What will happen to Main street is a discussion the candidates for President and others talk about in the national fiscal crisis. This is my offer of praise for those who work in small to mid-size nonprofit groups, not on Main street but on the side streets of America. They and their clients, customers, patients and constituencies will feel more pain. We have been told for years to do more with less. The near future may be do less with even more less, if you know what I mean.
It appears to me that there are several reasons why we have small ($100,00 annual budget and/or staff of five) and mid-size ($5M annual budget or less): There are community needs that are best served by them. They are "on the ground" meeting priorities, goals and objectives that are not or cannot be met by larger nonprofits such as national groups, universities and others which have a different mission and vision. Many of these larger organizations provide support, training, technical assistance and evaluation to small and mid-size organizations. Much funding from Federal and state government, United Way, the Combined Federal Campaign, trust funds, foundations and corporations is aimed at small to mid-size nonprofits. There are probably many other reasons but I am not a researcher or historian.
I offer my praise and deep appreciation to the founders of small and mid-size organizations who have the passion, the mission, vision, the smarts and understand the pulse of their communities to tackle serious community problems and gaps in services, underpaid and understaffed and yet producing change and support in human lives daily. They are in inner cities, rural and farm towns, in suburbs.
I offer my deep appreciation for what they provide our society. They comfort the disturbed - they disturb the comfortable at the local level. They give with their personal values of dedication and hard work. They give with their education and experience. They want to be in those small to mid-sized organizations because of their moral fiber...it isn't right and someone has to address that need now and on into the unforeseeable future. For so many employees and volunteers working with the small to mid-sized organizations, small pay and benefits, significant paper-work, hard issues - they can do no less. They have a spiritual sense of the rightness of being social workers, case managers, community organizers, lawyers, counselors, doctors, nurses, mothers, fathers, retirees, teachers, youth workers, respite support, mentors only in local small and mid-sized nonprofits
I offer praise to those who will spend a significant part of their lives working with broken families, mentally ill, people infected and affected by HIV/AIDS, victims of domestic violence and rape, growing artists, actors and musicians, literacy, migrant camps, tenants rights, undocumented aliens, ex-offenders, new born, homeless, women, elderly, job training, single parents, working poor, displaced people, health, community advocacy, civil rights, people suffering from addiction, offer mentoring, save and protect animals, the environment and local or ethnic history and so much more. All are within locally-based small and mid-sized 501(c)(3) tax exempt organizations with executive directors and boards and stake-holders and constituencies and clients, customers and patients. They are not on Wall Street. They are not even on Main street. They are on side streets, low rent areas close to those they serve.
They deserve the interest of donors, volunteers and funders. They deserve training, technical assistance and serious research, not at the expense of their missions but in the support and enhancement of their missions and results.
I can never offer thank you sufficiently for what you have given me and our neighbors and what I have learned at your knees.
Sunday, September 28, 2008
Friday, September 26, 2008
The Role and Non-Role of Nonprofits and Churches in Elections – Your Nonprofit Library Third Shelf
The Internal Revenue Service has issued significant material about the potential involvement of nonprofit organizations and Churches in an election including registering voters, inviting candidates to speak, endorsing candidates, driving voters to poll places, massive mailings in support of a candidate or to get out the vote, personnel policies. Here is a library shelf of web-based information about the role of nonprofits and Churches in elections from the IRS and other advocates of the nonprofit world, Alliance for Justice and Independent Sector.
Political Activities Compliance Initiative (2008 Election)
The Internal Revenue Service's Political Activities Compliance Initiative (PACI) will remain in effect for the 2008 election season. PACI seeks to educate section 501(c)(3) organizations such as charities and churches about the federal ban on political activity.
As in previous years, the 2008 IRS effort will include both educational and compliance components. This year's initiative will include:
The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations
Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.
Certain activities or expenditures may not be prohibited depending on the facts and circumstances. For example, certain voter education activities (including presenting public forums and publishing voter education guides) conducted in a non-partisan manner do not constitute prohibited political campaign activity. In addition, other activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not be prohibited political campaign activity if conducted in a non-partisan manner.
On the other hand, voter education or registration activities with evidence of bias that
http://www.irs.gov/charities/charitable/article/0,,id=163395,00.html
Political Campaign Intervention by 501(c)(3) Tax-Exempt Organizations - Educating Exempt Organizations
As a key element in its program to secure compliance with the ban on political campaign activity by section 501(c)(3) organizations, the Internal Revenue Service educates organizations about the ban and puts them on notice of the enforcement program. Towards this end, it employs an array of educational tools:
Examination Procedures – Prohibited Political Campaign Intervention by Section 501(c)(3) Organizations
In addition to the general procedures for audits of exempt organizations, the IRS has developed special procedures for cases involving potential political activity by section 501(c)(3) organizations. The goal of the procedures is two-fold:
Guidance for Churches:
Publication 1828, Tax Guide for Churches and Religious Organizations -
http://www.irs.gov/pub/irs-pdf/p1828.pdf
Special Rules Limiting IRS Authority to Audit a Church
The IRS may only initiate a church tax inquiry if the Director, Exempt Organizations Examinations, reasonably believes, based on a written statement of the facts and circumstances, that the organization: (a) may not qualify for the exemption; or (b) may not be paying tax on unrelated business or other taxable activity.
http://www.irs.gov/charities/churches/article/0,,id=179674,00.html
Restrictions on Church Inquiries and Examinations
http://www.irs.gov/charities/churches/article/0,,id=179675,00.html
On February 3, 2009 the Chronicle of Philanthropy reported on an IRS vs Church-audit case involving alleged lobbying and candidate support. The article says in part:
Court Rules Against IRS in Church-Audit Case, By Grant Williams
The Internal Revenue Service has suffered another setback in its effort to pursue an audit of a church in Minnesota in a case that has ramifications for the tax agency and churches nationwide.
A U.S. District Court judge in Minneapolis ruled that the Living Word Christian Center, in Brooklyn Park, Minn., does not have to comply with an IRS summons for information because the summons was not authorized by a government official of sufficient rank.
The ruling by Judge Ann D. Montgomery concurs with a decision in December by U.S. Magistrate Judge Jeffrey J. Keyes.
Some tax-law experts have said that the IRS’s defeat could spur challenges to audits by other churches and force the IRS to engage in a lengthy, formal rule-making process to determine who has the authority to order an investigation into a church’s finances.
The IRS began to investigate Living Word in April 2007, following reports that the Rev. Mac Hammond had endorsed U.S. Rep. Michele Bachmann, a Minnesota Republican, from the pulpit—an act that would violate charity tax laws.
(Snip)
http://philanthropy.com/news/updates/7005/court-rules-against-irs-in-church-audit-case
Faith leaders and other nonprofit leaders may want to monitor this over the next several years. It could take that long.
Alliance for Justice Material
Permissible Nonpartisan 501(c)(3) and Partisan Campaign Contact on Voter Engagement/Protection Efforts
Which says in part:
Under these rules, 501(c)(3) organizations may:
Elections Rules – Voter Education
http://www.independentsector.org/programs/gr/electionrulesvotereducation.pdf
Election Rules - Issue Advocacy vs. Political Campaign Intervention
http://www.independentsector.org/programs/gr/electionrulesissueadvocacy.pdf
Political Activities Compliance Initiative (2008 Election)
The Internal Revenue Service's Political Activities Compliance Initiative (PACI) will remain in effect for the 2008 election season. PACI seeks to educate section 501(c)(3) organizations such as charities and churches about the federal ban on political activity.
As in previous years, the 2008 IRS effort will include both educational and compliance components. This year's initiative will include:
- Letters to the national political party committees explaining the law's ban on political campaign activity by charities and churches.
- A letter in the Federal Election Commission's monthly newsletter asking candidates to ensure that their contacts with charitable organizations do not inadvertently jeopardize the tax-exempt status of any organization.
- A news release reminding charities and churches of the ban.
- Reorganizing the IRS' Web site materials concerning the ban to make them more accessible to organizations, political candidates and parties, and the general public.
- Examinations of organizations the IRS believes may be violating the ban.
- A memorandum from the Director, Exempt Organizations Examinations, describes how the IRS will analyze political campaign activity issues involving websites of section 501(c)(3) organizations
http://www.irs.gov/charities/charitable/article/0,,id=181565,00.html
The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations
Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.
Certain activities or expenditures may not be prohibited depending on the facts and circumstances. For example, certain voter education activities (including presenting public forums and publishing voter education guides) conducted in a non-partisan manner do not constitute prohibited political campaign activity. In addition, other activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not be prohibited political campaign activity if conducted in a non-partisan manner.
On the other hand, voter education or registration activities with evidence of bias that
- would favor one candidate over another;
- oppose a candidate in some manner; or
- have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention.
http://www.irs.gov/charities/charitable/article/0,,id=163395,00.html
Political Campaign Intervention by 501(c)(3) Tax-Exempt Organizations - Educating Exempt Organizations
As a key element in its program to secure compliance with the ban on political campaign activity by section 501(c)(3) organizations, the Internal Revenue Service educates organizations about the ban and puts them on notice of the enforcement program. Towards this end, it employs an array of educational tools:
- Guidance to exempt organizations on how to apply the ban in various factual situations.
- Revenue Ruling 2007-41 and Factsheet 2006-17 distill IRS guidance in this area, each providing 21 examples of how it applies.
- News releases and other resources for the media discussing the ban.
- Phone Forum on Rules for Tax-Exempt Organizations During an Election Year: Topics include the distinctions between political activity, lobbying, and general advocacy, and which activities are permissible by 501(c)(3), 501(c)(4), 501(c)(5), 501(c)(6) and 527 organizations. Read the script and see the slide show.
- Access to internal training materials . Note: These materials were designed for training purposes only; under no circumstances should the contents be used or cited as authority for setting or sustaining a technical position.
- Frequently asked questions
- 'Charities and Politics' audio interview featuring Steven T. Miller, Commissioner, Tax-Exempt and Government Entities.
- Other resources
- Program letter describing components of the IRS Political Activity Compliance Initiative (2008 election)
Examination Procedures – Prohibited Political Campaign Intervention by Section 501(c)(3) Organizations
In addition to the general procedures for audits of exempt organizations, the IRS has developed special procedures for cases involving potential political activity by section 501(c)(3) organizations. The goal of the procedures is two-fold:
- to educate 501(c)(3) organizations of the ban on political activity and put them on notice of the enforcement program in order to prevent violations, and
- to address noncompliance while the issue remains prominent, so that there are no recurrences and so correction can occur before the relevant election.
Guidance for Churches:
Publication 1828, Tax Guide for Churches and Religious Organizations -
http://www.irs.gov/pub/irs-pdf/p1828.pdf
Special Rules Limiting IRS Authority to Audit a Church
The IRS may only initiate a church tax inquiry if the Director, Exempt Organizations Examinations, reasonably believes, based on a written statement of the facts and circumstances, that the organization: (a) may not qualify for the exemption; or (b) may not be paying tax on unrelated business or other taxable activity.
http://www.irs.gov/charities/churches/article/0,,id=179674,00.html
Restrictions on Church Inquiries and Examinations
http://www.irs.gov/charities/churches/article/0,,id=179675,00.html
On February 3, 2009 the Chronicle of Philanthropy reported on an IRS vs Church-audit case involving alleged lobbying and candidate support. The article says in part:
Court Rules Against IRS in Church-Audit Case, By Grant Williams
The Internal Revenue Service has suffered another setback in its effort to pursue an audit of a church in Minnesota in a case that has ramifications for the tax agency and churches nationwide.
A U.S. District Court judge in Minneapolis ruled that the Living Word Christian Center, in Brooklyn Park, Minn., does not have to comply with an IRS summons for information because the summons was not authorized by a government official of sufficient rank.
The ruling by Judge Ann D. Montgomery concurs with a decision in December by U.S. Magistrate Judge Jeffrey J. Keyes.
Some tax-law experts have said that the IRS’s defeat could spur challenges to audits by other churches and force the IRS to engage in a lengthy, formal rule-making process to determine who has the authority to order an investigation into a church’s finances.
The IRS began to investigate Living Word in April 2007, following reports that the Rev. Mac Hammond had endorsed U.S. Rep. Michele Bachmann, a Minnesota Republican, from the pulpit—an act that would violate charity tax laws.
(Snip)
http://philanthropy.com/news/updates/7005/court-rules-against-irs-in-church-audit-case
Faith leaders and other nonprofit leaders may want to monitor this over the next several years. It could take that long.
Alliance for Justice Material
Permissible Nonpartisan 501(c)(3) and Partisan Campaign Contact on Voter Engagement/Protection Efforts
Which says in part:
Under these rules, 501(c)(3) organizations may:
- Provide publicly available information to all candidates or parties—either upon request or at the organization’s initiative.
- Issue press releases or post information on their websites describing their nonpartisan voter outreach plans and strategies or concerns about voter intimidation or voting problems in particular districts.
- Share research on voter-protection problems or other issues of general concern, as long as it is made generally available to the public (e.g., posted on the 501(c)(3)’s website) or is offered to all candidates in a race or all viable political parties in a jurisdiction.
- Solicit support from all political parties or candidates for a particular office for the 501(c)(3)’s advocacy efforts to ensure a fair and effective voting system (e.g., asking all political parties to submit an amicus brief in support of the 501(c)(3)’s efforts).
- Support litigation brought by a party or candidate that, in the independent judgment of the 501(c)(3), furthers the security of the voting process. In doing so, though, the 501(c)(3) must avoid showing support for the party or candidate and should affirmatively state its neutrality.
501(c)(3) organizations may not:
- Explicitly or implicitly endorse any candidate or political party. Nothing should be said, done, or implied that suggests electoral favor or disfavor either for a specified candidate or political party, or for unnamed candidates or parties generally that subscribe to particular issue positions or have particular characteristics. For instance, 501(c)(3)s cannot suggest that any particular political party or candidate has a better or worse position on election-protection issues.
- Make any direct or indirect candidate, party, federal PAC or 527 contribution. A 501(c)(3) should not conduct research on an issue in order to provide it to a particular candidate or party or at the request of a particular candidate or party. In addition, it cannot use any of its resources to pay for or participate in a partisan event.
- Target election-protection efforts to a precinct based on the political party or candidate the precinct is likely to support.
- Consult with a particular party or candidate to determine where to target election-protection efforts.
- Coordinate voter outreach efforts with candidates, parties, federal PACs or other 527 groups, even if the 501(c)(3) itself otherwise follows nonpartisan guidelines. Public charities cannot tailor their efforts to mesh with those of partisan entities or share voter outreach strategies with one candidate or party only.
Even if these standards are satisfied, other groups or the media may raise questions about any 501(c)(3) engagement with a political candidate, party, or partisan group. Therefore, the risk of adverse publicity for your efforts should be considered in deciding whether to deal with them in any manner.
Note that 501(c )(3) organizations may coordinate their voter protection efforts with other 501(c)(3) organizations, and with other kinds of tax-exempt groups, businesses and other organizations, so long as the 501(c)(3)’s collaborators themselves are complying with 501(c)(3) nonpartisan standards in their coordinated efforts. (Underline in the original - DAG)
http://www.afj.org/for-nonprofits-foundations/permissible-501-c-3-interaction-with-partisan-groups-final.pdf
The Alliance for Justice states in one of its articles about lobbying, The Downside of Private Foundations Using Restrictive Grant Agreements:
Contrary to popular belief, federal tax law does not require private foundations to include lobbying prohibitions in grants made to public charities. Many foundations unfortunately make restricted grants by using grant agreement letters that prohibit their grantees from using grant funds for “any propaganda or attempt to influence legislation.” Such language is overly restrictive and may undermine the grantee’s ability to effectively and efficiently achieve its goals. The prohibition on using grant funds for lobbying only applies to private foundation grants to non-public charities, such as 501(c)(4) organizations.
http://www.afj.org/assets/resources/nap/restrictive-grant-agreements.pdf
Independent Sector Material
Election 2008: http://www.independentsector.org/programs/gr/ElectionResources.html
Democracy in Action -- Projects by Nonprofits
- Candidate Forums
- Election Judges for Charity
- Engaging Young Adults
- Funding Voter Engagement
- Get Out the Vote
- Personnel Policies
- Policy Agendas
- Voter Education
- Voter Registration
Elections Rules – Voter Education
http://www.independentsector.org/programs/gr/electionrulesvotereducation.pdf
Election Rules - Issue Advocacy vs. Political Campaign Intervention
http://www.independentsector.org/programs/gr/electionrulesissueadvocacy.pdf
Tuesday, September 23, 2008
Your Nonprofit Library Second Shelf - Sample Nonprofit Fiscal Audit Agreement
This article is part of the continuing series concerning nonprofit fiscal audits.
Auditors are prepared to create what they call a “Letter of Engagement” when contracting with clients. It may be basically a form letter with changes pertinent to each client. I found the Letters of Engagement did not spell out enough details for my satisfaction. Therefore when we sent out a Request for Proposal (RFP) to auditors, I included a copy of a draft agreement that we would be using. Frequently we developed cross references to each document, our Agreement and their Letter of Engagement after working out all contradictory sections.
Here is a sample agreement and a list of resources to help you prepare for the audit agreement or letter of engagement. It is offered to provide issues for consideration. I am not suggesting that all auditors will be happy if you were to use this sample – which I do not recommend.
1. This Agreement, between NPO XXX (the Organization), 111 New Street, Anywhere NY 00000-0000 and (Name of Audit Firm, the Contractor), 222 New Street, Anywhere, NY 00001-0001, shall be effective as of the date of execution below.
2. The Contractor will audit the financial records, accounts and statements of the Organization as of July 1, 2008 and for the year ended June 30, 2009.
3. The audit will be conducted in accordance with generally accepted government auditing standards (GAGAS); the standards for financial audits contained in Government Auditing Standards (GAS) issued by the Comptroller General of the United States; the AICPA guide, Audits of State and Local Government Units; OMB Circular A-122, Cost Principles for Non-Profit Organizations; and the Office of Management and Budget (OMB) Single Audit Circular A-133 (and any other applicable standards).
4. The audit will include tests of the accounting records and such other audit procedures as necessary to express an independent opinion on the statement of financial position and the related statements of activities, and cash flows, and Reports on Compliance with Laws and Regulations and the Internal Control Structure.
5. The Contractor will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Under the concept of reasonable assurance, the Contractor will exercise its judgement about the number of transactions to be examined and the areas to be tested. There is, therefore, a risk that material errors, irregularities or illegal acts, including fraud or defalcations may exist and not be detected. The Contractor will, however, advise immediately the Organization’s Audit Committee of any such matters that come to its attention. The Contractor’s responsibility is limited to the period covered by the audit and does not extend to matters that might arise during any later periods.
6. The Contractor, as part of the engagement, will request written representations from the Organizations attorneys. Prior to the conclusion of the audit, the Contractor will also request certain written representations from the Organization management about the financial statements and related matters. It is understood that these financial statements are the responsibility of management. The responsibility includes the maintenance of adequate records and related internal control structure policies and procedures, the selection and application of accounting principles, and the safeguarding of assets. The Contractor will advise management about the appropriate accounting principles and their application, and will assist in the preparation of the financial statements, if necessary.
7. The Contractor understands that it has the responsibility:
- to prepare the audit reports in accordance with the requirements and standards for financial audits contained in Government Auditing Standards (GAS) issued by the Comptroller General of the United States; the AICPA guide, Audits of State and Local Government Units; OMB Circular A-122, Cost Principles for Non-Profit Organizations; and the Office of Management and Budget (OMB) Single Audit Circular A-133 (and any other applicable standards).
- to prepare and electronically submit a Summary Report Form on Noncompliance with Laws and Regulations, Questioned Costs and Reportable Conditions;
- to maintain all records that are pertinent to this Agreement retain them for a period of three years (or other amount of time) following final payment against the Agreement. The Organization will assume the duties of maintain the records after that period. The records, while maintained by the Contractor, shall be subject at all reasonable times for inspection, review and audit by any Federal or state government official as authorized by law;
- to provide a special report to the NPO XXX on noncompliance in the event that the recipient fails to do so in accordance with the requirements of the Organization’s Audit Committee and any other entity required by an audit guide for recipients and auditors; and
- to notify NPO XXX’s Audit Committee within five (5) business days of its termination or cessation of services to the Organizatio
8. The Contractor will also prepare the Federal tax return (IRS Form 990) and State and Local returns (where required) with the management of NPO XXX for the year ending June 30, 2009. Organization will file the 990 and any other returns prepared by Contractor.
9. Entrance and exit conferences will be held with the Organization management and the Audit Committee or Board of Directors.
10. The Organization management responses to draft audit reports will be delivered to the Contractor for inclusion in the final reports, where practical.
11. The Contractor will deliver to the Organization:
- Three (3) copies of the draft audit reports no later than October 15, 2009;
- the original and thirty (30) copies of the financial audit reports no later than 120 days after closing; and
- the State and Federal tax returns within a reasonable time after the acceptance of the final audit reports
12. In consideration for the satisfactory performance of the audit, the Contractor will receive $ __________, paid as follows: One half upon completion of fieldwork and balance to be paid upon completion of final audit report and delivery of the Federal tax returns. .
13. The Contractor will immediately notify the Organization’s Audit Committee of any significant and/or reportable conditions noted during the course of the audit.
14. Audit working papers will be prepared in accordance with Government Auditing Standards, and will be retained by the Contractor for at least three (3) (or other amount of time) years from the date of the final audit report. The working papers will be available for examination upon request by authorized representatives of funding and government sources
15. The certifications numbered A through H are incorporated by reference and made a part of this Agreement.
16. In the event that there is a significant change in funding from the (names of funders) and/or a change in the legal or regulatory requirements applicable to this audit, the Organization shall be allowed either to: (1) withdraw from this engagement after paying in full for any and all services rendered by the Contractor prior to the date of withdrawal; or (2) seek, without penalty, a negotiated modification of this Agreement which would result in the satisfaction of the new legal requirements through the services to be performed under the modified Agreement.
17. The fees set by the Agreement are based upon the following assumptions: management will respond promptly to all requests for basic information and/or documentation; the books will have been posted through the year; all adjustments will have been posted; management personnel will prepare cash and other confirmations; and that year-end schedules supporting the account balances will be provided.
18. The Contractor will give an oral presentation of its audit report to the Board of Directors or the Audit Committee of the Board.
19. The Consultant agrees to hold harmless and indemnify Contractor, its officers, agents and employees, from and against any and all actions, suits, damages, liability or other proceedings which may arise as a result of performing services rendered under this Agreement.
20. The Consultant agrees, at its sole cost and expense, to maintain adequate general liability insurance, workers’ compensation, professional liability and automobile liability insurance during the period of this Agreement.
21. If circumstances arise that will require additional services and time by the Contractor, the Contractor will notify the Organization and obtain its agreement prior to undertaking such activities. The hourly fee for such agreed to services will be $________ .
22. The terms of this Agreement may be modified only in writing, signed by duly authorized representatives of the parties.
23. If the parties are unable to resolve a dispute regarding the acceptability of deliverables under this Agreement, the dispute will be submitted to the (name of arbitration organization) for resolution through binding arbitration.
24. This Agreement, which includes the matter specifically incorporated by reference, constitutes the entire Agreement between the parties.
25. This Agreement has been made, and shall be construed, in accordance with the laws, rules and regulations of the Federal Government and the State of New York (your state).
Executed on the ________ day of July, 2008 for the parties by their duly authorized representatives
For NPO XXX Auditor
CERTIFICATIONS
A. The individual signing certifies that he/she is authorized to contract on behalf of the Contractor and to make these certifications.
B. The individual signing certifies that the Contractor is not involved in any agreement to pay money or other consideration for the execution of this Agreement, other than to an employee of the Contractor.
C. The individual signing certifies that the Contractor meets the independence standards of the Government Accountability Standards (GAO) issued by the comptroller General of the United States.
D. The individual signing certifies that he/she is aware that all individuals to be assigned to the audit have met the GAO Continuing Education Requirement of 80 hours of continuing education every two years; and that 24 hours of this education have been subjects directly related to the auditing of government grants.
E. The individual signing certifies that he/she has read and understands the GAO requirement of an external quality control review at least once every three years.
F. The individual signing certifies that the Contractor, and any individuals to be assigned to the audit, do not have a record of substandard audit work and have not been debarred or suspended from doing work with any Federal, state or local government. (If the Contractor or any individual assigned to the audit has been found in violation of any state or AICPA professional standards, this information must be disclosed.)
G. The Contractor certifies that it and its employees will abide by the Organizations policies on drugs, alcohol and smoking in the workplace, recycling, anti-sexual harassment, safety in the workplace, use of equipment and equal opportunity employment.
H. The individual signing certifies that the Contractor does not discriminate against any employee or applicant for employment because of race, color, religion, sex, sexual orientation, veteran status, age, national origin, disability, or any other basis prohibited by law. The Contractor shall take affirmative action to insure that employees are treated during their employment, without regard to race, color, religion, sex, sexual orientation, veteran status, age, national origin, disability, or any other basis prohibited by law. Such action shall include, but not be limited to the following: employment, upgrading, demotion, or forms of compensation; and selection for training, including apprenticeship. The Contractor will, in all solicitations or advertisements for employees, placed by or on behalf of the Contractor, state all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, sexual orientation, veteran status, national origin, disability or any other basis prohibited by law.
Dated this _______ day of July, 2009
_______________________
Name of Organization’s Authorized Representative
_______________________
Signature of Organization’s Authorized Representative
________________________
Contractor’s Name
________________________
Signature of Contractor’s Representative
________________________
Federal ID Number or Social Security Number
NOTE: The audit report includes a Statement of Financial Position (Balance Sheet), Statement of Activities (Income Statement), Statement of Cash Flow, Notes to Statements, and possibly a Statement of Functional Expenses. In order to print the opinion letter or otherwise associate an audit firm's name with your statements, you must present the whole report.
RESOURCES
The AICPA Audit Committee Toolkit: Not-for-Profit Organizations - http://www.aicpa.org/Audcommctr/toolkitsnpo/homepage.htm
See the Check List to Evaluate the Engagement Letter (Scroll down for a printable copy) http://www.aicpa.org/audcommctr/toolkitsnpo/Evaluation_of_Auditors_Engagement_Letter.htm
Controlling the Audit Process completely revised and expanded by Hilda S. Renteria, CPA and Edited by Catherine Barker with sample documents and forms
http://www.icpas.org/cpaspi/pdf/auditprc.pdf
PowerPoint presentation about audits, Inside Your Audit: Secrets Revealed by Andrea T. Mills, MBA, CPA, CCSA
http://www.lisc.org/docs/events/fm2006/inside_your_audit.pdf
AICPA’s article Common Engagement Deficiencies in Audits Performed Under OMB Circular A-133 Noted in Peer Reviews, Ethics Investigations, and Federal Office of the Inspector General (OIG) Quality Control Reviews http://gaqc.aicpa.org/Resources/OMB+Circular+A-133/Common+Engagement+Deficiencies/
A Management Letter from CAPIN CROUSE LLP, Accountants & Consultants to the Board of Directors, Wycliffe Bible Translators International Inc. Dallas Texas
http://www.wycliffe.net/Portals/8/financials/WBTI_Audited_StmtsFY02.PDF
Office of Management and Budget Circulars for Nonprofits - http://www.whitehouse.gov/omb/circulars/index-education.html
Sample Audit Engagement Letter Single Audit
http://support.rg.thomson.com/doc/aa/npo_cl_1.2.pdf
Auditing Services Required for MetroPool, Inc.
http://www.das.state.ct.us/rfpdoc/DOTMetropool01/bids/mpauditservices2007.pdf
North Carolina Department of Health and Human Services Fiscal Nonprofit Administration, Audits for State Grants Compliance
http://info.dhhs.state.nc.us/olm/manuals/ooc/fnp/man/Fiscal_Non-Profit_Admin-06.htm
Excellent Material about Boards and Their Legal and Fiscal Obligations - http://www.boardsource.org/
Sample Audit Agreement from the Ed. Fund, http://www.edfundwest.org/downloads/08_Fiscal_Agent_Agreement.pdf
Your Nonprofit Library Second Shelf - A Sample Nonprofit Audit RFP
Your Nonprofit Library Second Shelf - Request for Audit Proposals (RFP)
Your Nonprofit Library Second Shelf – Considering An Audit
Tuesday, September 16, 2008
Your Nonprofit Library Second Shelf – The Nine Threshold Points for a Nonprofit Fiscal Audit
This posting, Your Nonprofit Library Second Shelf – The Nine Threshold Points for a Nonprofit Fiscal Audit, is a part of an ongoing series about nonprofit organizations considering formal independent audits.
When must a nonprofit tax exempt 501 (c) (3) organization have a formal audit by an outside independent auditor? Audits are not required for all nonprofit tax exempt 501 (c) (3) organizations. Smaller organizations with revenue less than $25,000 can perform an internal annual audit. Groups with revenue in excess of $50,000 should be considering hiring an auditor each year. For smaller organizations the changes to the IRS Form 990 may be helpful enough to ask funders and others if filing the most recent Form 990 or 990-EZ or 990-N will suffice as a substitute for an audit.
Independent audits help show the board and the community that appropriate fiscal steps are being taken and that the group is accountable to those supporting it.
There are at least nine threshold points that can lead to an audit:
1. The board of trustees/directors decides to have a formal audit by an independent auditor. The board is the responsible fiscal authority of the organization and can require an audit as it wishes.
2. The new CEO/Executive Director requests a formal audit by an independent auditor from the board as a condition of accepting the position after discussions with the board, and reviewing financial and administrative records.
3. The state may require an audit when a charity hires a professional fundraiser who solicits contributions for the organization for a fee. Check your state law or talk to an attorney familiar with nonprofit law in your state.
4. If your organization is fundraising in states other than its home state, the other state may require a formal independent audit as a condition for raising funds. The trigger point for an audit may be the amount of funds raised in that state. Check the state law in each state you plan to do fundraising before the drive begins. You may have to seek legal assistance for this in other states. States may also require registration for a professional fundraiser.
5. The state may also require an independent audit when the organization has a certain amount of revenue in a year or in a fiscal year. It could be any amount, but some states have set the threshold at $250,000 annual revenue but it can be more or less. Check your state law or talk to an attorney familiar with nonprofit law in your state.
6. A grant, contract or funder may require as a condition of funding that an independent audit be filed each year of the funding. The organization should include the cost of that audit or a fair share of that audit as part of the grant budget in the application.
7. The Federal Office of Management and Budgets Circular No. A-133 requires an independent single audit for those organizations that receive $500,000 or more in federal grants. Section 105: Auditor means an auditor that is a public accountant or a Federal, State or local government audit organization, which meets the general standards specified in generally accepted government auditing standards (GAGAS). The term auditor does not include internal auditors of non-profit organizations. Subpart B: Audit required. Non-Federal entities that expend $300,000 ($500,000 for fiscal years ending after December 31, 2003) or more in a year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the provisions of this part.
http://www.whitehouse.gov/omb/circulars/a133/a133.html
8. An immediately previous audit found significant deficiencies and material weakness in the operation of the organization. The subsequent audit will show whether the organization has corrected the deficiencies and weaknesses, has accepted and enacted the recommendations of the auditor and become more fully accountable fiscally and in the management of fiscal elements.
9. When two or more nonprofit organizations begin to talk about merging or acquisition aka "take over" (yes, there are nonprofit take overs), one discussion point should be that each will have a formal independent audit prior to finalizing the merger or acquisition. The financial due diligence may not require a full independent audit in all mergers but what form the due diligence will take should include the consideration of a full independent audit. Due diligence is the process of investigation of a business, individual or organization and includes fiscal as well as other considerations, property ownership, potential for legal action for instance.
Resources
For the links to state offices that regulate charities, charitable solicitations and nonprofit organizations see the National Association of State Charity Officials for all states - http://www.nasconet.org/agencies
For a list of the states that require registration for fundraisers see the Multi-State Filer Project, The Unified Registration Statement:
Home Page - http://www.multistatefiling.org/
States that will accept the Unified Registration Statement - http://www.multistatefiling.org/#yes_states and
States that require registration but will not accept the Unified Registration Statement - http://www.multistatefiling.org/#no_states
Strengthening Transparency, Governance, Accountability of Charitable Organizations, A Final Report to Congress and the Nonprofit Sector June 2005 by the Panel on the Nonprofit Sector recommends a threshold of $1 Million total annual revenue for an independent audit. For smaller organizations with at least $250,000 and under $1 million in total annual revenues, a financial statement review by an independent accountant offers a less expensive option while still providing the board, regulators, and the public with some assurance of the accuracy of the organization’s financial records. -
http://www.nonprofitpanel.org/report/final/panel_final_report.pdf
Statement on Auditing Standards (SAS) No.112, Communicating Internal Control Related Matters Identified in an Audit from the American Institute of Certified Public Accountants and the resources listed there –
http://www.aicpa.org/download/members/div/auditstd/AU-00325.PDF and
http://ebpaqc.aicpa.org/Resources/General+Accounting+and+Auditing/New+Auditing+Standards/SAS+No.+112.htm
The Better Business Bureau aka “Wise Giving Alliance” states this standard:
Make available to all, on request, complete annual financial statements prepared in accordance with generally accepted accounting principles. When total annual gross income exceeds $250,000, these statements should be audited in accordance with generally accepted auditing standards. For charities whose annual gross income is less than $250,000, a review by a certified public accountant is sufficient to meet this standard. For charities whose annual gross income is less than $100,000, an internally produced, complete financial statement is sufficient to meet this standard.
http://us.bbb.org/WWWRoot/SitePage.aspx?site=113&id=4dd040fd-08af-4dd2-aaa0-dcd66c1a17fc
Nine Steps to Prevent Merger Failure by Gerald Adolph, Karla Elrod, and J. Neely, HBS Working Knowledge, http://hbswk.hbs.edu/archive/5271.html
Previous postings in this “Nonprofit Audit” series are
Your Nonprofit Library Second Shelf - A Sample Nonprofit Audit RFP
Your Nonprofit Library Second Shelf - Request for Audit Proposals (RFP)
Your Nonprofit Library Second Shelf – Considering An Audit
When must a nonprofit tax exempt 501 (c) (3) organization have a formal audit by an outside independent auditor? Audits are not required for all nonprofit tax exempt 501 (c) (3) organizations. Smaller organizations with revenue less than $25,000 can perform an internal annual audit. Groups with revenue in excess of $50,000 should be considering hiring an auditor each year. For smaller organizations the changes to the IRS Form 990 may be helpful enough to ask funders and others if filing the most recent Form 990 or 990-EZ or 990-N will suffice as a substitute for an audit.
Independent audits help show the board and the community that appropriate fiscal steps are being taken and that the group is accountable to those supporting it.
There are at least nine threshold points that can lead to an audit:
1. The board of trustees/directors decides to have a formal audit by an independent auditor. The board is the responsible fiscal authority of the organization and can require an audit as it wishes.
2. The new CEO/Executive Director requests a formal audit by an independent auditor from the board as a condition of accepting the position after discussions with the board, and reviewing financial and administrative records.
3. The state may require an audit when a charity hires a professional fundraiser who solicits contributions for the organization for a fee. Check your state law or talk to an attorney familiar with nonprofit law in your state.
4. If your organization is fundraising in states other than its home state, the other state may require a formal independent audit as a condition for raising funds. The trigger point for an audit may be the amount of funds raised in that state. Check the state law in each state you plan to do fundraising before the drive begins. You may have to seek legal assistance for this in other states. States may also require registration for a professional fundraiser.
5. The state may also require an independent audit when the organization has a certain amount of revenue in a year or in a fiscal year. It could be any amount, but some states have set the threshold at $250,000 annual revenue but it can be more or less. Check your state law or talk to an attorney familiar with nonprofit law in your state.
6. A grant, contract or funder may require as a condition of funding that an independent audit be filed each year of the funding. The organization should include the cost of that audit or a fair share of that audit as part of the grant budget in the application.
7. The Federal Office of Management and Budgets Circular No. A-133 requires an independent single audit for those organizations that receive $500,000 or more in federal grants. Section 105: Auditor means an auditor that is a public accountant or a Federal, State or local government audit organization, which meets the general standards specified in generally accepted government auditing standards (GAGAS). The term auditor does not include internal auditors of non-profit organizations. Subpart B: Audit required. Non-Federal entities that expend $300,000 ($500,000 for fiscal years ending after December 31, 2003) or more in a year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the provisions of this part.
http://www.whitehouse.gov/omb/circulars/a133/a133.html
8. An immediately previous audit found significant deficiencies and material weakness in the operation of the organization. The subsequent audit will show whether the organization has corrected the deficiencies and weaknesses, has accepted and enacted the recommendations of the auditor and become more fully accountable fiscally and in the management of fiscal elements.
9. When two or more nonprofit organizations begin to talk about merging or acquisition aka "take over" (yes, there are nonprofit take overs), one discussion point should be that each will have a formal independent audit prior to finalizing the merger or acquisition. The financial due diligence may not require a full independent audit in all mergers but what form the due diligence will take should include the consideration of a full independent audit. Due diligence is the process of investigation of a business, individual or organization and includes fiscal as well as other considerations, property ownership, potential for legal action for instance.
Resources
For the links to state offices that regulate charities, charitable solicitations and nonprofit organizations see the National Association of State Charity Officials for all states - http://www.nasconet.org/agencies
For a list of the states that require registration for fundraisers see the Multi-State Filer Project, The Unified Registration Statement:
Home Page - http://www.multistatefiling.org/
States that will accept the Unified Registration Statement - http://www.multistatefiling.org/#yes_states and
States that require registration but will not accept the Unified Registration Statement - http://www.multistatefiling.org/#no_states
Strengthening Transparency, Governance, Accountability of Charitable Organizations, A Final Report to Congress and the Nonprofit Sector June 2005 by the Panel on the Nonprofit Sector recommends a threshold of $1 Million total annual revenue for an independent audit. For smaller organizations with at least $250,000 and under $1 million in total annual revenues, a financial statement review by an independent accountant offers a less expensive option while still providing the board, regulators, and the public with some assurance of the accuracy of the organization’s financial records. -
http://www.nonprofitpanel.org/report/final/panel_final_report.pdf
Statement on Auditing Standards (SAS) No.112, Communicating Internal Control Related Matters Identified in an Audit from the American Institute of Certified Public Accountants and the resources listed there –
http://www.aicpa.org/download/members/div/auditstd/AU-00325.PDF and
http://ebpaqc.aicpa.org/Resources/General+Accounting+and+Auditing/New+Auditing+Standards/SAS+No.+112.htm
The Better Business Bureau aka “Wise Giving Alliance” states this standard:
Make available to all, on request, complete annual financial statements prepared in accordance with generally accepted accounting principles. When total annual gross income exceeds $250,000, these statements should be audited in accordance with generally accepted auditing standards. For charities whose annual gross income is less than $250,000, a review by a certified public accountant is sufficient to meet this standard. For charities whose annual gross income is less than $100,000, an internally produced, complete financial statement is sufficient to meet this standard.
http://us.bbb.org/WWWRoot/SitePage.aspx?site=113&id=4dd040fd-08af-4dd2-aaa0-dcd66c1a17fc
Nine Steps to Prevent Merger Failure by Gerald Adolph, Karla Elrod, and J. Neely, HBS Working Knowledge, http://hbswk.hbs.edu/archive/5271.html
Previous postings in this “Nonprofit Audit” series are
Your Nonprofit Library Second Shelf - A Sample Nonprofit Audit RFP
Your Nonprofit Library Second Shelf - Request for Audit Proposals (RFP)
Your Nonprofit Library Second Shelf – Considering An Audit
Wednesday, September 3, 2008
Your Nonprofit Library Second Shelf - A Sample Nonprofit Audit RFP
SAMPLE NONPROFIT AUDIT REQUEST FOR PROPOSAL
1. The completed written audit report is due to NPO XXX (Organization, Address, contact number) on (Date), 2008.
2. (An introduction about the Organization, 2-3 short paragraphs, include date of incorporation and date of IRS recognition as a 501 (c) (3) tax exempt organization, paragraph about fiscal staff, financial record keeping )
3. The audit report will cover the period of July 1, 2008 through June 30, 2009.
4. All costs preparing the proposal are borne by the bidder. Bidders shall provide (y) number of copies of the bid. The proposal shall be filed with the organization sealed envelopes There shall be no acceptance of late filing and no sending by fax or electronic communication,
5. The length of time for the contract will be 4 years (or other number of years) subject to approval of the board, satisfactory work and satisfactory continuing terms
6. The auditing agent (Contractor) shall provide an entrance and exit conference with the Executive Director, the chief financial officer of Not for Profit Organization XXX and the Audit Committee of the Board of Trustees.
1) (NOTE: Some states call the third sector “nonprofit”, others “not for profit” and so on. Use the language in your state law)
2) (NOTE: States vary in the use of the words “trustees” and “directors” to describe members of the board. Use the language in your state law).
7. Contractor will provide the organization with (z) number of copies of the audit.
8. The Contractor is to perform a financial and compliance audit to determine whether the financial statements present fairly the financial position and the results of financial operations in accordance with generally accepted accounting principles, and whether NPO XXX complied with applicable laws and regulations having a material effect upon the financial statement. The auditor will provide a management letter
9. The Contractor must follow the generally accepted auditing standards (GASS) of the American Institute of Certified Public Accountants (AICPA) and OMB Circular A-122, Cost Principles for Non-Profit Organizations and Circular A-133 Audits of States, Local Governments, and Non-Profit Organizations.
NOTE: As needed the following standards may be part of the requirements: The Contractor must also follow the guidelines presented in the General Accounting Office’s Standards for Audit of Governmental Organizations, Programs, Activities and Functions, commonly referred to as “generally accepted government audit standards” or GAGAS; the AICPA guide, Audits of State and Local Government Units; the U.S. OMB Circular A-128, Audits of State and Local Governments, Grants and Agreements with Institutions of Higher Education, Hospitals and Other Nonprofit Organizations or other applicable circular letters.
10. The auditing agent will be responsible to acquire any manuals from funding sources at her/his own expense.
11. Bidders shall demonstrate the technical factors to be involved in the audit, the technical experience, qualifications of staff, the size and structure of the firm, and provide client references
12. The audit report must include, at a minimum:
13. Any new award funded after the signing of the audit contract and beginning operation prior to the end of the fiscal year must be included in the current Single Audit Report.
14. Attached is a schedule of grants to be audited, including the approximate budget, contract period and funding source. (Attachment A)
15. Proposals must be submitted on forms provided. Proposals submitted in any other form will be considered non-responsive and will be rejected.
16. The Contractor shall comply with all applicable federal, state and local laws. The audit proposals shall be submitted in envelopes clearly marked “Single Audit Proposal” and must be received at the organization no later than (Date/hour) 2009. Proposals received after the scheduled deadline will not be considered.
17. Each proposal may be submitted with the understanding that the acceptance in writing by NPO XXX of the offer to furnish the organization-wide audit described herein shall constitute a contract between the auditing agent and NPO XXX. This contract shall bind the auditing agent on its part to furnish and deliver at the proposal price in accordance with the conditions of said accepted proposal and specifications.
18. Conditional proposals, or those which take exception to the specifications, may be considered non-responsive and may be rejected.
19. The organization reserves the right to postpone the proposal deadline for its own convenience and to reject any or all proposals or parts thereof. Changes to the specifications will be made by addendum. Contractors may make appointments to discuss these specifications.
20. The Contractor shall provide with the proposal, a copy of the (Name of state) State CPA license, certificate and, if reviewed by peers in AICPA, a copy of the findings. The Contractor must meet the qualifications stated in Government Auditing Standards (GAS) and has the responsibility for ensuring that
a. the audit is conducted by personnel who collectively have the necessary skills, training and continued education,
b. independence is maintained,
c. applicable standards are followed in planning and conducting audits and reporting results,
d. has an appropriate internal quality control system in place and
e. undergoes an external quality control review.
21. An representative of the auditor for the must complete the Independent Public Accountant Certification Form and submit it for review to the (your state licensing authority for a CPA) with a copy to the organization.
22. The Contractor shall provide with the proposal, the working experience of all personnel who will be working on the project.
23. In all cases, the services must be furnished as specified. Minor changes will not negate the contract. All proposals shall remain in effect 30 days after opening.
24. The award in the form of a contract will be made to the proposal that provides the most auditing service per audit dollar compared with the least amount of organization’s employee services. The organization reserves the right to accept or reject any or all proposals or parts thereof.
25. Terms will be negotiated with the Contractor and included in the contract.
26. The Contractor will not be allowed to take advantage of any errors or omissions in this specification. Full instructions to correct errors or omissions will be given to the Contractor, should errors or omissions be called to the attention of the Executive Director or designee of the organization.
27. The audit schedule due dates are subject to change upon agreement between the organization and auditor, and in future years
28. The Contractor will be responsible for assuring that any special schedules required by a particular funding source are included in the completed audit. The organization will provide the contact persons for each funding source. In general, most sources require standard audit reports, but certain grants require special schedules and the Contractor must determine what those schedules are.
29. The obligations of NPO XXX
a. Prepare and type confirmation letters
b. Prepare trial balances for all funds
c. Provide the updated figures for the statistical section of the Comprehensive Annual Financial Report (CAFR) (if required)
d. Provide budget figures in the format to be used in the CAFR
e. Provide analysis schedules: all revenues, investment, A/P, A/R, fixed assets/capital additions
f. Prepare transmittal letter
g. Any other supporting work expected to be provided by the organization should be described in the proposal.
h. The chief financial officer shall be responsible for coordinating the completion of the annual audit. The organization will provide work space convenient to the finance department and records. However, calculators, computers, and other office equipment and supplies are to be furnished by the independent auditor.
i. In the past, NPO XXX has traditionally called on its auditor throughout the year to answer questions regarding its finances. There has not been any additional charge for this contact. Inasmuch as questions will need to be answered in the next year after the audit is completed, what would your firm’s policy be?
30. The Contract between the organization and the successful auditing agent shall contain the following provisions:
Equal Employment Opportunity – The Contractor agrees to comply fully with Executive Order 11246, entitled “Equal Employment Opportunity”, as amended by Executive Order 11375, and as supplemented in Department of Labor regulations (41CFR Part 60) and Federal and (your State law relative to discrimination). Specifically, the Contractor agrees that in connection with the carrying out of this project, the Contractor shall not discriminate against any employee or applicant for employment because of race, age, gender, religion, color, sex, sexual orientation, veteran status or national origin. The Contractor will take affirmative action to ensure that applicants are employed, and that employees are treated equally during employment, without regard to their race, age, gender, religion, color, sex, sexual orientation, veteran status or national origin. Such action shall include, but not be limited to, the following: Employment, upgrading, demotion or transfer, recruitment or recruitment advertising, layoff or termination, rate of pay or other compensation and selection for training, including apprenticeship.
No member, officer or employee of the organization during his or her tenure or for one year thereafter, shall have any interest direct or indirect, in this contract or the proceeds thereof.
No member of or delegate to the Congress of the United States, Federal or State Department, organization or parent company shall be admitted to any share of part of this contract or receive any benefit arising there-from.
If the Contractor shall fail to perform any material part of this contract, the organization may at its election, within 30 days after delivery, either reject the audit report and cancel the contract, or retain the report without prejudice to any right to damages for such breach of contract or to any other right arising from such breach.
31. The representation by the Contractor of the quality of the audit report shall be an essential condition of the contract and any non-compliance therewith shall give the organization the right to reject any of the audit report and to cancel the contract.
If audit work does not begin 30 days or more following the agreed starting date, the organization shall have the option of terminating this contract. If the audit report is not delivered 30 days or more after the close of the audit work, the organization shall have the option to demand delivery of the audit otherwise deliverable or terminate this contract.
The Contractor agrees to comply fully with NPO XXX’s policies relative to sexual harassment while working with NPO XXX’s employees. A copy of the Sexual Harassment policy is attached as Attachment B.
The Contractor agrees to comply fully with NPO XXX’s policies relative to a drug-free and smoke-free workplace while working in NPO XXX’s offices. A copy of the Drug-Free/Smoke-Free Workplace policy is attached as Attachment C.
The Contractor agrees to comply fully with NPO XXX's policies relative to recycling to preserve our natural resources and reduce the need for additional landfill space. The Consultant is encouraged to establish a recycling program within its own business. A copy of the Recycling Policy is attached as Attachment D
The contact person for the organization shall be _____________________. The contact person for the auditor shall be _____________________.
A $_______ per day penalty will be assessed against the Contractor for each day after ____ days that the audit is not delivered.
Any questions regarding the audit proposal specifications should be discussed with the organization.
The undersigned hereby agrees to provide the Audit Services in accordance with the specifications contained herewith. Auditing agent has carefully examined these specifications and certifies full knowledge thereof.
This proposal shall remain in effect for thirty (30) days after opening.
Name of Auditor, Partner or Authorized Signature
Company
Address
Title
Date
Contact Person Telephone Number
Proposed Cost/Hours:
Standard Audit Report proposal not to exceed $_____________________
Estimated Standard Report Hours
Supplemental Schedules proposal not to exceed $_____________________
Estimated Supplemental Report Hours
Total Written Audit Report Proposal (a+c) $_____________________
Estimated Total Audit Hours _________
SAMPLE AUDIT RFPs
The Pease Development Authority Audit RFP - http://www.peasedev.org/index/documents/AUDITSERVICESRFP.pdf
Kodiak Island Health Care Foundation Audit RFP - http://kodiakchc.com/RFP_audit_2007.pdf
OTHER RESOURCES
The AICPA Audit Committee Toolkit: Not-for-Profit Organizations - http://www.aicpa.org/Audcommctr/toolkitsnpo/homepage.htm
Office of Management and Budget Circulars for Nonprofits - http://www.whitehouse.gov/omb/circulars/index-education.html
The Dirty Little Secret of Nonprofit Boards - http://www.help4nonprofits.com/NP_Bd_DirtyLittleSecrets_Art.htm
Excellent Material about Boards and Their Legal and Fiscal Obligations - http://www.boardsource.org/
What is an A-133 Audit? - http://www.allianceonline.org/FAQ/financial_management/what_is_a-133_audit.faq
Criteria for Nonprofits’ Operating Reserves - http://www.iknow.org/pages/articles/criteria.html
Preparing for the Audit by Susan Griffin, Director of Operations, Center for Nonprofit Excellence http://cne2.memberpath.com/eNewsletters/eNewsletters/PreparingfortheAudit/tabid/371/Default.aspx
This sample audit RFP is not to be considered a legal document. It is only a sample of what an audit RFP might include. Any errors or ommissions shall be further indication this is only a sample and not a legal document. Check your state law about audits and requests for audit proposals as well as all grant applications and contracts.
See earlier articles about nonprofit audits:
Your Nonprofit Library Second Shelf – Considering An Audit
Your Nonprofit Library Second Shelf - Request for Audit Proposals (RFP)
1. The completed written audit report is due to NPO XXX (Organization, Address, contact number) on (Date), 2008.
2. (An introduction about the Organization, 2-3 short paragraphs, include date of incorporation and date of IRS recognition as a 501 (c) (3) tax exempt organization, paragraph about fiscal staff, financial record keeping )
3. The audit report will cover the period of July 1, 2008 through June 30, 2009.
4. All costs preparing the proposal are borne by the bidder. Bidders shall provide (y) number of copies of the bid. The proposal shall be filed with the organization sealed envelopes There shall be no acceptance of late filing and no sending by fax or electronic communication,
5. The length of time for the contract will be 4 years (or other number of years) subject to approval of the board, satisfactory work and satisfactory continuing terms
6. The auditing agent (Contractor) shall provide an entrance and exit conference with the Executive Director, the chief financial officer of Not for Profit Organization XXX and the Audit Committee of the Board of Trustees.
1) (NOTE: Some states call the third sector “nonprofit”, others “not for profit” and so on. Use the language in your state law)
2) (NOTE: States vary in the use of the words “trustees” and “directors” to describe members of the board. Use the language in your state law).
7. Contractor will provide the organization with (z) number of copies of the audit.
8. The Contractor is to perform a financial and compliance audit to determine whether the financial statements present fairly the financial position and the results of financial operations in accordance with generally accepted accounting principles, and whether NPO XXX complied with applicable laws and regulations having a material effect upon the financial statement. The auditor will provide a management letter
9. The Contractor must follow the generally accepted auditing standards (GASS) of the American Institute of Certified Public Accountants (AICPA) and OMB Circular A-122, Cost Principles for Non-Profit Organizations and Circular A-133 Audits of States, Local Governments, and Non-Profit Organizations.
NOTE: As needed the following standards may be part of the requirements: The Contractor must also follow the guidelines presented in the General Accounting Office’s Standards for Audit of Governmental Organizations, Programs, Activities and Functions, commonly referred to as “generally accepted government audit standards” or GAGAS; the AICPA guide, Audits of State and Local Government Units; the U.S. OMB Circular A-128, Audits of State and Local Governments, Grants and Agreements with Institutions of Higher Education, Hospitals and Other Nonprofit Organizations or other applicable circular letters.
10. The auditing agent will be responsible to acquire any manuals from funding sources at her/his own expense.
11. Bidders shall demonstrate the technical factors to be involved in the audit, the technical experience, qualifications of staff, the size and structure of the firm, and provide client references
12. The audit report must include, at a minimum:
- Financial statements, including notes to financial statements:
- Combined balance sheet – all fund types and account groups.
- Combined statements of revenues, expenditures and changes in fund balances – all governmental fund types.
- Combined statements of revenues, expenditures and changes in fund balances – budget and actual – general and special revenue fund types (and similar governmental fund types for which annual budgets have been legally adopted).
- A statement that the financial statements present fairly the financial position and the results of financial operations in accordance with generally accepted accounting principles and an opinion on the fairness with which the financial statements present the financial position, results of operations and changes in financial position.
- A statement and opinion on internal accounting control – The auditors shall report on their study and evaluation of internal accounting controls made as part of the financial and compliance audit. They shall identify as a minimum:
1) the entity’s significant internal accounting controls,
2) the controls identified that were evaluated,
3) the controls identified that were not evaluated (the auditor may satisfy this requirement by identifying any significant classes of transactions and related assets not included in the study and evaluation), and
4) the material weaknesses identified as a result of the evaluation.
5) If a study and evaluation of internal control was not made, the auditors must describe in their report why a study was not made. - A statement and opinion on Compliance and Fraud, Abuse and Illegal Acts – The auditor shall make a statement of positive assurance on those items of compliance tested and negative assurance on those items not tested. This statement shall also include material instances of noncompliance and instances or indication of fraud, abuse or illegal acts found during or in connection with the audit. A statement and opinion on compliance and material reportable conditions relative to requirements and regulations of the funding, attached.
- Listing of any questioned costs with comments.
- Comments on corrective actions taken or a written plan for corrective action
- The auditor shall promptly notify the Executive Director, chief financial officer and chair of the board/audit committee of any suspicion of fraud, defalcation or misapplication of funds. Such notice shall be in addition to any notice to grantors required by single audit legislation, if applicable in the future.
- The work papers and reports of the audit must be retained by the auditor for a minimum of three years from the date of the audit report, unless the auditor is notified in writing by the grantor(s) for the need to extend the retention period. The audit work papers and reports shall be made available upon request to the grantor(s).
13. Any new award funded after the signing of the audit contract and beginning operation prior to the end of the fiscal year must be included in the current Single Audit Report.
14. Attached is a schedule of grants to be audited, including the approximate budget, contract period and funding source. (Attachment A)
15. Proposals must be submitted on forms provided. Proposals submitted in any other form will be considered non-responsive and will be rejected.
16. The Contractor shall comply with all applicable federal, state and local laws. The audit proposals shall be submitted in envelopes clearly marked “Single Audit Proposal” and must be received at the organization no later than (Date/hour) 2009. Proposals received after the scheduled deadline will not be considered.
17. Each proposal may be submitted with the understanding that the acceptance in writing by NPO XXX of the offer to furnish the organization-wide audit described herein shall constitute a contract between the auditing agent and NPO XXX. This contract shall bind the auditing agent on its part to furnish and deliver at the proposal price in accordance with the conditions of said accepted proposal and specifications.
18. Conditional proposals, or those which take exception to the specifications, may be considered non-responsive and may be rejected.
19. The organization reserves the right to postpone the proposal deadline for its own convenience and to reject any or all proposals or parts thereof. Changes to the specifications will be made by addendum. Contractors may make appointments to discuss these specifications.
20. The Contractor shall provide with the proposal, a copy of the (Name of state) State CPA license, certificate and, if reviewed by peers in AICPA, a copy of the findings. The Contractor must meet the qualifications stated in Government Auditing Standards (GAS) and has the responsibility for ensuring that
a. the audit is conducted by personnel who collectively have the necessary skills, training and continued education,
b. independence is maintained,
c. applicable standards are followed in planning and conducting audits and reporting results,
d. has an appropriate internal quality control system in place and
e. undergoes an external quality control review.
21. An representative of the auditor for the must complete the Independent Public Accountant Certification Form and submit it for review to the (your state licensing authority for a CPA) with a copy to the organization.
22. The Contractor shall provide with the proposal, the working experience of all personnel who will be working on the project.
23. In all cases, the services must be furnished as specified. Minor changes will not negate the contract. All proposals shall remain in effect 30 days after opening.
24. The award in the form of a contract will be made to the proposal that provides the most auditing service per audit dollar compared with the least amount of organization’s employee services. The organization reserves the right to accept or reject any or all proposals or parts thereof.
25. Terms will be negotiated with the Contractor and included in the contract.
26. The Contractor will not be allowed to take advantage of any errors or omissions in this specification. Full instructions to correct errors or omissions will be given to the Contractor, should errors or omissions be called to the attention of the Executive Director or designee of the organization.
27. The audit schedule due dates are subject to change upon agreement between the organization and auditor, and in future years
28. The Contractor will be responsible for assuring that any special schedules required by a particular funding source are included in the completed audit. The organization will provide the contact persons for each funding source. In general, most sources require standard audit reports, but certain grants require special schedules and the Contractor must determine what those schedules are.
29. The obligations of NPO XXX
a. Prepare and type confirmation letters
b. Prepare trial balances for all funds
c. Provide the updated figures for the statistical section of the Comprehensive Annual Financial Report (CAFR) (if required)
d. Provide budget figures in the format to be used in the CAFR
e. Provide analysis schedules: all revenues, investment, A/P, A/R, fixed assets/capital additions
f. Prepare transmittal letter
g. Any other supporting work expected to be provided by the organization should be described in the proposal.
h. The chief financial officer shall be responsible for coordinating the completion of the annual audit. The organization will provide work space convenient to the finance department and records. However, calculators, computers, and other office equipment and supplies are to be furnished by the independent auditor.
i. In the past, NPO XXX has traditionally called on its auditor throughout the year to answer questions regarding its finances. There has not been any additional charge for this contact. Inasmuch as questions will need to be answered in the next year after the audit is completed, what would your firm’s policy be?
30. The Contract between the organization and the successful auditing agent shall contain the following provisions:
Equal Employment Opportunity – The Contractor agrees to comply fully with Executive Order 11246, entitled “Equal Employment Opportunity”, as amended by Executive Order 11375, and as supplemented in Department of Labor regulations (41CFR Part 60) and Federal and (your State law relative to discrimination). Specifically, the Contractor agrees that in connection with the carrying out of this project, the Contractor shall not discriminate against any employee or applicant for employment because of race, age, gender, religion, color, sex, sexual orientation, veteran status or national origin. The Contractor will take affirmative action to ensure that applicants are employed, and that employees are treated equally during employment, without regard to their race, age, gender, religion, color, sex, sexual orientation, veteran status or national origin. Such action shall include, but not be limited to, the following: Employment, upgrading, demotion or transfer, recruitment or recruitment advertising, layoff or termination, rate of pay or other compensation and selection for training, including apprenticeship.
No member, officer or employee of the organization during his or her tenure or for one year thereafter, shall have any interest direct or indirect, in this contract or the proceeds thereof.
No member of or delegate to the Congress of the United States, Federal or State Department, organization or parent company shall be admitted to any share of part of this contract or receive any benefit arising there-from.
If the Contractor shall fail to perform any material part of this contract, the organization may at its election, within 30 days after delivery, either reject the audit report and cancel the contract, or retain the report without prejudice to any right to damages for such breach of contract or to any other right arising from such breach.
31. The representation by the Contractor of the quality of the audit report shall be an essential condition of the contract and any non-compliance therewith shall give the organization the right to reject any of the audit report and to cancel the contract.
If audit work does not begin 30 days or more following the agreed starting date, the organization shall have the option of terminating this contract. If the audit report is not delivered 30 days or more after the close of the audit work, the organization shall have the option to demand delivery of the audit otherwise deliverable or terminate this contract.
The Contractor agrees to comply fully with NPO XXX’s policies relative to sexual harassment while working with NPO XXX’s employees. A copy of the Sexual Harassment policy is attached as Attachment B.
The Contractor agrees to comply fully with NPO XXX’s policies relative to a drug-free and smoke-free workplace while working in NPO XXX’s offices. A copy of the Drug-Free/Smoke-Free Workplace policy is attached as Attachment C.
The Contractor agrees to comply fully with NPO XXX's policies relative to recycling to preserve our natural resources and reduce the need for additional landfill space. The Consultant is encouraged to establish a recycling program within its own business. A copy of the Recycling Policy is attached as Attachment D
The contact person for the organization shall be _____________________. The contact person for the auditor shall be _____________________.
A $_______ per day penalty will be assessed against the Contractor for each day after ____ days that the audit is not delivered.
Any questions regarding the audit proposal specifications should be discussed with the organization.
The undersigned hereby agrees to provide the Audit Services in accordance with the specifications contained herewith. Auditing agent has carefully examined these specifications and certifies full knowledge thereof.
This proposal shall remain in effect for thirty (30) days after opening.
Name of Auditor, Partner or Authorized Signature
Company
Address
Title
Date
Contact Person Telephone Number
Proposed Cost/Hours:
Standard Audit Report proposal not to exceed $_____________________
Estimated Standard Report Hours
Supplemental Schedules proposal not to exceed $_____________________
Estimated Supplemental Report Hours
Total Written Audit Report Proposal (a+c) $_____________________
Estimated Total Audit Hours _________
SAMPLE AUDIT RFPs
The Pease Development Authority Audit RFP - http://www.peasedev.org/index/documents/AUDITSERVICESRFP.pdf
Kodiak Island Health Care Foundation Audit RFP - http://kodiakchc.com/RFP_audit_2007.pdf
OTHER RESOURCES
The AICPA Audit Committee Toolkit: Not-for-Profit Organizations - http://www.aicpa.org/Audcommctr/toolkitsnpo/homepage.htm
Office of Management and Budget Circulars for Nonprofits - http://www.whitehouse.gov/omb/circulars/index-education.html
The Dirty Little Secret of Nonprofit Boards - http://www.help4nonprofits.com/NP_Bd_DirtyLittleSecrets_Art.htm
Excellent Material about Boards and Their Legal and Fiscal Obligations - http://www.boardsource.org/
What is an A-133 Audit? - http://www.allianceonline.org/FAQ/financial_management/what_is_a-133_audit.faq
Criteria for Nonprofits’ Operating Reserves - http://www.iknow.org/pages/articles/criteria.html
Preparing for the Audit by Susan Griffin, Director of Operations, Center for Nonprofit Excellence http://cne2.memberpath.com/eNewsletters/eNewsletters/PreparingfortheAudit/tabid/371/Default.aspx
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