Spring 2007
Nonprofit News
Accountability Wizard Helps
Nonprofits Show Transparency
An online tool from the Charities Review Council lets nonprofit
organizations demonstrate their accountability to individual donors and to
foundations and corporate giving programs. Accountability Wizard allows
nonprofits to conduct a self-assessment against the Charities Review
Council's Accountability Standards and, after approval by the nonprofit's
board, the resulting report becomes an online resource for potential donors
and funders.
"Trust is the lifeblood of the nonprofit sector," said Rich Cowles,
executive director of the Charities Review Council. "Public trust has taken
a beating in the media, and it's important that we, collectively as a
sector, demonstrate that a few bad apples are not indicative of the whole
barrel. The Accountability Wizard provides a unique opportunity to
demonstrate to the people of Minnesota that we are good stewards of their
support and honor the trust placed upon us."
The Accountability Wizard process includes: 1) completing a simple
pre-enrollment to make sure the process is right for the organization; 2)
assembling information and documents requested and sending them along with a
payment for the service to CRC (this is a nominal administrative fee,
ranging from $100 to $1,500 based on the size of the organization, that
covers a three-year duration of the review); 3) using the access method
provided and completing the required questions; and 4) sharing the Summary
Report of Wizard Responses with the organization's board to pass a
resolution committing the organization to meet the accountability standards.
The Charities Review Council reviews and verifies information and then
issues a final report to the nonprofit, drawing conclusions based on CRC
standards. Finally, the report becomes an online resource at
smartgivers.org.
To date, about 300 nonprofits have adopted the Accountability Wizard
service. "Because of the service's educational component, many of the
participants have been able to make changes during the Wizard's 60-day
window to come within compliance of the standards," said Cowles.
For charities to effectively pursue their public missions, they must be well
managed and accountable. Smaller nonprofits often do not have access to
appropriate resources to help them assess and publicly demonstrate their
commitment to accountability and transparency. To help small Minnesota
charities demonstrate their trustworthiness to the public, Marquette
Financial Companies has offered an incentive program, reducing the cost of
the service by 50 percent for nonprofit organizations with annual expenses
of $2 million or less. Technical assistance and mentorships also are
available to aid nonprofits in the Accountability Wizard process.
For more information, contact the Charities Review Council at 651.224.7030
or
wizard@smartgivers.org.
SAS 112 Auditing Change Brings
Potential for Nonprofit Headaches
A new SAS 112 auditing change for nonprofits could greatly increase the
number of internal control weaknesses reported in financial audits and cause
concern among nonprofit boards of directors. The new rules became effective
in December 2006, and the first audits applying them are beginning to see
the light of day.
"With the new standard, the likelihood that control deficiencies will be
identified and reported is now probably higher," said Kate Barr, executive
director of Nonprofits Assistance Fund. "For one thing, terminology is
changing from ‘reportable condition' to 'significant deficiency.'
"Even with the same audit findings as in previous years," Barr continued,
"more nonprofits may receive reports of control deficiencies related to
their capacity to apply generally accepted accounting principles to
financial transactions and reports." She noted that many nonprofits will
have this finding with their next audits.
Barr recommends that nonprofits read a
PricewaterhouseCoopers publication on the new rule; talk to the
nonprofit's auditor; communicate the standards to the treasurer, finance
committee and board; and, finally, do what's needed to improve internal
controls and quality accounting.
Find a PDF of the
SAS 112 standard at the American Institute of Certified Public
Accountants' website.
IRS Reports on Excessive Executive
Compensation Practices at Tax-Exempts
The IRS has issued
a report on executive compensation practices at tax-exempt
organizations that reveals significant problems with improper reporting of
compensation paid to officers and other employees on Form 990 and 990-PF
returns.
The IRS also found that 15 percent of 782 organizations examined had
problems involving excessive salary and incentive compensation, improper
self-dealing transactions and failure to treat payments for certain personal
expenses as compensation. As a result of the report, the IRS has proposed
over $21 million in excise tax assessments for excess benefit transactions.
This report covers the first two parts of the IRS's Executive Compensation
Compliance Initiative, launched in 2004. The third part, currently underway,
is looking into concerns over loans to directors and key employees.
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Thank you to the sponsors of this issue of Giving Forum:
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| $5,000 Sponsor |
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| $5,000 Sponsor |
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| $1,000 Supporter |
Duluth Superior Area
Community Foundation |
© Copyright 2007 Minnesota Council on Foundations
Reproduction in any form without the written permission of the publisher
is prohibited.
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