of the charity.


#6 Contributions - Substantiation Requirements

Over the past several months we have discussed the requirements for reporting/deducting charitable contributions. In our final post, we will discuss the substantiation rules...

The Pension Protection Act of 2006 (PPA of 2006) changed the substantiation requirements for deducting charitable contributions. Prior to 2007, donors could deduct charitable contributions using a cancelled check, a receipt from the charity or another reliable written document.

Risk Standards (6 of 6)

In our previous posts we have discussed the new risk standards promulgated by the AICPA affecting audits for years ending after 12/16/07. In post #5 we briefly discussed SAS 108 and 109. Now we will end this series of posts and discuss SAS 110 and 111.

Defining “Those In Charge”

The new auditing standards require certain communications to “those charged with governance”. These individuals are responsible for overseeing the strategic direction of the church or ministry. These same individuals have accountability for and to the entity, including the financial reporting process.

Those charged with governance may include a board of directors, a supervisory board, or trustees. Subgroups (such as an audit committee) may be charged with specific tasks to assist a governing body in meeting its responsibilities.