NGO Breakfast. Are you well prepared for the changes to come? Wednesday, 26 November

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www.pwc.ch/academy NGO Breakfast Are you well prepared for the changes to come?

1 NGO Breakfast Are you well prepared for the changes to come? An event presented by PwC s Academy for actors in the NGO community. Wednesday, 26 November 2014

2 Programme 08.30am 09.00am 09.05am 09.20am 09.35am 09.5oam 10.05am Welcome coffee & breakfast Introduction Gill Sivyer, Partner, Global Leader International Development, PwC Assurance over donor reporting David Mason, Assurance Partner, PwC NGO s joining forces to develop a common accountability framework Gill Sivyer, Partner, Global Leader International Development, PwC W-8 form compliance Monica Cohen-Dumani, Tax & Legal Partner, PwC William Holloway, Tax & Legal Manager, PwC WebAccounting for the NGO Daniel Garcia, Tax & Legal Manager, PwC Sophie Balser, Tax & Legal Assistant Manager, PwC Questions & discussion NGO Breakfast 26 November 2014

3 Assurance over donor reporting David Mason Assurance Partner, PwC

4 Agenda 1. Why this topic? 2. Common issues 3. Types of engagement 4. What do we see in practice 5. Questions NGO Breakfast 26 November 2014

5 Why this topic? NGO s are funded by public or private donations Increasing expectations from donors regarding transparency and accountability Some confusion in the market as to what can be expected from the audit firms Expectation gap identified between the donor and the grant recipient

6 Common issues Misunderstanding from grant recipient on what to do Lack of details in donors requirements Determine which type of engagements Identified which attribute should be tested for each type of expenses

7 Types of engagement ISA 805 Audit of single financial statements and specific elements, accounts or items of a financial statement ISAE 3000 Assurance engagements other than audits or reviews of historical financial information ISRS 4400 Engagements to perform agreed-upon procedures regarding financial information Gap analysis/ Internal audit Use expertise of professional audit firm to provide perspective but no assurance provided

8 Types of engagement typical examples Obtain confirmation that NGO has opened separate bank account for receipt of donor funds Opinion on project statement of expenditure provided by NGO to donor Assurance over the design, implementation and effectiveness of processes and controls (high hurdle) Professional input sought over the NGO s financial /operational processes and controls environment (no assurance no hurdle) ISRS 4400 ISA 805 ISAE 3000 Gap analysis / Internal audit NGO Breakfast 26 November 2014

9 What do we see in practice ISA 805 is the most used reporting and most appropriate New trend to request ISAE 3000 and ISRS 4400 but not always suitable Recommendations: Seek clarifications about subject matter and criteria Ask for a draft report to enter into discussion about the deliverable

10 NGO s joining forces to develop a common accountability framework Gill Sivyer, Partner, Global Leader International Development, PwC

11 Context and background NGO sector remains unregulated in many countries. Numerous NGOs have developed codes of good governance that extend beyond financial reporting and cover topics such as human rights, gender and governance. The International Civil Society Centre helps the world s leading ICSOs maximise their impact for a sustainable and more equitable world. The Centre develops strategies for ICSOs to successfully navigate change and promotes robust accountability to strengthen ICSOs effectiveness and legitimacy.

12 Evolving reporting model 1 Financial statements Fair values Risks and uncertainties Expanded disclosures 2 Annual report Management report/md&a Remuneration report Corporate governance report Audit committee report 3 Broader reporting Adjusted financial measures Non-financial KPIs Sustainability reporting CSR reporting 4 Integrated reporting Balanced and integrated reporting across capitals

13 Trends in financial reporting Report pages in Prudential s Annual Report Front end pages Back end pages

14 Initial mapping of twelve Accountability Frameworks - A truly global project INGO Accountability Charter, global Philippine Council for NGO Certification (PCNC) InterAction, global Quality Assurance Certification Mechanism (QuAM), Uganda Viwango, Kenya Voluntary Action Network India (VANI) Cooperation Committee for Cambodia (CCC) Australian Council for International Development (ACFID) Rendir Cuentas, Latin America Global frameworks: Istanbul Principles for CSO Development Effectiveness Humanitarian Accountability Partnership (HAP) CORE Humanitarian Standard

15 General observations Large variety of standards: - Recent and long standing - Global, regional and national reach - Focus on internal development vs accountability/ transparency - Guidance, code of conduct, accountability standards - Qualitative and quantitative indicators - Compliance mechanisms All 12 standards include values related to the empowerment of people and beneficiaries and creating positive sustainable change. All 9 Project Partner frameworks include values related to vision, mission, strategy; governance & independence and professional management. The values responsible advocacy and environmental sustainability are addressed in only half of the standards.

CSO Effectiveness as the benchmark: Set of

development work of CSOs worldwide result

thousand CSOs in more than 70 countries.

were common across many of the standards:

16 In depth review of the shortlisted 12 values We used the Istanbul Principles for CSO Effectiveness as the benchmark: Set of mutually shared values guiding the development work of CSOs worldwide result of thorough consultations with over thousand CSOs in more than 70 countries. Broad applicability to all CSOs irrespective of size and location of operations. We added 4 values because of their importance to CSOs work and because they were common across many of the standards: 9. Responsible advocacy 10. Vision, mission and strategy 11. Good governance and independence 12. Professional management

Presentation of the standards Istanbul Principles for CSO Effectiveness Presentation Set of mutually shared values guiding the development work of CSOs worldwide.

17 Presentation of the standards Istanbul Principles for CSO Effectiveness Presentation Set of mutually shared values guiding the development work of CSOs worldwide. Result of thorough consultations with over thousand CSOs in more than 70 countries. Unanimously adopted by more than 170 CSO representatives from 82 countries in Serves as the baseline for the mapping CSO accountability standards. Structure: 1. Human rights and social justice 2. Gender equality 3. Empowerment 4. Environmental sustainability 5. Transparency and accountability 6. Partnerships and solidarity 7. Knowledge and mutual learning 8. Positive sustainable change Characteristics Broad applicability to all CSOs irrespective of size and location of operations. Focuses on the internal development of CSOs to guide them as effective development actors. No implementation indicators provided but guidance included in the accompanying framework. No compliance mechanism in place but CSOs pledged to continue discussions following the Fourth High Level Forum in Busan towards implementation and monitoring of the Istanbul Principles.

18 W-8 form Compliance Monica Cohen-Dumani, Tax & Legal Partner, PwC William Holloway, Tax & Legal Manager, PwC

19 Agenda Introduction to Relevant Terms and Selected US Tax Concepts Why Should You Care? Chapter 3 Considerations Chapter 4 (FATCA) Considerations Elements of Form W-8BEN-E Example

20 NGO Breakfast W-8 Form Compliance Introduction to Relevant Terms and Selected US Tax Concepts Internal Revenue Service (IRS): The US Tax Authority Nonresident Alien (NRA) Withholding / Chapter 3 : US tax regime imposing 30% withholding tax on US source non-business payments made to parties outside the US (sometimes reduced for non-us residents or under tax treaty) FATCA / Chapter 4 : US law requiring financial institutions to apply extra due diligence in order to identify and report US taxpayers; noncompliant parties are subject to a 30% tax penalty Form W-8BEN-E: One specific variant in the IRS Form W-8 series of tax forms; allows requestor to determine Chapter 3 and Chapter 4 withholding and reporting needs Penalty of Perjury: Form W-8BEN-E is signed under penalty of perjury, meaning that the person signing the form could, in theory, be sentenced to US federal prison for misstatements

21 NGO Breakfast W-8 Form Compliance Why Should You Care? Any US counterparty from whom you receive a payment will likely require Form W-8BEN-E as a condition of making the payment Many Swiss banks (and other foreign financial institutions, including funds and other collective investment schemes), as a component of their internal FATCA requirements, will require all of their account holders to complete Form W-8BEN- E, otherwise you may be subject to penal 30% FATCA withholding Many donors (e.g., discretionary trusts) will have FATCA obligations which will require you to complete Form W-8BEN-E as a condition of making the donation Form W-8BEN-E has many parts, often some parts can be ignored: The elements which you will need to complete depend upon your relationship with the party (donor, customer, bank, etc) asking for the form

22 NGO Breakfast W-8 Form Compliance Chapter 3 Considerations US source non-business income subject to 30% withholding However, sometimes, this can be reduced as long as: Recipient can certify that it is not a US tax resident, and/or Recipient can certify that it is eligible for benefits under a double tax treaty Chapter 3 elements of W-8BEN-E only required for payments that are subject to US tax: First, you should consider whether the payment is subject to tax (e.g., US source) Second, you should determine whether a treaty claim would affect the tax withheld We Are Seeing Swiss/US Tax Treaty Rates Payment Type US counterparties often require W-8BEN-E in cases where it is not technically required Non-US Financial Institutions sometimes want Chapter 3 information when not required Rate Interest 15% Dividend 15% Qualified Dividend 5% Royalties 0%

23 NGO Breakfast W-8 Form Compliance Chapter 4 (FATCA) Considerations Under FATCA, every non-us entity has a FATCA status 31 options on W-8BEN-E Each status reflects the IRS s perception of how likely it is that the entity is being used to assist a US person with evading US tax For a non-financial entity, often W-8BEN-E only requires ticking the right boxes Chapter 4 elements of W-8BEN-E only required for either: Payors (US or foreign) that pay you US investment income (dividends, interest, etc) Non-US Financial Institutions which maintain a financial account on your behalf (including equity interests held in investment funds) We Are Seeing US counterparties often require Chapter 4 information when not technically required

NGO Breakfast W-8 Form Compliance Elements of Form W-8BEN-E Part of Form W-8BEN-E Part I Except Box 4 & 5 Where Applicable Generally Always Applies Part I Box 4 Only Applies for Chapter 3 Payments

24 NGO Breakfast W-8 Form Compliance Elements of Form W-8BEN-E Part of Form W-8BEN-E Part I Except Box 4 & 5 Where Applicable Generally Always Applies Part I Box 4 Only Applies for Chapter 3 Payments Part I Box 5 Part II Part III Part IV to XXVII, and XXX Part XXIX Only Applies for FATCA Payments or Accounts Held with Financial Institutions Only Applies for Certain Entities for FATCA Purposes Only Applies for Tax Treaty Claim for Chapter 3 Payments Only Applies for Certain Entities for FATCA Purposes Always Applies Certification Under penalties of perjury, I declare that I have examined the information on this form and to the best of my knowledge and belief it is true, correct and complete 8 Page Form (Pre-FATCA version was 1 Page)

NGO Breakfast W-8 Form Compliance Example Swiss charitable foundation receiving a payment from a US customer in exchange for services is asked to provide

If Payment is subject to Chapter 3: Is foundation eligible for tax-exempt organization status in US; otherwise, should the foundation be a trust,

25 NGO Breakfast W-8 Form Compliance Example Swiss charitable foundation receiving a payment from a US customer in exchange for services is asked to provide Form W-8BEN-E Is this a Chapter 3 payment? What are the services to which the W-8 applies? Where were the services performed and/or consumed? If Payment is subject to Chapter 3: Is foundation eligible for tax-exempt organization status in US; otherwise, should the foundation be a trust, corporation, or something else under US tax principles? Is foundation eligible for any tax treaty benefits? Notable Excerpts from Form W-8BEN-E NGO Breakfast 26 November 2014

26 WebAccounting for the NGO Daniel Garcia, Tax & Legal Manager, PwC Sophie Balser Tax & Legal Assistant Manager, PwC

27 What is WebAccounting? A solution for computerising accounting processes Invoices prepared and handled within the accounting system Payments (automatic booking of entries and reconciliation) Filing and archiving by scanning Advantages Takes less time to handle day-to-day work Digital speed and efficiency Focus on strategic and planning requests PwC s security and competence NGO Breakfast 26 November 2014

28 What are the benefits for NGOs? A source of information to help drive your activities An adapted accounting structure (financial and analytical) gets you the information you need more quickly A tool for predicting your cash needs Updating your accounting system enables you to detect anomalies Projections allow you to anticipate the future (i.e. calls for funds) Management tool Enables you to monitor your budget Facilitates reporting to donors (i.e. IRS 4400, ISA 805) How do you manage it yourself? NGO Breakfast 26 November 2014

WebAccounting, the solution for NGOs WebAccounting is a tailormade tool designed to assist you in accounting The solution means you have an accountant without having

29 WebAccounting, the solution for NGOs WebAccounting is a tailormade tool designed to assist you in accounting The solution means you have an accountant without having to pay a salary An expert is always there to help if you have any problems WebAccounting can be used by NGOs of any size, but the majority have between 1 and 25 employees

30 NGO Breakfast 26 November 2014

31 WebAccounting requirements We can only provide the solution to non-audit clients You need Internet access and a SuisseID The only costs you pay are a subscription You don t pay for a software licence NGO Breakfast 26 November 2014

32 How does it work? [corrections in graphic: Serveur -> Server Gestion abonnement -> Subscription management La poste -> Swiss Post NGO Breakfast 26 November 2014

33 How much does it cost? Up to 2,500 entries possible without accounts receivable and accounts payable accounting Account for VAT after receipt of payment Payroll accounting possible for up to 50 employees One general ledger and one user Price: Total subscription per month: CHF 95 (excluding VAT) NGO Breakfast 26 November 2014

34 How much does it cost? Financial and payroll accounting With budget and cost centres With accounts payable and accounts receivable Maximum of 2,500 booking entries per year, one general ledger and one user Monthly payroll processing with 20 employees Price: Total subscription per month : CHF 215 (excluding VAT) Website and video presentation Calculator for subscription NGO Breakfast 26 November 2014

35 Questions & discussion NGO Breakfast 26 November 2014

36 Contacts Gill Sivyer Partner, Global Leader International Development PwC Geneva Tel David Mason Assurance Partner PwC Geneva Tel William Holloway Tax & Legal Manager Daniel Garcia Tax & Legal Manager PwC Geneva Tel PwC Geneva Tel NGO Breakfast Monica Cohen-Dumani Tax & Legal Partner PwC Geneva Tel Sophie Balser Tax & Legal Assistant Manager PwC Geneva Tel November 2014

37 Thank you for your active participation! This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers AG, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PwC. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers AG which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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