Nonprofit Organization Update:2012 in Review and Hot Topics for 2013January 11, 2013
Agenda9:00–10:15 amExempt Organizations in the News – A Retrospective of What MadeHeadlines in 2012Doug Boedeker, CPA, CMA, Audit Partner; Katrina Henderson, CPA, AuditManager10:15–10:25 am: Break10:25–11:15 amAccounting & Audit Update – Looking Back at 2012Jeffrey Stefan, CPA, Audit Partner; Rich Banner, CPA, Senior Audit Manager11:15–12:30 pmRevisiting Executive Compensation Reporting on the Form 990Subrina Wood, CPA, Tax Manager; Sara Smith, Senior EO Tax Specialist12:30 pm–1:15 pm: Lunch
Agenda1:15–2:30 pmHow to Effectively Facilitate the Investment Manager Selection ProcessLisa Swatkoski, Vanguard Institutional Advisory Services; Camille Alexander,Graystone Consulting; Moderator: Charles Tate, CPA, Managing Partner2:30–3:20 pmTrending Towards CRMChristopher McCarthy, MCP, Principal, T3 Information Systems3:20–3:30 pm: Break3:30–4:45 pmHow to Prevent and Detect Common Frauds at Nonprofit OrganizationsChristian Spencer, CPA, Audit Partner, and John Kubichek, CPA, CFE, AuditManager
Exempt Organizations in the News –A Retrospective of What Made Headlinesin 2012 Douglas Boedeker, CPA, CMA Katrina Henderson, CPA Audit Partner Audit Manager January 11, 2013
Speaker BiographyDouglas Boedeker , is a partner within Tate & Tryon’s Audit andAssurance Services unit and is also actively involved in the Firmsexempt organization tax services group. He has more than 20years of experience providing an array of audit, tax, and consultingservices to a variety of nonprofit organizations and employeebenefit plans. He takes particular pride that his family hascontained at least one CPA every year since 1923.Doug graduated summa cum laude from Susquehanna Universityin Selinsgrove, Pennsylvania with a Bachelor of Science degree in Doug Boedeker, CPA, CMAaccounting while simultaneously completing the coursework for a Audit Partnersecond major in arts administration. Tate & Tryon 202-419-5106Known for an enthusiastic and entertaining style, he is a frequent email@example.com on a variety of exempt organization audit, accounting, andtax issues. Doug is also a coauthor to Guide to the Newest IRSForm 990: Interpreting and Complying with the New Tax ReportingRequirements for Transparency and Accountability, (published byASAE).
Speaker BiographyKatrina Henderson, CPA, is a manager within Tate & Tryon’sAudit and Assurance Services unit. She has more than 12 yearsof experience providing an array of audit services to a variety ofnonprofit organizations and employee benefit plans.Katrina graduated cum laude from the University of Maryland inCollege Park, Maryland with a Bachelor of Science degree inaccounting and marketing. Katrina Henderson, CPA Audit Manager Tate & Tryon 202-419-5121 firstname.lastname@example.org
Revisiting Executive CompensationReporting on the Form 990Speakers:Subrina Wood, CPA Sara SmithTax Manger Senior Exempt Organization Tax SpecialistTate & Tryon Tate & Tryon January 11, 2013
Agenda General Overview of Compensation Reporting Voting members and independence Definitions and time periods Common paymaster treatment Reporting on the Statement of Functional Expenses
Agenda Schedule J and Compensation Information Special Topics Accountable plans and Cash Advances Severance, non-qualified plans, and equity based payments Miscellaneous topics
Overview Board of Directors/Trustees Voting members Officers - By-laws Independence Conflict of interest Officers Board Officers Organization Officers Deemed Officers CEO and CFO
Overview Key Employee Authority – broad based or quantified by control over at least 10% of the total assets, expenses, revenue or program. Salary threshold - $150,000 reportable (W-2 Box 1or 5 whichever is higher or 1099 Box 7) compensation Must be one of the top 20 employees who satisfy the responsibility and $150,000 test Five Highest Paid Salary threshold - $100,000 in reportable compensation
Overview Officers, Trustees and Key Employees are separately reported on Line 5. Amount includes salary, pension, and non taxable benefits Fiscal year organizations must provide an additional calculations for Line 5. Allocation differences of key and officer salaries Amounts are based on the fiscal year of organization Amounts will not tie to the totals found in Part VII due to the $10,000 exception rules.
Overview Common paymaster treatment Method of allocation between organization is time based and is only for the reportable compensation. Reportable Compensation allocated to related organizations and reported as if paid by that organization Columns (D) and (E) of Part VII equal the total amount of reportable compensation. Column E – Other compensation is not allocated and does not change. Amounts reported in Part V for the number of W-2s filed is based on the EIN of the organization that actually filed the W-2s.
Schedule J – Compensation Information Special Topics First class travel and travel for companions Not business class or bumps to first class Any guest or family member not on bona fide business purpose Health or social clubs dues or initiation fees Does not include on premise facilities Does not include athletic facilities provided by a school Tax indemnifications and gross ups Any reimbursement of any tax obligation paid by the organization.
Schedule J – Compensation Information Special Topics Business use of personal residence Payment for use of all or any part of a listed person’s residence for any purpose of the organization. Discretionary spending accounts Any sum of money controlled by a listed person’s control that is not under an accountable plan, whether or not used for any personal expense. Personal services Babysitter, bodyguard, chauffeur, chef, tax preparer, pet sitter, financial planner, lawyer, personal assistant.
Schedule J – Compensation Information Expense reimbursements Accountable plans – require substantiation Method is not material: credit card, reimbursement or cash advances are permitted by these plans Payments to employees that were not substantiated or allowances for more than spent are compensation Directors and trustee are considered employees for purposes fringe benefits and can be reimbursed substantially identically as employees under the plan. Outstanding salary advances that are not under an accountable plan are considered loans and reported on Schedule L, Part II.
Schedule J – Compensation Information Severance payments Report if amount paid by reporting or related organization Includes payments for wrongful termination or demotion Payments resulting in termination or change of employment made under a change-of-control Report name, amount and any terms in Supplemental Information section of Schedule J
Schedule J – Compensation Information Participation in supplemental non-qualified plans Does not include 457(b) plans or split-dollar life insurance plans, but does include 457(f) plans. All plans that are not generally available to all employees, but only to highly paid ones Disclose name, amount, and description of plan in the Supplemental Information section of Schedule J
Schedule J – Compensation Information Participation in equity based plans Paid by organization or related organization Includes stock, stock options, stock appreciation rights, restricted stock or shadow stock. Includes payments determined by reference to equity in a partnership, limited liability company, or corporation
Schedule J – Compensation Information Special compensation considerations for public charities 501(c)(3) and social welfare 501(c)(4) organizations Compensation contingent of net earnings or revenue Bonuses and non-fixed payments rules Contracts and employment agreements Initial contract exception and the rebuttable presumption procedure
Miscellaneous Topics Insurance policies Form 8925 – Report of Employer Owned Life Insurance Polices Only for contracts issued after 8/17/06 and in force at the end of the tax year Insured must be a US citizen or resident Answer YES to payment of premium of personal benefit contract on page 5
Miscellaneous Topics Payments to Owners of Single Member LLCs Form W-9 indicates if the payment is to the corporation of the individual Payments made to the corporation appear on Schedule L, Part IV if over the reporting threshold. Consider additional disclosure on Schedule O Payments made to the individual are reported on a 1099-MISC. The amount in Box 7 should be reported in Part VII
Miscellaneous Topics Management companies Report payments as Independent Contractors in Part VII, Section B Check question about delegating control over management duties in Governance and Management section YES. Report top management or financial person from the management company in Part VII with full disclosure Leased employees Professional employer organization (PEO) Reporting is the same as above, if appropriate.
Reference Material and WebsiteInterpreting and Complyingwith the New Tax ReportingRequirements forTransparency andAccountability By: Charles F. Tate, CPA Deborah G. Kosnett, CPA Douglas A. Boedeker, CPA Subrina L. Wood, CPA Frederick U. Longwood, CPA ASAEcenter.org/bookstore
Speaker BiographySubrina Wood, CPA, is a Tax Manager in the Firm’s ExemptOrganization Tax department with more than 25 years of exempt-organization tax experience. Previously, Ms. Wood worked in thetax departments of the Boston offices of KPMG, Mellon Bank, andThompson Reuters.Ms. Wood has extensive experience establishing and maintainingprivate foundations and charitable gift strategies, and has workedwith organizations such as Carnegie Mellon University, VirginiaMilitary Institute, and Smith College. In addition, she has Subrina Wood, CPAconsiderable experience with the following exempt organization Tax Managertax specialty areas: Form 990 reporting; tax reporting for Tate & Tryonnonprofits holding alternative investments; preparing entities for 202-419-5129electronic filing and payment options; accounting and reporting for email@example.com events and fundraisers; and handling nonresident alien taxissues.Ms. Wood has presented on a variety of exempt organization taxissues at nonprofit industry conferences such as the AICPANational Not-For-Profit Industry Conference and ASAE’s AnnualAssociation Law Symposium.
Speaker BiographySara Smith, is a senior exempt organization tax specialist with theFirm. She has extensive experience in dealing with a variety ofexempt organization tax areas such as governance policies, nexusissues, functional allocation of expenses, non-cash contributions,and foreign reporting requirements on the Form 990. Ms. Smithalso recently published an article in the Firm’s newsletter titled,“The Value of Good Governance Policies,” in which she discussesthe importance of establishing good governance policies and howthis information should be disclosed on the Form 990. Sara SmithMs. Smith is involved in the oversight of the tax engagements Senior Exempt Organizationsuch as American Society of Association Executives (ASAE); Tax SpecialistAmerican Society of Cataract and Refractive Surgery; American Tate & TryonAssociation of Justice, American Association of Universities; 202-419-5195Common Cause; Council of Better Business Bureaus; firstname.lastname@example.orgPharmaceutical Research & Manufacturers of America; UnitedStates Capitol Historical Society; and Washington DC EconomicPartnership.
Form 990 (2012) Page 5 Part V Statements Regarding Other IRS Filings and Tax Compliance Check if Schedule O contains a response to any question in this Part V . . . . . . . . . . . . . . Yes No 1a Enter the number reported in Box 3 of Form 1096. Enter -0- if not applicable . . . . 1a b Enter the number of Forms W-2G included in line 1a. Enter -0- if not applicable . . . . 1b c Did the organization comply with backup withholding rules for reportable payments to vendors and reportable gaming (gambling) winnings to prize winners? . . . . . . . . . . . . . . . . . 1c 2a Enter the number of employees reported on Form W-3, Transmittal of Wage and Tax Statements, filed for the calendar year ending with or within the year covered by this return 2a b If at least one is reported on line 2a, did the organization file all required federal employment tax returns? . 2b Note. If the sum of lines 1a and 2a is greater than 250, you may be required to e-file (see instructions) . . 3a Did the organization have unrelated business gross income of $1,000 or more during the year? . . . . 3a b If “Yes,” has it filed a Form 990-T for this year? If “No,” provide an explanation in Schedule O . . . . . 3b 4a At any time during the calendar year, did the organization have an interest in, or a signature or other authority over, a financial account in a foreign country (such as a bank account, securities account, or other financial account)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4a b If “Yes,” enter the name of the foreign country: See instructions for filing requirements for Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. 5a Was the organization a party to a prohibited tax shelter transaction at any time during the tax year? . . . 5a b Did any taxable party notify the organization that it was or is a party to a prohibited tax shelter transaction? 5b c If “Yes” to line 5a or 5b, did the organization file Form 8886-T? . . . . . . . . . . . . . . . 5c 6a Does the organization have annual gross receipts that are normally greater than $100,000, and did the organization solicit any contributions that were not tax deductible as charitable contributions? . . . . . 6a b If “Yes,” did the organization include with every solicitation an express statement that such contributions or gifts were not tax deductible? . . . . . . . . . . . . . . . . . . . . . . . . . . 6b 7 Organizations that may receive deductible contributions under section 170(c). a Did the organization receive a payment in excess of $75 made partly as a contribution and partly for goods and services provided to the payor? . . . . . . . . . . . . . . . . . . . . . . . . 7a b If “Yes,” did the organization notify the donor of the value of the goods or services provided? . . . . . 7b c Did the organization sell, exchange, or otherwise dispose of tangible personal property for which it was required to file Form 8282? . . . . . . . . . . . . . . . . . . . . . . . . . . . 7c d If “Yes,” indicate the number of Forms 8282 filed during the year . . . . . . . . 7d e Did the organization receive any funds, directly or indirectly, to pay premiums on a personal benefit contract? 7e f Did the organization, during the year, pay premiums, directly or indirectly, on a personal benefit contract? . 7f g If the organization received a contribution of qualified intellectual property, did the organization file Form 8899 as required? 7g h If the organization received a contribution of cars, boats, airplanes, or other vehicles, did the organization file a Form 1098-C? 7h 8 Sponsoring organizations maintaining donor advised funds and section 509(a)(3) supporting organizations. Did the supporting organization, or a donor advised fund maintained by a sponsoring organization, have excess business holdings at any time during the year? . . . . . . . . . . . 8 9 Sponsoring organizations maintaining donor advised funds. a Did the organization make any taxable distributions under section 4966? . . . . . . . . . . . . 9a b Did the organization make a distribution to a donor, donor advisor, or related person? . . . . . . . 9b 10 Section 501(c)(7) organizations. Enter: a Initiation fees and capital contributions included on Part VIII, line 12 . . . . . . . 10a b Gross receipts, included on Form 990, Part VIII, line 12, for public use of club facilities . 10b 11 Section 501(c)(12) organizations. Enter: a Gross income from members or shareholders . . . . . . . . . . . . . . . 11a b Gross income from other sources (Do not net amounts due or paid to other sources against amounts due or received from them.) . . . . . . . . . . . . . . . 11b 12a Section 4947(a)(1) non-exempt charitable trusts. Is the organization filing Form 990 in lieu of Form 1041? 12a b If “Yes,” enter the amount of tax-exempt interest received or accrued during the year . . 12b 13 Section 501(c)(29) qualified nonprofit health insurance issuers. a Is the organization licensed to issue qualified health plans in more than one state? . . . . . . . . 13a Note. See the instructions for additional information the organization must report on Schedule O. b Enter the amount of reserves the organization is required to maintain by the states in which the organization is licensed to issue qualified health plans . . . . . . . . . . 13b c Enter the amount of reserves on hand . . . . . . . . . . . . . . . . . 13c 14a Did the organization receive any payments for indoor tanning services during the tax year? . . . . . . 14a b If "Yes," has it filed a Form 720 to report these payments? If "No," provide an explanation in Schedule O . 14b Form 990 (2012)
Form 990 (2012) Page 6Part VI Governance, Management, and Disclosure For each “Yes” response to lines 2 through 7b below, and for a “No” response to line 8a, 8b, or 10b below, describe the circumstances, processes, or changes in Schedule O. See instructions. Check if Schedule O contains a response to any question in this Part VI . . . . . . . . . . . . . .Section A. Governing Body and Management Yes No 1a Enter the number of voting members of the governing body at the end of the tax year . . 1a If there are material differences in voting rights among members of the governing body, or if the governing body delegated broad authority to an executive committee or similar committee, explain in Schedule O. b Enter the number of voting members included in line 1a, above, who are independent . 1b 2 Did any officer, director, trustee, or key employee have a family relationship or a business relationship with any other officer, director, trustee, or key employee? . . . . . . . . . . . . . . . . . . 2 3 Did the organization delegate control over management duties customarily performed by or under the direct supervision of officers, directors, or trustees, or key employees to a management company or other person? . 3 4 Did the organization make any significant changes to its governing documents since the prior Form 990 was filed? 4 5 Did the organization become aware during the year of a significant diversion of the organization’s assets? . 5 6 Did the organization have members or stockholders? . . . . . . . . . . . . . . . . . . 6 7a Did the organization have members, stockholders, or other persons who had the power to elect or appoint one or more members of the governing body? . . . . . . . . . . . . . . . . . . . . 7a b Are any governance decisions of the organization reserved to (or subject to approval by) members, stockholders, or persons other than the governing body? . . . . . . . . . . . . . . . . . 7b 8 Did the organization contemporaneously document the meetings held or written actions undertaken during the year by the following: a The governing body? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8a b Each committee with authority to act on behalf of the governing body? . . . . . . . . . . . . 8b 9 Is there any officer, director, trustee, or key employee listed in Part VII, Section A, who cannot be reached at the organization’s mailing address? If “Yes,” provide the names and addresses in Schedule O . . . . . 9Section B. Policies (This Section B requests information about policies not required by the Internal Revenue Code.) Yes No 10a Did the organization have local chapters, branches, or affiliates? . . . . . . . . . . . . . . 10a b If “Yes,” did the organization have written policies and procedures governing the activities of such chapters, affiliates, and branches to ensure their operations are consistent with the organizations exempt purposes? 10b 11a Has the organization provided a complete copy of this Form 990 to all members of its governing body before filing the form? 11a b Describe in Schedule O the process, if any, used by the organization to review this Form 990. 12a Did the organization have a written conflict of interest policy? If “No,” go to line 13 . . . . . . . . 12a b Were officers, directors, or trustees, and key employees required to disclose annually interests that could give rise to conflicts? 12b c Did the organization regularly and consistently monitor and enforce compliance with the policy? If “Yes,” describe in Schedule O how this was done . . . . . . . . . . . . . . . . . . . . . . 12c 13 Did the organization have a written whistleblower policy? . . . . . . . . . . . . . . . . . 13 14 Did the organization have a written document retention and destruction policy? . . . . . . . . . 14 15 Did the process for determining compensation of the following persons include a review and approval by independent persons, comparability data, and contemporaneous substantiation of the deliberation and decision? a The organization’s CEO, Executive Director, or top management official . . . . . . . . . . . . 15a b Other officers or key employees of the organization . . . . . . . . . . . . . . . . . . . 15b If “Yes” to line 15a or 15b, describe the process in Schedule O (see instructions). 16a Did the organization invest in, contribute assets to, or participate in a joint venture or similar arrangement with a taxable entity during the year? . . . . . . . . . . . . . . . . . . . . . . . . 16a b If “Yes,” did the organization follow a written policy or procedure requiring the organization to evaluate its participation in joint venture arrangements under applicable federal tax law, and take steps to safeguard the organization’s exempt status with respect to such arrangements? . . . . . . . . . . . . . . 16bSection C. Disclosure 17 List the states with which a copy of this Form 990 is required to be filed 18 Section 6104 requires an organization to make its Forms 1023 (or 1024 if applicable), 990, and 990-T (Section 501(c)(3)s only) available for public inspection. Indicate how you made these available. Check all that apply. Own website Another’s website Upon request Other (explain in Schedule O) 19 Describe in Schedule O whether (and if so, how), the organization made its governing documents, conflict of interest policy, and financial statements available to the public during the tax year. 20 State the name, physical address, and telephone number of the person who possesses the books and records of the organization: Form 990 (2012)
Form 990 (2012) Page 7 Part VII Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors Check if Schedule O contains a response to any question in this Part VII . . . . . . . . . . . . . .Section A. Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees1a Complete this table for all persons required to be listed. Report compensation for the calendar year ending with or within theorganization’s tax year. • List all of the organization’s current officers, directors, trustees (whether individuals or organizations), regardless of amount ofcompensation. Enter -0- in columns (D), (E), and (F) if no compensation was paid. • List all of the organization’s current key employees, if any. See instructions for definition of “key employee.” • List the organization’s five current highest compensated employees (other than an officer, director, trustee, or key employee)who received reportable compensation (Box 5 of Form W-2 and/or Box 7 of Form 1099-MISC) of more than $100,000 from theorganization and any related organizations. • List all of the organization’s former officers, key employees, and highest compensated employees who received more than$100,000 of reportable compensation from the organization and any related organizations. • List all of the organization’s former directors or trustees that received, in the capacity as a former director or trustee of theorganization, more than $10,000 of reportable compensation from the organization and any related organizations.List persons in the following order: individual trustees or directors; institutional trustees; officers; key employees; highestcompensated employees; and former such persons. Check this box if neither the organization nor any related organization compensated any current officer, director, or trustee. (C) Position (A) (B) (D) (E) (F) (do not check more than one Name and Title Average box, unless person is both an Reportable Reportable Estimated hours per officer and a director/trustee) compensation compensation from amount of week (list any from related other or director Individual trustee Institutional trustee Officer Key employee employee Highest compensated Former hours for the organizations compensation related organization (W-2/1099-MISC) from the organizations (W-2/1099-MISC) organization below dotted and related line) organizations (1) (2) (3) (4) (5) (6) (7) (8) (9)(10)(11)(12)(13)(14) Form 990 (2012)
Form 990 (2012) Page 8 Part VII Section A. Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees (continued) (C) Position (A) (B) (D) (E) (F) (do not check more than one Name and title Average box, unless person is both an Reportable Reportable Estimated hours per officer and a director/trustee) compensation compensation from amount of week (list any from related other or director Individual trustee Institutional trustee Officer Key employee employee Highest compensated Former hours for the organizations compensation related organization (W-2/1099-MISC) from the organizations (W-2/1099-MISC) organization below dotted and related line) organizations(15)(16)(17)(18)(19)(20)(21)(22)(23)(24)(25) 1b Sub-total . . . . . . . . . . . . . . . . . . . . . c Total from continuation sheets to Part VII, Section A . . . . . d Total (add lines 1b and 1c) . . . . . . . . . . . . . . . 2 Total number of individuals (including but not limited to those listed above) who received more than $100,000 of reportable compensation from the organization Yes No 3 Did the organization list any former officer, director, or trustee, key employee, or highest compensated employee on line 1a? If “Yes,” complete Schedule J for such individual . . . . . . . . . . . . 3 4 For any individual listed on line 1a, is the sum of reportable compensation and other compensation from the organization and related organizations greater than $150,000? If “Yes,” complete Schedule J for such individual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5 Did any person listed on line 1a receive or accrue compensation from any unrelated organization or individual for services rendered to the organization? If “Yes,” complete Schedule J for such person . . . . . . 5Section B. Independent Contractors 1 Complete this table for your five highest compensated independent contractors that received more than $100,000 of compensation from the organization. Report compensation for the calendar year ending with or within the organizations tax year. (A) (B) (C) Name and business address Description of services Compensation 2 Total number of independent contractors (including but not limited to those listed above) who received more than $100,000 of compensation from the organization Form 990 (2012)
Form 990 (2012) Page 9 Part VIII Statement of Revenue Check if Schedule O contains a response to any question in this Part VIII. . . . . . . . . . . . . . . . (A) (B) (C) (D) Total revenue Related or Unrelated Revenue exempt business excluded from tax function revenue under sections revenue 512, 513, or 514 1aContributions, Gifts, Grantsand Other Similar Amounts Federated campaigns . . . 1a b Membership dues . . . . 1b c Fundraising events . . . . 1c d Related organizations . . . 1d e Government grants (contributions) 1e f All other contributions, gifts, grants, and similar amounts not included above 1f g Noncash contributions included in lines 1a-1f: $ h Total. Add lines 1a–1f . . . . . . . . . Business Code Program Service Revenue 2a b c d e f All other program service revenue . g Total. Add lines 2a–2f . . . . . . . . . 3 Investment income (including dividends, interest, and other similar amounts) . . . . . . . 4 Income from investment of tax-exempt bond proceeds 5 Royalties . . . . . . . . . . . . . (i) Real (ii) Personal 6a Gross rents . . b Less: rental expenses c Rental income or (loss) d Net rental income or (loss) . . . . . . . 7a Gross amount from sales of (i) Securities (ii) Other assets other than inventory b Less: cost or other basis and sales expenses . c Gain or (loss) . . d Net gain or (loss) . . . . . . . . . . Other Revenue 8a Gross income from fundraising events (not including $ of contributions reported on line 1c). See Part IV, line 18 . . . . . a b Less: direct expenses . . . . b c Net income or (loss) from fundraising events . 9a Gross income from gaming activities. See Part IV, line 19 . . . . . a b Less: direct expenses . . . . b c Net income or (loss) from gaming activities . . 10a Gross sales of inventory, less returns and allowances . . . a b Less: cost of goods sold . . . b c Net income or (loss) from sales of inventory . . Miscellaneous Revenue Business Code 11a b c d All other revenue . . . . . e Total. Add lines 11a–11d . . . . . . . . 12 Total revenue. See instructions. . . . . . Form 990 (2012)
Form 990 (2012) Page 10 Part IX Statement of Functional ExpensesSection 501(c)(3) and 501(c)(4) organizations must complete all columns. All other organizations must complete column (A). Check if Schedule O contains a response to any question in this Part IX . . . . . . . . . . . . . .Do not include amounts reported on lines 6b, 7b, (A) (B) (C) (D) Total expenses Program service Management and Fundraising8b, 9b, and 10b of Part VIII. expenses general expenses expenses 1 Grants and other assistance to governments and organizations in the United States. See Part IV, line 21 2 Grants and other assistance to individuals in the United States. See Part IV, line 22 . . . 3 Grants and other assistance to governments, organizations, and individuals outside the United States. See Part IV, lines 15 and 16 . . 4 Benefits paid to or for members . . . . 5 Compensation of current officers, directors, trustees, and key employees . . . . . 6 Compensation not included above, to disqualified persons (as defined under section 4958(f)(1)) and persons described in section 4958(c)(3)(B) . . 7 Other salaries and wages . . . . . . 8 Pension plan accruals and contributions (include section 401(k) and 403(b) employer contributions) 9 Other employee benefits . . . . . . . 10 Payroll taxes . . . . . . . . . . . 11 Fees for services (non-employees): a Management . . . . . . . . . . b Legal . . . . . . . . . . . . . c Accounting . . . . . . . . . . . d Lobbying . . . . . . . . . . . . e Professional fundraising services. See Part IV, line 17 f Investment management fees . . . . . g Other. (If line 11g amount exceeds 10% of line 25, column (A) amount, list line 11g expenses on Schedule O.) . . 12 Advertising and promotion . . . . . . 13 Office expenses . . . . . . . . . 14 Information technology . . . . . . . 15 Royalties . . . . . . . . . . . . 16 Occupancy . . . . . . . . . . . 17 Travel . . . . . . . . . . . . . 18 Payments of travel or entertainment expenses for any federal, state, or local public officials 19 Conferences, conventions, and meetings . 20 Interest . . . . . . . . . . . . 21 Payments to affiliates . . . . . . . . 22 Depreciation, depletion, and amortization . 23 Insurance . . . . . . . . . . . . 24 Other expenses. Itemize expenses not covered above (List miscellaneous expenses in line 24e. If line 24e amount exceeds 10% of line 25, column (A) amount, list line 24e expenses on Schedule O.) a b c d e All other expenses 25 Total functional expenses. Add lines 1 through 24e 26 Joint costs. Complete this line only if the organization reported in column (B) joint costs from a combined educational campaign and fundraising solicitation. Check here if following SOP 98-2 (ASC 958-720) . . . . Form 990 (2012)
SCHEDULE J Compensation Information OMB No. 1545-0047 2012(Form 990) For certain Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees Complete if the organization answered "Yes" to Form 990, Part IV, line 23. Open to PublicDepartment of the TreasuryInternal Revenue Service Attach to Form 990. See separate instructions. InspectionName of the organization Employer identification numberPart I Questions Regarding Compensation Yes No 1a Check the appropriate box(es) if the organization provided any of the following to or for a person listed in Form 990, Part VII, Section A, line 1a. Complete Part III to provide any relevant information regarding these items. First-class or charter travel Housing allowance or residence for personal use Travel for companions Payments for business use of personal residence Tax indemnification and gross-up payments Health or social club dues or initiation fees Discretionary spending account Personal services (e.g., maid, chauffeur, chef) b If any of the boxes on line 1a are checked, did the organization follow a written policy regarding payment or reimbursement or provision of all of the expenses described above? If “No,” complete Part III to explain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1b 2 Did the organization require substantiation prior to reimbursing or allowing expenses incurred by all officers, directors, trustees, and the CEO/Executive Director, regarding the items checked in line 1a? . . . . . 2 3 Indicate which, if any, of the following the filing organization used to establish the compensation of the organization’s CEO/Executive Director. Check all that apply. Do not check any boxes for methods used by a related organization to establish compensation of the CEO/Executive Director, but explain in Part III. Compensation committee Written employment contract Independent compensation consultant Compensation survey or study Form 990 of other organizations Approval by the board or compensation committee 4 During the year, did any person listed in Form 990, Part VII, Section A, line 1a, with respect to the filing organization or a related organization: a Receive a severance payment or change-of-control payment? . . . . . . . . . . . . . . . 4a b Participate in, or receive payment from, a supplemental nonqualified retirement plan? . . . . . . . 4b c Participate in, or receive payment from, an equity-based compensation arrangement? . . . . . . . 4c If “Yes” to any of lines 4a–c, list the persons and provide the applicable amounts for each item in Part III. Only section 501(c)(3) and 501(c)(4) organizations must complete lines 5–9. 5 For persons listed in Form 990, Part VII, Section A, line 1a, did the organization pay or accrue any compensation contingent on the revenues of: a The organization? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5a b Any related organization? . . . . . . . . . . . . . . . . . . . . . . . . . . . 5b If “Yes” to line 5a or 5b, describe in Part III. 6 For persons listed in Form 990, Part VII, Section A, line 1a, did the organization pay or accrue any compensation contingent on the net earnings of: a The organization? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6a b Any related organization? . . . . . . . . . . . . . . . . . . . . . . . . . . . 6b If “Yes” to line 6a or 6b, describe in Part III. 7 For persons listed in Form 990, Part VII, Section A, line 1a, did the organization provide any non-fixed payments not described in lines 5 and 6? If “Yes,” describe in Part III . . . . . . . . . . . . . 7 8 Were any amounts reported in Form 990, Part VII, paid or accrued pursuant to a contract that was subject to the initial contract exception described in Regulations section 53.4958-4(a)(3)? If “Yes,” describe in Part III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9 If “Yes” to line 8, did the organization also follow the rebuttable presumption procedure described in Regulations section 53.4958-6(c)? . . . . . . . . . . . . . . . . . . . . . . . . 9For Paperwork Reduction Act Notice, see the Instructions for Form 990. Cat. No. 50053T Schedule J (Form 990) 2012
Schedule J (Form 990) 2012 Page 2 Part II Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees. Use duplicate copies if additional space is needed.For each individual whose compensation must be reported in Schedule J, report compensation from the organization on row (i) and from related organizations, described in theinstructions, on row (ii). Do not list any individuals that are not listed on Form 990, Part VII.Note. The sum of columns (B)(i)–(iii) for each listed individual must equal the total amount of Form 990, Part VII, Section A, line 1a, applicable column (D) and (E) amounts for that individual. (B) Breakdown of W-2 and/or 1099-MISC compensation (C) Retirement and (D) Nontaxable (E) Total of columns (F) Compensation (i) Base (ii) Bonus & incentive (iii) Other other deferred benefits (B)(i)–(D) (A) Name and Title reported as deferred in compensation compensation reportable compensation prior Form 990 compensation (i) 1 (ii) (i) 2 (ii) (i) 3 (ii) (i) 4 (ii) (i) 5 (ii) (i) 6 (ii) (i) 7 (ii) (i) 8 (ii) (i) 9 (ii) (i) 10 (ii) (i) 11 (ii) (i) 12 (ii) (i) 13 (ii) (i) 14 (ii) (i) 15 (ii) (i) 16 (ii) Schedule J (Form 990) 2012
Schedule J (Form 990) 2012 Page 3Part III Supplemental InformationComplete this part to provide the information, explanation, or descriptions required for Part I, lines 1a, 1b, 3, 4a, 4b, 4c, 5a, 5b, 6a, 6b, 7, and 8, and for Part II.Also complete this part for any additional information. Schedule J (Form 990) 2012
FASB Not-for-Profit Advisory Committee Established in 2009 to be a resource for the FASB in obtaining input from the NFP sector on existing guidance, current and proposed technical agenda projects, and longer-term issues affecting NFPs. In 2011, the NAC began a standard-setting project to reexamine the existing standards for financial statement presentation by NFPs. The project has three goals:
Not-for-Profit Advisory Committee – cont.1. Improve the current net asset classification scheme.2. Improve statements of activities and cash flows to more clearly communicate financial performance.3. Review existing NFP-specific disclosure requirements to improve relevance and understandability. In May 2012, the NAC recommendations to FASB.
Not-for-Profit Advisory Committee – cont.Net Asset recommendations Revising the net asset classification to have only two general net asset classes: 1. Donor-restricted 2. Other net assets NAC believes that the distinction between temporarily and permanently restricted net assets has outlived its usefulness.
Not-for-Profit Advisory Committee – cont.Net Asset recommendations – cont. Prefers the term Other Net Assets rather than Unrestricted. The term Unrestricted can confuse and perhaps mislead stakeholders to believe that those net assets are without any restrictions. They can be subject to limitations that result from laws, regulations, debt covenants, and other contractual restrictions. Focus on liquidity of net assets.
Not-for-Profit Advisory Committee – cont.Presentation recommendations Supports requiring presentation of an operating measure in the statement of activities. Suggested the FASB consider extending the requirement of a statement of functional expenses for all NFPs except those with an insignificant percentage of revenue from contributions. Currently only required for VH&W organizations.
Not-for-Profit Advisory Committee – cont.Notes to financial statements recommendations Highlights the need for cross-referencing the fair value disclosures with the endowment disclosures to provide clarity about the extent to which investments represent restricted net assets and restricted asset. Wants to better depict financial risks through disclosure requirement.
Not-for-Profit Advisory Committee – cont.Communications other than financial statements Recommends a management commentary that is presented as supplemental information placed before the financial statements and notes. (See handout) The NAC staff projects that a final statement should be issued in 2014.
Lease Accounting Changes (again) Right of Use ModelControl of the use of the leased assetROU assetConsumption of ROU Asset Significant portion of ROU asset Other than property Amortization expense and interest expense Insignificant portion of ROU asset Property (land and/or buildings) Lease expense
Lease Accounting Changes Schedule for the Proposed New StandardSecond Exposure Draft due in the first quarter of 2013After Exposure Draft Consultations and outreachFinal Standard Released TBD
Intangibles – Topic 350 (ASU 2012-2) Testing Indefinite-Lived Intangible Assets for ImpairmentWhy was the standard changed? Cost and complexity of recurring quantitative impairment testingWhat changed? Permits assessment of qualitative factors to determine if it is more likely than not that the asset has been impaired Qualitative assessment determines necessity of quantitative assessmentWhat does “more likely than not” mean? Likelihood of more than 50%
Statement of Cash FlowsDonated Securities – exposure draft If directed for immediate sale, then operating activity. If donor restricted for long-term purposes, then financing activity. Otherwise, investing activity.
Contributed Services from an Affiliate The proposal in the exposure draft would require a recipient NFP to recognize in its standalone financial statements all personnel services received from an affiliate that directly benefit the recipient NFP. Those services would be measured at the cost recognized by the affiliate for the personnel providing those services.
OMB Update Increase audit threshold to $1,000,000. Creation of a new type of audit for auditees between $1M - $3M. Change criteria for testing compliance requirements. Making federal agencies more responsible for audit follow-up and audit resolution.
Audit Clarity Project – SAS 122Changes to Auditing Standards 58 AU sections 47 new “AU-C” sections 3 withdrawn 37 redrafted to corresponding SAS 7 combined into 1 new SAS 11 combined/split into 9 SASs AU section numbers changed to converge with ISA numbering Effective for audits of periods ending on or after 12/15/2012
Audit Clarity Project – SAS 122 (continued)Examples of Impact of Selected Standards—Auditor ReportsHeadings and SubheadingsManagement’s ResponsibilitiesOpinion(Basis for qualified, adverse, ordisclaimer)Emphasis of Matter• Matters appropriately presented or disclosedOther Matter• To understand audit mattersOther auditor reportingresponsibilities
Audit Clarity Project – Group AuditsSpecial Considerations—Audit of Group FinancialStatements (AU 600)Acceptance and continuance - group auditor;identify components; preconditions Understanding - group; components; component auditors; make reference? Materiality decisions and responding to risks of material misstatement Other procedures - consolidation process; subsequent events; evaluating evidence Communications - with component auditors; with group governance and management
Audit Clarity Project – SAS 122Impact of Selected Standards—Group Audits Extent group auditor Understanding of will be able to be Decision to make entity includes involved with reference components component auditor Obtaining Communications Group auditor’smisstatements above between group and reporting of trivial noted by component auditor component auditor’s component auditor increased MW and SD
Speaker BiographyJeff Stefan, is the partner in charge of Tate & Tryon’s auditing practiceand has more than 25 years of experience serving the nonprofit sector.In addition to his extensive audit and tax experience, he has providedconsulting services to organizations such as The World Bank, PublicCompany Accounting Oversight Board, and ASAE & The Center forAssociation Leadership in a variety of areas, including grantcompliance, merger due diligence, and internal controls. He has alsobeen called upon to consult on a variety of complex issues such as fairvalue accounting (FAS 157), accounting for alternative investments(FAS 133), split interest agreements, endowment accounting (UPMIFA/ FSP 117-1), single member limited liability corporations, uncertain tax Jeff Stefan, CPApositions (FIN 48), and interest rate swap agreements. Audit Partner Tate & TryonMr. Stefan has presented and authored articles on many recent 202-419-5104accounting and auditing issues including : “FASB Staff Position (FSP) email@example.comFAS 117-1, Endowments of Not-for-Profit Organizations,” “EducatingYour Board About Audits,” “Understanding Statement of AuditingStandards (SAS) 103, Audit Documentation,” “SAS112,Communicating Internal Control Matters Identified in an Audit,” and “ASummary of the new Audit Risk Standards.” Jeff is a member of theAmerican Institute of CPAs (AICPA), the Greater Washington Societyof CPAs (GWSCPA), and ASAE.
Speaker BiographyRich Banner, CPA, is a senior audit manager with the Firm andhas been working with nonprofits for the past 15 years. Prior tojoining Tate & Tryon, Mr. Banner was an internal auditor with anational labor organization based in Washington, DC.Mr. Banner has extensive experience managing and performingaudits of various types of nonprofit organizations including tradeand membership associations, related for-profit subsidiaries,charitable organizations, and Section 527(f) political actioncommittees. Mr. Banner has experience with a variety of complex Rich Banner, CPAauditing issues such as Federal awards and OMB A133 Audit Managerrequirements, alternative investments and fair value accounting, Tate & Tryonand bond financing. He also has extensive experience with 202-419-5183restricted contributions, trade shows, exhibits, and sponsorship firstname.lastname@example.org.
AICPA Management Discussion and Analysis – Fiscal 2012This year we reﬂect not just on the past year, but on more than with the FAF’s announcement, the AICPA also announced plans Fiscal 2012 efforts to launch the National Commission ona century as we celebrate the 125th anniversary of the Institute. to develop a ﬁnancial reporting framework for small- and Diversity and Inclusion (Commission) were realized in earlyAlthough we live in a time of rapid change, the profession’s core medium-sized entities (SMEs). This special purpose framework September 2012. The Commission includes representativesvalues have remained consistent since 1887. Our core values will be a less complicated, more relevant and less costly system from minority professional advocacy groups; large, medium— integrity, objectivity and competence — have cemented the of accounting for SMEs that do not need ﬁnancial statements and small ﬁrms; state CPA societies; and leaders fromCPA profession’s strong foundation and remain the compass of prepared in accordance with U.S. GAAP. It will meet the ﬁnancial business and industry, government and education, and isthe AICPA today. Since its beginnings, the Institute has been reporting needs of the SME community and the lenders and others designed to identify strategies that will increase the numberat the forefront of raising the professional performance of its who use their ﬁnancial statements. and the advancement of underrepresented groups in themembers by setting high professional standards, a strict code We launched The Total Tax Insights™ calculator (totaltaxinsights.org) accounting profession. This process will involve investigatingof professional ethics and a commitment to serving the public and understanding the barriers that impede the long-term in May 2012 as a public service to give taxpayers a clearerinterest. We are proud to continue this legacy while evolving to retention and advancement of minorities in the accounting picture of the types and number of taxes they pay throughout thelead future generations of CPAs to the same level of success. profession. In addition, the Commission will closely monitor year and the estimated amounts of each. By linking federal taxThe following is a discussion of key accomplishments achieved population trends and analyze the impact of these trends on rules with the country’s abundant and varied state and local taxduring the year and management’s report on operations for the the profession and the clients CPAs serve and the employers conventions — including more than 20 of the most widely appliedﬁscal year. This discussion should be read in conjunction with for whom they work. taxes — this ﬁrst-of-a-kind online tool fosters greater publicthe audited combined ﬁnancial statements and notes to the The Institute continues to provide tools and research in the understanding of taxes and provides key insights to enhance one’scombined ﬁnancial statements. growing niche areas. These specialized niches include personal ﬁnancial well-being.Regulatory and Legislative Advocacy ﬁnancial planning, forensic and litigation services, business MembershipOn September 16, 2011, our long-term efforts paid off as valuation services and information technology and offer the For the ﬁfth consecutive year, we reached record-breakingcomprehensive patent reform was signed into law. A provision CPA the opportunity to provide a broader array of services membership levels, with more than 358,000 regular votingactively supported by the AICPA, which prohibits the U.S. to their clients and companies. Increased opportunities in and nearly 386,000 total members at July 31, 2012. ThesePatent and Trademark Ofﬁce from issuing new patents for tax providing services to CPA clients and companies have led to results reﬂect the AICPA’s continuing efforts to provide value tostrategy methods, was included in the America Invents Act. a 30% growth in section membership in the last ﬁve years. the profession to attract new members and retain our currentOn November 21, 2011, the Three Percent Withholding Repeal The AICPA offers credentials in the services most commonly membership base.and Job Creation Act was signed into law. Strongly supported offered and include the Accredited in Business Valuation In line with our strategic plan, we continued our focus on (ABV®), Certiﬁed in Financial Forensics (CFF®), Certiﬁedby the AICPA, this act repeals a requirement that the federal people. In Fiscal 2012, the student member-focused Legacy Information Technology Professional (CITP®) and Personalor state governments or their instrumentalities or subdivisions Scholars Program was created to engage future CPAs by SM Financial Specialist (PFS ). The credentials demonstrate a(including multistate agencies) withhold 3% of payments to providing scholarship opportunities and an interactive commitment to a specialty and distinguish our members inany person for services or property. peer community on ThisWayToCPA (ThisWaytoCPA.com). We the marketplace.After championing for new solutions for private company U.S. registered more than 17,000 new users in this community,generally accepted accounting principles (U.S. GAAP) for many As part of our strategy to further enhance our value to added more than 7,000 new student members and now allowyears, the Institute supported the May 2012 decision of the our members, the Institute created a joint venture, the international CPA candidates. In addition, with the culminationFinancial Accounting Foundation (FAF) to form a Private Company Association of International Certiﬁed Professional Accountants of two years of study and insights from teams representingCouncil to help set differences in U.S. GAAP, where appropriate, (Association) with the London-based Chartered Institute of diverse viewpoints in practice and academia, the Pathwaysfor privately held companies. While the structure was not exactly Management Accountants (CIMA). Through the Association, we Commission, a joint effort of the AICPA and the Americanas supported by the AICPA, the Institute acknowledged signiﬁcant launched the new Chartered Global Management Accountant Accounting Association, released its ﬁnal report in July 2012modiﬁcations by the FAF and the step forward. In conjunction (CGMA) designation. The CGMA designation offers a unique on the future of higher education in accounting. value proposition to our members by recognizing their 2011 – 2012 ANNUAL REPORT 3