Reconstructing Missing Accounting Records for Audit
During a period of significant management change at the organization it was discovered that there were virtually no accounting records to be found. Prior management kept no documents or files related to income and expenses, assets, or liabilities. The organization was also subject to the financial audit rules governed by the California "Nonprofit Integrity Act" and had never had such an audit prepared. Along with a contract bookkeeper I hired, we reconstructed a year’s worth of financial information to create an income statement and balance sheet. The auditor conducted its financial audit and the organization received a “clean” opinion.
Eliminating IRS Fees & Penalties
An organization had failed to file over 350 Form 1099’s in a timely fashion. The IRS penalized them $37,000 in late filing fees. I assisted the client with responding to the IRS with an explanation of why the forms were late and how we have implemented processes to avoid any future late filings. The $37,000 penalty was completely waived by the IRS.
A client wanted to make significant changes to how it compensated its top management. Knowing compensation is a “sensitive” area for non-profits, they reached out to me for advice. We created documentation providing evidence on our diligence regarding comparability data, review and approval by independent persons, and substantiation of the deliberation and decision.
Reinstating and Maintaining Tax-Exempt Status
Numerous organizations have approached me over time because of their tax-exemption being revoked by the IRS. In one such case, they had failed to file tax returns for 3 consecutive years. I worked with them and the IRS to successfully get the tax-exempt status reinstated. They remain in good standing with me preparing the tax returns on a timely basis.
Setting Best Practices
Wanting to follow best practices, a client and I worked on creating an “accounting manual” to document the policies and procedures for cash disbursements, cash receipts, payroll, tax compliance, and budgeting. Adhering to these practices allows them to maintain their tax-exempt status, creates an easier defense against audits, and provides reassurance to donors that management is taking appropriate care to ensure the integrity of the organization and its mission.