Category Archives: Non-Profit Accounting

Exempt Organizations Annual Reporting Requirements – Annual Electronic Notice (Form 990-N) for Small Organizations: Information Reported

From www.irs.gov

Exempt Organizations Annual Reporting Requirements – Annual Electronic Notice (Form 990-N) for Small Organizations: Information Reported

 
What information do I need to provide on the e-Postcard?

The e-Postcard is easy to complete. All you need is the following information:

  • Organization’s legal name –
    • An organization’s legal name is the organization’s name as it appears in the certificate of incorporation or the organization’s application for Federal tax-exempt status, unless a request was previously submitted to the IRS to have the name officially changed.
  • Any other names your organization uses – If the organization is known by or uses other names to refer to the organization as a whole (and not to its programs and activities), commonly referred to as Doing-Business-As (DBA) names, they should be listed.
  • Organization’s mailing address – The mailing address is the current mailing address used by the organization.
  • Organization’s website address (if you have one).
  • Organization’s employer identification number (EIN) –
    • Every tax-exempt organization must have an EIN, sometimes referred to as a Taxpayer Identification Number (TIN), even if it does not have employees. The EIN is a unique number that identifies the organization to the Internal Revenue Service. Your organization would have acquired an EIN by filing a Form SS-4 prior to requesting tax-exemption.  The EIN is a 9-digit number and the format of the number is NN-NNNNNNN (for example:  00-1234567). 
    • If you do not know your EIN, you may be able to find it on the organization’s bank statement, application for Federal tax-exempt status, or prior year return.
    • Please note that the EIN is not your tax-exempt number.  That term generally refers to a number assigned by a state agency that identifies organizations as exempt from state sales and use taxes.
    • If you do not have an EIN, see the Instructions for Form SS-4 for different ways to apply for an EIN.  DO NOT use the EIN of a parent or other organization.
  • Name and address of a principal officer of your organization –
    • Usually president, vice president, secretary, or treasurer – often specified in the organization’s by-laws.
  • Organization’s annual tax year –
    • Like any taxpayer, exempt organizations must keep books and reports and file returns based on an annual accounting period called a tax year.  A tax year is usually 12 consecutive months that can be either calendar year or fiscal year and is often specified in the organization’s by-laws.
  • Answers to the following questions:

Page Last Reviewed or Updated: September 21, 2011

 

Schutte & Hilgendorf, CPAs, a Prescott accounting firm, specializes in auditing, accounting and tax preparation and planning for non-profit Organizations throughout Yavapai County and Northern Ariziona.  Should you need assistance with filing a non-profit information return (990) or notecard, please call us at 928-778-0079.  We can e-file 990-e postcards (990-N) for you from our office for a nominal fee.  Call us today!


Audits Add Shine to Firms – WSJ.com

By ANGUS LOTEN, WSJ.com

Small businesses whose books are audited—by a hired certified public accountant, not the Internal Revenue Service—improve their chances of getting a loan, and at far better terms, than businesses with less scrutinized financial statements, a new study shows.

Yet even as owners continue to struggle with tight credit, few can afford the time, effort or cost of preparing complex financial statements, let alone having them audited, small-business owners, lenders and accountants say.

“Banks love when you have audited financials because they view it as a form of insurance,” says Buzz Rose, a certified public accountant in Pittsburgh. “But audits have become very expensive and to have one done ‘just in case’ would seem to be a waste of time and money.”

But the benefits might outweigh the costs.

Based on data from more than 10,000 closely held companies—about half of which have less than 500 employees—a study by the University of Chicago Booth School of Business found audited businesses save an average of $6,900 for every $1 million in outstanding debt every year as a result of lower interest rates, which were more than half a percentage point below rates paid by nonaudited businesses. For a loan of $3.3 million, the average size of loans analyzed in the study, the savings was about $23,000.

A small-business audit costs anywhere from $5,000 to $75,000, depending on the size of the company, the complexity of its data and other factors—typically double the cost of a financial statement review, the next highest level of CPA-verified assurance after an audit.

An audit provides third-party assurance that a company’s financial statements are correctly prepared and based on verified business data, while a review shows the statements are at least internally consistent with data provided by management.

“There appears to be a very real cost benefit to getting an audit, beyond the obvious value of having your financial statements in order,” says Michael Minnis, a Booth School assistant professor of accounting who led the study. The Booth School study is expected to be published in the Journal of Accounting Research in May.

Similarly, a joint study last year by Michigan State University and Indiana University found small businesses with audited financial statements were “significantly less likely” to be denied credit from banks.

David Leuthold, chief executive of Century Negotiations Inc., a North Huntingdon, Pa., consumer-debt settlement firm, says he started having his books audited annually in 2005 to double-check his own bookkeeping, paying about $8,000 an audit. The move paid off when he applied for a $100,000 line of credit the following year.

“The bank required audited financial statements,” says Mr. Leuthold, whose company made $8 million in revenue last year. Even without audited books, he believes the bank might have approved the loan, though at less favorable terms. “We had what they wanted, so it was definitely worth it,” he says.

Still, for many small businesses seeking a loan, lenders say an audit is costly and unnecessary.

“Audits provide good information. The more concrete information a lender can get, the better,” says Tom Burke, the director of Wells Fargo’s Small Business Administration lending division. But he questioned the necessity of audits for every business.

Mr. Burke says a business with less than $1 million in annual revenue can ask a CPA to prepare a compilation, which is a cheaper, unaudited financial statement based on recorded sales, inventory and other data. Since owners often use these statements to manage daily operations—and they’re prepared by CPAs—lenders have some assurance of the statements’ accuracy in making loan decisions.

“I’d hate to see people taking steps that aren’t necessary, or that they can’t afford,” Mr. Burke says.

Small-business accountant David Wilke, of Carnegie, Pa., says he helps borrowers and lenders negotiate loan terms based on mutually acceptable levels of assurance, ranging from compilations to audits. He says a CPA “adds value by determining what a bank wants and what a business can provide at an early stage,” rather than trying to convince every client to get audited.

Mr. Rose, the accountant in Pittsburgh, says it’s only worth going through an audit—which can require days and even weeks of a manager’s time—when a business owner has a loan in hand that’s contingent on providing audited financial statements.

Audited or not, less than a quarter of businesses with fewer than 500 employees keep financial statements of any kind, according to the Federal Reserve Board’s National Survey of Small Business Finances.

“There’s a lot of criticism that it’s expensive and difficult to prepare and audit your financial statements,” says Teri Yohn, an Indiana University associate professor of accounting who sits on the Financial Accounting Foundation’s blue-ribbon panel on private-company accounting standards. “But there are clearly benefits.”

Schutte & Hilgendorf, PLLC, a Prescott based CPA firm provides audits and reviews to small businesses, government entities, non-profit organizations, and homeowners associations.  We also provide tax preparation and planning services, QuickBooks consulting and training and payroll and sales tax services to individuals and small businesses.  Contact us for pricing or more information about how we can help you!


How many non-profit boards hire an outside auditor?

How many non-profit boards hire an outside auditor?

Eighty-four percent of the respondents of a recent BoardSource governance survey say that they annually hire an auditor to conduct an external financial audit. Smaller organizations are less likely than large organizations to hire an auditor.

Here are five key ways to maximize the audit process:

Be sure the board is in the audit driver’s seat. The nonprofit board has the responsibility to oversee the audit process. This includes assessing the financial controls, policies, procedures, and condition of the organization and overseeing the external auditor.

Review the auditor’s independence. The board should be certain that the auditor is independent and objective in performing duties.

Choose your auditor carefully. Even with rigorous efforts by professional bodies governing the practice of Certified Public Accountants to improve the quality of audits, not all audits are created equal.

Invest your audit dollars wisely. While it is important to be certain the audit fees are reasonable in light of the quality and value of an audit, focusing too much attention on cost can be detrimental to the health of the audit and ultimately to the organization.

Properly use your audit committee. The audit committee should be the fulcrum of the financial reporting function. Start with an independent audit committee. The committee members should not be members of the nonprofit’s staff. Invite staff members to committee meetings to answer questions and to provide information.

Excerpted from the Maximizing the Audit Process by Dan Busby.

Should you have questions regarding this post or any other accounting or auditing needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.