AUDIT BEST PRACTICES FOR COMMUNITY DEVELOPMENT CORPORATIONS May 2011

Correcting that “Audit” Mindset

Auditing Standards-What’s New? SAS 99 through 121 MORE clarity of roles, purpose of audit, risk assessment, fraud considerations, evidence, planning & supervision (independence), risk & materiality, sampling Auditor’s responsibilities

Is Your CDC Ready? Prepared? How much are YOU doing for auditor? Are you “ready” for auditor? How much was auditor usually doing FOR you? –Adjustments? –Depreciation? –Accruals?

Accounting Standards-What’s New? Not so much… –Mainly “familiar” rules, potentially new issues facing you, like.. Lower of cost or market (e.g. writing down your real estate holdings) Debt ratio concerns for readers Consolidations

Here’s What We’re Seeing… Classified statements –Current assets –Current liabilities –Support income –Earned income –Programmatic expense –Administrative expense –Fundraising expense Consolidated statements Consolidating schedules Value of real estate = same for years? Excess acronyms Clear info on restricted net assets Comparative statements Functional expense details –In meaningful way Footnote references in statements Readable, meaningful footnotes – of what’s needed Clean, clear schedules – especially with A-133 If Management Letter – RESPOND! AND Pay attention to your 990!

EXPENSES ANALYSIS Recent national non-profit study found 25 – 45 year olds consider the Internet “grades” for NPO’s before giving The quality of management determines quality of decision making about incurring expenses….

AUDIT “COST” What does you audit tell its readers Funds (income & debt) are MUCH MORE SCARCE, readers better: –Understand the business –Understand the financial results –See appropriate ratios –Have accurate, timely, trusted financial statements How can you save on audit costs? Talk with your auditor! Do NOT make your funders “guess”

Need a follow up? Contact LISC – They are your partner, their business is your growth Contact