2011 BSA Compliant Audit Toolkit

Transcription

1 2011 BSA Compliant Audit Toolkit Includes Local Council Audit Self-Review Form TOOLS FOR ENSURING A BSA-COMPLIANT AUDIT FOR 2011 AND LOCAL COUNCIL AUDIT SELF-REVIEW FORM

2 Please use this information in conjunction with the Local Council Audit Self-Review Form (attached) to help ensure a BSA-compliant audit. The Local Council Audit Self-Review Form is a tool that local councils can use to assist in the evaluation and understanding of the audit standards set by the AICPA and the Boy Scouts of America. The Tools for Ensuring a BSA-Compliant Audit for 2011 section of this kit explains many of the items on the Local Council Audit Self-Review Form. In 2006, the National Council began reviewing and evaluating council audits to determine compliance with existing, published BSA standards. While many of the evaluation standards were not new, judging the audit against these standards and evaluating whether or not the audit is BSA-compliant was still new. As management of a local council is responsible for preparing its financial statements in accordance with generally accepted accounting principles, the national BSA compliance or non-compliance status indicated on your council s Local Council Audit Review Record is a reflection of your council s and your independent auditor s understanding of and compliance with BSA standards. While the AICPA offers lesser requirements than the BSA in terms of its financial statements, the BSA wants to have consistent audit reporting from all its local councils, and therefore has established this standard. REQUIRED FINANCIAL STATEMENTS Compliance requirements are: 1) including the four required statements: Statement of Financial Position, Statement of Change In Net Assets (or Statement of Activities), Statement of Cash Flows, and Statement of Functional Expense;(AICPA required) 2) each statement must be in three-fund format and include total of all funds column; and 3) all required reports should show comparisons to last year for all three funds, and the total of all funds column on all required reports MUST show a comparison to last year. FORMATTING REQUIREMENTS Inter-Fund Loans The inter-fund loan entries must all be on the same line in the asset portion of the Statement of Financial Position. Since inter-fund loans balance to zero, the total of all funds column must be blank or show as zero. Inter-fund loans shown in both asset and liability sections of this report in your audit are non-compliant (GAAP requirement). Investment Income Interest, dividends, royalties and if applicable to satisfy the council s spending policy, if adopted, net realized gains should be reported in the period earned. These earnings if they are not subject to donor-imposed restrictions should be credited as earned to the appropriate revenue account of the operating fund. Transfers and Prior Period Adjustments Shown on the Statement of Changes in Net Assets. Be sure transfer and adjustment information appears between net assets, beginning of year and net assets, end of year. See example below: Net assets, beginning of year $10,000 Adjustments to net assets $2,000 Transfers $1,000 Net assets, end of year $13,000 2

3 FOS Provision for Uncollectible Shown on the Statement of Changes in Net Assets. FOS income must show gross contributions and provision for pledge loss, and special events must show cost of direct benefits. There are two acceptable formatting standards. See examples below: Sample A FOS $15,000 Provision for Uncollectible ($2,000) Net FOS $13,000 Sample B FOS (less provision for uncollectibles of $2,000) $13,000 Note: In this example, the specific amount of the provision for uncollectible ($2,000) must be shown. Special Events Cost of Direct Benefits* Special event gross $25,000 Less cost of direct benefits ($5,000) Special events net $20,000 Sale of Supplies Cost of Goods Sold* Shown on the Statement of Changes in Net Assets (Statement of Activities). Sale of supplies revenue must show gross sales and include information about cost of goods sold. If the BSA Supply Group operates your Scout shop, the rent check should be recorded to other revenue using account number xxx-90. There are two acceptable formatting standards. See examples below: Sample A Sale of supply $15,000 Less cost of goods sold ($2,000) Net sale of supply $13,000 Sample B Sale of supply (less cost of goods sold of $2,000) $13,000 Note: In this example, the specific amount of cost of goods sold ($2,000) must be shown. 3

4 Product Sales* Shown on the Statement of Changes in Net Assets. Product sales revenue must show gross sales and include information about cost of goods sold and commissions paid, even if the council did not write commission checks to the units. Product sales - gross $15,000 Less cost of goods sold ($2,000) Less commissions paid to units ($1,000) Sale of Product net $12,000 * At a minimum, the BSA will accept a parenthetic presentation of these items displayed on the face of the Statement of Changes in Net Assets,e.g., Product sales (net of cost of goods sold of $XXXX and commissions paid to units of $XXXX). NOTES SECTION Notes to the Financial Section There must be a notes section included behind the four required statements. Notes on Operation Specific language required in this section includes: service to young men ages 7 21, and young women ages 14 21, in XX counties of (your state), and the BSA Mission Statement. Inventory Valuation If the council uses SellWise*, then inventory is valued using the average method. If your council uses hand receipts, inventory is most likely valued using first in, first out method. If hand receipts are used, a notation in this section will alert the reader that the audit is stating the correct method for your operation. *If some other point of sale software is being used, check with the software vendor to validate the valuation method being used. Temporarily Restricted Contributions Auditors should copy the language directly from the Local Council Guide to the Audit in the donor restrictions pages. Although restricted contributions typically are reported as support that increases restricted net assets, they may be reported as unrestricted support if the restrictions are met in the same reporting period, the policy is followed consistently, and it is disclosed. Retirement Plan Specific language is included in the Local Council Guide to the 2011 Audit. Eligible employees contribute 2 percent of compensation and the council contributes an additional 6.75 percent to the plan. Pension expenses for the years ending December 31, 2010, and 2011 were $XX,XXX and $XX,XXX, respectively. Investment Disclosure Investment information in the notes section must list the fees paid, e.g. The investment expense paid by the council for 20XX was $X,XXX. Spending Policy Calculations, if applicable The auditor should include a short definition of the council s spending policy, if the council has adopted a policy. This provides the reader insight as to the rationale of investment income/transfer amounts recorded in the operating fund. 4

5 Fair value measurement Please see the Local Council Guide to the 2011 Audit for sample notes. Uncertainty in income taxes Please see the Local Council Guide to the 2011 Audit for sample notes. UPMIFA Please see the Local Council Guide to the 2011 Audit for sample notes. Federal Income Tax Status Almost all audits correctly state that the council is exempt from income taxes under Section 501 (c)(3) of the IRS Code. The key for BSA compliance is adding this sentence: However, the council is subject to federal income tax on any unrelated business taxable income, and they do not have any (or they have some and taxes were paid). Donated Services Disclosure The financial statement preparer should copy the language directly from the Local Council Guide to the 2011 Audit donated services pages. Donated services are recognized as contributions in accordance with the Not-for-Profit Topic of the Codification, Accounting for Contributions Received and Contributions Made, if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the council. Many volunteers provide services throughout the year that are not recognized as contributions in the financial statements, because the recognition criteria under the Not for-profit Entities Topic of the Codification was not met. It is impracticable to determine the fair market value of all donated services by the volunteers of the BSA beyond those required to be recognized as income. Minutes of the audit committee meeting(s) must be taken. These are minutes of meeting(s) where the audit committee meets to discuss engaging the auditor before the audit starts, and the meeting to review the draft audit BEFORE the board meeting and votes to recommend the audit be approved at the next board meeting. The minutes must list those in attendance, those absent, actions taken, and have the signature of the audit committee chairman and Scout executive. Minutes of the board meeting where the audit was accepted does not meet this BSA requirement. 5

6 NET ASSETS BY FUND AND RESTRICTION Once the audit adjustments are entered, statements should be printed and compared to the audited statements. The statements should match exactly. In particular, the net asset accounts MUST match by fund and restriction (allows for rounding). If they do not, then the auditor should be contacted and the issue resolved with additional audit adjustments. As you look at your audit review report* for the prior year, if the net assets did not match by fund and restriction for the prior year, then it is important that you go back to your auditor before they start the new year s field work and get additional audit adjustments to bring your statements in-line with the audited statements. It is NOT enough to have totals that match; balances must also match by restriction. *If you do not have the audit review report for the prior year, please contact your Scout Executive, Area Director or a member of the Fiscal Management Team, Finance Impact Department for a copy. NOTE: We recommend that the audit adjustments be given to your accounting specialist at the same time that the draft audit is delivered to the council. Audit adjustments are entered at that time. If the draft audit needs changes before the final product is produced, then additional audit adjustments are given with the bound audit. 6

7 Example of compliance: Council-transmitted net assets match audited net assets by fund and restriction Example of Non Compliance: Council transmitted net assets do not match by fund and/or restriction Local Council Audit Self Review Instructions 7

8 The Local Council Audit Self-Review Form is a tool designed to help councils in understanding and evaluating the audit and BSA standards prior to the submission of your audit to the Finance Impact Department. The tips for a compliant audit are a resource that describes in greater detail the required BSA local council audit standards. 1. Make sure the audit adjustments proposed by the auditors and accepted by the audit committee have been entered into ScoutNet and posted to the general ledger. 2. Obtain a draft copy of the 2011 audit. 3. Generate the following financial reports from ScoutNet for the period December 31, 2011: Statement of Financial Position Statement of Changes in Net Assets Statement of Functional Expense Statement of Cash Flows 4. Compare the financial reports from ScoutNet to the audited financial statements. The reports should be as close to identical as possible. 5. Using Tools for a Compliant Audit as a resource document, complete the Local Council Audit Self-Review Form. 6. Check the boxes on the Local Council Audit Self-Review Form if the standards are met. 7. If the draft audit does not meet BSA audit standards, this is the time to go back to your auditors and work together to correct the deficiencies. 8. If corrections are made, obtain another draft copy of the audit and repeat steps 1 through 7. 8

9 Local Council Audit Self-Review Form Year ended 2011 Reviewed by Classification of audit Unqualified Qualified Other REQUIRED FINANCIAL STATEMENTS Are they in the three-fund format (operating, capital, and endowment) and do they contain prior year information? Three-Fund Format Prior Year Comparison Statement of Financial Position Statement of Changes in Net Assets Statement of Functional Expenses N/A Statement of Cash Flows INTER-FUND LOANS: Inter-fund loans are recorded in the asset section only, and total of all funds net to zero on the Statement of Financial Position. INVESTMENT INCOME: Investment income from the endowment fund is recorded in the fund for which its use is intended (in most cases is the income generated from the investments of the endowment fund and earned, less expenses in the current year recorded as investment income in Fund 1) and the amount is in accordance with the council s spending policy, if earned. TRANSFERS: There are no transfers, or they are recorded between net assets beginning of year and end of year on the Statement of Changes in Net Assets. COST OF GOODS SOLD: If applicable, is disclosed on the Statement of Changes in Net Assets. PROVISION FOR UNCOLLECTABLES (FOS): Is disclosed on the Statement of Changes in Net Assets. PRODUCT SALE COST OF GOODS SOLD: Is disclosed on the Statement of Changes in Net Assets. PRODUCT SALE COMMISSIONS PAID: Is disclosed on the Statement of Changes in Net Assets. SPECIAL EVENT DIRECT COST OF BENEFITS: Is disclosed on the Statement of Changes in Net Assets. AUDIT COMMITTEE MINUTES: Submitted with the two required signatures/scout executive and audit committee chairman. AUDIT REPRESENTATION LETTER: Submitted. MANAGEMENT LETTER /SAS 115: Submitted. MANAGEMENT RESPONSE LETTER/ SAS 114: Submitted. 9

10 NOTES INCLUDED WITH AUDIT Notes on operations disclosure is met Inventory valuation disclosure is met Council uses Sellwise (the averaged method is used to calculate the valuation) Council has national Scout shop Council uses other (hand receipts or other point-of-sale software) Temporarily restricted contributions reported as unrestricted if restriction is met in same year Donated services are recorded if the services create or enhance nonfinancial assets or require specialized skills and are performed by people with those skills, and otherwise would be purchased by the council. Investment expenses (management/trustee fees) are disclosed Federal income tax status includes unrelated business income statement Spending policy disclosure contains a short definition of the basis for the calculations of the amount of the spending policy for the current year Retirement plan is described as the employee contribution is 2% and the employer contribution is 6.75%. ASC Fair Value Measures defines the use of fair value measurements ASC Endowments/UPMIFA disclosure is included ASC Uncertainty in Income Taxes disclosure is included Spending policy percentage: If council does not have a board-approved spending policy, is the amount of the draw from endowment explained? Y N Net assets by fund and restriction within each fund match the council-generated Statement of Financial Position Audited Statement of Changes in Net Assets Surplus or deficit Total revenue and support Total expenses ScoutNet-Generated Statement of Changes in Net Assets Surplus or deficit Total revenue and support Total expenses Council Statement of Financial Position NET ASSETS Fund 1 Values Fund 2 Values Fund 3 Values Unrestricted Net Assets Unrestricted Net Assets Unrestricted Net Assets Temp Rest. Net Assets Temp Rest.Net Assets Temp Rest Net Assets Perm Rest. Net Assets Perm Rest. Net Assets Total Net Assets Total Net Assets Total Net Assets Audited Statement of Financial Position NET ASSETS Fund 1 Values Fund 2 Values Fund 3 Values Unrestricted Net Assets Unrestricted Net Assets Unrestricted Net Assets Temp Rest. Net Assets Temp Rest.Net Assets Temp Rest Net Assets Perm Rest. Net Assets Perm Rest. Net Assets Total Net Assets Total Net Assets Total Net Assets 10